Today I am announcing that the Government propose to set an ambitious target in law to reduce greenhouse gas emissions in line with the advice from the independent Committee on Climate Change.
Signing up to an ambitious fourth carbon budget will result in no additional costs to consumers during this Parliament. We will, however, undertake a review of progress in early 2014 to ensure that our carbon targets are in line with those of the European Union. We are working up a package of measures, to be announced by the end of the year, to help energy-intensive industries adjust to the low-carbon industrial transformation while remaining competitive.
By agreeing to the level proposed by the Committee on Climate Change, we are demonstrating our desire to drive the changes needed to turn the UK into a dynamic, low-carbon economy that is attractive to investors in the new and growing low-carbon sectors. We are also sending a clear signal to the international community that the UK is committed to the low-carbon economy. That will help us to reach agreement in Europe on moving to a 30% emissions reduction target and build momentum towards a legally binding global climate change deal.
The Climate Change Act 2008 sets a target to reduce greenhouse gas emissions in the UK by at least 80% from 1990 levels by 2050. It also requires Governments to set carbon budgets, which are limits on greenhouse gas emissions in the UK for consecutive five-year periods. Carbon budgets must be set at least three budget periods in advance. They are designed to put emission reductions on an appropriate and cost-effective pathway to our 2050 target. The first three carbon budgets were set in 2009, following advice from the independent Committee on Climate Change. The fourth carbon budget, which sets the limit on emissions for the five-year period from 2023 to 2027, has to be set in law by the end of June 2011.
As advised by the Committee on Climate Change, the level that we propose setting in law would mean that net emissions over the fourth carbon budget period should not exceed 1,950 million tonnes of carbon dioxide equivalent, which is a 50% reduction from 1990 levels. As required by the 2008 Act, once the fourth carbon budget has been set in law, we will publish a report setting out the policies and proposals required in the medium and long term to meet the budget, building on the strong foundation provided by our existing policies. That will take the form of the revised Government carbon plan later this year, following the publication of the interim version in March.
The Committee on Climate Change advised that we should aim to meet the budget through emissions reductions in the UK, rather than by relying on carbon trading, such as under the EU emissions trading system or the purchase of international credits from projects abroad. We will aim to reduce emissions domestically as far as is practical and affordable, but we also intend to keep our carbon trading options open, to maintain maximum flexibility and minimise costs in the medium to long term. Given the uncertainty involved in looking so far ahead, that is a pragmatic approach.
Under the Climate Change Act, emissions reductions by the UK’s industrial and power sectors are determined by the UK’s share of the EU emissions trading scheme cap. That protects the UK industrial and power sectors from exceeding EU requirements. However, if the EU ETS cap is insufficiently ambitious, disproportionate strain could be placed on sectors outside the EU ETS, such as transport. To overcome that problem, and to provide clearer signals for businesses and investors, the Government will review progress towards the EU emissions goal in early 2014. If at that point our domestic commitments place us on a different trajectory from the one agreed by our partners in the EU under the ETS, we will revise up our budget as appropriate to align it with the actual EU trajectory. In line with the coalition agreement, the Government will continue to argue for an EU move to a 30% target for 2020, and for ambitious action in the 2020s.
As part of the transition to a low-carbon economy, we need to ensure that energy-intensive industries remain competitive and that we send a clear message that the UK is open for business. Before the end of the year, we will announce a package of measures for the energy-intensive businesses whose international competitiveness is most affected by our energy and climate change policies. Rising electricity costs pose a risk to those businesses’ sectors, which are critical to our growth agenda. We will therefore take steps to reduce the impact of Government policy on the cost of electricity for those businesses, allowing them to continue to play their part in delivering our green industrial transformation. In that way, we will ensure that those sectors remain internationally competitive and send a clear message that the UK is open for business.
It is important to stress that the UK’s existing policies already put us on track to meet the first three carbon budgets. They also provide a strong foundation for the fourth carbon budget, implying no additional near-term costs. We are reforming the electricity market, making homes and businesses more energy-efficient through the green deal, ensuring that new homes are built to a high energy efficiency standard, encouraging the uptake of ultra-low carbon cars and setting up a green investment bank.
Meeting the 1,950 million tonnes target that we propose for the 2023 to 2027 period is ambitious but achievable. By providing long-term clarity for investors, the fourth carbon budget places the UK at the leading edge of the global low-carbon industrial transformation. It will set Britain on the path to green growth, establish our competitive advantage in the most rapidly growing sectors of the world economy, generate jobs and export opportunities in those sectors, maintain energy security and protect our economy from oil price volatility. It is a framework not just for action on climate but for growth and prosperity.
I thank the right hon. Gentleman for early sight of his statement this afternoon. May I make it very clear that we welcome the fact that the Government have finally made a decision on the fourth carbon budget? We know that it has been a rocky week for him, as his colleague the Business Secretary sought a very different decision on this issue. We also know the many battles that he has lost within Government on the green agenda, so I congratulate him on this progress. I welcome the fact that he has not, after all, ducked the chance to answer questions on this important matter and is here before the House today.
I need to pick up on a point that the right hon. Gentleman made. He talked about our being on track to meet the first three carbon budgets, but I do not really think that is thanks to the current Government. We have seen a go-slow from him on green progress. Can he reassure us that he, the Treasury and the Business Secretary are united in delivering on these challenging targets? Can he be sure that he at least has the support of the Prime Minister?
The importance of this decision cannot be overstated, and I shall not repeat what the Secretary of State clearly laid out on the rationale behind the Climate Change Act 2008, which was established under the previous Government. However, I am puzzled about the 2014 review that he announced, because it introduces new uncertainty for those investing in the country’s greener future and breaks with the five-year cycle. He has already failed to provide business certainty by delaying the green investment bank and pulling the rug from underneath the solar industry. It is therefore essential that the scope of that review is clarified so that it does not do the same.
With those budgets now agreed, the Government must deliver on policies to meet them. As I have said, we have seen over the course of this year the Government failing to deliver on their green promises. The long-awaited green investment bank is unable to borrow till 2015—no rush there!—and it is the subject of yet more disagreements. Confidence in the renewables sector was shaken by a hasty and ill-conceived revision of the feed-in tariff, and of course, the commitment to zero-carbon homes was scrapped with no notice.
The right hon. Gentleman’s confidence in his record belies the facts. He needs to focus on his Department and on the detail of this agenda, which is very important to the future not just of the UK, but of the world. For the UK to meet those targets, we need a clear plan from the Government. The right hon. Gentleman talked about a strong foundation, which we need, but he needs to get real and to deliver on that.
We cannot meet our targets without a major reduction in domestic emissions. It is therefore critical that the Government make the improvements to the Energy Bill that the Opposition have demanded. Most importantly, they need to be clear on what carbon reductions the green deal will deliver, which, as we said last week, cannot be left to the market to decide.
Policy needs to be joined-up if we are to have the green industrial revolution that this country needs. We are clear that there is cross-party agreement on the carbon-reduction trajectory, but I should like to ask a few detailed questions of the Secretary of State. What will be the purpose and scope of the 2014 review, which I have already highlighted? Is there a prospect that the Government will weaken the targets that he announced today, or is he suggesting that they can only be tightened? What are the Department of Energy and Climate Change and the Department for Business, Innovation and Skills doing to support energy-intensive industries? When will he have more detail on that? He alluded to that, but we need more detail.
Will the Government introduce clearer aims for the green deal, so that we can be clear on how it will contribute to the necessary emissions reductions? When will we see the national policy statements, including on nuclear? Will that happen before the summer? When will the revised carbon plan be published? Will the Secretary of State and his Department consult widely on that?
After scrapping the grant funding for wave and tidal—we still await the renewables obligation certificates review—how will the UK gain a competitive edge in wave and tidal energy, in which we should be groundbreaking? Will the Secretary of State introduce an accelerated timetable for the trial and deployment of industrial-scale carbon capture and storage for coal and gas?
Does the Secretary of State agree with the Committee on Climate Change that we need to be more explicit in our support for new nuclear and onshore wind? Finally, what plans do the Government have for introducing road pricing, as suggested by the Committee? Has he consulted the Transport Secretary? Is that a policy for the next Parliament, or is there an urgent need to legislate for vehicle use now?
Perhaps I would be forgiven for wondering whether the hon. Lady and I have been living in the same country for the past few years. Given the picture that she is painting of policies that have been put in place to deliver on carbon budgets, she should perhaps remember that our inheritance after 13 years of the previous Labour Government is that our renewable sector is 25th out of 27 EU member states. That is not a record of which the hon. Lady can be proud. As for efforts to be made, for example, on energy efficiency, it took this Government to introduce the Energy Bill, which legislates for the green deal, which is the most comprehensive attempt to deal with energy saving in future.
Since the hon. Lady asked, I can assure her that the carbon budget has been approved unanimously by the Cabinet and has the support of the Business Secretary, the Chancellor and the Prime Minister. It is an important commitment by the Government, because it is the first commitment beyond the period for which the EU has legislated. Unlike the previous Labour Government’s three carbon budgets, this one goes beyond what the EU requires of us. We have set it according to our own domestic legislative framework and with our own domestic legislative agenda.
The 2014 review will be simple and clear. On the traded sector, which is crucial to our international competitiveness, we will review what is happening in the rest of the EU, because it is appropriate that we move at the same pace as the sector there. The hon. Lady mentioned that the green investment bank can borrow in 2015, which is crucial because the second part of this decade will see the greatest need for borrowing powers to ensure the installation of renewable and other low-carbon energy. I am astonished by her description of what has happened so far under this Government. We have set aside more than £800 million for a renewable heat incentive, and we are legislating for a carbon price floor.
Despite the Opposition’s warm words, in 13 years of a Labour Government not a single piece of turf was turned in order to install a single new nuclear reactor, yet work has already begun at Hinkley Point. The sense of urgency in dealing with the climate change challenge displayed by this Government is of an entirely different order of magnitude. On clean coal and gas, about which the hon. Member for Bolsover (Mr Skinner) and some of his friends are particularly concerned, the Government, in an extremely tough and difficult expenditure round in which we have to clear up the mess inherited from the Labour party, found £1 billion to set aside for the first commercial-scale carbon capture and storage project. In 13 years under Labour, no money was put aside and no planning was done for low-carbon growth.
We will proceed with our national planning statements, and there will be an interim review by the nuclear regulator, Mike Weightman, which I anticipate coming shortly. The hon. Lady asked a detailed question about road pricing. We have made it clear already that there will be no plans for that in this Parliament. I repeat, however, that we are set on a road that will unlock enormous opportunities for British business, with a low-carbon economy and high growth.
This is a most welcome decision by the Government. Does my right hon. Friend agree that there are considerable potential economic advantages for Britain in leading the world towards a lower carbon economy? Does he further agree that, although it is understandable that the Government should wish to retain the option of purchasing credits in order to achieve the target, the sooner that option is ruled out, the greater the incentive will be for British business to invest in low-carbon technology?
I very much agree with the hon. Gentleman, the Chairman of the Energy and Climate Change Committee, who has made a powerful case in the past for a low-carbon economy. This is no longer a set of cottage industries. We are talking about a sector of the British economy that employs 910,000 people, which is growing extremely rapidly in a major world market, and which offers us enormous opportunities. I have no doubt that to those who move first and furthest will come the great advantages of the low-carbon economy. On the point about purchasing credits, having in a misspent youth practised economic forecasting and knowing about the difficulties of getting forecasts right one or two years in advance, I think it makes pragmatic sense to preserve a little flexibility when looking ahead as far as 2023-27.
We are on track to meet our first three carbon budgets because of the policies put in place and pioneered by the Labour Government. The right hon. Gentleman is yet to deliver on any of his flagship policies. When he speaks of renewables, does he not have some concern about the Ernst and Young report showing that only 13% of UK-based corporates, financiers and clean-tech companies believe that the coalition will create an environmental success this year?
I am grateful to the right hon. Lady for her question. She has followed this area for many years and has enormous expertise in it. However, if she is going to claim the credit for meeting the current carbon budget on the back of the previous Government’s record, she should be aware that an important contributor to the 28% reduction in our carbon emissions since 1990 has been the depth of the recession. I am glad that she is at last owning up to the impact that those on the Opposition Benches had on our economy. On the Ernst and Young report, we are determined to set a framework that provides certainty and clarity for investors, and we will do so particularly with the electricity market reform that we shall be announcing later.
I am grateful to the right hon. Gentleman for his question. The energy-intensive work group that we have set up between my Department and the Department for Business, Innovation and Skills will come forward with a set of measures by the end of the year. That is a clear commitment. As he knows, there are a number of ways to help energy-intensive industries, including the free allocation of units under the EU emissions trading scheme and encouraging a move towards the use of biomass and biofuels, for example. We are looking at all those measures to ensure that we can balance the concerns of the energy-intensive industries as well as make substantial progress towards the low-carbon economy.
The climate change targets that the last Parliament legislated for were arguably the most ambitious thing that any Parliament in this country has ever legislated for. I certainly welcome the broad thrust of the coalition Government’s proposals today, even if the Secretary of State failed to understand that turning over turf during his term of office depended on four years of preparatory work, which I am happy to discuss with him.
Many of the goods that we consume in Britain used to be manufactured in Britain. They are now manufactured in places such as China, thereby producing carbon emissions, and then imported into this country. Those carbon emissions in China and elsewhere occur only because of demand from western societies such as ours. Given that we are talking about a global phenomenon, does the Secretary of State have any ideas for how Europe as a whole can use its influence to bring about appropriate carbon reduction policies in places such as China, India and elsewhere?
The right hon. Gentleman’s question is an interesting one, as I would expect, given his background as an Energy Minister and his expertise in this field. Wherever one goes in the world, people will say that everyone else is working much less hard on the low-carbon agenda than they are. That is the prevailing myth. I was recently speaking to my counterpart in Australia, who said that the entire debate there is about how only the Australians are dealing with climate change and no one else is. The reality is that enormous progress is being made on this agenda right across the board, including in India and China. The five-year plan that the Chinese have just established is enormously ambitious. Six of the largest renewables companies in the world are now Chinese. The Chinese are making an enormous commitment to offshore wind, as well as in more conventional sectors such as nuclear. They are now the dominant player in solar photovoltaics, having taken the lead from Germany, so I simply do not accept that this is a world where we are moving ahead of other people. We are moving ahead together, but it will be the people who move furthest and fastest who get the best prizes.
Will the Secretary of State confirm that, when he publishes the plan in the next couple of months, it will include an industrial plan that supports the green economy, not only in the energy sector but right across the manufacturing sector in areas such as white goods manufacturing and the production of electric cars? Will he also ensure that his Department and BIS provide the support to ensure that we have all the necessary skills and investment?
My hon. Friend makes a good point, and I know that it is a heartfelt one because of her commitments to her constituency. I remember her being present when I opened the wind farm off Thanet. There will be enormous opportunities as a result of our proposals. We set aside £60 million for port transformation in the comprehensive spending review, for example, and we now have some substantial commitments of interest, including from Mitsubishi in Scotland, from GE and from Siemens in Humberside. Vestas is also talking about an area close to my hon. Friend’s constituency in Kent. I believe that we will see an enormous amount of investment in those crucial industries. Our carbon plan will focus on meeting our carbon objectives, but the work that BIS, in particular, is doing to lead the charge for the carbon economy is very important, and I am backing it completely.
I congratulate the Secretary of State on stepping up to the plate on this issue; it is really good that he has established that it is he, and not the Business Secretary, who is in the driving seat. I want to ask him about long-term clarity for investors. He mentioned that that was key, but he will appreciate that those wishing to invest in gas now risk seeing their investments stranded after 2025. It is extremely important, when addressing that question, that he review the proposals on electricity market reform to ensure that those investments can be maintained.
We have every intention of ensuring security of supply, and gas will perform an important role in that regard, in the short run and in the medium run. Given the worldwide potential for the exploitation of unconventional gas from shale and other formations, it might well be the case that gas will play a long-term part in our energy mix as well, through clean coal and gas, and carbon capture and storage. I take the hon. Gentleman’s point on board, however, and we will not have stranded assets of the kind he describes. We will be introducing our proposals in the White Paper on electricity market reform.
I warmly welcome my right hon. Friend’s statement to the House today, and his commitment to ensuring that the UK will be the first country in Europe to have legally binding emissions targets beyond 2020. Further to the point raised earlier by my hon. Friend the Member for South Thanet (Laura Sandys), what can his Department do to ensure that the green growth industries are able to take full advantage of the opportunities that this statement and the Government’s policy will provide?
We are determined that there should be enormous growth opportunities for low-carbon goods and services in the UK, and I would like to highlight two things that our Department can deliver. The first is the certainty required to enable investment in the replacement of ageing power plant that we will need over the next 10 years. Ofgem has estimated a figure of £200 billion, which is roughly double the normal level of investment in the UK, so this will be important in powering the recovery over the next few years. The second is the provisions in the Energy Bill, the Second Reading of which took place last week. The green deal, which is set out in the Bill, will provide the opportunity for an enormous number of new jobs. We calculate that we will move up from the present figure of 27,000 jobs in the insulation sector to 100,000 by 2015 and that, at its peak, the policy will result in 250,000 jobs right across the industry, which will have to retrofit every home in the country. My hon. Friend is absolutely right to highlight the enormous job-creating potential for these industries, and we will keep that matter very much in the forefront of our minds.
I congratulate the right hon. Gentleman on coming out on the right side of the scrap in Cabinet over the fourth carbon budget. Does he accept, however, that according to the Climate Change Act 2008, a fourth carbon budget with a review in 2014 will not really be a fourth carbon budget in law? Can he confirm that a review in 2014 would not change the law as far as the fourth carbon budget was concerned? If that is the case, why should there be a review?
The key point of having a review is to make sure that in the tradeable sector, where we have industries exposed to international competition—and we want them to thrive—industries are not exposed to unique costs that will not be imposed on the competition in the EU. That is what the review is designed to achieve. Under the Act, any review will have to be preceded by a recommendation from the Climate Change Commission—and we have absolutely no plans to change that, so it will depend on recommendations from that commission.
I welcome my right hon. Friend’s ambitious announcement. I remind him that in evidence to the Energy and Climate Change Select Committee, Lord Turner said that our carbon targets might lead to an appreciable increase in domestic energy prices. I urge the Secretary of State to roll out the green deal with all speed to ensure that any domestic energy price increase is offset by the energy saving elements of that green deal.
I can assure my hon. Friend that we in the ministerial team are absolutely committed to low-cost, affordable electricity. The last assessment the Department made—at the time of the annual energy statement, and we will make another at the next such statement—is that the overall impact of our policies, including energy saving and the effects that my hon. Friend mentioned, will add 1% to the cost of household energy bills in 2020. As it happens, that was posited on a world oil price of $80 a barrel. As he knows, the oil price has moved substantially beyond that. With oil prices and associated gas prices higher than $100 a barrel, our estimate is that our policies will save money for the British household. I am not saying that British households will not face increases in the cost of gas and electricity in future; what I am saying is that the policy mix of energy saving and low-carbon electricity generation will give a better deal to British households than would reliance on imports of variable fossil fuels from volatile parts of the world.
Does the Secretary of State accept that purchasing carbon offsets abroad as a means of meeting carbon emission reduction targets in the UK is deeply flawed on grounds of additionality, leakage and uncertain duration and that, in any case, they do not achieve the ostensible objective of decarbonising Britain? What precise proportion of the 29% cut in carbon emissions planned between now and 2027 do the Government intend or expect to be achieved via carbon offsets?
I can assure the right hon. Gentleman that we intend to try to meet all the reductions we have set out from our domestic activity. That is the clear intention of setting out the fourth carbon budget as we have. However, given the enormous uncertainties of making projections so far in advance, it would not be sensible for us to rule out the flexibility afforded by carbon trading at the relevant time.
If my right hon. Friend is going to meet these targets by reducing emissions here, it will mean reducing a lot of emissions from domestic housing. Will he give us more information about how he is going to achieve that with existing housing, and what exactly does he mean when he talks of ensuring that new homes are built to a high energy efficiency standard? What is a high energy efficiency standard in relation to zero carbon?
My hon. Friend knows that the lead Department on zero-carbon homes is the Department for Communities and Local Government. It has set out its thoughts on this issue. I am pleased to see that we intend to continue with the substantial improvement in energy efficiency standards in the 2013 and 2016 building regulations. On that basis, we will move quickly towards a zero-carbon homes standard, which will make a major contribution to meeting our long-term carbon reduction goals of 80% by 2050.
I welcome the Government’s acceptance of a 50% emissions cut by 2025, but like others I am deeply concerned that behind a headline that looks so good in theory is something that risks being a sham. In reality, a significant proportion of the reduction will be happening in other countries. What impact does the Secretary of State expect that to have on the “green industrial transformation” that he says that he wants? Such a transformation will not happen if we pay other countries to do the work for us.
I can add very little to what I have already said to the right hon. Member for Oldham West and Royton (Mr Meacher). We are, in fact, dealing with a period that is very far off—well beyond the normal range of economic forecasting—and it is sensible for us to exercise a measure of flexibility in the way in which we achieve our aim. However, I can assure the hon. Lady—as I assured the right hon. Member for Oldham West and Royton—that we intend to meet this budget from our domestic activity. That is absolutely in line with everything that I have said about encouraging low-carbon goods and services.
The hon. Lady should also bear in mind that even the flexibility that is afforded by trading will be limited by the existence or otherwise of far cheaper opportunities to ameliorate the position by mitigating carbon emissions outside the country rather than inside it. I believe that the more we invest in the industries that I have mentioned, and the more “learning by doing” that we do, the greater will be the chance of our meeting our targets entirely from domestic activity, which is what we intend to do.
The concept of negawatts is very important. Let me explain to those who have not followed the debate that it means we should be able to trade into the electricity system savings in energy and not merely electricity generation. That concept is part of the consultation that we are currently considering about electricity market reform, and I believe that it will be a crucial part of our reform proposals. There are several different aspects, but I am sure the hon. Gentleman will not be disappointed when he sees the results.
The strategy announced today contains a “ripcord”: the targets will be reviewed in 2014 if they prove to be more aggressive than those of our European Union partners. Does my right hon. Friend agree that that will be important to energy-intensive industries in Britain which are themselves important to our future prosperity and the creation of jobs?
I do. I noted the criticism from Opposition Members, and I refer them to a bit of socialist history. The attempt to build socialism in one country under Joe Stalin was not an unalloyed success, and, similarly, an attempt to build climate change policies in one country would not be an unalloyed success. We must keep a weather eye on the competitiveness of our industries and on what is going on overseas, but we have set a very clear direction. We will be ambitious in our climate change goals, and I am determined for us to drive the growth of these new opportunities and industries as a result.
The Secretary of State has led the House to believe that a review of progress early in 2014 was intended to ensure that the emissions trading system trajectory agreed by the EU could be revised up. Can he rule out the possibility that those ambitious targets will be revised down?
Were our EU partners to move even further and faster than we are currently suggesting, we might indeed see revision in the other direction, but I think that the hon. Gentleman accepts as much as I do that the chances of that happening appear to be remote at the moment. I think that we are making progress with our aim to achieve a 30% reduction in carbon emissions by 2020. A number of other countries have joined us in the call for that, including, recently, Denmark, Sweden and Spain, and I am confident that we will make further progress among our partners in the months to come.
I welcome my right hon. Friend’s statement. Businesses in my part of west Yorkshire are already playing a major part in the green economy. David Brown Engineering in Lockwood make the gears for offshore wind turbines and is very appreciative of a £2 million investment from the regional growth fund for a research centre there; TEV Ltd in Brighouse is investing in air source heat pumps; and the then Conservative-run Kirklees council introduced the warm zone scheme. Does my right hon. Friend agree that as we cut emissions, the number of green jobs will increase?
I certainly do. I think this presents an enormous opportunity for the future. There will be enormous numbers of jobs in energy saving and in the other low-carbon goods and services, and that will be the case right across the country. There will be no bias towards one region or another—no bias towards London and the south-east, for instance—because homes, and therefore the industrial opportunities, exist everywhere.
The Secretary of State has explained why he is resiling from the Committee on Climate Change advice to forgo the carbon trading option, but is he proposing to sidestep any of its other recommendations? Also, do any of his concerns for ensuring the competitiveness of energy-intensive industries and for signalling certainty to investors extend to feeling regret about the adverse impact of the Chancellor’s raid on the CRC scheme?
We have not accepted a number of the other detailed recommendations in the committee’s report, but the trading one is an obvious example. It also asked us to set a target for 2030, and we do not see the need for that. I am not a great believer in intermediate targets when we have a very clear overall carbon budget, but given our commitment to a target figure of 1,950 million tonnes for the overall carbon budget for 2023 to 2027, nobody should be in any doubt about the thrust of our policy or our determination to meet our target. I have a very strong preference for achieving what we are actually trying to do, which is to cut carbon emissions, rather than for setting a whole group of intermediate targets, but that we will do.
I warmly welcome the Government’s decision to accept the independent committee’s advice. Further to the question I asked my right hon. Friend on Second Reading of the Energy Bill, can he confirm that the Government report setting out the policies and proposals required to meet the budget will include an assessment of the contribution each will make so that the House can assess the value for money that they offer?
I am concerned to ensure that all our policies offer real value for money. I believe the only way we will be able to hold public consensus behind what is a very ambitious programme of industrial change is if we show we are really ensuring that we get value for taxpayers in each policy we pursue. That is why we had to take the decision we took on solar feed-in tariffs. Although everything was unchanged below two tennis courts-worth, we have had to review the solar tariffs for the larger scale solar because we are determined to get good value for money. That is crucial. I also take on board the fact that the OECD’s latest country report urged us to look at the different implicit carbon prices in our policies across the board. I very much take that to heart and we will look at it. I can therefore assure my hon. Friend that we will address value for money, and that it is foremost among our considerations in delivering good policy.
Does the Energy Secretary believe that it would help to achieve his carbon targets if the speed limit for cars were lowered, or does he think the speed limit for cars should be raised, as do the Transport Secretary and, presumably, the Energy Secretary’s wife?
I thank the Secretary of State for his statement and welcome the Government’s ambition in this area. Given the critical role local authorities must surely play in delivering their goals, how does the Secretary of State intend to help local councils do their bit?
The most important way in which this Government can help local councils be innovative, creative and imaginative is to get away from telling them what to do from Westminster. We must remove ring-fencing and make sure local councils can take responsibility for their own decisions. As my hon. Friend knows, we have some robust debates about the priorities between different levels of government in Hampshire, and that is as it should be. Those priorities are determined by the councils—whether the county council at Winchester by the Conservatives, or the district council at Eastleigh by the Liberal Democrats. They make different decisions and it is proper that they should then be accountable to local people for those decisions.
I, too, am pleased that we got a statement on this today, but I am anxious about the future and viability of energy-intensive industries, such as those in my constituency which have been the backbone of the north-east England economy. They have done much to reduce emissions already, but what will the Government do to help with transition funding, possibly through the growth fund or other mechanisms, to ensure that such industries can make further change and develop in the future?
The hon. Gentleman is right to mention the growth fund, which is having a tremendous impact in bringing in a vast amount of private investment where it would not otherwise have been occurring; that is definitely a tremendous innovation. In addition, we are and will be developing the package for the energy-intensive industries, which I mentioned earlier. That is being done with our colleagues in the Department for Business, Innovation and Skills, and it will be coming forward by the end of the year. We want balanced growth so that all parts of the economy can benefit from a robust economy.
I, too, wish to add my thanks to the Government and welcome the steps being taken to move to a low-carbon economy. It is also encouraging to see the great work being done by community groups, particularly Macclesfield Transition Town and Food4Macc in my area, to support these ambitions. Can my right hon. Friend tell the House what steps he is taking to engage these community groups in helping to achieve these very important targets?
We are keen to engage community groups; the ministerial team does a lot of visits and makes sure that we are talking to members of civil society and, of course, to non-governmental organisations, which have an important influence on community groups. This is also particularly crucial in an area that I know can be controversial, even among those on the Government Benches: proposals for onshore wind. I think that that is a beautiful form of renewable energy, although I know that that opinion is not always shared across the House. It is an important part of our strategy to get community groups involved and owning these policies, and some interesting proposals have been made. For example, the biggest proposal for onshore wind is the Viking proposal for Shetland and it is half-owned by the community group that supports Shetlanders. So I am very much in favour of the sort of engagement that my hon. Friend has rightly suggested.
Given his comments today and previously, the Secretary of State is obviously keenly aware of the danger of carbon leakage, particularly if the Government proceed to reduce emissions through unilateral taxation on the energy-intensive industries. So what consideration has he given to an annual assessment of UK emissions on a consumption basis—an assessment taking into consideration imported goods—because that would act as a real incentive for us to reduce our emissions properly here in the UK?
The hon. Lady raises an important issue that people periodically talk about, which is that no matter how well we do in the UK, we are not making a difference to the world as a whole if we are merely outsourcing production of carbon-intensive goods to economies such as China. However, I would make two points in response, the first of which is that we should not underestimate the progress being made in economies such as India and China to grapple with and move very fast on this agenda. The Department and the Government are working with the low-carbon pilot areas in China and the developments are truly impressive, so I urge her to look at them. We are aware of this issue, but I do not think that any time soon we will be able to move globally towards a situation where we are taking into account the embedded carbon emissions in trade. The reality is that most of the nearly 200 countries that are members of the United Nations are fiercely protective of their own territorial sovereignty, so it seems likely that our major efforts to tackle climate change will be based on states’ control of their own territorial integrity.
I congratulate the Secretary of State on accepting the ambitious fourth carbon budget recommended by the Committee on Climate Change. His statement highlights how vital it is to increase the EU carbon emission reduction target from 20% to 30% by 2020, so how will the Government redouble their efforts to secure that agreement and, in particular, to get a significant tightening of the EU emissions trading scheme cap?
I am grateful to my hon. Friend for that question. We have made substantial strides in the direction of securing an agreement and a number of countries in the EU are clearly signed up to the 30% ambition level for 2020. A number of other countries would like to go beyond 20%. The European Commission is the key player and one of the points that it is making—rightly I think—is that if we as a European Union were to deliver on just the energy efficiency commitments that we have already made, we could get to a 25% cut in carbon emissions by 2020 without any additional cost. There is a lot of progress to be made on this agenda and I and my ministerial colleagues are pressing that point at all the meetings we attend in Brussels and elsewhere. I believe that we are making good progress.
One issue for intensive energy users is the cumulative effect of Government policies on their competitiveness. Has the Minister carried out a full impact assessment of the cumulative effect of climate policies and, if not, will he commit to doing so?
The group that is considering the impact on energy-intensive industries is certainly taking into account all the impacts of policy as well as the other impacts. Obviously, some effects on energy-intensive industry have nothing to do with policy and there are some macro-economic effects, such as the relative competitiveness gained through the improvement in the real exchange rate. We will take account of all those factors when we come to conclusions about the measures necessary to help energy-intensive industries.
The Secretary of State has mentioned on a number of occasions the increased number of jobs in the renewables sector of the economy. This March, Verso Economics produced a report for the Scottish Parliament that showed that for every job created in the renewables sector 3.7 jobs were destroyed in the rest of the economy. How does he marry that report’s conclusions with the statements he has been making?
For every report that reaches the sort of conclusion that the hon. Gentleman is suggesting, I can point him to other reports that suggest exactly the opposite. The OECD, which is probably the most respected and authoritative of international economic organisations, has done some very good work on green growth. We have had a very important study from Potsdam in co-ordination with a number of leading economists from Oxford and elsewhere that suggests that there are positive growth effects through investment and learning by doing. Recently, I received a very important note from Professor Nick Stern—Lord Stern—arguing that the attempts to see his report as imposing costs on the economy were simply mistaken. He feels very strongly that the move to low-carbon goods and services involves enormous opportunities and that the increase in investment involved can help to power us out of an exceptionally deep recession. That is perhaps a long answer to show that when two economists are in a room, there are sometimes three opinions. None the less, the balance of argument is very much against the hon. Gentleman’s point.
The Secretary of State has made a number of points this afternoon, but one point that came out of the findings and recommendations of the Committee on Climate Change was that international aviation and shipping should be included in future carbon budgets. Does he agree with that recommendation?
This issue should transcend party politics, but I regret to say that some of the Secretary of State’s actions do not live up to his rhetoric. This morning, I met representatives from East Midlands airport whose ambition is to make its ground operations carbon-neutral. The plan was to provide 36% of the airport’s energy requirements through a major photovoltaic scheme that has now been made unviable as a result of the wholesale butchery of feed-in tariffs. Will the Secretary of State tell the House whether he has abandoned photovoltaic cells as a way of generating energy and what advice can he give to East Midlands airport about its ambition to deliver a carbon-neutral target?
The hon. Gentleman should perhaps be aware that the intention of the feed-in tariff scheme was to encourage microgeneration. Any proposal that involves less than two tennis courts-worth of solar photovoltaic cells will be completely unchanged by the review that we have announced, so he is clearly referring to a scheme that is very much bigger than that. All I would say is that we have to look at value for money. I am surprised that Opposition Members think that that is a revolutionary concept but it is important to consider value for money. If we had not announced the review, we would have found that a very large part of some of our finest shire counties would, instead of disappearing under oil seed rape or some more conventional crop, have been disappearing under solar photovoltaics. That was not, I am sure, the intention of the Opposition. It certainly is not our intention and that is why we have acted.
Does the Secretary of State accept the commission’s finding about seeking a reduction of 44% in emissions from surface transport by 2030 in comparison with the figures for 2008? If he does, will he make representations to the Secretary of State for Transport to put right the cuts in the budgets for electric-powered and hybrid vehicles that were made in the spending review, which put the long-term viability of those industries at risk?
I do not think that the policies that my right hon. Friend the Secretary of State for Transport has introduced can be characterised in the way that the hon. Gentleman suggests. We recently did some calculations that suggested that, given the prices we have at the petrol pump today, it makes sense to buy an electric vehicle because of the subsidies that the Secretary of State for Transport has announced in co-operation with my right hon. Friend the Chancellor. I believe that the framework has been set for very rapid growth in this area and I am confident that that is what we will see.
As the continuing and intensifying nightmare of Fukushima has undermined the public’s confidence in nuclear, and because no nuclear power station, old or new, has ever been built on budget, on time or without public subsidy, does the Secretary of State still persist in his belief that nuclear power stations can be built here without public subsidy? If so, will he explain who will pay the billions in insurance and compensation if a major incident occurs? Will it be the industry or, as in Japan now, the taxpayer?
The hon. Gentleman has a long track record of concern on this subject, which I respect. Some of the answers to his questions will be there when we see the interim and then the final report from the chief nuclear inspector, Mike Weightman. I hope that we can bring that forward very rapidly and then the hon. Gentleman will be able to see for himself. He is right in one respect, on which I entirely agree with him: if there is to be, as the nuclear industry hopes, a nuclear renaissance, it is absolutely crucial that the nuclear industry shows that it can deliver on time and to budget. Investors will not come forward on a repeated basis if that is not the case.
I can certainly confirm that we will not be providing public subsidy to nuclear and that we see nuclear as part of the energy mix for the future provided that safety concerns are met—we have the Mike Weightman review to be announced shortly—and provided that investors are prepared to come forward. At the moment, the indications are that investors are prepared to come forward provided that we put in place, as I believe the House has already done with the regulatory justification, the necessary steps to facilitate the normal big infrastructure spending that it involves.