My Lords, I do not wish to prolong this debate greatly although I am grateful to have this opportunity to speak to this amendment, which raises a different issue from the one we have just debated.
Almost in anticipation that the Government would use the setting of the carbon budgets as a reason not to agree to setting a decarbonisation target, I tabled this amendment to probe the logic of that. I have tried to explain, possibly in vain sadly, that carbon budgets and carbon intensity are not one and the same and should not be linked. However, I feared that I might not succeed in making that point, so tabled this amendment simply to show that the carbon intensity of electricity is a very clear indicator of progress in the implementation of the Bill. Carbon intensity is a value that is currently recorded and reported but, sadly, over the past decade has not fallen. It fell dramatically between 1990 and 2000 when we invested in CCGT gas plants which were more efficient and cleaner. The carbon intensity of power fell from around 950 to around 450 to 500. That was achieved in a decade.
Since then, I am sad to say that both the previous Government and this Government have utterly failed to deliver anything comparable and carbon intensities have been bouncing around pretty much at will, reflecting the global prices of the commodities involved—gas and coal. Last year, we saw almost a record high of 530 grams per kilowatt hour in the UK in 2012. This is just wasteful carbon emissions, I am afraid to say. Had we got a grip and introduced a proper energy policy that took into account the carbon intensity and managed it down, we would not have seen the high carbon burn that we saw last year, which is displacing gas.
Members of the Committee who are fans of gas ought to note that we have a common enemy in coal, particularly coal treated in old stations built 30 or 40 years ago, some of which are now fitted with filtration equipment that knocks their efficiency down even further. There is probably no worse way of generating electricity in terms of carbon emissions, yet there they were base loading all the way through last year, pushing up the carbon intensity to record levels. As I have mentioned previously, that can be addressed. The merit order of existing plants, if it operates optimally, could take 200 grams off overnight without the need to sign any long, expensive and hard to negotiate contracts—if we simply introduce the right policy framework.
The amendment would require budgets to start to be set in 2020, when it would be possible to get emissions to around 200 grams per kilowatt hour with very little in the way of any extra investment. Simply using the investment that is already in the supply chain to meet our 2020 renewables targets, coupled with a change in the merit order, would take us there. Beyond that, we can look at a target in 2025 of around 150 grams per kilowatt hour. Again, there is no great need to invest in lots of new capacity to achieve that. It simply means continuing to invest in renewables on roughly the same scale as we are doing now, seeing the CCS demonstration projects get under way on gas and coal and seeing the biomass conversions. Essentially, this is not a hard trajectory. The point of putting down this amendment is to explain that the pathway from where we are today, with ridiculously high carbon intensity, to where we need to get to in 2030 to reach our legally binding targets cost-efficiently is not difficult. If you want to see the road map or the plan of how to get there, you need only refer to the CCC’s reports on the subject, which contain a huge amount of detail
outlining this and explaining how existing kit and existing plant can be used to reach very much lower levels than we have today.
I also mentioned in my previous speech that we already have a carbon floor price. The Government should accept that targets need to be set that justify that policy. It is an incredibly distorting policy, with no environmental benefits. As I have said before, reductions that occur underneath the cap set in Europe are simply traded away. So it is not about carbon. It is meant to be about securing investment in UK plc. If that investment is not forthcoming—if, for whatever reason, the policies in this Energy Bill do not deliver—the public and Parliament have a right to be able to measure that. This is a significant piece of legislation, taking wide-ranging powers. It is matched in its size and significance by the existing carbon floor price. It is only right that we take it upon ourselves to deliver an outcome for these policies. That outcome must be a steady decline in carbon intensity.
Obviously, I would not recommend the setting of a series of targets starting in 2020 and going five years beyond that if I was not confident that we had the policies to deliver on that. If they work, CFDs are the mechanism which the Government hope will be used to achieve this. If the Government have confidence in their Bill and the measures contained in it, they ought to have the confidence to set these targets. Many people have made the point that flexibility is necessary, as we cannot predict the future and should not be technologically specific in our aspirations. I completely agree. I have said before, and will say again, that the market should decide how best to meet these targets. It will do it with much more efficiency than even the best minds in the Treasury can achieve.
I will stop there because I do not want to prolong this debate too much and I am grateful for being able to raise this separate issue. When we go through the Bill, I will speak to amendments concerning the energy performance standard because that is the mechanism within this Bill that could certainly deliver on these decarbonisation targets. Taken as a whole, these targets are actually very sensible: carbon budgets already exist and, knowing that, the Government can set them happily. There is nothing to stop the Government and it is something that should accompany this Bill. Consumers and wider society deserve some accountability for all these powers that we are giving to the Secretary of State.