Electricity and Gas (Carbon Emissions Reduction) Order 2008

I say to the noble Viscount that we have one—I hope—day left in Committee on the Climate Change Bill. I look forward to him participating in our debate on Wednesday. He brings valuable experience. I have no brief on this, but the short answer to the noble Viscount’s point about Denmark is that coal and North Sea oil and gas made us incredibly lazy and inefficient in this country. It made everybody ignore renewables, as there was no pressure. The Danes did not have those resources, so they went down their route. What has happened in this country is an absolute disgrace and, of course, we are making up for it now. As the noble Viscount rightly says, there has been a push in this respect in Northern Ireland because of the former Secretary of State, Peter Hain. That was in the face of some pressure that I know of—I sat at the table with him—against even the turbine experiment at Strangford Lough. It took enormous pressure to drive that through to see what we could do with renewables. I entirely agree with the noble Lord, Lord Jenkin, about eaga. I pay tribute to the support that it gave to my former constituents. It is an absolutely first-class organisation, both when it was an agency and since it has been in the private sector. It provides a valuable service, as any Member of the other place would confirm. I shall do my best to answer the specific questions. I shall take first those asked by the noble Earl, Lord Cathcart. He asked about the CERT, the incentives for innovation and how it would work. We think that there are two key routes for innovation: the market transformation route and the demonstration route. The market transformation activity is that for which the carbon saving is known but which was not used in the energy efficiency commitment phase 1. As an incentive for these measures new to the market, they will be attributed with an extra 50 per cent carbon saving. Solid wall insulation and ground source heat pumps are also included since, although they were used in small numbers under the energy efficiency commitment phase 1, we wish to support market transformation for those measures. Demonstration action will allow energy suppliers for the first time to count towards their obligation innovation measures in which accurate carbon savings cannot yet be determined. In return for an upfront score based on the cost of the project, energy suppliers will make publicly available the results of their demonstration projects so that we can all benefit from a better understanding of these new approaches. The noble Earl asked how the delivery of the CERT will be overseen. The draft order makes Ofgem the regulator responsible for overseeing the delivery of the CERT. I know nothing about the background to why Ofgem was chosen as opposed to any other body. I am giving the position at the moment following the consultations and the approval by the other House. The order makes Ofgem responsible for overseeing the delivery by monitoring suppliers’ progress towards meeting their obligations. Suppliers’ proposals for meeting their targets must be approved by Ofgem, which will determine the reduction of carbon emissions that will be attributed to them. In August last year, Ofgem issued a consultation paper on its supplier guidance for the operation of the CERT and expects to issue its final administrative arrangements as soon as this order comes into force. The noble Earl also asked what happens if a supplier fails to meet the obligation. Ofgem will be responsible for the enforcement of each supplier’s CERT obligation. It has the power to impose on a supplier a financial penalty of up to 10 per cent of company turnover if it fails. The Electricity Act 1989 and the Gas Act 1986 are the primary legislation that requires Ofgem to be the administering body. Article 16 requires Ofgem to submit annual progress reports to the Secretary of State—that goes without saying, but you always have to say these things. Those reports will also be in the public domain. The noble Earl said that the issue depends on individual consumers taking action. I admit that there will be some difficulties. We are talking about what household consumers in this country can be persuaded or incentivised to do. In the past six years of the energy efficiency commitment, suppliers have shown that they can work effectively and creatively to deliver action from individual customers. The Government are committed to helping individual consumers to overcome real and perceived barriers to action, such as poor information, high upfront costs, apathy and the hassle factor. We intend to build on the successful Act on CO2 campaign with TV, online and press advertising, and we continue to work at local and grass-roots level. In November, the Prime Minister announced that the Government would provide £100 million to the Energy Saving Trust to transform its energy efficiency advice centre network into a proactive green homes service. The level of the target is based on an analysis of an illustrative mix of a balanced selection of possible measures generally regarded as cost-effective. The analysis is informed by information and data provided by energy suppliers, representatives of the industries concerned and experts, including the Building Research Establishment and the Energy Saving Trust. We recognise that the costs to suppliers of achieving their CERT obligations are passed on to consumers through their bills. The Government have sought to ensure that the cost to consumers is kept at a reasonable level.