Debate on the Address

I shall at least touch on that, but essentially I agree with the hon. Gentleman. If taxation is related to the environment, it must be designed to deal with environmental problems. I do not think that there is much difference between us on that. If the Government make the wrong decisions, foundries in my constituency will have higher costs and jobs could be lost to companies abroad that have higher carbon emissions, but which are at a competitive advantage because their overall costs are lower. The Bill will create a new domestic legal framework for emission reductions and provide a long-term certainty and incentive for business to invest in low-carbon technology. We are assured of that. It will also help with the development of international policy. If that is so, and I think that it will be, it provides the opportunity to preserve our steel and foundry industries, to promote lower-carbon technology within them, and to export that technology abroad. Traditionally, steel production and cast metal production have been regarded as dirty industries because the processes they use are carbon intensive. Ironically, the products—steel and cast metal—are relatively environmentally friendly because they are durable, which means that they last a long time and do not need to be replaced. Above all, however, they are recyclable in a way that many substitute products are not. We have to face the reality that the world demand for those products will escalate, possibly dramatically. The world market for steel is 1.1 billion tonnes this year. It will increase to 1.2 billion tonnes next year and so on for the foreseeable future. In China alone, just 1 per cent. of the population own a car. If it gets anywhere near to the western equivalent of about 50 per cent., the implications for the use of steel and carbon emissions are breathtaking. However, as a nation that enjoys all those advantages, we cannot stand aside and lecture China, demanding that it does not progress in that way. We must find a cheaper method of producing steel and metal in a greener and more energy efficient way, and ensure that that technology and the processes are exported. Key to our success will be the development of the international emissions trading scheme. I welcome moves to set European-wide emissions targets of a 30 per cent. reduction by 2020 and a 60 per cent. reduction by 2050. However, for those to be effective and to have a substantial impact on future emissions, they must be international. The current emissions trading scheme needs to be refined to meet that challenge. The system estimates future levels of production and allocates carbon credits accordingly. Any production above that has to involve purchasing carbon credits from under-users. It is quite possible for a company to invest to increase its production, albeit by cleaner methods, but to have to buy carbon credits to accommodate that increased production. That involves a double cost—first, for the new investment, and secondly, for the additional carbon credits to accommodate the additional production. In addition, no incentive is built into the system for companies that keep within their production targets to reinvest to ensure that their processes become cleaner. The bottom line is that companies in this country could be penalised for expanding their production to meet rising world demand, while companies in other countries with higher levels of carbon emissions expand their production to meet the shortfall. The perverse consequences of that would be the loss of production here coupled with an overall increase in the level of carbon emissions internationally. I want to suggest a solution, which I know the industry is putting to the Minister and which involves adopting a sectoral approach. It would not penalise investment or increase production, but it would relate carbon credits to energy efficiency. In steel, it would mean that a series of CO2 emission factors could be calculated and then averaged according to the type of process used. At the end of the accounting period, each company would have its actual emissions assessed against its baseline figures and multiplied by the volume of steel produced. If a company’s performance were worse than the baseline, it would have to buy allowances, and if its performance were better than the baseline, it would receive allowances for sale, thereby incentivising companies to reduce emissions and to increase profits. Furthermore, by recalculating the baseline downwards after each accounting period, the target would get tougher, which would provide a long-term drive for greater energy efficiency and a model that would enable companies from other countries to join. I welcome the current dialogue between my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs and business to develop a unified position for phase 3 of the emissions trading scheme by 2012. I hope that he will take my remarks and argument on board as the most coherent way to make an international impact on carbon emissions. On the role of environmental technology and renewable energy in reducing carbon emissions, given the inevitability of global manufacturing expansion to meet the demands of developing economies, it is essential that we offset the increased carbon emissions from industry by reductions through environmental technology and consumer behaviour. There is a danger that environmentally friendly lifestyles will become synonymous with a reduced quality of life. People want to fly and travel, and although improvements in public transport can help, it is ultimately changes in technology that will assist lower carbon emissions without dramatic changes in people’s quality of life. Education in more environmentally friendly lifestyles is necessary, but provision within the climate change Bill must go with the grain of people’s aspirations and not frustrate them. My region, which is known as the black country, has been synonymous with heavy dirty industry, but it is now intent on driving the development of new environmental technologies. The Black Country chamber of commerce is holding an environmental technology summit in the new year with the intention of making the region a world leader in the field. Although research and development are vital to develop new products to reach those goals, there is a whole range of other Government functions that need to be changed to assist the process. A company in my constituency, Forkers Ltd., is in the vanguard of geothermal technology and heat pump products. The earth is a huge battery of energy that could be used to fuel new buildings. Amazingly, the use of geothermal energy in this country is very low at the moment, especially in comparison with Scandinavia and countries such as Iceland. Given the difficulties in developing wind farms and other forms of renewable energy, the Government need to concentrate on geothermal energy. We need to work with planners and developers and examine building regulations to ensure that where the technological potential exists, new buildings use geothermal energy to conserve energy from other sources. RegenCo, the vehicle for the regeneration of the black country, has ambitious plans for an environmental technology park near West Bromwich, but it needs cash and a commitment from local planners to prepare the site for development and to line up companies that are pioneering environmentally friendly and recyclable products. I trust that the Government will ensure that the regional development agency, working with the local agency, will develop that resource and play its part in changing the image of the black country from an area with traditional industries to one that is in the vanguard of new technologies. In conclusion, I congratulate the Government on both commissioning the Stern report and responding to it. Climate change legislation must reflect the scale of the challenge and cut across all Departments, because the matter is not only DEFRA’s responsibility. We need investment in new technologies, education on changes in lifestyle and changes in planning priorities and, possibly, in tax priorities, too. It is for Departments to take a lead and, above all, it is for Britain to be a driver of change in both Europe and the rest of the world.