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Department of Energy and Climate Change

With permission, I would like to make a statement on the new Department of Energy and Climate Change. The new Department brings together the Government's work on three long-term challenges that face our country: ensuring that we have energy that is affordable, secure, and sustainable; bringing about the transition to a low-carbon Britain; and achieving an international agreement on climate change at Copenhagen in December 2009. Those are our goals, and the new Department recognises that when two thirds of our emissions come from the use of energy, energy and climate change should not be considered separately, but together. Some people will ask whether we should retreat from our climate change objectives in tough economic times. In our view, it would be quite wrong to row back, and those who say that we should misunderstand the relationship between the economic and environmental tasks that we face. Of course, there are choices to be made, but there are also common solutions to both—for example, energy-saving measures for households, such as those announced by my right hon. Friend the Prime Minister in September, which cut bills and emissions; or investment in new environmental industries, which both improves our energy security and reduces our dependence on polluting fuels. What we know from the Stern report of 2006 is that the costs of not acting on climate change are greater than the costs of acting on it. Only if Britain plays its part will a global deal in Copenhagen to cut carbon emissions be possible, so far from retreating from our objectives, we should reaffirm our resolve. Over the summer, the Secretary of State for Environment, Food and Rural Affairs, to whom I pay tribute for his work and leadership on climate change, asked the independent Committee on Climate Change to review the long-term target for Britain's emissions. Based on a Royal Commission report in 2000, the target had been set at a 60 per cent. reduction in CO2 emissions. Since then, independent reports have added further to our knowledge. Arctic sea ice has melted faster than expected, global emissions have grown faster than expected and the impact of each degree of climate change is known to be worse than expected. Last week, Lord Turner wrote to me with the committee's conclusions, which have been placed in the Library of the House. His report found that to hold global warming to 2° above pre-industrial levels—commonly accepted as the threshold for the most dangerous changes in the climate—global emissions must fall by between 50 and 60 per cent. by 2050. Lord Turner concluded that to play its proper part, the United Kingdom should cut its emissions not by 60 per cent. but by 80 per cent. He concluded that the target should apply not just to carbon dioxide but to all six Kyoto greenhouse gases. He also concluded that while there were uncertainties about how to allocate emissions from international flights and shipping, they too should play their part in reducing emissions. The Government accept all the recommendations of the Committee on Climate Change. We will amend the Climate Change Bill to cut greenhouse gas emissions by 80 per cent by 2050, a target that will be binding in law. I hope that Members on both sides of the House will support that move. Indeed, let me say that I want to create as much of a consensus as possible on climate change. However, as we all know, signing up to an 80 per cent. cut in 2050, when most of us will not be around, is the easy part; the hard part is meeting it, and meeting the milestones that will show we are on track. For us in Britain, the milestones will be shaped by the recommendations of the Committee on Climate Change, which will advise us in December on the first 15 years of carbon budgets. That means national limits to our total emissions, within which we shall have to live as a country. We will report next year on how we will meet them. We are also determined to ensure that the signal and the commitment come not just from Britain but, as the Prime Minister has been making clear in recent days, from Europe. That means an agreement by the end of this year on strengthening the European Union emissions trading scheme, and on the targets for 2020: that Europe should reduce greenhouse gases by 20 per cent. unilaterally and by 30 per cent. as part of a global deal—targets that I reaffirm today—and that the EU should confirm its renewable energy target. Earlier this year, we published our draft renewable energy strategy. Having examined the issue, I can say that what is clear to me is not only the scale of the challenge, but the urgency of getting on with the delivery. The renewables obligation has tripled supply in the past five years, and we are making further changes in its structure, in planning policy and in access to the grid. However, having heard the debate on the issue, including what has been said by many colleagues on both sides of the House, I also believe that complementing the renewables obligation for large-scale projects, guaranteed prices for small-scale electricity generation—feed-in tariffs—have the potential to play an important role, as they do in other countries. Having listened to the views that have been expressed, including those expressed in the other place, we plan to table an amendment to the Energy Bill to make that happen. I believe that renewable power can play a bigger role not just in electricity but in heating. Heating produces almost half Britain's carbon emissions, and cleaner sources of heat can help us to meet our target in 2050 and the milestones on the way. I recognise that we need to make rapid progress on that issue as well, and I will make further announcements soon. Our objective is a climate change policy that is fair and an energy policy that is sustainable. The present structure of the energy market was designed in a world of abundant supply, British energy self-sufficiency, low commodity prices and an emerging debate—but not a settled consensus—on the issue of climate change. Today, all those assumptions have changed. There is international competition for resources and a need for new investment in supply; there are structurally higher energy prices; and there is urgency about carbon emissions. To respond to this new world we need a market that secures future supply, which must include investment in nuclear power and carbon capture and storage. We need a market that provides incentives for cuts in emissions and does more to help homes and businesses. Those are the big issues that we need to address for the future, but today I want to signal a direction of travel on affordability. Last week the energy regulator, Ofgem, highlighted what it believed to be unjustified higher charges for 4 million electricity customers in areas not connected to the gas main. It also believes that, even when account is taken of higher costs facing companies from customers with pre-payment meters, many homes that use them are being overcharged. Unfair pricing that hits the most vulnerable hardest is completely unacceptable. I made that clear to the representatives of the big six energy companies when I met them yesterday. I also told them that the Government expect rapid action or explanation to remedy any abuses, and I will meet them again in a month to hear what they have done. We, and Ofgem, are determined to see those issues addressed. Ofgem is consulting on its findings until 1 December as part of a due process, but let me say this: if the companies do not act satisfactorily and speedily, we will consult on legislation to prevent unfair pricing differentials. For us, markets can provide enormous benefits in dynamism and efficiency, but they will only work properly if they are regulated effectively in the public interest, including with a strong independent regulator. There is more to be done to help consumers, and we will not hesitate to act. We need an end to unfair pricing, feed-in tariffs for electricity generation, and an 80 per cent. cut in emissions. Our aim is a climate change and energy policy which is fair and sustainable, and which meets our obligation to today's and future generations. That is the work that we are beginning in my new Department, and I commend my statement to the House.