11:45 Matthew Pennycook (Labour)

but the consequences of not making sufficient progress are stark. As the Prime Minister put it in 2012 during an appearance before the Liaison Committee, if CCS is not available,

Lack of sufficient progress on CCS will therefore result in either the UK failing to meet its climate change objectives or the Government’s planned expansion in gas-fired generation being obsolete by 2030.

We know that the technology works. The Prime Minister no longer holds that view, I believe, given his recent remark that he did not think the technology stacks up, but witness after witness who came before the Select Committee on Energy and Climate Change during its recent hearings on CCS said that that was plain wrong. As my hon. Friend the Member for Southampton, Test outlined, 22 projects across the world show that CCS is working. Statoil’s Sleipner West project, now in its 20th year, captures 1 million tonnes of CO 2 a year, and Exxon Mobil’s Shute Creek gas processing plant in Wyoming started in 1986 and captures 7 million tonnes of CO 2 a year. Despite teething problems, the world’s first major commercial power plant to employ CCS, the Boundary Dam project in Canada, will capture 90% of the emissions from that 110 MW coal unit. We know that the technology works. The problem is that, once those 22 projects are up to speed, they will shave only 0.1% off global emissions each year, so we need a strategy for transportation and storage in particular to bring CCS to scale quickly.

[Source]

12:00 The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)

I gently point out to the hon. Gentleman that the reference to CCS in the Conservative party’s manifesto was as an example, not as a manifesto commitment.

It is worth bearing in mind—the Minister touched on this—the context in which the decision was made. Funding was abruptly withdrawn at a time when a number of companies had been working tirelessly for many years to progress their projects, and just weeks before they were expected to submit their bids. Business and investors were given no notice. We heard evidence in the Select Committee that the industry first got wind of this through the Financial Times , when it reported expectations of the Government about that settlement. That was just a few hours before Department of Energy and Climate Change officials posted the notice on the London Stock Exchange and a week after the “reset” speech in which CCS was mentioned as a central part of the Government’s energy policy. To say it was unexpected is an understatement. As a witness in the Select Committee said, it was a shabby way to treat those involved in trying to further this technology.

“the effect of taking the wind out of our sails. I think the cancellation by UK Government of the competition signals to the market that there is a question mark in the UK Government’s mind over CCS.”

I should state an interest, having previously been involved in the carbon capture project at Peterhead—I moved it from Longannet to Peterhead—so I know something about the issue. I have been on record a few times exactly anticipating this reduction. Matthew Bell, the new chief executive of the Committee on Climate Change, when asked what we would have to do without CCS to hit our targets replied:

“You really need to virtually completely decarbonise your transport sector and completely decarbonise your heating sectors, in order to deliver on the 2050 ambition, without being able to benefit from the CCS.”

I know it is extremely unlikely. As we touched on at our previous sitting when discussing onshore wind, the Secretary of State has admitted that the Government do not have the right policies in place to meet their targets on heat and transport. From what I can see, they do not even have any institutions within Government to make it happen. We have been told there is an interministerial group on carbon growth but we do not know how many times it has met or what its terms of reference are to drive forward progress in this area. The implication of that, as I will come to, is that we will see greater costs down the line if we do not get serious about CCS.

We need a strategy. The Minister has explained why she believes the Oil and Gas Authority’s function should not be extended to incorporate the regulation of CCS activity. I disagree with the case she made, but I hope she does not dispute the need for more clarity in this area and for some kind of strategy. In the absence of an effective carbon price, we need to have a comprehensive strategy from the Government on CCS development and deployment. Such a strategy would be formed in consultation with a number of Departments, including the Treasury and the Department for Business, Innovation and Skills, the OGA and the CCS industry itself, as the clause makes clear.

The strategy would have to include some of the following elements, which I mention in the hope that the Minister will take them on board. It would need a strategy for maintaining those strategically important pieces of UK-critical infrastructure, such as Peterhead, that have been put at risk by the recent decision to withdraw CCS funding. It would need provisions for the development particularly of transport and storage, to incentivise what we know we need, which is large clusters of CCS, where multiple operations are linked into a single plant, because that is how to get the economies of scale. It would need a strategy to facilitate the industrial application of CCS, particularly in the iron and steel industry, cement production and petrochemicals. Those three sectors account for 45% of CO 2 emissions that need to be captured by 2050.

Above all, we need a strategy because the private sector needs some certainty about funding, so that it can build confidence, investment and support for CCS projects, importantly where the finances in such projects do not rely on carbon being reinjected to maintain reservoir pressure in producing oil and gas fields. That happens in a large majority of the CCS projects that are up and running, and is, I think, questionable in terms of its long-term impact on climate.

Why do we need to do this for funding, to touch on the point made by the hon. Member for Coatbridge, Chryston and Bellshill? If we do not get a strategy soon, not only will the UK lose direction, but it will cost us a great deal of money. As I said, a significant amount of UK taxpayer money has already been wasted as a result of the abrupt decision to withdraw the £1 billion CCS funding. That is why the National Audit Office is going to look into the matter, and why the companies involved are now seeking to recover the costs they have sunk into the projects. There are other greater and more significant long-term costs at stake: the costs of avoiding dangerous climate change if CCS does not come forward to scale.

Let me put on the record the assessment of the Energy Technologies Institute. According to the ETS, delays in deployment as a result of the CCS competition cancellation have

While delays in CCS infrastructure are still likely to mature, the legacy effect of the Government’s decision will in the decades ahead

As the Opposition Whip in this Committee, I would not normally speak at any length, but I hope Members will forgive me for making an exception to speak in support of new clause 10. I do so as an MP from Yorkshire, where the decision to cancel the £1 billion CCS competition fund has been a real blow for the region, as I have no doubt it was for Peterhead and for other hopeful projects and their surrounding areas up and down the country.

The White Rose project at Drax was set to be the first CCS project of its kind in Europe and it had been awarded Government funding to carry out a feasibility study, as has been mentioned. The project, once it was up and running, was expected to generate enough low-carbon electricity to power 630,000 households, with hopes that up to 2,000 jobs would be created, bringing much needed investment, jobs and growth to Yorkshire. If Yorkshire had been the first region in Europe to get CCS up and running on this scale, the economic benefits of exporting the expertise, the skills and the transferrable technologies all over the world could have been such a boost for the local and wider economies. With the cancellation of the £l billion fund, we also sent €300 million euros from the European Commission back to the Commission. That sum had been awarded to the White Rose project in match funding, because the project was the Commission’s preferred option in its NER 300 competition.

Getting to this stage has involved years of hard work and missed opportunities. The Energy and Climate Change Committee published a report in 2014 urging the Government to reach a final investment decision on the two projects that had made it through to the final stages of the competition by early 2015, which was in line with the Government’s original timetable. The report stated that it was critical that the Government did not waste any more time on unnecessarily delaying the start of the first CCS projects, stressing that we had already lost a decade. It has taken years to bring viable schemes such as the White Rose project into alignment with a Government commitment to invest in the technology and into alignment with the European Commission’s NER 300 timeframe, in order to secure match funding. With the cancelling of the scheme, we are now much further away from bringing those projects online than we were in 2014.

Against that backdrop, I urge the Government to consider the future for CCS, to commit to a strategy and to recognise that new clause 10, and new clause 4 for that matter, present the opportunity to do just that. I think we all agreed earlier in the week about the importance of investor confidence and we have talked about it again today. My hon. Friend the Member for Norwich South made a great analogy about picking the furthest point on the horizon and getting our troops there as fast as we can. In CCS, it is fair to say that investor confidence could not now be any lower. The chief executive of the Carbon Capture and Storage Association, Dr Luke Warren, said the announcement to axe the fund was “devastating”. He went further, saying:

I confess that I am still confused about what the Government strategy now is. Ministers have spoken about a future for CCS, but the Prime Minister’s suggestion that there are doubts hanging over both the technology and the economics has really left potential investors with nowhere to go. That is why I ask the Committee to consider supporting new clause 10, to give Members, but most importantly the sector, a much clearer picture about what the future for CCS now means.

New clauses 4 and 10 would place a duty on the Secretary of State to produce and implement a CCS strategy by June 2017, and to report to Parliament on progress every three years. I very much welcome the debate on CCS today. I recognise that the spending review announcement last year confirming that the £1 billion of ring-fenced capital funding to support the CCS competition was no longer available has led to questions regarding the Government’s CCS policy, but I can assure the Committee that the Government’s view remains that CCS has a potentially important role in the long-term decarbonisation of the UK’s power and industrial sectors.

[Source]

12:45 Andrea Leadsom (Daventry) (Con)

In summary, while we are pushing toward the targets set out in the Climate Change Act 2008 and waiting to see what comes from the fifth carbon budget, we need to provide certainty to industry that will enable it to plan for the future. That is what new clause 5 would deliver. New clause 6 would deliver the ability, through collaboration between both Governments, to unlock what is still a considerably untapped enormous resource in Scotland in the renewables sector. That would be beneficial to Scotland and to the United Kingdom as a whole.

[Source]