Energy Bill

Public Bill Committee, 21 January 2010.

Clause 27

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

On a point of order, Mr. Atkinson. May we take jackets off?

Peter Atkinson (Conservative, Hexham)

You may.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I propose to add only a word or two to those spoken by the hon. Member for Wealden on Tuesday. We have the same general concern. The clause appears to be very broadly drawn, giving significant discretion to Ministers. Therefore, the sensible thing is for me, like the hon. Member for Wealden, to listen to the Under-Secretarys response. However, we are very keen for the Government to undertake to consider the objections from the Opposition after the Committee stage and before Report, as they have done for other matters. I am very happy, as I am sure the hon. Member for Wealden and others would be, to meet after the Committee stage to discuss disputed matters that may be capable of resolution or progress. I hope, therefore, that the Under-Secretary will take note of the significant concern about the clause. Clause 27 is the only remaining clause that presents significant concern for the Opposition.

David Kidney (Labour, Stafford)

On Thursday, I promised to write to all Committee members with some statistics that I presented to the Committee on that day. The letter is in the process of being written. I point out on the record that when I said a figure of 40 per cent., I should have said 43 per cent., and when I gave a figure of 870,000, I should have said 837,000.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

Disgraceful! [Laughter.]

David Kidney (Labour, Stafford)

I have not finished my mea culpa yet. Apparently, my presentation of the tables was also infelicitous and the correct interpretation of them will be set out in the letter, to put me and hon. Members straight. I apologise for any error that I made in my presentation.

Clause 27 will allow the Secretary of State to devise a scheme that will adjust gas and/or electricity charges if he considers that a group of customers of a particular energy supplier is being treated on less favourable terms than another group of customers. The Secretary of State will be able to define which group of customers the scheme applies towhether gas, electricity or dual fuel, or a sub-group of those customersas well as which charges are covered by the scheme and how they will be calculated. The clause will ensure that the Secretary of State has the power to address the type of unfair discrimination, identified by Ofgems probe into energy markets, that exists in respect of the charges that suppliers imposed on electricity-only customers and dual fuel customers.

On Tuesday, my hon. Friend the Minister of State and I endured many hours of debate when Opposition Members criticised the effectiveness of the regulator Ofgem and said that the Government should do more. Now we have come to a clause where the Government propose to do more, and Opposition Members still criticise. But then, whoever said that Opposition Members had to be consistent in their criticisms?

Charles Hendry (Conservative, Wealden)

I was not one of those who led those criticisms. The issue at stake is that nobody knows when the Minister will use his powers, or in what circumstances. What we need is clarity. There needs to be an absolute degree of certainty among those working in the industry about whether certain things will be acceptable to either Ofgem or the Minister. There is a broad range of powers here, but without the detail to understand exactly what is intended.

David Kidney (Labour, Stafford)

The powers are largely based on existing powers found in sections 43A and 43B of the Electricity Act 1989 and sections 41A and 41B of the Gas Act 1986; they replace and expand on those powers. In each of those sections, which have existed since the Utilities Act 2000, the word considers appears in the first subsection, as here in the present draft. What is new in the clause appears in subsection (5), where the words

are added to the categories that the Secretary of State can take into account to discover whether there are disadvantaged customers. That precisely covers the point, which I mentioned in my evidence to the Committee, of a potential lacuna where people are dual fuel users with the same supplier.

Subsection (7) caused some concern among Members, particularly the phrase assumptions and calculations. That is new because of the addition of dual fuel customers; it would not always be possible to compare directly the charges being made between groups of customers because of the interaction of their gas and electricity supply. That is why the widening is required.

The change will ensure that the Secretary of State has a full suite of powers to address price discrimination between electricity and/or gas customers. It will mean that the Secretary of State will be able to address cases where suppliers have cross-subsidised their gas businesses from their electricity businesses, as a result of which electricity-only customers have been charged more than can be objectively justified.

The power is intended as a reserve power. Ofgem has already introduced new licence conditions to prohibit the kind of discrimination previously described, and we are confident that this will mean that such practices will not be repeated in future. The clause is still necessary to ensure that the Secretary of State has powers to intervene should it become necessaryif, for example, Ofgem is unable to obtain the necessary level of agreement from licence holders to allow it to introduce or amend licence conditions to prevent future discrimination.

The hon. Member for Wealden said that Ofgem does not have the same relaxations, as he regarded them, as the Secretary of State has here. Given that it is intended that the Secretary of State should step in, usually after Ofgem has failed to take the necessary action, having exercised its powers to investigate, the things that the hon. Gentleman believes should be done will already have been done by Ofgem.

I want to address the issue around subsection (7) and the word assumptions. First, it is restricted by its link to the words and calculations. It is a formula to enable the Secretary of State to make the necessary comparisons, to see whether one group is disadvantaged compared with another. It is also restricted by the opening words of the subsection: that it is

for the purposes of this section

and no other purposes, that this ability of the Secretary of State exists.

More widely, under the Gas Act 1986 and the Electricity Act 1989, the Secretary of State has a duty to have regard to best regulatory practice in carrying out his functions under the legislation. The duty requires him to have regard to the principles under which regulatory activity should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed. Subsections (8) and (9) of clause 27 make it clear that the carrying out of the Secretary of States functions under the clause are covered by the better regulation duty.

Clause 29 requires the Secretary of State to give advance notice of any proposals to make regulations under these powers and consider any representations or objections raised with him. In line with the better regulation duty, the Secretary of State would consult fully and complete an impact assessment before any scheme to adjust charges could come into force. When Sarah Harrison of Ofgem gave evidence on the point in answer to a question from me, she made it clear that it was helpful to Ofgem, in carrying out its duties in regulating the supplier companies, that this reserve power should exist with the Secretary of State.

As far as the suppliers are concerned, it makes sense for them to comply with Ofgem in changing their licence conditions; if they did not, they would know that the Secretary of State would step in with something much more effective. In that sense, they would prefer to cling to nurse for fear of something worse.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

That was a good coda.

We discussed the interrelationship between Ofgem and the Minister earlier in Committee. In defence of those of us who were critical of Ofgem, I should say that my criticism was not that there should not be a Government rolethat has never been the criticism. In opposition, one rightly criticises and probes to check that the powers that a Bill gives to Ministers or regulators are clear and that we know what we are getting. That was the burden of our song. We do not step back from the points that we made last week on the inappropriate inclusion of Ofgem as an alternative in an earlier part of the Bill. Ministerial powers can override and direct, but we need to know in advance their extent, breadth and import, and to have as few variables as possible.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for his response. I remain concerned that this is a sloppy bit of the Bill. We have to assess legislation against criteria to see whether it is appropriate. The first criterion is need, and that has not been proven in the Ministers argument so far. He talked about an existing power in other areas under the 2000 Act and explained that it has never been used, so, as I say, the need for the power is not clear.

The second criterion is urgency; we were told by the Minister of State that only issues that were pressing were going to be incorporated in the Bill, and we see no reason for urgency on this matter. I think that Ofgem, in evidence, said that how much should be taken forward was not its choice, that it was not appropriate that it should have a view on the powers and that the Government should decide. Ofgem did not sense the urgency.

Thirdly, is the power appropriate? That is not yet proven. The Under-Secretary has done his best to defend his case, but we have significant doubts about not only the powers that will be taken, butmore importantlythe potential scope for confusion. He has an unclear set of powers and it is not evident how those relate to the powers that Ofgem has. Nevertheless, the clause is perhaps better discussed in another place, where we have a raft of lawyers. Their lordships may wish to return to it in due course.

Peter Atkinson (Conservative, Hexham)

In a spirit of optimism I think that it may be convenient to consider clauses 28 to 37 together. Mr. Hughes, do you have a problem with that?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

No.

New Clause 1

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to move, That the clause be read a Second time.

Peter Atkinson (Conservative, Hexham)

With this it will be convenient to discuss the following: New clause 2Emissions performance standard

(1) The Secretary of State may by regulation introduce an Emissions Performance Standard to apply to all electricity generation plants.

(2) In this section Emission Performance Standard means a restriction on the amount of carbon dioxide that electricity generation plants are permitted to emit..

New clause 5Carbon emissions performance standard

(1) The Secretary of State shall make provision by regulations or otherwise for a carbon emissions performance standard to set the maximum level or levels of carbon dioxide that may be emitted per unit of output by all individual generating stations.

(2) The Secretary of State shall review the emissions performance standard established under section (1) no less frequently than every three years.

(3) In establishing the level or levels of the carbon dioxide emissions performance standard in section (1), and in carrying out the review required in section (2), the Secretary of State must

(a) take into account the most up-to-date scientific knowledge about climate change;

(b) obtain and take into account the advice of the Committee on Climate Change, particularly in relation to carbon budgets, medium and long-term emission reduction targets, and future emissions from the electricity generating sector.

(4) The Secretary of State must introduce the standard under section (1) no later than 12 months from the date on which this Act is passed..

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I hope that we have helped you to start your day in good humour, Mr. Atkinson, and that you are able to continue your birthday in a good way, following the dinner that you went to in the Speakers House with another birthday boy as part of the Chairmans Panel on Tuesday.

The debate is about emissions performance standards. To which Minister should I direct my comments? [Interruption.] I thank the Minister of State for raising her hand. The subject has significant importance not only in the UK but across the EU and globally. It is not new; how we deal with carbon emissions and regulate them has often been debated generally and specifically in the context of coal-fired power stations. I am conscious that last year there was a debate in Westminster Hall on St. Patricks day.

Coincidentally, the Secretary of State for Energy and Climate Change made a statement on St Georges day, which was responded to by my hon. Friend the Member for Cheltenham (Martin Horwood) as I was abroad.

We set out our view then, and have held to it, that industry must know that the next generation of coal-fired power stations must have a system in place from the beginning that captures the carbon and so does not continue the dangerous effects of carbon emissions. The qualified retrofit option is not good enough either in protecting our planet from emissions or in giving certainty to the people developing the next generation of coal-fired power stations. We have made it clear that we do not believe that we should get rid of coal in this country as a contributor to our power supplies, but it needs to be produced and used in a way that does not create the harm it has in the past.

My right hon. Friend the Member for Ross, Skye and Lochaber (Mr. Kennedy) introduced a private Members Bill on this subject on 3 July. It had its Second Reading on that day and the Under-Secretary of State for Energy and Climate Change, the hon. Member for Stafford, responded. The burden of his song was that it was a premature proposal for three reasons. First, the Government had indicated that there would be an Energy Bill in the coming Session. He was right about that and here we are. Secondly, in the background there was ever-changing technology, proposals and other matters. That is obviously true. Thirdly, there was a consultation going on at that very time, so it would be premature not to await the response to it.

The consultation has happened. The response was published by the Department in November, so we are now past that. The implicit agreement between my right hon. Friend and the Under-Secretary was that it would be appropriate to come back to the matter once that process had been completed.

David Kidney (Labour, Stafford)

Very reasonable.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Indeed. We are coming back to the matter at the first available opportunity, obviously with the knowledge of my right hon. Friend, and keen to pursue the matter.

Before the end of last year there was also the report of the estimable Committee on Climate Change, Meeting Carbon Budgets - the need for a step change, which we all take very seriously and value very greatly. By any criterion Lord Turner and his colleagues do an excellent job. They have made a significant contribution to the issue. On page 134 of the report, talking about whether we can only rely on the carbon price and so on, they say:

Given our concerns we therefore recommend that:

Whether CCS is deemed proven should not be judged only on the basis of the carbon price. Rather it should be considered in the wider context of power sector decarbonisation required both in the UK and internationally, and on the basis of UK and international evidence.

To the extent that retrofit might be considered desirable in this context but would require additional support over and above what is likely to be provided by the carbon price, investors should be given comfort now that a mechanism would be introduced to provide this support.

Such a mechanism should be introduced no later than 2016 to support roll-out once the first demonstration plants become operational. Some decisions on regulation and financing structure could be made in advance of this date.

The Government should make it absolutely clear now that whether or not CCS can be deemed economically viable any conventional coal plant still operating unabated beyond the early 2020s would only generate for a very limited number of hours. Such a statement should be complemented by a review (e.g. in 2020) to determine the precise level and timing of such a limit.

That is followed by a box entitled Potential power market interventions, which describes three such interventions. The first proposal, entitled Measures to strengthen the carbon price signal, is to extend the exemption from the climate change levy to all new low-carbon generators. It also suggests a second option of a carbon price underpin. The second proposal, entitled Measures to provide confidence over the price received by low-carbon generation, suggests feed-in tariffs for low-carbon technologies and tenders for low-carbon capacity. The final proposal, under the heading Measures to ensure investment in low-carbon capacity, suggests an emissions performance standard or a low-carbon obligation.

I want to focus on the emissions performance standard. The report states:

An emissions performance standard would entail regulation to specify a maximum emissions intensity (g/kWh) of generation. This could be introduced at firm or installation level.

We have had debates about what would be appropriate and the industry has given evidence. It may be much easier to introduce the standard at installation level than across all the plant run by a particular company or consortium. I am willing to have that debate. I was grateful to the Minister of State for her response to my question about whether an emissions performance standard would be legal in European law and, therefore, in British law. New clause 5, tabled by colleagues led by the hon. Member for Nottingham, South (Alan Simpson), also argues for an emissions performance standard, and the Conservative Front-Bench team have also tabled a new clause.

The difference between the three options available is that new clause 1, tabled by my hon. Friends and me, is considerably stronger. It states:

The Secretary of State shall make provision by regulations for a carbon emissions performance standard to set the maximum level of carbon dioxide that may be emitted for each unit of output by any new coal fired electricity generating station,

and that that

shall come into effect immediately on passage of this Act and will be progressively lowered so that new coal fired power stations will produce no carbon emissions from 2020.

That is a clear position. [Interruption.] Ministers may disagree, but it is clear and it gives a clear indication to the industry a decade in advance, so there is no lack of notice. One of the Ministers reminded us in an earlier debate that the Act will be enacted two months after its passage. We believe that the emissions performance standard should be introduced when the Act is enacted so that it can come into effect this year.

Next in effectiveness, though much less effective and, in our view, not effective enough, is new clause 5, tabled by six Labour colleagues led by the hon. Member for Nottingham, South. The difference between it and our new clause is that it offers no provision as to when the emissions performance standard would come into operation. It begins:

The Secretary of State shall make provision...to set the maximum level or levels of carbon dioxide that may be emitted.

It goes on to say that the standard should be reviewed

no less frequently than every three years.

It then sets out the issues that the review should take into account, including the most up-to-date scientific knowledge and the advice of the Committee on Climate Change,

particularly in relation to carbon budgets, medium and long-term emission reduction targets, and future emissions from the electricity generating sector.

The new clause also proposes that the standard must be introduced

no later than 12 months from the date on which this Act is passed.

It would start next year and would be reviewed every three years, but the new clause does not have a specific date for implementation.

Brian Binley (Conservative, Northampton South)

Does not subsection 3(a) in new clause 5 sum up the reason there is a real need for flexibility? It says that the Secretary of State must

take into account the most up-to-date scientific knowledge about climate change.

Over the last six months there has been considerable doubt about the impact of climate change, particularly the assumption that was made in the inter-parliamentary computer model to the effect that rising amounts of CO2 produced a similar rising amount of heat within the atmosphere. That seems to be in some doubt.

Alan Whitehead (Labour, Southampton, Test)

No.

Brian Binley (Conservative, Northampton South)

Let me continue. The point is that scientific evidence is in some doubt. We need some flexibility and that is why I welcome the new clause tabled by my hon. Friend the Member for Tunbridge Wells (Greg Clark), rather than the firm new clause tabled by the Liberal Democrats.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The hon. Gentleman is beginning to address the new clause tabled by his hon. Friends which I have not addressed yet. It is the weakest of them all. He has put his position on the record. He supports the weakest proposition. To put it bluntly, of course there are climate change deniers. There are more of them, as far as I know, in his party than in any of the other three parties represented in this Committee. There appear to be a significant number both in the current parliamentary Conservative party and among those selected to be Conservative prospective parliamentary candidates.

Indeed, it was distressing to discoverfrom research done not by us but by the Conservative partythat of all the issues that were thought to be important by its prospective parliamentary candidates at the bottom of the list were two things: social housing and climate change. That does not suggest that great new, radical, environmental

Peter Atkinson (Conservative, Hexham)

Order.

David Kidney (Labour, Stafford)

We are enjoying this.

Peter Atkinson (Conservative, Hexham)

I know. I am sorry to spoil the Committees fun, but this is really getting rather wide of new clause 1.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I was just warming up, Mr. Atkinson. I have been waiting to make this speech for at least three days. But I have other opportunities in the grid.

My hon. Friend the Member for Harrogate and Knaresborough, from both his personal knowledge and his knowledge as Chairman of the Science and Technology Committee, may wish to tell us that there is not increasing evidence to suggest that climate change is uncertain. That is certainly not the advice given to the Government. It is certainly not the Governments view. To their credit they are very clear about this issue. Of course, people can naively think that because we are having a cold winter it must mean that the evidence is different.

All the burden of scientific evidence, both from the Intergovernmental Panel on Climate ChangeI have heard its chairman speakand our Committee on Climate Changewe have heard their chairman and members speakis that the evidence is clear. I also take the view in politics that the precautionary principle is a good one and we should seek to anticipate things that are dangerous and not wait until after the event. I understand the position of the hon. Member for Northampton, South. He is entitled to his position. I do not think that it is supported by the science and this is a matter to which we will no doubt return. I will observe your polite request, Mr. Atkinson, not to stray too far into that debate now.

Having put two of the positions, I should like, to be fair, to put on the record the third, which is the position of the Conservative party as set out in new clause 2. Obviously the hon. Member for Wealden will speak to his own new clause in a minute but it is only affair that I address it. It states:

The Secretary of State may by regulation introduce an Emissions Performance Standard.

It then defines it. It does not say that the Secretary of State shall do so, and it does not say when. It does not say what the criteria will be and so on. I think that the hon. Gentleman will accept that it leaves an option, but it is simply that. My hon. Friend the Member for Harrogate and Knaresborough and I think that that needs to be tougher and clearer from the beginning.

There is, however, one major issue that I want to raise, as the Minister of State may suspect. It concerns the legal context of these matters, which is why I have questioned her in the past. Correspondence between her Department and the European Commission on this matter has come into my possession. I have a letter dated 16 June, written by her Department and sent to Mr. Jos Delbeke, the deputy director general for climate change and air, DG ENV 1, at the Commission, on the subject of a proposed UK framework for the development of coal. That was a perfectly courteous letter explaining the Governments position after the announcement made by the Secretary of State in April. I will not set it out in detail, but it starts by saying:

We are writing to update you on progress following recent announcements by the UK government in Budget 2009 and subsequently on proposals for new measures on coal and CCS.

I also have the reply to that letter, which I will put on the record. It is a short letter from Mr. Jos Delbeke, who is a long-standing European civil servant. The letter is headed: Proposed UK framework for the development of clean coal. It states:

Thank you for your letter of 16 June 2009, in which you lay out elements of the proposed UK framework for the development of clean coal, comprising, inter alia, the following measures:

1. Requiring any new coal power station in England and Wales to demonstrate CCS on at least 300MW net (around 400MTW gross) of its capacity; as is laid out in Chapter 4 Section 1 of the Consultation paper on the framework issued on 17 June 2009, the intention is to implement this requirement through the planning legislation.

2. Requiring these power stations to retrofit CCS to their full capacity once CCS has been technically and economically proven, and new power stations to then be fully CCS from the outset;

3. Exploring options that would deliver emission reductions from coal power stations should CCS not be proven as quickly as expected. With regard to the requirement under L, Chapter 4 of the Consultation Paper on the proposed UK framework, issued on 17 June 2009, lays out that the requirement should be implemented in the first place through the planning legislation. Amongst other options to ensure the monitoring and enforcement of this requirement, it is proposed to introduce emission performance standards or caps for individual plants through the Environment Agency's Environmental Permitting regime.

You have asked for DG ENVs views on these proposals. As you know, Article 9(3), 3rd subparagraph of Directive 2008/1/EC concerning integrated pollution prevention and control stipulates that:

Where emissions of a greenhouse gas from an installation are specified in Annex I to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community (1) in relation to an activity carried out in that installation, the permit shall not include an emission limit value for direct emissions of that gas unless it is necessary to ensure that no significant local pollution is caused.

DG ENV takes the view that this would rule out the introduction of any emission performance standard, cap or limit value for direct emissions of CO2 falling under the definition of emission limit value set out in Directive 2008/1/EC in the permits to operate installations covered by Directives 2008/1/EC and 2003/87/EC. I am looking forward to a continued dialogue on these issues in the coming months.

Jos Delbeke

The key point, as the Minister will have heard in the penultimate paragraph, is that

DG ENV takes the view that this would rule out the introduction of any emission performance standard, cap or limit value for direct emissions.

Unsurprisingly, I have some questions for the Minister. Given that the reply is dated September, why did the Government not refer to the letter when they published their coal policy on 9 November? What steps have the Government taken since 9 November to ensure that their proposed policy for coal will be exactly in line with the recommendations of the Committee on Climate Change?

Is it enough, given the correspondence that I have cited, for the UK to rely on its own legal advice? The advice may be different from that given to and by the Commission. What communication has there been between the lawyers here and in Brussels? If the Governments legal advice is wrong, it would still be possible, according to the Commissions letter, to use the UK planning regime to do something about the situation before it is too late. I accept that it would be possible to plan in advance and say that emissions above a certain amount will not be allowed as part of the planning condition.

I understand from the Under-Secretarys response to the debate on the private Members Bill in July, and from other dialogue, that the Governments contingency plan for an EPS option would be for a CO2 emissions performance standard by way of a plant-level cap. If that plan is found to be illegal under European Union law, there would clearly be no way of controlling or reducing the CO2 emissions from any coal power station in the UK once it had been granted consent. The Committee will therefore understand the concern of my hon. Friend the Member for Harrogate and Knaresborough and I about the danger that people would be trying to close the stable door after the horse had well and truly bolted.

That would also mean that the UK would not be able to follow the recommendations of the Committee on Climate Change, which apply to both new and existing coal power stations. A new station, such as the proposed new plant in Kingsnorth, could emit 8 million tonnes of CO2 a year indefinitely. Without an emissions performance standard, and if the Kingsnorth CCS project fails to meet the targets, the obligations and duties created by the Climate Change Act, which this country, to our credit, passed in 2008, would be rendered sterile and meaningless. E.ON has said, on the record, that if there is to be an emissions performance standard, it wants to know what it will be at the outset so that it can make an investment decision. The Government, however, have not done that. Why have they not made that indication? We know E.ONs current position in the market and in relation to Kingsnorth.

It seems to us that a rolling review in 2018the position described by Ministers the other daywith the threat of an uncertain regulation thereafter, creates more questions and problems than it answers. That is our criticism of the new clause tabled by the hon. Member for Nottingham, South. Although it has the support of some reputable voluntary sector organisations, I think that they are misguided about the new clauses logic. After extensive public consultation, we still do not know what the appropriate conditions for any new coal power stations will be. That is hopeless if we are trying to plan the future of an industry into the decade beyond this one.

The rolling review is also a hanging axe that will deter much-needed investment in new coal and CCS. That is clearly undesirableI could be stronger about itespecially when we now know that it is considered technically possible for new, commercial coal power stations, such as the Powerfuel 900 MW project at Hatfield, which has been supported by the European Union, to capture 90 per cent. of CO2 emissions from the outset. We now know the EUs view and that it had indicated it to the Government. Apart from the questions about why we were not told of the Brussels position earlier and why it is only coming to light now, is it the caseI hope it is, because, as the Minister of State knows, I respect her greatlythat the Government have been trying to ride two horses? On the one hand, are they creating the impression here that they are being tough and determined about the issue, knowing over the past few months that the European Commission would not allow them to carry out their proposed policy; and, on the other hand, have they been unwilling to stand up and take on the Commissions position, which needs to be challenged, on the issue? Ultimately, this might have to be taken to the courts. We take the view that this is sufficiently important to be taken, if necessary, to the European Court, so that the dispute between a member statethe United Kingdomand the Commission can be resolved.

If the UK is to take the lead in Europeand I commend the Government for the intentionthen it is necessary to take on the civil service or the European Commission on this issue. I am an enthusiastic European, but that does not mean I think every single decision or view the EC takes is correct. I have never taken the view that there ought not to be robust participation in the processes by member states.

The legal problem of how to regulate CO2 emissions from coal power stations in Britain must be resolved publicly, positively, urgently and ideallyI see no other opportunity before the general electionby this House in this Energy Bill, before consent is granted to any new coal power station. This is not meant to be provocative, but we face a general election and none of us knows the outcome. It is theoretically possible that there could be a Conservative Government, who will not be as tough on these things, in my view, as the present Government have been or intend to be. I look to the Minister and her colleagues to help those of us who have had a lifetime of concern on these matters, to take an opportunity that may not come again before the general election. In certain outcomes of the general election, the opportunity to succeed may not come at all in the House of Commons, even though the House of Lords will remain a balanced place, without any party having an overall majority.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

My hon. Friend makes an incredibly powerful and important point about the juxtaposition of UK law and European law. In the debate on the Constitutional Reform and Governance Bill earlier this week, the Conservative Front-Bench team proposed an amendment that, following a Conservative Government coming to power in May, any future change in competence in terms of European law would result in a referendum in the UK. That is their position. In that debate I sought a cast-iron guarantee; to be fair, the Conservative spokesman gave a cast-iron guarantee.

Peter Atkinson (Conservative, Hexham)

Order. I remind you that this is an intervention, not a speech.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I apologise, Mr. Atkinson. It is a very important point. Does my hon. Friend agree that in those circumstances, not only may we have a challenge in the European Court over this, which could take three to five years, but we may also have a referendum in the UK, which could put back the whole process for a decade?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I agree. Although I was not in the Chamber, I was able to see my hon. Friends intervention as I followed that part of the debate. I am keen to persuade the Government of what needs to be done on this issue. We need to amend the Energy Bill, because it is the last opportunity, to include a clause providing for emissions performance standards. That is consistent with the Government view and with what the Under-Secretary indicated might be possible when he replied to my right hon. Friend the Member for Ross, Skye and Lochaber in July. It is consistent with statements made by the Secretary of State and the Minister of State, both in the House and written answers. If we put into the Bill an emissions performance standard amendment or new clause, we would take the initiative and then it would be up to the European Commission if it wanted to take us on. We would get on with that and the matter would be resolved speedily, and not hang over everybodys head as an unresolved matter in the way that my hon. Friend indicates.

Our view, on these benches, is that new clause 1 is the only new clause exactly in line with what the Committee on Climate Change has recommended. I defer to its wisdom and expertise, as it is the best source of guidance in the UK and was specifically set up, with all-party agreement, to provide that guidance.

I shall make one last point. I am conscious that this is the month after the difficulties of Copenhagen and the Copenhagen accord, and, by 31 January, countries have to lodge the steps that they are taking as annex 1 countries. I unequivocally applaud the Government for the efforts taken, only the other day, at the Council of MinistersI think that it was the Secretary of Stateto get the EU to be more robust about emissions. I have had personal conversations with the Secretary of State and have encouraged him to be robust. I know that that was in his mind. I am grateful and I hope that his efforts deliver and that Baroness Ashton can assist that delivery in her new role, because it is a foreign affairs as much as an energy and environmental matter.

We have an opportunity for the Government to show, not only in Council of Ministers meetings in Spain, as that one was, or elsewhere, but also at home in their legislative programme, that they are determined to do something about carbon emissions. If we want the coal industry to thrive, and to let investors know what to expect in the future and to have a proper lead-time for investment planners, financiers and others to know what they are working towards, we need to tell them the score by the time that the Bill is on the statute book.

I hope that we will continue to take the lead after a disappointing conference in Copenhagen. I know that Ministers want to be in the lead position. Here is an opportunity for us to take political responsibility. If we do not amend the Bill, either in Committee or on Report, and introduce emissions performance standards, I fear that we will once more be accused of letting the public down and ducking a difficult decision. We are happy to work on the wording; we are not precious about it. I know the difficulties. I am clear that if we are in government, or sharing government, after the election, we will be promoting the measure and will come back to the issue with the objective of introducing emissions performance standards. That is our aspiration. However, it is always better to grasp the opportunity when it presents itself. We have a Bill; now is the opportunity and I urge the Government to take it.

Charles Hendry (Conservative, Wealden)

We should start by recognising that most people in this room are keen to have an emissions performance standard. Some aspects of the hon. Gentlemans speech were almost seeking to divide us into different categories, but, overwhelmingly, what binds us together is the desire to see an emissions performance standard introduced and formulated in a way that is right for Britain. That is his partys policy and my partys policy, and Back Benchers share that desire, as, I suspect from her comments and the campaigns that she has run, does the Minister of State, even if she cannot elucidate those views as openly as she might wish.

The background to the new clauses is that we all recognise that new coal plant must have carbon capture fitted to it from the outset and that if we are to secure the investment that we want in clean coal, investors need to know the framework under which they investing. An emissions performance standard is not only an environmental issue but an investment issue. It sets the framework within which company boards can say, We understand what is expected of us and what we need to do to meet deadlines to comply with the law. This, therefore, is a positive measure and will facilitate new investment if formulated in the right way.

Emissions from a coal-fired power station without carbon capture are around 900 grams of CO2 per kilowatt-hour, which is much higher than the emissions from a gas plant. If carbon capture and storage is introduced on one quarter of the plant, it will bring emissions down to 650-700 grams of CO2 per kilowatt-hour and can bring it down dramatically over time.

I am concerned with the absolutist nature of new clause 1. It says that

new coal fired power stations will produce no carbon emissions from 2020.

First, there is a debate about what is meant by new. Does that mean plant built from 2020 or plant built from when the Bill comes into force, which is what the new clause refers to? There is potentially a retrospective element, which companies might find hard to accommodate.

There is, however, also a practical consideration. The goal of producing no emissions whatever will be almost unattainable. The people with the greatest expertise to whom I have spoken say that a plant with 100 per cent. carbon capture and storage on a post-combustion basis would probably get its emissions down to about 50 grams per kilowatt-hour and perhaps slightly less, but it would certainly not be zero.

There will also be times when the emissions are higher. For example, about a third of the output of a plant will be needed to run the CCS facility. There will be a period when the plant is starting up and it does not have the power available to run the CCS facility. In those opening hours, there will be high levels of emissions until the plant is running at full capacity. Under the proposals made by the hon. Member for North Southwark and Bermondsey that would be illegal.

There will also be periods when, because of a very tight winter situation, we will need every element of our generating capacity to work at full tilt. For that period, and looking at the issue in terms of trying to control emissions on an annual basis, there would be a case for saying, We dont want you to run your CCS for a few hours, because we need the extra capacity to keep the lights on. Under the new clause, however, that would be illegal, and the lights would have to go off, because the CCS facilities would have to be working at all times to capture 100 per cent. of emissions.

There are therefore practical issues that create a fundamental flaw, even though I agree with the direction of travel. One has to imagine what will happen in boardrooms in Essen, Spain and elsewhere, when executives sit down to decide whether they want to invest in new clean-coal plant in Britain. They will wonder whether they can, realistically, be absolutely certain that they will be able to capture all the emissions within a decade. They will say, We dont believe we can commit to that yet, because the technology is not in place. When we have an urgent need for new investment in new capacity, the boards of companies based overseas will say that there are better opportunities elsewhere and they will turn their minds away from the UK.

That is why it is better to go for a permissive approach that gives the Secretary of State powers to introduce an emissions performance standard. That should be based on the science and on discussions with business and industry so that we understand what is realistic from their perspective. We do not want to kill the goose that lays the golden eggs.

It would be good for the emissions side of things to have a completely perfect emissions performance standard that could be met because no new plant was built, but that would be catastrophic for our security of energy supply. A balance has to be struck in these discussions between security of supply and carbon emissions. The hon. Gentlemans new clause simply falls on the wrong side of that balance.

Our new clause 2 is the best proposal because it is the loosest, and the direction of travel is clear. My colleagues and I have committed ourselves to introducing an emissions performance standard if we are given the chance to do so, but the detail should be finalised based on the science and the industrial evidence. If that is not acceptable, we are willing to look at the new clause tabled by a number of Labour Back Benchers, but for the reasons that I have set out the hon. Gentlemans new clause for the Liberal Democrats cannot balance our climate change and security of supply objectives.

Michael Weir (Scottish National Party, Angus)

I do not want to repeat what has been said, but I want to make a few brief points. In the Bill, we are setting up the levy, which will put a considerable amount of money into CCS. It will be reasonable for those who pay the bill to know what they are getting for their money and that there will be a reduction in emissions.

The Governments framework for the development of coal says that they wish to see all new coal-fired plants fitted with 100 per cent. carbon capture and storage by 2025, but they have accepted that measures could be introduced in the 2020s to address the issue of emissions from new coal plants should there be difficulties with the technology. The difficulty is that if we have new coal plants in the meantime that are not fitted with CCS, the Government could come under great pressure to back off from the emissions standard at that time, for the simple reason that we could end up losing those plants and having a gap in electricity supplies. I think we need to be careful of that, and to address that matter now by making it clear that there will be an emissions standard that companies will have to adhere to.

I also draw attention to what I think is a slight disconnect. We talked about the proposals for gas CCS. The provisions of the national planning statement relating to large combustion plants states that any new plant must be carbon capture ready, and the company must be sure of the technical feasibility of retrofitting the chosen carbon capture technology. If not, the Infrastructure Planning Commission must refuse planning permission for that plant. I very much doubt if anyone is going to come forward with a large coal plant until such time as CCS has been proven to work; obviously, that is the reason behind the demonstrationsto show that it will work. It is interesting that although the Government were prepared to grant the new plant, for example, at Kingsnorth, with only 20 per cent. of CCS, E.ON pulled back. As a matter of interest, a similar thing happened at Hunterston with DONG Energy, which is an indication of the potential difficulty. It therefore seems that companies will, in the first instance, be unwilling to commit to building new coal plants until they are sure that CCS is coming online. It also seems that there will be a hiatus in new coal plants as a result. Having said that, it is important that we deal with the matter.

Another point that has not been raised is how adding a requirement now could act as a technological drive to develop CCS. Others have made the point that in, for example, the motor industry, it was a requirement for emissions reduction that drove the technology for cleaner engines in motor cars. If companies know that they must have CCS, and will not be allowed plants otherwise, it may work as a driver to push the technology on and get us there quicker than we might otherwise do.

I will support the principle of the ETS. I am also happy enough to support the new clause tabled by the hon. Member for North Southwark and Bermondsey, but I personally prefer new clause 5, which is a more reasonable way to approach the matter and takes into account the science as it develops along the way.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I do not want to repeat the points that have been quite excellently made by the hon. Member for Angus, and indeed, by my hon. Friend the Member for North Southwark and Bermondsey in tabling the new clause.

The hon. Member for Wealden makes a very valid point about the new clause. There is clearly room for negotiation on that clausehe is absolutely right in that. Not only in this Committee, but across most of the House, there is a commitment to see an ETS scheme of some sort in the Bill, as a clear statement of intent by this Government to carry forward into the future.

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman says that there is room for negotiation on the new clause, but he and his colleagues tabled it specifically to state that there should be no emissions. He knows, as I do, that the best technology that we anticipate would enable us to reduce emissions to 90 per cent. of what they would be if there was not carbon capture and storage.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I take the rebuke from the hon. Lady, who is passionately committed to much of what we are trying to do. It is the duty of the Opposition, when we are examining and scrutinising a Bill, to take up positions to allow the Committee to debate the extent to which we are able to legislate. That is what we should be doing. The Government do not always get it right. Neither do the Opposition parties, but we are humble enough to accept that, even if the hon. Lady is not. [Interruption.] We are making huge progress; perhaps the Prime Minister will learn from that exampleor is that too much to ask?

The hon. Member for Wealden makes the point that having a plant running with zero carbon would open up all sorts of different issues. We accept that point and, in view of the comments that the Minister is about to make, we will be happy if new proposals are brought forward on Report.

I wish to address the issue that the hon. Member for Northampton, South, raised. He will expect me to speak on that subject, as it goes to the heart of the matter. This is the first time that I have been a member of the same Committee as him. He seems to be an incredibly reasonable man; I am rather sad to see him in the climate change denial group.

Brian Binley (Conservative, Northampton South)

I am not a denier. I am simply saying that we need to be as sure as we can be before we proceed to lock in such regulations. That is all that I am arguing for. That seems eminently sensible to me.

Peter Atkinson (Conservative, Hexham)

Order. Before the hon. Member for Harrogate and Knaresborough replies to that intervention, may I say that, now that he has made his position clear, we do not want a debate on climate change at this stage? We have a lot of new clauses to get through in a rather short time. I know that it is tempting to comment on the subject, but I would be grateful if the Committee were to stick more closely to the new clause.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

The whole point of this debate, Mr. Atkinson, is to discuss whether CO2 in the atmosphere creates greater heat and thus a need for the technologies that we are talking about. I am saying to the hon. Member for Northampton, South, that there is absolutely no doubt whatever about the science. CO2 multiplied by heat creates a rise in temperaturefull stop. There is no doubt about it. Every scientist can prove that very simply.

Brian Binley (Conservative, Northampton South)

Will the hon. Gentleman give way again?

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

No. I am trying to finish the point.

Brian Binley (Conservative, Northampton South)

You are being very provocative.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

No, I am not. I am a nice chap, really.

There is no doubt about the science. There is no doubt that the sun is a heat source. That, too, is scientifically and absolutely undeniable. If one puts a heat source in with CO2, there will be an increase in heat. What cannot be proved, of course, is what the effect of that heating will be on the earths ecosystems. That is where the modelling comes in. The model from the university of East Anglia, to which the hon. Member for Northampton, South, referred, is but one model, using one data set.

Peter Atkinson (Conservative, Hexham)

Order. I have to tell the hon. Gentleman that the debate is straying far from the subject. I ask him to return to the new clause; otherwise, I shall have to be a little firmer with him.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

I simply make the point that there is no doubt. We are trying, in new clause 1, to get the Government to admit that it is unacceptable for the Bill to leave Committee without an ETS proposal having been included. Unless there is a clear timetable for Governments to achieve those objectives, the industry will not have security, and nor will we.

The hon. Member for Wealden made a vital point. What would happen if a company built a plant without having a clear direction on emission standards? The idea that, in two, three, five or 10 years, the Government would say to it: Unless you meet the standards, we will close down the plant is nonsense, for the very reasons that he gave about the lights going out. Unless the standards are locked in at the beginning of the system, and companies are given clear direction, we will not achieve our objectives, and that is why new clause 1 must have clear standards for the future.

Joan Ruddock (Labour, Lewisham, Deptford)

New clauses 1, 2 and 5 seek to address an issue that I think we all agree is critical: the decarbonisation of the UK power sector. Specifically, they seek to introduce an emissions performance standard to regulate carbon emissions from power stations. If the ultimate goal of the new clauses is to reduce carbon emissions from our fossil fuel power stations by as much, and as quickly, as is feasible, that is an aspiration that we share fully. The Government are absolutely committed to the fight against climate change, through actions both at home and abroad, and I am pleased that that approach has been acknowledged by the Opposition. The Climate Change Act 2008, and the system of five-year carbon budgets, establish a legally binding trajectory towards our UK target to reduce greenhouse gas emissions by at least 80 per cent. by 2050.

The move to a low-carbon electricity system is critical to the delivery of our climate goals and the Governments low-carbon transition plan, which was published last summer and which sets out our overarching strategy. Our approach considers both how we can use energy more efficiently and how our energy is supplied. Emissions from the power sector are already regulated through the emissions trading system, which is at the heart of our domestic and EU efforts to tackle climate change.

We have worked closely with the European Commission and member states to significantly strengthen the scheme from phase 3which starts in 2013onwards. For example, there will now be a centralised EU-wide cap, ensuring a more ambitious, certain and consistent approach across the EU, and in the UK there will be 100 per cent. auctioning of allowances to the power sector, which will ensure that the cost of carbon is better integrated into business decisions. I draw those matters to the Committees attention advisedly, because they are at the core of the strategy and we always have to consider any new proposals, such as the emissions performance standard, in that context. We recognise, however, that the EU emissions trading scheme is not sufficient. We must, in parallel, take action to remove barriers to the development and deployment of low-carbon technologies, namely new nuclear, renewables and clean coal.

As we have said consistently, tackling emissions from coal is a priority. Coal is the fuel with the highest carbon emissions, yet countries across the globe are set to use increasing amounts for electricity generation. That is why we are legislating in the Bill for a new CCS incentive to support four demonstration projects. We have already put in place the most environmentally ambitious package of policy measures for clean coal of any country in the world.

We require any new coal power station to demonstrate the full CCS chaincapture, transport and storageat a commercial scale of around 400 MW of their output; that is a minimum. Requiring that scale of CCS at this stage in the development of the technology is ambitious and goes beyond the scale of most projects planned elsewhere, but we believe that it is feasible. Modelling suggests that the carbon emissions from a demonstration programme of the scale that we are planning would be similar to those from the alternative gas generation that would be displaced.

We will maintain a rolling review of progress as regards CCS technology and, by 2018, will publish a report that considers the case for new regulatory and financial measures to drive the move to clean coal. In our public consultation, a common argument advanced by respondents was that we first need to demonstrate CCS and develop a better understanding of its potential. They were also concerned that the introduction of an EPS now, while uncertainty remains about CCS, would deter investment in new power stations that would form the basis of demonstration plants. That is clearly a very important consideration.

It is also worth noting that an EPS is not the only option for reducing emissions from coal power stations. In our consultation last year, we included other options: a cap on carbon dioxide emissions from individual coal power stations, allowing coal plants to emit up to a specified amount of CO2 each year, over a number of years; and a running hours limit on coal power stations. We also need to remember that we expect coal power plants to retrofit CCS to their full capacity by 2025, with the CCS incentive able to provide support. Such measures will be looked at as part of the rolling review.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I may be anticipating something that the Minister is planning to say, but before she sits down will she ensure that she gives the Governments view on the other two matters that were part of the consultationthe cap and the hours limit?

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman has asked me a lot of questions, which I shall endeavour to answer in due course.

I want to record that, as the hon. Gentleman said, the Committee on Climate Change has also listed in its first report a number of options to ensure that future power generation is low carbon. We do not have the time at the moment to go into the detail of all of them, but possible options includedagain, as the hon. Gentleman mentioneda carbon price floor, which I imagine we shall discuss later, a feed-in tariff and a low-carbon obligation, as well as an emissions performance standard. The hon. Gentleman sought to bring the support of the CCC to his new clause, but the fact is that the CCC has set out a range of options and has not said that an EPS is the one way forward.

Given the possible effects on issues such as security of supply and consumer bills, considering the options carefully will be important before deciding whether to implement any of them. In the same report, the CCC recommended a review in around 2020, which should consider additional regulation of emissions from coal power stations. As I said, it did not suggest that an EPS was the only courseor, indeed, that an EPS should be introduced now.

We have considered the full range of evidence submitted to us, including the CCCs advice, and thought about the risks to investment raised by the introduction of an EPS now. Having put those considerations against the absolute global imperative of demonstrating CCS on a commercial scale as soon as possible, we decided to commit to a review of the regulatory framework for coal power stations by 2018. In line with the CCCs advice, we have also clearly stated our expectation that, with or without CCS, coal power stations will need to reduce their emissions substantially if they are to continue operating in the 2020s.

It is clear that an EPS could be part of our emissions strategy in the future, but implementation now would be premature. That does not mean that we are being idle. We do ask ourselves whether we are doing enough, which question I hope will be answered when we publish, in the spring, the 2050 road map that will set out further pathways to a low-carbon UK.

As we know that the scale and pace of the change needed will test current energy market arrangements, particularly those for the electricity market, we are assessing in parallel the operation of the energy policy and market framework, to ensure that it will deliver the investment necessary for affordable and secure supplies of low-carbon energy. It is too early to say what measures, if any, might be proposed as a result of that work, but we will set out initial findings in this years Budget.

New clause 1 would introduce an emissions performance standard for new coal power stations and defines a pathway that would require emissions to fall to nothing by 2020. The hon. Member for North Southwark and Bermondsey needs to come clean about the consequences of the new clause: no emissions means no new coal. Without new coal power stations, we would not be able to demonstrate CCS, and coal would not be in the mix for the future. A coal power station is a long-term investment. No company would invest if it knew that it would have to close its station down within five years of starting, as would be the effect of the new clause. As I said, no new coal power stations risks no demonstration of CCS in the UK.

That matters for several reasons. First, CCS has the potential to play a critical global role in tackling climate change, and developed countries must take a leadership role in driving the technology forward. Secondly, fossil fuels play a vital role in providing us with secure energy supplies in the UK, and CCS will enable that role to continue. Through the demonstration programme, we will start to establish the expertise and infrastructure needed to enable wider roll-out of CCS as soon as possible. Finally, by acting early, we will open up opportunities for UK businesses in a major future market, sustaining between 30,000 and 60,000 jobs. I must say to the hon. Gentleman that there is no way that new clause 1 could be acceptable.

Alan Whitehead (Labour, Southampton, Test)

To what extent are utility companies total emissions across their activities limited under the national allocation plan? To what extent will those companies future investment choices be guided by their overall emission limits, as far as the quantum of emissions is concerned, in order to stay in line with their overall allocations and those that they will presumably have on a title basis under future ETS arrangements?

Joan Ruddock (Labour, Lewisham, Deptford)

My hon. Friend, as always, makes an extremely valid point. He is absolutely correct. That is why we must keep reminding ourselves of the centrality of the EU ETS.

Proposed new clauses 2 and 5 envisage the introduction of an emissions performance standard to restrict carbon dioxide emissions from all electricity generation plant. New clause 2 takes a fairly broad-brush, enabling approach, while new clause 5 gives Ministers less discretion over how to proceed and requires a review every three years. Both the proposed new clauses would not only create risks for investment in new coal but could delay or deter investment in new gas generation.

We expect and need significant investment in new gas power stations over the next few years. About 18 GW, about a quarter of current electricity capacity, is expected to close over the next decade as environmental standards for coal and oil power stations become more stringent and some nuclear plants close. We expect this to be replaced by 20 GW of new capacity that is under construction or has planning consent. But the fact that a project has planning consent does not necessarily mean that it will be built. There is a risk that the regulatory uncertainty created by new clauses 2 or 5 would cause investors to delay investment in new power stations that we would otherwise expect to be constructed over the next few years. That would pose risks to the security of our electricity supply.

I was asked a number of questions about the correspondence with the EU and whether we could do what we told the Committee we would do. The letter from the Commission only specifically refers to its view that an emissions limit value in two particular kinds of permit is against EU law; we believe that we can still use our legislation. More broadly, the Committee should recall that member states have the power under the EU treaties to go further than EU environmental legislation if they deem it necessary to protect their own environment.

I was asked why we did not refer to the letter from the Commission. It was because it was just one element of ongoing correspondence and we have not accepted entirely what the Commission has said. We have written again setting out our final policy and we await a response to that. We do not think it is appropriate at this stage for us to be picking a fight with the EU. We are confident in our own legal advice. We need to continue with the programmes that we think are appropriate and until we are told otherwise, we think the Commission may be content with our proposals. If it is not, then it will be a matter for it to take up legally.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Will the Minister be kind enough to circulate the remaining correspondence, either in that series or other relevant correspondence, so that we can all see before Report what the position is?

Joan Ruddock (Labour, Lewisham, Deptford)

I shall certainly look at that request. As I have indicated, we wrote to the Commission in November setting out our final policy. So far, it has not objected. There is nothing more to circulate at this stage, but the letter included references to our contingency policy and the possibility of an EPS. I think I may have answered most of the other questions.

I want to conclude by saying, once again, how committed the Government are to meeting our climate change goals, including delivering the required decarbonisation of the electricity supply. I do not believe that these new clauses are necessary to further those aims.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

We are coming near to the end of the first part of todays proceedings. I am grateful to colleagues for their considered and helpful response to this very important debate. It would be unfair, given the number of other new clauses to be discussed during the longer sitting later today, to deal with these new clauses at length. But I should like to confirm that we are aware of the technical points that the hon. Member for Wealden made; they were picked up by my hon. Friend the Member for Harrogate and Knaresborough. If the Bill were to have such a new clauseand we think that it shouldthe point that one cannot get an absolutely perfect, insulated, watertight, 100 per cent. guaranteed system would not be a barrier to having a system that allows for that inevitable escape. So that modification would need to be made.

It also seems important to make sure that, although it is less technical than arguments about the timing of the implementation, the question about having the capacity to increase the power supply from the coal-fired power station sources should be addressed. Those issues will be reflected in our decision about what we do with the new clause at the end of my contribution.

Hugh Bayley (Labour, City of York)

I remind the Committee that with this we are discussing the following : New clause 2Emissions performance standard

(1) The Secretary of State may by regulation introduce an Emissions Performance Standard to apply to all electricity generation plants.

(2) In this section Emission Performance Standard means a restriction on the amount of carbon dioxide that electricity generation plants are permitted to emit..

New clause 5Carbon emissions performance standard

(2) The Secretary of State shall review the emissions performance standard established under section (1) no less frequently than every three years.

(3) In establishing the level or levels of the carbon dioxide emissions performance standard in section (1), and in carrying out the review required in section (2), the Secretary of State must

(a) take into account the most up-to-date scientific knowledge about climate change;

(4) The Secretary of State must introduce the standard under section (1) no later than 12 months from the date on which this Act is passed..

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I presume that it is still acceptable for us to be jacketless, if we choose to be so, Mr. Bayley.

Hugh Bayley (Labour, City of York)

It is.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Thank you. I had just finished by accepting that we understood some of the points that the hon. Member for Wealden had made about the difficulties of an over-precise clause. He made the perfectly acceptable general point that there is a consensuscertainly on the Opposition Benches. His party, my party and the Scottish National party agree that there should be a provision for emissions performance standards in the Bill.

Our proposal expresses what we think should be the starting point for that debate. I absolutely understand the points that the hon. Gentleman made; we need to allow for the flexibility and definition that he suggested, although I would not go as far as he would in having a completely open and general clause. That would not be my preference.

The hon. Gentleman made one other point, which was that there probably needs to be a more precise definition of a new coal-fired power station. I understand that the intention of the drafting was that it would be defined as a power station that had not started operating before 2020 and was to start operating from then on. I think we can accommodate that difficulty and that question of definition.

The hon. Member for Angus, who was very sympathetic to the idea that we should have emissions performance standards in the Bill, expressed a preferencenot a lack of support for new clause 1, but a preferencefor new clause 5. He said that we absolutely need certainty, not least so that there can be the drive towards the technological solutions that we all need down the road for carbon capture and storage.

The response from the Minister of State was partly helpful, but not as robust as I would have liked it to have been. Perfectly reasonably, she set out the Governments general commitment and her specific commitment to the cause of dealing with carbon emissions. It is a point that clearly differentiates us from some people in other parts of the Committee and the House. I noted her phraseaccurately, I hope. In respect of emissions reductions, she wanted as much and as quickly as was feasible. Of course, there is always the question of what is feasible.

My starting point in the general debate, on advice, is that the ETS in the current EU system will not be sufficient. The market of buying and selling, although progressive and innovative, does not in the endas it werecapture the whole problem. As I understand it, that is the Governments position. That is certainly my interpretation of the Committee on Climate Changes position in its last report at the end of last year. We need to find ways in which the cost of carbon is better integrated into business decisions. The Minister very specifically said that the Government had come to the conclusion that the ETS does not entirely do that; it is a way of doing that, a proposed step on the road. There will be a bigger debate about that issue as more people become aware of the implications.

The Minister was right to say that the ETS was not the only option. Although I prompted her, I did not hear her say where the Government had a preference; I am not suggesting that we open up the issue again, but I would be grateful to be told, in writing if not now, about the other options. She has listed two other options: a cap on emissions of individual power stations and a rising hours limit. I do not think that I heard her come back to that. If she wants to intervene, I will be very happy to let her do so for the record.

Joan Ruddock (Labour, Lewisham, Deptford)

I was hoping that we might finish this morning; that is why I suddenly speeded up and tried not to, perhaps, remember as many questions as I might have. It is not our place at this stage to look for preferences at all. The burden of my case is that we have the rolling review and we look at the options as we progress in learning about CCS. We will then look at what else might be necessary. That will be the time to look at specific choices.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

That is consistent with what the Minister has said. I do not accept that a rolling review by 2018 will be sufficient; it has all sorts of weaknesses in relation to determining the markets decisions. I understand the argument, but we could be much more certain and thereby get much better outcomes.

The last group of issues that the Minister raised related to the road map and its budgets and consequences. She undertook to look at the question of whether she would put into the public domain the rest of the correspondence between our Government and the European Commission. It would obviously be very helpful if she did so. I have shared the parts of the correspondence that are, perfectly properly, now in the public domain. The Minister says that there has been a further response, but we have not seen the reply from the Commission. We would all benefit from seeing that. I hope that there will not be a row about that, and that the Minister can facilitate it at the earliest possible opportunity after Committee stage.

I note the intervention of the hon. Member for Southampton, Test, who, as always, asked pertinent questions. The debate is about how we best end up with a system that minimises emissions and maximises certainty while making sure that we incentivise people to find the solution that allows and does not prevent coal to continue to be used. I think there is consensus on that. We need a harder view to enable us to drive towards that conclusion. Industry generally shows itself to be responsive, given a long enough lead time. There is a competition issue, but, as most of the consortiums are unlikely to be wholly British or only British, and as lots of other international companies are participating, there is an international, not just a national, interest in our moving as far and as fast as possible.

We had a substantial debate this morning, as befits a really important issue. I accept that the new clause that I and my colleagues have tabled will have to be modified. Instinctively, I would not want to go as far as new clauses 2 and 5 unless I was driven to it. However, I am absolutely clear that it would be much better for the Bill to include a provision for emissions limits.

If we come up with a different formulation of words, I hope we will be able to persuade the Minister that a clause on a carbon emissions performance standard would be acceptable and of benefit. As in other areas, I am happy to talk to colleagues from other parties and the Government to see whether we can make some progress between now and Report.

I understand from the Leader of the Houses business statement that we are likely to have a couple of weeks before the Bill returns. It was not in the business announced for next week or the following week, so it sounds as though we have a clear fortnight before it comes back. That should give us time to get a substantial amount of work done. I hope that we will be able to make progress and that the issue under discussion will be included in the Bill.

Charles Hendry (Conservative, Wealden)

We have had a useful debate about the emissions performance standard. It is important for us to establish a principle that we are in favour of the ability to introduce an EPS. I agree with the hon. Gentleman in that respect. The benefit of the approach that we have taken in new clause 2 is that that can be done through secondary legislation, rather than through a new Energy Bill or Act.

The Minister said earlier that she did not think that the EPS would be good in relation to encouraging investment. That depends, however, on where the EPS is set. An EPS set at a level with which industry is comfortable and that it believes achievable would actually be helpful to it in its investment discussions. It would know exactly what was required by 2020, 2025 and 2030. The issue, therefore, is not whether the EPS encourages investment, but the level at which it would be set.

We think that new clause 5 has significant attractions. It also has significant cross-party support, and there is a basis for developing it further on Report. As the hon. Member for North Southwark and Bermondsey does not plan to press his new clause to a vote, I seek your permission, Mr. Bayley, to press new clause 2. It is important that we have the chance to say that in principle we support the idea of an EPS and that Ministers and the Secretary of State should have the power to put it in place in due course.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to ask leave to withdraw the motion.

New Clause 2

New Clause 3

Charles Hendry (Conservative, Wealden)

I beg to move, That the clause be read a Second time.

Hugh Bayley (Labour, City of York)

With this it will be convenient to discuss the following: new clause 7Energy efficiency schemes

(1) The Secretary of State shall ensure that

(a) all households in fuel poverty; and

(b) such other households as he may specify,

are offered a whole house package of approved energy efficiency measures.

(2) A whole house package of approved energy efficiency measures

(a) may before being finalised take into account the effects on a particular household of any measures taken or proposed to be taken pursuant to any other scheme to combat fuel poverty; and

(b) must consider a householders energy needs and carbon dioxide impacts as a whole and establish a comprehensive package of measures to address them; and

(d) must include all measures available at the time of assessment that are suitable for the property and

(i) which pay back through fuel bill savings over their lifetime; and

(ii) which are necessary to remove that household from fuel poverty or bring the property up to Energy Performance Certificate Band C.

(3) The Secretary of State must specify a method of financing those works provided that subject to subsection (4) no householder shall be required to pay for the cost of those works.

(4) If the Secretary of State specifies that any works carried out pursuant to this section shall be funded in whole or in part by a loan scheme, then he must ensure that any repayments for which a householder shall be liable must be equal to, or less per month than, the total savings on the energy bills of that householder.

(5) If a householder accepts an offer made pursuant to this section the Secretary of State must ensure that the resultant works must be carried out within 12 months of that acceptance.

(6) The Secretary of State must take reasonable steps to promote the scheme to households in fuel poverty with a view to maximising the acceptance by householders of the offers made under the scheme..

New clause 8Reports and reviews

(1) The Secretary of State must report annually to parliament on actions taken pursuant to section [Energy efficiency schemes] and any such report must include information on

(a) the reduction in emissions of carbon dioxide, and

(b) the reduction in the number of households in fuel poverty,

as a result of those actions.

(2) The Secretary of State may from time to time, and in the circumstances specified in subsection (3) below must, carry out a review of the scheme established by this Act and the results of any such review must be laid before Parliament.

(3) The circumstances referred to in subsection (2) are, if in the opinion of the Secretary of State, the scheme is either

(a) failing to deliver sufficient reductions in the emissions of carbon dioxide; or

(b) likely to fail to end fuel poverty.

(4) Where the Secretary of State has carried out a review pursuant to subsection (3) he shall ensure that that review is debated and voted on in Parliament..

New clause 17Schemes for reducing fuel poverty: further provisions (No.2)

(1) In this Part a support scheme

(a) must include the offer of a reasonable amount of energy efficiency measures to all persons in the fuel poverty risk groups who are offered financial benefits;

(b) may include the offer of energy efficiency measures to such other persons as the scheme specifies;

(2) In this section

energy efficiency measures includes any of those measures that are at the time of the passing of this Act rated at 5% for any purposes; and

a reasonable amount of energy efficiency measures means an amount of measures that the Secretary of State specifies having regard to the condition of the property concerned..

Charles Hendry (Conservative, Wealden)

We have a number of new clauses left, and I am keen that we should make as much progress as possible. Under earlier clauses on fuel poverty, we discussed some of the energy efficiency issues in great depth. The new clause would introduce a programme to roll out energy efficiency across the country, which would help people in homes across the nation. The Government have set a target that all homes should have cavity wall and loft insulation by 2030.

The Prime Minister announced a year or so ago that the Government intended to get 6 million households insulated between September 2008 and 2011. The plans that we have seen lack ambition, and the new clause sets out a much more robust, determined and comprehensive approach. Every home in the country would have proper insulation, worth up to £6,500, and the onus of repayment would, fundamentally, stay with the property rather than the individual.

When we announced the approach a year or so ago, the energy efficiency NGOs, the fuel poverty NGOs and the energy industry reacted genuinely positively. The subsequent enthusiasm from high street retailers, including Marks and Spencer and Tesco, has surprised us. They say that they want to be actively involved and that they can contribute greatly. They think that they can bring in new innovative funding mechanisms that minimise the cost and make the scheme more attractive to householders. Critically, there are shared systems, which means that the work is carried out and the benefits of reduced energy bills begin to accrue to the householder before they have to start to pay for the work. They would gradually pay for it over 20 to 25 years.

The policy is endorsed by the National Housing Federation, WWF and the Green Building Council. We have support from the energy companies, which are keen to be involved, and from high street retailers. It is important to note that the figure of £6,500 is not going to be an absolute maximum. That is a figure we have worked on in conjunction with others, where they have said that that would appear to provide the right level of insulation for the average home. It would not get a bad-quality home up to a perfect level but it would move poor-quality homes up to a good level or beyond, and we think that is important.

I will give way to the Liberal Democrat spokesman, but I am keen to pick up on something that he said in earlier proceedings. He said:

The £6,500-per-dwelling contribution figure is the lowest, which, as I am sure the hon. Member for Wealden will either confirm or deny, is the one that the Conservatives still use. The more realistic proposed and accepted figure is in the order of £10,000[Official Report, Energy Public Bill Committee, 14 January 2010; c. 209.]

That came as a bit of a surprise to me, because my recollection of when we announced this policy was that a similar policy announcement quickly appeared from the Liberal Democrats. We went back through our records and came across a February 2009 press release, in the name of the hon. Member for North Southwark and Bermondsey, entitled Warm Homes: an opportunity offered. It sets out the scheme and says:

On best estimates obtained from the Energy Saving Trust the average cost will be £5,000 for the installation and an additional £1,500 for the administrative costs of the survey and the organisation of the programme.

His press release, therefore, said that the figure should be £6,500. Now we hear that the Liberal Democrats have moved on and that that is not sufficient. We were intrigued to see the way that story was written up in the Guardian at the time.

In the announcement today...Hughes will propose the government underwrite renovation work worth £6,500.

It said this was a recommendation

originally made by the...Energy Saving Trust, which was also adopted as party policy recently by the Conservatives.

The Guardian goes on:

In fact the policy is a pure copy of the Conservative proposaldown to the exact figure of £6,500. The Energy Saving Trust (EST)...asked about this policy recommendation which supposedly originated with them, responded with bewilderment.

I hope that this issue is something on which we can find great common ground.

Simon Hughesrose

Charles Hendry (Conservative, Wealden)

With that understanding, I give way to the hon. Gentleman.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I have the relevant document and probably even the press release with me. I remember exactly what we said last February; it was indeed based on the best advice of £6,500. However, we have done a lot of work, as a result of which we believe that the average figure would be higher. In the interests of transparency, we believe that we need to be clear that the costs will be higher.

I asked the hon. Gentleman a simple, straightforward question: does he have a figure on advice as to what the average cost of a full energy efficiency refurbishment programme would be for a property, either in England or the UK? He has an aspiration that people should be lent money to achieve energy efficiency, but what rating of energy efficiency does he have in mind?

Charles Hendry (Conservative, Wealden)

The advice that we have been given is that £6,500 would move most homes from a poor to a good level. We have not set a specific standard assessment procedure rating because we want to be flexible to respond to the needs of individual houses. Once one starts setting a SAP level that every house must meet, the figure will not necessarily be one that can be averaged out in that way across the housing stock.

We have been encouraged that Sam Laidlaw, chief executive of Centrica, has said:

The Green Deal is a bold vision to cut household energy bills and reduce CO2 emissions...As Britains largest energy supplier we are committed to making these proposals work in practice.

He goes on to say:

The Green Deal could require as much as £150 billion of capital by 2020. Energy suppliers such as British Gas would be willing to provide some of the finance necessary but we believe that if the Green Deal follows our design, the financial markets will come forward to provide the capital. In order to ensure the energy bill savings outweigh Green Deal repayments, it is vital that the interest rate associated with financing is low. This means minimising the repayment risk and our paper outlines a range of proposals to enable this.

There is a great deal of support out there. The basis on which the proposal has been calculated has not been questioned. There are financial organisations keen to work with us to develop the detail. All we need now is the authority for this programme to be rolled out. One of its most important aspects is that it relates to an individual property.

One concern that we have about other approaches, which require the energy efficiency of the homes of those living in fuel poverty to be improved, is that the work would be carried out where people were living at that time, but there would be no guarantee that they would continue to live there. If a family in fuel poverty were living in privately rented accommodation, work would be carried out, as legally required, but that family could move on, and a different family could move in. The other approach means that, at every single moment, somebody would have to monitor the family in every single home to see whether they were in fuel poverty and entitled to support. Therefore, to achieve the change that we are looking for, it is better for a scheme to run on a household basis.

I do not doubt Ministers commitment to energy efficiency. I am not sure which Minister will respond to the new clausethe Minister of State has a personal commitment to dealing with the issue. The unsatisfactory aspect is that we seem to lack ambition about what we can do in this country. We start from the position of being one of the worst in Europe for the energy efficiency of our housing stock. There is an element of an accident of geography in that. Had Britain been further north, we would have had to have such energy efficiency and insulation measures, otherwise our homes would be too cold in winter. Had Britain been further south, those measures would not be necessary. We have an enormous amount to do to catch up with those countries that have been investing over many years. The Germans, Danes and others look askance at the appalling energy efficiency of our homes. We need to show determination to drive change.

The new clause gives the Government the power to start rolling out the necessary measures. It is an idea whose time has come. We hope that the Minister will support us.

Alan Whitehead (Labour, Southampton, Test)

I should like to address my remarks to new clause 17. I say in passing that two other new clauses in the group refer to the essential link between fuel poverty and household energy efficiency. As far as I can see, new clause 7forgive me for saying it in this wayis entirely stolen from the Fuel Poverty (No. 2) Bill, which I introduced last spring. That may be accidental but a small footnote would be nice.

New clause 3, as the hon. Member for Wealden suggested, requires something like £150 billion, which I think is the lowest estimate, to underwrite the programme. Among other problems, it would not necessarily deal with those households in fuel poverty. It may have the opposite effect. I want to be brief this afternoon as I recognise that we have a lot of business to get through before we finish.

My new clause makes the direct connection between fuel poverty and energy efficiency energy in homes in terms of an offer made to households in fuel poverty by those bodies required under the scheme to provide assistance to them, and requiring part of that assistance to be energy efficiency measures. That is important as it is clear that there is a close correlation between those in fuel poverty and those in houses with a low SAP rating.

Almost 40 per cent. of those in fuel poverty live in houses with a SAP rating under 30. Over 80 per cent. of the fuel-poor live in properties with a SAP rating below 50. Conversely, once a property reaches a SAP rating of 65 or above, which is where energy performance certificate band C mentioned in new clause 7 comes in, it is extremely unlikely that any householder living in it would have to spend more than 10 per cent. of their income on fuel. The correlation is clear.

While it is true that not everybody who is fuel-poor lives in a house with a low SAP rating, or that everybody who lives in a house with a low SAP rating is fuel-poor, if one goes to a property that has a low SAP rating, one is quite likely to find someone who is also fuel-poor living in it. Therefore, when assistance is given under the scheme for those people who are in fuel poverty, the requirement to include an element of fuel efficiency in the offer means inevitably that that propertys SAP rating will be increased. The likelihood of that familys being in fuel poverty will be lessened over time.

If the SAP rating of properties across the UK is 65 or above, one can effectively say that it is unlikely in general that people will be in fuel poverty. Clearly, that has to be the target over the medium to long term. Although the Government have made extraordinary strides to increase the energy efficiency of properties in the UK, and the average SAP rating of properties in the UK has risen over the last few years as a result, that outcome is still a little way off. We know that fuel poverty is linked to the energy efficiency of the house, so including a requirement that the energy efficiency of that house should rise over time so that it is eventually within the range of SAP 65 would ensure that fuel poverty was all but extinguished for UK households.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I, too, am keen that we should have a chance to debate the groups of new clauses so that we can complete our business in time. I will not go over the ground again that we covered when we put forward our proposals the other day. I simply ask the hon. Member for Wealden to be more precise about how the funding mechanism would work. Obviously, we are talking of a ballpark figure of more than £100 billion. The scheme has to start somewhere. The idea is that the payback is attached to the electricity bill of the property. Clearly, there needs to be some funding upfront. I am keen to hear him elaborate on who lends the money. Will it all come from the utilities companies? Will it come from the partners he has talked about? What is the division? Is there any underwriting? What are the guarantees? We need a bit more meat on the bone to be persuaded that this is a credible system.

Charles Hendry (Conservative, Wealden)

No set funding scheme is necessary. The companies are keen to develop their own funding aspects and are trying to see how they can make this scheme work best for them, too. Our initial intention was that the onus would be on the energy companiesthey would have to borrow. There might then have needed to be an element of Government guarantee for that borrowing so it did not conflict with the building of new plant and infrastructure. Subsequently people have come forward and told us that they are talking to organisations in the City and that they can fund this on a long-term loan basis. They are happy to do it on that basis, so we do not think it is necessary to have a single prescriptive scheme; the largest companies in the country believe that it is workable and that they can fund it.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

With respect, I do not think that that quite works. New clause 3(1) says:

The Secretary of State may by regulations introduce a scheme whereby every household shall have an entitlement for household energy efficiency measures.

That means a right. If there is a right it means that everybody could in theory on day one say, I want my energy efficiency measures. That therefore has to be backed up by a system of financing because it cannot be done without the necessary funding. A suck-it-and-see answer is not sufficient here. If the new clause said shall have a potential opportunity, that would be something else, but an entitlement is a different kettle of fish.

Alan Whitehead (Labour, Southampton, Test)

Would the hon. Gentleman care to raise the question of whether the savings that would result from energy efficiency measures of £6,500 per house could be entirely funded, considering the interest that will arise, at a reasonable rate, from that £6,500 over time, by the difference between the savings the householder might make and the money the administering body may take? Would the householders bill be genuinely reduced? If that is not the case, the proposal will simply not work.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I note and respect the hon. Gentlemans inquiry. He has posed a similar question to me. The Minister replied that because the issue is so important, we need a pilot scheme and we need to make sure that the sums work. The hon. Member for Wealden needs to answer the question put by the hon. Member for Southampton, Test. Such a scheme is not credible unless it guarantees that the addition of the energy bill as reduced by the energy efficiency measures plus the payback is less than people will be paying. That is a key issue.

There are two areas of common ground, and other areas of difference, between the hon. Member for Wealden and me. First, we think the system should attach to the property, not the person. If the property changes hands, it is much more manageable in Britain to track properties than people. That is therefore the right system. Secondly, we think that there should be a scheme. Beyond that, we are in the area of debate and competition. We know that the Government have their great British refurb programme ready in the wings for the final proof-read by Ministers. We hope the Minister will say that we will see it before Report. We discussed it the other day and the Ministers tried to be helpful; it would be nice if they could be really helpful today and say, Yes, weve signed it off. It will be coming down the track and the Secretary of State will be on his hind legs in the Chamber announcing it next week or the week after, which means that we are guaranteed to get it. I am being light-hearted, but I am serious about the need for it. It would be nonsense for us to debate how we deal with the issues without the Government plan.

We support new clause 17, which was tabled by the hon. Member for Southampton, Test and his colleagues. It would make sure that the scheme is not just a payback, but a wide range of energy efficient measures to be offered in schemes for reducing fuel poverty. We had part of that discussion the other day. It is clearly a step in the right direction and I hope that the Government will be sympathetic towards it.

The hon. Gentleman merits much more than a footnote in relation to new clauses 7 and 8. I intended to say, without any prompting, that both new clauses have considerable parliamentary progeny, because they have appeared elsewhere. They appeared in the hon. Gentlemans presentation Bill, for example, and my hon. Friend the Member for Somerton and Frome (Mr. Heath) was using the same song sheet when he introduced his private Members Bill last year, which, all too sadly, the Government blocked. I give credit to the hon. Member for Southampton, Test for the work that he has done and for suggesting the idea. It is absolutely not meant to be unattributed. To be fair, he and I and others benefit from work done by people outside the House who seek to come up with schemes that might find favour with Ministers. The scheme in new clauses 7 and 8 is one of them.

I hope that the Government will be favourably disposed towards new clauses 7 and 8, because they have a common, cross-party heritage. Not only are we trying to make sure that there is a whole-house packageto use the summary phrasebut that there are then regular reports. We need to see progress on the issue, because systems may need to be tweaked and adjusted, there may need to be greater incentives, and more money may need to be put in the kitty. We are committed to a scheme, the ballpark nature of which I set out the other day. The hon. Member for Wealden has presented the Conservative scheme and will answer in a second the question of exactly how we deal with the entitlement question when no money is guaranteed in the kitty. I still do not understand how there can be entitlement in that situation. I hope that the Under-Secretary will reply positively to the concept, and bring us up to date since last week, by telling us that the great British refurb, or whatever the final version is called, will appear any day now.

David Kidney (Labour, Stafford)

It is a pleasure to welcome you back, Mr. Bayley, to your position overseeing our deliberations.

Across the parties, we share the ambition for our country to do much better at making our built environment energy efficient. Although todays debate will be about domestic properties, it applies equally to commercial and non-domestic properties. It makes sense in terms of hitting our targets for tackling climate change, and in terms of our energy security and fairness for citizens and affordable prices, which is particularly on our minds as we debate fuel-poverty measures in the group of new clauses.

New clause 3 would give the Secretary of State the power to introduce a scheme giving every household an entitlement to energy efficiency measures, with repayment charges added to their bills. This is not my answer to the debate, but at one level everyone is already entitled to access a subsidised offer for energy efficiency measures under the supplier obligation. Since the beginning of the energy efficiency commitment in April 2002, the supplier obligation has delivered 3.4 million cavity wall insulations and 3.6 million professional loft insulations. We have already committed to insulating all lofts and cavity walls where practicable by 2015not 2030 as the hon. Member for Wealden said. We also intend to support a whole-house package for 7 million homes by 2020. Financing those measures is critical to their success, and to encourage take-up of the energy efficiency measures available and to test various financing models, we launched the home energy pay as you save pilots on 7 December. Through those pilots, we aim to assess consumer interest in pay as you save finance and identify the best delivery mechanisms, including the repayment route. Another important consideration is the extent to which finance packages will be appropriate to support low-income and vulnerable customers, particularly the fuel-poor. It behoves us to give particular attention to ensuring that people who cannot afford the payments are not overlooked in the delivery of the service.

New clause 7 would require the Government to introduce a scheme offering whole-house packages of energy efficiency and heating measures to fuel-poor households. A combination of supplier obligations mandated by the Governmentthe carbon emissions reduction target, for exampleand public expenditure programmes such as Warm Front have formed the backbone of our fuel-poverty strategy, and work is under way on a household energy management strategy, which will build on the current range of programmes to take us through to 2020. I am afraid that I cannot give the hon. Member for North Southwark and Bermondsey a date, nor can I say precisely in which week the matter will be dealt with, but progress has been made since I last reported to the Committee. We have all heard the announcement for the next two weeks business in the Chamber, and the Bill does not feature. I am thus on good course to ensure that Members will see the strategy before Report, but I am not able to give that commitment.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

That was helpful. We are encouraged, but we await the date.

The Under-Secretary made a point about the pilot scheme. Does the work done by the Building Research Establishment and others not already produce a lot of the evidence needed to answer the sort of question that the hon. Member for Southampton, Test asked about the benefit of certain types of insulation and the money saved by an average family? I know that the BRE has had a family of fourtwo adults and two childrenliving in several of its houses to test average use for different materials.

David Kidney (Labour, Stafford)

I would be diverted slightly by answering that intervention, but I will. BRE is doing excellent work to devise the kinds of technologiesor accrediting, or identifying them for usthat will help us to tackle the so-called hard to treat properties, such as those with solid walls, and the components that we would need in a whole-house package to get the kind of SAP ratings that hon. Members, including my hon. Friend the Member for Southampton, Test, have pressed on Ministers today and in the past. That work is very valuable and will feed into the final conclusions for a programme to make energy efficiency universal in our built environmentin properties.

CERT will remain a key component of our strategy. Forty per cent. of CERT activity now must be delivered to low-income or vulnerable households. Many such householders have benefited from insulation for little or no cost as a result. It is estimated that between 2008 and 2011, approximately £1.9 billion of the total £3.2 billion invested in CERT will be directed to households in the priority group. That is why we are currently consulting on an extension of CERT and, within it, a new super-priority group, with an obligation during the CERT extension period to 2012 to identify those in particular need due to fuel poverty who ought to have help through the CERT programme.

The Governments Warm Front scheme has assisted nearly 2.1 million homes in England since 2000, with energy efficiency and central heating improvements bringing average reductions in fuel bills for those helped of £300 or more each year. Additional funding announced in the recent pre-Budget report will take the total allocation to £1.1 billion over the current spending period up to 2011.

Charles Hendry (Conservative, Wealden)

Can the Minister confirm that actually the Warm Front budget was cut and has now been largely restored to £1.1 billion? It is not an increase to £1.1 billion; it is a restoration of cuts the Government have made.

David Kidney (Labour, Stafford)

No, that is a shocking representation of the reality. The three-year settlement for Warm Front was extremely generous, far exceeding any previous funding. However, because of the pressures on the Budget and the needs of an impending and then growing recession to keep workers in jobs we spent more money in years 1 and 2 than the profiled spending would otherwise have taken. That left year 3 looking sick, with just £195 million left from that record spending. I am eternally grateful to the Chancellor for being brave enough, in the middle of a very difficult economic crisis, to be able to find £150 million more for Warm Front when it was very difficult for him to do so. It is a mark of the man that he found the money that was needed.

Our view is that there can be no one-size-fits-all approach for delivering those ambitions, especially given the wide variation in housing, tenure and the socio-economic characteristics of households. That is why we are trialling various new approaches; for example, the community energy saving programme.

In addition to attacking the issue of energy efficiency, tackling fuel poverty requires us to have regard to household incomes and the prices that people pay. I do not want to remind the House again, at great length, of the measures we are taking in those areas, but for incomes winter fuel payments and cold weather payments are clearly of great assistance to people in fuel poverty, as are other measures from the Government, such as working tax credit, child tax credit, child benefit and pension credit.

Another feature of household income is the ability to help people to claim the benefits to which they are entitled. Benefit entitlement checks are a very important component under Warm Front and a very important component of our thinking for the schemes we are devising. Under Warm Front, for example, every applicant to the scheme is offered a benefit entitlement check. In 2008-9, 78,000 checks were completed. In more than 40 per cent. of those cases additional benefits were identified, resulting in an average weekly increase in household income of £31.

The other element concerns prices and, again, I do not wish to repeat matters we have previously debated. However, I remind hon. Members that for three years the voluntary agreement is delivering consumer support in the prices that people pay for their electricity and gas, and other measures that we heard the energy companies describe. We are taking that forward in the Bill to make social price support mandatory in the future for a larger number of recipients.

As my list shows, we are working across all three drivers of fuel poverty. Where appropriate, we are looking at ways to tie together the different strands.

That brings me to new clause 8, in terms of reports to Parliament. The Government have no objection to making timely reports about progress on each item they are dealing with, but there are already a number of such reports. For example, CERT has several layers of reporting and evaluation; Ofgem reports annually on the suppliers contributions to the voluntary agreement and we publish official annual fuel poverty statistics. Going forward, effective monitoring and reporting will be a central pillar of our work to deliver the household sector carbon budgets to 2020 and beyond.

In addition to all that, we have already established the independent monitoring arrangements through the Committee on Climate Change, which now publishes a high-profile report each year on the performance of the Departments policies. I would like to say to Members interested in the reporting aspect that I am happy to think about new ways to deliver adequate transparency and accountability, but I do not think we should put in place the reporting at this stage, when we have not yet settled the UKs strategy for the work we are to do. We ought to consider it as part of what we do and perhaps bring in some of the things I have described, rather than duplicate or add to the bureaucratic burden of those who have the responsibility of reporting.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I understand the logic of the timetable the hon. Gentleman proposes. Two things would be really helpful: to have an annual occasion when people could see the report on all the schemesor one scheme, whichever it happens to beand to have a document that collected progress in each of the four home countries. When we asked the other day about figures elsewhere, they were clearly not as easy to find in some cases as one would wish. If we are looking at the UKs international responsibilities, seeing figures arranged by the separate internal countries put together, would allow far better assessment of relative progress in each of the four countries.

David Kidney (Labour, Stafford)

I am not resistant to any of that. We have reporting impositions already. For example, on fuel poverty there is the annual fuel poverty report from the Fuel Poverty Advisory Group to which the Government publish an annual response. The Committee on Climate Change, as we have seen, is to make an annual report to Parliament, to which the Government will deliver to Parliament and the Committee a formal response. Those mechanisms already exist. I am willing to arrange, either in those mechanisms or in a new one, the same kind of arrangements for a major programme for this country to make its building stock more energy efficient.

I turn to new clause 17, proposed by my hon. Friend the Member for Southampton, Test. I share his ambitions but I do not want to tie the social price support measures in the Bill to the more pressing and major requirement for the country to deliver universal improvements in the energy efficiency of our housing stock. The new social price support will play a specific role in providing direct financial help with the cost of energy for vulnerable consumers. Although some benefits other than direct financial ones should be allowed under the scheme, social price support must predominantly focus on ensuring that suppliers provide financial assistance towards the cost of household energy bills.

That is not to say that our energy efficiency policies, particularly those targeted at the fuel-poor, should not be joined up with our social price support policy. That is why, for example, subject to meeting any necessary data protection requirements, suppliers should be able to use the information and data they have on households receiving social price support to identify those eligible for measures under CERT. We do not, however, need additional powers to introduce that.

I have said a little about each of the individual proposed new clauses and have talked about the work that we are doing on fuel poverty, which I believe shows that we are doing all that is reasonably practicable to tackle fuel poverty, having put in place an extensive programme of works across all three drivers. I have explained that we plan to link our energy efficiency measures for the fuel-poor to our work on social price support in the ways that I described. I have outlined the reasons why our social price support policy must remain predominantly focused on helping most of the most vulnerable with their energy bills.

Finally, I restate our commitment to the proper monitoring and reporting of our schemes, and I have given examples of work that we already do. I ask hon. Members not to press the new clauses to a vote, but to join us in making the most successful scheme that we can when we have all the evidence for the UK-wide national strategy, to greatly improve the energy efficiency of our entire built environment.

Charles Hendry (Conservative, Wealden)

I am grateful to the Under-Secretary for his response to the arguments so far and for the detail that he has gone into. What comes through clearly is the desperate need for a strategy. At the moment, we have a range of schemes, some of which work well and some of which work poorly. They need to be brought together into a system that can be widely understood by the people who will be affected. If we went into the street and said, What do you know about the community energy saving programme, CERT and Warm Front?, overwhelmingly, people, particularly those in fuel poverty, would say, Ive never heard of them. I dont know what theyre about and I dont know how to access them. A readily understandable system is crucial.

I emphasise the point made by the hon. Member for North Southwark and Bermondsey about the imperative need for the Government to publish the strategy before Report. I know that the Under-Secretary is not in charge of timetabling, but the Government are. They were in charge of deciding when we went into Committee. They are in charge of deciding when we will get to Report and they are in charge of publishing the document. I will write to the Speaker to say that in the event of the plan not being published, I hope that he will refuse to allow the Report stage, because that document sounds so important to the consideration of the Bill. It would be a discourtesy to the House if it was not available for consideration at that time. I know that is a strong expression, but we need to understand the Governments wider strategy in detail before we consider the Bill further.

There have been discussions about the schemes being proposed. The Under-Secretary said that we need to ensure that people who cannot afford to make the payment are not excluded. The key to the schemes working is the principle that the payment should be less than the savings made. That should help to answer the point made by the hon. Member for Southampton, Test. People would inspect the house and then assess where there would be reasonable savings in the amount of electricity or gas being used and, therefore, where the saving would be greater than the cost spread over a period of time.

In response to the point made by the hon. Member for North Southwark and Bermondsey, we started by thinking that the obligation would be on the energy companies, but companies from the energy sector, retailers, the financial sector and elsewhere are now all saying that they want to work to make the scheme possible. They want to use their particular expertise to make schemes different from those that might be offered by others. There is a real desire to offer competition. People might be able to go to a range of different providers to get the work to which they were entitled carried out on their homes. We want to end up with a range of providers, so people can see who can carry out the work, who they trust most and what the financial regime is. The scheme will only workthis is its fundamental building blockif the savings continue to be greater than the cost.

Alan Whitehead (Labour, Southampton, Test)

Is the suggestion that, following an inspection, only energy efficiency measures that could be profitable, in terms of the persons energy bills, would be countenanced? Would those items that proved not to be profitable simply not be done?

Charles Hendry (Conservative, Wealden)

No, that is not the case. One would look at the totality of the measures to be put in place. The total would have to deliver greater savings than the measures cost, or else it would not be an attractive package to the person living in the property. There might be a big gain from one measure, such as roof insulation, and that would enable other measures to be included, which would still keep the cost within £6,500. The guarantee would be that the saving has to be greater than the cost. It is encouraging how many companies are keen to help to develop the detail of the scheme and make sure that it is something that they are happy to roll out in their name.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

If anybody wanted to exercise their entitlement, what would be in place to guarantee that they could get the £6,500 from the day they did that?

Charles Hendry (Conservative, Wealden)

There is nothing that says that the entitlement would be from day one; the details would set out the relevant period. Clearly, there simply are not the skills available to roll this out nationwide in a couple of months. There would have to be some degree of processing to make sure that it could be done in an orderly and sensible way. There would be some early adopters who were keen to have it done; there would be others who would be less keen and would want to see how it worked for their neighbours before doing it themselves. So this programme would be rolled out over a period of years, perhaps up to 2020. This is not an entitlement about which on day one, everyone can say, Here is my entitlement. I want to have this.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

A rolling entitlement.

Charles Hendry (Conservative, Wealden)

Absolutely.

Emily Thornberry (Labour, Islington South and Finsbury)

For the middle classes only.

Charles Hendry (Conservative, Wealden)

The hon. Lady sneers, but instead of doing 7 million houses by 2020, this would do the entire housing stock by then. I hope that she will recognise the difference in ambition between what she advocates for her constituents and what we advocate.

Alan Whitehead (Labour, Southampton, Test)

Does the hon. Gentleman not accept that as this is an offer and an entitlement the question of who takes it up could be very important? If the hon. Gentlemans sums are correct, it is highly likely that those who would take up the offer would be those who could more or less afford it in the first place. Those people in fuel poverty or close to it, who would have difficulty in contemplating how this all works, would probably not take up the offer. Yes, it would be an improvement for certain houses, but it would probably not increase the SAP ratings of the houses of those in fuel poverty.

Charles Hendry (Conservative, Wealden)

On this rare occasion, the hon. Gentleman is absolutely wrong. The important aspect is that people would be able to make their evaluation about whether the provision worked for them; critically, they would have to know that the saving was going to be greater than the cost. If they were going to make a saving of £300 or £400 a year on their electricity and gas bills and the measure would cost £300 a year, even for those in fuel poverty it would be easy to decide to make that happen.

Above all, we want to use this provision to help people in fuel poverty. This is not the only measure; we are not saying that we should scrap everything else and just do this. There will be a range of other measures, and we would agree with the Government about the validity and importance of some of them. This measure is one of a number of ways to tackle the problem.

I hope that Labour Members will take note of the fact that huge organisations that do not take these decisions lightlyMarks and Spencer, Tesco and the energy companiesbelieve that the measure will work for consumers and for them as well. At the end of the day, this will work for people in that it will deliver a greater saving than the cost involved.

What it all comes back to is ambition. The hon. Member for Islington, South and Finsbury, who sneers from her large house in Islington[Interruption.] Sorry, I thought that people who were married to QCs lived in large houses in Islington. She will be aware that the Governments ambition is 7 million homes by 2020. Ours is for the entire nation to be sorted out in that timea much greater ambition.

Michael Weir (Scottish National Party, Angus)

As I understand the hon. Gentlemans scheme, the repayment will be made through energy bills, but if it is over 20 or 25 years, how does that fit with the right to switch suppliers? How will that be dealt with under his scheme?

Charles Hendry (Conservative, Wealden)

The scheme will be done in such a way that the payment for those who switch suppliers will continue to be made through the bill to whoever has carried out the work on their behalf. That straightforward element would be included in the bill; although people could switch, they could not get out of that obligation. As the hon. Member for North Southwark and Bermondsey was saying the other day, there might be a case in which when somebody sold their home, the remaining part of the bill was paid off, so that that aspect would be sorted out. That detail, however, can be developed in due course.

The issue comes back to ambition. We want a comprehensive programme that addresses the inadequacies of energy efficiency in this countrys housing stock. Our proposal has an overwhelming amount of support in business, among consumer groups and among those who are concerned about fuel poverty. We have been working through the detail with them and no one has said that the proposal has a fundamental flaw and cannot work. There is a principle and a desire to raise the level of ambition.

The Minister says that the Government are doing all that is reasonably practical to tackle fuel poverty. Under this Governments watch in recent years, since the Prime Minister came to power, the numbers in fuel poverty have been increasing inexorably. There is virtually no prospect of reaching the Governments targets for removing vulnerable households from fuel poverty by 2010. The targets for 2016 look pretty challenging as well.

Paddy Tipping (Labour, Sherwood)

In the unlikely event that the hon. Gentleman finds himself in the same position as my colleagues the Ministers, will he guarantee to meet the existing fuel poverty targets?

Charles Hendry (Conservative, Wealden)

The target for 2010 looks virtually unachievable, because of what has happened over time. The Government have failed to deliver on that target over 10 years, so to deliver on it suddenly in a few months would be very challenging indeed. It may be another area in which we will have to do our best to clear up the mess, but we will not be able to do everything that the Government promised.

I am keen to push the new clause to a vote. It represents an important principle and involves an ambition to do the most we possibly can to improve the energy efficiency of our housing stock, to help tackle fuel poverty.

New Clause 9

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to move, That the clause be read a Second time.

The new clause covers a ring-fenced issue. However, it reverts to the practice, structure, operation, popularity and effectiveness of the regulator. My belief that the regulator is not a great friend of the consumer is on the record; I do not resile from it. The implementation of the new clause would be a very positive step to improve the chance of the regulator becoming more respected and valued by consumers.

The new clause proposes an amendment to the Utilities Act 2000 that would improve the regulators governance and board by requiring it to have a majority of lay persons as members. It would also require it to have a lay chair and to hold its meetings in public, except when commercially sensitive information was being discussed. That would help ensure that Ofgem fulfilled its primary objective of protecting consumers, which is what it says on the tin. The new clause would also ensure that Ofgem offered more effective consumer representation and transparency in its decision-making at the highest level.

Which? is a well respected and popular consumer organisation that stands up for consumers. Its experience of other regulators, such as the Food Standards Agency and the Legal Services Board, has shown that a lay independent majority helps to drive accountability and better outcomes for consumers. We can discuss how to define lay member. In the new clause, a lay member is defined as someone

who has been independent from the energy industry, the government and civil service interaction with the energy sector for a period of at least five years.

If the Government have a better definition, I am entirely open to discussing it between now and Report. The proposal, however, stands as an absolute win-win; if the Government resist it, they will be being conservative. I hope that the Minister can be positive. Ofgem needs rescuing from being seen as principally looking after the industry and being too close to the Government. If it were given the ability to speak for the consumer, that would make a significant difference and would be a popular move. I hope that the Government see the merit of the new clause.

Joan Ruddock (Labour, Lewisham, Deptford)

I am very sorry that I rise to disappoint the hon. Gentleman, because I understand very much where he is coming from. We all share the desire that Ofgem be seen to be on the side of the consumer, because that is clearly where it is supposed to be.

The new clause would require the chairman of Ofgem and a majority of the board to be lay members, and it would also require the board to meet in public unless considering commercially-sensitive information. The provisions seek to ensure that Ofgem is a consumer-focused body and is transparent in its decision-making. Those are, of course, aims with which the Government sympathise, and which they seek to reflect in the current regulatory regime. Ofgems principal objective is to protect consumers, and it will remain so.

To achieve that aim, Ofgem clearly needs people on its board who understand the consumer perspective. In the last recruitment exercise in 2008 we appointed two new board members with a background in consumer issues, including the chief executive of Citizens Advice. It is important to note, however, that Ofgem regulates a vital sector within the economy and the decisions it takes are often highly complex, covering issues such as price controls for the monopoly network businesses, and licence modifications that affect the various industry codes that are crucial to the smooth running of energy markets. It therefore needs a broad range of skills and experience on its board, including people with not only energy industry and consumer backgrounds, but skills in and experience of law, economics and regulation, finance and audit, and wider commercial areas.

We do not object in principle to the chair of Ofgem or a majority of its board being lay members as described by the new clause, but the crucial criterion in appointing members is that they should have the necessary expertise and competence to consider the often complex matters that the board is required to consider and decide. To require that the chair and most members of the board be lay persons with no recent experience of the energy industry or of energy issues through the Government or the civil service, could seriously narrow the field of available and interested candidates to the extent that we might have difficulty in appointing suitable people. That would adversely affect Ofgems ability to regulate effectively.

It is, of course, vital that Ofgem regulate the markets in an unbiased way, and both the Government and Ofgem go to considerable lengths to address potential conflicts of interest. We consider that major issue during the recruitment process, and otherwise well-qualified candidates have not been appointed because of that. Ofgem will exclude any board members from discussion of an issue if there could be a conflict of interest.

When considering future appointments, we will continue to look at the wide range of experience and skills, including experience of consumer issues, that Ofgem needs, but putting constraints on the background of board members could adversely affect our ability to ensure that the board is made up of people with the broad range of skills and quality of leadership it needs to regulate effectively.

Turning to the other requirementthat the authority should hold its board meetings in public where possibleI again sympathise with the underlying aim that the regulator should be transparent. Ofgem has taken steps to improve transparency by holding one board meeting a year in public, and that is welcome.

In practice, however, almost all of Ofgems board discussions are commercially sensitive. Many of its decisions are also market sensitive and hence covered by stock exchange rules on announcements. There is relatively little, therefore, that would be suitable for discussion in an open meeting. The changes proposed by the hon. Gentleman would simply lead to the creation of expectations that could not be met. Meetings could be open on only a small proportion of occasions, and probably only a small proportion of any agenda of any meeting could be made open to the public. Therefore, it is unlikely that this would do very much to improve transparency. For the reasons outlined, and on this occasion with some regret, I urge the hon. Gentleman to withdraw the amendment.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

That was a very unsatisfactory response. I understand that the Minister was trying to let me and the Committee down gently by saying how much she regrets this, but she read the case for the secret, closed cabal of the self-interested. That is exactly what she put to us. I have to say, with respect, that the argument she madeput two people on the board who have experience of consumer interestsis almost tokenistic. Whatever the best intentions, the majority of people on the board would come with an industry background, focus and involvement.

The Minister went on to say that the industry is highly complex and therefore no one else can understand it. I have to say that I have met many people in Britain who are capable of understanding highly complex things, and who may not come from a particular sector. They are often called on by Government, from their list of the great and the good and others, to apply their skills in an area where they have not traditionally worked. That is what Governments have always doneGovernments of all persuasions.

The Minister said that there is a need for a broad mix of skills. Of course there is, and that absolutely does not contradict our proposal. A broad mix of skills means that there are people with experience ofshe cited five qualificationsthe law, economics, regulatory practices and financial audit. It is entirely possible. It is not impossible to find people in all those sectors who do not come from the energy industry, the Government or the civil service. I just do not believe that that would pose a difficultyit has not in the other examples I gaveand that is not the experience of those who deal with such things all the time. The Minister defies logic to say that the UK does not have, among its more than 60 million people, the people from other sectors who have the skills to do the job.

Joan Ruddock (Labour, Lewisham, Deptford)

I wish to intervene only on the point where the hon. Gentleman said that he had given other examples, because the examples he gave are not comparable. To cite Which? is in no way comparable to citing an independent regulator that has enormous potential effects on commercial markets.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The examples I gave were the Food Standards Agency and the Legal Services Commission. They both do jobs that involve a considerable amount of complex work, and both have a large range of skilled people. They have both been changed relatively recently, as I understand it, from the tradition of a non-consumer majority. I have not heard a criticism that suggests they are doing a less good job now. Indeed, the Government say that they are doing a better job now. The Minister needs to look again at the practice of other agencies where the regulators composition has been changed to reflect, and have more people from, the consumer sector.

I have to say that I am completely unpersuaded. Of course this is a complex area and of course the energy industry is fundamentally important. However, there are plenty of people in the industry who can put the case, as they do in any complex area of activity. Many MPs do not have such skills, but we are called on to make decisions on the basis of the evidence and advice given to us.

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman asked me to look and think again, which I am more than happy to do, but I think he is seeking a majority of lay members. From my understanding of the needs of the board, it would be a complete misjudgment to suggest that a majority of lay people could do the jobs required. The hon. Gentleman may be correct in saying that perhaps more than two would be a good idea, and I would not demur from that.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I hope there is no misunderstanding between the Minister and me. I am not suggesting by lay people with no qualifications, A-levels, degrees or academic qualifications. They can be lay in this context, but still be lawyers, economists, or people with a regulatory, audit or financial background. I am not seeking to say that such people are not lay. I am saying that there should be people who do not come with an energy involvement or close liaison with energy, so that they can look at the situation from the point of view of the consumerthe majority of us, who are not energy experts but who consume the products for which these people regulate the price, tariffs and all the other things we have discussed.

The new clause contains two proposals: on the composition of the board and on the nature of the meetings. Of course, there will be matters that are price-sensitive and that need to be dealt with in private because they are stock market-sensitive, and there may be more than in many business activities. The Minister will know thatbe it local government, health trusts or other regulatory bodiespeople can order into public agendas and confidential elements. It may be that some agendas involve significant discussion that is price-sensitive, and that would have to take place behind closed doors. The presumption should be that the boards are open to the public. One open meeting a year can often be a tokenistic attempt to placate people when they know, as everybody does, that all the other meetings are in secret.

I was disappointed that the Minister did not even say, I am sympathetic. I do not think we can go as far as the hon. Gentleman wants us to, but we are willing to go some of the way. We are willing to come back with a new clause on Report that says a third, or perhaps an additional three members, will be lay members. I have not heard any such response. I have heard the Minister say, We have done a bit and for the moment that is sufficient. The Government would do everybody a service by adopting a more consumer-focused view in this area. In the end, we would get a much more positive view about Ofgem, and I have no reason to believe we would not get a much more effective Ofgem as a result.

Joan Ruddock (Labour, Lewisham, Deptford)

I happily say that I have heard the case the hon. Gentleman has made. Of course, we do have the power to recruitas and when appropriate, as seen by Governmentin liaison with Ofgem. I do not see the need for a new clauseI certainly reject the one he is putting forwardbecause we have the powers and ability to do what he suggests, if we wish.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I hear what the Minister says. Prompted by that I will ask her one question, as I am obviously not managing to persuade her with the new clause tabled by my hon. Friend the Member for Harrogate and Knaresborough and me. Will she at least be willing before Report to meet Which?formerly the Consumers Associationwhich has experience of persuading government in other sectors to change the nature of the regulatory authorities in entirely beneficial ways? If she accepted that as a reasonable next step, that would be something. I would still be minded to press the new clause to a vote, Mr. Bayley, but at least she would be accommodating the possibility of hearing the argument and responding more positively the next time the issue is put to her.

Joan Ruddock (Labour, Lewisham, Deptford)

For the record, Mr. Bayley, I mentioned two lay appointments that we have made that may indicate the direction in which things are moving. In fact, three of the eight non-executive directors are lay people at present. I am certainly willing to have anot too lengthymeeting with Which?

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I shall take that answer as sufficient. No one was suggesting that it need be a lengthy meeting.

Mr. Bayley, I have put the case that we need a different sort of Ofgem if Ofgem is to have the confidence of the public.

New Clause 10

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I beg to move, That the clause be read a Second time.

Hugh Bayley (Labour, City of York)

With this it will be convenient to discuss

New clause 11Regulation of the electricity market

(1) Section 11A of the Electricity Act 1989 is amended as follows.

(2) Omit subsections (6) to (8)..

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

These two new clauses go together. They relate to the way in which licence conditions are modified. New clause 10 is about the Gas Act 1986 and new clause 11 is about the Electricity Act 1989. They would amend those two Acts to change the rules about the process for the modification of licences. The current position is that Ofgem regulates the activity of the gas and electricity markets. Companies involved in those activities must be licensed by Ofgem. The Utilities Act 2000 amended the procedure for the collective modification of gas licences in line with new arrangements that were being introduced for electricity licences. It removed the need for each standard condition in each licence to be modified on an individual basis.

Section 11A of the Electricity Act 1989 and section 23 of the Gas Act 1986, as amended by the Utilities Act 2000, state that Ofgem must consult with the licence holders on any collective modifications proposed to the standard licence conditions. If enough objections are officially lodged by the consultees, Ofgem cannot proceed with the collective licence modification. Those sections in the 1986 and 1989 Acts also gave the Secretary of State power to prescribe the market share calculationsthe blocking minoritythat is to be used by Ofgem to determine whether a collective licence modification can be made.

In July 2002, the Department of Trade and Industry consulted on a draft statutory instrument that set out the proposed market share calculations and blocking minority threshold percentages. The Electricity and Gas (Modification of Standard Conditions of Licences) Order 2003 SI No. 1746 came into force on 16 July 2003. It provides for two blocking minority thresholds. If those thresholds are exceeded, Ofgem may not make the modification. Ofgem then published guidance alongside the regulations to explain how the two blocking minority tests work. The guidance states:

The Order prescribes that if the number of relevant licence holders that have made a statutory objection is equal to or greater than 20 per cent of the total number of relevant licence holders, the proposed modification cannot be made. If the number of relevant licence holders that have made a statutory objection is less than 20 per cent then the second test will be considered.

The second test will consider the market share of relevant licence holders that have made a statutory objection to the proposal. In this second test, the market share of licence holders will be calculated with reference to a specific time and date (referred to in the Order as the relevant time). If the market share of objectors so calculated is equal to or exceeds 20 per cent the proposed modification cannot be made.

It is possible, in some circumstances, for a modification to be made even when the blocking minority threshold has been met.

The guidances last point on the subject states:

As set out in Section 11A(8) of the Electricity Act and Section 23(10) of the Gas Act, Ofgem may make a collective licence modification even if one or both of the two blocking minority thresholds have been met provided that Ofgem is satisfied that...the existing SLC imposes a burden which affects relevant licence holders in the carrying on of their activities... the proposed modification would remove or reduce the burden without removing any necessary protection, and...no holder of that type of licence would be disadvantaged in competing with other holders of such licences...Ofgem will indicate at the earliest practicable stage whether it considers that these tests are likely to be relevant. This may be during an informal consultation. Ofgem will in any event indicate this in the statutory notice so that interested parties can comment on whether they consider that the tests are satisfied.

The guidance also states that

section 12 of the Electricity Act and section 24 of the Gas Act would still enable Ofgem to make a reference to the Competition Commission on a proposed licence change in respect of any matters relating to activities which are authorised or regulated by a particular licence which operate or may be expected to operate against the public interest.

The blocking minority test does not preclude Ofgem from making a reference to the Competition Commission, which can then order changes to the licences if the existing arrangements were found to restrict or distort competition.

As far as I can tell, we are unique, with the possible exception of Ireland, which followed our legislation, in having that blocking system. In the UK, one of the big utility companies can block a change to the licence condition. The proposal is to remove that right of veto. It is not in the interests of consumers and it does not give equity to the system. At the moment, if Ofgem proposes a licence change, energy suppliers have the opportunity to block it, but consumers do not have an equivalent power. Some consumer organisations, such as Consumer Focus, argue that they, too, should have the power to block licence changes. If the Minister is not willing to go as far as to accept that proposal, I hope that she will consider positively that the position should change so that nobody, as a matter of right, should be able to block the licence changes. I hope she sees the logic of the proposal, which is significantly supported by consumer organisations.

Joan Ruddock (Labour, Lewisham, Deptford)

New clause 10 aims to make it easier for Ofgem to change the standard conditions of gas licences by removing the condition that such amendments cannot be made if a specified proportion of relevant licence holders object. New clause 11 has the same aim with respect to electricity licences, as the hon. Gentleman has said. I sympathise with the need to ensure that Ofgem can make timely changes to further its remit. However, that needs to be done in a way that also gives companies a way to object when licence conditions have, or could have, significant implications for their operations. To remove that recourse altogether could reduce regulatory certainty, increasing costs and therefore prices. It could also act as a deterrent to new entrants.

The current rules allow the industry to block the introduction of licence conditions by ensuring that a change to a standard condition of a gas or electricity licence is subject to its not being objected to by 20 per cent. or more of the licence holders, measured by market share and the number of licence holders. The collective licence modification process was introduced by the Utilities Act 2000.

Previously it was more difficult for Ofgem to change standard licence conditions, because each modification had to be agreed with every individual licence holder. The Electricity and Gas (Modification of Standard Conditions of Licences) Order 2003, to which the hon. Member for North Southwark and Bermondsey referred, sets out the proportion of licence holders needed to prevent a standard licence condition being adopted or amended. Before that order was made, there was a consultation on what that proportion and the method of calculation should be. The changes introduced strike a balance: they have made it quicker and easier to alter standard licence conditions, while ensuring that when a significant proportion of licensees object to a proposal, their objections are taken into account.

If a significant share of licensees wish to object to a proposal, their objections must be taken into account. It is not necessary for a majority of licenseeswhether by number or by market shareto object, only a significant number or a significant player. As the hon. Gentleman said, Ofgem can appeal to the Competition Commission when a modification to a standard licence condition is blocked.

In considering any such appeal, the Competition Commission will consider whether the modification is in the public interest, with Ofgems remit in mind. That means that a change vital to the interests of current and future consumers can be made, even when licence holders object. The effect of the new clauses would be to remove that safeguard for companies holding electricity and gas transmission and supply licences, and their only recourse would be a lengthy and costly judicial review.

Changes to licence conditions could have significant implications for companies operations and profits, which in turn could affect their willingness to invest or even participate in the market. It is therefore appropriate that they should have a means of challenging the decisions. The collective licence modification process provides a balance, as it requires there to be significant concern about an issue across the industry. It therefore provides an appropriate mechanism whereby companies can block a licence condition that causes them legitimate concern, without unduly fettering Ofgems ability to act.

It is also worth remembering that if the Government consider that market arrangements are not delivering essential change, there is the option of legislating for amendments to licence conditions, as we are doing with the introduction of a market power licence condition in the Bill. For those reasons, I put it to the hon. Gentleman that the matter is not as straightforward as he suggests. I understand where organisations such as Consumer Focus are coming from, but we must have some regard to the complexities of the market that Ofgem regulates.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

May I ask the Minister two factual things before I conclude on the new clauses? First, will she confirm the implication of what I understand her to have saidthat it would be possible for one of the big six to exercise a blocking veto under the current system? Secondly, even if she is not willing at the moment to deal with that blocking veto threshold issue, will she consider whether there might be the ability for an organisationlogically, Consumer Focusto have an entitlement either to veto or at least to trigger a review process, so that the consumer is directly represented in the licence modification system, rather than just the companies?

Joan Ruddock (Labour, Lewisham, Deptford)

I understand that because of its market share, British Gas is in a position to exercise that power in relation to the licensing. However, the hon. Gentleman is wrong to represent it as a veto, because there is a mechanism whereby Ofgem can go to the Competition Commission. It is not an absolute block. The block is not a veto as one understands a veto in other forums.

On his suggestion about the ability of Consumer Focus, he almost implies that Ofgem in its primary aim of protecting consumers should have to be second-guessed by another organisation. On the face of it, that does not seem to be an appropriate way to proceed, but I will reflect on what he has said.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I am grateful for the Ministers last comment, and I will reflect on what she has said in answer to my original proposal. I am still concerned about the current system, but the sensible thing is to go away, look at the exchange on another day and reflect on where we go next. On that basis, I beg to ask leave to withdraw the motion.

New Clause 12

Charles Hendry (Conservative, Wealden)

I beg to move, That the clause be read a Second time.

I hope that we can deal with the new clause briefly, to provide additional time for the remaining new clauses.

We have talked about the range of different approaches necessary for dealing with the challenges of fuel poverty, including some of the financial and social support mechanisms and energy efficiency. The new clause suggests an additional way to help some of those people who are in fuel poverty by ensuring that they are first to get the benefits of a smart metering roll-out.

The commitment to smart metering was incorporated in statements in the House of Lords on the Energy Act 2008. The Government had resolutely refused to agree to the changes made in Committee in the House of Commons, and this Bill may follow the same pattern. The Government have become enthusiastic in their words about smart meter installation and the need for a national roll-out programme, but there is great concern about the programme being very slow. Most people in industry believe that 2020 is a very unambitious target. The Minister may believe that it is ambitious, but everybody in industry believes that the roll-out could be done in three years, or perhaps sooner, with the right degree of commitment and enthusiasm from the Department and Ministers.

The case for the new clause is that smart meters will bring significant benefits. We can see from the roll-out in Northern Ireland that people on prepayment meters pay less for their electricity than those who are on ordinary tariffs. That is in stark contrast to the situation in other parts of the UK. The people who have the most to gain by being able to choose the tariff best for them and to opt for arrangements to minimise their charges are those in the greatest fuel poverty. Therefore, there is a case for saying that, in deciding how the roll-out should be doneand there are still decisions to be madethe Government should prioritise those in fuel poverty.

The people least likely to have access to the internet and least able to shop around for the best tariff, given some of the complexities of that approach online, will be some of those in fuel poverty. That is not to stigmatise them as people who are not best able to use the internet; it is to recognise that the households least likely to have broadband connections are those homes where poverty is greatest.

Through the installation of smart meters, those people can be given access to a wider range of tariffs and options for using power at times when the charges are lower. It may have the additional benefit of bringing broadband into their homes, as that is a requirement for smart metering. The scheme is a way of trying to do more to help the fuel poor and give an extra kick-start to the roll-out of smart meters. I hope that the Minister will accept the prioritisation.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

This is clearly a good idea. Like the hon. Gentleman, I am troubled that the current plan will be executed over such a long period. I think that the Italians did it in three years, although no countries are exactly comparable. If that is possible in Italy, which is not always regarded as the most organised country in the whole world, we can do much better than 10 years. It is clearly important as a sub-process that the fuel poor, people in particular need, should have smart meters first.

Can I just make one other technical point? I understand that there has been a debate about who should receive the information that the meter displays. It is absolutely paramount that all the information is received, by not just the companies but the customer, in a way that is easy to read, understand and interpret, so that it is clearly visible for the individual in their home.

Joan Ruddock (Labour, Lewisham, Deptford)

The new clause would enable the Secretary of State to require energy suppliers to give to the fuel poor, those living close to renewable energy generators and any other group, priority in receiving smart meters. It would also allow the Secretary of State to specify a deadline, within seven years, for achieving full roll-out.

I am sure that members of the Committee are aware of the Governments strong commitment to smart meters and our continued progress in implementing the comprehensive roll-out programme. As announced by Lord Hunt on 2 December, the Government have made a series of key decisions on the implementation of smart metering in Great Britain, and put in train a major implementation programme led by the Department of Energy and Climate Change and Ofgem.

The programme follows the taking of some broad implementing powers from the Energy Act 2008. Under the enabling powers set out in the 2008 Act, the Government already have wide discretionary powers to require energy suppliers to give priority to particular groups of customers, who might include those mentioned in the amendment, and also other groups. The first part of the proposed new clause would not, therefore, add anything to existing powers.

The second part of the new clause focuses on a deadline for the roll-out of all smart meters. There is a considerable amount of work to do before a formal mass roll-out of smart meters starts, covering the regulatory framework, market design, standards, consumer protection, data protection, access rules and other matters. Our current estimate is that the work under the implementation programme will take about three years. I really suggest to the hon. Members for North Southwark and Bermondsey and for Wealden that those issues, such as design, standards, consumer protection, access arrangements and data protection, are all things that every one of us would want to be done properly. We believe that the time is required to ensure that those factors are accommodated and considered properly, so that when we begin our roll-out it will be supported and welcomed by people, without lots of household conflicts.

On that basis, the start of the roll-out under the mandate would happen at the end of 2012. We remain committed to our target of completing the roll-out by the end of 2020. That target is based on previous experience of the complexity and time involved in delivering major change projects in the energy industry, and a detailed economic analysis of the costs and benefits profile of a range of options. Setting an earlier deadline for installing smart meters would be likely to lead to significant increases in costs and risks to what is widely recognised to be the largest and most complex energy industry change programme since the conversion to North sea gas in the 1960s and 1970s.

In conclusion, the power contained in subsection (1) is unnecessary, as the Secretary of State could already prioritise groups under section 88 of the Energy Act 2008. In relation to the remaining provisions, I do not believe that it would be appropriate to set a deadline in legislation for the achievement of such a complex undertaking as the roll-out of smart meters. Nevertheless, I am happy to confirm to the Committee that we are committed to delivering the smart meter roll-out as quickly as possible for a programme of this magnitude. For those reasons, I regret that I cannot support the inclusion of new clause 12 in the Bill. Within that roll-out, the Government will consider whether there can be targeting of the fuel-poor and how the balance will need to be created between efficiencies, and therefore costs, and how the programme itself is rolled out. That is why we need to take great care over doing it, so that when we do it, we do it well and do not have to revisit it.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I am happy to continue to support the hon. Member for Wealden. I will not argue that technically the new clause is needed. Perhaps it is not, but the politics and the delivery is certainly needed, which I guess will be the burden of his song.

Charles Hendry (Conservative, Wealden)

The hon. Gentleman has absolutely identified what I should focus on. I am grateful to the Minister for her commitment to try to ensure that the installation of smart meters will bring benefits only to those who are in fuel poverty. Her words will be welcomed generally. There are times, however, when one wants to shake the Department and ask it to get a grip on the emergency, the challenge and the opportunities that are there rather than just saying that it is really difficult and we are going to have think about it for another three years.

As the hon. Gentleman pointed out, Italy has done this; it has gone through those difficult discussions and completed the roll-outprimarily only for electricity rather than for dual fuel issues, but a great deal more energy has been directed there. Sweden will have completed its roll-out programme to 5 million homes in the next few months, and it has been done in Ontario in the last few months. Around the world other countries are grappling with the issue, but they have reached the stage of implementation and roll-out, rather than conversation, discussion and consultation.

The Minister talks about the consultation conclusions that were announced last December. What caused huge dismay in industry was the extra element of consultation that came from that. Rather than reaching conclusions and a delivery programme, which is what industry had hoped, the consultation said that we need to think more about a huge range of different issues.

What people want now is leadership. The way forward is to ask what we can agree on. There are a range of important issues. I do not in any way minimise the importance of the issues that have to be resolved, but which of them can we readily agree on? Let us get agreement and let us park them. Then let us focus on the ones where there is no agreement and put in place a rigorous time-constrained approach to try to sort them out.

I always thought the programme could be sorted out in the course of a long weekend. If the President of Europe can be chosen over dinner, it should be possible to sort out a smart metering programme over a few days. The Government should just lock the doors and not let people home until the detail has been agreed. A few long weekends might be needed to agree the different elements of the various sections, but there just is not enough drive and enthusiasm to make it happen.

The hon. Member for North Southwark and Bermondsey is absolutely right about information. The key issue in the roll-out of smart meters is that the public must trust the system. They will trust the system only if they have access to all the information their electricity and energy companies have. If there is that proviso, they may not want to use it; however, they must feel that there is nothing about their consumption patterns that someone can access remotely but they themselves cannot see. That is a fundamental building block and I hope there can be early agreement on it.

I accept that the Minister has powers to prioritise within the existing powers and so the clause would not be necessary. We will not seek to push it to a vote but I wish we could get a greater sense of dynamism and urgency. What do we need to do to move things forwardfrom 2020 to 2017? How do we shorten the three-year consultation period to something that can be achieved much more rapidly? We are falling behind other countries. They have all managed to do it. They are ahead of us on the roll-out programme. There are issues that make it more complex in the United Kingdom than elsewhere but we are being unambitious. We hope that the Government will take away a strong message from this debate. We want greater drive and greater urgency to make the programme happen.

I beg to ask leave to withdraw the motion.

New Clause 13

Charles Hendry (Conservative, Wealden)

I beg to move, That the clause be read a Second time.

We are now on the final stretch of this marathon exercise. [Interruption.] I am not quite sure what the Minister said. I think she said it was becoming exceedingly boring, which I hope is not her view about some of the most important energy issues facing our country.

Hugh Bayley (Labour, City of York)

Enthralling, perhaps.

Charles Hendry (Conservative, Wealden)

I am sure the Minister will clarify. It will get more enthralling by the minute as we proceed into the final hour.

Proposed new clause 13 is about how we give greater impetus to the development of carbon capture and storage in this country. There is frustration within the business community that we have not seen greater urgency attached to the development of carbon capture and to the putting in place of the pilot schemes. There is frustration about the way the initial competition was mounted, the fact that it ruled out pre-combustion technologies and how long it is taking to choose a winner.

In the course of the Bill, the Government have put in place a levy, so we have a funding system. There are two potential funding systems because we may still be able to work on another. The funding issues are now being addressed and resolved. There is a whole range of other managerial issues about what is necessary to take us from where we are to commercial reality in the development of the plants.

A year ago we asked Lord Oxburgh, former chairman of Shell, to bring together some people from all aspects of industry to look at what was necessary to make the roll-out happen. They included the chief executive of Scottish and Southern Energy, a company that will be producing CO2; the executive vice-president of Shell, a company with expertise in sequestration; Professor Jon Gibbins of Imperial College, who gave evidence and is a pre-eminent authority on the development of the technology; and Tony White, who has tremendous expertise in the financing of such issues.

Those people were asked what was needed to make the roll-out happen, and they concluded that there needed to be an authority to handle aspects of the process. Before Christmas, I provided members of the Committee with a copy of the brief, three-page report that shows clearly why they believe those steps are necessary. The purpose of proposed new clause 13 is to put in place a CCS body responsible for pipelines and associated infrastructure. Lord Oxburgh initially said an authority; we have referred to it as a body, because that gives the Government greater opportunities to decide how best to structure it. Clearly, a case could be made for its being a regulated monopoly, as Lord Oxburgh set out.

The body would be responsible for the development of hubs. We believe that the real potential for the United Kingdom to develop the technology comes from identifying clusters of particularly large use and demand, for example, in the Thames estuary; or where we have particular expertise already, as at the Forth, or a particular amount of CO2 emissions, as in Humberside and Teesside. Those are areas where co-ordination is needed with a body responsible for doing that. There needs to be somebody who will put in place the oversized pipelines and set out the contracts requiring that to be done. It would be absurd to go about CCS with pipelines that were simply the right size for the power stations that would be emitting. If we are to roll it out as a major programme, the pipelines need to be oversized.

There are other contractual aspects in developing CCS and the disbursal of funding, however it is arranged. We think that needs a strategic body, at arms length from Government and with the ability to take an overview.

The Government may refer to examples and say, This will be done by the office of carbon capture and storage, which, I have to say, has had a frustratingly slow start. Ministers will have often heard me referring to the Office for Nuclear Development, which has been an important way of driving forward investment in nuclear, with an approach orientated towards problem solving, identifying the challenges and seeing what solutions can be identified. We are not seeing the same drive yet from the office of carbon capture and storage. It may happen, but six months since its announcement the office is not yet up and running. It still has a blank sheet of paper for its objectives and priorities.

Somebody ought to be putting in place a road map; we will shortly come to a vote on the need for a road map for the development of carbon capture and storage. There is a caseas set out by Lord Oxburgh and his unparalleled team of expertsfor giving the Secretary of State the power to set up a body to take on the role.

If the Government decided in due course that such an authority was required, it would almost certainly require primary legislation. That is not to say that there must be a body, but that the Secretary of State has the power to create such an organisation. The detail could be sorted out in secondary legislation so that we did not end up, as this time with the levy, with people saying, Hows it going to be done? Were under great time constraints. It could be done in a timely, sensible manner to enable the measure to go forward at maximum speed.

Brian Binley (Conservative, Northampton South)

I very much welcome the new clause, for a number of reasons. We now know that there will be four test projects, which is welcome, but if we look at how the pace for clean coal has picked up and gathered momentum over the past year, we see that things are beginning to move quickly. The concept of clean coal, which was seen by many to be a bit of a fantasy a year ago, is now seen by a greater number of people as a real opportunity for this country, especially for the coal industry, which will go to the wall unless clean coal becomes a reality. There are some real issues. We need to move beyond saying, Is clean coal going to be a real part of our future? to saying, What else do we need to do to ensure that it is an effective operation in as short a time as possible? I therefore welcome the operation.

I want to talk about a couple of other issues, beyond those that my hon. Friend the Member for Wealden raised. There is a real opportunity for oil enhancement. Unless we take action by 2015 many of the oil wells that we will need could be closed down, and we know how difficult it is to maintain them once they have been cappedit cannot happen because the opportunity has gone. The body, if approved, ought to think about that as well. It also ought to think about the impact on our coal communities, and the opportunities it offers them. To areas that traditionally produced coal, setting up the body would bring great hope of a new opportunity for the product they sit on. There are sizeable amounts of energy possibility. We need to talk about that too.

Finally, the proposal would give the messagethe most important thing at the momentthat the Government are thinking beyond, Will clean coal work?, and that would give people the confidence to say, This is going to happen. Clean coal will be an important part of where Britain will be, not over the next 10 to 30 years, but over a longer period, and it provides an opportunity to ensure that people see that there is real export potential, in technology and manufacture. That ought to excite industry as well, and ensure that it is geared up to be a part of what I think will be a movement of major importance for our nation. I support my hon. Friend. The new clause is important and I hope that the Government will accept it. If they do not, I hope they will do something similar in the near future.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Clearly, the issue is important and it is proper for the hon. Member for Wealden and his hon. Friends to raise it. The new clause is sufficiently drawn to probe how we can have the infrastructure in place to deal with the CCS implications. We need to make sure that it is led by the Government and that they make sure that the private sector, which is trying to fix its own arrangements, puts the grid in place. Given the advice that I have received, I share the view of the hon. Member for Northampton, South that the future of carbon capture in the coal industry will be in three or four significant parts of the country at most. They are all predetermined; the industry is fairly clear about that.

The Thames estuary will play into the Kent coalfields, and the Humber estuary feeds into the Yorkshire coalfields, which my hon. Friend the Member for Harrogate and Knaresborough has referred to in the past. There is also what is described as either the third or the third or fourth area, depending on whether one views the north-east as part of the Scottish sector or not. Part of the industry views the area as the Scottish sector plus the north-east, but calls it Scotland. It is the same area.

There is bound to be collaboration; we have been around that circuit before. We are talking about several companies working and putting their expertise together. We need to make sure that we do not end up with something, driven by a short or immediate interest of the individual company or consortium, that does not play into the bigger picture. That could relate to pipeline size or other things. Everything needs to be integrated.

I am a legatee, as is the Minister of State to a lesser extent, of the decision on where the Jubilee line extension went. The extension was made because it was driven by the contribution offered by and eventually negotiated with Canary Wharf plc after a lot of to-ing and fro-ing by the then Conservative Government. The extension, as originally proposed, was going to be a fast line from places such as Waterloo to Canary Wharf. However, we persuaded people that stopping once south of the river in London Bridge, between Waterloo and Canary Wharf, was a good idea. To put it bluntly, it took a hell of a battle to persuade the then Government and the promoters of the private Bill that we needed stations for the people who lived above the line if a line was to be built disrupting everybody beneath it.

Hugh Bayley (Labour, City of York)

Order. We are straying a little wide of the new clause.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

No, I am not. I am being careful to ensure that the example is relevant. There was a hell of a battle, because we had to block the private Bill to make sure that we had the additional stations to meet the general and not just the particular need. I am making exactly the same point in relation to the new clause. We need to get the agreement in place at the beginning, not afterwards.

We need to make sure that a structure is in place that meets the needs of the wider community as well as those of the operators. I will be interested in what the Minister has to say about that. The debate on the issue will not finish today, but it is sensible that we all work together to ensure that the infrastructure is in place. The new clause is an attempt to ensure that the Government are reading from the same page.

Hugh Bayley (Labour, City of York)

I know that Joan Ruddock has a great knowledge of transport in London. When responding to the hon. Gentleman, however, she should centre on the merits or otherwise of establishing a body at the outset rather than his points about public transport.

Joan Ruddock (Labour, Lewisham, Deptford)

Mr. Bayley, you have disappointed me. I was going to explain the merits of the Surrey Canal Road station on the extension of the East London line, for which I am campaigning. I will turn to new clause 13 instead.

The new clause would give the Secretary of State powers to establish a new body, the primary function of which would be to facilitate the transport and long-term storage of CO2 from not just power stations, but all carbon emitters. The new clause provides that the bodys duties may include a range of activities considered necessary to develop a national network for the transport and storage of CO2for example, organising competitive tenders for the provisions of pipeline capacity and storage monitoring services.

As the hon. Member for Wealden said, his proposed new clause arises from the paper, prepared for his party, that he has kindly circulated to the Committee. The paper raises an important set of issues. I very much welcome the contribution that Lord Oxburgh, with whom I worked at GLOBE International, and others bring to the debate. I will look carefully at the suggestions he makes as we develop the policies required to make the successful transition from the demonstration of CCS to realising its future wide-scale deployment.

However, there are many interrelated and complex issues that need to be understood before we decide how the infrastructure needed for the deployment of CCS can most effectively be developed. Those include how we implement the requirements of the EU directive on geological storage of CO2 to ensure third-party access to storage sites; the approach that might best be taken within the context of the demonstration programme in order to best provide a platform for the further long-term expansion of CO2 infrastructure, including the question of oversizing pipelines; and how we best facilitate the development of the CCS value chain to maximise opportunities for UK business.

In the light of those complexities and our ongoing work to define the scope and role of the office of carbon capture and storage, we are not clear whether a body such as that proposed in the new clause offers the best way forward at this time, nor are we in a position to determine exactly what functions any such body should be given. There are also genuine uncertainties currently about the extent to which CCS will be deployed in the economy and the consequent need for pipelines and storage sites.

Establishing a statutory body whose sole focus is the development of such a network could well be a distraction from our main priority of demonstrating CCS at the present time, and could well lead to considerable inefficiency in undertaking such investment. Our priority is to demonstrate CCS on a commercial scale and this Government have done more than virtually any other to help bring that about. We are not neglecting the important issues associated with the future development of infrastructure for the transport and storage of carbon dioxide.

As part of our work to implement the third-party access provisions of the EU directive on the geological storage of carbon dioxide, we will take steps to encourage those investing in CCS infrastructure to anticipate foreseeable future demand and also to allow for the expansion of initial investments into the network. We will also publish further thinking on infrastructure shortly in the forthcoming CCS strategy, and then discuss more widely with stakeholders how those might be developed.

I recognise and sympathise with the intent behind the new clause, but to accept it would be premature given the current stage of CCS and the many complex aspects of the framework that will need to be developed and put in place, over the coming years, if we are to realise our ambitions for this technology. Therefore, I hope that the hon. Gentleman will withdraw his new clause, confident in the knowledge that the Government will certainly continue to consider the issue.

Charles Hendry (Conservative, Wealden)

I was just talking to my hon. Friend the Member for Leominster and saying, Who was the American President who used to talk about the vision thing? I think it was the first George Bush, although it could easily have been the second George Bush.

What comes through is the lack of vision. Some of the steps taken by the hon. Lady will be read by people outside here. They will accept that the Government have done one thing: the great compliment paid to the Minister and the Government is about the step forward on the levy system, which people say was a potentially world-leading approach.

However, there is also frustration. People will say, Where is the rest of it? Where is the rest of the package that is really going to drive this forward and make it all happen? My hon. Friend the Member for Northampton, South made extremely valid points about some of the wider implications. It is important that we move forward so that we can address issues such as enhanced oil recovery and the additional benefits that it will bring.

We must recognise that if something does not happen soon, it will be too late because the fields in question will have closed. It is important to bring hope and help to coalfield communities and to present them with a better, brighter future. We want this to be a technology that brings extraordinary gain to parts of Britain that have had a difficult period over recent years. We totally understand those difficulties and we want to see those communities revitalised and investment returning to many different parts of our economy.

The Ministers approach seems to be characterised by her taking a little step here and another one there, rather than having an overall strategic approach and asking, What do we really need to do to send a signal to some of the biggest companies in the world, which are looking at this, that we are determined to move from a position of following to one of leadership? This is not just an issue of funding; it is about the whole structure that needs to be put in place, not only to conduct the competitions but to take the process beyond that point.

Joan Ruddock (Labour, Lewisham, Deptford)

The hon. Gentleman does a disservice to his own arguments by suggesting that we are followers, not leaders, in this matter. We are widely acknowledged in the world community to have a leading role. If we are successful in getting the Bill through the House, it will put in place a framework funding mechanism and enable us to go ahead with a programme unprecedented anywhere in the world. That is real ambition, and everything that the hon. Gentleman wants us to do can be done regardless of whether a body such as the one that he proposes exists.

Charles Hendry (Conservative, Wealden)

The hon. Lady has been rather partial in the evidence that she has accepted from those who appeared before us. Jeff Chapman, of the Carbon Capture and Storage Association, did indeed say that the levy system was one of the best in the world, but he was also asked which countries had moved ahead of Britain, and he said:

There are a number of countries. The USA certainly has extensive plans with support arrangements already in place. Canada has three projects which were between the time that the funding was announced in total, and the projects were selected through competition and allocated.

He also said:

The first commercial size power project in the world may well be in China. The second one may well be in Abu Dhabi.[Official Report, Energy Public Bill Committee, 5 January 2010; c. 38, Q77.]

It is simply not true to say that we are still leading the world. We are leading the world in talking about this, but we are not leading the world in delivering it.

I want to send a message to people who are looking to invest in this technology that we are thinking about all of it and how the whole jigsaw fits together. Although the funding system is, of course, crucial, there is also a need to look at the overall strategic vision and ask how we intend to deliver the technology as we start to make progress.

The hon. Lady talked about decisions on pipelines that need to be made. I refer her to what Tony White said in his evidence:

An overall organisation could take the judgment that a nine-inch pipe would do for one plant, but that if there is another plant nearby that will come on later, a 14-inch pipe should be used. By being able to anticipate where the demand will come from, such an organisation would not fall into the problems that the National Grid has had of being unable to anticipate where generation will come forward.[Official Report, Energy Public Bill Committee, 5 January 2010; c. 46, Q98.]

It is that overall strategic vision that we think importantworking out who should be doing what and by when, to make everything happen.

We will do all we can to support the development of this technology in Britain. We see it as being incredibly important. The Chairman of the Energy and Climate Change Committee has often spoken about the big difference that it can make for us. We feel that we are creeping forward when we could be moving with much greater drive and determination.

Joan Ruddock (Labour, Lewisham, Deptford)

I remind the hon. Gentleman that, as I have said, there will be a CCS strategy, which will be published in the foreseeable future. He needs to suspend his judgment until that has been produced.

Charles Hendry (Conservative, Wealden)

The hon. Lady has made her point. We have tabled a new clause to meet the need for a road map, and an obligation and a time scalesix monthsfor that to be produced. I hope that she will support that because, for a Government facing an election in a few months, six months must be well beyond the foreseeable future.

The argument comes back to vision and strategy, and to having a real sense of trying to make a difference, so that companies around the world will say, Look what they are doing in Britain. There is no doubt that this is the most exciting place to do it. However, if the hon. Lady had come with me to many of the meetings with the companies, she would have heard the frustration about the slow progress. We want to move forward to make a real difference, which our measure can. Therefore, I shall press the new clause to a Division.

New Clause 14

Charles Hendry (Conservative, Wealden)

I beg to move, That the clause be read a Second time.

I thank the hon. Member for Halton for giving guidance to the hon. Member for North-East Derbyshire, in respect of her momentary aberration during the Division.

New clause 14 is about how we try to change attitudes in communities around the country towards developments such as wind farms. Our approach is to do that through partnership. We are passionately committed to localism and believe that local communities should be empowered to make the decisions about what is right for them. We also completely accept that certain sizes of projectthe Governments threshold of 50 MW is broadly rightshould be considered national schemes, and that decisions on them should be made in the wider interest, which requires a separate decision-making body. We part company with the Government on how decisions on those national schemes should be made, but nevertheless accept the need to decide such matters in a different way.

For projects below 50 MW, the decision will stay with local communities. Our concern is that often when a community learns that a wind farm is proposed in its area, it sees downsides, such as visual intrusion, noise and construction work, but cannot see the benefits of having a local wind farm. The Governments approach has moved through different phases. Initially they were saying, You should have it because it is generally good for us all. That approach has not won round local communities. The Government went through a phase of saying, If you dont have it, you are really rather a bad person, and the present Secretary of State likened such communities to people who drive across pedestrian crossings without stopping. That was not going to win hearts and minds either. We need a different approach to how we win people round to the idea that such developments may have benefits for their communities, not just downsides.

Other aspects of our proposals should be taken into account. Elsewhere, we have proposed that, for the first six years, the business rates from a new plant be kept within the local community. A wind turbine brings in, on average, £7,000 or £8,000 a year in business rates per megawatt, so a 3 MW turbine would bring in more than £20,000 a year in business rates. A few turbines paying that money into the local community would mean a significant financial gain.

The new clause is about finding ways to bring more direct benefits to the communities that decide to host such facilities. Looking at how the applications have worked in different parts of the country, one can see a clear pattern emerging. In areas where projects were seen to have been imposed with no benefit to the community, there was significant opposition and people argued strongly against them. There are examplesparticularly in Scotland, where there has been a much more constructive approachof communities seeing real benefits, financially and otherwise, and actively supporting the applications, rather than seeking to block them. We want to move people to a more balanced situation, in which they can see both sides of the equation and make decisions based on those values.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The hon. Gentleman will have seen that my hon. Friend the Member for Harrogate and Knaresborough and I support the new clause, and I am encouraged by his argument. Will he, however, concede that people find it difficult to buy into supporting local renewable energy projects? That is the case with people in our party, the Labour party, and certainly the Tory party; I do not know about the Scottish National party. Will he explain why, for example, it was impossible for the Conservatives in the Isle of Wight to see that if they were so opposed to wind farms they would lose the manufacturer that provided jobs for the community? Sometimes I do not understand how people just do not see the upside and can see only the downside, when the implications are so obvious.

Charles Hendry (Conservative, Wealden)

If one looks at the facts of the decision to close the factory, one finds that the decision was in part based on the nature of the turbines being manufactured, which were for offshore facilities. The company had to decide whether to build a new facility in the United States to meet demand there as a result of the changes being made by President Obama, and it had to consider the implications for its factory in Denmark. The choice was very much to do with internal decisions; it was not simply because the Isle of Wight did not want the facilities. I have to recognise, however, that a proactive approach by a local authority may influence investment decisions.

Joan Ruddock (Labour, Lewisham, Deptford)

I just want to put on the record that the turbine factory was not producing turbines that were being used in this country. It did, however, comment that it saw a difficult future, and therefore had to consider whether it was worth investing in turbines for the UK when it had people on its doorstep saying, We dont want turbines.

Charles Hendry (Conservative, Wealden)

That makes the case for a different approach. The approach up to now has been one of antagonism and entrenched opposition. We need to find people who can be persuaded to look at the merits of both sides of the case. The new clause states that there should be a change to regulations, so that people living close to a renewable energy facility benefit from cheaper electricity. That has long been the approach in France. Someone living near a nuclear power station there gets cheaper electricity as part of the deal for that community. Some people say, Is that not bribery?, but I think that it is saying, We recognise the fact that you have this facility nearby that is of greater benefit than to just your community. We are keen to see that issue addressed.

Wherever possible in such developments, we are keen to ensure a degree of shared ownership. Perhaps that could even be obligatory. A turbine could be erected free of charge but be owned by the local community, or there could be a shareholding within the overall development. Money would then come into the community on a continuing basis, and the community could spend it on improvements and the things about which it cared most.

We are trying to find a way through the entrenched opposition that so often causes blockages. We want to leave it to local authorities to decide what is right for their communities, but we want to ensure that when they say to their people, This is the application, people can say, Okay, I understand that there may be some downsides, but I can see that there is a real benefit for us as well. There can then be a much more balanced and constructive debate about what is right for the community. That is an important way of encouraging the development of renewable facilities on land in Britain. We are grateful for the Liberal Democrats support. The new clause could start to make a real difference, and I hope that the Minister will be supportive.

Michael Weir (Scottish National Party, Angus)

I have a lot of sympathy with the hon. Gentlemans argument. As he said, there is some experience of such developments in Scotland. However, community benefit does not always work in the way that he outlined. A community can be split between those who want a community benefita new sports centre, for exampleand those whose main concern is the view, or whatever. My concern, however, is not so much about that but about the road that the approach takes us down.

If we decide that we will give cheaper energy to those who are close to a wind farm, why not give it to those close to a nuclear power station or a power line, too? We know about the huge opposition to the Beauly-Denny power line because of the impact on views and the alleged impact on property values. The new clause will open up a can of worms that could be very dangerous and very expensive.

I understand what the hon. Gentleman is saying. However, there are proposals for two significant wind farms off the coast of my constituency. One is at Bell Rock, which is a national monument, but it will have turbines around it. I strongly support those applications; not only will they provide energy for our future, but they will bring huge economic benefit to the community. They will provide work in the area and will benefit local ports and firms. That is my argument in favour of the Bell Rock and Inchcape wind farms. The idea of seeing the economic benefit of a wind farm is a much stronger argument with which to try to win over the local community.

The trouble with smaller applications is that relatively small numbers of people get involved in the argument, but both sides are extremely passionate. I do not think that it is a question of money. It is a question of the passions that wind farms arouse. Sometimes it is difficult to see the rational argument. People have real concerns about views and amenities. I can understand that.

Brian Binley (Conservative, Northampton South)

May I tell the hon. Gentleman that his comment about it being a small number of people who get involved flies in the face of all that I know about the matter? There is nothing that stirs a community up more than a proposal to site eight or 10 great windmills above them. There is a problem here that we need to deal with. I understand the point that he is making about benefit, but such proposals involve a great many people in a given community.

Michael Weir (Scottish National Party, Angus)

I understand what the hon. Gentleman is saying. The number of people involved varies from application to application. Sometimes it is small. I accept that in some cases it may be large. Again, that would depend, I suspect, on the size of the application. I was speaking from my experience in my constituency. None the less, my principal point is that the new clause opens up a huge can of worms. If we go down the route proposed in the new clause, we will have to give compensation to anybody who lives near any massive, disruptive development. Any such development is disruptive. I mentioned nuclear power stations, but coal stations, carbon capture and storage, power lines and even motorways can come into it. I am happy to go along with community ownership, but the cheaper tariffs would be a step too far. That would be a very dangerous road to go down.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

The Committee will see from the amendment paper that my hon. Friend the Member for Harrogate and Knaresborough and I support the new clause. As the hon. Member for Angus has made clear, the proposal is not without its difficulties, but on balance, we all have an obligation to try to do something to increase public acceptance of renewable power.

The most important point to make, particularly to the hon. Member for Angus, is that the new clause is specifically drafted to apply to renewable energy generation facilities. I understand that it can be argued that once we have something in legislation or regulations that incentivises people to think that they might support such facilities, it could be used as an example to show that the approach could be extended to nuclear power stations and other things. He knows that our party, like his party, opposes nuclear power as an answer to the question of the UKs energy needs.

Michael Weir (Scottish National Party, Angus)

I understand what the hon. Gentleman is saying but my point is that in the Bill we are setting up a levy for CCS demonstration projects. Presumably we are going to have some new coal-powered stations as a result of that. That raises an immediate problem, because it is not something that may happen in the future; it is something that is going to come over the hill within the next few years.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I understand that. My view and that of my hon. Friend is that we support this on the basis that it is only for renewable energy projects. That is how it is drafted and that is as far as we go, because we think they are in a different category. They are entirely about using the elements to increase our energy supply. It is true that at the moment we struggle in our communities to tell people of the benefits of renewable energy facilities. It is often paradoxical because, as Scotland in particular knows from recent experience, the alternative has often been great big transmission lines across the country, which are far uglier and less pleasant neighbours than wind turbines, either on or offshore.

Wind turbines are often not visible to most of the people who complain or, when they are visible, are not audible, even though people think they will be. When they are visible and even sometimes audible, they add to rather than detract from the countryside. There are different views; beauty is in the eye of the beholder. Going around Europe, one sees many turbines; people do not find them offensive and they see the benefit.

Two points follow. Proximity is an issue. My Friends and I opposed a ten-minute Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff) because it seemed a nimby-ish proposal. This is a less nimby-ish proposal, because it realises that the best way to develop renewable energy, certainly on a small scale, is for the community to see the direct benefit. We have always argued for that; that the energy should power the supply for the village, local community hospital or school. We believe that is the way energy should go.

That is why nuclear power is so hopeless as an alternative. There is no community ownership proposed for the nuclear industrythat is beyond imagining. It is the least susceptible to community involvement of any industry in the world, unless the Tories or Labour were to espouse it as a new policy, to get them off the hook at the election. I cannot see that coming. Renewable energy is best linked to communitiesas it has been in the past, can be in the future and is in many countries. If communitiesvillages, town and citiessee themselves as linked to their project, they are far more likely to be supportive. So this probing new clause is a good idea to put to Government and we look forward to their response. We need to do something so that all the people who at the moment are still reluctant can be encouraged to realise that renewable energy is the future. It is the future of this country and of many other countries in the world. If we cannot show the way in this country, we cannot expect many other countries to do the same.

Joan Ruddock (Labour, Lewisham, Deptford)

I have to say I have rarely heard the hon. Member for Angus say anything with which I agree, but on this occasion[Hon. Members: Oh!] I am being completely honest. I do think he showed a degree of common sense on the issue that has not been demonstrated elsewhere.

My constituency, being in the inner city, is unlikely to host wind farms.

Steve McCabe (Labour, Birmingham, Hall Green)

They could put them on the river bank.

Joan Ruddock (Labour, Lewisham, Deptford)

It is not impossible, as my hon. Friend says. Places such as hostels for the homeless or the mentally ill attract the strongest objections. The corollary would be a rebate on the council tax if someone lived next to something they thought was objectionable and was taking the value from their home. My hon. Friend asked earlier what would happen if someone were living next to where a new prison about to be built. What would be the compensation? If enacted, this proposal would set a precedent that would lead us into an immense number of difficulties. Frankly, the way it is written does not make sense. What we are trying to do, as I understand from the hon. Member for Wealden, is win people round. I do not believe that we can do that by saying, You will have this, but you or the community will get a bit of money in compensation. I do not think that that is the way. There are many other arguments, and the Government try to engage people in thinking about what is beneficial overall and what can be beneficial to their communities. I shall say a little in a moment about how we are doing that.

As the hon. Gentleman said, the new clause would introduce powers to make a scheme to make provision for the community local to a renewable energy development to benefit directly, either through cheaper energy bills or through part-ownership of the development. Community involvement in renewable energy projects is a key element of our renewable energy strategy. As well as helping to deliver renewable energy projects, effective engagement of communities that will be hosting such projects is recognised as playing a vital part in gaining public acceptance of renewable energy sources.

In our view, the most effective way of promoting and encouraging the provision of community benefits by developers is on the basis of a voluntary rather than prescriptive approach. We believe that that will engender effective joint working and proactive partnerships in a way that imposing a statutory obligation would not. Renewable energy projects vary widely, as they depend on many factors. Any prescriptive scheme would need to be carefully developed so that it would fit the specific circumstances of a large variety of projects.

In addition, due to the way in which the grid is set up, it is not clear that those living near a wind farm would obtain their electricity from that wind farm. A better way to ensure that people benefit from lower electricity prices is by ensuring a competitive market, while making sure that the necessary investment can be made to reduce greenhouse gas emissions and to ensure long-term security of supply.

We are already taking forward several measures that will provide benefits to communities. Those include developing and demonstrating models of community engagement through the low-carbon communities challenge and setting effective financial subsidy levels through feed-in tariffs and the renewable heat incentive, all of which will benefit communities. We have also provided capital grants to community renewables projects through initiatives such as the low-carbon buildings programme. The low-carbon communities challenge is a two-year programme to provide financial and advisory support to 20 test-bed communities in England, Wales and Northern Ireland that are seeking to cut carbon emissions.

I have already been involved in considering the programmes of those who have come forward. The scheme is incredibly popular. Those who have won the first places in the low-carbon communities challenge have produced the most remarkable plans, involving whole communities working together to introduce a complete range of renewablesnot just turbines but, for example, solar photovoltaics on small businesses, a turbine in a school and even, in the case of one project that I have seen, including further micro-hydro in a local weir. There is enormous enthusiasm in many communities, and we must harness that and ensure that they can engage and develop renewable energy facilities in their communities.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

I share the hon. Ladys enthusiasm about the schemes that she is describing and the winners, many of which, I understand, are in constituencies that my hon. Friends represent. The schemes are very good. Can she tell us the date on which we will have the announcement about the feed-in tariffs to which she alluded?

Joan Ruddock (Labour, Lewisham, Deptford)

I was about to say that FITs will provide increased certainty. The hon. Gentleman is asking me

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

When the announcement will be made about what the rate will be.

Joan Ruddock (Labour, Lewisham, Deptford)

I was getting confused with the fact that we have said when FITs will start, clearly. The hon. Gentleman is asking about the rate. I am not in a position to tell him the date on which that announcement will take place.

The increased certainty that FITs will provide is intended to encourage communities and community organisations, as well as businesses and householders, to consider installing small-scale, low-carbon electricity generation technologies. Switching to greener sources of heat will also help consumers lower their overall energy bills year on year and the renewable heat incentive will apply to the generation of renewable heat at all scales, whether that is on a household, community or industrial scale.

In addition, the renewables advisory board republished an updated toolkit alongside the renewable energy strategy in July last year. The toolkit is intended to help developers and communities as it provides details of how to deliver community benefits from wind energy developments. It also includes case studies showing a variety of ways in which community benefits have been provided for different wind energy developments across the UK. It is hoped that the toolkit will encourage communities to become directly involved in renewable energy projects, as they will be able to see what is possible from the examples provided and use the information to start considering what could be practical for their particular circumstances.

In conclusion, we very much recognise the important role community energy installations have to play in promoting renewable energy and gaining public acceptance. We think that it is through these routes, which are voluntary and which the Government are doing everything possible to incentivise, that there will be greater public acceptance and, as I have already said, in some areas there is real enthusiasm for moving in this direction. We are taking many steps to encourage such projects to come forward and I am therefore not persuaded of the need for the new clause. I also think that it has real problems on practicality and I urge the hon. Member for Wealden to withdraw it.

Charles Hendry (Conservative, Wealden)

I am grateful to the Minister for her response and the tone in which she gave it, although I think it was disappointing in its content. I am surprised by the opposition from the hon. Member for Angus. People in Scotland would be some of the prime beneficiaries of the new clause. It is suggested that Scotland could have 60 GW of renewable energy. That would overwhelmingly have to be exported. There could be a sense of anger among many people living in rural areas in Scotland that they live where Englands electricity is being generated. They get the disadvantages, in terms of the visual intrusion, but they do not get the benefit from it, apart from the initial, short-term job creation. I thought that the new clause could be very popular indeed in Scotland, but it may be a case that we need to put to the Scottish people as the Opposition to the Scottish National party.

We are very keen to encourage methods of community engagement. There is a strong case for saying that we should be going a stage further. There is a difference between the hostel and the homes for the mentally ill, to which the Minister referred. There is local authority provision for people within that boroughthat community. Therefore, one recognises that they need to go somewhere in their local community, whereas with a renewable energy facility one is potentially generating electricity for people many hundreds of miles away. One therefore wants to do more to encourage them to see the case for doing it.

There is a separate debate to be had about other installations. For example, I always felt that people living in the shadow of Drax, one of the biggest coal-fired plants in Europe, had a strong case for receiving cheaper electricity for putting up with that near their homes, while the benefit of the power plant goes elsewhere. That is a different debate for a different time, but this debate is about how we make communities more accepting of the idea of having renewable energy facilities.

I accept that the Minister is not prepared to accept the new clause. Therefore, I will not put it to the vote. It might be an issue to come back to in another place. I beg to ask leave to withdraw the motion.

New Clause 15

New Clause 16

Charles Hendry (Conservative, Wealden)

I beg to move, That the clause be read a Second time.

In the course of our deliberations the word finally has been used on many occasions, but this is probably the first time that it has been genuine. The new clause has profound implications and is one of the more serious things that we have been discussing. It is a shame that we will not have longer to do so, but I hope that we can conclude the discussions before we reach the 4 oclock deadline.

The issue of a carbon price is one of the most significant hurdles in securing investment in low-carbon technology; it goes to the heart of investment in new-build nuclear, in coal with carbon capture and in renewables. People need to be certain that they are going to secure a return on their investment, and to do that they need to know the likely price of carbon. The price of the EU ETS has been up to €30 a tonne in mid-2008; it has been €10 a tonne in early 2009; it is trading at about €13 a tonne today. It has not provided the necessary robustness and certainty, and we need to look at a better means of doing so.

When the Under-Secretary gave evidence to the Energy and Climate Change Committee, he said that he was hoping that Copenhagen would resolve the matter. He said that

if we have a positive outcome in Copenhagen we know that the European Union has said that it will raise its target to 30 per cent. carbon emissions reductions by 2020.

That was linked to whether further market signals were needed. He continued:

If it does not then you are right, we need to be talking about other measures about taxation. I agree that we cannot put that off forever, but at the moment Copenhagen is a very, very important part of the equation.

That was the day before the Copenhagen discussions broke down without the agreement that was necessary.

The key players in investment in the sector are all talking about the importance of a carbon price. Vincent de Rivaz, the chief executive of EDF, wrote in the Financial Times on 8 January:

Some believe we can leave it to the market to guide the right investments. But so far it has not done so. The price of carbon is the key.

He went on:

To be effective the UK carbon market needs one additional feature: a floor. This is the most cost-effective way to discourage investment in carbon-emitting plant and encourage all low-carbon investment including nuclear, renewables and clean coal.

In a submission to the Committee, Centrica told us:

A clear and long-term floor in the carbon price will provide greater confidence to investors about the viability of low carbon power generation within the market.

During the evidence sessions we asked witnesses whether they thought that the carbon price was an important element and would like to see it dealt with in the Bill. Those from the energy sector were universal in saying that they thought it was an important element.

In France, President Sarkozy has indicated that there will be a carbon floor price, which will start at a low level in some areasnot across the boardbut gradually build up. The power in the new clause would not require the Government to set a carbon floor price; it does not set the arrangements for doing so. It would simply provide a permission, meaning that instead of primary legislation being required to allow a carbon floor price to be set, it could be done through secondary legislation, in a much more straightforward way than requiring a new Act of Parliament. That would start to remove one of the key areas of uncertainty and unpredictability.

On nuclear, the Government have done an enormous amount to remove barriers to potential new investment, but talking to the companies involved, in renewables and in carbon capture, one finds that the big remaining element is concern about carbon. The new clause would give the Secretary of State the power to give people the certainty they are looking for, at a time when he feels it would be appropriate. I hope the Minister will accept it on that basis.

Phil Willis (Liberal Democrat, Harrogate and Knaresborough)

We have come to the final clause, and the hon. Member for Wealden is absolutely right in saying that this is the most important issue we need to deal with, regardless of whether the Minister accepts the clause. I genuinely hope that she will accept it, and I compliment the hon. Gentleman on tabling it.

When the European emissions trading system came in, there was huge hope that it would drive the reduction of carbon throughout the EU much more significantly. I understand that the price today is under €13 a tonne. At that price, it is hardly worth collecting because it has no incentive at all to force the behaviours of the biggest polluters. Therefore, the new clause, which is relatively simple in its construction and would not bind the Governments hand with specific prices or dates, would establish the principle that Britain can lead Europe in creating a floor price for carbon, and that would enable us to be a major player with other nations around the world in achieving a global system.

The reality, which I hope the hon. Member for Wealden will accept, is that we do not need a floor for Europe, but a global carbon trading system. The only way we will effectively get China, Indonesia and other large polluters in terms of the use of carbon for energy into a system is to ensure that there is a significant cost.

I compliment the hon. Gentleman on his new clause. I hope that the Minister will support it, and that we can finish our debates in Committee on an extremely positive, if final, note.

Brian Binley (Conservative, Northampton South)

First, I must declare an interest. I am a director of an anaerobic food waste disposal company, which is perhaps the greenest of all ways of disposing of waste. That is the point I want to make: the matter is wider than energy production; it has an impact on a number of other industries. I ask the Minister to take that into account when replying to the new clause.

The whole business of setting a bottom carbon price is massively required by industry on a wide scale. We need to get on with it very quickly. I hope the Minister will give us some hope in that respect.

Joan Ruddock (Labour, Lewisham, Deptford)

First, it is important that I query what has been said about France. I have no knowledge of France seeking to establish a carbon price floor. President Sarkozy has, as I understand it, proposed a carbon tax, which would be for sectors outside the EU ETS. I think what has been suggested is not correct.

On new clause 16, the UK remains strongly committed to using the carbon market and ensuring that there is a robust carbon price to help drive emissions reductions and provide certainty for industry. There are, however, risks involved with the Government intervening in the market to control the carbon price, so we do not support the introduction of a price floor.

It is also worth noting that there is no consensus among industryindeed there is some strong oppositionthat establishing an EU ETS price floor is the right intervention to drive investment. The carbon price and its long-term certainty is just one of many factorsperhaps not the most significantthat attract investment decisions in low-carbon electricity generation.

Gas price volatility and its relationship to energy price is a key driver, as are uncertainty about future electricity demand, the impact of renewables, the oil price, construction and capital costs, and capacity factors. The independent Committee on Climate Change noted that supporting the carbon price is one of a number of market interventions that could help support investment in low-carbon capacity. Other options it cited included extending the exemption from the climate change levy to all new low-carbon generators, tendering for low carbon capacity and introducing a low-carbon obligation.

The Government believe that the best approach to give the long-term signal sought by investors is through setting the right, long-term regulatory framework with a reducing cap on emissions. Under the revised EU ETS directive, the EU ETS cap will fall by 1.74 per cent. compared with the cap in the first carbon budget period each year after 2013. Longer term, the most effective way of strengthening the carbon price is by limiting the supply of allowances by tightening the cap.

Our efforts will now be focused on taking forward the work agreed at Copenhagen to secure an ambitious legal treaty. We are committed to reviewing and tightening the cap further as part of a move from 20 to 30 per cent. in the EU emissions reduction target for 2020 in the context of a new global climate agreement. Tightening the EU ETS cap would deliver a higher carbon price and provide clearer incentives for investors. In addition, the Government are taking forward work to ensure that the electricity market framework can most effectively deliver a fair deal for the consumer and the low-carbon investment needed in the long term. We will report our initial findings at this years Budget.

For those reasons, we do not believe that the Government should intervene in the carbon price. We are tightening the cap and reducing emissions. That is the way forward. Indeed, as the hon. Member for Harrogate and Knaresborough said, it is important to have global trading systems and link them, but an intervention by one nation in the carbon price would be incredibly problematic in the global carbon market that we are trying to achieve. That has to be the future and that is what we are concentrating upon.

Charles Hendry (Conservative, Wealden)

That is a disappointing response. More important, it will be disappointing to businesses that read our discussions. It has been made clear to the Minister and the Committee that people who are looking at multi-billion pound investments in Britain need a greater degree of certainty than they currently have about what the price of carbon will be. The new clause is one way of trying to deliver that.

I accept the point made by the hon. Member for Harrogate and Knaresborough that things should be done on a global, international basis. However, we have a particular need in Britain for £200 billion of new investment over the next 15 years according to Ernst and Young. We need to give better market signals to people about the environment in which they will be investing. I am afraid that I therefore wish to push the new clause to a vote.

Joan Ruddock (Labour, Lewisham, Deptford)

On a point of order, Mr. Bayley, I extend our gratitude as a Committee to you, and your co-Chairman, Mr. Atkinson, for your chairmanship of our proceedings. I also thank my Labour colleagues, who have so dutifully come to support their Government, and all the other members of the Committee, who have been dutifully doing other things. Thank you, too, to the civil servants, many of whom have left the room. So many have been in attendance and so many have worked so hard outside the Committee proceedings, and I thank all of them. I also thank the Committee Clerks, the Hansard writers and the Doorkeepers.

Charles Hendry (Conservative, Wealden)

I wish to echo everything that the hon. Lady has said. There is unanimity and complete agreement in the dying moments of this Committee. Our thanks to you, Mr. Bayley, to your co-Chairman, Mr. Atkinson, and to all those who have made these proceedings possible. I extend particular thanks to the officials, who have been extremely assiduous.

We have failed to make progress on the Bill. It may have to return to another place so that we can change it for the better, as happened with the previous Energy Bill. My favourite rebuke was from the Minister when she rejected an argument of mine by saying:

I cannot dispute the hon. Gentlemans intellectual argument.[Official Report, Energy Public Bill Committee, 19 January 2010; c. 304.]

She still disagreed with it though. We have had good discussions, but sadly we have not made much progress. Nevertheless, we thank you, Mr. Bayley, and the Clerk and the other officials for running things so smoothly.

Simon Hughes (Liberal Democrat, North Southwark and Bermondsey)

Thanks to you, Mr. Bayley, and to your co-Chairman, Mr. Atkinson, on behalf of my hon. Friend the Member for Harrogate and Knaresborough and me. We join in the thanks to the Ministers and the Conservative and SNP representatives for their courteous participation. We also thank all those who in their different roles have supported us as a Committee. Without them, we would not be able to get on with our business.

I, too, am frustrated that the Bill is unamended. We will have further goes in the Chamber and elsewhere, and I hope that at the end of the process it will be a better Bill. We have certainly flushed out a lot of issues, and I hope that we have done the public a decent service with our deliberations.

Hugh Bayley (Labour, City of York)

I am grateful for the comments that everybody has made. It has been a pleasure for me and my co-Chairman, Peter Atkinson, to chair this lively and well-informed band of hon. Members debating the Bill.