My Lords, these amendments have attracted significant debate across the House today and I am extremely grateful for the insights of all noble Lords who have spoken. However, the Government do not agree that the Bill should be amended as proposed and I shall set out the reasons for this.
The provisions in Part 1 set out a logical, measured approach that enables the Government to set the UK’s first sector-specific carbon intensity target in law. Once set, the provisions place a legal duty on the Secretary of State to ensure that the target is achieved. This brings with it important responsibilities. It is not something that should be rushed into. A target would have significant implications for the power sector, consumers and the wider economy. It is therefore vital to understand fully, based on evidence, whether a target represents the best approach to meeting our economy-wide carbon budgets cost-effectively and, if so, what level it should be set at.
The right time to consider this is in 2016, not 2014 as proposed by Amendment 1, as 2016 is when, in line with the requirements of the Climate Change Act, we will be undertaking extensive analysis to set the level of the fifth carbon budget in law, incorporating advice from the Committee on Climate Change. At that point we can consider a decarbonisation target within the broader context of the trajectory of our whole economy towards our 2050 target.
Moreover, in 2016 we will have a better understanding of how low-carbon forms of electricity have developed, the commercial deliverability of carbon capture and storage, the uptake of electric vehicles, and how the market is responding to the reforms included in this Bill. We will also have a clearer idea of a future climate change package both at the global and the EU level. These are important considerations when looking at the UK’s targets for 2030. By contrast, the noble Lord’s proposed approach would mean rushing to set a target in less than six months. As it stands, there are significant uncertainties now as to the energy mix that will best meet our objectives of secure, sustainable and affordable energy. This would make setting a robust target challenging.
In terms of investor certainty, according to the British Chambers of Commerce, the Energy Bill as it stands will,
“provide sufficient incentives to attract investment in low carbon forms of energy”.
This is supported by the point made at Second Reading by my noble friend Lord Browne of Madingley. In his experience as a businessman and an investor:
“The incentive structures contained in the Bill are far more important than targets or aspirations, because they are the mechanism for action”.—[Official Report, 18/6/13; col. 192.]
This is not forgetting that since January 2010 there have been announcements that could see more than £29 billion of investment in renewable energy. This speaks for itself. Clearly, a decarbonisation target is not the only way to encourage investment.
On Amendment 2, I fully agree with noble Lords that there should be a role for the Committee on Climate Change. In line with its responsibilities under the Climate Change Act, it is due to provide advice on the level of the fifth carbon budget. This covers the 2030 period. This analysis is perfectly sufficient to advise on a decarbonisation target range and it is therefore unnecessary to include further provisions in the Bill.
Amendment 2A, tabled by the noble Lord, Lord O’Neill, proposes setting annual carbon intensity limits on electricity suppliers. I do not support this amendment for three key reasons. First, the government reforms in the Bill support market-based mechanisms to incentivise a cost-effective transition to low-carbon power. Introducing an annual carbon limit on suppliers would be contrary to this approach. Secondly, the proposal would introduce confusion around accountability. The Government’s provisions clearly place legal responsibility for meeting the target range on the Secretary of State. This position should be maintained since it is he or she who is responsible for setting UK energy policy and is ultimately accountable to Parliament. Lastly, this is a blunt instrument which could have unintended consequences. We are not convinced that the proposal would not undermine our security of supply objectives. We are also concerned that the amendment may lead to an increase in consumer bills if the costs of compliance are passed on from energy suppliers to consumers.
The Government are not willing to accept these amendments today. However, we considered the amendment tabled by the noble Baroness, Lady Worthington, in Grand Committee. This proposed that the Secretary of State explain the actions to be taken to stay on track to meet the target over time. The Government support the aim of transparent reporting and I therefore commit to the House that, where carbon intensity is reported to have increased year on year for three consecutive years, the Government will explain the reasons why, and, where appropriate, report additional actions to address it within the annual statement of grid carbon intensity.
In conclusion, I hope that noble Lords can see the drawbacks of rushing to set a target next year. We want a much more measured approach. We all want to see decarbonisation continue—and this Bill enables that—but we must all be mindful that any targets set now will impact on consumer bills. Without having the more detailed information that is needed across all sectors, and without looking at our position against our European partners and more widely globally, setting a target would put us in isolation and make us uncompetitive against our partners.
We have to be sensible and see this as an opportunity to debate the subject but to set it in the appropriate
context. We do not know which technologies will realistically be able to be deployed in the 2020s. As the EEF has warned,
“should current assumptions about the development of carbon capture technology, the level of investment in nuclear power, the cost of offshore wind or the future price of gas prove wrong the UK could end up committed to an unrealistic and extremely costly target”.
We need to keep these issues very much in mind. Ultimately, what we decide will be borne by the consumer. I hope that the noble Lord will withdraw his amendment.