Electricity and Gas (Carbon Emissions Reduction) Order 2008

I thank the Minister for introducing this order. From our debates on the Climate Change Bill, I know that he shares my interest in reducing carbon emissions. While the Bill is setting out the framework for the effort to stem climate change, orders of this kind are the nuts and bolts. Thus, I welcome the opportunity to debate this order. Under this Government, emissions have risen. There is no chance of the Government meeting their target of a 20 per cent reduction of CO2 by 2010. Scrutiny is therefore important. We need to ensure that opportunities for improvement are not missed, so it is important that the potential benefit of some of the provisions in this instrument are realised. The carbon emissions reduction target could play an important role in emissions reduction. Indeed, the housing stock in this country accounts for 27 per cent of our CO2 emissions. Targeting housing, then, is a welcome step. The CERT will build on the energy efficiency commitment, which stimulated tremendous investment—£600 million—in energy efficiency. The net benefits to householders are estimated to be over £3 billion. This can claim to be a success. However, I remain sceptical about the way in which the Government are rolling out a scheme and trying to stimulate microgeneration. The goal in all our efforts to stop climate change is to reduce emissions and to secure for the UK a genuinely greener energy sector. Thus, we must not be, as was said in another place, too quick to pick winners in the mix of available technologies. Reducing carbon emissions through the various microgeneration technologies that are allowed to be used by suppliers under this order is by no means bad in its own right. However, it skews the market towards a narrow way of thinking about reductions. There does not seem to be enough to stimulate real investment in further green technology that could provide potentially much greater benefits. The point here is one of emphasis. Does the Minister think that enough has been done with this instrument to encourage innovation? If we are to tackle the problem of climate change, there needs to be nothing short of a revolution in energy supply. Does the Minister see this order as the best example of encouraging the necessary innovation? Suppliers can currently claim back 50 per cent if they make market transformative actions. Will the Minister explain what constitutes a market transformative action? What standards are used to judge this? Does he think that it is adequate to encourage suppliers to innovate? My concern is that there does not seem to be a clear enough mechanism for making a real change to energy supply. There seems to be a risk that suppliers will focus on the cheapest short-term solutions that tick the box; that is, even if the targets can be met, that will be done in such a way that suppliers are locked into a higher-carbon method of providing energy than they would be if serious emphasis were placed on greater capacity for innovation. The order places an overall target for reduction in carbon emissions in the household sector on energy suppliers. The regulation, enforcement and determination of what measures can be used to meet the targets will be the responsibility of Ofgem. This is also a cause for concern. The report of the Government’s own Sustainable Development Commission, Lost in Transmission?, calls for huge changes to the structure of Ofgem to ensure that it prioritises the transition to low-carbon energy supply. Has the fact that a large regulatory burden is placed on a body that has been criticised by this report been considered? Has the report been considered and have the necessary changes been made to Ofgem? The accountability of the suppliers to Ofgem and of Ofgem to the Government is unclear in this instrument. Could the Minister explain the mechanism that will ensure that suppliers are accountable to Ofgem? As the instrument stands, we will not know the progress that suppliers are making towards the targets for a three-year period. Article 22 requires Ofgem to determine whether or not a supplier has met its obligations regarding emissions cuts. The cuts must occur between 1 April 2008 and 31 March 2011, after which Ofgem will present a report to the Secretary of State. Can Ofgem intervene, if progress is not being made to meet these obligations? Will there be any interim reporting? Is there any mechanism to ensure that the efforts made by the suppliers will be on course with meeting their obligations? What if suppliers do not meet the overall targets? When the CERT was put out for consultation, grave concerns were expressed by some of those who would be involved, particularly regarding the targets, which some respondents considered very challenging. There was concern about the fact that there might be significant costs to consumers. What will happen if consumers do not get on board? Does the Minister think that there is a need to increase customers’ willingness to participate in the scheme through incentives or marketing? There was also concern that Defra’s estimation of the costs had been too low. Consumer participation seems to be essential in ensuring that this works. If the burden on the consumer is considerable, there will be no scope without further incentives to encourage microgeneration or other types of innovation. Considering the scepticism of the consultation, what further measures have been taken to ensure that the targets are feasible? I also wish to express some concerns regarding fuel poverty. The energy providers will be obliged to achieve 40 per cent of their reductions by promoting measures to those on benefits and tax credits and to householders over 70. In the consultations, energy suppliers and climate change groups considered this target to be unachievable. Has the fact that this target has already been deemed unrealistic been taken into account? How are the energy suppliers to identify the priority group in the first place? I know that my noble friend Lord Jenkin of Roding may speak to this part of the statutory instrument. None the less, I want to mention the lack of clarity surrounding just how this group is going to be reached. Is the Minister convinced that enough people will volunteer for this scheme? Will energy companies be obliged to spend money advertising that there are schemes for those on benefits? We must ensure that the benefits of this instrument will be long-term benefits. For example, this is supposed to promote microgeneration, but are there provisions that allow for small generation to sell back to the grid? Are there any price-controlling mechanisms to ensure that small generators can prove to be a worthwhile investment? It would be a cruel fate to see measures such as these, with so much potential to make a real step towards stimulating green energy and energy reduction in this country, being scuppered by quick-fix solutions and ineffective accountability. I look forward to hearing the Minister’s response.