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Energy Bill

I do not have a department. I am chair of a research institute and an academic.

The cost of energy to industry is indeed an important factor in its competitiveness, but it is not nearly as important as the investment climate, wage rates, productivity and exchange rates. This is of fundamental importance. Primary energy in the UK and similar economies is about 5% of GDP. Even a 20% increase would give you a one-off 1% increase in costs. That does not move industry from one place to another. You can study some of the publications on our website. If you look at what determines where people are, the data are made up of those issues that I have described: investment climate, wage rates, productivity and exchange rates. This is an important part of the story, but a small one relative to other big factors. Furthermore and fundamentally, I have given reasons why over the medium term the policies that we have been describing here are just as likely to force prices down over 15 or 20 years as to raise them, if not more likely to do so.

A target for power sector decarbonisation that gives a crystal-clear signal to investors is essential. Without such a target and with potentially mixed messages from government, there remains a high degree of uncertainty that will deter investors. The best way to address this government-induced uncertainty is to include in the Energy Bill a target for power-sector decarbonisation, specifically a target to reduce the carbon intensity of power generation to 50 grams of CO₂ per kilowatt hour by 2030, as recommended by the Committee on Climate Change as being necessary to meet overall emissions reduction targets. I urge your Lordships to support the Bill. It is a wise and sensible step in a good direction. It would be much stronger and wiser with a decarbonisation target.

In summary, there are five reasons for this target. It is the responsible way to play our part in a world at immense risk from climate change. It is necessary to reach the target for emissions reduction that we have sensibly set for ourselves. It is necessary for the credibility

and clarity to foster the confidence necessary for the investment on the scale that we need. It will allow us to move still more rapidly into the world markets of the future. Finally, as that investment takes place, we will find that it plays a key role in fostering the investment and infrastructure that will deliver the energy security, affordable energy and growth that this country sorely needs.

5.28 pm