09:45 Chris Heaton-Harris (Daventry) (Con)

That applies not only to wind farms but to a number of developments where planning applications to some extent represent a two-stage process of looking at the technical issues and the not exactly political but local issues related to those technical issues. If that process is carried out properly and stops there, that discharges the Conservatives’ obligation in terms of their manifesto commitment on future onshore wind applications. If, however, changes are to be made to the obligation itself, either through new powers for the Secretary of State for Communities and Local Government to call in, on an enhanced basis, schemes that otherwise would be subject to only that process, or through constraints placed in secondary legislation on how the process is undertaken, that should cause the Secretary of State for Energy and Climate Change—the key proponent of this particular manifesto commitment being placed into law—to worry a little bit.

The Opposition would like amendment 16 to be made because we believe that for every action, there is the potential for an equal and opposite action that needs to be understood and taken into account in future activity. Later, we will discuss at greater length actions recently undertaken by the Government on various matters relating to the progress of renewable energy. The foreshortening of the period in which the renewables obligation is available for wind farms is just one such action. A number of other actions call into question the Government’s trajectory as far as renewable deployment is concerned.

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10:00 Andrea Leadsom (North Dorset) (Con)

I am grateful to the hon. Gentleman for raising his second point. The purpose of amendment 16 is to require the Secretary of State to report within six months after the Bill comes into force on how changes to renewable energy policy, including the changes stipulated in clause 79, have affected the UK’s ability to comply with the 2020 EU renewable target. The Government are already obliged to report on our progress towards decarbonisation of energy supply, the development of renewables and the development of energy efficiency. As the hon. Gentleman may be aware, we last reported our progress under the EU renewable energy directive on 21 January 2016, just under two weeks ago. The report says clearly that we surpassed the target for 2013 and 2014, with an average 6.3% of final energy consumption coming from renewable sources against a target of 5.4%. Renewable contributions to energy generation are increasing across heat, electricity and transport. Heat from renewable sources increased by 4.6% during 2014, a record 19.1% of electricity generation came from renewables in 2014 and the use of renewable biofuels for transport rose by 14% during 2014.

As well as the report of 21 January, we regularly publish statistics on energy use in a number of other publications. “Energy Trends” provides a quarterly update, the “Digest of United Kingdom Energy Statistics” is published annually, and statistics on greenhouse gas emissions, solar PV deployment, renewable heat incentive take-up and renewables obligation certificates and generation are published monthly. The 2013 electricity market reform delivery plan set out our ambition of achieving at least 30% of electricity from renewables in 2020. The hon. Gentleman will know that we are on course to achieve that, with renewables representing almost 20% of generation in 2014. I hope that I have reassured the hon. Gentleman. There are a lot of reports, and I am happy to send him details of each if it would be helpful to him.

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10:15 Dr Whitehead (Norwich South) (Lab)

Clause 80 was inserted into the Bill by the Opposition in the other place and intends to restrict the carbon accounting rules that are permissible under the Climate Change Act from 2028, which is the start of the fifth carbon budget period. This is quite a technical area and to aid Committee members’ understanding, I thought it would be helpful to explain briefly how carbon budgets and carbon accounting work at the moment. I hope hon. Members will bear with me as I explain that before I come to set out our reason for seeking to remove the clause from the Bill.

The Climate Change Act sets a target for the UK to reduce emissions by 80% from 1990 levels by 2050. It also requires us to set intermediate targets called carbon budgets to reduce emissions along the way. Carbon budgets are a cap on the emissions allowed over successive five-year periods. For example, the first carbon budget covered the period from 2008 to 2012, and we met that budget with 36 million tonnes of carbon dioxide equivalent to spare. We set carbon budgets 12 years in advance, so by 30 June this year we will be setting the fifth carbon budget to cover the period from 2028 to 2032. As well as setting each carbon budget, we make regulations that set carbon accounting rules for each budget period. The rules, in addition to what is set out in the Climate Change Act, tell us how to calculate the budgets and therefore whether we have met them.

Clause 80 is intended to stop us reflecting how the EU ETS works in our accounting for carbon budgets. It amends the Climate Change Act to say that EU ETS units cannot be debited or credited from the UK net carbon account. I clarify that, even with that change, we will still participate in the EU ETS; we would just not reflect how it works in our carbon budgets.

There are positives and negatives in different accounting methods. Weighing them up needs careful consideration of a number of factors, such as the potential impact on consumers, on businesses, on industry and, of course, on cutting emissions at the lowest cost. It is absolutely right that we keep our accounting practices under review. However, I make it clear to all hon. Members that now is not the right time to make this change. The Government are totally focused on setting the fifth carbon budget by 30 June, and we have already been working on it for upwards of a year, as required by the Climate Change Act. That 30 June deadline is less than six months away.

We have been working on the basis that it will be permissible to use the current accounting framework, which is also the basis on which the Committee on Climate Change has produced its advice on the level of the budget. Accepting clause 80 would threaten serious delay in setting the fifth carbon budget, putting us at risk of not complying with the Climate Change Act at a time when the UK should be showing clear, decisive leadership following Paris. It is therefore my strong desire to see clause 80 removed from the Bill.

Having repeatedly listened to the Minister and her colleague, the Secretary of State, I am convinced that they both personally share the Opposition’s genuine desire to make a success of our Paris COP 21 commitments. We all understand the urgent necessity to reduce our carbon output in the most cost-effective way possible. Ultimately, we all want to stave off the worst effects of climate change in a way that bolsters rather than undermines our economy.

To that end, I will break down our arguments in support of the clause into four key parts: first, how the clause will ensure investor confidence in renewables and the Government’s approach to them; secondly, why the over-complex accounting of our current carbon budgets risks our failing to meet our reduced emission commitments, both nationally and internationally; thirdly, how the clause will ensure lower costs for taxpayers, consumers and businesses as we strive to decarbonise; and fourthly, why the clause is necessary to live up to both our European and international commitments.

So far, Ministers have cut the solar subsidy by 64%, costing up to 18,000 jobs. They have cut the biomass subsidy and the biogas subsidy. They have scrapped the green deal without replacing it with something more effective, and they have slashed investment in home insulation and reducing fuel poverty. They have imposed a carbon tax on renewables by scrapping their exemption from the climate change levy, which is akin to extending an alcohol tax to apple juice. They are about to try their best this week to block further onshore wind generation, even where projects enjoy popular local support. They have slashed support for community renewable energy projects, and they have announced the sell-off of the UK Green Investment Bank without protecting its special green status. They have handed out generous 15-year subsidy contracts to diesel generators, which are one of the most polluting energy sources available. They have failed to incentivise a single new gas-fired power station, and they have cancelled a £1 billion manifesto commitment to carbon capture and storage—going back on a decade of promises from the Prime Minister himself.

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10:30 Chris Heaton-Harris (Aberdeen South) (SNP)

The hon. Gentleman mentions the institution just across the way from us and its report last week. Did that report not say that the intermittent nature of so much of our renewable energy supply meant that the Government could not guarantee that they could meet our future energy needs? I think that the hon. Gentleman may inadvertently have slightly misquoted the report.

By supporting the amendment, the Government would send the industry a clear signal about the direction of travel of our power sector, giving businesses clarity, transparency and long-term assurances as to what decarbonisation investment will be needed and by when. In other words, they would be providing certainty—something that is now in short supply. Part of that certainty will come from clear, unambiguous accounting of carbon budgets. This goes to the heart of the clause. It means that by 2028 the power sector in particular should be using cleaner technologies, not simply buying in credits from other parts of Europe. Opposition Members are not opposed to the EU ETS scheme in itself. If reformed, it still has the potential to be a key part of Europe’s strategy for reducing pollution levels, but permission to use ETS credits in the carbon budget accounting process indefinitely is wrong, because it distorts the clear market signals that business needs to invest in new cleaner power stations here in the UK.

“If the UK is to continue to be at the forefront of global efforts to reduce greenhouse gas emissions following the historic agreement in Paris, we need carbon budgets which are clear, certain, and which drive emissions reductions in all sectors of our economy…This new clause, if implemented, would remedy these weaknesses and mean the Climate Change Act for the first time doing what it must do: set genuinely clear and certain emissions targets that are binding across the board.”

I am sorry if I have to keep disagreeing with the hon. Gentleman, but he talked about decarbonisation across every sector of the economy, and about transparency, having integrity in what we are trying to say and having a coherent policy. He has a very strong background in the green agenda. I know from a tiny bit of research I did that he is backing the divestment fund from the University of East Anglia to get out of investing in the North sea, which makes things interesting for some parts of the Bill, because we are talking about trying to save our oil and gas industries to a certain extent. However, surely he understands that to get to the point that he might want to get to in future, there has to be a long-term economic energy plan that heads in this direction. Perhaps gambling all on just one or two technologies is exactly the wrong thing to do.

However, let us put all that aside for just a second and deal simply with the cost of meeting our international commitments and getting value for taxpayers’ money—something that I am sure all Members here would agree is worthy of our attention. The Government’s advisers, the Committee on Climate Change, said that we should be a net seller of ETS credits if we are to pursue the lowest-cost option to go green and meet our climate targets. Therefore, there is a real risk that by putting off emission reductions to future years, as current accounting practices inevitably encourage, taxpayers and consumers would be at risk of higher costs.

“the way the budgets work is that, essentially, we pay other people to decarbonise and then we import the certificates. That can be done for a while, and it makes economic sense to do so. In fact, for the first three carbon budgets, while the system has been bedding down, it probably made sense to use a traded system—the rules and the allocations from Europe were clearer”—

“and we were all finding our way to see whether the EU ETS would deliver. The closer that we get to our 2050 target, the more that that approach starts to be a false economy. We find then that, potentially, we are repeatedly paying other countries to decarbonise and not investing in our own country.” —[ Official Report, House of Lords, 21 October 2015; Vol. 765, c. 722.]

The cheapest route to climate safety is to get investment flowing now into clean energy industries such as solar, CCS, nuclear and wind. Yet, as I have explained, the Government are pulling the rug from underneath the lowest-cost options, such as onshore wind and solar. Only last week, the Government were warned that the cost of achieving climate targets could double without CCS, yet they have pulled support away from that in the UK as well. Let me be clear: the amendment would not prevent the Government from taking measures to protect our important strategic manufacturing industries from higher costs, whether through exemptions or other devices. Instead, it would ensure that the UK stayed on the cheapest pathway to a clean energy future.

Ultimately, though, the amendment is necessary to ensure that we live up to our European and international commitments. The proposed fifth carbon budget for the period in question is aligned with EU ambition—no more, no less. Nothing in the amendment would mean that we were going further than the rest of Europe, nor is it a decarbonisation target for the power sector of the type that the Conservatives ruled out in their manifesto. What we propose is new, but it is not a target. It is about clarity of carbon budget accounting. The amendment would complement European efforts in the same way as the Chancellor’s own carbon floor price and the UK’s contracts for difference. Those initiatives were taken with the stated intention of driving investment into cleaner energy sources here in the UK. The amendment would bolster those efforts without undermining the European ETS.

In Paris, the UK signed up to achieving a carbon-neutral global economy. The amendment would ensure that we played our part in achieving that, rather than offloading our responsibilities through tricks on a spreadsheet. I therefore conclude by asking the Minister to see that in the absence of a clear strategy to build a low-carbon British economy, and given the roll-back of key policies on solar, wind and CCS, there is a need to send an unqualified signal to the investment community and the world at large—a clarion call that Britain remains committed to achieving the goals to which we signed up in the historic Paris agreement. The amendment would do that job, and I urge Committee members to support it.

What I would like to see, as I think would all of us when dealing with the Climate Change Act 2008 and the carbon budget, is no cooking of the books, to borrow a phrase from the hon. Gentleman. I am not suggesting that anyone would do that deliberately, but the mechanism allows for it almost by default because of the lack of clarity and of proper accounting for the major sectors of energy production and large-scale manufacturing.

The proposal is not short-term. We are dealing with the carbon budget for 12 years hence, which provides ample opportunity for the Government to establish, through their work with the Committee on Climate Change, how it can be achieved. That will not necessarily be easy, but given the changes that have come through the Paris agreement and the fact that we as a country led the high ambition coalition at the discussions in Paris, we need the same high level of ambition here at home. We cannot have high ambition or high achievement unless we have appropriate accounting.

The Committee on Climate Change’s November report contains a section on maintaining the integrity of the carbon budget process, which recommends that the budget not account for the ETS cap and that we account for what we actually deal with and emit here. That is what the general public and our constituents would expect, and, to return to a point, the people who will make the transition work are the businesses that will invest the money. They need clarity on how the accounting process would work, how the Government would be held to account, and how that will shape Government policy over the next 12 to 19 years. Clause 80 would provide greater clarity on that and a much stronger focus in shaping Government policy, and I look to see it retained.

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10:45 Andrea Leadsom

I am disappointed that Opposition Members think that clause 80 is the answer—to what question, I am not entirely sure. The hon. Member for Norwich South suggested that there were four reasons—investor confidence, complexity, getting costs down and helping us to meet climate change commitments. I put it to him very courteously that clause 80 would not achieve those things of itself. It is absolutely not the case that simply changing the accounting method in the power generation sector as currently covered by the ETS would improve investor confidence.

What is vital in improving investor confidence is the very good speech made by my right hon. Friend the Secretary of State for Energy and Climate Change last November, in which she made it absolutely clear that the priorities for the UK Government were first, far and above all else, energy security, and, secondly, that no responsible Government should take a risk on climate change. Those two absolute abiding principles underline everything that we do.

Throughout this Parliament, we will be seeking to meet our objectives, which are energy security while decarbonising at the lowest cost to consumers. The Secretary of State talked about our commitment to new offshore wind, getting the costs down and deploying up to 10 GW; to new nuclear, which, as the hon. Member for Norwich South must concede, is a very low carbon form of power generation; and to new gas, which again I think the hon. Gentleman will accept is the bridge. Consulting on taking coal off the power generation side of things and using instead new gas as a bridge to a low carbon future is possibly the biggest thing we could do to decarbonise quickly and securely and at the lowest cost to consumers.

It is simply not the case that by changing the way we account for carbon in the power generation sector we would achieve any of the investor confidence and assurance of meeting targets for reducing costs to consumers or helping us to meet our climate change commitments.

I make it clear that, in our feed-in tariffs review and in all our work on renewables, we have trodden a fine line between what is right for renewables generation and what is right for the bill payers who pay for it. We have had a lot of debates in this House, and in the other House, on fuel poverty, which is a big issue. New technologies should stand on their own two feet when they are able to do so. As the costs of deploying new renewables come down, so should the subsidies. We should not continue with subsidies that create an overly generous return when, at the other end of the spectrum, we still have many people who cannot afford to heat themselves or to keep their lights on. That is an important balance. As I have said time and again, the Government are absolutely committed to energy security but, secondly, we are committed to decarbonising at the lowest cost to consumers, which underpins everything that we do.

The hon. Member for Norwich South asserted that effectively removing ETS from the calculation of carbon budgets would somehow make decarbonisation cheaper. I am sorry, but I just do not find any evidence for that. We will keep our accounting under review, and it is right that we do so, but he has not provided any evidence that decarbonisation would be cheaper or that investor confidence would be greater. He has failed to answer why, with only a few months to go before, according to our legally binding commitment under the Climate Change Act 2008, we must set out our policies to meet the fifth carbon budget, which is being proposed, we should suddenly turn everything on its head and change how we account for carbon.

The hon. Gentleman and all Opposition Members must appreciate and realise that although what they are proposing has some merit—it is certainly an interesting idea that the Government will keep under review—it is just not realistic at this late stage to start to turn on its head the way in which the Committee on Climate Change or the Government make their calculations. The work has been going on for up to a year already and is now stepping up apace so that we can meet our legally binding commitment to publish our report by the end of June this year.

The hon. Gentleman quoted the Committee on Climate Change’s recent letter, which I can quote back to him. On whether the fifth carbon budget should be tighter, it said a few days ago, in January, that its

The Committee on Climate Change also said that it expects the ETS sector, which is exempt from the current carbon budget proposals, as we have been discussing, to use only ETS credits, not debits, by the fifth carbon budget. That is my understanding. If we are to achieve the most cost-effective route to decarbonising the economy, we have to make this change. Yes, what the Minister says is correct, but there are other components to what the Committee on Climate Change has said that imply to me that the clause would simply make the whole process clearer and more transparent. The Minister says that there is no evidence, but I do not think anyone present would disagree that markets like clear signals. They want to be able to see what is coming in future. They do not like surprises and want to know what the investment scenario is. By making that clear and having a clear accounting process, the market signals will be far clearer.

I have to disagree. The hon. Gentleman talks about clarity, but, having worked on one basis for a year and with the Committee on Climate Change having proposed that we work on that basis in its recommendations, there is nothing clear about suddenly deciding to change it six months ahead of putting out a legally binding commitment to a legally binding piece of legislation. What is clear about that? Absolutely nothing. I am sorry, but I just do not agree.

On the hon. Gentleman’s point about the budget, the Committee on Climate Change says that it

We are where we are. I have already said to the hon. Gentleman that it is right that we keep our accounting policies under review, and I have told him that we will do and are doing that, but now is not the right time to make this change. It would be very destabilising and would certainly give us a problem in meeting our legally binding commitment. Hot on the heels of what I think all Members would agree was the significant leadership role played by the UK in the Paris agreement, it would not be the right thing to do. We would be throwing the balls in the air, which would lead to a great deal of uncertainty. I therefore hope that clause 80 will be removed from the Bill.

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