Examination of Witnesses (Questions 250-296)|
MP AND MR
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
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 Planeveryone knows the Government are good
at having targetsis 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
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
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
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
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 weand I use
this collectivelythe 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 roledo not get me wrong,
I can do those with the best of thembut 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 emissionsa
new Government25% 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 budgetsthe 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
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 sayand I am not saying
you are saying thisthat 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 interventionsthis 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
importantindeed, 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 responseat 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 isif I can paraphrase them slightlya 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
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
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 itwe 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
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
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 sayand this is important
for the people who believe in thisthere 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 nuclearI am sorry
to say that in front of some Members of this Committeewhich
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
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
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 maybethat
is part of our proposalscan 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
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-opwhich
I think is a great organisation, there is no disrespect to the
Co-ophave 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 understandI am sure we would
have it about our own housesabout 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
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 reviewsthe
spending reviews take place probably every three years and this
will be a very important part of that processand 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 havethe 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 officerthat is quite often at board or Director
levelwho 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 actualbut
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
Edward Miliband: To a man and
Q295 Dr Turner: I do not believe
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 52to
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.
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.
6 Note by witness: 6GW, rather than 9GW, has
got planning permission and is awaiting construction. Back
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