Low-Carbon Growth Links (China)

- Thursday, 18th April 2013

 

China

Mr Peter Lilley (Hitchin and Harpenden) (Con): Criminologists have observed that the victims of confidence tricksters are often willing—indeed, eager—to believe the story to which they fall victim, and the more absurd, fantastic or fabulous the story, the more willing they are to believe it. The report is an example of a confidence trick that has been willingly absorbed by the Government and members of the Committee. It contains all the characteristics necessary for the sort of fairy tale in which one wants to believe: it has a faraway country, mysterious powers that we attribute to ourselves, and pots of gold—green gold—at the end of the rainbow.

 

The first delusion affirmed by the report is the delusion of power. It is a strange hangover from liberal imperialism that the British intellectual classes believe that they can still dominate the world—that the world is anxious to hear from them, and will jump to attention at their every word and follow their every command. Take the opening words of the report:

 

“China is central to global efforts to tackle climate change”—

 

true, but it continues, and I ask Members to savour these words—

 

“and should be at the heart of HMG’s climate change mitigation strategy.”

 

What imperialist arrogance and what delusions of grandeur that the United Kingdom, a nation of 65 million people off the coast of Europe, could somehow direct, guide or in any substantive way influence the policies of the largest nation in the world, with 1.3 billion people, on the other side of the globe.

 

How are we to achieve that remarkable feat? The summary refers to

 

“our leadership role in China”.

 

Members should also savour those words. I read about the change of leadership in China last year, but I did not realise that that involved the replacement of Xi Jin Ping by “Greg Bar Ker” and “Ed Da Vey”—they apparently now have a leadership role in China to which the Chinese are now anxious to respond. The report states that, sadly, our

 

“leadership role in China is being undermined by our ‘image’…The UK’s image is also tarnished by the reputation of being ‘all talk and no action’.”

 

I wish it were all talk and no action in this country. When people who do not like windmills—I quite like them—look across our countryside and find that they blight the horizon, they wish there was more talk and less action. When people pay their household bills, they wish there was more talk and less action. Abroad, however, the word has apparently got out that we do not really mean what we say. I do not know how that has happened, but it will apparently be made worse if we do not inflict more problems on ourselves, because the report states:

 

“Slowing the pace of decarbonisation at home could undermine…the credibility of UK leadership on climate change.”

 

The second delusion is about China’s decarbonisation policy. The British intelligentsia has always been capable of convincing itself that China is a paragon of whatever is the current fashionable virtue. When I was at Cambridge, Professor Joan Robinson used to dress in a Mao suit and teach us that China had shown us a new economic model that we could all follow. Now it is doing the same on climate change. The report states:

 

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“China has set out some of the most ambitious decarbonisation plans in the world.”

 

Yet, it also states that,

 

“half the growth in energy-related emissions from now until 2030 will come from China.”

 

Half of that growth will come from the country that is pursuing the most ambitious decarbonisation policy in the world, and by 2030

 

“China could account for half of the world’s emissions.”

 

I submit that those two views are incompatible. Either China is pursuing the most ambitious decarbonisation policy in the world, in which case one assumes that it will decarbonise—or at least match our skills in reducing, or preventing the growth in, carbon emissions—or it will not.

 

Why is that rosy view of China’s emissions policies peddled? The British public have to be convinced that China’s emissions are under control. The report admits:

 

“The UK’s emissions reduction efforts are negligible compared with emissions increases elsewhere.”

 

In 2011, the increase in emissions from China exceeded the UK’s total emissions by 200 million tonnes. The device used in the report to convince us all that the Chinese are pursuing an ambitious decarbonisation policy is, first, to glide from talking about reducing emissions to talking about reducing emissions growth, which is not quite the same thing, and secondly, to equate reduction in carbon intensity with cutting carbon emissions, which is not the same thing at all.

 

Like any sensible country, China of course wants more economic output from every tonne of fuel or joule of energy used. It enjoyed steady reductions in carbon intensity until the beginning of this century—not that it had any particular plan for CO2 reductions; it just used energy more efficiently each year—but for some reason that stopped early in this century, and it now has plans to return to the same path of increasing energy efficiency each year. Despite such increasing energy efficiency, however, it will experience major rises in energy use and carbon emissions.

 

The third delusion is the prospect of green jobs in the UK resulting from exports to China. That prospect depends on the UK inflicting on itself severe and ambitious measures to decarbonise the UK economy. The report states:

 

“Slowing the pace of decarbonisation at home could undermine our low-carbon businesses and the export opportunities for this sector”.

 

What are the opportunities? The report states that the

 

“inquiry identified three sectors where…the UK has an established lead”.

 

What are they? The first is the oil and gas sector. It is true that we have expertise in oil and gas, but I would not have thought of it as a typical green sector. Indeed, the report states that,

 

“British expertise could help to ensure that”

 

Chinese resources are used

 

“in the most sustainable way possible. The UK’s own emissions profile has been improved by the ‘switch to gas’ and…a similar switch could be achieved in China, reducing emissions between 50% and 70%. Significant potential for gas development lies in the exploitation of unconventional resources.”

 

The report mentions shale gas in China, but not much encouragement has been given to that in this country, where we have had an 18-month moratorium and no drilling so far. None the less, the Committee’s report, which the Government have endorsed, believes:

 

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“UK skills in the emerging market for unconventional ‘shale’ gas could help China to diversify its energy mix away from coal.”

 

Anything further from reality than the suggestion that we, who have held back shale gas development in this country and who—as we are told by the Committee, which has carried out an investigation—lack the expertise and will take a long time to develop our own resources, if they are there, can nevertheless help the Chinese to do so and then count that as a green export, would seem to me to be pretty bizarre.

 

The second sector is low-carbon buildings, primarily their design. That is fair enough. Let us send a few designers and architects over there and get the Chinese to pay their fees, but it will not revolutionise the British economy.

 

Interestingly, the third sector is carbon capture and storage. We are actually paying the Chinese to help them to develop the technology, and the report says that they already have a plant up and running. The idea that somehow the result is going to be us exporting carbon capture and storage technology to them when we are helping them develop a technology in which they are already further ahead than we are is bizarre.

 

Barry Gardiner: Am I right in thinking that the right hon. Gentleman genuinely believes that the expertise that this country has built up both from the North sea oilfields and in drilling in that technology is not something that we can export to China in helping them to develop shale gas?

 

Mr Lilley: We can certainly export to China the technical expertise that we have in the North sea, and we are doing so.

 

Barry Gardiner: What is wrong with the Select Committee report, then?

 

Mr Lilley: What is wrong with it is that such expertise has nothing to do with green exports. It is a delusion, and a deliberate delusion, to portray exports of expertise in oil and gas development as a green export. If the hon. Gentleman cannot see that, it takes my breath away.

 

Have we got the expertise in shale gas? We have not developed any shale gas in this country, onshore or offshore. So if we have expertise, it comes from operating in other countries and we may be able to transfer that to China, but again, it would not be a green export—although I can see that the Minister is about to tell me otherwise.

 

The Minister of State, Department of Energy and Climate Change (Gregory Barker): My right hon. Friend must take great credit for the fact that he presided over one of the largest single factors in Britain’s being able to meet its decarbonising targets, because he was in the Government during the dash for gas, and I would say that the single biggest factor that we could hope for in shifting China from its current carbon intensity is to shift it off coal and on to more gas. That would have a transformational impact in the way that the Government of which he was such an important part did here in the UK in the ’90s—[Interruption.]And it is a green export.

 

Mr Lilley: In following the previous Chairman’s admonition to us to keep interventions short, I have cut short the Minister’s intervention. The suggestion that 

 

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we need to pursue at home policies to decarbonise our industry, in order to persuade the Chinese to use our expertise in oil and gas, defies all logic and I find it completely breathtaking. The argument seems to be that if we are to get these green jobs—the Minister has now reclassified exporting oil and gas expertise as a green job—we have to discourage the use of oil and gas at home. The mind boggles. The sheer, passionate desire of the Minister and, I am afraid, of some members of the Committee, not to face up to reality but to come up with every kind of spurious defence for a policy that simply does not hold water, baffles me.

 

The truth is that we are, by imposing on our business high energy costs in the UK, driving business abroad, some of it to China. By subsidising the investment in solar panels and wind turbines, we are creating opportunities for China to export to the UK and we are probably creating green jobs in China. But let us not pretend that we are creating any green jobs for ourselves, or any opportunities to export to China, that would not exist if we simply abandoned all our climate change commitments in this country.

 

Mr Clive Betts (in the Chair): Do the Front-Bench speakers think that eight minutes is sufficient time for their winding-up speeches? [Interruption.] Okay. Dr Whitehead has four minutes.

 

4.44 pm

Dr Alan Whitehead (Southampton, Test) (Lab): I do not want to detain hon. Members for long; indeed, I cannot, because I only have four minutes. Just as an aside, I draw hon. Members’ attention to an Asterix comic of a long time ago, entitled “La Zizanie”, which was about a person who went into Asterix’s camp and annoyed everyone so much, setting people against each other, that they lost track of what it was they were trying to talk about. I merely want to leave that on the table.

 

The Select Committee report is not about whether Britain has an imperialistic relationship with China and wishes to influence the whole of Chinese development. It is a modest effort to look at how the UK’s climate change and energy considerations might be attached to relations with the largest emitter of CO2 in the world. I am talking about a country that is developing rapidly economically, and changing equally rapidly its position as regards its stance on climate change. The report tried to consider how those two things might be matched. Unless we do not believe that there is any merit whatever in having any sort of international dialogue with anybody, we should take that Select Committee view at face value and welcome it for what it is.

 

The report is not a view that all is rosy in the world of China, but a timely reminder that China is changing its view on climate change. A number of things are happening in China that underline that view. Indeed, just yesterday, the Minister in charge of climate policies, Xie Zhenhua, indicated that the aim for the Chinese economy now is a reduction in the 2011 levels of carbon intensity by 40% to 45% by 2020. It also wants to boost its non-fossil fuel use to 15% of energy consumption by 2020. He talked about the beginning of the carbon market in Shenzhen in June and then later in the year in Shanghai. Significantly, 

 

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he said that instruments will be included in the Shanghai carbon trading market that will take credits off the market when supplies are too high and prices are too low. He said that China would learn from the difficulties that are taking place in Europe and that it was committed to the development of a carbon trading market. In the 11th five-year plan, China had attempted to reach some targets. Among other things, it closed down factories for a number of weeks towards the end of the five-year period for each region to reach its target.

 

China understands the situation now and has developed its way of doing things enormously, so that its measures on carbon trading arrangements begin to coincide with other countries around the world. Therefore, there could be international co-operation on these matters, built on the basis of everyone following similar practices. We should not dismiss that on the grounds that the UK has a population of 65 million or 70 million and that China has a population of many billions, thus making us insignificant. Actually, we have a role to play in this matter and in a dialogue with China, along with other countries in the EU and across the world. That takes us back to that multilateral discussion that we were concerned about in the previous debate. This is not about Britain being imperialistic and trying to tell China what to do; it is a question of the UK’s contribution to a country that appears to be changing many of its assumptions about its own growth and how it goes forward.

 

Whatever we may think about elements of the political and economic situation in China and how they are dealt with, it is worth while collaborating with China to a far greater extent for the greater good, not only of China or this country but of the wider world. If the Committee’s report has been able to emphasise and underpin that process, it has achieved a good purpose. However, hon. Members should not read into the report something that is not there. It is an honest attempt to consider how UK advances and UK positions may be aligned more closely with other countries and with China in particular. China is indeed changing its stance on climate change—it is not a delusion to say that—and for its own purposes, as well as for international purposes, beginning to make substantial changes in how it goes about its economic activity, and it is important that we do likewise—

 

Mr Clive Betts (in the Chair): Order.

 

4.50 pm

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): This afternoon’s debate has been very lively and informative. Once again, I commend the hon. Member for South Suffolk (Mr Yeo), the Chairman of the Select Committee, for how he introduced the debate, and I thank all the members of the Committee for the work that they have done in producing another excellent report.

 

As many hon. Members have noted in their contributions, China is key to the fight against climate change. China’s carbon emissions have risen rapidly during the past decade; they are up by more than 171% since the year 2000, growing to be 48% larger than the USA’s output of carbon emissions. As China is now responsible for 29% of the world’s carbon emissions and, on current trajectories, is predicted to become responsible for 50% of global emissions by 2030, so it is clear that no effort to tackle climate change will be successful without its 

 

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engagement. Therefore, as the Chairman of the Select Committee alluded to, it is welcome that China’s latest five-year plan is the greenest yet.

 

My hon. Friends the Members for Brent North (Barry Gardiner) and for Southampton, Test (Dr Whitehead) gave a number of examples that showed the investment and support that China is extending to its wind power sector, as well as its general commitment to increase renewable generation, which is happening alongside plans to draft a new climate law and to trial a carbon trading scheme.

 

The Committee’s report highlights the huge opportunities that this Chinese low-carbon transition could provide for British business. According to the latest report from the Department for Business, Innovation and Skills on this sector, “Low Carbon and Environmental Goods and Services”, UK exports to China are currently worth £795 million, which makes China by far our largest export market in this sector; it can be compared with our next largest export market in the sector, Hong Kong, which is currently worth £595 million.

 

I do not know whether the Minister has had an opportunity to read the Committee’s report in full. It argues that there is a huge opportunity to increase trade links, but says that that opportunity could be missed because of the Government’s current inaction. One of the major criticisms that the report made was that a lack of progress on the low-carbon agenda here at home was damaging our reputation abroad. The exact phrase that the Chairman of the Select Committee used at the time of the report’s publication was that

 

“The UK’s image is unfortunately in danger of becoming tarnished by a reputation of being more talk than action when it comes to climate change.”

 

We know from independent analysis by Bloomberg New Energy Finance that investment in renewable energy has fallen by half since this Government came to power, and figures published in November 2012 by Ernst and Young on attractiveness for investment in renewable energy showed that the UK has fallen to sixth place, slipping below France, which, as has been pointed out in the two debates this afternoon, is a country that generates nearly 80% of its electricity from nuclear.

 

In the earlier debate, I spoke about the incredible frustration that is felt about the fact that the Government are refusing to include an explicit commitment in the current Energy Bill to decarbonise our power sector by 2030 that would provide businesses with the certainty and confidence in the Government’s green agenda that they are crying out for. That reluctance to commit resources and support at home is, as the report identifies, damaging our reputation abroad. The report notes:

 

“The UK’s ability to influence policy in China and to compete for business in low-carbon development depends on the reputation of the UK as a credible leader… However, the UK has not been as effective as other countries at showing China what the UK has to offer.”

 

So, while it is welcome to note in the Government’s response to the Committee’s report that the UK’s presence in China has increased, those efforts will be undermined if the Government do not rapidly improve their performance at home.

 

The report also raised concerns that the UK Trade & Investment team’s efforts on the ground in China could be better targeted. The Committee was not convinced 

 

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that the UKTI arm of BIS is currently focusing on the right areas to deliver high-value opportunities for British business. The report’s summary says:

 

“There are too many projects, focusing on too many different areas, rather than a coordinated effort to achieve key objectives.”

 

The report says that the UK Government should instead focus on a smaller number of “strategic interventions” and that

 

“Projects should be tailored to appeal to Chinese priorities and to build on UK strengths. For policy, this means a focus on…carbon pricing and accounting, where the UK has experience to offer.”

 

The Committee calls on the Government to undertake a systematic assessment of the sectors where the UK could have such an advantage. One of the ways that the report suggests the Government’s focus could be improved is to

 

“adopt a clearer set of high-level objectives”—

 

high-level cross-Whitehall objectives and actions—

 

“with regard to low-carbon cooperation with China”.

 

That was recommendation 9 of the report. On that, the Government said:

 

“We agree with the committee that strategic coordination across Whitehall is important”,

 

but then they go on to reject the Committee’s recommendation that a formal cross-departmental Committee should be set up to develop this strategy. The impression that I took from that was that, in effect, nothing will change. Will the Minster tell us in detail what action has been taken since the Committee’s report to develop cross-Whitehall objectives for low-carbon co-operation with China?

 

I will draw my remarks to a close. The Committee’s report underlines the key strategic importance of China in efforts to reduce global carbon emissions. It reminds us of the importance of China as Britain’s largest overseas market for low-carbon goods and services, and it highlights the numerous opportunities that China’s low-carbon transition presents for the UK to develop these links further. However, the report warns that, as a result of the Government’s lack of progress in securing investment in this country and in progressing towards our carbon reduction commitments, these opportunities may slip away from us. The Committee recommends that to prevent that from happening the Government’s work in China needs to improve its strategic focus, as well as shifting its attention to areas where Britain has experience to offer, such as carbon capture and storage and carbon pricing and accounting. The report makes sensible and practical suggestions that I hope the Government will act on, and I look forward to hearing the Minister’s response to the debate.

 

4.57 pm

The Minister of State, Department of Energy and Climate Change (Gregory Barker): This has been a much shorter debate than the previous one. Nevertheless, it has been extremely useful and I thank my hon. Friend the Member for South Suffolk (Mr Yeo) and the rest of the Energy and Climate Change Committee for producing this important report, following the Committee’s inquiry on co-operation with China on low-carbon development.

 

I welcome the report and this debate, like the earlier one, has been enlivened and made much more dynamic by the challenging interventions of my right hon. Friend 

 

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the Member for Hitchin and Harpenden (Mr Lilley). He began with rather a theatrical flourish, almost using pantomime language, but I am afraid that his attack slightly faltered and became less Dandini and rather more Wishy Washy as he progressed, because the fact of the matter is that the UK, as the hon. Member for Southampton, Test (Dr Whitehead) suggested, is not seeking to make some bold post-imperial or neo-imperial play in China. We have a modest role to play in China, but there is a role for us and we can leverage our influence to some effect. Given the extraordinary transformations that are going on in China, even a modest impact from our modest interventions can have a profound effect and, as a result, mitigate the net amounts of carbon being produced.

 

Fundamentally, the real drive behind China’s emissions growth is urbanisation, which is continuing apace. It will reach a peak, however, and there will inevitably be emissions growth while that extraordinary—indeed, unprecedented—urbanisation happens. However, the key point is that China can put in place the policies that will enable its emissions to peak and fall, and our technical policy co-operation, however modest, is playing a part, even if it is small, in helping that process in areas such as emissions trading, gas market regulation, low-carbon product policy standards and so on.

 

I am constantly reminded by colleagues in this place, quite rightly, that the UK accounts for a tiny proportion of global emissions. It is right that we remember that, but we can, by our example, play an important role, and by sharing our expertise and skill sets—particularly technical expertise of the terrific, cutting edge British companies—we can make a modest impact on that important country.

 

We can help build, as the report makes clear, a greater share for the UK of the market for low-carbon goods and services in China, which is the second biggest UK market for those things and getting closer to a value of £1 billion a year. That involves not only services. I am reminded that among the successful contracts won by UK firms is one for the David Brown company, a distinguished engineering company, which has won a contract for the design and production of wind turbine gear boxes and marine tidal devices. This is not just about a small suite of service companies. Real high-tech manufacturing and engineering jobs increasingly depend on that important market.

 

I want to mention the low-carbon challenge, the UK’s action to address the challenge and the future of UK co-operation on low carbon. The low-carbon challenge, as we heard in the earlier debate, is a significant challenge to deliver an ambitious 2015 global agreement and additional emissions reductions before 2020. Achieving that is critical to meeting the goal of limiting global temperature increase and keeping below 2° C, and the UK is playing its part in that. Our strategy to achieve this includes working across Whitehall and through our global network of climate and energy attachés to help to encourage greater ambition, and collaborating and sharing our experience to encourage low-carbon development.

 

I get positive feedback when I engage with members of the Chinese Government, as I did last week in Washington, when I had a good conversation with some 

 

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of those people, who appreciate the role that we play. As the Committee’s report observed, China is central to global efforts to tackle climate change. The challenge is huge. We believe that, working with our Chinese colleagues, we can accelerate both our own and their transition to a low-carbon growth pattern, however modestly.

 

I draw attention to our shared interests in energy, including security of supply, energy pricing and energy efficiency, as well as development of low-carbon energy technologies. We have a bilateral energy dialogue, supported by a memorandum of understanding between DECC and China’s national energy administration. As the Committee has flagged up—I am afraid that I disagree with my right hon. Friend the Member for Hitchin and Harpenden—gas exploitation is an important element to consider and is likely to be discussed at the next energy dialogue, which we hope will take place later this year.

 

Our embassy is working closely with the Chinese national energy administration on gas pricing and regulations, including funding a new project to identify necessary policies and regulations to enable timely yet responsible development of shale gas in China.

 

The Committee, like hon. Members in the debate, recognises the importance of carbon capture and storage as a technology that is critical to meeting our climate change goals, particularly in the longer term. Although the technology faces significant challenges in China around cost and energy penalties, there are encouraging signs that China may be taking a more proactive stance. For example, the Ministry of Science and Technology has recently issued its 12th five-year plan, which lays out its priorities for research, development and demonstration of CCS use and storage. The UK will continue to share its experience with China and to use our influential climate financing to advance that agenda, given how critical it is for the delivery of our climate change objectives.

 

The International Climate Fund is giving £35 million to support an Asian Development Bank programme, developing CCS in countries including China. In addition, Research Councils UK has put £3 million of co-funding into joint CCS research, and a Foreign and Commonwealth Office-funded study stimulating interest in taking forward CCS in the Guangdong region may result in new offshore demonstration programmes. We will not fund those programmes or projects, but we must not undervalue the long-term commercial benefit of being associated with their early development. That is a sensible use of taxpayers’ seedcorn in a global industry that could, in a very few years, be worth billions of pounds and where the UK will be seen to have a leadership role.

 

We appreciate that there is a lot more that we can do. I take on board the Committee’s urging a more coherent approach across Whitehall, as the hon. Member for Liverpool, Wavertree (Luciana Berger) also said. I confirm that a review is under way, looking at how we can do that more effectively. We expect that review to finish in the summer.

 

5.6 pm

Mr Yeo: With the leave of the House, I thank all my colleagues for contributing so constructively to this brief but important debate. There were moments when 

 

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I wondered whether my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) had been reading the Committee’s report. I do not want to suggest—

 

Mr Lilley: Can I intervene?

 

Mr Yeo: Sadly, I do not have time.

 

Mr Lilley: All my quotes were direct from the report.

 

Mr Yeo: I will check Hansard in detail. My right hon. Friend also said that, at Cambridge university in the 1960s, China was held up as a model that Britain should follow. I also attended Cambridge university in the 1960s, but I do not recall anyone at the university suggesting that at any time.

 

I deeply regret my right hon. Friend’s low opinion of the expertise of British business. He obviously assumes—I am sad to hear this from a former Trade and Industry Secretary—that German, French and Italian business is so superior to British business that it is not worth our 

 

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making any effort at all to try to capture a tiny segment of the business in the largest and one of the most rapidly growing markets in the world. I deplore that pessimism and do not share it, and I am delighted that the rest of the Committee actually visited China. I would be interested to know when my right hon. Friend last went there, because if he had visited in the past year or two he would have seen a picture very different from that which he painted.

 

I am grateful to everyone for taking part in the debate and I am sure we will return to the subject. We should vigorously pursue opportunities for sharing our expertise, including in the important area of emissions trading, where we are among the leaders in the world. I welcome the support for that aim from those on both Front Benches.

 

Question put and agreed to.

 

5.7 pm

Sitting adjourned.

 

 

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