Energy Bill

Viscount Hanworth Excerpts

Monday 28th October 2013 Lords Chamber

[Lord Krebs (CB)]

My Lords, the noble Lord, Lord Lawson, cites as his authority the Financial Times. I want to address the question of energy prices by turning to the authority of the statutory committee set up by this Parliament, the Committee on Climate Change. I declare an interest as a member of that committee. Through rigorous detailed economic analysis it has uncovered the facts. Between 2004 and 2012 the average household energy bill for a dual-fuel household that uses electricity and gas increased by £520, from £610 to £1,130. How much of that was caused by green, low-carbon measures? The answer is that £30, or 6%, of the energy price increases over that period was due to investment in low-carbon energy generation. Another £45 was due to investment in energy efficiency to help with the affordability of energy for vulnerable consumers, and the rest was largely due to increases in the price of gas.

Turning to the present, 2013-14, the climate change committee has calculated that the increases due to the renewables obligation, the feed-in tariff, the energy company obligation and the carbon-price underpin between them amount to 1% of household energy bills. Let us look forward to 2020. The climate change committee estimates that household energy bills will be 10% higher due to low-carbon investment but—and this is an important but—that 10%, which is small in relation to the overall increase, could easily be offset by investment in energy efficiency such as the installation of new boilers and energy-efficient lighting, appliances, heating and insulation in homes. It is therefore a complete canard to claim that investment in low-carbon energy is the cause, and will be the cause, of increases in energy prices. It is simply not true. What about the commercial sector? The climate change committee estimates that by 2020 1p in every £10 will be added to consumer prices as a result of investment in low-carbon energy.

We should not get confused in this debate by the arguments about energy prices. We should also remind ourselves, as the noble Lord, Lord Oxburgh, has said, that this country is by no means the only one to be taking serious steps to transition to a low-carbon economy. China, Germany, South Korea, Mexico and many others are taking steps, just as we are. We are not leading alone but should be among the leading nations that are setting an example to the rest of the world.

The latest report of the Intergovernmental Panel on Climate Change says that if we take no action we are likely to see global warming of between 3.2 and 5.4 degrees by the end of this century, which could be disastrous for our descendants, and that we should take action now. In that context, I commend the amendment of the noble Lord, Lord Oxburgh, and hope that this House will support it.

[Viscount Hanworth (Lab)]

My Lords, the description of the Bill by the noble Lord, Lord Lawson, bears no relationship to what I and many others understand to be its nature. It is a curious document that is suffused with the free-market ideology that accompanied the privatisation of Britain’s energy industry in the latter years of the Thatcher Administration. The Bill contains evidence of the dangers of global warming and the effects of carbon emissions associated with fossil fuels, which have been well understood. However, notwithstanding its pieties in that respect, the Bill does very little to promote the cause of climate protection. It poses some ineffective and non-binding constraints on the rates of emission and, in truth, will not help in reaching the targets set out in the Climate Change Act 2008.

The truth is that the Bill is attempting to appease a powerful faction within the Conservative Party that is strongly opposed to any measures that might be taken to staunch the emissions of greenhouse gases. There is solid and highly disturbing scientific evidence that should alert every one of us to the perils that we face through global warming. However, many in the Conservative Party believe that they are as entitled to their own contrary opinions on such matters as any of the scientists are to theirs. The climate change deniers have a powerful ally in the Chancellor of the Exchequer, George Osborne. He envisages a dash for gas based on fuel that might be conjured up by fracturing the ground on which we stand. This vision has strongly influenced the Bill. Such a dash for gas would utterly negate the purposes of the Climate Change Act 2008, which proposed that the emissions of greenhouse gases in 2050 should be 80% lower than those in 1990.

The Labour Party brought the matter to a head in the Commons by tabling a reasoned amendment declining to give the Bill a Second Reading in the absence of a decarbonisation target. In the absence of full support from the Liberal Democrats, the amendment was defeated by 279 votes to 206. Perhaps now we can trust that the Liberal Democrats are not bound by whatever agreement it was that made them adhere to the Government’s position on the amendment, and that they will support the amendment of the noble Lord, Lord Oxburgh, which surely accords with their natural instincts. There is clamorous support from industry for a binding emissions target. A target somewhere between 100 grams and 50 grams of CO₂ per kilowatt hour, to be set in 2014, would indicate that the UK Government are genuinely committed to their climate change obligations, and give much needed confidence to investors.

The privatisation of the power industry, according to the nostrums of free-market economics, has given rise not to a competitive market but to a dysfunctional oligopoly consisting of six big companies. On the sidelines are a few small independent companies specialising in renewable power generation. Given adequate protection, the independent companies could be expected to provide a large proportion of the new investment in renewable power generation. At present, there is a danger of their being squeezed out of the market by the big six, who are intent on fulfilling their renewables obligations with their own power plants. The Government and the Department of Energy and Climate Change have paid scant attention to the plight of the independent generators. They need to act with urgency to protect these players.

The Government’s free-market ideology and aversion to government sponsorship and national ownership have severely prejudiced the prospects for nuclear energy in the UK. It is an outstanding irony that in their pursuit of a free-market ideology they have bequeathed our nuclear future to two foreign state-owned monopolists, Électricité de France and the China General Nuclear Power Company. These suppliers are expecting a rate of return in double figures as a consequence of a high price for their electricity that is guaranteed for a period of 35 years. This return is supposedly justified by the risks inherent in the project and the difficulties of raising the necessary finance on the open market.

However, in their attempt to attract firms to undertake nuclear projects, the Government have provided a so-called infrastructure guarantee that guarantees 65% of the necessary funds. Surely under such circumstances, it would have been appropriate for the Government to raise the necessary funds by selling bonds and to commission the building of the nuclear power stations directly, thereby taking them into national ownership. Such a course of action would have given the Government powers to ensure that native suppliers would be fully exploited and that our nuclear industry would stand a good chance of revival. Instead, foreign suppliers will predominate and Britain’s taxpayers will have the burden of supporting a much troubled French nationalised industry.

[Lord Jenkin of Roding (Con)]

My Lords, the noble Lord, Lord Oxburgh, has posed a fairly simple question to the House. There is widespread agreement that we are aiming for a very substantial reduction—80%—in carbon emissions by 2050. There is also wide agreement, embodied in the Bill, that we should have a considerable measure of decarbonisation by 2030. For the most part, there is no dispute about that. When I have discussed this with some of the companies outside, they all accept that that is what we are heading towards. The question is whether we set the figure for 2030 now or wait until 2016, as the noble Lord, Lord Teverson, suggested at the end of his speech, a bit to my surprise. The argument for 2016 is really quite strong. Under the Climate Change Act, this is all administered by the climate change committee, of which my noble friend Lord Deben is the chairman, and which is engaged in setting a series of five-year ceilings as the measure of decarbonisation, leading to an 80% cut by 2050.

The fifth carbon budget comes up in 2016. It seems to be of the highest importance that the figure agreed for 2030 should be consistent with what the climate change committee comes to in 2016. I think that the effect of the amendment of the noble Lord, Lord Oxburgh, would be to set now what the figure would be—which would seem to make that extremely difficult if not very doubtful. The noble Lord, Lord O’Neill of Clackmannan, said, “Let it be done by regulations and then you can change it”. I am not sure that is not exactly where we are anyway. The climate change committee will be setting a fifth carbon budget in 2016, which will of course be part of the then Government’s policy. The question is whether we do it now or wait until then.

I have attended a number of meetings in the past two or three weeks on this subject but will just mention, in passing, one thing that disturbs me. I read the short report from the Intergovernmental Panel on Climate Change. The report of the Nongovernmental International Panel on Climate Change also came into my possession, which takes the view that the intergovernmental panel is completely wrong. What disturbs me about these two bodies, and I will leave it there, is that they do not argue with each other—they abuse each other. One side calls the other climate change deniers and that side calls the others back a bunch of government stooges. I find that a very tiresome argument. If one is going to have an argument about something, one should have a proper one, not one that just descends into abuse.

One of the most interesting meetings that I attended was the one chaired by my noble friend Lord Deben and also, I think, by the noble Baroness, Lady Worthington. One of the points that my noble friend made was that the climate change committee has always been determinedly technology-neutral. It does not seek to identify how a particular target should be reached. It accepts the international figures and then sets a British target for that. I have found that the people I talk to are worried that this is all very well for this country but that Europe has gone and set a technology target, with a figure for 2020—I cannot remember the exact figure—that has to be covered by renewables. The companies who are having to invest and develop their investment programmes say, “Which are we to believe? Are we free to work towards the 2030 target or do we have to pay attention to this?”. The one thing I agreed with my noble friend Lord Lawson about was when he quoted from that extremely interesting Financial Times article and said that if one thinks there is something wrong—as I think there is with this technology target—the right answer is to renegotiate. One of the questions that I therefore ask my noble friend is: what are the chances of our going to the European Union and saying, “Look, this 2020 target for renewables is really quite inconsistent with the much broader target, which will lead on to our 2050 target”? It seems to me that it is an aberration, and that is unfortunate. We should renegotiate that directive.