IPCC Fifth Assessment Report

Debate between Tim Yeo and Graham Stringer

Thursday 20th November 2014 Westminster Hall

[Graham Stringer (Blackley and Broughton) (Lab)]

I am sure that the hon. Gentleman, who chairs the Select Committee, knows and recognises that having a commitment to reduce intensity is really a commitment to improve efficiency; it does not mean that less carbon dioxide will be going into the atmosphere. Does he agree?

[Mr Yeo]

Of course, that distinction is absolutely accurate, but it is also the case that China has said that it will see a peak in its carbon emissions, and it is suggested that that will happen in 2030. My observation of China and of the culture there is that if a target of that sort is set publicly and becomes the official policy, it is done in the Chinese Government’s absolutely certain knowledge that they will achieve that target and probably improve on it by several years. I would guess that we will reach a period within the next 15 years when China’s emissions stop going up and start to come down.

As Sir David King, the former Government chief scientific adviser and now adviser to the Foreign Secretary, said, the announcement by the US and China makes the possibility of an international carbon emissions pact “very likely”. I agree with that assessment, particularly when we see the progress—I will come back to this later —on emissions trading systems, investment in renewables and so on, and not just in China.

Last month, equally importantly in my view, the EU agreed a 40% target for cutting greenhouse gas emissions from 1990 levels for 2030. That was, of course, exactly the outcome that the British Government were working towards and they deserve great credit for securing that outcome. They have got the target for overall carbon emissions to be reduced without having that overlain with what in my view are less rational targets for specific progress on renewables. It leaves countries free to decide how they are going to decarbonise their economies. That was exactly the right approach, and it is the approach that the British Government had taken a lead in fighting for. As the Secretary of State for Energy and Climate Change said:

“This is a historic moment. Europe has sent a clear and firm message to the world that ambitious climate action is needed now.”

The Prime Minister spoke at the UN climate summit in New York on 23 September and pointed out that the British Government are keeping their promise to be the greenest Government ever. I know that some critics say that that is not actually being achieved, but the truth is that the decision alone to confirm the fourth carbon budget from 2023 to 2027 was of great significance. Although there are lots of areas where we would like the UK to be going further and faster, that commitment alone—again, I will come back to carbon budgeting—strongly supports the claim to be the greenest Government ever.

The UK has more than doubled the capacity of the renewable energy industry in generating electricity in the last four years. That is a substantial achievement and a vindicator of the kind of incentives that have been put in place for investment in renewables. As we know, the UK has also played an important role internationally with its carbon finance commitments. However, we need the whole world to step up if we are going to deliver a deal that keeps the target of a maximum rise in average temperatures of 2° centigrade within reach. That is a big part of the agenda as we move towards the Paris COP—the conference of the parties to the UN framework convention on climate change—at the end of next year. Above all, we need to make sure that policies are in place that give business the certainty that it needs to make investments in low-carbon technology. As the Prime Minister said,

“we need a framework built on green growth not green tape.”

We will need a good outcome from Paris next year, and a lot of work remains to be done to achieve that.

It is worth looking now at what the IPCC has done. It was set up in 1988 to provide assessments of the latest peer-reviewed climate science for policy makers. The fifth assessment report, which has come out in various stages for more than a year now, is the most recent output—in fact, the very most recent was the synthesis report published at the start of this month.

Overall, the fifth assessment report was the culmination of seven years of academic research—literally thousands of scientific papers and reports. There were three working group reports, and, of course, a lot of inter-Government negotiation as well. The most recent synthesis report concluded:

“Human influence on the climate system is clear”.

It also stated:

“Recent climate changes have had widespread impacts on human and natural systems.”

Carbon Capture and Storage

Debate between Tim Yeo and Graham Stringer

Thursday 20th November 2014 Westminster Hall

[Mr Tim Yeo (South Suffolk) (Con)]

Once again, I draw attention to my entry in the Register of Members’ Financial Interests and in particular I declare my interests in a company developing a hydrogen fuel cell and in the nuclear industry.

As we mentioned earlier, the fifth assessment report of the Intergovernmental Panel on Climate Change introduced the concept of a global carbon budget, a total maximum level of greenhouse gas emissions that can be emitted safely consistent with a 2° average rise in temperatures. The report stated that the maximum carbon that can be released into the atmosphere compatible with the 2° target is 1,000 gigatonnes.

We have already emitted half that budget. Between the start of the industrial revolution and 2011, 515 gigatonnes of carbon were emitted into the atmosphere, which is a little more than half the carbon budget. We have, however, an enormous amount of fossil fuel still available to burn. According to the International Energy Agency, the total potential emissions from the remaining fossil fuel reserves in 2012 amounted to 780 gigatonnes of carbon which, added to the 515 gigatonnes that we have already emitted, take us well in excess of the budget identified in the IPCC report. In effect, more carbon dioxide is locked up in the fossil fuels that we have not yet consumed than can safely be emitted in order to stay within the global carbon budget.

The International Energy Agency has therefore argued that without a significant deployment of carbon capture and storage, a substantial proportion of the fossil fuel reserves that are proven to be available cannot be commercialised if the temperature rise is to be limited to 2°. According to my arithmetic, less than two thirds of the available reserves may safely be consumed.

All that would change if we had an economically viable form of carbon capture and storage. CCS could allow continued fossil fuel use while staying within the carbon budget. In 2005 the IPCC estimated, for example, a technical potential of at least 545 gigatonnes of carbon storage capacity in various geological formations around the world. Using that potential would transform the prospects of the fossil fuel industries.

Carbon capture and storage not only would allow us to consume more fossil fuels, but has the potential to reduce the overall cost of decarbonisation. In 2009, International Energy Agency analysis suggested that, without CCS, the overall cost of reducing emissions to 2005 levels by 2050 would be 70% higher. Unfortunately, however, the high energy and financial costs involved in CCS at the moment make the process uneconomic. That is why we need to look at whether any policy interventions might be able to overcome the problem.

The carbon capture and storage cost reduction taskforce’s final 2013 report estimated that the first set of CCS projects in the UK could have costs in the range of £150 to £200 per megawatt-hour, which is roughly three times as expensive as using fossil fuels without CCS. That is actually considerably more expensive even than some of the more expensive low-carbon technologies now being supported with money from the levy control framework. Those CCS prices are significantly higher than the strike prices even for offshore wind and nuclear.

The challenge therefore is to find a way of getting the cost of CCS down to levels that make it economically viable. Unfortunately, at the moment, momentum on CCS around the world is pretty slow—in my view, much too slow to offer a realistic prospect of a rapid cost reduction in the near term. Some of the other solutions to climate change have seen a transformation in their costs, such as in the case of solar power. Costs have been driven down to an extraordinary and largely unforeseen extent by the huge scale-up of the solar industry and by the cost reductions achieved by manufacturers in China.

The Global CCS Institute’s 2014 progress report stated, however, that in the whole world at present only 22 projects were in operation or under construction. The next few years are therefore critical if the development of CCS is to be accelerated sufficiently for it to become a significant part of the solution to the challenge of climate change.

[Graham Stringer (Blackley and Broughton) (Lab)]

I think there is more consensus on this report than the previous one. Does the Chairman of the Select Committee share my optimism about the combination of power production and carbon capture in such novel production facilities as NET Power’s in Sheffield, from which the Committee heard evidence?

[Mr Yeo]

I am hopeful rather than optimistic, but I certainly do not underestimate the potential for either that or innovation in other areas. We underestimate at our peril the potential impact of technological innovation in a number of ways. Certainly, one of the reasons why I am not despondent about our ability to decarbonise our economies without constraining economic growth is because I am confident that technology advances will continue to surprise us all. The hon. Member for Blackley and Broughton (Graham Stringer) said that we might have more consensus in this debate than the previous one. That is not setting a demanding threshold, but I hope that we achieve that.

The CCS technology road map produced by the International Energy Agency in 2013 highlighted seven key actions needed in the next seven years to create a solid foundation for starting to deploy CCS by 2020. That is a demanding—and perhaps slightly optimistic—target, but at least we are seeing a few more positive signs of progress. Indeed, the Committee has seen a couple of those signs in its work.

On the Committee’s visit to Canada last year—I did not take part and therefore I do not know as much about it as some other members of the Committee—it saw the flagship CCS initiative in Saskatchewan that started operating last month. More recently, on the Committee’s visit to Guangdong province in China, we saw the work carried out on what is referred to there as carbon capture, utilisation and storage in which there is significant UK engagement.

In the UK, we have a particular interest in developing CCS for several reasons. First, obviously it is potentially a key technology that will help decarbonise our power generation and industrial sectors, which are, and are likely to continue to be, significantly reliant on fossil fuels—perhaps in the future that will be more on gas than coal, but it will still be fossil fuels. Secondly, potentially enormous wider economic benefits will flow from the development of economically viable CCS.

The export potential is enormous. Indeed, one of the reasons why I am a little pessimistic about rapid progress on CCS is because the financial opportunities open to any organisation that creates economically viable carbon capture and storage technology are such that it will have the most massive market. When one looks around the world at the amount of coal that exists and could be burnt in China, India, Australia, America and even Europe, one can see that the rewards for developing that will be breathtaking. Given that many businesses in the energy industry have research budgets that run into not millions, but billions of pounds, I am concerned that none of them seems willing to risk much of that money on trying to develop CCS on their own: they all have their begging bowls out and are saying, “This has got to be paid for by the taxpayer” to some—or even a large—extent. Nevertheless, let us not underestimate the potential rewards to be had. If the UK is a leader in developing economically viable CCS, we will get a particular benefit from it.

Thirdly, we should focus on CCS in the UK because we have a significant geological advantage in that, close to our shores, we have the potential for enhanced oil recovery, which greatly improves the economics. Therefore, in our research we should focus particularly on that potential advantage. Other parts of the world, including China, also have that advantage, but if we could show that enhanced oil recovery makes the economics of CCS more viable—if it is brought down close to the price of solar—we should focus on that.

There are, however, barriers to making progress that need to be overcome. The first is the absence of a carbon price. If we had a significant carbon price, that would transform the prospects for CCS. As I said in the previous debate, I am confident that, by the end of the 2020s, we will have a significant carbon price, but that is still 10 or possibly 15 years away and it would be better if we could get on with developing CCS in the meantime. Secondly, it would help if we had a clearer global agreement to tackle climate change. As my hon. Friend the Minister said, and I agree, there is at least a possibility of that emerging from Paris next year. Without that, it will be a struggle and a great deal more Government effort will be needed to develop CCS, especially if we are doing it largely on our own.

Progress in the past 10 years or so has been patchy, to put it no more strongly. The competitions unveiled in 2007 were expected to deliver an operating CCS project by this year, but initially they did not manage to support any projects at all. We had something resembling a lost decade. In 2012, an NAO report on this matter criticised the Government’s handling of the competition, and a second competition, which was announced in that year, is now looking to fund two projects that we hope will be operational between 2016 and 2020.

Despite that slightly faltering start, I am pleased with the recent attempts to move a bit faster. The Government’s response to my Committee’s report stated:

“The Government is committed to facilitating the development and deployment of cost-effective CCS by the 2020s.”

I am reassured. I would have been disappointed if they had said any less than that, but that is at least an earnest of good intentions. The publication in August of “Next steps in CCS: Policy Scoping Document”, which set out the Government’s plans to support the industry, is also helpful.

Looking ahead, there is a clear possibility that the UK will be overtaken by other countries and thereby we might relinquish some advantage that we once had. That would not necessarily be a complete disaster: any country or company that develops CCS will rapidly want to share its technology—though no doubt at some sort of cost—with other potential users.

I welcome and support the Government’s efforts in a number of respects, but I conclude by reiterating some of the key aspects of the Committee’s report. It would be desirable to have contracts for difference available for first-of-a-kind CCS projects. It would be useful to support projects beyond those for which there have been competitions. We would like longer term clarity about the funding framework that may be available in the 2020s. It would be helpful if the tax regime incentivised enhanced oil recovery. I believe there are issues about building public confidence in relation to storing carbon dioxide, on which some people express concerns that seem to me somewhat irrational. Any update that the Minister can give us on any of those matters would be useful.

I have sometimes been publicly sceptical about the potential role of CCS. I do not want to be negative about it; I very much want it to succeed. It seems to me to be the one technology that the world most urgently needs if we are to overcome the problem of greenhouse gas emissions. However, I do not believe that progress has yet been sufficient to enable Governments—here or anywhere—to base their energy and climate change policy on the assumption that an economically viable form of carbon capture and storage will be available in the near future, or, possibly, even the next decade.