14:09 The Minister of State, Department of Energy and Climate Change (Joan Ruddock)

(3) In establishing the level or levels of the carbon dioxide emissions performance standard in subsection (1), and in carrying out the review required in subsection (2), the Secretary of State must—

(a) take into account the most up-to-date scientific knowledge about climate change; and

(b) obtain and take into account the advice of the Committee on Climate Change, particularly in relation to carbon budgets, medium- and long-term emission reduction targets, and future emissions from the electricity generating sector.

(a) the most up-to-date scientific knowledge about climate change;

(b) the advice of the Committee on Climate Change, particularly in relation to carbon budgets, medium and long-term emission reduction targets, and future emissions from the electricity generating sector;

‘(1) The Secretary of State shall, within one year of the passing of this Act, make provision by regulations or otherwise for a carbon dioxide emissions performance standard to set the maximum level of carbon dioxide that may be emitted each year by any coal fired electricity generating station.

Let me now address new clause 8 and Government amendments 5, 9 and 36. There has been much discussion during the passage of the Bill about the need to reduce the emissions from electricity generation and particularly from fossil fuel generation. In many ways, this issue is at the heart of my Department’s mission. The decarbonisation of the electricity sector is central to achieving our statutory goal of reducing carbon emissions by 80 per cent. by 2050. The low carbon transition plan, which was published last July, set out our plans for getting about 40 per cent. of our electricity supplies from low carbon sources by 2020. Those plans include a comprehensive package of measures such as increasing support for renewable technologies, facilitating the development of new nuclear power stations, and demonstrating, then deploying, carbon capture and storage technology in our fossil fuel plants.

We have not stopped there. The lead times for investment decisions in energy infrastructure are such that we now need to develop clear pathways towards our 2050 goal; we cannot just stop at 2020. Our decarbonisation pathways to 2050 document, which will also be published shortly, will build on our low carbon transition plan and set out possible pathways to a low-carbon UK, including the decarbonisation of the electricity sector.

The need to decarbonise the electricity sector means that the issue of emissions from fossil fuel power station has to be addressed. Coal-fired power stations generate about 30 per cent. of UK electricity and about 40 per cent. of global electricity. Tackling emissions from coal-fired power stations must therefore be a priority if we are to avert dangerous climate change while enabling countries to maintain energy security.

These are issues with which Parliament should be rightly concerned. We have set out clear ambitions that any new coal plant constructed from 2020 will be fully carbon capture and storage from day one and that coal-fired power stations with demonstration projects will retrofit CCS to their full capacity by 2025. Let me make it absolutely clear that there will be only a limited role for unabated coal in the 2020s.

have full capacity for CCS. Can she assure us that it is not anticipated that coal stations that cannot have CCS in them after 2020 will continue to operate, or is it anticipated that such stations might continue without CCS?

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14:15 Joan Ruddock (Morley and Rothwell) (Lab)

I repeat that these are issues with which Parliament should be rightly concerned. Ensuring that our policies deliver the carbon reductions that we need within the time frame that we need them is of critical importance if we are serious about tackling climate change. New clause 8 provides the means for Parliament to hold the Government to account for progress on these matters. It requires the Government to lay before Parliament, every three years, a report on progress towards the decarbonisation of the electricity sector including the decarbonisation of coal-fired power stations. The report will also include an assessment of the status of CCS technologies and progress towards demonstration at a commercial scale, and whether coal-fired power stations that have been consented to from 2020 can be expected to be fully CCS from the start.

I think that I was a second ahead, but I am sure that my hon. Friend the Minister will take both interventions. Will she spell out what decarbonisation means in the context of this debate? I know that the Government have had a consultation on the subject. When we talk about CCS, are we talking about 100 per cent. abatement, 50 per cent. abatement or somewhere in between? I hope that we are talking about nothing less.

Knowing how deep an interest my hon. Friend takes in these matters, I am afraid that I cannot answer his question in the precise detail that he would require. We will follow the advice that we get from the independent Committee on Climate Change, which has already made pronouncements on the decarbonisation of the electricity supply by 2030. We are currently considering how to progress from 2020 through 2030 to 2050, and it is in that context that we will be able to give him a definitive answer.

Does the Minister believe that we need to be really honest with people and say that CCS has real potential but that it is currently unproven? That is why we need demonstration plans and a period of time in which to experiment with the technology and economics of the area. Those who press for early action risk the possibility of closing down CCS plants.

My hon. Friend demonstrates real understanding of and wisdom on this issue. As I continue with my remarks, I will give force to the points that he has made. CCS is a new technology and we need to work on it, but it has great promise.

Does the Minister agree with the International Energy Agency greenhouse gas R&D programme that

“there are only four fully integrated, commercial-scale CCS projects in operation”

I am sorry to contradict what I am sure is an excellent report—indeed, I might not contradict it, as there may be a misunderstanding about size—but I am advised that there are no plants operating at the scale that we are proposing in our CCS arrangements for this country. There are plants operating at a pilot scale and there are research plants in other parts of the country, but there are no known commercially viable plants operating at the scale that we propose.

The Minister will have seen the report of the Select Committee on Science and Technology on CCS and its investigation, so she will know that the Committee agrees with her regarding CCS and the developing technology and that we must not rush into it too quickly and fall. She will also be aware that the three-year review period mentioned in new clause 8 is very long. Has she considered making it a one or two-year period?

I thank the hon. Gentleman for that question. I know that he, too, takes a great interest in these matters. We certainly did consider having a shorter reporting period, but because there is quite a long way to go to make CCS operational at a commercial scale, the three-year period seems appropriate to us. That will mean that we will report in 2012 at the latest—just a couple of years from now—and in 2015 and 2018, coinciding with the review period. We think that that is appropriate, but of course hon. Members can always ask for ministerial statements at any time.

I recognise the wisdom of the hon. Member for Sherwood (Paddy Tipping), but also the need for balance in these matters. Will the Minister therefore confirm that competition among nation states for investment in CCS technology is massive and growing quickly? Does she agree that we must make sure that we do not disappoint potential investors by giving the impression that we are not overly bothered?

I could not agree more with the hon. Gentleman. I am so glad to see such support on the Opposition Benches, from him at least. He is right: we need to get on with this— [ Interruption. ] I think that we may hear from some members on the Opposition Front Bench that they want to tinker with our plan for CCS, and possibly undermine it. We are very concerned about that.

I am grateful to the Minister for giving way again. She questioned the scale of existing CCS projects. The Sleipner project in Norway currently stores 1 million tonnes of CO 2 a year in the Utsera saline formation, which is expected to have a total capacity of about 600 billion tonnes. What kind of scale is she imagining?

A key part of the new clause is the requirement for the Secretary of State to take into account points raised by the independent Committee on Climate Change. That will ensure that reports will have to consider the advice of the organisation best placed to judge progress in delivering carbon reductions. I think that that answers to some extent the point raised by my hon. Friend the Member for Sherwood (Paddy Tipping).

This new clause, with the first report due in 2012, will guarantee hon. Members the opportunity to scrutinise progress towards our decarbonisation objectives and, importantly, to challenge the Government’s actions. It will ensure that the Government undertake a regular review of key policies. It will ensure regular assessment as to whether policies require revision in order to deliver on our commitments. It is the backstop that will ensure that there is only a limited role for unabated coal in the future.

The new reporting clause is designed to give confidence to those who argue for an emissions performance standard. We share the concern across the House for greater progress on decarbonisation of our energy supplies. We agree with the Climate Change Committee that a step change in the pace of emissions reductions is required. We reflect this need in the measures set out in our low carbon transition plan, which will deliver emissions reductions to achieve our target of 34 per cent. over 1990 levels by 2020. They will also enable us to meet our statutory carbon budgets.

Emissions from the power sector are already regulated through the EU emissions trading scheme, which is at the heart of our domestic and EU efforts to tackle climate change. Phase 3 of the scheme, starting in three years’ time, provides a significantly stronger framework than previous phases. An EU-wide cap will ensure a more ambitious, certain and consistent approach across the EU, and in the UK there will be 100 per cent. auctioning of allowances to the power sector, which will ensure that the cost of carbon is better integrated into business decisions.

Our policy measures for clean coal are specifically designed to deliver a package that will enable us to meet the Climate Change Committee’s recommendation that there should be only a limited role for unabated coal in the 2020s. There are four elements to the package, as follows: all new coal-fired power stations must demonstrate CCS at commercial-scale, around 400 megawatts of output; four commercial-scale demonstration projects on coal-fired power stations will be funded by the CCS incentive delivered by this Bill; demonstration stations will be expected to be retrofitted to their full capacity by 2025; and, finally, a rolling review of progress in the development of CCS technology will culminate in a report by 2018 that will consider the case for new regulatory and financial measures to drive the move to clean coal. I think that that goes some way to answering the questions raised by the hon. Member for Angus (Mr. Weir).

No other coal-dependent country has a policy that says that no new unabated coal-fired power stations will be built. No other country has a statutory financial incentive capable of raising the sums required to support the capital and operational costs of four large-scale CCS projects over the next 10 to 15 years.

I was setting out the elements of our plan for CCS. Far from being a laggard, as is often suggested by the Opposition, Britain is leading the world on this agenda, as is widely acknowledged by other countries. The new reporting requirement in new clause 8 guarantees that Parliament has the opportunity to challenge the Government on delivery of this programme to monitor our wider decarbonisation of the electricity sector, and to consider whether an emissions performance standard might be needed in the future. The introduction of an EPS now, as required by new clauses 6, 15 and 25—all of which are supported by some Labour Back Benchers, as well as by the Liberal Democrat and Conservative parties—would not lead to greater emissions reductions than those delivered by the framework that I have just set out and the EU ETS.

My hon. Friend anticipates me. I have just said that the introduction of an EPS now would not lead to any greater emissions reductions. In my next sentence I intended to say that instead it could prevent any new investment in coal, and thus the demonstration of CCS and the development of clean coal. My hon. Friend is right.

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14:30 Dr. Gavin Strang (Edinburgh, East) (Lab)

Does my hon. Friend agree that the Government would be capable of setting a level—obviously, no level is specified in any of the new clauses—that will not prevent investment in CCS?

What we are saying clearly is that an EPS, whether it is set at a specific level or whether it is entirely open, will undermine the coal programme that we set out, all the provisions in the Bill, and the investment that companies will be prepared to make if—if—there is support for CCS. They will not be prepared to make that investment in circumstances in which there is uncertainty about layering over some other standards.

I shall try to make progress. The energy industry, the CBI and the TUC have all told us, in no uncertain terms, that an emissions performance standard introduced now will significantly undermine investment plans. If there are no new coal power stations, that puts at risk the whole demonstration of CCS in the UK. Does that matter? We think it does. It matters because CCS has the potential to play a critical role globally in tackling climate change. It matters because fossil fuels play a vital role in our energy mix, and CCS is the only technology that will allow them to continue in a low carbon future.

By acting early on CCS we open up opportunities for UK businesses in a major future market, sustaining 30,000 to 60,000 jobs. But it is not just coal that is at risk. The extension of an emissions performance standard to gas-fired power stations, which is required by new clauses 6 and 15, would delay, and possibly deter altogether, investment in new gas projects.

Greenpeace say it will, and I say it will not be possible. These are the reasons. We have made it clear that we expect that the CCS demonstration plants will retrofit CCS to their full capacity by 2025. Our aim is that any new coal-fired power station built after 2020 is 100 per cent. CCS from day one.

A moment ago the hon. Gentleman was shouting from a sedentary position that CCS was a proven technology, and he cited Norway. He cannot have it both ways. Either he thinks the technology will work— [Interruption.] Yes, my hon. Friend the Member for Blaydon is absolutely right: being a Lib Dem, the hon. Member for Cheltenham (Martin Horwood) can it have it both ways. The question is whether the technology is demonstrated at research and pilot level, which it is; whether it is promising, which it is; and whether it is a technology in which companies with enormous expertise are prepared to invest, which they are. It is all those things.

It is reasonable to have expectations, but suppose the hon. Gentleman’s pessimistic outlook were confirmed and all that were to fail. We have said categorically that there will be a rolling review. We are debating a clause that provides for a strict reporting regime. The House will always know what is happening in this field and Government policies can be adjusted. We have said that that rolling review will conclude by 2018. If the CCS technology is not working and is not deployable, we will have to introduce other means of curbing and decarbonising. We have said that clearly again and again. [Interruption.]

The hon. Member for Wealden (Charles Hendry) says that that is such a threat. One of the potential measures that could be introduced is the EPS, which he seems to favour so much. We have said that the proper way of dealing with the situation is to consider, measure and analyse what is happening with CCS. If it is a success, as we hope, we have solved the problem. If it is not, we have to move to another technology. That is the time to consider an EPS, not now.

I could not have put it better myself, and I am grateful to my hon. Friend, because the question is essentially one of timing: introducing an EPS today would be premature and undermine investment; and, as we progress with CCS we will be able to judge whether we require an EPS or, possibly, another mechanism. The independent Committee on Climate Change has said that there could be as many as four ways of making further progress on decarbonisation, of which EPS is one. My hon. Friend may be right and EPS may become the favoured means if we have to deploy other means than CCS, but at this stage it would be premature to decide that an EPS was the right instrument, because several could be used and EPS is just one of them.

As a consequence of the policy of new coal, CCS and retrofitting, by 2025 all new stations would be achieving abatement well above the EPS in new clause 25. It defines the EPS as limiting carbon dioxide to 25 per cent. of the emissions that would exist if CCS were not in place, but including a specific measure in legislation now might cut across the future methods of delivering our stated policies, and as I have clearly indicated it would not add anything to decarbonisation.

Even the independent Committee on Climate Change does not recommend the introduction of an EPS now. Instead, in its report of October last year, it identified a number of options, as I just indicated, for delivering the necessary investment in low-carbon generation. They include a carbon price floor, a feed-in tariff and a low-carbon obligation, as well as a low EPS.

My hon. Friend is absolutely right, and I know how much expertise he has in this field. I remind the House that the CCS technology promises to take out 90 per cent. of carbon dioxide emissions.

The independent Committee on Climate Change report to which I referred clearly states that the committee

The introduction of an EPS does not depend on the Bill. If at some point in the future we decide that an EPS is required to deliver decarbonisation of the electricity sector, we already have a well established and comprehensive framework for introducing it under the Pollution Prevention and Control Act 1999.

My hon. Friend is absolutely right. Given the extent to which the developing economies and the great emerging economies, such as China and India, will continue to use coal, CCS is absolutely vital to tackling climate change, as I said at the beginning of my speech. If we are able to develop the technology speedily in this country, there will be real export potential. Co-operation is already under way between the UK and China and the EU and China. The EU will also fund some CCS projects, of which we hope at least one will be in the UK, and they will be combining all the information. CCS is very much a global project, but at the same time, from the point of view of British industry, if we get ahead we will be in a very good position to help other countries and benefit financially.

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14:45 Charles Hendry (Edward Miliband)

We entirely accept the role that CCS and coal can play in the mix. It is a new technology, and it is one where we absolutely should be leading the world. The Minister said that Britain remains a leader, but she must be in danger of believing some of her own rhetoric. At the evidence sessions before we started the Bill’s consideration in Committee, we heard many people say that we were losing our global opportunity, and we heard companies say that they had closed down their projects in Britain because of the approach adopted to them. Jeff Chapman, who heads up the Carbon Capture and Storage Association, said that Abu Dhabi and China will probably be the first two countries in the world to have commercial CCS facilities.

“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.”

“Such changes could include introducing an EPS once some experience of CCS has been gained.”

I have made it absolutely clear today that we are providing for CCS to become operational, and that we have a rolling review of that. The companies want to have this opportunity. If they are in any doubt about whether we favour an EPS now, I think that I have made it absolutely clear that we are completely opposed to that, and we will vote against it. Perhaps the hon. Gentleman has not read the letter from the CBI, which says that it is completely opposed, too. That should be enough of an indication as to where industry stands.

Everything that I have said today about the rolling review and the reporting clause in new clause 8 is predicated on the fact that we believe that CCS will succeed. The companies think that CCS will succeed. There is therefore no reason for them to suspect that we are going to introduce an EPS, because if we succeed, there is no rationale for doing so. It is but a backstop in the event that CCS does not succeed.

As far as I recall, the hon. Gentleman supported the mechanism that was contained in the carbon budgets system in the Climate Change Act 2008, which provides not only for carbon accounting and budgeting but for a five-yearly review of what is happening, not only on the basis of where we are going but of a review of whether there should be corrections to that course. That does not spread uncertainty, as I am sure that he would agree, because he supported it. Does he not accept that this is a similar mechanism, which, by the way, he should address in terms of what happens with marginal coal plants as the process continues over the years? Does he consider that this system, in sustaining marginal coal plant in the system through the years, may be a better system than the indeterminate approach that he suggests in his proposal?

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15:00 Mr. Weir (Brighton, Kemptown) (Lab)

The hon. Gentleman assumes that a change in Government policy would mean the introduction of an EPS or similar mechanism, but there is another danger. The only coal plants likely to be built in the next few years are those that will be subject to the levy and will effectively be subsidised. We may get to a point in 2020 at which the plants have been built but CCS is not working or is not economic, and there is then a real danger of a change in policy, with the Government saying, “We will not go ahead with this, because we have invested so much money in these plants.” We could therefore end up with higher emissions in the long run unless there is an EPS from the beginning that would force down the emissions or mean that the plant would not proceed.

New clause 15 would also provide clarity about what factors should be taken into consideration. It mentions evidence from the Committee on Climate Change, affordability and other issues affecting consumers, which we should bear in mind, and security of supply.

One of the points made by people who prefer the market approach is that the market is better than the state because it will always find innovative ways to do things. We heard that argument this morning in the Energy and Climate Change Committee. If that is the case, what does the market have to be worried about? If the EPS is not in place, it will find innovative ways of addressing the matter. If the hon. Gentleman does not believe companies can do that, will he tell the House which companies they are, as my hon. Friend the Minister asked?

The hon. Gentleman is a highly respected member of the Energy and Climate Change Committee, but on this occasion his arguments have more holes than Swiss cheese. Will he confirm or deny the story in The Guardian this morning suggesting that although he and his Front-Bench colleagues will troop through the Division Lobby in support of the new clause, his Back Benchers are on a one-line whip?

“could mean no investment in new coal at all thus making the development of carbon capture and storage (CCS) technology impossible in the UK.”

That is absolute nonsense. The levy will pay for the demonstration projects and there is scope for it to pay for retrofitting 100 per cent. of the plant’s capacity, so that all those bidding under the CCS competitions would know that all their extra costs would be covered. The Minister paints a picture of what the EPS would do that takes no account of the level at which it might be set after further consultation. She writes:

The Minister also expresses a view that an EPS could cover gas as well as coal, which of course is true. Indeed, both she and the Secretary of State have referred to the fact that both coal and gas would be likely to be involved in CCS. However, investors in gas—equally as much as those involved in coal—need to know what will happen in years to come. Leaving things so open could drive away the crucial investment that we need in new gas capacity in this country, because not only coal will be affected.

It is worth registering that there is an overwhelming consensus in the House that we need to take effective action in response to the threat of climate change. The statistics issued by the Department for Energy and Climate Change are very interesting in that they emphasise the importance of the energy and electricity supply in that context. The figures from 1990 to 2008 are striking because they show that energy supply and transport account for well over half of total emissions, and that emissions from energy supply are more than 50 per cent. more than for transport. The Government are right to believe that energy supply is at the centre of where we need to take action to tackle climate change. The nub of the argument is whether there should be an emissions standard or standards in relation to our power stations. There is a strong case for having more than one emissions standard, and I am of that view, and a case for more effective regulation of our power stations in future.

We should not forget that. It is implicit that such technology may not be successfully demonstrated and that any emissions reductions may not be cost-effective. Of course we can have CCS in some form or other, but the question is whether we can develop it effectively to reduce emissions sufficiently significantly—by more than 50 per cent., as my hon. Friend the Member for Morley and Rothwell (Colin Challen) indicated—and whether that will be cost-effective. We should not lose sight of the fact that that is where we are.

There is a consensus in the House that we should go down the road of providing financial support for CCS. That is fine, and it is important that we acknowledge that Government new clause 8 is constructive because it provides for a report. However, it is essentially retrospective, in the sense that we will always be looking back and seeing what happened, which is very different in principle from setting out standards that will apply in future. Of course, there could be different standards for new coal, old coal, gas and, indeed, in theory, for every single power station. The problem is sufficiently important that we must drive down emissions for new power stations and old.

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15:15 Mr. Redwood (Harrogate and Knaresborough) (LD)

If we follow the right hon. Gentleman’s argument on new clause 25, having a set date by which companies must have carbon-neutral stations with full CCS would be the best incentive in terms of giving certainty to the market on the delivery of those technologies.

Is my right hon. Friend confident that within a year we can correctly define the emissions to a target standard? New CCS will not be up and running within 12 months: it will be far later than that before the technology is proven. Any definition at this stage, or in 12 months, will be premature.

I join the hon. Member for Wealden (Charles Hendry) in giving credit to the Secretary of State and the departmental team for the progress they are making in, for example, tackling climate change and addressing issues such as carbon capture and storage. It is worth casting our minds back to the days before the appointment of the current Secretary of State to a time when we had no Committee on Climate Change, no Climate Change Bill and no feed-in tariffs. We did not even have the expectations that we now have for CCS by the 2020s, and there was limited competition to incentivise it. We should recognise the progress that is being made.

However, this debate takes place in inauspicious times. According to an opinion poll this morning, there is growing scepticism about the reality of climate change and the anthropogenic causes of it. There is growing scepticism in the media, in newspapers such as the Daily Express , and among those on the Conservative Benches. Indeed, I see that the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for Northampton, South (Mr. Binley) are breathing down the neck of the hon. Member for Wealden. That kind of scepticism is on the rise, but it is important that we reiterate that the overwhelming scientific consensus is still that climate change is certainly happening and it is overwhelmingly likely that it has man-made causes.

We also meet in the context of the failure at Copenhagen to agree a rigid international framework for tackling the next phase of carbon emission reductions worldwide. The world’s Governments are drinking in the last chance saloon when it comes to tackling climate change in time.

Other hon. Members have referred to the warnings from the Committee on Climate Change, the newly established Government advisers on this subject. It says:

The right hon. Gentleman makes an important point. That is an issue that might in the end lead to derogations from European directives to keep aged power stations online or to allow more importation of gas, which would not be a satisfactory outcome. We certainly need action now, not only to promote CCS but to promote greater seriousness about renewables. For example, we need a stronger feed-in tariff for renewable energy and many other such actions to address the issue that he is talking about.

The Committee on Climate Change also said in its report that the current market arrangements—in other words, those prevailing under the European trading scheme at the moment—are insufficient and leading to a perception of risk in investment in low-carbon generation. It states:

“A new framework to support investment in CCS generation is required.”

“It is likely that there will be a period where CCS is deemed viable but where the carbon price is insufficiently high to cover the CCS cost penalty. In these circumstances, a successor support mechanism would be required. An early signal that such a mechanism would be introduced as appropriate should be provided to reduce risks for investors in the first set of partially fitted CCS plants.”

I am sorry to disagree with the Minister, but I do not think that that clear signal is being given at the moment. In answer to the hon. Member for Wealden, the Minister talked about how an emissions performance standard might undermine the whole investment market, and the hon. Gentleman gave a very good response to that point— [ Interruption. ] I do give credit to Conservative Front Benchers occasionally. They know about business and investment, if nothing else—[Hon. Members: “Oh!”] I withdraw that uncharitable remark. We need those early signals now in order to create the investment framework. The truth is that businesses respond to clear long-term signals. The investment decisions in CCS have to be made now, and they are being made all over the world.

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16:00 Colin Challen

In summary, the new clause provides for the introduction of a framework of emissions performance standards that will apply to all new power stations; sets out a clear timetable; acknowledges that decisions need to be based on a recognition of the advice that comes from the Committee on Climate Change; and provides for account to be taken of the impact of any policy changes on energy prices and energy security. All those things were built in to try to incorporate a recognition of concerns that were raised by Ministers and by the industry in response to the initial consultation.

The second argument against the introduction of EPS is that CCS is somehow the answer. CCS will be applied to four pilot projects. My hon. Friend the Member for Sherwood (Paddy Tipping) was right to say that it might have great potential, but it also carries huge uncertainties. I am not certain whether I believe that it can deliver, but, at this stage, it is an unavoidable gamble that we have to take. However, we need a plan B. To say that somehow standards of performance run counter to that process, rather than reinforcing the urgency of the upward trend, is to miss the point completely and surrenders to the notion that we are held hostage to an ever increasing set of demands for public or customer finance to try to make something work when it might well not. This is an extra safety net rather than an obstacle on the road to progress.

I am delighted that we agree on something. Will my hon. Friend concede that we are not clear not only about the technology and about whether it can work—the hon. Member for Cheltenham (Martin Horwood) did not give us an example of a coal project that was working anywhere in the world—but, more importantly, about the economics of carbon capture and storage? Until we can develop and refine that, it is premature to introduce emissions performance standards. We need the learning from CCS before we introduce an EPS.

That is quite wrong. We have to say that if someone is going to build a new coal-fired power station they should, in any case, expect to set an emissions performance standard for that station. What is done in CCS should be an enhancement of that. We cannot say that we should build anything that does not have an emissions performance attached to it now. That seems crazy. How can we set ourselves national targets if we begin from a presumption that we are not going to measure anything? That is why we should have the courage to set for ourselves an emissions performance standard.

I concede that the only project that I have been able to find is one that has not been mentioned; it is in the United States. An American Electric Power company CCS retrofit project in West Virginia has so far been able to capture carbon at a rate of 1 per cent., but it hopes to raise that level to 7 per cent. That is a salutary measure of both the starting point and the extent of the road ahead of us. Having said that, I return to the point that this gamble is unavoidable: we have to take it, but we should not do so without setting safety-net standards in relation to power stations having CCS.

Absolutely. That is precisely the point that the Climate Change Committee made to us: we need a step change in our thinking that engages with the transformation of what we have, while making a shift to what we need for a more sustainable future. This is a time to be brave and interventionist. My biggest disappointment in this regard is about the argument that is used against us—that we should leave everything to the emissions trading scheme. For a start, the Climate Change Committee has specifically said that it does not believe that it would deliver. All the evidence suggests that the scheme, which has been a monumental failure so far, has become a cheats’ charter. In the pre-conferences before Copenhagen, many of our new EU partners were deeply resistant to strengthening carbon-reduction commitments and emissions trading. I fear that the system will turn into a carbon casino which will end up benefiting no one except those who speculate on carbon price changes. That is why the House has nothing to lose and everything to gain from committing itself to the introduction of an emissions performance standard.

My greatest worry is about Parliament and the Government being afraid to take that stance. If we continue to rely on a market for which we have aspirations, aims, ambitions and bundles of encouragement, but precious little to show that any real market transformation is taking place, then all we are doing is playing into the hands of the climate change protestors who believe that the Government of the day have lost the will to tackle the transformation agenda now—not at some stage in the future when we have passed the tipping points of climate change.

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16:15 Mr. Redwood

Of course, Energy Ministers past, present and future will tell us great things about CCS, new technologies and exciting opportunities. However, I think that any present or prospective Energy Minister will agree with me that the one thing that the Government really must not let happen on their watch—or on the watch of their successor, because we will know whom to blame—is that the lights go out.

The Government are trying to suggest to us this afternoon that requiring them to set up targets and standards now will only delay matters more, but I do not see how they can possibly believe that. Given that all CCS projects rest on levy finance, subsidy and grant, any Government seeking value for public money will surely have to say what they expect from those projects.

The Opposition Front Benchers have, to coin a phrase, something of the night about them. They have rather cynically taken up a populist cause, as they did with Heathrow runway three, while behind the scenes they support a massive expansion in carbon emissions—in that case, in aviation. This afternoon, they have not said anything at all about the level of the emissions performance standard, or how it would be applied and so on. We did not hear an alternative policy explaining how much more money might be invested in CCS to achieve an EPS. There is a lot to explain, but tomorrow’s press will present the debate simply as a collection of invertebrates giving into Government bullying. It would be quite wrong to characterise the debate in that way, but the press will no doubt have their field day—fed by people from Conservative central office.

I support an EPS, but the question is about timing. The principle is correct, but the timing is of the essence. We have heard examples of where standards exist, but they are applied to existing technologies that we well understand and whose development we can predict. I am not sure that we know how CCS will develop and if, indeed, it will be successful. Indeed, I regret that the Minister was not able to define CCS, and I hope that we establish a definition, because without one we cannot establish a standard. Should CCS be defined as more than 50 per cent. carbon capture, more than 75 per cent. or 90 per cent? The Environmental Audit Committee said that 90 per cent. was the right level, and I agree.

A couple of years ago, several Labour Members visited a CCS pilot project in eastern Germany, close to the Polish border, at a place called Schwarze Pumpe, which might be on the list of stations that the hon. Member for Cheltenham (Martin Horwood) has. It is a coal-fired power station that produces millions of tonnes of emissions a year—not comparable to Drax, but pretty big—and its little pilot project captures 36,000 tonnes a year. That is state-of-the-art technology, so there is a big gap and a long way to go, and the issue is not just about the technology, but about the legality. Where do we put the stuff? It is okay to say that we can put it in the North sea, which has a huge capacity, but is it necessarily correct to do so? What are the legalities of storing something in these reservoirs for centuries? Who is responsible for them over time? Is that going to be included in, or excluded from, the standard?

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16:30 Martin Horwood

I have been working for a clean coal sector within our energy provision for quite a long time, and I have been disappointed by the progress in the House since I have been here. I must say, however, that the pace of progress has increased remarkably since the current Secretary of State has been in his position, and I am delighted that that is the case. I was disappointed that the CCS competition was not worked out in quite the efficient way I had hoped. To be fair, the Minister of State has admitted that, which I welcome. I also welcome the fact that the next three of the promised four projects in Britain’s CCS programme will be undertaken under different criteria. There is an important learning curve, and we have grabbed it and taken it on board.

I shall briefly mention the technology involved. There are already more than 70 projects in existence throughout the world, and carbon storage has been well handled by BP in the middle of the Algerian desert for 13 years. Anyone who goes down to Sunbury to look at its centre where CCS is controlled and researched will be amazed by the progress that has been made, how much monitoring is undertaken and how safe the process is. I am worried for my grandchildren, not about leaks of carbon dioxide but that the power stations will cease to produce the energy that we need in this country. My right hon. Friend the Member for Wokingham (Mr. Redwood) said that too, although we come to different conclusions.

New clause 8 is particularly important. I am disappointed that the Minister decided to go for a three-year reporting term. I would prefer an annual report, not least because energy provision will be the most crucial and worrying area of activity, and one of the most doubtful, for our well-being and that of our children and grandchildren. The development of CCS in the next 10 years will be absolutely vital for the well-being of this country, which is why I would have hoped that we could return to it every year. There are many questions that we need to keep track of and find answers to.

The pace has picked up enormously, and in my view it will continue to do so. We will be hanging on the back of global development in CCS in the next 10 years, and we need to be as well informed as we possibly can be. That is why I urge the Minister, even at this late stage, to rethink the timing of reporting. I believe that we need an annual report.

has been successfully demonstrated. “On a commercial scale” means that all three elements of CCS must have been demonstrated—taking the carbon from the generation station, transporting it to the aquifer and shoving it down the aquifer. It also requires getting the coal in the first place, so we need to keep track of many issues with regard to CCS on a commercial scale. I ask the Minister whether a number of them will be included in what I hope will be the annual report to the House.

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16:45 Mr. Binley

I am with the right hon. Member for Wokingham (Mr. Redwood) on this. Like him, I want to see British coal burned cleanly. There are those who oppose the coal industry internationally, but I know that fossil fuels will be burned into the future. I am also with the hon. Member for Northampton, South (Mr. Binley), because he spelled out all the things we need to do to ensure that CCS works properly. We need to get demonstration plants up and running in this country very quickly.

Like the hon. Member for Wealden (Charles Hendry), I spend a lot of time talking to energy providers, and it is clear to me that they are dependent on the new mechanism. It is also clear that they are most concerned about the introduction of an EPS. It is interesting that in this discussion no one has been clear about what the levels in the EPS are to be. People say, “It’s going to happen within a year. We can define it within a year”, but CCS will not be up and running within a year. Let us be absolutely clear about this: it will be five years, at least, before we know how to put that technology together.

Like the hon. Member for Northampton, South, I know that we can put the technology together, but I am not clear about the future costs. The perception is that the cost of burning coal, with CCS on top of it, will be 10 per cent. greater than for present conventional mechanisms. We need to get the experience and to demonstrate not just the one project, but the four that have been mentioned. It is clear, therefore, that we have to make progress quickly, and I am delighted with the acceleration that has taken place within the new ministerial team, on this issue, at the new Department.

Obviously, as we have discussed at length, there is no existing large-scale CCS on a coal-fired power-generating station, but there is a wealth of experience on the cost of this technology, because, as various Members have said, it has been around for a long time. The IEA greenhouse gas project has a wealth of data on the economics of CCS. It ranges from that which is commercial now—for instance, where there is advanced oil recovery, where storage is right next to the plant and on particular types of recovery—right through to that which is quite expensive, very distant from the aquifer and so on. That experience and those data are already readily available.

In introducing this debate the Minister talked about the need to decarbonise the energy supply. I do not think that anybody in the House would disagree with that. I agree entirely that we have got to get CCS to work. Coal and gas are important to our current energy supply and are likely to remain so for the foreseeable future, so CCS is vital. Indeed, I am pleased to see that there will be a change, with gas perhaps being allowed later. However, if we are to persuade people of the need to pay for CCS, we will have to show results.

“An EPS could deter investment in CCS which would have an adverse impact on energy security”,

“Introducing an EPS risks the unintended consequence of diverting investment away from UK clean coal, and towards CCS projects in countries where the risk profile is lower.”

That is a point of view, but as was pointed out earlier, there is one thing being done in this country that is not done elsewhere, and the Minister said it herself. No other country has a statutory funding mechanism. She has talked about £9.5 billion from the levy for four demonstration plants. That is a considerable amount of the investment that will be needed for those four plants, but the money will not come out of thin air; rather, it is money from the levy on the energy companies, the cost of which will be met by the consumer at the end of the day. We are therefore talking about giving £9.5 billion of consumers’ money to the energy companies to demonstrate CCS, and possibly also for retrofitting.

Earlier, the hon. Member for Cheltenham (Martin Horwood) mentioned the increasing scepticism about climate change shown in polls of late. However, another type of scepticism is increasing, and that is scepticism among energy consumers, who are being asked to bear more and more costs, for environmental issues, helping with the grid and so on. As we are in a period when wages are not rising and are not likely to rise for the foreseeable future, yet energy bills continue to rise, and more and more is being put on those bills, there is a squeeze on the energy consumers who pay them. If we are going to take consumers with us down this route, we have to convince them that we are getting value for money for the huge amounts that we are putting into CCS and other things. One way to do that is by putting the EPS in place.

I understand the point that the hon. Member for Sherwood made about timing, and he is right. A year is a short time when we are talking about CCS, which we have talked about for many years but have never really got off the ground, for various reasons that I could go into at length, but will not. We have to show the consumer that we are putting real pressure on the companies to perform, to ensure that the money is well invested, that we will have a CCS system that works and reduces carbon emissions, that the cost is worth while for reducing the long-term emissions into the atmosphere and for helping to meet our challenging targets for carbon emissions reduction.

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17:00 Dr. Whitehead

If we want certainty about what will happen to investors in new coal plant, as well as investors in existing coal plant, if they continue to use those assets to develop energy—or not, as the case may be—we need to look no further than the Committee on Climate Change. In a recent report, it said explicitly that

It is impossible for us to conduct this debate without understanding the background: what is actually going on in the world of energy supply. The debate is long overdue, and, given the position in which we now find ourselves, perhaps too late. Ofgem’s recent report “Project Discovery” has been a wake-up call for many—perhaps for Ofgem more than for anyone else. This morning, at a meeting of the Energy and Climate Change Committee, its chief executive, Alistair Buchanan, spoke to us along with some colleagues. He told us that he had been surprised and exposed by events that he had not anticipated. I was quite concerned when he said that. He mentioned six things that identified his concern about the stage we have reached in developing an energy system that is fit for the future. I think that most people who are involved in energy debates would understand five of them.

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17:15 Joan Ruddock

My hon. Friend the Member for Nottingham, South also asked, as did my right hon. Friend the Member for Edinburgh, East (Dr. Strang), why the Government would throw such enormous sums of money at the private sector without setting any conditions. First, let me remind the House that conditions already exist in our climate change levy and the EU emissions trading scheme. We are already in a carbon-constrained economy where all fossil fuels are subject to some constraint, and that is recognised and codified in the carbon budgets that we have set through to 2022. They, of course, are statutory.

Obviously, conditions will be set on the projects through the incentive. There will be performance standards, which will need to include the meeting of an agreed schedule for the storage of CO 2 and the amount of CO 2 that is to be stored. There will need to be monitoring of the CCS projects, as well as the collection, collation and reporting of information to an agreed standard. The information will then have to be shared. We will have to ensure that the CCS projects fully meet any relevant safety and other standards. So, there will be standards. In addition, the payment made to companies will not just be given to companies willy-nilly. It will be awarded to companies based on the amount of CO 2 that is saved.

As for the right hon. Member for Wokingham (Mr. Redwood), whom I see nodding—perhaps he is glad to have had that information—he asked for more information. He asked about the overall investment and I repeat what I said earlier: the estimated cost of the investment is £9.5 billion. He spoke well and in a way with which we would all agree about energy security. It is fundamental to what we are doing and the Bill is intended to assist with energy security. He said that the Government need to be clear about the missing bits, and we think that we have done that by saying that we need new nuclear projects, by making massive renewables incentives available to industry and by saying categorically and specifically in the Bill that we need four new coal-fired power stations, which we will enable to come on stream by making the CCS levy available. He can find further details about finance in the annexe to the low carbon transition plan, but that will be revised soon, so he is welcome to write to me if he wants further detail, which I may or may not be able to give him. Where I am able to, I will do so.

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18:30 Ed Miliband (Labour)

I thank Members for their contributions since Second Reading. I particularly thank the Minister of State, Department of Energy and Climate Change, my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock)—who has done such a fantastic job in leading our work on the Bill—and the Under-Secretary of State for Energy and Climate Change, my hon. Friend the Member for Stafford (Mr. Kidney), for their able steering of the legislation. I also thank my hon. Friends, and Opposition spokespeople and Back Benchers, for their contributions.

The work that has been done has helped to strengthen the Bill in a number of respects. It has helped in relation to the scope of the CCS incentive, the reporting of progress towards decarbonising our electricity supply, and consumer protection. The relatively speedy passage of the Bill has been due partly to the able work done in Committee, and partly because it was designed as a short Bill that could make swift progress before a general election. Our task now is to send the Bill to the other place so that it can make further progress.

The first and most important part of the Bill from Labour’s point of view relates to the CCS incentive. However, we are aware that the low-carbon transition involves costs, and it is important for us to take all the action we can to protect consumers from those costs. There have been significant advances recently, such as those for people on prepayment meters; a number of Members have raised that matter in the House. A year ago, people on prepayment meters paid £41 more for their energy than standard credit customers; today that differential has, effectively, been eliminated.

It is a short Bill, but it puts in place important measures in respect of the transition to low carbon. The CCS levy delivers an unprecedented amount of investment, not just in Britain but around the world, into CCS, which is a crucial technology for the future. The strengthening of the powers of the regulator is essential moving forward, as we face upward pressures on prices. There is also specific support for the most vulnerable.

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18:39 Greg Clark

I am sure that we can look forward to the contributions of my hon. Friend the Member for Wealden for many Parliaments to come, but I am conscious also of the contribution made to the passage of this Bill by Members of the House who are stepping down at the forthcoming general election. The issues at stake in this Bill are of long-term importance and I wish to pay tribute to those retiring Members who served with distinction during the passage of the Bill. When future generations look back on this era and ask what our generation did about the energy and climate change crises of the 21st century, they will judge the record not only of Governments but of Parliaments. The judgment of history on us all will be the kinder for the contribution made by outstanding parliamentarians such as my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) and my hon. Friend the Member for East Surrey (Mr. Ainsworth).

With their work in mind, I wish that this Bill presented a more substantial legacy, but it is not entirely without substance. As the Secretary of State says, it provides a long-overdue framework for the demonstration of carbon capture and storage. Although we have lost ground to other countries, it is not too late for Britain to establish a leading position in this emerging global industry. If the Bill is passed, a Conservative Government would certainly not hesitate to use its provisions wherever that would be of help to the UK CCS industry.

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18:45 Simon Hughes

Let me end on this point. Two of the three great future challenges for our country are climate security and energy security. The third is economic security—by definition, they come together. Unless we remain absolutely clear, as Front Benchers have, that the threat to the planet from climate change caused by human activities is so serious that we need always to take precautionary action, a much more serious position will face the next Parliament, the next Government—whoever they are—and the Governments after them. Front Benchers have a duty to stand together on this issue, and our friends on the Conservative Benches must be tough with their colleagues who do not appear to understand the urgency of these matters.

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18:52 Mr. William Cash (Stone) (Con)

I have listened to the hon. Member for North Southwark and Bermondsey (Simon Hughes), but I must say that he seems not to have taken account of the genuine concerns about some of the assumptions that have been made about climate change. However, I shall not elaborate on that as there is no need to do so now.

I acknowledge that there should be an energy mix and that offshore wind farms have some merit. I suspect from my previous exchanges with the Secretary of State that he agrees with me about carbon capture, about which I have campaigned for as long as I can remember. I believe profoundly in British coal, which should be part of our energy security and part of our foreign policy, and I applaud those who are in favour of it, including those in Government circles. If we can develop proper carbon capture methods and get things right, we will be able to supplement the energy security that we really need. Those of us who are rather more sceptical, to say the least, about climate change as a whole will none the less acknowledge certain changes. It has been pretty cold recently, as I am sure people will acknowledge. There are important issues in the mix; carbon capture is definitely a plus, and wind farms are definitely a minus.

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18:54 Mr. David Heath (Somerton and Frome) (LD)

My final point has been touched on by others. This Bill is part of getting the whole mix right, especially in the encouragement that it gives to all forms of renewable forms of energy, but there are still inconsistencies in the Government’s approach. I was a strong supporter of feed-in tariffs: I believe that it was right to introduce them and I am pleased that the Government finally adopted them, but I want to say a word on behalf of one small group of people engaged in renewable energy generation in my constituency. They use micro hydro to generate electricity and power. They often bring historic buildings back into use, but they are faced with a feed-in tariff system that involves a microgeneration certificate scheme that is wholly impractical and which in fact acts as a deterrent. Only this week, I had a message from one of them to say that they get 12p per kWh at the moment but that, as a result of the feed-in tariff, they will get only 9p.

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