13:37 Joan Walley (Stoke-on-Trent North) (Lab)

I congratulate the hon. Member for South Thanet (Laura Sandys), who serves with distinction on the Select Committee on Energy and Climate Change, on bringing the debate to the Commons this afternoon, and I note that the Economic Secretary to the Treasury, the hon. Member for Norwich North (Miss Smith), is in her place, because if we really are going to make progress on this most important issue, we will do so only if the Treasury puts the whole issue at the core of its policy making.

It has always seemed to me perverse that we have a Green Book that is anything but green, so the time has come to ensure that the Treasury’s guidance on the national infrastructure programme, in particular, guarantees that every single policy is appraised and joined-up in taking further forward the agenda of securing more renewable energy and more energy efficiency.

We have aspirations to decarbonise our city. We have an untapped renewable resource, but at the same time we recognise the need for investment across a wide range of different industries and sectors. If this debate helps to take that agenda further forward, and if our Select Committees can examine and scrutinise every single action that the Treasury is taking to make these aspirations a reality, given the urgency of the need for greater energy efficiency, it will have been worth while.

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13:45 Mr Peter Lilley (Hitchin and Harpenden) (Con)

There are perfectly respectable, if not entirely convincing, arguments for saying that we have to replace cheap energy with expensive, less reliable energy to reduce carbon emissions, and that that is a price worth paying, to coin a phrase. However, the premise of this debate is that we can generate economic growth by introducing fiscal measures to subsidise and promote green energy. Let us be clear what that means: it means subsidising the replacement of comparatively cheap and reliable energy from fossil fuels with more expensive and intermittent energy from renewables.

Does my right hon. Friend agree that the debate should really be about whether we want to switch from higher-emitting to lower-emitting sources of energy, rather than having this complete confusion all the time about its being a question of carbon emissions or renewable energy? Renewable energy is very expensive, but there are plenty of sources of non-renewable energy that would be far less carbon-emitting.

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13:56 Dr Alan Whitehead (Southampton, Test) (Lab)

The emergence of a green economy cannot be brought about just by changing the dials on a few economic levers; it is fundamentally asymmetric with what has gone before. Low-carbon sustainable energy, for example, does not have an investment or operational pattern that is anything like what we have been used to for the past 100 years. We cannot construct the next generation of low-carbon power plants and providers on the basis of what has gone before.

We can no longer rely on the assumption that we can generally predict what capacity will be needed and then work out how best to meet it. Future energy policy must be based on investing first in consciously reducing demand and then in decarbonising the remaining demand. In doing that, we have to move to a different paradigm of investment, because demand reduction is a process not an asset, and because low-carbon plants are capital intensive but mean on fuel. In other words, low-carbon plants take a lot of money to construct but, once constructed, use fuel that is either free or recovered from other processes. The model of low and basic construction costs and investment in sourcing, transporting and using fuel, and paying for it as we go, is no longer applicable.

What might we do? We could invest in decarbonising our homes, for climate change purposes and for demand reduction purposes. We should insulate homes to make them fuel poverty-proof—as we know, the green deal will only scratch the surface. We will get £4 billion per annum over the next 15 years from the EU emissions trading scheme, carbon trading and the carbon floor price. As a fiscal measure—without hypothecating what is in the tax pot—we could invest a large amount of that money in ensuring that our homes are energy-efficient.

Above all, we should get real about the green investment bank. The bank will have £3 billion as a fund until 2016, or perhaps later, depending on whether the Chancellor decides that it is ready for investment as a whole, yet last year KfW, the German public green investment bank, invested £24 billion—more than a third of its £70 billion —on energy and climate change measures. We can do that if the green investment bank is a bank, but it needs the ability to raise bonds and money at an early stage. That is the sort of fiscal underwriting we need for this green energy, resource and social revolution that we are going through. We need to get on with that urgently, and I urge the House to support the motion to assist with that process.

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14:06 Gordon Henderson (Sittingbourne and Sheppey) (Con)

We will hear in the debate arguments for and against investment in renewable energy, although I can see only one person in the Chamber who is against such investment. Those on both sides of the argument would probably agree on two things: the first is that there is only a finite supply of fossil fuels, and the second is that Britain relies too heavily on foreign imports for the energy needed to power its homes and businesses.

The advantage of establishing an alternative energy industry is that most of the components needed to generate power could be sourced in Britain. That is particularly true of the renewable energy sector. As an island, we have the advantage not only of a limitless flow of water, but also of access to all-year-round wind, particularly offshore, which leads me nicely to that part of the green economic sector on which I would like to concentrate.

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14:14 Kelvin Hopkins (Luton North) (Lab)

Energy conservation would be labour-intensive, rather than capital-intensive, which is what nuclear investment is about. I have been informed this week that officials in the Department of Energy and Climate Change are doing a deal that will be massively beneficial to EDF. All the other energy companies have dropped out of the nuclear programme in Britain, leaving EDF the monopoly supplier. It is effectively owned by the French Government—they own 85%—and our DECC officials are so obsessively pro-nuclear that they are going to strike a deal that will effectively subsidise EDF to the tune of £5 billion. That money will go to EDF, a French company, and will be used to benefit French taxpayers, French consumers and, no doubt, the French nuclear industry as well. It will not benefit us at all. That £5 billion could be spent in many other ways, particularly on energy conservation.

The right hon. Member for Hitchin and Harpenden is right that we need a base provision of core generation for peak times, but if we invest heavily in green energy of every kind in order to maximise energy provision in other ways, we could reduce that core requirement to its very lowest level. Germany has already done it. I understand that it has invested gigantic amounts in all sorts of alternative energy, such that, on warm summer weekend days, they can effectively shut down their power stations and tick over on the alternative energy provision.

It has been said so many times, but we have wind on our shores and we are surrounded by sea and tides. We are aware of a positive move towards using the Severn barrage, that will produce enormous amounts of our energy, but there are other forms of generation, too, which could be flexible and provide us with base load, such as generation by burning organic waste, or anaerobic digestion. Unlike with wind and sun, we can turn that on and off. If we invested heavily in anaerobic digestion, so that all the organic waste was used to produce methane, which could be used either directly or to generate electricity, it would provide a massive contribution to the core base load of our electricity and energy provision. We have to go in this direction. We have to resist the power and controls of the energy companies and go for an alternative energy and green energy society.

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14:41 Nigel Adams (Selby and Ainsty) (Con)

We are talking about world-leading companies that have proven that their technology works and that have solved the supply and materials handling problems. However, they cannot provide a solution on financial viability without having a UK policy framework that supports it, which is why I am delighted that we have a Treasury Minister here with us today. Drax is already the UK’s largest producer of renewable energy, even without yet running its current renewable capacity to the full—the current renewables obligation framework does not make it financially attractive to do so. Drax is willing and able to go further, but the policy framework must support rather than hinder it.

Such a level of subsidy for wind, which proudly claims to be the cheapest form of renewable energy, is not a particularly good use of the money that is being levied from the consumer, driving more of them into fuel poverty every year. Electricity that can be produced as and when required, at any time of the day or night, must be worth more than electricity produced only when the wind blows.

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14:46 Diana Johnson (Labour)

I am grateful to the hon. Lady for her intervention. I will talk about the regional growth fund, but under the previous Government funding was made available for ports so that they could develop projects such as the wind turbine manufacturing that I mentioned. We need to recognise that not only the previous Government but, to give them some credit, this Government have taken steps to support the green economy through wind turbine manufacturing. I think it is a combination of the two things. I do not think we can deny that the previous Government did a lot around the green economy, with the very important legislation in the Climate Change Act 2008, which was the first of its kind in the world. I will come to the regional growth fund in a moment.

I hope there is cross-party support for the motion. Labour introduced the Climate Change Act. We are committed to a green economy, and I very much hope that the Conservatives will fulfil their promise to be the greenest Government ever.

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14:55 Peter Aldous (Waveney) (Con)

The green economy is performing particularly well at present and it is important that the UK takes full advantage. Last year, the low carbon goods and services market grew by 4%, and investment in renewable energy around the world reached record levels. In 2011, there was an estimated £6.9 billion of investment in the UK renewables sector, with 21,000 jobs announced. Research and development work is ongoing, and renewable technology is becoming more competitive. The offshore wind cost reduction taskforce estimates that it should be possible to cut the cost of offshore wind by a third by the end of the decade.

It is welcome that the Government are tackling electricity market reform as part of the draft Energy Bill, which is at present before the Environment and Climate Change Committee. I shall not comment on EMR in detail as we shall return to it in the autumn, but it is an extremely important subject where it is vital that the right decisions are made. In tackling EMR five guiding principles should be pursued: timeliness, simplicity, certainty, transparency and coherence.

I commend the Government for the work they have done locally in East Anglia. There is an enterprise zone aimed at the renewable energy sector in Lowestoft, in my constituency, and in Great Yarmouth, and a centre for offshore renewable engineering designation for those two ports.

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15:03 Mr William Bain (Glasgow North East) (Lab)

China and South Korea are investing hugely in the low-carbon sector, which, it is estimated, will be worth $2.2 trillion by 2020. China’s share of the low-carbon economy is set to rise to 24% by that year. The Chancellor’s lack of foresight risks leaving the UK in the economic slow lane. It is extraordinary that it is not only the Governor of the Bank of England who now writes letters to the Chancellor about the state of the economy but, we have learned, the Secretary of State for Environment, Food and Rural Affairs, the Secretary of State for Energy and Climate Change and, perhaps most surprisingly, the Foreign Secretary. Perhaps there is only 24 hours to save the green economy, based on their concern that Government policy is simply not going far enough to generate growth in an innovative sector that, after the financial crash of 2008, provides an opportunity to rebalance a growth model that many people believe has failed.

Ernst and Young estimates that £4 billion to £6 billion of public capital is necessary over the course of this Parliament for the bank to be effective in tackling the investment barriers in offshore wind, carbon capture and storage, and associated infrastructure. Lord Stern, a leading climate change economist, notes that that is not state aid or subsidy, as the institution is needed because of market failures in finance, particularly those associated with risk and policy risk. However, the green investment bank will not have borrowing powers until April 2017, which casts huge doubt on its ability to raise the £200 billion estimated to be necessary to meet the UK’s CO 2 reduction targets by 2020. While immediate borrowing powers are essential, so is timing. As the Environmental Audit Committee reported in March last year, investors may put off investment while there is uncertainty about how the bank will operate. A bank that is slow in building its balance sheet may not meet our emissions and renewable energy targets by 2020.

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15:12 Dr Thérèse Coffey (Suffolk Coastal) (Con)

With regard to the fiscal and regulatory framework, I was not surprised by the speech made by my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), because I know that he holds strong views on these matters. I understand perfectly why he feels that energy costs are unnecessarily high: he blames the subsidy and thinks it is a problem for other industries. I take a very different view: that if we are to encourage self-reliance in energy, we have to invest in our energy infrastructure. It is not about subsidy; it is about an incentive to attract investors from around the world, and nowhere more so than at Sizewell C. I have seen the strong commitment of EDF and British Gas to continuing their planning application work not only at Hinkley Point, but at Sizewell C. Frankly, all the talk about subsidy is nonsense. It is an incentive to have green energy infrastructure on which we can all rely.

I hope that we in Suffolk Coastal will be vying with my hon. Friend and neighbour across the river with the coming online of the Greater Gabbard, Galloper, and East Anglia wind farms and so on, as many of those come onshore in my constituency. That does not mean pylons in my constituency, although sadly it does in one nearby. We are seeing for ourselves the future of green energy, and we are proud to be part of it.

I shall use part of my contribution to this debate to call on my local district councils and indeed councils throughout the country to take advantage of the recent Department for Communities and Local Government guidance on including a supplementary planning document specifically on renewable energy. Instead of councillors being beset by every single application and the Planning Inspectorate overturning decisions, I would like to see local councils develop their activities in a planned and structured way and be part of the process of making sure that the future is as green as the luscious fields that we have enjoyed since all this rain fell.

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15:20 Martin Vickers (Conservative)

Developing renewable energy is more than an environmental solution to help slow climate change, however; it is about bringing jobs and investment and revitalising, rejuvenating and regenerating my constituency and other areas that have been hard hit by unemployment and by business closures.

To return to future jobs, however, the Government have recognised the area’s potential by establishing an enterprise zone, the very name of which—the Humber renewable energy super cluster enterprise zone—does not roll off the tongue but is an acknowledgment of the Government’s support for the growth of the sector in the area.

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15:27 Andrew George (Liberal Democrat)

So far, speakers have not much reflected on why it is necessary for us to pursue a low-carbon future—apart, that is, from the right hon. Member for Hitchin and Harpenden (Mr Lilley), who is no longer in his place—and have accepted that policy as a given. As a responsible and significant country that wishes to lead the way internationally—for example, at the recent Rio+20 summit —we should be setting the standards in responding to the challenges facing the globe. The recent Stern report set out the significant impact that rapid climate change will have on people and their lifestyles around the globe, and on the world’s economy, including this country’s economy, if we fail properly to get on top of the problem.

I am glad that that is now seen as the relatively unarguable fact of the matter. Although there are some who advance the case—I will not say that it is a respectable case, but I respect the fact that they argue it—of the climate change deniers, who are the modern equivalent of the flat earth society, on a relatively un-peer reviewed and un-scientific basis, it is good that this Government, the previous Government and Members of this House generally take a reasonable approach to the challenges that we face.

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15:36 Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)

I am proud that one of the Labour Government’s legacies was the broad acceptance of the need to tackle climate change. They worked tirelessly to attract low-carbon investment and to strengthen the UK’s green economy. The Climate Change Act 2008 was a world first—it binds the UK Government by law to reduce carbon emissions by a third by 2020 and by 80% by 2015. My hon. Friends the Members for Southampton, Test (Dr Whitehead), my hon. Friend the Member for Kingston upon Hull North (Diana Johnson) and others were part of that process. We owe them a debt of gratitude for their work at that time, because it helped us to reduce the UK’s greenhouse gas emissions by more than 20%—to below 1990 levels—and to beat our Kyoto target.

The Labour Government doubled renewable energy generation. We tried to establish Britain as a world leader in offshore wind capacity, and moved towards the UK becoming a world leader in the prototype development of wave and tidal technology, as hon. Members have said. Clean coal and coal-fired power stations can sometimes be controversial, but the previous Government proposed that no new coal-fired power stations would be built without carbon capture and storage to cut emissions drastically.

“We need to recognise the fierce urgency of now. We need to see the whole of the government pulling in the same direction to cut emissions and green our economy… Climate change cannot solely be the concern of the climate change Minister.”

The green economy is growing worldwide, but the real danger is that if this Government do not continue the work started under the previous Government and do not see that climate change is important or that the green economy is a part of growing the wider economy, we risk being left behind.

Let me add my concern to those already raised about the plan by Vestas for the manufacture of wind turbines. It was originally hoped that it would create some 2,000 jobs, but it has been abandoned. The hon. Member for South Thanet, a member of the Energy and Climate Change Committee, was quoted as saying at the time that Vestas’ decision would have been

As I understand it, she went on to say, as other Members have said this afternoon, that the market needs certainty from the Government. That has been a running theme throughout our debate: in order to develop, create and ensure that new technology is made accessible and affordable as part of the delivery from tackling climate change and growing the economy, the market needs certainty and long-term planning. I strongly argue that it is necessary for the Government—across all Departments, including the Treasury—to stand up and take those responsibilities seriously.

Let me end my speech by telling the House what Labour believes we need to do. Some of it has already been set out by the shadow Secretary of State for Energy and Climate Change, my right hon. Friend the Member for Don Valley (Caroline Flint). She identified five key elements in an active industrial strategy. First, we need to unlock private investment by delivering on electricity market reform and ensuring that the Government act decisively. Secondly, we need to improve public procurement to support the green economy. We have heard about housing-related issues, and I think that we could do more in that regard.

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15:52 The Economic Secretary to the Treasury (Miss Chloe Smith)

I am taking up the Minister’s invitation to intervene. Will she consider, even at this late hour, telling us about electricity market reform and how it affects the Treasury at the next meeting of the Select Committee on Energy and Climate Change, which I hope will be held next week? May I assure her that if she does take up our invitation, she will receive a warm welcome and some very straightforward and supportive questions during that discussion?

I thank the hon. Gentleman for his good-natured reiteration of an offer to appear before the Committee. I have not appeared before it because it is scrutinising the draft legislation of another Department. I believe that my right hon. Friend the Secretary of State for Energy and Climate Change, who was also here this afternoon, explained to the Committee this week that he, of course, is representing the Government’s collective position. Although I welcome the hon. Gentleman’s faith in me, I regret that I do not feel that I could usefully add more than that which the Secretary of State has already provided to the Committee. May I also point out that electricity market reform, as my right hon. Friend will have set out, is an early and credible signal to investors that the Government are serious about encouraging investment in low-carbon electricity generation now?

I shall now deal with some of the points made in this debate. My hon. Friend the Member for Sittingbourne and Sheppey exhorted the Government to be clearer on wind energy. I say to him that the Government have been conducting a thorough review of the support provided by the renewables obligation and the Department of Energy and Climate Change will publish the results of it shortly. I know that he and others will take a deep interest in that.

May I further reassure the hon. Members for Southampton, Test and for Glasgow North East (Mr Bain) on the green investment bank? The important point is that the GIB pathfinder—UK Green Investments—is now open for business, with more than 20 individual projects under active consideration, including in renewable energy, waste management and energy-efficiency. All those are large markets with enormous growth potential. Calls have been made this afternoon for it to move forward more quickly and be able to borrow. I wish to reassure the House that it has been given £3 billion in its initial capitalisation and has the potential to borrow from April 2015 when debt is falling as a percentage of GDP—that is a crucial point.

Regulation can play an important role in setting common standards and expectations. The Government recently announced that we will introduce mandatory reporting of greenhouse gases for all companies quoted on the London stock exchange. Again, that goes back to the theme of transparency. In this current economic climate, it is crucial to make it simpler for businesses and industry to meet their environmental responsibilities. We will continue to review and amend existing fiscal instruments and regulatory instruments to ensure they remain focused on achieving both economic and environmental objectives. An example of that is the review of the carbon reduction commitment scheme. Budget 2012 announced a consultation on proposals to reduce administrative burdens in that scheme and the Government are considering the responses to the consultation, which has just closed.

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