14:31 Mr. Tim Yeo (South Suffolk) (Con)

We chose to study carbon capture and storage because the world simply has a great deal of coal—an awful lot of which will get burnt. Coal happens to be one of the cheapest, but one of the most polluting ways in which to generate electricity. Having studied the climate change issue generally very closely as a Committee over the past five years, it is clear that although most of the technology that we need to decarbonise the world’s economy—certainly in terms of the built environment and transport—already exists, the one crucial technology breakthrough we must have relates to carbon capture and storage, because of all the coal.

The large combustion plant directive was introduced to reduce sulphur dioxide and nitrogen oxide emissions, which will lead to the closure of about a third of Britain’s coal-fired power stations. Any new plants will have to be fitted with scrubbers to remove those problems. If coal-fired power stations are replaced even with gas-fired generation, as happened in the previous dash for gas, it will do little or nothing to meet our longer-term targets for cutting greenhouse gas emissions. Of course, there is a short-term gain, because gas produces less than half the emissions of coal-fired electric generation. That will therefore help to meet short-term targets.

Up to that point, I regret to say that progress on carbon capture and storage had been appallingly slow. The 2003 White Paper “Our Energy Future—Creating a Low Carbon Economy”, which was published when I was shadow Secretary of State for Trade and Industry, promised what was called an urgent, detailed, implementation plan, and that a study to inform decisions would reach its conclusions within six months. Three years later, when my Committee considered carbon capture and storage as part of our report entitled “Keeping the Lights On: Nuclear, Renewables and Climate Change”, we concluded that a plethora of reports gave an impression of activity, but that nothing had actually happened. A situation we justifiably described at the time as “scandalous”. By 2007, the Committee reported in its annual pre-examination of the pre-Budget report that there was still slow progress on the CCS demonstration project and no progress on devising a financial framework.

“The lack of a clearer signal from Government…has slowed the development of CCS.”

The Government argued that it was necessary to restrict the competition to focus attention on the technology that was most deserving of development and that would be easiest to retrofit. We supported their decision to focus on post-combustion technology but called for the demonstration programme to be extended. The Government told us that there was significant uncertainty on the costs, technical requirements and risks associated with CCS.

Our report concluded that the resurgence of interest in coal was failing to take account of the damaging environmental impact that would arise from running those power stations unabated, or unabated on most of their output, until CCS was proven. We said that opening the door to a new era of coal-fired generation was potentially very damaging, both environmentally and economically.

We also warned against abusing the arguments about energy mix. Investment in coal, even with the promise of CCS, must be the last resort. The Committee does not accept the Government’s claim that new coal-fired generation has no impact on overall emissions because new coal-fired power stations would have to operate with the EU emissions trading scheme cap. We have debated that point at some length. In theory, that sounds all right on one level, but as we have argued in other reports, the Government should not rely on the EU ETS in that way because the emissions from a coal-fired power station do not disappear and have to be accounted for somewhere. It goes right against the intention and spirit of the EU emissions trading system, which was designed to reduce emissions, for the Government to use it as a cover to justify continuing to encourage, or at least allow, investment in the most polluting form of electricity generation. We said they should take more urgent and ambitious steps to develop CCS. They should also make it clear that unabated coal-fired power stations will not be allowed to operate in the longer term. Our view, incidentally, is absolutely consistent with what the Energy and Climate Change Committee has said since our report was published.

The Government have made much of the concept of CCS readiness, meaning the planning consent given when a new plant fulfils certain conditions that would enable CCS to be fitted at some point in the future. That has been included in a handful of gas-fired power stations. However, it was clear from the evidence we heard that, in the absence of a Government requirement that CCS be retrofitted, CCS readiness is pretty meaningless. There is no guarantee that CCS will ever be fitted to those plants, even when that is a condition of granting planning permission.

The price of carbon is currently far too low, and too volatile, to drive the necessary investment in CCS. Given the impact of the economic recession on the EU ETS, particularly on phase 2, the carbon price is likely to remain too low for several years, so we urge the Government to look at feed-in tariffs for CCS or some other funding mechanism.

We published our report in July 2008. It took more than a year for the Government’s response to appear, and when it eventually did it was published as a Command Paper. In October 2008, after the summer recess, we received a response from the Department for Business, Enterprise and Regulatory Reform, as it was then called, just as the Department of Energy and Climate Change was being created. I must say that members of the Committee from all parties were absolutely dismayed by the contents of DBERR’s initial response, so much so that we wrote to the new Secretary of State for Energy and Climate Change and asked whether the Government would like to reconsider their response. We refrained from embarrassing them by publishing what had come from DBERR, which we would have been entitled to do and were happy to give the Secretary of State some time to, produce another response.

We warmly welcomed that, and I congratulate the Secretary of State, with whom I agree on a whole range of issues relating to climate change. He has overseen, and probably led, a significant change in Government policy on that subject, and that is extremely welcome. I note in passing that if DBERR was capable, as late as October 2008, of producing a response of the sort it did for our report, it is dismaying to think how out of touch and backward looking sections of that Department must then have been.

I welcome the fact that the published response to the report accepted many of our recommendations. It confirmed the Government’s commitment to expand the CCS demonstration programme and set out what was being done to take forward the competition and support the development of individual CCS components. The Committee had called for a more strategic approach to the development of CCS, and the Government’s response on a framework for the development of clean coal and the energy national policy statements provides some detail on its development in the UK.

The response also described the development of a strategy for the international development of CCS. It noted that the EU’s ambition was to have 12 CCS plants operational by 2015, and a further €1 billion was made available for CCS projects in April 2009. That is welcome, but unless Britain advances its plans there is a risk that it will be other member states that build a competitive advantage in CCS. Other EU countries may position themselves better to make money from selling and installing CCS technologies in parts of the world where they must be fitted if there is to be any hope of getting global emissions to peak. There is therefore a risk that Britain will once again miss out on the chance to build a world-class industry because it has failed to harness UK creativity and innovation. That would be a tragedy in a field where the global market is potentially truly enormous, and I hope that the Minister will comment on that.

In their response, the Government stressed that coal still has a vital role to play, but Britain must be cautious about the investments that it makes in fossil-fuel-powered generating capacity, because there is a real danger that we could lock ourselves into a high-emissions pathway. If it turns out that we have made investments in assets that must be retired before the end of their economic lives, billions of pounds will have been wasted. Having said that, I welcome the Government’s acceptance of the Committee’s recommendation to step up efforts to drive forward the development of CCS and their recognition of a possible role for emissions performance standards. I also welcome their decision to scale up their financial support for CCS by funding up to four CCS demonstration projects.

Requiring any new coal-fired power station to demonstrate CCS on at least 300 MW of its operating capacity from day one, however, looks inadequate. Although that figure is much higher than the target for the original competition, it still probably represents only a quarter of typical output. At that level, we cannot be sure that we will get enough information to know whether CCS is technically and economically viable. Requiring new coal-fired power stations to retrofit CCS to full capacity within five years of its having been proven is the very minimum expectation that we should place on the industry. Preparing for the possibility that CCS will not be proven by considering emissions performance standards is another urgent matter.

In line with the Committee’s recommendation that the demonstration project be extended, the 2009 Budget announced an extension covering up to four sites and including pre-combustion and post-combustion technology. Up to four means two to four, so at least one more site will be built then would have been built under the original arrangements, which covered only post-combustion technology. I understand from the Government’s response to the Committee on Climate Change, which was published earlier this month, that they are considering only two bids, but that another round of the competition will be launched towards the end of the year. Perhaps the Minister can clarify that when he replies.

I am grateful to the Minister for that clarification. I hope that that means that the Government are confident that when they respond to the bids, we will be able to gain the information that we need to answer the questions about the technical and economic viability of CCS. I look forward to what the Minister has to say on that.

The Budget also announced extra research funding for companies in the existing competition. The recently published energy national policy statement recognised that CCS is unlikely to be built without financial support. It also recognised that planning consent will be given without reference to the allocation of funding, so more applications may receive planning consent than are able to secure funding. The Government have consulted on how a reliable funding stream can be developed for CCS, and there are proposals in the Energy Bill, which is currently before the House. Ofgem will have a role in relation to CCS and in managing the vehicles for funding and monitoring CCS demonstration projects, and I hope that the Minister can tell us a bit about what Ofgem has done to ensure that it has the right people and skills to fulfil that role. The Committee on Climate Change has made it clear that decisions on financing CCS will need to be taken in 2016 if finance is to be in place to support its roll-out in the early 2020s.

The framework for clean coal, which was published around the same time as the energy national policy statement, makes it clear that the Government’s ambition is for CCS to be ready for widespread deployment from 2020. Once again, that ambition is the minimum that the Government should aim for—2020 is still quite a long way away. The Secretary of State made it clear that the framework’s objectives are to advance the development of CCS, improve its affordability, ensure the diversity and security of energy supplies in Britain and create jobs and opportunities for UK businesses. I am sure that we all strongly endorse those aims.

The framework also envisages all new coal-fired power stations fitting CCS by 2025, which implies that some generating capacity may not do that for another 14 years. The energy national policy statement made it clear that the Government plan to report on the status of CCS by 2018 in the light of the progress made by the demonstration projects. That review will consider the framework in which coal-fired power stations would be constructed beyond the demonstration phase. If CCS is not proven, the national policy statement suggests that we will need a regulatory approach to managing emissions—one that is consistent with, and complementary to, the EU ETS and which might, therefore, be an emissions performance standard. Can the Minister reassure us that there will be adequate time to take all the necessary actions between the report on CCS in 2018 and the 2020 target date for CCS to be ready for widespread deployment?

The advice of the Committee on Climate Change makes it clear that power generation must be almost completely decarbonised by 2030, and it has talked about a 90 per cent. cut, which my Committee certainly endorses. If progress is made on CCS in 2018 and it is deployed on all new coal-fired power stations from 2025, that would appear at first glance to be consistent with what needs to be done domestically. However, the advice from the Committee on Climate Change is equally clear that global emissions must peak in the next five or six years, and certainly by 2020, if the world is to have any chance of meeting its climate change objectives. It therefore looks impossible for the UK’s work on CCS to make any real contribution to efforts to achieve a global emissions peak by 2020. That is a disappointing outcome and it is the direct result of the neglect of CCS and, I am sorry to say, the scandalously lethargic attitude that the Government showed for quite a number of years, until they woke up a couple of years ago and started to do something.

Britain has not built a new coal-fired power station since 1974, but pressures on energy security, fluctuations in gas prices and the prospect, however distant, of clean coal technology have all increased interest in new coal-fired power stations. The irony is that CCS may have contributed to the resurgence of the prospects of coal.

CCS must play a decisive role in reducing emissions domestically and internationally. If we act too slowly now, the British effort to develop CCS will play no part in the effort to get global emissions to peak by the late 2020s; indeed, it may already be too late. Far more urgent action is needed if Britain is serious about gaining any competitive advantage on CCS. Active efforts are being made elsewhere, and what we are doing may be too little, too late compared with what our competitors are doing abroad. It remains unclear who bears the risk if CCS is not ready and what action will be taken if it is not proven. That uncertainty does not help to generate the investment that the Government are trying to encourage.

The initial delay in responding to my Committee’s report was disappointing, but we welcome the fact that so many of our recommendations have been recognised in the reshaped CCS policy. There is some distance still to travel, and the Government must show that they are treating this issue with the urgency with which they promised to treat it way back in the 2003 energy White Paper. I commend my report to hon. Members.

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14:58 The Parliamentary Under-Secretary of State for Energy and Climate Change (Mr. David Kidney)

The Committee’s report on carbon capture and storage highlights the importance of CCS as an option for tackling climate change and ensuring our long-term energy security. It also raises a number of important issues, which the hon. Gentleman has discussed, and I thank him and his Committee for their clear and well-presented report, which has indeed assisted the development of policy in the ways that he described.

As the hon. Gentleman said, the report was published in July 2008. At about the time that there should have been a Government response, the Department of Energy and Climate Change was created, and there was some delay in producing a proper response. I apologise unreservedly for that delay and I hope that the response that was eventually published, as well as what I say today, will satisfy the Committee that its report has been given the consideration that it deserves and has influenced the direction of Government policy. I want to argue that we have made significant progress with our policies for clean coal and carbon capture and storage, much of which takes up the helpful comments made by the Committee in its report.

However, a coal-fired power station emits about twice the carbon dioxide of an equivalent gas-powered station. If coal is to remain part of the electricity mix and the world is to meet its climate change objectives, it is essential that CCS should become an established technology. We all enjoy, and will want to continue to enjoy, the high level of security of supply delivered by the integrated national electricity system, but it has to be low carbon, and so we all stand to benefit from the development of CCS. I remind hon. Members that CCS has the potential to reduce emissions from fossil fuel power stations and industrial installations by around 90 per cent., while at the same time enabling fossil fuels to continue to be an important element of a secure and diverse energy mix. CCS can also create economic opportunities for the UK and reduce the cost of tackling climate change.

Those factors explain why any credible strategy for tackling climate change must include the development of CCS technology.

The 2005 G8 summit at Gleneagles introduced a package of measures to combat climate change, one of which was to develop cleaner fuels and accelerate the development and commercialisation of CCS technology. Since then, we have made enormous progress in the UK to achieve that. In 2006 we launched a call under the Environmental Transformation Fund for projects demonstrating carbon abatement technologies, followed by a second call in 2009. There are now such demonstrations in this country. In 2007 we launched the first competition in the world to build a commercial-scale CCS project. Through the Energy Act 2008 we created a comprehensive regulatory regime for the storage of carbon dioxide in geological formations. Again, we were the first country in the world to bring in such regulation. Through the Climate Change Act 2008 we increased our 2050 target for a reduction in greenhouse gas emissions to an 80 per cent. cut on 1990 levels. That legally binding target is an ambitious plan showing that we are wholly committed to creating a low-carbon economy, in which CCS will play an important part.

In summer 2009 the Government published the UK low carbon transition plan, which plots how the UK will meet a 34 per cent. cut in emissions on 1990 levels by 2020. The transition plan takes a cost-effective route to reducing carbon and is the most systematic response to climate change of any major developed economy. Our plan includes the development and eventual wide-scale deployment of CCS.

In April 2009, ahead of our low carbon transition plan, we outlined our proposals for a new regime for new coal-fired power stations, and we launched a consultation on the detail of those proposals in June 2009. In November 2009 we confirmed our policy for a new financial and regulatory framework to drive the development of clean coal. Those policies are the most ambitious for clean coal and CCS anywhere in the world. All new large combustion power stations in the UK already have to be constructed in a way that ensures that they are meaningfully carbon capture ready. I take to heart the strictures of the Committee about what carbon capture readiness means, in relation to the advancement of the technology. Nevertheless, the requirements go considerably beyond European requirements, and require the developer to undertake an assessment of the technical feasibility of retrofit, transport and storage options, as well as providing for sufficient space for the capture facility.

Since November 2009 no new coal power stations may be built without the demonstration of CCS. That is backed up by a significant increase in the scale and ambition of our demonstration programme for CCS. We have now committed to support a world-leading programme of four commercial-scale CCS demonstrations. Both pre-combustion and post-combustion technologies will be demonstrated under the programme, and that reflects one of the Committee’s recommendations.

“Later in 2009, we plan to publish a CCS strategy that will consider”

“international development of CCS, including in the EU”.

Our demonstration programme will provide the platform for the necessary long-term transition to clean coal. Our ambition is to have CCS ready for wider deployment from 2020 and for any new coal plant constructed from then to have full CCS from day one.

Many hon. Members, like the hon. Member for South Suffolk today, have referred previously to the Energy Bill and its progress. The Bill was introduced in November and will put in place a new legislative framework, which is needed to deliver our programme for CCS. Specifically, it will create a new financial support mechanism for CCS, funded through a levy on electricity supplies. Such legislation is the first of a kind and will ensure the availability of financial assistance that could be worth up to £9.5 billion over the coming two decades. That is the largest single investment in CCS of any country in the world, including the United States. The Bill also includes provision for funding to retrofit supported CCS projects. That is a significant step towards ensuring that we prove the technological and commercial viability of CCS for current and future power stations. We will expect demonstration project plants to retrofit CCS to their full capacity by 2025, with the CCS financial incentive able to provide support if needed.

One theme that came through strongly in the report and was also mentioned by the hon. Member for South Suffolk is the perception of a lack of progress on CCS over the past decade. I strongly reject such claims. We have made enormous progress in several areas, which have been in line with the Committee’s recommendations. As I have already mentioned, the Government’s demonstration programme is among the most advanced and ambitious of any in the world. It is tempting, I know, to compare progress in the UK with that in other countries. However, I want to make two points about that. First, this is not a race. The Government welcome and positively encourage other Governments to develop their own demonstration projects. To that extent we have been instrumental in encouraging investment and progress in the demonstration of CCS, both in the G8 and in the European Union.

The UK is leading international efforts on CCS through active engagement in many forums. Shortly after the G8 summit we established the North sea basin task force with Norway, looking at what steps the North sea basin countries might need to take to enable storage under the sea bed.

In 2005 an agreement called the near zero emissions coal initiative was made between China, the EU and the UK to demonstrate CCS technology in China by 2020. Following the first phase, which was to carry out research, this initiative has now moved into its second phase, which will be to select a project before moving onto the construction of the plant some time between 2015 and 2020.

The carbon sequestration leadership forum was established in 2003, bringing together ministerial-level members to develop the technologies involved in CCS. In October 2009, the UK jointly hosted the ministerial-level meeting where agreement was reached that more than 20 industrial-scale CCS demonstrations could be needed by 2020. The UK is a founder member of the recently created Global Carbon Capture and Storage Institute, established in 2009, which brings together more than 20 national Governments and more than 80 leading organisations.

In the UK we need the trinity of low-carbon fuels—renewables, nuclear and clean fossil fuels—to meet our energy needs. Internationally, there can be no solution to the problem of climate change without a solution to the issue of coal emissions. Many of the UK’s coal plants are ageing and due to close between the mid 2010s and mid 2020s. New coal power stations are important to maintain the diversity and security of energy supplies, but only if their emissions can be managed. CCS is the only suite of technologies that has the potential to substantially reduce emissions from fossil fuel power stations. But we fully recognise the challenges and know that achieving our ambitions for clean coal will not be easy.

Each step of the CCS chain—capture, transport and storage—has been demonstrated and separately shown to work, but significant technical and cost challenges are to be met before CCS can be widely deployed. The Government’s commitment to an extensive demonstration programme is intended to address these challenges.

A rolling review process, which is planned to report by 2018, will consider the appropriate regulatory and financial framework to further drive the move to clean coal. In the event that CCS is not on track to become technically or economically viable, an appropriate regulatory approach for managing emissions from coal power stations will be needed. Again, this puts into effect the Committee’s recommendation 11.

I cannot stress enough that the importance of CCS is many sided: it will bring not just environmental and energy benefits, but benefits for our economy. It is also important to recognise that CCS is not only applicable to power stations. Any large static source of emissions could potentially benefit from this technology. Taking all these opportunities together, it has been estimated that the CCS industry could sustain up to 60,000 jobs in Britain by 2030.

I pay tribute to regional development agencies and others who are working on the potential for CCS in their own areas. This is true in Yorkshire and in the north-east. I visited Durham Energy Institute last week and met Professor Jon Gluyas, who occupies what he claims is the first chair in the world for carbon capture and storage, although I think some other UK institutions would challenge his suggestion that that is the best position on carbon capture expertise, even in this country—Edinburgh comes to mind instantly. Nevertheless, that shows the enthusiasm at regional level to make a success of something that is important nationally and internationally.

Looking forward beyond 2010, we plan to release a CCS strategy this year, considering the international development of CCS, our business opportunities and jobs in this country, infrastructure development, the skills that are needed, capacity building and technology development. We have also announced the creation of an office of carbon capture and storage, about which we are currently consulting stakeholders to determine its role and objectives. In the December 2009 pre-Budget report we also confirmed that the UK will fund four demonstration projects, including our current competition that was launched in 2007. We plan to commence the selection process for the further demonstration projects later this year.

Returning to my previous question, which the Minister mentioned in his last paragraph, he said that a CCS strategy is in the pipeline, which is welcome even though it is slightly delayed. May I ask him the same question that the hon. Member for Wealden (Charles Hendry) and I asked him about another document during the Committee stage of the Energy Bill? Will it be possible, and is it not logical, to have that document in the public domain, as with the document that the Government are preparing on warm homes, in time for us to consider it before Report and Third Reading of the Energy Bill?

We are moving swiftly onwards with the progress of CCS and I hope that today’s debate helps allay any concerns that hon. Members have raised and gives confidence that the Government are committed to the delivery of an ambitious programme of four commercial-scale CCS projects by 2020, and to ensuring that appropriate technical, regulatory and commercial frameworks are developed with timely, informed decisions taken to put them in place. To take CCS forward we must raise its profile publicly. I am sure that all hon. Members agree that gaining cross-party support on this issue will go a long way towards gaining the public’s backing and acceptance.

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15:18 Dr. Alan Whitehead (Southampton, Test) (Lab)

Things have moved on since the report’s publication, arguably with the substantial assistance of that report’s considerations. That is a credit to the report and its contents. I say that things have moved on, but in the next few years, we want to pursue an energy strategy that is coherent; that keeps the lights on; that moves us towards an almost complete decarbonisation of our energy supplies by 2030; that keeps us on track for our 2050 climate change targets; and that keeps us within our carbon budgets as set out by the Climate Change Act 2008. Action is clearly imperative very soon if we are to ensure that our energy supplies decarbonise in that way, but also remain in place. I shall perhaps go into that further in a moment.

When we talk about mineral fuels, we need to be clear on what carbon capture and storage is about in the first instance. As the Committee on Climate Change says,

“there is a longer term role for unabated gas generation reflecting lower emissions intensity and a potential role as back-up generation. The clear priority is therefore for early application of CCS to coal generation.”

The Committee on Climate Change also states that

That is significant not just in the UK, but for coal plants across the world. The hon. Lady is right: it is bad enough if we have unabated coal continuing into the 2020s in this country, but if that continues across the world, the chances of world energy supplies decarbonising as a whole will be zero. As far as the plants’ continuing emissions are concerned, if the plants continue, it is essential that they are effectively decarbonised by wholesale retrofitting and/or have limits placed on the total amount of power that they can generate in any one year. That is very important because unless we fundamentally change the way we operate the UK energy market, we will continue to have a system whereby calls for power are made to energy suppliers via a central balancing mechanism, which will involve a combination of very long-term contracts, shorter-term contracts and what one might call panic contracts, the contracts that deal with the peak of power use—metaphorically, at half-time in the cup final. Smart grids and various other devices will do a great deal to smooth those peaks. Nevertheless, the idea that there will be very long-term contracts, medium-term contracts and very short-term contracts will probably continue in the UK energy market.

Keeping those plants in some form of operation is important in terms of balancing the energy economy, but the dilemma is that if those plants continue unabated, it will be inimical to our climate change targets. We need schemes to ensure that new plants are fully abated by a certain time. If new plants are to be commissioned, whether or not there is initial substantial underwriting with respect to carbon capture and storage, money will still need to be put into commissioning, investing in and developing those plants.

Secondly, we need to ensure security at the storage end of CCS. That is not mentioned as being part of the process; it is assumed—indeed, it has been stated on occasions—that we are extremely fortunate compared to other countries. Provided one builds new power stations reasonably near the coast, particularly the North sea coast, getting the captured carbon piped and sequestered is easier, given the number of redundant oil fields that we have in the North sea.

That is partly true, but the analysis done for the Committee on Climate Change by Pöyry Energy Consulting demonstrated that in general terms there will be enough depleted gas and oil fields, stretching out to 2030, for 10 GW capacity of coal CCS. That will give sufficient space for storage from all pilot plants, and will allow for full sequestration from the new energy plants.

At that point, it will be necessary seriously to consider aquifer storage—that is, depleted aquifers and saline aquifers underground. That is a slightly different picture, in as much as the science on such storage is by no means as clear. The geological surveying of aquifers is not as good as that of depleted oil and gas fields. In the not-too-distant future we must move ahead on that front, in addition to the rapid progress that we are making on CCS technology for retrofitting, pre-combustion and post-combustion.

We must ensure that we are able to store in both depleted oil and gas fields and in aquifers; again, we are fortunate to have a plentiful supply of the latter in many parts of the UK. We must get the science right for that, too, so that we can not only store in the immediate future, but can deal with the long-term storage capacity for full retrofitting for coal—and, in the longer-term, the retrofitting of gas-fired power stations, which will eventually be necessary to balance our energy economy. By then, it will be very decarbonised indeed.

I commend this report, the Government’s response to it and the tremendous progress that has been made in carbon capture and storage. None the less, I do not underestimate the work that has to be done. The prize of ensuring that we in this country can use a mix of energy that is secure and substantially decarbonised, and that reaches our targets in the years to come, is one that we should acknowledge and reach out for. Hopefully, we will be successful in decarbonising our energy economy in the years to come.

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15:40 Mr. David Anderson (Blaydon) (Lab)

Let me start where my hon. Friend the Member for Southampton, Test (Dr. Whitehead) left off, and let me say that I welcome the report. The hon. Member for South Suffolk (Mr. Yeo) was quite right to be critical of the delay in the report. It is not just his Committee that has been affected; as the chairman of the all-party group on coalfield communities and as co-chair, along with the hon. Member for Northampton, South (Mr. Binley), of the all-party group on clean coal, I have been very concerned about the delays in the report. For both all-party groups, this is not just a theoretical matter—it is real life. The APG on clean coal deals not only with the industry but with people who will, hopefully, take the process forward. As for the coalfield communities, a lot of the work that results from that process will be work that people in those communities will get involved in. Over the past year, the setting up of the Department of Energy and Climate Change has been a key feature, and it has moved things rapidly forward. We must welcome the work done by the Secretary of State, and by the Minister who is with us today.

As for resolving the problem, the Minister spoke about some of the avenues that are available. Nuclear energy is a possibility, as is the development of additional renewables. He missed out the key option, however, but I know that that is not because he does not believe in it. The key option is making what we do—in our homes, as regards transport and so on—more efficient. Key to that is the work being done in north-east England on the development of electric cars, of which the Department of Energy and Climate Change and the Department for Business, Innovation and Skills are very supportive. We cannot ignore the fact that fossil fuels will be needed and, to some extent, they should be welcomed in this country, but only if we get CCS right. My hon. Friend the Member for Southampton, Test, talked about the unabated nature of power plants; we cannot accept anything other than the full abatement of power plants going forward. We really need to know what we are talking about.

The reality, as is mentioned quite often, is that different parts of the CCS jigsaw are already in place. Earlier this week, a group of us visited BP in Sunbury, and we were given some really strong examples of where BP is working, across the world, to store carbon dioxide. A million tonnes a year are being stored in Salah, Algeria. The Sleipner field in the North sea off Norway has been successful. BP is piping carbon dioxide 200 miles overland from North Dakota and storing it underground in Westbury in Canada. There are also successful projects in Germany and other parts of the world. The Carbon Capture and Storage Association says that there are 50 sites in the world that are successfully storing carbon dioxide, so things are up and running as regards one part of the circle.

One of the things that is missing, which we do not talk about and which is never mentioned in the CCS debate, is the “T” word—the transport or transmission of the waste product. We have to get the carbon dioxide emissions from the power plant to where they are to be stored. Earlier this week, the Energy and Climate Change Committee said that that was one area that was not covered fully in the national policy statement. I believe that the matter will come back from the Select Committee for the Minister to consider.

If we are really serious about ensuring that the process is accurate and supported, we should seriously consider putting transmission of carbon into a national policy statement, so that it clearly forms part and parcel of the planning regime. There is no doubt about it: we might successfully go through local planning procedures; use the national policy statements so that the Independent Planning Commission can come to a view on whether a power plant should be built in a particular area; and tick all the boxes, but we must apply the same rigour to the transmission system. We need closer scrutiny of how it is being transmitted, whether it goes directly out to sea, goes underground through pipes, or is transported into ships and taken further out. I hope that we look seriously at the issue when we and the Minister come back to it following a report from the Energy and Climate Change Committee.

One of the real benefits that will emerge from the CCS debate, and one of the reasons why we should go for CCS big time in this country, has to do with security of supply. The UK has huge reserves of coal. Since 1853, somewhere in the region of 23 billion tonnes of coal have been extracted from this country. It is a huge amount of coal, but it is less than 10 per cent. of the estimated total. The Coal Authority estimates that there are still 190 billion tonnes of coal beneath the UK. Clearly, much of that would not be accessible using traditional methods. Later on, I will discuss how it can be accessed.

On a number of occasions, I have had discussions with the Secretary of State for Energy and Climate Change on the issue, and I have asked questions on the Floor of the House, and the Secretary of State has told me that his Department is seriously considering supporting a strategic environmental assessment for the area off the north-east coast. This week, I spoke to Newcastle university to find out to what extent that assessment has happened. The university’s response was that it had recent meetings with civil servants from the Department of Energy and Climate Change, but it has still not got the agreement to go ahead with the commissioning of a strategic environmental assessment. The Department has not said no, but quite clearly it has not said yes, and the longer it does not say yes, the longer there will be concerns about whether the assessment will happen.

that is, if we combine UCG with CCS. He says that the project would also

There is a positive story emerging from what is a huge challenge. There are big job opportunities across this country, particularly in areas of real need—areas that have been hit very hard in the past 25 years and that have never really kept pace with the rest of the country. The reality is that we can access huge amounts of our own resources, so that we are not reliant on unstable and immoral sources of energy. That could have a huge impact on the climate change issue, and it will negate the need for any more open-cast mining. There is huge potential for the export of technology and expertise, but that export will happen only if we get on with things.

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15:57 Simon Hughes (North Southwark and Bermondsey) (LD)

So that that statement is not misinterpreted—although I do not resile from it at all—my party, if we are in a position to influence the issue after the next election, would wish for a reconstituted Government to bring back together the Department for Environment, Food and Rural Affairs, the Department of Energy and Climate Change and the Department for Transport. To be clear, that does not undermine my view of the importance of the energy and climate change agenda, but if we want less top-heavy government, those Departments should be brought back together.

“In addition to our support for commercial-scale CCS demonstration, we continue to support the development of a wide variety of CCS components through our support for research, development and demonstration via the Technology Strategy Board (TSB), the Energy Technologies Institute (ETI) and the Environmental Transformation Fund (ETF). For example…DECC’s Environmental Transformation Fund (ETF) includes support for CCS through the Carbon Abatement Technologies Demonstration Programme. To date some £2.2 million has been committed to one project for the demonstration of a 40MWt Oxyfuel combustion system.”

I have prompted the Minister about the CCS strategy document. I am encouraged to hear that it is imminent. To pick up on part of the speech made by the hon. Member for Southampton, Test, what storage capacity do we think is in the UK and around the British isles? The Committee’s fourth recommendation says:

“Unless the Government is able to show there is sufficient storage capacity there must be some question about the long-term viability of CCS.”

“In our Report on the 2007 Pre-Budget Report we recommended that the Government ‘introduce some form of financial mechanism for incentivising CCS power plants over conventional power stations’, such as a feed-in tariff for CCS plants, or contracts which guarantee funding for the difference in costs between CCS and conventional plants.”

We have talked about the competition; we have talked about an emissions performance standard in other contexts. The Committee on Climate Change is clear that the carbon markets—the EU emissions trading system—may not be sufficient as a mechanism for dealing with that. Will the Minister tell us the Government’s present thinking about the role of feed-in tariffs? Will they consult further on them? I am not aware of having heard the Government speak about that since they gave their response. Might there be other ways to use financial mechanisms? I do not mean for the competition; I am talking about what happens post-competition for the development of carbon capture and storage.

Those are the issues that come directly from the Government’s response. My party is clear: the country will need oil and gas for as long as we have them. We shall need to use our coal, but there should be CCS. We have debated how hard-line the requirements should be in advance. We should like them to be as tough as possible. I accept the points that were made in Committee by the hon. Member for Wealden that there are technical limits to how near to 100 per cent. it is possible to get. One cannot be naive about that. We started from an absolutist position, but there must be compromise, and I remember the hon. Gentleman’s perfectly valid points about the fact that when a plant is powered up it may not be possible to prevent the escape of some emissions. Also, occasionally—I buy that qualification, too—there will be a need to allow coal-powered stations to be used, even if they do not fully comply, if the nation needs them. Those were three good and reasonable qualifications. Some collaborative work is being done on trying to agree some common wording on Report that will be acceptable to many in the three major parties—and, I anticipate, the Scottish National party—which we hope the Government will accept. That will be an important part of the debate.

A fantastic piece of work has helpfully been done by the Committee on Climate Change, which we all value greatly. Would the Minister be kind enough—we went into this subject a bit—to touch on the closeness of the Government position, because I am still slightly confused about the proposal in chapter 4 of their October report on the framework for investment in conventional coal generation. On page 134 of that report, they make four recommendations. I would be interested to hear whether the Minister agrees with each of those four recommendations. His answers on that have not been as clear as I would would like.

Given the context that the hon. Member for Blaydon reminded us about, it is vital that we deal with the way of production, as well as with the volume of production and the technology for dealing with the carbon capture. The Government reminded us that the IEA estimates we will need 100 CCS projects globally by 2020, although I accept that that includes gas. My other questions are as follows. In paragraph 1.14 of “A Framework for the Development of Clean Coal”—I am conscious that there is also the energy policy, which includes coal—the Government state:

Finally, I should like to mention the future of CCS and its compatibility with the European Union, which we touched on when we last debated this matter. The Minister of State, Department of Energy and Climate Change, the hon. Member for Lewisham, Deptford (Joan Ruddock) said in her reply last week that there was further correspondence between her Department and the EU. A request was made that that correspondence should be made public so that we could see the latest position. It would help if the Minister said whether that is now possible, whether that confirms or changes the Government’s position on how acceptable the various CCS options are as technologies and whether they will still regard the emissions performance standard as a key component part of their policy for dealing with a new generation of coal-fired power stations.

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16:21 Charles Hendry (Wealden) (Con)

My hon. Friend the Member for South Suffolk rightly mentioned the urgency with which the issues must be addressed. In the recent coal period, coal generated more than 40 per cent. of the electricity used in this country, so it is still a significant player. However, we can already see that by 2016, as a result of the large combustion plant directive, a third of our coal plant will be out of commission. If the industrial emissions directive goes through, most of the rest of our coal plant will be closing by the early 2020s, so there is a significant need for new investment in plant, and from our perspective that must be genuinely clean coal with CCS.

There are, of course, areas for competition, but it is our view, and that of many others, that Britain is in a unique position to lead the world on that. We have the skill-sets from the North sea oil and gas industry, which can be used for the sequestration technologies that will be necessary. We have a need, we have the many years of coal supply left and we have some of the best scientists in the world operating in places such as Imperial college, Edinburgh and elsewhere. It would be an absolute tragedy if in 20 years’ time we found that CCS was a global technology, but a technology that other countries had mastered. We think that we should have a real vision of Britain leading the world in the commercial development of those technologies.

Jeff Chapman, chief executive of the Carbon Capture and Storage Association, told the Committee in evidence that it was now likely that China would be the first country to get a commercial-scale CCS coal plant operating and that Abu Dhabi would be the second country to do that. Therefore, we have lost out, and in international terms that is a matter of significant concern. The Chairman of the Environment and Climate Change Committee, the hon. Member for Sherwood (Paddy Tipping), said that it appeared to be a competition without end. In the three years that that competition has been running in the UK, Canada has had a competition that was over in one year, so there needs to be greater urgency if we are to see people really looking at investing in Britain in that technology.

The report states that there is an urgent need for a strategy for the development of CCS to give a strong signal to industry, and I absolutely agree. That is one of the reasons we tabled an amendment to the Energy Bill on the need for the Government to publish a road map within the six months after the Bill becomes an Act, should it do so. The Minister talked about a CCS strategy coming out in the next few months, but that is not far removed from a road map.

I would be grateful if the Minister said how we should move forward. The Energy Bill would put in place a levy, a funding system, but that still will not give an overall structure for the development of CCS. That was another issue at the heart of the report. We advocate that a body, perhaps an authority, should be set up to be responsible for the purchasing of the CO 2 emissions, and for letting the contracts for the pipelines and the sequestration facilities. That would be unique in the world, and it would say to businesses large and small that the United Kingdom was determined to lead. I hope that the Minister will reflect on such initiatives and differences.

The Government say that 20 GW of new power plant has been consented; 12 GW of that, or 60 per cent., is gas. Gas will play an extremely important part in our energy mix for many years to come. The people building those plants are not building them for the next few years, to see us over the shortfall before the new plants come into use; they are building them with the expectation that they will be in use for 20, 30 or 40 years. For that reason, CCS on gas becomes particularly important.

The Select Committee discusses a feed-in tariff or other method of support. I hope that the Minister will consider the alternative approach of putting a floor on the price of carbon, which would help secure investment across the board in low and zero-carbon technologies. That would be helpful for investors in nuclear, CCS and renewables. I hope that he will be able to indicate the Government’s position. When he appeared before the Energy and Climate Change Committee a few weeks ago, he said that if the deal that the Government hoped for was not reached in Copenhagen, they would announce their way forward shortly afterwards. In the course of this week, we must declare our response to the Copenhagen agreement. If a carbon price announcement will be part of that, maybe he could share it with us now.

The report is thorough and is enhanced by its brevity and the clarity of its thinking and recommendations. I think that we are all united in wanting coal to play a vibrant part in the United Kingdom’s future energy mix, but it must be genuinely clean and involve carbon capture from the outset. We share the Government’s goal of having a significant number of plants. We have said 5 GW, with some degree of CCS in place, by 2020; the Government have mentioned 4 GW. We are in the same area on that issue, but if we do not have a road map or a strategy in place for delivery, it simply will not happen. I hope that the Minister can reassure us in his closing remarks and respond again to the important recommendations made in the report.

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16:37 Mr. Kidney

The hon. Member for North Southwark and Bermondsey (Simon Hughes), in an intervention on me, asked about the 90 per cent. reduction in carbon emissions if CCS is successful with coal. I shall add to what I said then that the International Energy Agency cites that figure as its assessment. We can do better than 90 per cent. if we are prepared to spend more money, assuming that the technology is capable of being pushed that much further forward. For the sake of completeness, I should point out that today, some coal generators seek to reduce their emissions by co-firing coal with biomass and there is no reason why that would not continue in the future.

My hon. Friend made the important point about sufficiency of storage for carbon dioxide. It is intended in this country that there will not be storage on land, so the surveys that have been done under the seas around this country are very important. He mentioned one survey; there have been several others, and certainly the British Geological Survey in 2006 is the one on which we rely in thinking that there are 100 years-worth of storage of our carbon dioxide emissions in safe places under the sea. However, I take the point that, although some of that capacity might consist of oil and gas fields as they are exhausted of gas and oil, some of it might be aquifers and he is right that our knowledge of those aquifers and their security, in terms of their being a safe storage place, is not complete. So, to answer a question that the hon. Member for North Southwark and Bermondsey asked me, there is ongoing surveying work, to ensure that we have sufficient information.

To conclude that point, I met with representatives of the Crown Estate earlier this week—after all, the Crown Estate is our landlord of the seas—and they are very aware of the need for this transition from oil and gas fields being producers of oil and gas to being, in the future, the storage places for carbon dioxide emissions. They are very attuned to the need to help the industries—both the current oil and gas industries and the future carbon dioxide storage industry—to make that transition a smooth one.

I thank my hon. Friend for reminding me that energy efficiency comes first, before the trinity of fuel supplies that I mentioned to him. Of course, if we can avoid using energy in the first place, we will contribute both to fighting climate change and to our security of energy supply, and we will help those people who find it difficult to afford to pay their bills to reduce their bills. Also, for businesses it is a good thing to reduce their overheads if they can. So energy efficiency—every day—should come first, and I thank him for reminding me to say that.

I still have a little bit of life left in the explanation I gave to the Select Committee on Energy and Climate Change. We are waiting to see about Copenhagen because, as the hon. Gentleman says, the accord has led to the opening of a register for which people will put in their commitments by the end of January. We are not quite at the end of January, but I agree that there will be a need to address the issue of carbon price. However, I still say that it remains the Government’s ambition that the EU ETS will be the main lever by which that is driven. I have been asked about feed-in tariffs, tax incentives, taxation and a new form of obligation. All of those are within the Government’s contemplation to assess before they make a decision on further actions.

The hon. Members for North Southwark and Bermondsey, and for Wealden, asked about the emissions performance standard. I shall come back to that in a moment. The hon. Member for North Southwark and Bermondsey asked me about page 134 of the Committee on Climate Change report. Of course, the Government published their response to that report in January 2010. However, just to take him through the four points that he raised, the committee urged us not to judge the success or otherwise of CCS simply by carbon price, but to consider the wider context of power-sector decarbonisation, and to assess CCS on the basis of UK and international evidence. In our response, we agreed that when we undertake that report in 2018, we will move away from a narrow assessment and take into account the broader points, as the committee recommended.

“The Government should make it absolutely clear now that whether or not CCS can be deemed economically viable any conventional coal plant still operating unabated beyond the early 2020s would only generate for a very limited number of hours.”

I totally agree. The Government will therefore conduct a rolling review and make a report in 2018. We are not proposing an emissions performance strategy today. We will conduct our business as recommended by the independent Committee on Climate Change and give our decision in 2018. That is my answer to the hon. Gentleman and the hon. Member for Wealden on emissions performance standards.

The hon. Gentleman asked me about making public the EU correspondence. I am not in a position to say that I will do that, but I can confirm to him, as the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) has already done, that we did reply to the European Union letter—the one that he said had been leaked to him, and which he read to the Committee. We said that we did not agree with it. We have not had a substantial response to that letter yet.

Finally, I come to the speech made by the hon. Member for Wealden. He asked whether there was a race. I thought that I said “world-leading” lots of times in my opening speech. I agree with him that we would like to be at the front of the development of carbon capture and storage. Moreover, I agree with him in the sense that there is a race against time, and we must make a success of carbon capture and storage. Nevertheless, we are co-operative, and we understand the hugely important global challenge involved. We want others to be successful, too. That is why, when the European Union and China settled on the near zero emissions programme for coal, they turned to the United Kingdom to take the lead. We are the scientific, administrative and civil service lead for that project because of our recognised expertise.

The hon. Gentleman said that Dr. Jeff Chapman thinks that China and Abu Dhabi will be the first places to produce commercial CCS. I respond by saying that Ernst and Young think that the US and the UK will be first, and I am with it on that. He says that we need to publish a road map. I refer him to the response that we have made to the first annual report of the Energy and Climate Change Committee, and show him the road map on page 27. There is a timeline there, and text that goes with it. It demonstrates that we are in command of our subject, and that we have a coherent plan and a time scale that goes with it.

I want to finish by agreeing with my hon. Friend the Member for Blaydon, who said that there are exciting prospects for the world, and specifically for this country, in making a success of carbon capture and storage. It is exciting because of the jobs and the energy supplies that we can secure, because of the contribution that we can make to the global challenge of tackling climate change, and because of the exports and manufacturing opportunities that we can obtain from this development. The Government are fully committed to doing their utmost to get all those benefits for this country and for the world.

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16:59 Mr. Yeo

First, on the race, it is true that the world has an interest in getting the technology viable. In that sense, it does not really matter who develops it first. But at a time when the appetite for addressing climate change in this country and many others is faltering a bit for various reasons, it is important to identify the economic opportunities presented by the potential solutions. It would be a tragedy if Britain, with its tremendous record of creativity, innovation, scientific expertise, and so on—and a distinguished, long history of mining—were not in the vanguard of devising the technology. That is why, although I welcome what the Minister says about the exciting opportunity, which is undoubtedly true for the reasons he gave, I very much regret that we have lost a bit of time already in the past six years. We are now much more focused on the potential. It will be of enormous potential commercial advantage to Britain—our economy will benefit—if we are one of the winners in this race, just as it will benefit the whole world.

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