11:00 Thomas Docherty (Dunfermline and West Fife) (Lab)

I congratulate the hon. Gentleman on securing this debate on a very important issue. Does he agree that it is important to have carbon capture and storage not only for energy security but for environmental reasons? Even if Scotland, with its renewable potential, were able to have a much greater percentage of its energy supplied by renewables, that would not be the case in the rest of the UK and in other countries around the world. Consequently, if we are to tackle carbon dioxide emissions, clean coal and carbon capture and storage have to be a part of any solution we find.

I make no criticism of Iberdrola or of Ministers for the decision that they ultimately made. Building on the excellent work of the Leader of the Opposition, my right hon. Friend the Member for Doncaster North (Edward Miliband), when he was Secretary of State for Energy and Climate Change, the current UK Government offered a £1 billion fund for carbon capture and storage. The only observation that I would make—as I say, it is not particularly a criticism but more a general observation—is that many colleagues misunderstood the nature of the competition. The competition was not a case of “last man standing wins the prize”; it was a marathon, and to qualify for the funding one had to reach the finish line. Regrettably, but for obvious reasons because Longannet was the last entrant in the competition, there was an assumption that it would receive the £1 billion. The UK Government and Iberdrola, the Spanish energy giant that owns Longannet, were clearly in the region of £500 million apart on the start-up and ongoing costs of Longannet. That is regrettable, particularly for my constituents, but I do not think this was doable for the UK Government.

It is worth saying that no short-term danger is posed to the Longannet power station by the current carbon capture and storage project not getting the go-ahead. The lights will not be turned off at the station tomorrow morning, but there is a question about its medium-term future. There is a genuine debate to be had about whether it would be the right decision to build another coal power station, whether Iberdrola should be encouraged to seek a further life extension, and if so what Government support could be offered, or whether, as at Cockenzie in East Lothian, a decision is made to shift the type of fuel. Whatever the options, I sincerely hope that the UK Government will do all they can to offer genuine support to Iberdrola as it seeks to take this forward, and I would be grateful if the Minister found time—for either himself or his colleague Lord Marland, who has, to be fair, been a big supporter of CCS—to meet with me. Whatever decision is made about Longannet, I hope, ultimately, that when we get successful CCS we can either retrofit the station or, if we do persuade Iberdrola to go for a new build, that we can get it included. For the benefit of my constituents, I would be grateful if the Minister spelt out what support the Government will be able to give to any new build fossil fuel plant that might be needed to keep the lights on.

I thank the hon. Gentleman for giving way. I have listened very careful to his arguments about coal and gas. It seems that this technology is a long way from being proven, and it would be a big win if we could get it to work for either gas or coal. I want to address the point about Longannet. The Government’s most recent publication, “The Carbon Plan”, which came out about a month ago, states that the first decision about an operational plant for CCS will be made in 2018. That is a long time after the current generation of coal is scheduled to be switched off, so there is an issue there if we expect this technology to save some of the coal stations that are planned to be switched off in the next five years.

I am most grateful to the hon. Gentleman, because he has reminded me of an important issue. If the project had gone ahead at Longannet, the full 2,000 MW would not have been converted to a CCS scheme. Forgive me if my figures are slightly out, but roughly only 20% of the capacity would have moved across. He is entirely correct to say that it is a long-term technology. The problem with energy and its supply is that by its very nature it requires long-term decisions, which is what makes the SNP’s ludicrous plan for 100% renewables so unachievable. They have no “plan McB”—to use the First Minister’s slogan. When the hon. Member for Banff and Buchan addresses the Chamber, I would be grateful if she spelt out how an SNP plan McB would work, given that it is so clearly failing on its plan McA.

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11:20 Ian Swales (Redcar) (LD)

I have more than 25 years’ experience in the electricity and heavy process industries. The delay in carbon capture and storage implementation at Longannet is disappointing. The UK is in a great position to exploit CCS. As Lord Oxburgh, president of the Carbon Capture and Storage Association recently put it:

“Experience gained in the North Sea oil and gas industry, and the abundance of offshore geological sites where CO 2 may be stored underground have allowed the UK to become one of the global leaders in CCS. Capitalising on this early leadership is vital”.

We should be ambitious about CCS in the UK. It is needed to decarbonise our power production and our heavy industry. The areas that get CCS infrastructure will become magnets for new power and industrial investment. That means that we can protect energy-intensive industries, which are currently being challenged by European Union and United Kingdom climate measures, and help to reverse the decline in our manufacturing sector. Failure to act will lead to more announcements like the recent one on the closure of the UK’s last aluminium smelter. Ironically, it is in Northumberland next to the North sea, and the owners had considered using CCS to keep the plant going. It is now too late.

Where should CCS investment take place? Again, we should be ambitious. There are four obvious prime locations: the Aberdeen area, the Forth, the Tees and the Humber-south Yorkshire area. They all have merits, and the Department of Energy and Climate Change should kick-start development in them all. A long-term strategy should be developed for CCS infrastructure.

To those who say that such development is highly expensive, I say that we need to look more at the overall longer-term finances for the Government, industry and energy generation. For example, it has been estimated that the CCS project proposed for Teesside can generate a peak of £1 billion a year in extra petroleum revenue tax for the Government, through oil companies using CO 2 to get more oil from their North sea wells. That possible extra oil recovery from the North sea is estimated at 4 billion barrels. The use of CO 2 for enhanced oil recovery is already widely practised in the United States.

The debate is about Scotland, but a project is ready to go in Teesside, and the necessary list of major players in pipelines, processing and so on are ready to start. More than 30 large CO 2 emitters in the power and industrial sectors can be connected to the system. Interestingly, a few of those are using biomass, which raises the prospect of net carbon-negative power—sequestering CO 2 from the atmosphere. By generating clean power and running clean industry, CCS can make a huge contribution to UK climate change targets. A clear and ambitious UK-wide strategy, action to remove roadblocks to progress and a sense of urgency are needed from DECC, so that the UK can genuinely lead in this exciting new industry.

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11:28 Dr Eilidh Whiteford (Banff and Buchan) (SNP)

I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate. I am rather disappointed that he chose to squander his opportunity today; instead of asking the Government about progress on the plans for carbon capture and storage in the UK, he preferred to take pot shots at the First Minister, who not only is not here but does not have the power to make decisions on CCS that will be made under the current constitutional arrangements.

I want to focus on CCS in Scotland. I share the hon. Gentleman’s disappointment and frustration over the abandonment of the Longannet project. It promised job security for the folk involved, offered technological innovation and would have brought significant investment to Fife. I regret that it hit the buffers, but it is not only the people of west Fife who have been frustrated by the slow progress of carbon capture projects in Scotland. Peterhead, in my constituency, has long been recognised as having leading potential as a site for CCS. Indeed, Scottish and Southern Energy asserted that Peterhead represents the best site in the UK for a gas demonstrator CCS project. By no means is that a new plan. The previous CCS plan for Peterhead was abandoned in 2007, after expectations were raised and then dashed. Frankly, delays and indecisiveness on the part of Government led BP to scrap its plans and turn its attention to projects overseas. The problem was that the previous Government were not decisive enough.

I do not think there is much argument any more with the view that we need to mitigate the environmental impact of fossil fuels if we are to have any hope of meeting our international commitments and obligations in tackling climate change. We need to continue using fossil fuels, but we also need to make them cleaner. It is also evident—I was surprised by the hon. Gentleman’s comments on this—that gas will remain a crucial part of our energy mix. What are the Minister’s views on the role of gas in the UK’s energy supply? It is important to understand the role that CCS might play, not just from the perspective of energy security, but from that of the sustainability of our planet.

That, however, does not negate the argument for a CCS gas demonstrator project at Peterhead. We are where we are and we are dependent on gas, but the proposed Peterhead site fits in extremely well with both the UK’s strategic objectives and the EU’s strategic priorities. It is also very well located for old oilfields in the North sea. We are in a good position to use them—it is probably a better position than that of anywhere else in Europe at present.

I am grateful to the hon. Gentleman, who has considerable expertise in this area, for making the important point that it is not just gas but coal that comes from overseas. The point about CCS technology is that it is extremely marketable and the UK has a comparative advantage in that market. A number of coal demonstrator projects are taking place elsewhere in Europe, whereas gas is not being explored to anything like the same extent internationally. That could give us a proper comparative advantage in gas CCS technology. It is about not just our domestic markets but international marketability.

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11:36 Gordon Banks (Ochil and South Perthshire) (Lab)

We need to determine—we can only do this through full-scale trials—whether carbon capture and storage is a real option for future economic prosperity, as well as for dealing with the knock-on environmental issues, which are the driving factor. It is equally important to determine what a successful CCS programme—developed and branded in the UK—could deliver to the UK economy in terms of revenue and the skills of our constituents.

In an intervention, I made the point that, with coal-fired power stations in the UK and throughout the world—an increasing number are coming online in countries such as China—CCS is the real gain and the holy grail. We need to focus our minds on it in the UK, while bearing it in mind that both the public and private sectors have limited resources to invest. I will come to that in a moment.

Can the Minister confirm the expected release date of the CCS roadmap, because that is absolutely vital for the private sector embracing the challenge of this technology and seeing the Government as a partner in this? Unless the Government play their part, we cannot expect the private sector to play its part. That in itself will create jobs, technology and developmental skills that I hope we can build on and in some way export. CCS could create 13,000 jobs in Scotland and 14,000 jobs elsewhere in the UK. By 2025, the sector could be worth more than £10 billion a year to the economy, which, in addition to the environmental impact, makes CCS a bit of a no-brainer. We have touched on how many times we have been left behind.

Does the hon. Gentleman agree that, if CCS is worth £10 billion to the economy, those who will benefit have an incentive to help to get things going? It does not seem to make sense to rely only on Government funding.

As I was saying, how many times have we been left behind and missed the boat in the UK in terms of various different technologies? The hon. Member for Redcar (Ian Swales) talked about wind technology. It is a crying shame that we are where we are with wind technology. We are largely importing the technology and the equipment to build turbines. That really has been a missed opportunity. Although CCS may be costly—I will come back to that matter—it is an opportunity we cannot afford to miss.

We need something from the Government to show that they are embracing CCS and that demonstrates to the private sector how serious they are. The hon. Member for Warrington South (David Mowat) raised the point about CCS being expensive. Yes, it is. There are no cheap or quick fixes to our energy position, but we have to consider what the fixes are and CCS is potentially one of them. Governments in Holyrood and Westminster need to step up to the plate, and I am not sure they are doing that.

My hon. Friend makes a valuable point. We must determine what becomes a priority in the United Kingdom and ensure that people’s lives are not blighted by decisions that are trying to make things better. There is a real need to recognise that we must have security on a core range of issues, one of which is energy. I embrace the possibility of ensuring that future CCS opportunities and, indeed, new build with carbon capture get the relevant scrutiny and are of benefit to the UK, Scotland and the immediate community. Future CCS opportunities need to be fully valued and evaluated in that process.

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11:44 David Mowat (Warrington South) (Con)

Thank you for letting me speak, Sir Roger—I had not intended to do so. I want to make two points in relation to some of the comments I have heard: one in favour of CCS and one expressing some reservations. I will mention the latter one first, which relates to cost.

Many hon. Members have talked about the benefits of CCS technology. Of course, we live in a country where energy is still 90% fossil fuel generated, and anything that can enable us to make the transition from that in a carbon-free way, such as CCS, is attractive. Yet there seems to be something wrong. What the Government should be doing is setting a price for carbon and then letting the private sector do the work. We do not know the details about Longannet but, for whatever reason, that approach is not enough. People are saying that we have to invest a further £1 billion here and have a further pilot scheme there. What the Government’s role ought to be—this is the energy market reform—is, as it is with nuclear, to set a price for carbon, give industry that stability and let it make the investment. For example, let us consider Iberdrola.

I do not, no. If this technology is to work, it has to be done on the same playing field as everything else. I mentioned the price of carbon. The other thing about CCS technology that is not in doubt is that it requires an injection of power over and above what a power station is currently using—in the order of 25% for coal. That is an immediate increase in emissions and everything else just to make CCS work.

I am willing to accept that this technology is new and that the Minister might therefore say it is a bet to try to get it to work in our country. I agree that our country is uniquely well suited for CCS because of the offshore gas fields. In places such as Germany, people have been resistant to CCS because the fields are onshore and they do not want CO 2 under them. Our country is in a uniquely good position for CCS, as it is for wind, and I do not necessarily begrudge the Government spending the money. However, I repeat the point that, structurally, the energy market reform sets the price for carbon and we should let the market decide. We will watch with interest whether the market does decide that this technology is worth pursuing. That is my negative point. I shall now make my positive point.

The hon. Gentleman is certainly bringing a different perspective to the debate. Does he not accept that Governments have given subsidies and financial support to both nuclear and renewables for a decade-plus and that CCS pump-priming would be no different from the support that those industries already get?

Just to be clear, I completely buy into the Climate Change Act 2008 and its requirements. However, the way that the Government have chosen to meet their environmental obligation is by setting a price to carbon. That is what makes CCS viable because, obviously, the companies will save the money from burning the carbon at whatever the rate is—£30 or £50 a tonne—and so on. That is my point. The level playing field that the Government are trying to obtain through the energy market reforms is being achieved over the medium term by the price of carbon.

Let me now make my point about CCS from a more positive point of view. What worries me a little about the Government’s position on CCS is a little similar to what worries me about the Government’s position on nuclear. Both CCS and nuclear have one thing in common: they are extremely good at reducing carbon, but they are not renewables. The Government have an issue to work through, and I have said this in other forums. The Climate Change Act 2008 requires us to reduce our carbon emissions by 80%—a huge and difficult target, but it is right that we are trying. My concern is that, in 2009, the EU 20-20-20 directive required us to increase our use of renewables by a factor of five over a decade or so. That objective is not necessarily consistent with the objective of reducing carbon.

It is possible that CCS may lose out, like nuclear, through a little bit more ambivalence on the part of Government. I looked at the Government’s carbon plan. It estimates how much of our electricity will be produced from CCS by 2030 and how much will be produced from renewables. I am not anti-renewable at all, if it can be made to work in a cost-effective way. The Government’s estimate for 2030 is a factor of five difference between renewables and CCS. I do not know whether CCS will be made to work or not. We should try, and it would be great if it did, but I am worried that the emphasis of policy is not on carbon reduction. The emphasis of policy is on renewables, and that might take us to, or down, a sub-optimal path.

Just one point of clarification: those two things are not necessarily entirely separate. A new 300 MW biomass power station has been announced for Teesport. A CCS network in the area could actually feed into that. As I said earlier, we could end up with carbon negative power as a result of doing that, so they are not entirely separate. While 300 MW is not a huge amount, it is worth noting that the Longannet project was only 400 MW.

I agree. I mentioned CCS and nuclear as opportunities. Biomass is also an opportunity. In common with the first two, it is also not a renewable. As I said, I am concerned that the emphasis of policy is in the wrong place. The 2008 Act was a hugely ambitious plan to try to achieve. We should not be diverted from doing so and we should look very hard at optimising that.

Finally, we have not really covered nuclear in any detail, other than an exchange at the start between two hon. Members from north of the border—the hon. Member for Dunfermline and West Fife (Thomas Docherty) and the hon. Member for Banff and Buchan (Dr Whiteford). People say to me that there is no cost-effective option. On the facts, it would appear that nuclear is cheaper than some of the other options, but of course the market needs to determine that. I agree with that. The carbon price will allow that to happen. That needs to be the case with CCS.

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11:53 Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)

We have had an interesting and wide-ranging debate on CCS in Scotland and other related factors. It is not a surprise that the debate has sometimes ranged beyond CCS projects in Scotland, because so many aspects of energy policy and energy considerations are tied up with the potential—the potential projects and the success, or otherwise—of CCS. I am sure there are many other issues, from the contributions we have heard, that the Minister will wish to reflect on. He missed the very start of the debate, but what is gratifyingly clear from the whole of the debate is that—despite one comment from the hon. Member for Warrington South (David Mowat)—nobody taking part in the debate fails to see the potential of CCS and its impact. From time to time there is a view that, because CCS is unproven and has not been demonstrated on a commercial basis, it is a distraction. I do not believe it is a distraction. It is integral to achieving the right, balanced energy policy and the right mix of energy sources, and to reducing carbon emissions at the same time. It is interesting and positive, therefore, that that view has not been expressed during the debate.

I think my hon. Friend is trying to tempt me into one aspect of a constitutional debate that we will have, and I am sure we will have plenty of opportunities. I join other hon. Members in seeking clarification from the Minister on what offers of funding for CCS were made, if any, from the Scottish Government. It would be interesting to learn more about that issue if he has the opportunity to address it in his winding-up speech.

Scotland has had a relatively long, and sometimes chequered, past—and present—with CCS: from Peterhead to Longannet, and back to Peterhead again. There is also the potential of the Hunterston project, which is currently caught up in the planning process. Other hon. Members referred to the difficulties that can arise with the planning process.

All those things make it important that the Government remain committed to CCS, including, potentially, in Scotland. That does not mean that the decision on Longannet was not disappointing, as I have said: it was bad news for the plant, for the local economy and for Scotland. My two hon. Friends here today with local connections made that point eloquently. However, as my hon. Friend the Member for Ochil and South Perthshire said, we are where we are and we have to deal with the realities. The important thing now is that the potential demonstrated in the work at Longannet is not lost, so that we do not have to start from scratch.

It is important and significant that we understand the difference between CCS being encouraged through other aspects of energy policy, including carbon pricing, in the longer term—as the hon. Member for Warrington South mentioned—and where we are now, because this technology has not yet been proved commercially on a significant scale. The real potential has been demonstrated, but it is reasonably widely accepted, if not universally, that to get that benefit Government intervention and support is needed in the initial stages.

Funding is important and I am sure the Minister will have expected me to mention that, given that I have used many opportunities in the past few months to seek answers on this issue. It is important that we get clarity from the Minister today, including about the funding that is available going forward. At the time of the Longannet decision, the Minister’s boss, the Secretary of State for Energy and Climate Change, said at Energy questions that there would be no backsliding from the Treasury, that the £1 billion would be available for CCS funding, and that that was an absolute commitment. Yet the day before the autumn statement—I am sure the Minister recalls the radio interview—the Chief Secretary to the Treasury made it clear that the £1 billion for CCS would be subsumed within the £5 billion infrastructure plan, although he was not clear about what would then be available for CCS. The ramifications of the interview on 5 Live that morning were pretty significant and have caused a degree of concern in the industry that has not yet abated. Perhaps the Minister will comment on that and say what that means for the timeline for the development of CCS.

Again, will the Minister make clear how much of the £1 billion that his boss said there would be no backsliding on will be available during the current CSR period? How much of the £1 billion previously set aside for CCS will now be used for other infrastructure projects? Will those other infrastructure projects in the Treasury infrastructure fund exclude CCS, and is the money being double-counted? What form will the remaining funding take? Will it be up-front capital, or fixed or variable payments over time?

I am asking the Minister these questions again because on 29 November 2011, I asked the Chancellor during his autumn statement to provide some clarity, but he was not able to do so. On 1 December I asked the Secretary of State for Energy and Climate Change to provide some clarity, but I am afraid his answer was not clear. On 6 December I asked the Chief Secretary again to provide further clarity, but, again, he was unable to do so. On 15 December I even asked the Leader of the House to provide some clarity, and he said that he thought the issue had been dealt with with the appropriate degree of clarity beforehand.

Four Cabinet Ministers were, in the space of 11 sitting days, given an opportunity on the Floor of the House to spell out clearly and without ambiguity exactly how much money was available for CCS in this Parliament, what the impact would be on the timeline for distributing that funding and whether the funding was, potentially, being spread far too thinly to have a positive impact. On each occasion the Government were found wanting: rather than providing potential investors with the clarity they were asking for, they preferred to provide further confusion.

The Energy Minister even claimed, in a written answer to me, that the Chief Secretary to the Treasury had not made any announcement on CCS funding. People who heard the interview I have mentioned would beg to differ: although it may not have been a formal announcement to Parliament, that statement by the Chief Secretary has caused such a degree of concern that it is incumbent on the Government to provide the clarity we need now.

I should like to touch on the European NER300 funding package. The lack of clarity about Government funding for CCS projects has a knock-on effect on other sources of funding, which hon. Members have mentioned, whether private or public. One such source is the European Union NER300 programme. The six CCS projects competing for funding from the UK are also doing so at European level.

The Peterhead project is seeking funding. The chief executive of SSE, Ian Marchant, has made it clear that the development of the commercial-scale CCS demonstration is dependent, to some extent, on levels of support from both the EU and the UK Government. The criteria for accessing EU funding are clear. Before any allocation of EU money for a CCS project that is seeking both member state and EU funding:

Those words are chilling, and unless that criterion has changed, they highlight the urgent need for the Government to get in place their plan in relation to CCS, so that that opportunity is not missed.

Scotland is at the forefront of this pioneering low-carbon technology, which could hugely benefit our energy security and how energy policy is taken forward across the UK and more widely around the world. However, as hon. Members have highlighted, the right support from the Government is needed to get that opportunity up and running. It is time for the Minister and the Government to bring the uncertainty to an end, to provide clarity and to come clean on CCS.

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12:09 The Minister of State, Department of Energy and Climate Change (Charles Hendry)

We have had an extremely valuable debate, characterised by the extent to which hon. Members have spoken with both commitment and expertise. It reinforces why we all desire the issue to be seen as outside politics, and there is an enormous prize for our whole country. People looking to invest want to see as much clarity and agreement between the parties as possible, to which the tone of the debate has been conducive. We are all frustrated about the pace of progress and we are all disappointed that the Longannet project could not be made to work within the budgetary framework, but we are all equally committed to taking the issues forward, to ensure that the United Kingdom is one of the most attractive places in the world in which to invest in CCS. The UK has unique facilities, which should put it at the forefront of developing CCS, and Scotland is at the forefront in the United Kingdom. The industry’s potential for Scotland, for existing industry and for new industries that want to support CCS and to provide part of the supply chain is extremely comprehensive.

The frustration was outlined before the general election by Paddy Tipping, then the Member of Parliament for Sherwood and a member of the Select Committee on Energy and Climate Change, who said it was a competition without end—the competition for CCS seems to have gone on for ever. Given that we must now proceed with new urgency on setting a new competition, it is not lost on any of us that we wasted the chance over a number of years to take the opportunity forward, and we must now do so with extra vigour.

My concern was always that the competition was too narrowly focused. Given the requirement for post-combustion technology, the interest in pre-combustion technologies, such as the BP project at Peterhead, could not qualify. The assumption at the time was that the technology could then be sold to China and elsewhere to retrofit old plants, but the Chinese are now clearly quickly developing their own technology that they want to sell to the rest of the world, so we need to look at a wider range of technologies. An added complication, which I will come to later, is retrofitting an old technology to an old plant, with the significant extra costs inevitably occurred in bringing that plant up to scratch, to give it decades of future life, on top of the cost of the CCS alone.

We all agree that CCS can play a fundamental part in delivering our secure, low-carbon energy needs. It provides us with a generation option that other technologies do not: its flexibility can provide a balance between the intermittency associated with renewables and the base-load nature of nuclear. It allows fossil fuels to play a full part in our low-carbon future and allows the decarbonisation of industrial emissions. We—the whole of the United Kingdom and the Government—remain firmly committed to working with industry to achieve that.

We have made available £1 billion of capital funding to support early CCS projects, and I will say more on that in a moment, in response to the questions. We are establishing a market for CCS electricity through our reforms to the electricity market. We are continuing to lead the world in putting in place the regulatory framework to support CCS, including legislation on third-party access to pipelines. We are supporting essential research and development, including opening the UK’s first carbon capture demo at the Ferrybridge power station. We have also established the CCS development forum, which has drawn together around 40 members from the industry to be directly involved in delivering CCS in the United Kingdom, together with representatives from the international academic and non-governmental organisation communities.

There are many different ways to achieve the decarbonisation of the power sector. At this stage, it is not possible to predict which will be the most cost-effective route or what exactly the power sector will look like in 2030. Nevertheless, we can use economic models to produce projections, using the best evidence currently available. Analysis undertaken for the carbon plan of the Department of Energy and Climate Change suggests that around 40 to 70 GW of new low-carbon electricity generating capacity will be needed by 2030, depending on demand and the mix of generation built. In response to the point made by the hon. Member for Banff and Buchan (Dr Whiteford), a strong continuing role for gas is envisaged in that mix.

Our analysis shows that CCS could contribute 10 GW of capacity to the UK electricity market by 2030 and up to 40 GW by 2050. I want to be absolutely clear that we are not setting targets for separate technologies. The industry’s ambition for CCS, as set out by the Carbon Capture and Storage Association strategy paper last year, is significantly higher than in our modelling, seeking 20 to 30 GW by 2030. We would be happy with such deployment, provided that it is the most cost-effective way to meet our decarbonisation targets—an issue raised by my hon. Friend the Member for Warrington South (David Mowat). We must do three things to make that possible: provide incentives for investment, bring down the costs of the technology and tackle barriers to deployment.

The key to delivering the investment that we need in the UK electricity sector is confidence, for both technology developers and investors in the long-term future for their technology, and in the certainty of opportunity for those who want to take forward CCS and other low-carbon technologies. That is why the Government are implementing the biggest reforms to the electricity market for a generation, to provide the certainty that investors require and to create an industry for CCS, rather than only a few pilot projects. We are committed to reforming the electricity market to incentivise the deployment of low-carbon generating capacity.

Electricity market reform is a game changer for CCS. The reforms that we have announced offer the prospect of a future market for CCS electricity that will drive investment in commercial CCS plants. We are considering reforms that offer a range of benefits: longer-term contracts to provide stable financial incentives; support for early CCS projects, with contracts designed to recognise the associated uncertainties; an emissions performance standard set at the equivalent of 450 grams of carbon dioxide per kWh; and a carbon price floor that will further incentivise investment in low-carbon generation. With such incentives in place, the deployment rate for CCS will be dependent on the costs of the technology and how they stack up against nuclear and renewables.

If CCS is to be competitive with other low-carbon technologies, we and the industry must work together to understand the costs and how they can be reduced. There are two elements: technical discovery, through both research and development and learning by doing, and reducing the perceived risk of investing in a new technology, which leads to higher premiums for investment. We are tackling these issues in two main ways: through our £125 million research and development programme, which will continue to provide support for projects such as the UK’s first carbon capture pilot at Ferrybridge, which was opened by the Secretary of State for Energy and Climate Change last year; and through our new CCS delivery programme, which will support larger-scale projects, delivering learning by doing, moving the technology forward and reducing risk premiums. The programme will focus on achieving the overall outcome of cost-competitive, low-carbon electricity from fossil fuel power stations in the 2020s, thus achieving exactly what we want, which is a long-term industry in the sector.

The hon. Gentleman’s point is critical to the whole Scottish electricity sector. The work is being taken forward by Ofgem through Project TransmiT, which is considering the appropriate regime for charging when electricity is transmitted over long distances. It will set out its thoughts during the next few weeks, and that can be discussed in more detail. I am very encouraged by the progress that I understand is being made to find a formula that will work for those who are developing projects north of the border and in other parts of the country. More detail will be available shortly, but it is critical to the development not just of CCS in Scotland, but to the whole electricity generating sector north of the border.

We are putting in place a strong financial offer for early CCS projects, and it is one of the best offers anywhere in the world. It includes the £1 billion that is available for the up-front capital costs of projects, the potential for low-carbon contracts for difference to support operational costs and the potential for European new entrant reserve funding, which we fully support.

I am grateful to the Minister for his partial answer to one of my questions. May I press him on how much of that £1 billion will be available during the current CSR period and the current Parliament if demand is present and whether the projects are advanced enough for the money to be available to spend? How much of that £1 billion could be spent on CCS during this time, or has it been subsumed into a wider infrastructure pot?

Certainly, the funding that was assumed would be spent on CCS in the middle of this spending round and that will not now be spent and cannot be spent is being made available to other infrastructure projects. I am sure that the hon. Gentleman welcomes that, because it will help to drive forward our economic recovery. Until we have seen the scale and type of the projects and the extent to which they will co-operate and collaborate, we cannot set out exactly what the funding will be. Some of them will access the new entrant reserve fund; some will be more dependent on a predictable income stream through the contracts for difference; and some will need more up-front funding. Until we know exactly what the projects will be, we cannot say exactly how they need to be financed. I understand why the hon. Gentleman wants clarity now, but until we understand the nature of the front-runner projects, we cannot say with certainty exactly how that funding should come forward.

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