Michael Fallon
Main Page: Michael Fallon (Conservative - Sevenoaks)
Barry Gardiner
If the hon. Gentleman will forgive me, I will not, as I have tried to give way as much as possible and I wish to respect Mr Speaker’s advice. I am conscious that I have spoken at great length, so I will now conclude my remarks.
Earlier this year, the Chancellor of the Exchequer received a letter from many of the companies referred to by the hon. Member for South Suffolk, in which they make the situation very clear:
“Projects can take 4-6 years from investment decision to construction and operation. We are already close to the point where lack of a post-2020 market driver will seriously undermine project pipelines. Supply chain investment decisions depend on reasonable assurance for manufacturers that a production facility to be constructed during this decade, costing hundreds of millions of pounds, will have an adequate market for its products well into the 2020s.
Postponing the 2030 target decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs.”
The Government must reconsider.
The Minister of State, Department of Energy and Climate Change (Michael Fallon)
These amendments have attracted significant debate and interest across the House. Let me say, first and foremost, that the Government share the view that decarbonisation of the electricity sector, done in the right way, is vital. It will help us to: deliver secure and affordable energy for the long term; diversify our energy mix: insulate the economy from price spikes in the international energy market; and meet our long-term, legally binding goals on renewable energy and climate change. It is because decarbonising energy generation is one of the central pillars of this Government’s energy policy that we introduced these new provisions into the Energy Bill, in order to take that critical step of enabling a legally binding decarbonisation target range for the electricity sector to be set in 2016. That would be the first of its kind in the world.
Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)
The Minister referred to the amendments introduced in Committee as ones that enabled the Government to set a target, but he is as aware as I am, and as many others are, that that is not what they do; they say that the Government “may” set a target. If he is now saying that the Government will set a target, will he support the amendments proposing to change the wording from “may” to “must”?
Michael Fallon
The amendments we introduced in Committee allow the Government, if they so wish, to set a target. I will come on to deal with that point, but let me turn first to the amendments tabled by my hon. Friend the Member for South Suffolk (Mr Yeo) and the hon. Member for Brent North (Barry Gardiner). I do not believe that these amendments take the right approach for the following reasons.
First, now is not the right time to set a target range. Hon. Members say that doing so will improve investor certainty, but this Government are already giving clear signals about the future of our electricity sector, and I shall address that in a moment. Secondly—this answers the point made by the hon. Member for Rutherglen and Hamilton West (Tom Greatrex)—it would be a mistake to impose a legal obligation now that a target range must be set. Decarbonisation of the electricity sector is inextricably linked to that of the entire economy, so a decision to set a binding target range should be taken in 2016 when we consider the trajectory of the whole economy towards our 2050 target. Thirdly, the Committee on Climate Change is the wrong body to set a legal constraint on what the level of the target range should be.
I wish to expand on each of those three points. Hon. Members say that we must set a target now because investors need greater certainty. The Government agree wholeheartedly that investor certainty is essential to delivering our energy and climate change goals at the least cost. That has been a fundamental part of our policy to date and it will continue to be a high priority. However, it is very important to recognise that we already have legal targets and measures that clarify the long-term future of electricity generation in this country. They include: the 2050 target to cut emissions by at least 80%, which is likely to require the entire electricity sector to be decarbonised; the fourth carbon budget that runs up to 2027, which requires this country to halve its emissions in the whole economy—we have set out in the carbon plan the likely implications of that for the electricity sector; and the 2020 EU renewables directive, which will mean 30% of electricity generation coming from renewables in 2020, compared with around 10% today. We shall also be arguing, as the Secretary of State announced last week, for the most ambitious greenhouse gas emission target ever to be set in the European Union of 50% by 2030.
In addition, we have committed ourselves to providing clarity on the trajectory of the electricity sector up to 2030 by issuing guidance to the National Grid Company on an indicative range of decarbonisation scenarios consistent with the least-cost approach to achieving our overall 2050 carbon target. Of course, we must also not forget that what matters most for investors now is not simply words and aspirations, but funding. That is what we have got through the Government’s decision to increase support for low-carbon electricity year on year to £7.6 billion by 2020, a tripling of support between now and 2020 which provides a clear and durable signal to investors.
Dan Byles (North Warwickshire) (Con)
Was my hon. Friend, like me, struck by the comments made by the chief policy officer of the CBI at the weekend? She said:
“It is clear that investment decisions will stand or fall on the details of the Contracts for Difference, the capacity mechanism, and the levy control framework—not on a carbon intensity target.”
Michael Fallon
My hon. Friend anticipates me; I was certainly due to quote the CBI in support, and I will come to that in a moment.
Finally, in this regard, I should mention this Energy Bill, which puts in place the most significant reform of our electricity market since privatisation, in order to attract the £110 billion of investment we need over the next decade to replace current generating capacity, upgrade the network and cater for rising electricity demand. That will provide further support for investors. For example, the Government’s delivery plan, which is due to be published in draft in July, will provide draft strike prices for renewables projects that wish to take up contracts for difference. They will provide further certainty about potential future revenues to developers of such projects, at an earlier stage than under the renewables obligation. We expect this approach to bring on significant investment in renewable technologies, enabling the Government to meet their objectives on renewable energy, decarbonisation, security of supply and affordable energy for consumers.
This Bill has already been welcomed by investors. John Cridland, director general of the CBI, has said that it sends a
“strong signal to investors that the Government is serious about providing firms with the certainty they need to invest in affordable, secure, low-carbon energy”.
The chairman of ScottishPower has said:
“our investment plans will create 4,500 jobs…along with thousands more jobs in other industries, and a further increase in the £1 billion we spend each year with UK suppliers.
We are able to make that sort of investment because we have confidence in the UK, and in its energy policy and regulatory regime.”
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister states that trajectories are already in place, not only for electricity generation and decarbonisation, but in this Bill. Bearing those in mind, will he now, this afternoon, rule out the implementation of any element of the gas strategy that his Department has recently published, particularly the one suggesting that a possible scenario might introduce gas to twice the emission levels put forward by the targets he has set out today?
Michael Fallon
No, I certainly will not do that; gas is a key part of our carbon plan, and I hope that the hon. Gentleman will look at the gas strategy as a whole.
Setting a target now to come into effect next April would mean not waiting to consider what is happening in the wider economy, for example, the progress being made in the commercial deliverability of carbon capture and storage, how that could contribute to decarbonising our energy supply, and the take-up of electric vehicles in the coming years. Therefore, setting a target now risks imposing additional costs on the economy and on consumer bills in the future in order to meet the target, and that would not be helpful for anyone.
The Government believe that the right approach is to make a decision on whether to set a target in 2016, when we can consider the whole picture. That already means setting the target range 14 years before it is due to be met. That is even longer than is required under the Climate Change Act 2008 in respect of carbon budgets, which are set 12 years ahead. Setting it now—in effect, asking Ministers to set it at Christmas—means that we would be doing so 17 years ahead. I suggest to the House that there is no certainty for investors in setting a target before we can possibly know how we can meet it.
That takes me to my second point, which is that the Secretary of State can only make a decision on whether to set a target when considering the trajectory of the whole economy towards our 2050 target in a way that is consistent with the overarching framework provided by the Climate Change Act. The timing is important. There is significant interaction between the electricity sector and other sectors of the economy, especially those, such as heat and transport, that might well become more dependent on electricity as we move into the 2020s and 2030s. That will in turn have an impact not only on overall demand for electricity but on when that electricity is needed.
Such questions must all be considered together when thinking about the best way to decarbonise electricity generation as part of a least-cost route to meeting our obligations under the Climate Change Act. It is therefore vital that a decision to set a target range is not taken in isolation, which is the approach suggested by my hon. Friend the Member for South Suffolk and the hon. Member for Brent North, but in the context of considering the pathway of the whole economy towards our 2050 target. That date will be in 2016 and not before, because 2016 is when we are due to set in law the level of our economy-wide fifth carbon budget, which will cover the corresponding period between 2028 and 2032. At that point, we will be able to consider the pathway of the whole economy towards our overarching 2050 target and understand better the most cost-effective way to achieve that. If at that point in time it is decided that a target range is the right approach, we will have the legal authority under the Bill to act swiftly to set a binding target at the right level.
I believe that my hon. Friend the Member for Wealden (Charles Hendry) was right to say in an article last weekend:
“My difficulty with the target…is that we would be requiring it to be set without knowing that it can be met, and that cannot be a responsible decision for government to make, when the costs of getting it wrong would have to be picked up by consumers for decades to come.”
His argument is that given the uncertainties about the relative costs and potential of different low-carbon technologies, it would not be right for a Government to set a target now without first having thought through precisely how a particular level would be achieved. I agree with him and believe that that is why we should consider setting a target range in 2016 in the wider context of setting and determining how we will meet the fifth carbon budget.
That takes me to my final argument, which is that amendment 14 requires that the level of the decarbonisation target range must not exceed that recommended by the Committee on Climate Change. I fully agree that there should be a role for the committee and our proposed approach takes that into account.
Mr Redwood
Is the Minister at all concerned that China, the United States of America, Japan and most other non-EU countries are not setting any of those targets and as a result have much cheaper energy than we do?
Michael Fallon
Some have not passed climate change legislation, of course, which is why they are not bound to set targets.
By waiting until 2016 to make a decision on whether to set a target, the Government can take on board the advice provided by the Committee on Climate Change on the level of the fifth carbon budget, covering that period, as part of its responsibilities under the Climate Change Act. That advice must include views on the whole economy, including the electricity sector.
It would be wrong to blur the lines of accountability between the Committee on Climate Change and the Secretary of State, as the role of the committee is to advise the Government and not to set policy. That point was made neatly by the right hon. Member for Lewisham, Deptford (Dame Joan Ruddock), who was the Minister in charge of the Climate Change Bill in Committee in 2008. She said:
“The committee will have a vital role in providing impartial advice and scrutiny, but we do not think it appropriate for an unelected body to make, or be seen to be making, policies. The individual decisions that will directly affect families, communities and businesses should be made by Parliament and the Government.”––[Official Report, Climate Change Public Bill Committee, 3 July 2008; c. 285-286.]
That could not be clearer and I agree that it should be for the Secretary of State to decide the level of any decarbonisation target range, because it is he who ultimately bears the responsibility and is accountable to Parliament. Of course, he should take into account the committee’s advice, just as he does now when setting the carbon budgets, but that advice should not impose a legal constraint.
Mr Yeo
One thing about which I am pretty certain is that the world’s concern about climate change will be more intense in 2030 than it is today. The probability is that through a combination of emissions trading systems and carbon taxes there will be a high carbon price in 2030, and I believe that the most competitive economies in 2030 will be those that have reduced their dependence on fossil fuel consumption.
Michael Fallon
I can certainly agree with my hon. Friend that the concern might well be more intense, but whether we will be so certain, I am not so sure. Indeed, I have read a report of a speech delivered by my hon. Friend during the recess, in which—I was somewhat puzzled to see this—he said about climate change that
“the causes are not absolutely clear. There could be natural causes, natural phases that are taking place.”
Mr Yeo
Let me make the record absolutely clear. I said that during the 4 billion year history of the planet there have been much greater changes in climate than anything that is likely to result from a 50% increase in greenhouse gas concentrations, but that those changes took place before there were human beings, which are one of the most recently arrived species. If we are to support life for 7 billion going on 9 billion human beings in the style to which we have rapidly become accustomed and to which many still aspire, the one absolute precondition is climate stability.
Michael Fallon
I am sure that those who support my hon. Friend will be grateful for that explanation. The quotation I have seems pretty clear to me, but it is for him to explain it. If he is not so sure any more, why should the rest of us be so sure?
I would say to my hon. Friends that they should let the Opposition, as they always will, be opportunistic. Let the Opposition please the lobbyists by suddenly supporting a target that they never endorsed in 13 years in power. I ask those of us here who share the responsibility of government to be a little more careful not to risk higher bills now for our hard-pressed industries and constituents, not to force out generating plants before we have the new investment that the Bill will deliver and, above all, not to drive up costs for those industries struggling to compete against lower energy costs abroad.
Let us have economic and industrial policy that is coherent, and energy policy by design, not decarbonisation by dogma or by default, which can only drive our industries offshore. There is a better way forward, and it is in the Bill. Let us be the first Government ever to enable a legally binding target to be set at the right time: when we set the fifth carbon budget in 2016. We can then better assess the real prospects and costs of carbon capture and storage; properly measure what is happening to the whole economy; and better judge the transition to a greener future against the costs that our consumers and businesses must bear. I urge all my hon. Friends not to rely on blind faith, but on the practical steps that we are taking in the Bill to decarbonise our economy while ensuring security of supply at least cost to our constituents.
Caroline Lucas (Brighton, Pavilion) (Green)
There are many reasons to support the decarbonisation amendments, and many hon. Members—most recently the hon. Member for Brent North (Barry Gardiner), who is just leaving the Chamber—have set them out with great expertise and eloquence. From a security perspective, I want to underline that the stakes could hardly be higher. It is clear that those who will suffer the most harm and hardship from the impacts of climate change are often the poorest and most vulnerable, here in the UK and globally—those who have contributed the least to the problem. In that respect, this crisis is not unlike the banking crisis.
As many business leaders and experts such as Lord Stern have said, there is no business as usual at all in a 3° or 4° warmer world. A couple of years ago, at the launch of the UK’s climate adaptation plan, the big idea was managing the unavoidable and avoiding the unmanageable. “Avoiding the unmanageable” means keeping global temperature rises below 2°. For years, that line in the sand has been recognised by the UK and most other Governments, and enshrined in legal documents under the auspices of the United Nations framework convention on climate change and the G8. That is the basis for the UK’s Climate Change Act 2008, and our carbon budgets, which the policies in the Bill will, or perhaps will not, deliver. Internationally, citizens and Governments of low-lying island states risk their entire nation being literally wiped off the face of the map, even with a 2° rise.