My Lords, I thank the noble Baroness for her introduction to the government amendments before us. I shall speak to Amendment 95ZAA tabled in my name and the other amendments grouped with it. The Wood review was a very interesting document. I think that the noble Lord, Lord Jenkin, has alluded to the fact that we are now in the endgame of a 40-year period during which we have been very blessed with an industry that has been able to deliver in a safe and secure way the volumes of oil and gas that have powered our industries and made our way of living possible. It has underpinned everything we do. However, let us be in no doubt that we are coming to the end of that golden era and obviously a lot needs to be decided about what to do next.
We have the Wood review, which is a great report and to be massively commended for having only four recommendations; that is always easy to get your head around. However, the executive summary tells us the story. We have had the equivalent of 42 billion barrels of oil from the North Sea. There are now possibly only another 12 to 24 billion barrels of oil equivalent left. It is clearly a depleting resource. It is common knowledge that it peaked 15 years ago. As a result, we now see our economy being affected. Our ability to raise tax has been severely impacted by this and it has changed the revenues that we see. In fact, the Wood review makes clear that in 2013 the steep decline in productivity of this resource led to £6 billion less in tax receipts. That is not a small amount of money to try to make up. I can see perfectly why there would be a desire to extract the last barrel in order to get every drop out. This is a problem which faces us all as a community. As UK plc, it has been such a big part of our tax receipts over the past 30 to 40 years.
In the context of the Infrastructure Bill, does the implementation of the Wood review’s recommendations give us a strategic direction? Does it show that the Government understand the nature of the problem and are preparing us for the future? I would argue: not yet. There is clearly a need to implement these findings. I should state that being able to provide our own oil and gas as opposed to importing it from far-flung places is obviously of benefit in terms of security of supply, broader geopolitical stability and carbon emissions. Carbon emissions have been well regulated. Indigenous production of the fossil fuels that we still need to use will emit lower levels of carbon than importing over long distances from different parts of the world where the regulations are not governed by us and we cannot be certain of the carbon footprint.
None of that is to say that we should not do this, but because of where we are today, we need to think of the future of the continental shelf and what it will deliver for us in the next 40 years. It is quite clear that if we are to benefit from a new industry, it will be carbon capture and storage. In fact, it is mentioned in the Wood review. The purpose of tabling Amendment 95ZAA is simply to put in the Bill the recognition that we are in transition and moving to a new era where no matter how much we skirt around it, the oil and gas are running out. That problem is not explicitly stated or put front and centre of the Wood review, for probably good reasons. However, the issue is not that it is a fractured and small industry with 300 wells and
a number of different companies. It is just that the resource is dwindling. We can make ourselves more efficient and increase the rate of extraction, but it will not be around for ever.
It is important that the Government of the day should realise that we need to start investing now in what will be the future industry. Carbon capture and storage provides us with a potential source of revenue and a very important tool in the armoury of the low-carbon economy. We know the Government are committed to that, but we would like to see more emphasis being placed on it. In Government, we certainly would put that emphasis on it because it is fundamental to our industrial strategy for the UK. There are many ways to produce low-carbon electricity, such as nuclear or renewables. There are not that many way to produce steel, chemicals or cement if you exclude carbon capture and storage. It offers the potential to enable us to fully decarbonise our economy without at the same time de-industrialising and losing those heavy industries to other parts of the world. The key to that is ensuring that we have the infrastructure in place that enables us to build carbon capture and storage technology. I have tabled Amendment 95ZAA merely to raise the issue and ensure that Government thinking is in line with this analysis and that there is a recognition that carbon capture, transportation and storage will be a big part of our infrastructure going forward.
The other two amendments are very much probing in nature and relate to the broader question of whether maximising economic recovery is compatible with our climate change commitments. As I said at the start, I am absolutely clear that there are carbon benefits to indigenous supply, and this is not intended to go against that. However, it is also of concern to people that we often hear rhetoric such as, “Well, if we don’t develop it, we’ll be buying it from somewhere else and that will be a negative thing”. That is only true in so far as the carbon footprint of extracting the asset is lower than if it comes from overseas or other sources. There is nothing inherently lower carbon about extracting the last drop of oil from the North Sea. It may well be the case at the moment, but it might not be in the future. We want to make sure that we are not ignorant of the fact that we are going to have to shift to a low-carbon economy and that there will come a point where oil and gas have to be left in the ground.
We know from the Intergovernmental Panel on Climate Change that we have roughly a 3 trillion tonne international or global carbon budget and that around half of that has already been emitted. At the rate we are going, the remaining half of the budget will be fully emitted before 2040, which is not that far away—and that is to have a safe chance of staying within a 2-degree increase in terms of global warming. At some point the oil and gas industry will have either to commit to full carbon capture and storage of all its emissions or accept that a large proportion of the oil and gas will have to stay in the ground. The reason for tabling these amendments, which as I say are very much probing amendments, is to elicit some comments from the Minister about the longer-term vision and whether we accept and acknowledge that there will come a point when our global carbon budget is exceeded and we need to do things very differently.
Amendment 95ZAC is designed to try to tease out some of the recommendations of the Wood review in a bit more detail. We understand that this is enabling legislation but we felt that it would be good to be provided with a little more detail and some assurances that the Wood review’s recommendations will be introduced.
The last amendment in my name in this group is Amendment 95ZBA, which relates to an aspect of these clauses that the noble Baroness has touched on; namely, the payment of the new regulator. We fully support the idea that this should be an arm’s-length regulator in due course and that it should be funded from receipts from industry. We have tabled this amendment simply to require the Secretary of State to report on when the regulatory body will be fully funded by that levy.
These amendments explore an area which is now the subject of a very important debate. As I have said, we have had 40 years of access to an amazing resource that has led to countless millions and billions of pounds being ploughed into our economy, many thousands of jobs being created and various successful industries being born off the back of it. Those days, I fear, are drawing to a close. There are new ways we can use the continental shelf and what it offers us, and there is infrastructure there which can be reused. Let us be under no illusion: the Wood review was needed because we are in a process of change, and I am sure there will be more changes in the future. I would like to see the Infrastructure Bill, before it leaves this House, fully acknowledge that we are in this transition and put an emphasis on new technologies, new uses of our assets, and the new infrastructure that we will need.
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