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Energy Intensive Industries

The shadow Minister has validated himself in the debate. They are a sight that will always be remembered—I will certainly always remember it. I did not spend six months there, but I did work there.

Many industries have Ministers in this place who are directly responsible for them. We have a Minister for the City or banks, a Minister for farming, a Minister for sport, a Minister for IT and digital, a Minister for arts and a Minister for small business. Those are all important segments, but there is no Minister for the foundation industries and I think that shows a little.

Let us recap on what we are talking about—ceramics and bricks, chemicals, steel and aluminium. I should have said that I am the chair of the all-party parliamentary group for the UK aluminium industry, which is an interesting group to chair because globally aluminium is a real growth industry. It is increasingly displacing ferrous and other metals in the car industry. It is actually a very green material that is light and strong and we are seeing it used more and more. In the UK, though, that industry, which used to have three primary smelting works, now has only one, and that one—in fact, it is in Scotland—is under consultation for closure.

That is not to say that the aluminium industry in the UK is in bad shape. We are going more into secondary processes, which are higher value processes and there is an element of logic in that, but it is a shame that we are losing the raw material-producing capability that is also at risk in other industries such as steel. I will reflect on some of the reasons for that. I will talk about two things: energy prices, as my hon. Friend did, and what we are doing to ourselves—it is nearly all to ourselves—in that regard; and some of the aspects of our position on market economy status vis-à-vis China. I would like clarification from the Minister on that. Others may also talk about that, because some bits of it are not clear to me.

The basic premise is that it is not possible for us as a country to have a march of the makers, with a resurgence in manufacturing—that is in the north by definition, because much of that is in the north—on the back of differentially higher energy prices vis-à-vis our neighbours, whether in Europe or in the United States. We are not talking about China; we are talking about differences in approach in Europe and, to a lesser extent, in the United States.

In terms of energy, there are two sorts. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) talked about the gas industry in the United States and what that has done. This is not a debate about fracking other than to say that we sometimes talk about it as though it is a new industry and we are deciding whether it, and all that goes with it, will happen. The truth, of course, is that fracking has already happened—it has been going certainly for more than a decade—and it has transformed the United States’ eastern seaboard. Something like a million jobs have been created and the gas industry—gas is not just a raw material for energy but a feedstock for chemicals—in the United States has been transformed by it.

It is also worth reflecting that, as a result, the United States’ carbon emissions have massively come down, faster than any other country in the world. The United States did not sign up to Kyoto, but had they signed up they would have made their targets because of the displacement of coal by gas. All of us who are concerned about the environmental aspects of that need to reflect on that.

One of the interesting questions is: have the million jobs created in the United States affected us in the UK? Actually, yes, they have—only at the margin, but everything in all these industries happens at the margin. By and large, whole industries do not get moved; by and large, industries such as the one in Teesside are not closed down. What happens is that a decision is made about an individual process plant. It is now more cost-effective to put that plant in the United States than in Teesside, where it may have gone 10 years ago, because they are paying one third of the price for that gas there. Those of us who are taking opportunistic positions regarding fracking—whether it is INEOS in Grangemouth or elsewhere—need to reflect on what that means for the 900,000 workers in this industry.

Vis-à-vis the rest of Europe, our gas prices are not out of line; in fact, if anything, they are a little cheaper than much of the rest of Europe. Electricity prices in this country are broadly 80% higher than the European mean, as my hon. Friend the Member for Weaver Vale said. This morning, Germany and France were paying 4p per unit. Our energy-intensive industries are paying 9p per unit, and there are two components of that. One is the carbon price floor, which I am sure the shadow Minister will rightly address. That is a tax on manufacturing, and it is arguably a tax on the north. It is certainly not a tax that I like.

As well as the carbon price floor, which we have unilaterally imposed in this country, there is the renewables and climate change stuff that we continue to impose on this country unilaterally. I want to consider the massive differences between what we are doing on this and what others are doing—not the Chinese or the Indians, because it is quite reasonable that they do less than us as they have so far to catch up, but the rest of the EU.

One of the big myths about carbon policy is that it is the EU making us do all this stuff. There was a bit of that in some renewables directives, but by and large, that is not the case. By and large, nothing going on now in climate change policy—policy that we may or may not agree with—is caused by the EU. It is caused by us, by the Climate Change Act 2008 and the Committee on Climate Change.

The point that needs to be made—and the Minister and shadow Minister need to be cognisant of it—is that the 2008 Act has imposed on our industry the need to

reduce carbon emissions by 80% over a 60-year period. The European submission to the Paris summit requires a change of 40% over 40 years. That is a lower gradient, and furthermore, it is easier to get a higher gradient to begin with. They are doing the easy bit at a much lower rate. If we take the UK out of the overall European submission to Paris, it means that—roughly speaking—they have signed up for an emission reduction rate of 50% to 60% lower than us. Either we are right or they are right, but it seems odd to me.

The reason for the difference is clear: in those countries, the people who run the foundation and heavy engineering industries have much more lobbying power with Government, perhaps as the banks do in our country. As a result, they look at the proposals and say, “We’re going to do what’s reasonable. We’re not going to bankrupt ourselves.” The trajectory of emission reduction to which the EU has signed up is 60% lower than the one we are giving ourselves in the UK. The EU has not even assigned that amount by country yet; it is just a total EU level. That should give us all pause for thought. Maybe we are right, maybe they are right, but our trajectories are certainly different.

The European emissions trading scheme was supposed to reduce carbon emissions. The European Parliament had a vote three or four years ago because the ETS did not set a high enough price for carbon. It implies a carbon price of €5 per tonne of CO₂. The vote was to try to get that price up, but the Germans, the French and others would not agree to it. That is one reason that on Monday night, an Opposition amendment to the Energy Bill will advocate going further down the path of unilateral action here—in that case, because of the failure of the emissions trading scheme in Europe. If it were not so serious for the 900,000 people whose livelihoods we are talking about, it would almost be funny.

In terms of progress on emissions and climate change, a very good database called EDGAR—the Emission Database for Global Atmospheric Research—shows emissions per capita, per unit of GDP for all the countries in the world, and how they are moving and changing. It is worth reflecting that Austria, a relatively prosperous, affluent part of Europe, has increased its carbon emissions per head by 20% since 1990, while we have decreased ours by something like 15% or 20%. There is no consistency of approach, which is extraordinary.

We have talked in the past about the fact that countries such as Germany are building a new generation of coal power stations. Their renewables are not going up, but in fairness, they have done a lot on renewables in terms of emissions. However, Germany’s carbon emissions are one third higher than the UK’s per unit of GDP and about 30% higher per capita. We need to reflect on that and on the actions that we think it is necessary to take. I make the point again that either we are right or they are right, but for too long, we have listened to people’s words on this subject and not looked at their actions.

I asked the Committee on Climate Change at a meeting recently, “What about these industries? All other things being equal, if we decide that we wish to continue having the highest energy prices in Europe and so on, what does that mean for them?” One person on the committee said, “It’s about comparative economic advantage.” The theory of comparative economic advantage says that a developed economy should probably not be doing some of these things. The implication is that it is

probably right to leave steel production behind and move into making aeroplanes and so on. That is the thinking in some parts of the Committee on Climate Change. Either parliamentarians wish to challenge that, or we accept it. At the moment, that is the consensus on action—I personally think it is wrong.