asked Her Majesty’s Government:

What progress has been made with the development of clean coal technology.

My Lords, since the energy White Paper in May 2007 we have made steady progress on the development of clean coal technologies. The competition for our carbon capture and storage demonstration project is under way and the carbon abatement technologies demonstration programme is supporting an oxyfuel project and a new call for project proposals which will be announced this year. There is also increasing research and development activity across a range of clean coal technologies.

My Lords, I thank the Minister for that Answer. Does he agree that this is fast becoming a major issue of energy policy, as coal already represents a quarter of all the energy consumed in the world, a proportion which will inevitably increase as a result of the major coal-fired power station construction programme in China and elsewhere, including, as recently reported, in the Middle East? Does he also agree that while the competition on carbon capture and storage he has announced is undoubtedly to be welcomed, it means the selection of one process from many processes for clean coal technology? Last year, 10 projects were available, of which the Government have selected only one. Would it not have been better to have had an overall scheme for encouraging all those processes by which greater and more diversified progress could have been made?

My Lords, I am grateful to the noble Lord, Lord Ezra, for mentioning that coal has an enormous role to play as part of the mixed bag of fuel that will be used this century for energy generation across the world. As he will know, Kingsnorth power station, a coal burner, is going to proceed here in Britain. He also mentioned the Middle East. As chairman of UK Trade & Investment, I was in Qatar and Abu Dhabi last week. I was heartened to see Abu Dhabi putting $15 billion of its oil revenues, which come in part from this country, into research and development on using fossil fuels more cleanly for energy generation, and that includes coal.

The noble Lord asked why we selected from the 12 available CCS technologies. We had to select one. We can proceed only with one. We are talking £1 billion a time, which is big money in anybody’s terminology. We had to ensure that the competition was effective. Demonstrations are extremely expensive. It was not realistic to expect one country to tackle them all. I hope that noble Lords will be delighted to hear that we are just one of three countries in the world—Norway and America are the other two—which are even going down the path of a demonstration project on carbon capture and storage. We chose post-combustion capture because it is the most globally relevant technology. It can be retrofitted to existing installations—Kingsnorth may well benefit from it in the future—and it is likely to be relevant particularly to the future major emitters of carbon dioxide from fossil fuels. I include in that specifically the technology transfer that we can achieve with China.

My Lords, given the stage of development of this technology, particularly carbon capture and storage, is there not now a real need, as was identified last year by the European Union leaders, to provide incentives to companies to invest in this technology? Why is it, therefore, that I have been told by Ministers that the substantial proceeds from auctioning the allowances under the Emissions Trading Scheme cannot be used to provide these incentives but have to be surrendered to the Treasury? Surely what the Minister has just described from the Gulf is an example of how they are using their energy revenue to encourage development in low-carbon systems. Why cannot we do the same?

My Lords, the noble Lord, Lord Jenkin, raises a valid point about hypothecation. It is very easy for Abu Dhabi to hypothecate when they provide something like 20 per cent of the world’s fossil fuel revenues and have little call on that money. Here, the money goes into the Treasury and is used to promote so many different initiatives. But the noble Lord is not exactly accurate when he says that we are doing not a lot. We are supporting one of the world’s first commercial-scale CCS demonstration projects, as I mentioned. That is a significant commitment at £1 billion a throw. We are already supporting an oxyfuel project under the carbon abatement technologies demonstration programme. We are also supporting 15 other clean coal technology projects supported by the Technology Strategy Board. That is all using taxpayers’ money. It is not true that we are doing nothing.

My Lords, the Minister said that these technologies are £1 billion a throw, but in view of the cost of carbon as outlined in the Stern report that does not seem a vast amount for technologies that will be going through for the coming few decades. In that light, with just one demonstration project, are the Government not putting all their eggs in one basket? Would it not have been better to have a couple more projects looking at pre-combustion technology and not just at carbon capture and storage, as welcome as that is?

My Lords, I am certain that there will be a role for pre-combustion technology. This is not the only game in town but it is the one that we have chosen; there will be many others round the world. The advantage of pre-combustion is that it is slightly cheaper, and the problem is that you cannot retrofit it. With so many coal burners around the world—and I have in mind the developing world especially—the ability to use technology, which has yet to be completely perfected, to retrofit on to coal burners will be very useful. Britain will play a leading role in selling technological solutions to climate change around the world. This type of technology is one of the things that I sell round the world for this country. It is something where we can win. On that basis, I suggest to the House that we have made the right investment decision.

My Lords, how can the Government claim to promote a low-carbon economy when admirable projects such as the one at Peterhead have been abandoned thanks to government delay and inaction?

My Lords, we do promote a low-carbon economy. That is the entire basis, I sincerely hope, of every nation in the European Union. I wish that our friends 3,000 miles across the Atlantic had the same thought; one lives in hope. At the end of the day, I completely refute the suggestion that we do not promote a low-carbon technology.