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Net-zero Emissions Target

Volume 814: debated on Monday 11 October 2021


Asked by

To ask Her Majesty’s Government what fiscal measures they are taking in pursuit of their net zero emissions target.

My Lords, the Prime Minister’s 10-point plan demonstrates our commitment to net zero. It sets out £12 billion of new government investment in green industries. We have set up the UK Infrastructure Bank, backed by £12 billion of capital, to help unlock more than £40 billion of overall investment in infrastructure. Carbon pricing will play a key role in helping the UK achieve net zero, at the same time as raising funds to be invested in the Government’s spending priorities.

My Lords, our entire fiscal system is out of kilter with decarbonising the economy and achieving net zero. For example, look at the gas and oil sector: since signing the Paris agreement, the Government have given £4 billion to oil and gas companies. Can the Minister therefore commit, on the eve of COP, that this practice will be confined to the scrapheap of history and that those companies will receive no more funding through subsidies and tax breaks? If so, can this be included in the spending review?

My Lords, it is important to point out that we need to transition to a net-zero economy in an orderly way and that we cannot immediately switch on a full net-zero energy system. We are one of the fastest reducers of coal use in the world: our coal consumption has fallen by over 80% in the last 10 years, and we remain completely committed to accelerating.

My Lords, in order to avoid a disruptive transformation from our current carbon-intensive society, we need the Government to include fiscal measures to protect the poorest and most vulnerable households. Can the Minister confirm that the full Government road map to net zero will include a carbon fee and dividend element to cushion the blow for low-income households, as already successfully trialled in several Canadian provinces, Alaska and elsewhere?

My Lords, we already do a great deal to support those on lower incomes. We have a number of schemes to support those who are under pressure financially and at risk of higher energy prices. We will, of course, keep all those measures under review.

Will my noble friend ensure that the Government commit water companies to reach their net-zero targets by ending the automatic right to connect for massive new housing developments where water companies simply cannot accommodate the huge amounts of waste water required in antiquated Victorian pipes?

My Lords, there are currently no restrictions to water companies raising funds to make investments in reaching net zero, and water companies are able to submit plans for such investment to Ofwat as part of the price control. The Government are currently consulting on the strategic direction for the water sector. This consultation outlines the expectation that Ofwat will contribute towards protecting and enhancing the environment and will appropriately challenge water companies’ plans to deliver the change needed in the water sector to meet net zero.

My Lords, I am sure the Minister will agree that the Government need to take a joined-up approach to decarbonising the economy. Surely it is inefficient and wasteful to public funds to stimulate decarbonisation with some funds, while stimulating the creation of greenhouse gas emissions with others. When will we see subsidies for fossil fuels wound down?

My Lords, as I mentioned in an earlier answer, we need to do this transition in an orderly way. We need to ensure that our net-zero energy generation is sustainable. We are moving very quickly. We have seen, for example, the cost of offshore wind drop dramatically over the last five years, from over £100 per kilowatt hour to around £45, but we need to keep moving that along before we remove any more support to the traditional sources of energy.

My Lords, according to the CBI, the obstacle that most frequently holds back business from taking action towards net zero is uncertainty, especially about the Government’s fiscal policy on the environment. Can the Minister assure the House that the Budget on 27 October will provide a clear net-zero fiscal strategy and road map, with a consistent environmental tax policy outlined, including principles and goals that business can rely on for the long term?

My Lords, I cannot speak to the detail of the Budget in a few weeks’ time, but we have a strong message, which we have been consistent with over the last few years. We have made clear, for example, the recently announced emissions trading scheme, which provides a clear road map for heavy users of carbon. We are about to introduce the plastic packaging tax, which again is clear, for industry to get behind. We will continue to send those messages, but I think they are pretty clear. Indeed, we are seeing dramatic change by business. For example, coming up to COP 26, three huge companies have made very strong commitments: GSK, Hitachi and Microsoft have all committed to get to net zero in the next few years.

My Lords, in the development of environmental fiscal policy, do the Government accept the fundamental principle that the polluter pays?

My Lords, ultimately, that has to be the direction of travel for us, but we cannot get there overnight. To implement that sort of stringent regime now would dramatically increase costs, which would then come back to consumers in other ways.

I have yet to meet a pensioner who has turned down free electricity. If the Government want to take the red wall with them on their environmental policies, why are they not bringing in again fiscal incentives for solar panels, giving some free electricity to households across the country?

My Lords, the market is playing its role. As the cost of solar panels declines, it becomes increasingly attractive for householders to implement those sorts of strategies. The cost of solar energy has declined dramatically over the last few years, and I think we will find that, very soon, it will be attractive for many households to take the route the noble Lord suggests.

Does the Minister agree that it would be very environmentally damaging to reduce taxes on aviation, which would in turn encourage more people to fly? Can he assure us that this will not feature in the Treasury’s forthcoming fiscal plans to be announced in the spending review?

My Lords, as I said earlier, I cannot speak for the spending review or the Budget. However, we will not be seeking to inadvertently encourage excess use of aviation travel. But again, it is a very vital part of our economy and, until other forms of transport take its place, we need to support it.

My Lords, it is, frankly, widely believed in both business and environmental circles that the Treasury is at best lukewarm about using fiscal measures to support the climate change strategy. If that is not the case, why has the Treasury not used the supposed freedom post Brexit to remove VAT from building refurbishment, thus continuing to incentivise high-carbon demolition and disincentivise refurbishment and retrofit?

My Lords, I respectfully disagree with the noble Lord’s view of the Treasury’s position. I mentioned the emissions trading scheme that was announced earlier this year. We have published the Industrial Decarbonisation Strategy, which sets out the vision for a low-carbon industrial sector by 2050. In March this year we were the first G7 country to agree a landmark North Sea transition to support the oil and gas industry’s transition to clean energy. Through this deal, the sector has committed to cut emissions by 50% by 2030. The Treasury is closely involved in all these initiatives.

My Lords, I follow on from the question put by the noble Lord, Lord Eatwell, about the polluter pays principle. I am sure the Minister is aware of the International Monetary Fund’s report earlier this month recommending that polluters—fossil fuel companies—should pay for deaths and poor health from air pollution and heatwaves, and for the impact of global heating. This is the International Monetary Fund. Will the Government be following this advice and publishing a road map for when they will get to the point of really making polluters pay?

My Lords, I repeat that we are moving very fast to decarbonising; we are one of the fastest in the G20, and indeed in the G7. If we push the envelope too hard, we will just see a boomerang of costs going back to consumers. We very much support the aspiration for polluters to pay but it must be done on a sustainable basis.

My Lords, on the one hand we have soaring utility prices, and on the other hand we have imminent climate catastrophe. The Minister repeatedly says he wants to move in an orderly fashion. Does that not point towards greater intervention and greater public ownership of vital utilities?

I am sure the noble Baroness will know that the current squeeze on gas prices has nothing to do with the quantity of gas available; it is a geopolitical move by Russia to put pressure on Europe, and we are caught up in it. Public ownership of our own utilities would make no difference.