Oral Question: Defense: Energy Bill (Lords)

- Friday, 18th December 2015

 

Oil Drill

Mr Peter Lilley (Hitchin and Harpenden) (Con): We thought that the hon. Gentleman was moving on to the closure of his speech. [Laughter.]

 

Callum McCaig: I am sorry to disappoint the right hon. Gentleman. I will be brief, to a degree. I do not need to rehash the arguments about the closure of the 

 

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renewables obligation, which is disproportionately affecting Scotland, because 70% of the wind farms that are in the pipeline would be there. I know that the Government have said that they want to try to reintroduce the closure in order to meet a manifesto commitment, but I urge them not to do so. If they do, we shall oppose the move.

 

Sammy Wilson: Given that fuel poverty in Scotland has increased by two and a half times since 2002-from 13% of the population to 34%-how can the hon. Gentleman justify further subsidies for wind turbines, which are paid by consumers and most of the proceeds of which go to well-heeled large landowners?

 

Callum McCaig: I do not think that that is the solution to fuel poverty. I think that the solution to fuel poverty is to insulate homes, in which there is huge and disproportionate investment in Scotland, and to end poverty. We have made various suggestions about how to do that, but the fact is that fuel poverty does not exist in a vacuum; it exists in the environment of actual poverty.

 

Onshore wind is a cheap renewable, and the closure of the renewables obligation is set to save bill-payers the princely sum of 30p. Moreover, it will produce up to 63 million tonnes more carbon dioxide.

 

Nigel Adams: Will the hon. Gentleman give way?

 

Callum McCaig: The hon. Gentleman’s colleague seemed to want me to nip on a wee bit, but I am happy to take an intervention.

 

Nigel Adams: I am very grateful. I apologise to my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who is far more senior than I am.

 

The hon. Gentleman talks of how cheap onshore wind is as a renewable. Does he not accept that it must be backed up by fossil fuels, which are not so cheap? If the full system cost of onshore wind is taken into consideration, it is one of the least affordable renewable technologies that we have.

 

Callum McCaig: So we are backing up the cheap renewables with fossil fuels that are not so cheap, and the solution to that is to use the fossil fuels that are not so cheap all the time? That sum does not quite add up. I am not sure that I have worked out the equation.

 

We have been EVELed out of the changes in the planning regulations, but I would not have opposed them anyway. However, I think that what is good for the goose should be good for the gander, and that the policies should respect the different attitudes that exist in the different nations of the United Kingdom. We in Scotland would like onshore wind generation to continue, and we hope that there will be mechanisms to enable that to happen-which brings me neatly to the idea of a subsidy-free contract-for-difference mechanism that would provide the price stabilisation and allow a route to market for onshore wind, the cheapest form of renewable generation. I am sorry; I could not help it. That was there for the benefit of the hon. Member for Selby and Ainsty.

 

Finally, the emissions trading proposals would ban the Government from using carbon accounting through the European emissions trading scheme. I and my party are not opposed to that in principle, but would recognise 

 

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we are probably a little premature in terms of agreeing that in advance of the fifth carbon budget, which is to come forward.

 

David Mowat: In principle, that apparently is the position of the hon. Gentleman’s party, because to leave the ETS, which is a Europe-wide system, seems an odd tack to take for a party that is always telling us how European it is. In particular, surely the way to fix this is to get a proper ETS, not one that has a price of carbon that is so low? That is the way forward, not by leaving it. Surely as good Europeans, that cannot be the SNP position?

 

Callum McCaig: I do not believe there was any suggestion to leave. I would not suggest we cannot use or do it, but, rather than looking to buy carbon emissions and the capacity off our dear friends on the continent we should be looking to be the leader and to have that high ambition. We could be in a position not only to stop counting those emissions towards our own contributions, but sell some to others who may not be quite so good in dealing with it.

 

In closing, as I see it there are three aspects to this Bill: the Oil and Gas Authority, the onshore wind and the emissions trading. We at this stage support two out of three, and, as Meat Loaf said, “Two out of three ain’t bad.”

 

Several hon. Members rose-

 

Madam Deputy Speaker (Natascha Engel): Order. I am going to have to impose a 10-minute limit on Back-Bench speeches from now on, and we will see how we get on.

 

5.51 pm

Mr Peter Lilley (Hitchin and Harpenden) (Con): It is a great pleasure to follow the two previous speakers, my hon. Friend the Member for Selby and Ainsty (Nigel Adams), who made an extremely realistic speech, and the hon. Member for Aberdeen South (Callum McCaig), who I thought was amazingly complacent about the primary industry in his constituency, which is going to suffer very considerably for a considerable time from the run-down in the oil industry. It is amazing to me that the SNP can abort two potentially valuable industries in Scotland-underground coal gasification and fracking-which might have provided alternative jobs for the people in his constituency, and I hope he will look closely at that.

 

Wherever we are on the spectrum on global warming, from sceptical to alarmist, we can surely all agree on one thing: that we should try to achieve the targets to which we are committed for reducing CO2 at the least cost to our constituents, because it is ultimately they who bear it either through their budgets or their jobs. So when my right hon. Friend the Secretary of State found that subsidies were proving unnecessarily generous to achieve our targets and we were achieving them ahead of time, so that without changing those targets she could reduce those subsidies, she assumed the whole House would be in universal agreement with what she was proposing; even I, for once, was on her side. But it was not so: there were calls from the green lobby and 

 

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the Opposition to keep subsidies higher than necessary for longer than necessary to achieve the targets to which we are committed, and key amendments in this Bill seem designed, likewise, to increase the costs of achieving our targets.

 

Clause 80 will not allow the use of the emissions trading scheme to achieve our targets, yet the whole purpose of the ETS is to ensure that those who can abate emissions at the lowest costs, do so. So by excluding the use of that, we are ensuring that higher costs are incurred to achieve a given abatement in emissions. Another amendment prolongs the subsidies for onshore wind for longer than needed, even though that is unnecessary. So I shall, unusually, be supporting the Front Bench in seeking to have both those amendments from the Upper House removed.

 

Above all, we have created a framework that commits us to load higher costs on UK consumers and businesses via the Climate Change Act 2008 and all its ramifications than any other country in Europe. Despite all that, we will ensure, because of the way the system works, that we do not reduce the amount of carbon dioxide emitted into the atmosphere by one molecule more than would be the case if we were doing the same as the rest of Europe.

 

Let me explain why that is so. At Paris all the countries of the world agreed to make commitments on what they were going to do in future to curb the growth of their CO2 emissions. The only exceptions were the countries of Europe, who put in a total figure for the whole of Europe and are now to allocate that figure among the member states. Because we are committed to doing so much more than the average in Europe-indeed, than anybody else in Europe-all that does is to reduce the amount by which the other countries in Europe will have to reduce their emissions. So we have increased the burden of costs on British households and business, reduced the burden of costs incurred by our partners in Europe, and not reduced the emissions of CO2 by a single molecule.

 

That is an extraordinary thing to achieve. It has puzzled me a for a long time how it is that we have a political class, particularly the green lobby that straddles both sides of the Gangway-

 

Sammy Wilson: Not universally.

 

Mr Lilley: Indeed, not universally on the Opposition Benches. It puzzles me that the political class is committed to such perverse policies. Then I found a possible hint of an explanation, when someone mentioned to me, Madam Deputy Speaker, a book that I am sure that, like me, you have not read but have heard about called “Forty Shades of Grey”. It is apparently a mildly pornographic-

 

Graham Stuart: Fifty, not forty, I think.

 

Mr Lilley: It is apparently “Fifty Shades of Grey”. [Interruption.] Have I any higher bids? I have not read it; I have not even read the title of it. However, the surprising popularity of that book demonstrated that sadomasochism, or the infliction of pain and the submission to pain, are far more widespread tastes than we had previously thought. It seems to me that in the political sphere there is a similar belief that it would be popular to inflict pain or submit to pain by green policies. We might say that what we are suffering from in this country is “Fifty shades of green”.

 

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The trouble is that Members who are committed to this doctrine measure the success of their policies not by what they will achieve, but by what they will cost, and not by how effectively they will reach a given destination, but by how onerous are the burdens they can place on Britain, British households and British business.

 

That pain is very significant. The Committee on Climate Change worked out the costs of climate change policies in 2014-15, and it came out at about £250 per household. [Interruption.] The right hon. Member for Doncaster North (Edward Miliband) may disagree with the Committee on Climate Change, which he helped set up; if so, please intervene-but of course he cannot sustain his position. That figure is set to double by 2020, to double again probably by 2030, and to double again by 2050. That is the direct effect on household budgets both through their energy bills and the cost of more expensive products because energy prices feed through to product costs.

 

There is also the cost on jobs. We have lost the aluminium industry already, and earlier today we were seeing the serious the impact of job losses in the steel industry. Of course, the basic reason why there are job losses in the steel industry is that there is a worldwide glut of supply, but the reason that falls excessively on this country is that our industrial energy costs are higher than those anywhere else in Europe. That is why we are suffering disproportionately at the moment. I am reliably informed by my right hon. Friend the Member for Wokingham (John Redwood) that we are importing bricks. I recently had lunch with a businessman who said that 7% of his output comes from the UK but that 28% of his energy costs were in this country.

 

John Redwood: Is it not the point that these green targets can bear down very heavily on our country without reducing carbon dioxide emissions at all, because these products are being made somewhere else and perhaps producing even more carbon dioxide?

 

Mr Lilley: My right hon. Friend is absolutely right. This is yet another example of the perverse effects of what we do. We impose costs on our own country, our own industries and our own households but we do not even achieve the objective of reducing carbon dioxide emissions. In fact, in these cases we probably marginally increase them.

 

My appeal to the House is that we start looking at this whole business in a rational way. Let us take all the targets to which we are committed as a given. Like the hon. Member for East Antrim (Sammy Wilson), I think they are unnecessary and unwise, but let us take them as a given and seek the least costly way of achieving them. Let us seek to achieve them in a way that will place the fewest burdens on British households and result in the fewest job losses and the least destruction of industry and output. Let us not measure our success by how much pain we can inflict and how much harm and burdens we can submit to, as we have done through the 50 shades of green up to now.

 

Caroline Lucas: Given that the right hon. Gentleman is apparently genuinely concerned about costs, why does he not extend that same analysis to nuclear energy? For example, Hinkley is going to put a massively greater strain on household budgets than renewables would do and it will not help us to get emissions down for at least a decade.

 

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Mr Lilley: When the Energy and Climate Change Committee produced its report, I voted against that project precisely because I was worried that we were committing to an unnecessarily high cost, although I am not against nuclear in principle. I do not agree with the hon. Lady that it is much more costly than offshore wind. In fact, I think it is less costly. It is still unnecessarily costly, however, and we should therefore look again at options such as modular nuclear. If she were to put forward a motion to reduce the subsidies for offshore wind so that they were equal to those for onshore wind, I would happily second it. I would happily join her in that because I am genuinely in favour of reducing costs.

 

Chris Heaton-Harris: Madam Deputy Speaker, I am sure you would agree that my right hon. Friend’s speech is spanking this out of the park. Does he agree that the way in which we have moved forward by introducing an element of the market into the mechanism of bidding for subsidy in our energy profile is the right way forward, and that the renewables obligation is the wrong way forward? I also support the Government.

 

Mr Lilley: I agree. It was very late in the day when we introduced that system, so at least we incurred the minimum cost of subsidy to achieve the given objective rather than just plucking out a number, which would inevitably have been high, given that civil servants always are rather generous with public money and set targets high, just so that they can say, “Oh look, we have achieved our quantitative solution, even if we have done so at unnecessary expense.”

 

Graham Stuart: My right hon. Friend is making an entertaining speech. Offshore wind has a price of around £140 per MWh, but the industry expects to bring that down to around £100 by 2020, and by the time we have any nuclear power stations, it is pretty likely that it will be below the cost of nuclear and falling, whereas the cost of nuclear will be fixed for the entire time.

 

Mr Lilley: My hon. Friend is normally very rational, but on this occasion he is being irrational. He is suggesting we should invest in very expensive and currently inefficient products in the hope that the next generation of such products will be cheaper. However, other people would also be able to invest in those cheaper products and compete with us. If they are going to be cheaper in five years’ time, we should wait five years and do it then.

 

6.4 pm

Edward Miliband (Doncaster North) (Lab): It is a privilege to follow the unique speech of the right hon. Member for Hitchin and Harpenden (Mr Lilley). I bow to his greater knowledge about 40 or 50 shades of grey-or green, for that matter. It is also fair to say that he has taken a consistent position on these issues. He was one of the three Members of this House-

 

Mr Lilley: Five.

 

Edward Miliband: I beg his pardon. He was one of the five Members who voted against the Climate Change Act 2008, which was supported right across the House. It will not surprise hon. Members to hear that I approach this subject from a slightly different perspective from his, and I want to focus on how the Bill can be improved. Given the scale of the challenge we face, the right 

 

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question to ask about any energy or climate Bill before the House is this: will it do everything necessary to meet our obligations and the requirements placed on us to take a leading role in tackling climate change? I believe that things can be done to the Bill to ensure that it does so.

 

This Bill is unlike many other Bills that have come before the House, in that a very important event has happened in between its being introduced in the other place and its Second Reading today. That event was the historic Paris climate change agreement. I paid tribute to the Secretary of State when she made her statement on the Paris agreement, and I do so again today for the incredible job that she has done.

 

My case to the House is that we need to reflect the high ambition of Paris in the Bill. In particular, I want to set out why the Government, in the light of the Paris commitment to a long-term global goal of zero emissions, should use this Bill to legislate for the same objective here in the UK. We need to legislate for zero emissions in law, with the date to be advised by the independent Climate Change Committee. I want to thank Members across the House whom I have talked to about these questions. They include Members on my Front Bench, the hon. Member for Brighton, Pavilion (Caroline Lucas), Liberal Democrat Members, Scottish National party Members and, indeed, the hon. Member for Beverley and Holderness (Graham Stuart), who plays an important role as the chair of GLOBE International, the international parliamentarians’ committee. If other hon. Members want to know more about this subject, a paper has been published today by the organisation Sandbag, setting out the case. My case is threefold. It is about consistency between international agreements and domestic action; it is about the economic case; and it is about the effect we can have on other countries.

 

Mr Lilley: Given what I said earlier about the effect of our having commitments that are higher than those of the other countries in Europe, which simply reduces the amount to which they are committed under the Paris agreement, if the right hon. Gentleman wants to raise our target even higher, would he not be reducing to an even lower level the amounts by which those countries would have to reduce their emissions in order to reach the EU global total?

 

Edward Miliband: No, because the EU target is set on the basis of effort-sharing between different countries, and we are one of the most important countries contributing to that effort-sharing: the more we do, the higher the EU target can be. That is part of being in the European Union and playing our role in raising these objectives.

 

My first case for acting relates to consistency between international agreements and domestic action. When I set a target of 80% by 2050 in the Climate Change Act, that was agreed on a cross-party basis and we were at the most radical end of the spectrum. That target was formulated to give us a fighting chance of keeping global warming below 2°C. However, Paris has crucially moved the world on from that. Paris sets a twofold objective: to try to keep global warming below 1.5°C, given that we are already at 1°, and, crucially, to achieve the long-term goal of zero emissions.

 

...some time later

 

Stephen Kinnock: I absolutely accept there have to be exemptions for energy-intensive industries. The steel industry has needed the energy-intensive industry compensation package for over four years. The Chancellor recognised the need for that in 2011 and it has taken until now to get it sorted. One reason for that is that we are expending so much political capital in Europe trying to negotiate a Brexit, but that is another case altogether.

Does the Secretary of State really think that investors are going to choose the UK, where one could be liable to see governmental and regulatory support wiped away overnight with no warning, or choose to invest in an environment of ever-increasing certainty? In fact, would she not consider investing in emerging markets, such as China, which is now investing more in clean energy than the whole of Europe combined, or in India, which is planning a fivefold increase in its clean energy investment by 2020, instead of putting money in an uncertain British market? We must be clear: the uncertainty will affect not only the renewable sectors explicitly covered by the changes; there will be contagion elsewhere from this assault on investor certainty.

On today of all days, I feel the need to talk about a specific example of where the Government’s failure to act decisively to support sustainable energy and create certainty for investors is costing our country dear: the Swansea Bay tidal lagoon. As hon. Members will be aware, Tata Steel announced over 1,000 redundancies today, with 750 of them at the Port Talbot plant in my constituency.

Mr Lilley: I can scarcely believe that I would hear such a clear example of sado-masochism: an hon. Member representing a steel constituency calling for the highest-cost energy in the western world to go ahead. That can only make the problem of the jobs of his workers even worse. I just cannot imagine how he stands any chance of being re-elected.

 

...some time later

 

Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP): It is a pleasure to follow the right hon. Member for Wokingham (John Redwood). In their manifesto for the 2015 general election, the Conservatives undertook to

 

“meet our climate change commitments, cutting carbon emissions as cheaply as possible, to save you money.”

 

Although I welcome action towards achieving this goal, and particularly the introduction of the OGA, recent action seems at odds with the climate change agenda. While I agree with the Secretary of State when she says that this is one of the biggest challenges facing this generation, with the advances in technology, clean renewable energy can be less expensive to the consumer than traditional carbon-based energy.

 

Mr Lilley: Is the hon. Gentleman saying that renewables are cheaper? If renewables are cheaper, they do not need subsidies. Discuss.

 

Philip Boswell: The £92.50 strike price at double the current rate for Hinkley C, guaranteed for 35 years, is a case in point. As for alternatives that might be cheaper in future, one possibility is compressed air energy storage, allied to the admittedly intermittent nature of wind power.

 

I could also tell the right hon. Gentleman about advances in technology in the context of the carbon capture projects in Scotland and Yorkshire. Before coming to this place, I was fortunate enough to work in the energy sector for 13 years, and for some time I was Shell’s contract leader for the carbon capture project. I moved it from the coal-fired power station at Longannet to the Peterhead gas fire power station, so I understand all too well what “advances in technology” means.

 

When we were talking about the amine process-before the rug was pulled from under our collective feet-we likened the technology to that of the mobile phones of 

 

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the 1980s-the right hon. Gentleman is not young enough to forget those clunky phones-which would capture 90% of emissions. Given the advances in technology, were we to retain and develop that process, the figure could rise to 92, 94 or 96, with ever-reducing costs. This was a missed opportunity: that is the point that I was making.

 

Creating market incentives to achieve the two-pronged goal of cheaper and cleaner energy requires a reworking of the United Kingdom Government’s involvement in the energy sector, and a rethinking of their relationship with energy. In the Bill, the Government propose to close the renewables obligation to new onshore wind projects from April 2016, a year earlier than originally planned. Given that the RO is the only current mechanism that enables large-scale onshore wind to enter the power market, the proposed closure poses a significant threat to the future of the onshore wind sector and the United Kingdom’s growing green manufacturing, export and investment potential, while increasing the difficulty and costs associated with meeting the challenging decarbonisation targets.

 

In the House of Lords, the Government proposed a number of grace periods designed to allow projects that had already committed significant investment on the basis of an expectation to deliver before April 2017 to proceed. Peers rejected the clauses on the RO closure, calling for the Government to respond more fully to the substantive concerns expressed by industry about the closure and the grace periods. I support that position. Investors and developers need clarity from Parliament on the future of the renewables obligation. Without that certainty, investors will be unable to proceed with projects that were expected to be delivered on the basis of RO grace periods. The Government must also explain how new onshore wind projects will in future be able to access and compete in the market for low-carbon power.

 

 

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