Infrastructure Bill [Lords]
Debate between Alan Whitehead and Tim Yeo(9 years, 3 months ago)
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Mr Yeo
My hon. Friend is exactly right. I was very tempted to sign his new clauses on that point. Improving gas storage would not only greatly improve our energy security, but make it possible for some of the low-carbon, intermittent generating technologies, such as wind and solar, to be used much more widely.
There is no reason to suppose that decreasing our reliance on imports will lead to an increase in gas consumption. Consumers will not suddenly think, “Oh, as we’re not importing gas, we’ll turn the heating up.” It is a completely mistaken notion to think that allowing fracking has such malign consequences.
In any event, emissions in this country are now subject to the carbon budgeting process. It is greatly to the coalition’s credit that it has confirmed the fourth carbon budget. Achieving that rigorous set of targets will absolutely put us on the path to meet the EU target of a 40% reduction in greenhouse gas emissions by 2030. That will be the case whether or not fracking occurs in this country.
My Committee looked very carefully at the environmental and safety concerns. We are satisfied that with the right robust and rigorous regulatory framework, fracking presents no danger to the integrity of the water supply, the health of local residents or the environment generally. The mistakes made by the fracking industry in the US in its early stages can easily be avoided in this country.
Dr Whitehead
Does the hon. Gentleman not accept that, according to all the projections produced by the Department of Energy and Climate Change, the amount of gas used between 2020 to 2030 will be substantially less than at present—not none, but substantially less—and that the likely net effect of recovering gas by fracking is that it will be for export, not the domestic market?
Mr Yeo
I do not entirely agree. The fall in gas consumption in the UK will not take it below the level at which we require imports. Even if gas consumption goes down, as the hon. Gentleman suggests, we will probably still import gas. For the reason I have just mentioned, if that gas is LNG, using our domestic supplies of shale gas would be beneficial in terms of greenhouse gas emissions.
I note that the environment, health and safety concerns highlighted by the Environmental Audit Committee are not shared by the Environment Agency. I also note that Lancashire county council’s objections relate not to such concerns, but to noise and traffic movements. Those understandable issues arise in all sorts of planning applications, many of which have nothing to do with the energy industry.
Energy Price Freeze
Debate between Alan Whitehead and Tim Yeo
Mr Yeo
The hon. Gentleman, another valued member of my Select Committee, raises a point that I was just going to come to. The consequences of the delay that will be imposed are themselves damaging in some respects.
The second aim of energy policy, which is affordability, is also harmed. As I have pointed out, if companies believe that prices will be frozen in May 2015, they will inevitably seek opportunities to raise their prices in the intervening period. Announcing a price freeze 20 months in advance has the perverse consequence of raising prices for consumers during that 20-month stretch faster than they would otherwise have risen.
The Leader of the Opposition, who certainly grabbed the headlines in his party conference speech last September, did not, I am afraid, do a great deal more than that. It is not a serious policy to announce a price freeze 20 months in advance. If this were an Opposition who were genuinely concerned about keeping consumer prices down, they would not announce the freeze until the day after they took office. There is an honourable and admirable precedent for that sort of approach, which was taken by the last Labour Prime Minister. When he was Chancellor of the Exchequer in 1997, he took the world by surprise a weekend after the election by announcing the formation of the Monetary Policy Committee at the Bank of England and transferring the power to control interest rates away from Ministers and the Treasury to an independent committee. An Opposition who were really concerned about consumer prices would have said, “We have this brilliant idea, but it can only work if we don’t say anything about it until we are in a position to implement it.”
Dr Whitehead
Is the hon. Gentleman saying that there should be a price freeze, but that we should not tell anyone about it until we introduce it? Or is he saying that we should let some people know, but not others, so that it will work, or that there should not be a price freeze?
Mr Yeo
I am saying that I am not in favour of a price freeze, but a price freeze that is signalled 18 months in advance is clearly a cynical electoral manoeuvre and has nothing to do with a responsible approach to trying to reduce consumer prices. I am not in favour of the freeze, but I am even less in favour of playing politics with energy bills in the way, I fear, that the Leader of the Opposition did by saying, “Okay, let’s have this price freeze, but obviously we can’t implement it until the middle of 2015.”
On the third test of cutting greenhouse gas emissions, a price freeze is at best neutral. I am afraid that I have to conclude that the Opposition’s proposal for a price freeze has the damaging effects of cutting investment, increasing the risk of the lights going out, and raising prices and consumer bills faster than otherwise would happen, at the same time as doing nothing to reduce emissions.
One final consequence of the proposal, which has been pointed out so I will not labour it, is the effect it has on small independent suppliers. Clearly, it is very damaging for them. If ever there was a policy designed to prop up the dominance of the big six it is the price freeze proposed by the Opposition. The ability of those smaller companies to survive the losses that a price freeze could impose on them is inevitably much less than large international companies.
Let me turn now to the Competition and Markets Authority reference. I believe that that was a belated recognition by Ofgem of the market failure in the energy industry, which is evident in a number of aspects, and of the risks that are, at the very least, inherent in vertical integration. Ofgem has been asleep on the job for the past two or three years. It has not used the powers that it already has as effectively as it should. Indeed, it commissioned BDO the accountants to make a number of recommendations, which it then proceeded to ignore once they had been announced.
Government Levies on Energy Bills
Debate between Alan Whitehead and Tim Yeo
Mr Yeo
I am not sure whether the total comes under public expenditure. The money is not coming from taxpayers; it might merely affect electricity prices. In the context of the fact that the Committee on Climate Change now sets carbon budgets a minimum of a decade in advance and that we now have a fourth carbon budget that covers the period up to 2028—even the third carbon budget goes beyond the period for which we know the levy control framework total—I am simply asking for some indication of the Government’s thinking. Will the total be maintained in real terms at £7.6 billion index-linked, given that a very big demand on levy control framework money will be made in the early to mid-2020s if the nuclear power station goes ahead?
Dr Alan Whitehead (Southampton, Test) (Lab)
To underline the hon. Gentleman’s point, does he agree that the likely take on CfDs in one year when Hinkley C comes on stream in 2023 will probably be more than the total money currently available for new entrants under the levy control framework? Does he therefore wish to emphasise that it would have a seismic effect on CfDs over the period 2020 to 2025, and the Minister might also want to consider that point?
UN Framework Convention on Climate Change
Debate between Alan Whitehead and Tim YeoWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Mr Yeo
My hon. Friend is right about the difference between new and old nuclear, and I take his point. I reiterate that my Committee and I are wholly opposed to the floor price for carbon, which is a tax. It is not a green measure, although it was introduced as one, and it was never going to have that effect. I am a great supporter of the concept of emissions trading and a great advocate of more urgent action to accelerate the introduction of low-carbon technology. The floor price for carbon will not do anything to achieve those objectives.
Dr Alan Whitehead (Southampton, Test) (Lab)
Will the Chairman of the Committee reflect on the fact that not only was a substantial floor price escalator effectively announced in the Finance Bill, but that escalator was £1 above EU ETS prices with respect to what was originally proposed in the consultative document on which the new rates are based; was put into place at £5 above EU ETS prices; and now, with the projections to 2015-16, is £12 above EU ETS prices? Does he have any thoughts on that trajectory and the way it was laid out?
Mr Yeo
The hon. Gentleman makes a telling point. It is clear that, even in the Treasury, the floor price is simply seen as a way to extract revenue, but it has chosen to do that in a way that is particularly damaging to some sections of British business. Incidentally, his thoughtful intervention has given me time to remember that, in opening, I should have drawn attention to my entry in the Register of Members’ Financial Interests and declared an interest in a number of energy businesses. I reiterate, as I have on previous occasions, that those interests were acquired long after my views on these subjects were formed 20 years ago, when I had some ministerial responsibility for the matter.
I shall touch briefly on one or two other recommendations. The Government agree with the Committee that we should work with industrial sectors and stakeholders to develop a sectoral trading scheme between developed and developing nations. The Government also accepted the Committee’s recommendation that the second commitment period of the Kyoto protocol should last eight years and include a review clause to allow for more ambitious emissions targets, if necessary. They also agree that efforts should be focused on developing the Durban platform, because countries such as Canada, Russia and Japan were unlikely to sign up to a second Kyoto period.
I share the concern of some commentators that more progress has not been made towards closing the emissions gap. Without wishing to provoke my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) into too much anger, I will quote Lord Stern, whose comments on it were apt. He said that
“there has been, yet again, a very big mismatch between the scale and urgency of action required to effectively manage the huge risks of climate change, and the political will and ambition that has been displayed in Doha. Current commitments and pledges by countries to reduce emissions by 2020 are clearly not consistent with the goal of giving the world a reasonable chance of avoiding global warming of more than 2 centigrade degrees. We are headed on current plans for likely increases of 3 centigrade degrees or more”.
He has more to say, but I think I have perhaps said enough on that point.
The Government also supported the Committee’s view that a target of a 30% emissions reduction by 2020 should be set at EU level, and the view that that would be in the UK’s long-term economic, as well as environmental, interest.
I will leave other members of the Committee to address some of the report’s other recommendations, because I want to allow a little more time, if possible, for the second debate, which is on low-carbon links with China. The process that we consider in the report and are debating this afternoon remains important and, frustrating though it is, I am glad that the Government continue to participate fully and constructively in it.
Mr Yeo
I do not want to get too distracted by that, but the terms of trade in the debate have clearly shifted a lot in the past year or so. The two big factors are, first, that the recession seems to be longer and worse that we had thought—not just in this country, but across the EU, although perhaps for slightly different reasons, and, secondly, the extent of the competitive advantage that shale gas now gives the US. Despite all that, if we say, “Okay, that’s fine. Let’s not bother with nuclear or low-carbon renewables, it’s all going to be gas,” we might find that we are buying gas expensively from a variety of places, which might even include America.
We would not have done much for our competitive position if we landed up completely dependent on fossil fuel imports, the price of which would be completely outside our control, and even the supply of which might not be wholly reliable. I point to the views of all sorts of businesses that are not green-dreaming tree huggers—some are not even connected with the energy industry—but which clearly feel that an energy mix involving a variety of technologies is a better bet than complete reliance on fossil fuels.
Dr Whitehead
Might the Chairman of the Committee wish to consider a distinction between internal domestic prices in the US and its export prices? Might he also reflect on the price of the most recent cargo of liquefied natural gas from the US, and the extent to which it was or was not related to the overriding price of shale gas within the US? The extent to which the competitive advantage of the UK may be exported is very much in doubt, and it is likely that world prices, not US domestic prices, will prevail.