RT HON EDWARD MILIBAND MP AND MR JAMES HUGHES

27 OCTOBER 2009

  Q250  Chairman: Good morning and welcome. Thank you very much for coming in. I rather felt in the light of the lead article in The Times that I should start with a sound engineer's question about asking what you had for breakfast this morning. You are not a meat eater at breakfast time?

  Edward Miliband: I had some fruit but not as a matter of policy is the way I would put it!

  Q251  Chairman: Do you want to introduce your colleague?

  Edward Miliband: Yes, I do. Thank you very much, Chairman. It is a pleasure to be here. I have with me James Hughes, who is the Head of our Carbon Budgets Team. It is great pleasure to be before your excellent Committee.

  Q252  Chairman: Thank you. We are appreciative of your coming in. We have got a lot of ground to try and cover. We just had Adair Turner and David Kennedy from the Committee on Climate Change before us, of course talking about their Progress Report that was published two weeks ago. Do you think that the Low Carbon Transition Plan can deliver the step change that report is calling for?

  Edward Miliband: Yes, I do and I want to be very clear that I agree with them, that we do need to step up the pace. I have been very clear about that. The reason for the setting up of the new Department of Energy and Climate change was a recognition that we needed to go further and faster on this low-carbon transition. I think what is important about the Transition Plan—everyone knows the Government are good at having targets—is what this tries to give a sense of is, sector by sector, how we are going to achieve the targets. Some of the areas are more difficult than others, but it is a clear analysis, if you like, of how each area can contribute to meeting our carbon budgets. I think it is worth saying that, partly helped by this Committee, this is a world first to have carbon budgets legislated for and is part of the architecture of what we do. Also, and James may want to say something about this, having carbon budgets for each department is very important because the truth is the thing I have learnt about Government, Chairman, and I am sure something you have found is that if everyone is responsible for something, then sometimes nobody can be responsible for it, if you see what I mean. By allocating out responsibility, and that was a hard process, and we may get into some of the detail of that, every department has a direct interest in meeting what we are doing. I think both the approach and, I hope, some of the substantive policies contained in the Low Carbon Transition Plan will mean that we will be on track to meet the ambitious targets that we have.

  Mr Hughes: Not to go into too much of the detail because you may want to ask some further questions later on, what we have done in the Transition Plan is set out, as we are required to do under the Act, both the proposals and policies for how we are going to meet the budgets that were set at the end of May. We have done that, I think, for the first time ever, quite comprehensively. We have had a number of publications in the past from Climate Change Programmes and Energy White Papers which have set out some of the new policies, but here for the first time we have set out all of the policies that are going to help us to meet those budgets. As the Secretary of State was saying, I think what we have also got there is, for the first time, this sharing out of responsibility between departments, for the small departments just in terms of their own operations and estates but for the larger departments the sharing out the sectoral emissions between them. We are currently working with those departments in drawing up what are going to be their carbon reduction delivery plans which will be published in the spring.

  Q253  Chairman: Will the Committee on Climate Change's Progress Report now involve making any change or review of the plans in the budgets in the Low Carbon Transition Plan?

  Edward Miliband: Of the actual level of the budgets?

  Q254  Chairman: Yes.

  Edward Miliband: No. We are going to do a formal response to them in January as required under the Act, so I do not anticipate that, but I do not think they are recommending changes in the actual level of the budgets, unless you heard differently from Lord Turner. They have specific recommendations which, of course, we will look at on the question of banking of any overachievement, if you like, in the first budget period or in subsequent budget periods but my understanding is they are not proposing changes to the actual level of the budgets.

  Q255  Chairman: No, but they are saying that the UK explicitly should aim now to overachieve emission reductions.

  Edward Miliband: Yes, although we did not make a huge deal of this at the time, it is worth saying that on our plans that we set out in each of the budget periods we do exceed by some margin what is required. I think it is 44 million tonnes in the first budget period, so in that sense we are on course to overachieve. I think there are a couple of things to say about that. One is that there is always a margin for uncertainty with these things. One of the reasons why the figures have moved in a more positive direction, according to the Committee on Climate Change, is to do with the recession which is undoubtedly true. It could move back in the other direction with higher economic growth. There is a whole range of other uncertainties. We are on course for overachievement. I think that is the right place to be.

   Secondly, it is worth saying also that we have taken a pretty tough line, as the Committee recommended, on the question of offsets and buying in offsets from abroad by setting a zero credit limit in the first budget period. We have set ourselves a pretty testing task. As I say, we will respond formally to them on the question of banking of any unused allowances in January.

  Q256  Chairman: You would accept their recommendations about how the impact of the recession should be taken into account?

  Edward Miliband: I think James may say something about this. There is a sort of disagreement about the precise detail of what the precise recession effect is, but there is no question that there is a bigger effect. To put this in a global context, it is worth saying that, according to the IEA, as a whole, the world will be emitting 2 Gw/t less in 2020 as a result of the recession. I think that is on a business as usual scenario, something like between 50 and 60Gt. There is no doubt that there is a recession effect. Do you want to say anything about the detail of that?

  Mr Hughes: Just a couple of things. One is that the Transition Plan published in the summer includes within the figures there our own assessment of what we think the impact of the recession is, so that has been taken into account in the Transition Plan. The figure that we came up with in terms of the impact of the recession was not as large as the one the Committee has suggested in its report. That is partly because the Committee and ourselves have used different analyses which has included a different approach in terms of looking at what the impact of the recession might be. That said, I think the decision on what the real impact of the recession is on the first carbon budget and what the implications might be in relation to the question of whether to bank or not may need to wait until towards the end of the first budget period when we can assess what the actual impact has been.

  Q257  Jo Swinson: We hear about this 2° rise figure. It is always mentioned in media interviews and at the despatch box. Do you think people would be surprised to know that even if the Government meet their plans and targets, there is still a 50% chance we will go over that 2° rise? Is that not an unacceptably high risk, given the consequences that more than a 2° rise could have?

  Edward Miliband: I think that the science is incredibly challenging and the truth is, globally and domestically, politics has a job keeping up with the science. It is important because I know your Committee has talked a lot about these 2° to various of its witnesses, including I think Brian Hoskins and also Lord Turner this morning. My understanding of this is that we have already got 1.4°C in the bank, if you like, that is going to happen anyway. The prospects of keeping to under 2° are very, very challenging and in a sense that is the implication that I take from the Committee's recommendations and the recommendations that we adopted. I think they are right to say that the effects become more severe as we head towards 3°. In other words, that is the importance of 2°, as you head towards 3° and 4°, the weather effects become much more severe and they wanted to minimise those chances of ending up in that position. I think it is something like a 10% chance of 3° and a 1% chance of 4°, more or less, that is implicit in their figures. In a sense, I think that part of the challenge we face in public debate, to be completely honest, is to get across to people the pace of change and what is already inevitable in this. I suppose my job domestically and internationally is to try and go as far and as fast as we can and be as ambitious as we can.

  Q258  Jo Swinson: I quite agree with you, politics does struggle to keep up with the science and that is challenging. What do you think the main barriers are to being bolder and taking a more precautionary approach, given even 10% of a 3° rise and what we know about what that would mean for the world? Are those barriers cost and affordability, technical feasibility or mainly political?

  Edward Miliband: That is a really good question. I think it is a combination of things. If I think about this globally, there is a perception barrier that we face and, to be completely honest, I do not think we—and I use this collectively—the people who are the advocates for tackling climate change have been good enough at saying there is avoiding the nightmare and there is putting forward the positive vision. If you think about the debate in the United States, for example, that debate is sort of where we were some years ago in terms of coming to grips with: "Is this a real problem? Is the science real? How are we going to tackle it? Is it going to involve a lot of cost? What are the costs of acting?" In a sense, I think part of our challenge globally and domestically is frankly to put forward more clearly the potential prosperity benefits of acting, the energy security benefits of acting, showing we can deal with the fairness aspects of transition. In a sense, gloom-laden warnings have their role—do not get me wrong, I can do those with the best of them—but I also think we have got to do a far better job of presenting the positive. In a sense, that is what is going to persuade people. A Labour Party member said to me, "Martin Luther King did not say, `I have a nightmare', he said, `I have a dream'". In a sense, I think we need to do a better job of that.

  There is one final point I would make, Jo, which is about the global context of this, which is if out of Copenhagen we can show that we can have global emissions falling, not rising, by 2020, that would be a major success because once that starts to happen, ie emissions start to fall, people will think, "Actually it wasn't as difficult as we feared it would be and it didn't have as profound a problematic impact as we feared".

  Q259  Mr Lazarowicz: On the question of Copenhagen, I know you have been travelling around quite a few places and consulting with many governments about the Copenhagen negotiations. Can you give us your current thinking on the prospects for a deal in Copenhagen?

  Edward Miliband: I think maybe it is sort of intrinsic to doing this kind of job that you swing between despair and hope in these things. I feel more hopeful than I did. I feel like it seems to me that the debate in America has taken a more positive turn. There are signs of a more bipartisan, not consensus but bipartisan support led by Senator Kerry and others. I think that is a positive. Overall, while this remains extremely difficult to do because it is doing what has never been done before, ie turning around global emissions is a big ask and it involves developed and developing countries, I think there are reasons to be optimistic in the sense that lots and lots of countries have responded to this deadline. The President of China went to the UN and announced a change in his policy and said, "We are going to target carbon intensity and have substantial reductions". Japan announced reductions in its emissions—a new Government—25% by 2020 below 1990 levels. The new Indian environment minister said, "Look, India can't just talk about the per capita approach, but has to say we are going to take real domestic action on climate change". In a sense what is tantalising about this is lots of the jigsaw pieces are on the board for a decent agreement. The question is whether we have the political skill, imagination and globally the collective, not just will, but method to put it together.

  Q260  Mr Lazarowicz: Can you also give us an assessment of the position of the European Union because, again, there have been some mixed messages? On the one hand, a reduction of a 95% on target was obviously a positive move. There were also some press reports yesterday about some Member States balking at the contribution required to the adaptation mitigation fund. Can you give us an update of the position with regard to the EU in the last couple of days?

  Edward Miliband: We have the heads of Government meeting at the European Council at the end of this week and that is a very important milestone. The Prime Minister will be going and arguing strongly for Europe setting out as clear a position as it can, including on finance, and his proposal on finance in June, $100 billion a year of public and private finance by 2020, I think has been an important milestone and benchmark in the debate. There are tough negotiations in this because it is a hard time for developed countries to be making additional financial contributions to developing countries or, indeed, to anything. There are some Member States who feel that this is going to be hard for them to do, so I think it is sort of inevitable in this that there are hard discussions and they are going on. Europe has shown leadership in this issue by saying, "We will do 20% unilaterally by 2020 and 30% as part of a global deal". That needs to be matched with a finance offer. I am hopeful but not certain that is something that will come out of the European Council this weekend. It is very important for Europe to set a clear benchmark. Why is this finance so important? Because we know we cannot tackle this global problem without developing countries being on board and we know that developed countries bear a very important historical responsibility. Quite apart from anything else, the poverty issues in developing countries, the problems that already have been created, the 1.4°C, if you like, that temperature rise is going to happen. Part of showing our sense of responsibility for that is by helping developing countries both to adapt to climate change and to get onto the low-carbon path, in a sense to do not as we did but to do as we say.

  Q261  Chairman: Do you think that the principle of contraction and convergence is likely to be discussed much at Copenhagen?

  Edward Miliband: I think probably not is the answer. I do not think that will form the basis of an agreement. I think that there is a sort of attractive justice element to the contraction and convergence idea. The complexity of it, though, is what is the point at which convergence takes place and what do we say about different countries' levels of growth at that point, GDP, how should we adjust for different weather conditions and all that? I think as a way of thinking about the problem and how you share out the problem, it is quite a good way of thinking about it. If you think about the US, they may be at 24 tonnes per capita at the moment but by talking about an 80% reduction, they are getting quite a long way down, not quite towards 2 tonnes per capita but towards a pretty low level of emissions. I do not think it will form the basis of this agreement, but it is an important thing in the background to be thinking about when we think about what different countries need to do.

  Q262  Dr Turner: Ed, it is very heart-warming to hear that you have taken on board the principle of overachieving and built it into carbon budgets—the next carbon budget and sector budgets. That is very good, but I would like to ask how confident are you about succeeding in that, given the fact that we are certainly going to fail to achieve our current target of a 20% reduction by 2010?

  Edward Miliband: Let me say something about this because this was a unilateral position that the UK took on. I think sometimes that the very brave and ambitious proposal we made obscures the massive progress that has been made for a variety of reasons. However, it is worth saying that the provisional numbers of greenhouse gas emissions show in 2008 20% below 1990 levels in the UK without trading and 22.5% below with trading; CO2 10% without trading, 13.6% with trading. The 20% was always very stretching. I would have preferred that we were on course to achieve it, but I think it is important to say, and you get this internationally, what people say to me internationally is, "Actually you are one of the few countries to have exceeded your Kyoto target". Therefore, there is respect for what we have done in this country. As to the future, I will be honest with you, Des, I am confident that we have the right plans in place, but I am absolutely clear about the scale of the delivery challenge we face. We face a massive delivery challenge in the energy sector where, for example, we have got to have 10,000 wind turbines on and offshore in the next ten years, quite apart from nuclear and clean coal. We have a massive delivery challenge in the household sector where we will have 80% of houses that are already built still standing by 2050 and that is why we have proposed big plans for pay as you save energy efficiency and insulation, but that requires a big communication with the consumer about the benefits to them of doing that and we face a big challenge in transport as well. I think the challenge is big. We have some very serious plans in place on the household sector, on energy and driving forward nuclear renewables, clean coal through planning reform, the levy on coal, all kinds of other things but it is a big challenge.

  Q263  Mr Caton: Ed, you said in reply to the Chairman at the beginning that the Government do not intend to use offset credits to meet the carbon budgets. However, the carbon budgets order allows the use of EU ETS credits to meet the budgets and they contain a portion of offset credits. Are you concerned about the use of offset credits within the EU ETS and do you think it undermines efforts to reduce emissions domestically?

  Edward Miliband: The way I would put it is that domestic action needs to be the backbone of what we do because we know that by 2050 if the world as a whole, including leading developing countries, has targets for reductions there will be much less available in terms of offsets. So domestic action is very, very important in this. People talk about the 20% target for the EU and how much of it is domestic and how much can be done by offsets. It is worth saying that our calculations suggest that about 16% of that 20% represents commitments the EU has made on renewable energy, efficiency energy, et cetera, so there may be a rule that up to 50% of it can be met by offsets, but it is also worth saying that there are additional domestic European commitments as part of the 2020 package which take you towards the lion's share of 20%.

  On the specific question about the use of offsets, having said that domestic action is the backbone, I do not think it is wrong to use offsets, no, because I think the whole principle of cap and trade is that you can make abatement happen in the places where it is least costly. Frankly, and it goes back to my earlier answer to Mark, we are trying to get to a situation where we have significant sums flowing to developing countries. One of the ways, but absolutely not the only way because you need public finance as well, in which those funds can flow is through the carbon market and to offset some part of that. I do not think it is wrong in principle, I think that the use needs to be constrained and there needs to be proper domestic action if we are going to be on a path to the kind of reductions that all countries need to make.

  Q264  Mr Caton: I guess the concern, and this is certainly what we have picked up from witnesses over the last couple of years, is that allowing offsets reduces the imperative to move to a low-carbon economy in developed countries.

  Edward Miliband: It should not do that. I have a half-sympathy with what you say, but I think it should not do that. Let me give a specific example. I had the chance to go to India. They have 450 million people not connected to the electricity grid and they were telling me about their plans for 20 million people to get lighting through solar energy. As part of the abatement that we need in terms of carbon emissions in relation to India preventing a very steep growth in its carbon emissions, as part of a carbon market or sort of offsets regime, if we enable more people in India to have solar lighting and avoid those people going down the high-carbon electricity road, I think that is a good thing not a bad thing, so it must not be an excuse for not taking domestic action. That is where I agree with you, but I do not agree with people who say—and I am not saying you are saying this—that all offsets are bad and we should not be engaging in this.

  Q265  Mr Caton: I think certainly one witness I can remember did not argue against putting resources into the developing world to allow them to do this sort of thing, they just argued that offsets have this negative impact in the developing world. Could I ask another supplementary? The Government count allocations rather than actual EU ETS emissions. Should they not be counting actual emissions, especially given that there is no direct national allocation of emissions beyond 2012? Will it make more sense to move to counting actual emissions now?

  Mr Hughes: First of all, fundamentally we believe in the EU ETS and see it as an important part of our strategy for reducing emissions and we are looking to link that scheme up with trading schemes elsewhere in the world. We see that as the way forward in terms of reducing emissions worldwide at least cost. The good thing about the EU ETS is obviously it places a cap on emissions and we know what our limit is, certainly within the current Phase 2 of EU ETS. For Phase 3, it is true that because it is EU-wide it is a little bit more difficult to work out exactly what the UK share of that is, but we believe we can work out to a fairly high degree what the UK share of the EU ETS will be. We will be able to use that in terms of monitoring how we are achieving reductions in relation to the cap. But, that is only one part of the strategy; the other part is decarbonisation of energy within the UK, particularly electricity. That fits in with the plan to see more low-carbon electricity being used for heating homes and for transport. We see those two things complementing each other. If you look at the Transition Plan, it shows there is a great deal of decarbonisation which will go on in relation to the UK energy supply, to the extent that under the EU ETS, certainly for part of the period over the three carbon budgets, we are quite likely to be selling allowances to Member States rather than buying them.

  Mr Caton: Thank you.

  Q266  Martin Horwood: Can I ask one supplementary to Martin's questions on that before moving on to the vexed subject of coal? One of the other issues which have been raised about the ETS, and BIS particularly raised in the National Audit Office Report, which we have highlighted on this Committee, is the use of carry forwards and how those are threatening to undermine even the achievement of the targets in Phase 3.

  Edward Miliband: This is a really important point. The potential of banking of unallocated allowances, both in Europe and internationally, is a potential issue. It does need to be addressed as part of the Copenhagen Agreement and that is what we are working on.

  Q267  Martin Horwood: That is very good news. The issue of coal: the Committee on Climate Change in its report has identified the risk that market investment is still pouring into fossil fuel fired power generation. Do you accept that point is right and, therefore, the market for power generation in this country needs to change in quite a fundamental way going forward? If so, what are your expectations, hopes or even plans for making that happen?

  Edward Miliband: The way I would put it is this, markets on their own will go for the least cost option, in a sense that is what they are good at. The least cost option at the moment is gas. That is why we need to build in a series of interventions—this is what I call "strategic government"—to make sure that what I think of as the "trinity of low-carbon", which is renewables, nuclear and clean fossil fuels, are part of our energy future. On renewables, we have the Renewables Obligation. On nuclear, through planning reform and other things we are providing support to make nuclear happen. On clean coal, frankly, which I think is fantastically important—indeed, I think your Committee wrote a very good report on this, which I think the previous Department disagreed with and I agreed with, and said so in my response—at least, I hope that was clear. This is a technology which has been around for a long time but has never got to the scale it needs to get to. That is why we have proposed a levy to make carbon capture and storage happen and drive it forward. In short, I recognise what the Committee on Climate Change says, that we need to make the right interventions in the energy market to ensure we do not end up with high carbon lock-in and high carbon solutions, but we end up going down the low-carbon route and that is what we are trying to do.

  Q268  Martin Horwood: One of the clear interventions the Committee has recommended and where it thinks there is—if I can paraphrase them slightly—a loophole in the current arrangements for carbon capture and storage, is that you have not yet sent a clear enough signal that by the 2020s essentially unabated coal will play little or no role in energy power generation. The loophole which is in there at the moment is that it is providing the technology is viable, but Lord Turner in his evidence earlier on today made the point that it is not really about the technology, it is about the simple fact that unabated coal cannot form a part of our energy generation in the 2020s on any significant scale if we are to meet the 80% target.

  Edward Miliband: I agree with Lord Turner on this. Let me try and explain where I see this as a background. We had a policy which was for building unabated coal fired power stations. The establishment of DECC led to a different policy, which has basically got three components. This was our proposal, which we are still consulting on. First of all, any new coal fired power station has to demonstrate CCS on a substantial proportion of the plant. Secondly, by 2020 we should take a view about whether CCS is proven and then if it is proven, these new plants should have 100% CCS. Thirdly, if it is not proven, and we have asked this question, what do we do then? We have said in our initial set of proposals that we should have a presumption there would have to be some kind of restrictions in order precisely to meet the problem you are raising. If I can put it this way, I think the dilemma or the needle we have to thread in this is we have got to find a way in which companies will build, in my view, so that we can test carbon capture and storage, and not just test it but make it work. If we do not make it work, we will be failing Britain and we will be failing the world and we have got to avoid high carbon lock-in. What we are trying to do with our three conditions is find a way of threading that needle alongside the levy.

  Q269  Martin Horwood: Is not the crux of it that an energy company needs to understand right now that if they are building an unabated coal fired power station, come the 2020s the likelihood is they will have to close it down if they have not got CCS and that signal has not been given yet?

  Edward Miliband: I would disagree with that. Under our proposals they cannot build an unabated coal fired power station because we have said we have got to have abatement on a substantial proportion of it under our conditions. That is the policy we changed. That is the first point.

  Q270  Martin Horwood: That was providing the technology was economically viable.

  Edward Miliband: No. To be clear about this, we have said that on any new coal fired power station a substantial proportion of it must have carbon capture and storage fitted. We have said 400MW (gross). That is absolutely clear. We have said no more unabated coal fired power stations. You are looking quizzical.

  Q271  Martin Horwood: That is not quite what was in the Government's statement. It is interesting that the Committee reported only two weeks ago that that clearer signal has not been given.

  Edward Miliband: The question they are raising is the question of full carbon capture and storage fitting on any new plant. It is worth saying this, just to be clear: I changed that previous policy, this was an announcement we made in April, followed up in June with a consultation and these are the three conditions we have set out for consultation.

  Q272  Martin Horwood: That is a clear statement of it now. The cut of 2% of emissions on 2008 levels by 2020 by the power and heavy industry sector—

  Edward Miliband: Did you say 2%?

  Q273  Martin Horwood: Yes, 2% of emissions by 2020, which is on 2008 levels. Do you think that is consistent with the Committee on Climate Change's vision for almost complete decarbonisation of power generation by 2030?

  Edward Miliband: I do not recognise the figure of 2%. We have said a lot on the Transition Plan that we are going to go to about 40% low-carbon generation of electricity by 2020 which compares with something like less than 10% at the moment. We are talking about a big change in low-carbon generation. I do not recognise the figure you were mentioning.

  Q274  Martin Horwood: I do not have my source immediately handy. Can you tell me what role you might envisage for emissions performance standards, which seems to be potentially a very important lever, one which is not used at the moment and could make a huge difference?

  Edward Miliband: We think they do have a role. Going back to this coal consultation we are in the midst of, we have said that if CCS is not proven, we think the EPS could have a role. We also said it could have a role in giving expression to the conditions we have laid out. I think the EPS could have a potential role in relation to coal, but potentially more widely also in the 2020s.

  Q275  Chairman: On this point about the new coal powered stations: as you say, your very much improved response to our report, for which we are grateful, if I can just quote from it—we have not really discussed it this morning—"In summary, the consultation is proposing that any new coal powered station in England and Wales should demonstrate CCS from day one on a defined part of its capacity". `Defined part' means what sort of proportion?

  Edward Miliband: We are saying at least 400MW (gross) of CCS on any new plant. It depends on the size of the plant basically.

  Q276  Chairman: That 400 might be a very substantial proportion on the capacity or it might not be.

  Edward Miliband: It is probably right to say it is at least 25% because you could be talking about a 1.6GW plant. There is an important issue which you may not want me to get into on this, Chairman, where some people say, "Why not do 100% from day one?" The reason for not doing 100% from day one is we are testing a new technology which has only been demonstrated at a much smaller scale previously and we are also going to be charging consumers for this. Therefore, I think it is right that we drive forward CCS as far and as fast as we can, but we do so in a way which is fair to consumers as well as the environment.

  Q277  Martin Horwood: I do not think the Committee was highlighting what you have to do on day one, what it was saying was the signal you give to the industry, that by 2020 something like 75% of the power stations' emissions being unabated is simply not going to form part of our energy policy. Therefore, if that is the case, it will have to close down.

  Edward Miliband: That is not the signal we are giving them because we are giving them a very clear signal about driving forward CCS, about demonstrating CCS and about saying it will have to be 100% if it is technologically and economically proven. Also, we are saying, if CCS does not work our presumption would be there would be restrictions on it. The argument some people would make is if you were to say, "We're going to close down the plant in 2020", then people are not going to build the plant. That is the point people would make to you. People are not going to build a new coal fired power station for five years, so we have to find a way in which we send a very clear message about decarbonisation and about CCS, but we also have to do it in a way which gets the CCS demonstrated.

  Q278  Martin Horwood: Surely that is the nub of it then. If you are scared about them not building the plant, surely that is exactly what the Committee on Climate Change is saying. It says: "Whether or not CCS can be deemed economically viable, any conventional coal plant still operating unabated or even in large part unabated"—you can read—"beyond the early 2020s would only generate for a very limited number of hours".

  Edward Miliband: Our proposals are exactly in line with the Committee on Climate Change.

  Q279  Martin Horwood: It does not think they are. If you read page 134 of its report, it thinks a stronger signal has not been sent.

  Edward Miliband: I do not know whether you asked Adair Turner and David Kennedy, but I had a discussion with them this morning about this and they think our coal policy is in line with their recommendations because we have said, as the third condition, if CCS is not proven there will be limits on what can be done.

  Martin Horwood: It may get down to exactly what the limits and how big the loopholes are, I guess.

  Q280  Chairman: You just mentioned consumers, which obviously are of great concern to your Department. However, if we are going to have a higher proportion of green secure energy, it is unavoidable that the price is going to go up for consumers.

  Edward Miliband: Yes.

  Q281  Chairman: Protecting consumers cannot be a driver of our response to climate change. It may be a driver of social policy in order to minimise the impact of fuel poverty, but we cannot allow a concern about price to restrict what we are doing to reduce the emissions.

  Edward Miliband: I do agree, except in this respect: we always have to be aware that we have to try and make low-carbon transmission happen at the least cost which is feasible. I have been very clear, Chairman, and I said this when we published the Low Carbon Transition Plan, prices are going to go up. Our estimates are that the climate change impact of what is in the Transition Plan is 6% by 2020 on energy bills and 8% if you include previously announced measures. I was very clear about that because I think we need to level with people about this. Also, it is important to say—and this is important for the people who believe in this—there is no low-cost, high-carbon future. In other words, simply going for high-carbon, relying on fossil fuels, opening ourselves up to increased demand from China and India, driving prices up, that is also not going to produce a low-cost outcome. That is a very important point to make to people.

  Q282  Chairman: One of the common threads in our earlier session was that the actions taken in the next two or three years are going to be critically important in achieving the 2020 targets and the budget cuts to 2022. If there appear still to be obstacles in the planning process, would you consider building into the remit of the IPC a requirement to have a strong presumption in favour of any proposals which appear to be necessary to achieve our climate change commitments?

  Edward Miliband: That is an interesting point and when we publish our national policy statements in the next few weeks, I hope you will engage with them. We need to send a very clear message in our national policy statements about the need, not just for security of supply reasons, but low-carbon security of supply reasons to make this energy infrastructure happen. The thing I have learned in this is there is a planning process aspect to it, but, frankly, there is also a big public persuasion aspect. Persuading people about renewables, which are not popular, persuading people about nuclear—I am sorry to say that in front of some Members of this Committee—which is not popular, persuading people in relation to clean coal, which is not necessarily popular, I think the planning is important. I would be interested to have your comments on our national policy statements when they come out, but I think the persuasion part is equally important.

  Q283  Dr Turner: The Committee on Climate Change suggests that the Government are relying on markets to drive the transition to a low-carbon economy and that any such confidence in markets to do this is misplaced. How do you respond to that?

  Edward Miliband: I think you need both. You need markets because, frankly, we have got some £100 billion or more of investment that we need to make this low-carbon energy happen and it is not going to come from Government. A lot of it is going to have to come from the private sector and that is going to come from markets, but you need a very strategic role for Government. Frankly, I think the idea of a markets-only energy policy is not going to work. I have tried to say that very consistently since I got this job. I do not mean this in a party political way at all, but Lord Lawson gave an important speech in the 1980s about his approach to energy policy, which was essentially talking about the way in which markets can deliver. However, we know that whether it is security of supply and the mix of gas and other fuels, low-carbon or price, markets on their own do not necessarily deliver on any of those, that is why you need a strategic role for Government, so I agree.

  Q284  Dr Turner: Quite. There are limits to the signals or market drivers which are in place at the moment. Carbon price is very weak and the ROC system has limited effects. What thoughts do you have about putting market drivers in place through Government policy which can direct the investment into low-carbon technologies?

  Edward Miliband: The most important thing we can do for a robust carbon price, and I agree that we need a more robust carbon price than we have, is to get an agreement at Copenhagen. If the EU can move from 20% to 30%, we will have a more restrictive ETS regime and, therefore, a higher carbon price. I do try and say this to people. There is a very strong economic case for Copenhagen, as well as the environmental case. If we are to give business the certainty it needs in terms of investment, we need a higher carbon price than we have at the moment and Copenhagen needs to make that happen. To be honest, that is where our focus is. It is also worth saying this, and this came through in the Committee on Climate Change report and Lord Stern's report: in the foreseeable future the carbon price on its own, even at significantly higher levels, is not going to be enough to stimulate the development of some technologies. If you think about carbon capture and storage or marine technologies, for example, which I know you take a close interest in, both of those are going to need specific Government support over and above what the carbon price on its own can provide. The only other thing I would say is I slightly think the ROC system gets a bad name in the sense that we have made a number of changes over time to adapt it. There was a 67% increase in offshore wind last year in the UK and I think something like a 30% increase in onshore wind. There are lots of forecasts in terms of what is going to happen in the wind industry here which are very positive now. We are now starting to accelerate deployment at quite a significant rate. I do not want to declare victory, absolutely not, but it is something like 9GW which has got planning permission and is awaiting construction.[6] We are already at 4, heading towards 5 of the 6GW, so we are moving on this and banding the ROC has helped. In that sense, I think we should put some faith into the ROC system now and it is starting to work. I do not think now is the time to get rid of it.

  Q285  Dr Turner: The Committee on Climate Change favours unilateral UK action to underpin the carbon price, almost irrespective of the outcome of Copenhagen. What is your view? Do you think it would help, and are you prepared to contemplate it?

  Edward Miliband: My preference is for Copenhagen to succeed. That is better and is going to be a more effective way to do it. There is an open question about whether unilateral action is possible. My focus is on Copenhagen and on plan A, which is that Copenhagen succeeds and drives up the carbon price. That is a better way forward.

  Q286  Mr Chaytor: Secretary of State, there is still a series of interventions which you think are necessary. To what extent has Government's capacity to intervene in a market failure of energy policy been limited by the excessive intervention which has been necessary in the other market failure in the financial services industry? The money has been spent in propping up the banks and there is not going to be much more left to develop electric cars or whole-house domestic energy efficiency policy on a national scale, is there?

  Edward Miliband: You are asking a very important question. It would be wrong for me to pretend that the economic situation somehow means it is as easy to get money for spending on climate change issues as it would otherwise be. It is very positive that, despite the difficult times, the Chancellor found £400 million of public finance in the Budget to help us develop our offshore wind industry, our marine industry, various other aspects, and also through the ROC, money to support offshore wind in particular. We have also got a huge amount of money in the system for ROCs. We have got the levy to support clean coal, which is important. In a sense, it is clearly unarguable that more difficult fiscal times make it more difficult.

  The only other thing I would add about this is in the last year or two the debate about the environment has changed in a very positive way in the sense that people now see green jobs as part of our future economy and I do not think they did two years ago in the same way. Part of our job and task as politicians is to articulate better what it means in practice to get the green jobs to come here, but I think there is an opportunity in thinking about the future of our economy and an active industrial policy that we need to make sure we have low-carbon jobs here. Overall, it makes life tough, but I think there are some opportunities.

  Q287  Dr Turner: The Committee on Climate Change's progress report says that currently we have been improving energy efficiency at 0.5% per annum and suggests that we need to move that up to 2% or 3% per annum. That is a huge increase in the first three carbon budget periods. To what extent do you think direct Government investment is going to be necessary to bring about that six-fold increase in energy efficiency?

  Edward Miliband: Direct Government investment can always play a role in these things, although here is a real answer in relation to energy efficiency, which I think you, as someone who is an expert on this subject, will know. The truth about energy efficiency is it pays to do it, but the problem is the upfront costs. The task is to spread those costs over time, not over the time that someone lives in a house because that might be eight or nine years and is probably not enough time, but to spread it over a longer period so the repayment is connected to the house, not the person. Also, it is to find ways in which I think the private sector and others, local councils maybe—that is part of our proposals—can come in and provide some of that up-front finance. Given the scale of the challenge, it is going to be very difficult for Government to provide all that up-front finance. Of course there are things we do through Warm Front, through, for example, the CERT obligation and, as part of our home energy efficiency plan, we are looking at what role the CERT obligation might play in the future and how that could help finance some of these changes we need to see. Essentially, you do need to make this a viable private sector business if you are going to get the kind of step-change we need as well as Government playing their role.

  Q288  Dr Turner: On the question of up-front finance for domestic energy efficiency, given that the state now owns wholly or partly an enormous proportion of our banking industry, why are the publicly owned banks not selling green mortgages?

  Edward Miliband: I think green mortgages, dependent on what way you want to put it, `pay as you save', can be part of the answer. I have to say, because I have looked at this, the experience with green mortgages so far has not been successful in the sense that I think the Co-op—which I think is a great organisation, there is no disrespect to the Co-op—have had a green mortgage which has had an extremely low take-up. There are bigger barriers that we face candidly in this. There is a direct financial barrier we face; I have tried to explain how I think we need to get over that, and that is going to need some changes in the way we think about this in terms of this longer time period of payback; that is important. There is a change aversion which people understand—I am sure we would have it about our own houses—about the kind of change that is going to be required, which we need to work out how we overcome. You are right that the banks can play an important role, I think they will have to play an important role, but it goes beyond that in terms of the scale of the challenge.

  Q289  Dr Turner: Finally, on electric cars. Who should pay for the infrastructure?

  Mr Hughes: What the Government are doing at the moment is putting down some seed corn money to get cities and regions to look at trialling some infrastructure. The Government have found about £30 million, which was announced recently under the Plugged in Places programme. Before the end of the year there will be an announcement on where that money is going to go and where that infrastructure is going to be built.

  Q290  Dr Turner: It would be geographically located, individual towns and cities will have their own local infrastructure.

  Mr Hughes: We are looking at about three to six cities. That will be the start and we will see how it goes after that.

  Q291  Chairman: Can we move on to the management of carbon budgets. Is the Treasury going to have a role here?

  Edward Miliband: Absolutely. Nothing ever happens in Government without Treasury co-operation. It is an enthusiast for the system, not least because it sees that on the issue of the Government Estate there are big potential savings to be made. It is going to play a very important role in the system. The way we see it working is as part of spending reviews—the spending reviews take place probably every three years and this will be a very important part of that process—and monitoring, obviously monitoring of how people are performing in their carbon budgets will take place on a continuing basis. The Treasury and DECC will play a very important dual role in this process.

  Q292  Chairman: If they are doing that together, will they be sharing some responsibility for delivering the reductions, and can we expect to see their tax policies targeted more accurately towards encouraging the necessary steps?

  Edward Miliband: I feel I will get vaporised if I comment on Treasury tax policy! The Chancellor has to maintain his discretion on this, but I have talked to him a lot about the system of carbon budgets. He is very personally committed and the Treasury institutionally understands the importance of meeting these carbon budgets. Obviously taxation is one of the instruments it has to meet it. Its centrality in this is very important. Again, it goes back to what I said at the opening, the fact that we now have—the first country in the world— financial budgets, departments have financial budgets but they also have carbon budgets, I think is part of the culture change we need in Whitehall and elsewhere.

  Q293  Chairman: Are sufficiently senior people in each department going to be held responsible for delivering individual departmental carbon budgets and their plans?

  Edward Miliband: Mr Hughes, do you want to comment on the seniority or otherwise of your equivalents?

  Mr Hughes: First of all, I should say within DECC we have set up a team that is going to be taking forward the management of the carbon budgets. We have specific individuals who are account managers who work closely with the main departments and working with them in terms of helping with capacity building, but also helping them with the development of their own carbon reduction delivery plans. Also, we have written around to all departments and asked them to nominate a senior responsible officer—that is quite often at board or Director level—who will be responsible for making sure the delivery of those departmental carbon budgets is seen through. We are going to be taking that forward, certainly through the National Directorate General within DECC, which covers delivery of domestic carbon emissions and meeting with opposite numbers to make sure they are all helping to deliver on this agenda. So far everything is on track for delivery of plans in the Spring.

  Edward Miliband: One thing to add, Chairman, is I do not want to pretend that this is a system which will not undergo a sense of trial and error. We have devised a set of carbon budgets with other departments on the basis of direct policy influence, but then you have got to have the questions on indirect influence. BIS, for example, does not necessarily have direct control over everything business does, but in the carbon budget regime takes a significant share of emissions from business and the workplace. The Department for Transport has an important role, but obviously that is shared by the NHS, which is important because people travelling to hospital is a big issue, schools, et cetera. We have had to factor all that in to the process of devising and allocating these budgets. Experimental sounds a bit unfortunate, but it is a pilot, not in the sense that we are going to abandon it but in the sense that we are going to have to learn as we go along as to how this system works. There is also the question of the impact the department's performance has on the judgments that are made and if you have to buy offsets, where do they come from? If you have to buy credits, who pays for them, and all that?

  Mr Hughes: One of the things this Committee will be very concerned about is obviously how effectively we are monitoring progress. This is something which has come up in the context of the report the Committee on Climate Change provided as well. What it has done in the context of its report is to set out what the indicators are and the milestones against which it will look to see how the UK is making progress; in the same way within the Department's Carbon Reduction Delivery Plans, it will be looking to agree indicators and milestones in that context as well. We will be looking at what the Committee on Climate Change has suggested are going to be its way of measuring things. It will need to be a much more rigorous process going forward to make sure we really do remain to be on track to meet our carbon budgets, not just in relation to what do the actual emissions reductions tell us, because they are a year or two behind, depending on whether we are talking about provision or actual—but do we look as if we are on course? Are we making the right decisions at the right time?

  Chairman: Our experience in looking at the Greening Government Agenda is there was an enormous variation in the performance of different departments. A lot of that reflects the priority which individuals within those departments attach to these particular goals.

  Q294  Dr Turner: I was going to ask whether your own appreciation of the gravity of climate change and the urgency of emissions reductions was shared across all Whitehall departments.

  Edward Miliband: To a man and woman, Des!

  Q295  Dr Turner: I do not believe that!

  Edward Miliband: The whole of Whitehall and the whole of politics have been undergoing a cultural change. Take an example, Peter Mandelson, rather unfairly in my view, got splattered with green custard. He has been one of the strongest advocates for low-carbon as an economic route forward for Britain. He has been championing discussions with the wind industry about what it can do here, obviously the nuclear supply chain and Rolls-Royce, with whom we are working on low-carbon in aerospace. I think there is a sense in which part of the task is to demonstrate that low-carbon and climate change is not just about the environment and is not just for environmental departments, important though that is, but it is part of our economic future, our transport future and all that. In a sense, that is what the culture of carbon budgets and the Transition Plan is trying to do. There is very wide sign-up to this in Government.

  Dr Turner: I will not press you any further on the Treasury.

  Q296  Chairman: Is there any particular action you think is called for on the Government's part in response to the Committee on Climate Change's progress report?

  Edward Miliband: To be fair to it, and maybe to us, we need to study it properly and come back on that. I will say, I do think the Committee on Climate Change is not always necessarily comfortable for Government but, as you and I have discussed on other occasions, it does play a very important role in holding Government to account. I welcome the characteristically wide remit it has taken up.

  Chairman: We have managed to dig up the reference in the Low Carbon Transition Plan— page 52—to the 2% cut in emissions, but we will write to you about that point. I would like to establish that we did find the reference in your own document, so it is there.[7] Can I say thank you very much indeed for coming in? It has been a very useful session and we look forward to a continued dialogue.

7   This was a typographical error in an early print run of the Low Carbon Transition Plan. The figure was corrected to 22% in later print runs. See Supplementary memorandum submitted by the Department of Energy and Climate Change, Ev 117. Back