Electricity and Gas (Carbon Emissions Reduction) Order 2008

rose to move, That the Grand Committee do report to the House that it has considered the Electricity and Gas (Carbon Emissions Reduction) Order 2008. The noble Lord said: The order places on electricity and gas suppliers an overall target for reduction of carbon emissions in the household sector in Great Britain, known as the carbon emissions reduction target, or CERT; while I do not generally use acronyms, because of the constant reference to this I will say ““CERT”” from now on. We held extensive informal consultations with a wide range of stakeholders on the development of the CERT, culminating in the issue of formal consultations in May 2007. The CERT is planned to run from 1 April 2008 to 31 March 2011 and will build on the success of the previous two phases of the energy efficiency commitment, with the current phase ending in March this year. Gas and electricity suppliers will meet their targets by encouraging and assisting household consumers to take up carbon abatement measures, specifically the promotion of measures for the following purposes: achieving improvements in energy efficiency; increasing the amount of electricity generated or heat produced by microgeneration; increasing the amount of heat produced by any plant that relies wholly or mainly on wood; and reducing energy consumption. By reducing carbon emissions and using energy more efficiently, household consumers will have the opportunity to reduce their carbon footprint, lower their fuel costs or be able to enjoy greater comfort. The main aim of the CERT is to make a significant contribution in the household sector to the United Kingdom’s targets and ambitions under the climate change programme. The CERT will have an overall target of 154 million tonnes of carbon dioxide over its lifetime. That is equivalent to annual net savings of 4.2 million tonnes by 2010, which is equivalent to the emissions from 700,000 homes each year. This will build on the 2.9 million tonnes of CO2 that we expect to be delivered by the previous phases of the energy efficiency commitment. The CERT will also give particular help to low-income consumers and the elderly, who spend a larger proportion of their income on energy or are more vulnerable. Energy suppliers will be required to achieve at least 40 per cent of their target by directing activity at householders in receipt of income or disability benefits or tax or pension credits. In order to ensure a focus on the most vulnerable members of our communities, we have also included all those customers aged 70 or over. The CERT will also introduce a new priority group flexibility option, which will support energy suppliers that wish to focus some of their CERT activity with low-income customers on those who are especially vulnerable or at risk of fuel poverty, using measures that will make a real practical difference for those hard-to-treat households. We expect that these new approaches will allow the CERT to contribute effectively to the alleviation of fuel poverty. On 6 December, the UK Fuel Poverty Strategy fifth annual report was published. It sets out our wider approach to tackling fuel poverty in the UK. We also want to ensure that we are ready for the carbon reduction challenges ahead. The CERT will introduce creative and significant support for innovation, offering space for energy suppliers to explore and experiment with totally new routes for carbon abatement in the household sector, including specific encouragement for microgeneration activity. The order sets an overall obligation on all relevant electricity and gas suppliers of 154 million tonnes of carbon dioxide over the lifetime. This is a challenging target at about twice the level of the current energy efficiency commitment, but we believe that it is achievable and will drive the effective promotion of carbon reductions in the household sector. The cost of meeting the obligation will fall on energy suppliers. However, we expect that, even if suppliers pass those costs on in full to customers, that would be no more than about £105 per household for the three years of the programme, or about 70p a week. Those costs are balanced by a range of direct and indirect benefits. We expect the average ongoing financial benefit for consumers, in terms of lower energy bills or increased comfort, to be about £29 per year for the lifetime of the measures installed, which could be up to 40 years in the case of cavity wall insulation, for example. An equivalent measure would be to fit four energy saving light bulbs, which, over their lifetime, would pay for the cost. The regulator, Ofgem, is responsible for administration of the CERT. The order provides the framework for Ofgem to set the targets for individual electricity and gas suppliers and to monitor their progress in achieving them. Ofgem will also be responsible for enforcement. We intend to monitor the continuing development of the CERT. Ofgem is required to report annually to the Secretary of State on suppliers’ progress towards achieving their targets. We want to help and support householders in understanding and reducing their carbon footprint. The CERT will be an important part of this process and will sit effectively with other major policies and initiatives aimed at meeting our climate change ambitions in this sector. Looking to the future, the Government have already made a commitment to some form of supplier obligation after the CERT to at least 2020. The new flexibilities introduced with the CERT, including new routes for innovation and for working with those most vulnerable in our society, will offer the opportunity to prepare effectively for new approaches. I hope that the Committee will agree to the Motion. I am most grateful to the noble Lord, Lord Jenkin of Roding, who has given me advance notice of some of his questions. I am happy to set out some of the answers before he speaks, so that he can comment on them later.