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Department of Energy and Climate Change

My Lords, with the leave of the House, I shall now 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. These are our goals, and the new department is a recognition that when two-thirds of our emissions come from the use of energy, energy policy and climate change policy should not be considered separately but together. In tough economic times, some people will ask whether we should retreat from our climate change objectives. In our view, it would be quite wrong to row back, and those who say that we should do so misunderstand the relationship between the economic and environmental tasks that we face. Of course there are trade-offs, but there are also common solutions to both; for example, energy-saving measures for households which cut bills and emissions, such as those announced in September by my right honourable friend the Prime Minister, or investment in new environmental industries, which both improve our energy security and reduce our dependence on polluting fuels. What we know from the Stern report in 2006 is that the costs of not acting on climate change are greater than the costs of acting. Only if Britain plays its part will a global deal 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 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 and the impacts of each degree of climate change are known to be worse. Last week, the noble Lord, Lord Turner, wrote to me with the committee’s conclusions, and they have been placed in the Library of the House. His report found that to hold global warming to two degrees above pre-industrial levels, commonly accepted as the threshold for the most dangerous changes in the climate, global emissions must fall by 50 per cent to 60 per cent by 2050. The noble Lord concluded that for Britain to play its proper part, the UK should cut our emissions not by 60 per cent but by 80 per cent. He concluded that the target should apply not just to CO2, but to all six of the Kyoto greenhouse gases. He concludes that, while there are uncertainties about how to allocate emissions from international flights and shipping, they, too, should play their part in reducing emissions. The Government accept all of the recommendations of the Committee on Climate Change. We will amend the Climate Change Bill to cut 80 per cent of greenhouse gas emissions by 2050, and that target will be binding in law. I hope that all sides of the House will support that. Indeed, I want to create as much of a consensus as we can on climate change. However, we all know that signing up to an 80 per cent cut by 2050 is the easy part. The hard part is meeting it and meeting the milestones that will show that we are on track. For us in Britain, those will be shaped by the recommendation of the Committee on Climate Change, which will advise us in December on the first 15 years of carbon budgets—national limits to our total emissions. 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, too. That means an agreement by the end of this year on the strengthening of the EU 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, and that the EU should confirm its renewable energy target. Earlier this year we published our draft renewable energy strategy. What is clear to me is not only the scale of that challenge but also the urgency of getting on with delivery. The renewables obligation has tripled supply in the last 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 this issue, including from many colleagues in this House, I believe that complementing the renewables obligation for large-scale projects with guaranteed prices for small-scale electricity generation and a feed-in tariff have the potential to play an important role, as they do in other countries. So, having listened to the views expressed, including those in the other place, we plan to table an amendment to the Energy Bill to make that happen. I also believe that renewable power can play a bigger role not just in electricity but in heating, too. Heating produces almost half of Britain’s carbon emissions, and cleaner sources of heat can help us meet our target in 2050 and the milestones on the way. I am clear that we need to make rapid progress on this, too, and I will make further announcements soon. I said at the start that our objective was a climate change policy that was fair and an energy policy that was sustainable. Today’s structure of the energy market was designed in a world of abundant supply, British energy self-sufficiency, low commodity prices and an emerging debate, though not a settled consensus, on climate change. Today, all those assumptions have changed. There is international competition for resources, a need for new investment in supply, structurally higher energy prices, and an urgency about carbon emissions. To respond to this new world, we need a market that secures future supply, including with investment in nuclear power and carbon capture and storage; more to incentivise cuts in carbon emissions; and more to help homes and businesses. These are big issues that we need to address for the future. Today, however, 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 taking account of higher costs facing companies from customers with pre-payment meters, many homes that use them are being overcharged. Unfair pricing which 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. I will meet them again in a month to hear what they have done. We and Ofgem are determined to see these issues addressed. Ofgem is consulting on its findings until 1 December as part of a due process. If the companies do not act in a satisfactory way, we will consult on legislation to prevent unfair pricing differentials. For us, markets can provide enormous benefits in dynamism and efficiency, but they will work properly only if they are regulated effectively in the public interest, including with a strong independent regulator. There is more to do to help consumers, and we will not hesitate to act. A climate change and energy policy that is fair and sustainable, and meeting our obligations to today’s and future generations—that is the work that we are beginning in my new department, and I commend this Statement to the House. My Lords, that concludes the Statement.