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Energy: White Paper

My Lords, I have thoroughly enjoyed my first House of Lords debate. I am learning all the time. I have never before listened to a full debate, and I found it eloquent and informed; and I have learnt so much. Please forgive me if in the next few moments, I forget to do the complete tour d’horizon. If I miss anything out, please contact me, and I shall do my best to give a satisfactory answer. I shall now attempt what my noble friend Lord Brennan said was a cautionary tale from Macmillan about steering the difficult path between the cliché and the massive mistake. Before dealing with the excellent points raised by your Lordships, I start by saying something that is very dear to my heart. It deals with a couple of the issues raised by the noble Lords, Lord Redesdale and Lord Dixon-Smith. Without wealth creation or making a profit, you get no tax in this country. With that profit, you reward the people who took the risk—the shareholders—and they pay tax on it; or you keep it in the business and you pay tax; or you employ people and they pay tax on it. Some of it goes to good, decent, hard-working people in the public sector, and they pay tax on it. Without the tax, there would be no schools, hospitals, armies, airports, railways, prisons or the rest of it. If it were not for the wealth creation of this nation, there would be no tax. If it were not for the energy supply produced in as low-carbon a way as possible with as safe and secure a supply as possible, there would be no wealth creation because the lights would go out. Energy drives factories, workshops and offices up and down the country. It is the tool with which jobs are created, hospitals are kept open and schools work. Energy is literally the power behind all economic development. As my noble friend Lord Brennan said in the speech that he devoted to this subject, security of supply is vital. The one sure way of achieving that is by having diverse sources of supply, but we need to bear in mind that the people of this great nation worry every day when they see other nations using energy as a way of flexing diplomatic and political power. We will not keep the lights on in our hospitals or our offices, or help with the insecurities of our people, if we do not keep security of supply at the top of our agenda. The noble Baroness, Lady Wilcox, and one or two other noble Lords mentioned the consultation on nuclear power. I can do no more than reassure the House that the Government have not made up their mind. The Government’s position is clear: we have formed a preliminary view, which can be seen in the White Paper, that energy companies should be given the option of investing in new nuclear power stations, but we are consulting on that view. No decision has been taken, and we will actively consider all the consultation responses. I can do no more than refer noble Lords to the Prime Minister’s statement in another place yesterday: "““My honourable friend knows that we put our nuclear proposals out to public consultation on 23 May. The Government’s preliminary view is that nuclear has a future role in providing our homes and businesses with the low-carbon energy that we need. Let me emphasise that the Government will make their decision in the autumn, after, and in the light of, the consultation””.—[Official Report, Commons, 11/0/07; col. 1444.]" That was the Prime Minister yesterday, and nothing has changed. When talking about renewables, the noble Baroness, Lady Wilcox, asked whether we are making adequate progress, whether we are going far enough and whether there is adequate investment. Of course we could always do more. It is very important that we get a mix, stimulate investment in renewables and that renewables do not suffer because of investment in other technologies. Our proposals for improving the renewables obligation will help the greater deployment of a wider range of renewables, and that includes marine technology. The changes will incentivise 40 per cent more renewables between 2009 and 2015 than if we had not changed the schemes. However, for it to work, we also need additional research and development. We need further, adequate funding of universities to make sure that they can play their part in that research and development and, probably above all, we need a planning regime fit for purpose in the 21st century to enable these schemes to happen and happen quickly. The noble Baroness also talked about choosing between technologies and criticised the renewables obligation banding. Renewables is a market-based approach that intervened to enable renewables to compete against established technologies. I assure noble Lords that that will increase support for renewables and will improve efficiency in the system. It will support technologies more in need and increase deployment by about 15 per cent by 2015. That is something of which business should rightly be proud because it will happen due to the investment from it. The noble Baroness then expressed concern about the BP plant at Peterhead and the Government’s handling of it. Prior to the publication of the White Paper, there were seven interested companies. Of those seven, only BP indicated that it no longer wishes to participate. Others may come forward; we do not know. The noble Lord, Lord Chorley, also raised this point. We would have preferred BP to have taken part in the competition because it is a fabulous global business, but we cannot design a competition to suite the interests of just one participant. That is not how we should behave. If BP feels that the timetable does not suit its project, that is a commercial matter for it. Welcome to the market. The noble Baroness, Lady Wilcox, then asked how the Government would ensure that the cost of any nuclear decommissioning would not fall on the taxpayer. The consultation document makes it clear that we would put arrangements in place through legislation to ensure that owners and operators of new nuclear power stations set aside funds in a secure way to cover their full decommissioning costs and their full share of waste management costs. That would be in legislation and would minimise the risk of taxpayers later being called on to cover the costs of decommissioning and waste management. It is important that, in consultation, which is a two-way process, others stated the facts in that regard while not alarming the public. In response to the noble Lord, Lord Teverson, perhaps I may mention that it was a delight to come down to Cornwall in my former life. I am committed to visiting a region of England or a nation of the United Kingdom at least once a month to understand the issues around inward investment. I look forward to going back to Cornwall as soon as possible. The noble Lord, too, mentioned BP. It is interesting that one of the advertising slogans it has always used is ““beyond petroleum””. It would be naïve of us to think that the major corporations in this field would stand still and not form views on where they can invest in tomorrow’s returns. One of those areas will be renewables; another may be—I do not know—nuclear power. What I do know is that energy supply companies definitely hedge their bets for a long-term future. I also assure the noble Lord, Lord Teverson, that the policies in the White Paper will help us to maximise UK energy resources—that is, oil, gas or coal—and to use our energy more efficiently. For example, gas consumption could be 13 per cent lower in 2020 if we implement our demand-reduction measures. The Government are committed also to energy saving. Full implementation of our measures could reduce CO2 by 7 million to 11.7 million tonnes of carbon, which is up to 36 per cent of all savings. We are not standing still. I hope that the noble Lord was speaking with tongue in cheek when he asked how we can expect energy sellers to take responsibility for our using less energy when they are making money out of selling it. Energy sellers succeed in a voluntary, democratically engaged society because they are seen to be responsible. This House, another place, the general public and the media respond very quickly to companies that abuse that position. However, to make it happen, both the customers of energy suppliers and citizens of the country more generally must feel that they have some skin in the game. Culturally, we need a shift in this nation, so that people approach the use of energy from an understanding of what a diminishing resource it really is. The energy suppliers cannot do that on their own; nor can politicians and media. Perhaps we should all do more to make sure that people feel better engaged. The noble Lord, Lord Teverson, mentioned also the example that we need to set for other major polluting nations. The noble Earl, Lord Liverpool, mentioned it, too. We rightly talk of China and India, but if we want to take the true moral high ground as we desperately try to ensure that this, our only planet, is saved, let us think also about the United States. It has 5 per cent of the world’s population, but is responsible for 25 per cent of the world’s pollution. We will not persuade India and China to change if they do not see the biggest economy on Earth changing. To pull that off, the European Union needs to set an example. The critics are correct in saying that Britain alone cannot change the whole of the world’s pollution, but we do not have a prayer of getting countries such as India, China, Brazil and the United States to do it unless we do it ourselves. I am proud to belong to a Government who put that very high on their agenda. I turn to the often reiterated point of the noble Lord, Lord Tanlaw, about daylight saving. There are potential advantages and disadvantages to a change to the summer-time arrangements. It would have an impact in many different ways on different sectors. Financial services, trade and tourism are all major sectors in this, the most successfully reconstructed economy in Europe. The present situation is a satisfactory compromise between those who prefer lighter mornings and those who prefer lighter evenings—those of us who work in both do not care. We are not convinced that a change to the current arrangements would be in the best interests of this country. I thank the noble Lord, Lord O’Neill, for his kind words. We worked together some years ago when I was at the CBI and he was at the then DTI. He mentioned King Coal—that is my phrase, not his—of many years ago. Coal plays a part in the future without a doubt. Obviously, clean-coal technology and carbon capture is very relevant. I do not apologise for the fact that this nation does not send men underground in very dangerous, dirty conditions, which at the end of the day is not where we should be putting an advanced economy’s population. One of the dangers of losing these industries—in Birmingham we have seen it happen with motor car factories, and it can happen with shipyards and steelworks as well as coalmines—is that those centres of communities had a cohesive effect on our society. It is important that as they go away we bear in mind the debilitating effect it has on the cohesion of a society struggling to deal with a changing world and the frightening aspects and challenges of globalisation. I can assure my noble friend Lord O’Neill that carbon capture and storage offers the potential to reduce CO2 emissions by up to 90 per cent. Because of its relevance to developing countries, it is estimated to have the potential to contribute up to 28 per cent of CO2 mitigation. That is why we are supporting a competition for a carbon capture and storage demonstration. That has never been done before. It is on an industrial scale with electricity generation. We think that a competition is the best way to encourage innovation both in the design and its operation. We await its results with great interest. The noble Lords, Lord Dixon-Smith, Lord Redesdale and Lord Chorley, asked whether the department is called BERR, DBERR or anything else? It is not DBERR because the ““Lady in Red”” who Chris de Burgh wrote about would be mightily dischuffed, and the department does not like being known as ““Chris””. It is called BERR—Business, Enterprise and Regulatory Reform. I am thrilled that at last we have a department whose name has ““business”” right at the start. I applaud the Prime Minister in taking the very brave step of bringing in some specialists in various fields. But, I would say that, wouldn’t I?—I am one of them. I hope that at last we can raise some of these major issues above factionalisation of party politics, and get on with the job. The noble Lord, Lord Dixon-Smith, asked where responsibility for energy would lie, and where was the juxtaposition between BERR and Defra. It is not the only one; there are transport, planning and low-carbon buildings. We have to be reminded of the crucial role the Treasury plays in this. The Foreign Office and the Department for International Development have a huge role to play in climate change, energy and, of course, trade negotiations. At what point do we say that the way other countries make things should be a barrier to entry and a barrier to trade, which is a protectionist’s last refuge? At what point do we actually acknowledge the issue? Different government departments have energy somewhere on their brief. Putting it in BERR, where business is so key to providing market solutions in so many ways, is, I submit, the best place for it. The noble Lord mentioned food miles. We have to be very careful when we listen to those in the developed world who tell us that we should not expect fresh fruit to be flown in on Christmas Day, with a huge carbon footprint from aircraft, as we are messing around with the livelihoods of many people in the developing world who need this speedy access to wealthy economies, simply to have clean water, better healthcare and the chance of a better life. A compromise has to be struck on this. It is important that people understand what they are playing with. The noble Lord spoke about efficiency being achieved at the expense of economic growth. Our economy will continue to grow, while our demand for energy will remain constant and could possibly fall if we get this right. Figures in the White Paper show that we have effectively decoupled economic growth and growth in energy consumption. This Government should be very proud of that because they have shown the rest of western Europe that it can be done. We obviously all need to do more. The chapter in the White Paper entitled ““Saving energy”” deals comprehensively with that. On the point concerning tidal power raised by the noble Earl, Lord Liverpool, given my lengthy time in the job, I cannot comment on individual projects—I hope your Lordships would not expect me to. But I can reassure the noble Earl that the Sustainable Development Commission is looking at a broad range of issues and options, as well as the Severn Barrage in isolation. Tidal lagoons are being looked at, as he mentioned. The commission is expected to report by September this year. Linking that to the noble Lord, Lord Jenkin, talking about getting on with it, it is important that, whatever happens, we reach decisions this year. I am pleased that the commission will also be reporting on that particular point in September. The noble Lord, Lord Jenkin, asked what is actually happening on the European Union’s emission trading scheme and the carbon price. As the White Paper says, we are active in shaping the future of this—in many ways, it is a British invention and something of which we should be proud. We are and have always been good traders, and this is just another way we can bring that expertise as a nation to a 21st-century issue. As a nation, we are actively engaged in Brussels and elsewhere across the European Union in making the UK’s case, and we are confident that progress is being made. The noble Lord will share with me the absolute frustration at the speed, or lack of it, in which progress seems to be made in various things in Brussels, and this is no exception. All I can assure the House of is that I and my colleagues will do absolutely everything possible to ensure this is given the level of importance and acknowledgement in Brussels that noble Lords clearly give it here. The noble Lord also raised site selection. It will be for the private sector to propose sites for new nuclear power stations, just like any other. In May, we launched a technical consultation on how to run a strategic siting assessment. The noble Lord raises just the issues that we are considering, and we welcome views from everybody—stakeholders and the public. We do not have a monopoly on wisdom, so enable us to bring up some definitive answers in the future. In conclusion, the United Kingdom has been fortunate up till now because we have been able to meet most of our energy needs from domestic sources. We started with our coalfields two centuries ago, and more recently used our North Sea oil and our gas. The trouble is that we have got used to the fact, and it is no longer the case. We are soon going to be very dependent on imports. While we can say that that is like other developed countries, it does not sit well with this island nation. As we all know, the big supplies of oil and gas are concentrated in some of the more volatile regions of the world. That does not give anybody in this country the sense of security that enables them to take risks. Business does not like volatile pricing in anything, it does not like unpredictability. If we do not have a secure source of supply, business will face that unpredictability and instability of pricing for a long time to come. The average man and woman in the street will then feel seriously insecure, which does not make for a happy country. Meanwhile, global demand for energy is increasing massively as economies such as China have boomed. China has now overtaken France and the United Kingdom. She is the fourth-largest economy and has Germany in her sights. China is already the world’s second-largest consumer of energy. Her demand for energy is increasing at a rate of 15 per cent every year and new power stations are being built every week. World prices for fossil fuels have increased by more than 50 per cent in the past three years. High prices impact on the vulnerable in this country as well as business and other users. Not only does that make the vulnerable even more so, the whole dimension feeds through to overall inflation, which impacts on the cost of money, which impacts on everybody. As if that were not enough, on top of that there is the need to decarbonise the world’s economies. Not one nation on this, the only planet that we have, can in any way exclude itself from that project. The need to wean ourselves off fossil fuels or find a way of storing the carbon emissions that they cause is of paramount importance. It is vital. Temperatures are rising. Sea levels are rising. Extreme and dangerous weather is becoming more common around the world. The way that we currently produce and use energy is, frankly, largely responsible. In other words, we have to save the planet. We also have to keep the lights on. I commend the Motion. On Question, Motion agreed to.