Climate Agenda

Lord Willetts Excerpts

Thursday 24th October 2024 Lords Chamber

[Lord Willetts (Con)]

My Lords, I very much welcome my noble friend Lord Lilley’s speech and congratulate him on calling this debate, because climate change is a challenge that we need to face, especially those of us who believe in an open, free-market economy. We have to accept that, historically, our free and open economies have operated without properly acknowledging the external costs created by the energy that we were using, exactly as the noble Lord, Lord Browne, said. We need to move to honest prices that fully reflect the costs of carbon emissions as part of a belief in a functioning market economy.

If we go through this process, we will end up with a system with enormous benefits: with greater security of supply, with much less exposure to the risks of volatile gas prices and indeed, in many cases, with lower operational costs, particularly for people driving motor vehicles. The costs of adjustment are indeed high. We absolutely need rigorous economic analysis of what those costs are and who bears them. At the Resolution Foundation—I declare an interest as president —we absolutely try to apply economic analysis to those costs.

I am delighted that this is a debate where we will be hearing the maiden speech of the noble Baroness, Lady May of Maidenhead. One reason, of course, is that she took a lead in committing Britain to a net-zero target. But, if I may say so, there is a second reason as well: she also took a lead in focusing on the living standards of people who were just about managing—people who were struggling to make ends meet. She reminded us that concern about those living standards should be a cross-party issue and not the prerogative of any one party. This debate is an opportunity to combine our concern about the challenge of climate change with a recognition that the costs of adjustment must be borne fairly.

Some of these issues are most acute in the transport sector, which I would like to touch on in particular. This is not an area where we have made massive progress. Transport emissions of carbon dioxide are now greater than they were in 1990. The problem is getting worse, not better. In large part these emissions are associated with car use—over 80% of journeys are still taken by motor car—but it is also where the gains from successful adjustment are massive, with hundreds of billions of pounds of savings when we move to fundamentally lower-cost electric vehicles, powered by clean energy. At the moment, the cost of buying these vehicles is still too high while the benefits, once you have one, can be very low. I would be interested to hear from the Minister what the Government’s plans are to improve the regime for electric vehicles.

For a start, if you are able to charge your electric vehicle at home—in a private driveway or whatever—the costs of charging are only half those faced by less affluent people who are having to charge their cars on the street. This gap in pricing is a major problem. We need to improve the planning regime, so that on-street charging becomes cheaper and quicker, and we need greater competition. I hope the Minister will be able to tell us what plans the Government have to narrow the gap between the costs of on-street and off-street charging, which is now very substantial.

We have historically been rewarding the purchase of electric cars with a very favourable tax regime. These benefits have largely gone to affluent people buying them. That is where innovation starts; they were initially very high cost and it was understandable that the driver of the change would come from the people who could afford expensive electric vehicles. But as the costs fall, will the Government accept that it is no longer necessary to have such expensive subsidies and rewards for the costs of buying an electric vehicle, and instead put more support into holding down the costs for people charging them?

Briefly, another area of transport where we face serious challenges is flying. The growth of emissions from jet flights means that we will soon be seeing them as the biggest single contributor to carbon emissions in the transport sector. There is another uncomfortable fact about the distribution of the costs of adjusting to climate change and the inability, at the moment, fully to cover those costs. It is very likely that the emissions simply from the jet travel of the most affluent 20% of people in this country will be greater than the total emissions incurred by the least affluent 20% from heating their houses, using transport and any other costs. Yet jet travel is an area where we are still not properly covering the costs of the carbon that we emit. Is that not an area for radical progress?

At the end of the day, I think we will end up with fantastic opportunities for Britain; the economic analysis is pretty compelling on this. This will be not because of fantasies about being world-leading, and certainly not by ignoring the economic costs, but by investing in technologies and our natural advantages, with wind and offshore power, tidal power and small modular reactors. We can then have a more efficient economy and a more equitable one as well.