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Finance (No. 3) Bill

The Economic Secretary to the Treasury has already suggested that those in favour of a carbon floor price should explain how it could be introduced in a different way from that proposed by the Government. I imagine that she will return to that subject at the end of the debate, but I suggest that she need only look at her own consultation document, which led to the amount that has been established and the mechanism by which the floor price works. The consultation document posited a £1 difference between a Europe emissions trading scheme and a carbon floor price, certainly in respect of the starting period. It also warned about how far away from that £1 difference a floor price might go and what might happen to energy prices in the rest of Europe. As people who contributed to that consultation document suggested, because our energy supply is highly interconnected with that of Europe, a substantial difference could lead to investment going to where the sale price is cheaper, with, perhaps, new gas-fired power stations being developed on the other end of an interconnector rather than lower-carbon power stations being developed at our end of an interconnector. Essentially, the Government ignored their own consultation document and came up with a carbon floor price that clunks, rather than floats, against the ETS. Indeed, it is a carbon floor price that has a £4.94 difference; as my hon. Friend the Member for Scunthorpe (Nic Dakin) said, when it is introduced there will be almost a £5 difference from the ETS, and rising, by decision, on an annual basis. It will also in essence be a straightforward tax—and not a very green one at that—on removing the exemption for producers upstream from the climate change levy. The objective could have been achieved in many other ways, such as retiring permits, matching the ETS and undertaking downstream arrangements, all of which could have led to a different outcome in respect of the carbon floor price, and I say that as someone who supports the idea of having a carbon floor price. We therefore need to ask why this has happened in this way. It has happened for two very tempting reasons. First, this clunking arrangement happens to net the Treasury about £800 million a year, so it is quite a large tax earner, and also—if one were so minded—potentially quite a large earner to redistribute through underpinning either mitigation for certain industries or other measures to develop a low-carbon economy. The second reason is that because this measure relates to upstream exemptions in respect of the climate change levy, it provides a clear and straightforward subsidy to the nuclear industry. That is not subsidy for new nuclear, however. One could argue that a subsidy for new nuclear ought to be honestly discussed, as the Chairman of the Energy and Climate Change Committee has suggested. The current policy of no subsidy for new nuclear might then be recast as an upfront debate on what subsidies new nuclear would need to come on stream in the time scale the Government suggest that it should. It is not a subsidy for new nuclear, however; instead, it is a subsidy for existing nuclear. The subsidy is essentially a subsidy for nuclear that will go out of commission. All but one of the current fleet of nuclear power stations will go out of commission by 2023. This is therefore a gold-plated pension fund for existing nuclear power station operation. That is because, as the Government have said, it in effect produces a £50 million subsidy for old nuclear. Another estimate is that up to 2030 it will produce £1 billion or more of subsidy. To the extent that it is defended as a subsidy—the Government's Office for National Statistic indicates that a number of its measures are indeed subsidies—it is defended because it is a subsidy that is not exclusively for nuclear. However, old nuclear power stations generated some 69 billion kWh in 2009, compared with 9.3 billion kWh of generation by wind over the same period, and more than 70% of all that money—which will be free money for existing lower-carbon operators—will go straight to nuclear. The money will not go just straight to nuclear either. It will go straight to one company, because after the closure of two nuclear power stations in 2012, all the existing nuclear power stations will be owned by one company: EDF. It has plans to develop four new nuclear power stations and it owns four sites about which there has been agreement on developing new nuclear in the recent national policy statement on nuclear power. We are talking about a direct subsidy going to one company to provide money for its existing power stations and this company has in prospect the plan to build four new nuclear power stations on sites it currently has. So a rather straightforward case is being put forward here. When the new arrangement comes into being there should, at the very least, be a review of what its effects are, whether other ways of doing things might have been better and how such a subsidy might be clawed back to undertake the sort of things that hon. Members have mentioned in terms of protection for high-emitting industries. Such a review should also consider the question of developing renewable energy and other forms of low-carbon investment at the same time. Currently, £800 million per year sits in the Treasury and £1 billion sits in the coffers of EDF. That is a far cry from what I thought a carbon floor price was about and we ought to make speed to ensure that a carbon floor price undertakes what it is supposed to do, which is to reward good green activity and not reward bad green activity.