My Lords, I am grateful to the noble Lord, Lord Oxburgh, for introducing his amendment, to the other noble Lords who have spoken in this debate, and to the Minister for introducing the government amendments starting with Amendment 12.
I do not wish anything that has happened today to undermine our great welcome for the way in which the Minister responded to our debate on CCS. The amendments that we are debating are testimony to how much the Minister has listened and taken on board the comments that were made. We very much welcome the measures, specifically the changes on making explicit the use of sampling and on the sharing of information and, indeed, the addition of government Amendment 12 to Clause 4, which sets out the matters to which the OGA must have regard. The amendment has both an explicit reference to carbon dioxide and the meeting of climate change targets. This is indeed very welcome and I certainly support the amendment being added to the Bill.
Because the Government’s amendment is comprehensive, we will not pursue Amendments 13 and 14 any further. We are delighted that those measures will now be included. I wish to speak also to Amendment 72, which the noble Lord, Lord Oxburgh, tabled and to which I was very pleased to add my name; and to what was my own Amendment 78, to which the noble Lords, Lord Oxburgh and Lord Teverson, have added their names, which is replaced by a manuscript amendment. I apologise for that but we felt that it was important to clarify a change of wording for that amendment. I shall come on to that.
As we are considering in more detail the environmental and climate change aspects of the Bill, I should declare a potential future interest, as I did in Committee.
As many noble Lords may be aware, I shall be stepping down from the Front Bench in a matter of weeks. I am in negotiation with a charity that works on climate change issues, so I felt that I should declare that potential future interest.
Amendment 72, in the name of the noble Lord, Lord Oxburgh, would require the Government to undertake and develop a national strategy for carbon capture and storage. This amendment has a great deal of merit. It was excellent to meet the Minister and officials from his department. As has been mentioned, Stuart Haszeldine from Edinburgh University was present. It was a very good meeting and it became clear in the debate that there is an awful lot to do in the world of carbon capture and storage. However, “carbon capture and storage utilisation” is possibly the phrase we need to start using. That addresses some of the points made by the noble Lord, Lord Howell, about the fact that there is not just one version of carbon capture and storage but potentially many with different attributes, in the same way that there are many renewables technologies with very different attributes.
Carbon capture and storage is a grouping of technologies with different aspects, technologies and uses and different storage end points, some of which are stored underground, some of which might be onshore and some of which might be offshore in disused oilfields or, indeed, in oilfields that continue to be used through enhanced oil recovery. However, there may be other forms of storage, including in mineralised aggregate and as a chemical feed into various other processes. I sense a mood change within industry towards wanting to have a much more in-depth discussion about the use of CCS going forward.
As we face our climate change targets going forward, and in particular the embodiment of those targets in the emissions trading scheme, which creates a hard cap on our industrial sectors that declines over time, we will have to develop a technology to enable us to maintain primary production in this country to keep a thriving and, we hope, growing industrial base. It is going through some difficult times at the moment, but we need to find a policy that will enable us to attract inward investment into industry to help it decarbonise, in the same way as we have done for renewables in the power sector. A strategy is definitely needed, particularly for those industrial players. Although it is welcome that we hope to have two demonstration projects proceeding in the power sector, which will potentially open up useful infrastructure that can be reused, there is very little in the way of policy for industrial players that helps them to decarbonise. They have an incentive to decarbonise in the shape of the carbon price but that is often softened by receiving compensation payments. However, there is no carrot. There is a stick and then there is compensation but there is no bankable, investable policy that would cause them to make a positive investment.
That is an urgent challenge for the UK to get its head around; otherwise, my fear is that we will see more closures, as we have seen at Redcar with SSI, which was meant to be a big element of the Teesside decarbonisation cluster. That closure removes one of the elements of that strategy, which would have led to
a carbon capture and storage hub, which would have decarbonised our industrial bases there and, I am certain, would have attracted investment from Europe and elsewhere because it would have been future-proofed. You could locate there, reinvest in industrial manufacturing and production, and be confident that you had a place to store your CO2 and therefore not just be compensated but actually avoid the need to pay carbon prices. So a strategy is definitely needed for industrial sectors.
Some ideas have been floated. One is that, just as we have a contract for difference in the power sector, it would be possible to have a contract for difference in the industrial sectors. You would not be able to do it off the power price, clearly, but you could do it off the carbon price. You could give some investor certainty that you will be compensating for the fluctuating carbon price and give a degree of confidence so that an investor could go to the bank and say, “On the back of this I am going to receive compensation from these contracts and we should go ahead and invest”. Those are the sorts of things we need to see in this strategy as we go forward.
Our strategy on the capped sectors—those subject to the EU ETS cap; that is, power and industrial—still leaves more than half the economy’s emissions uncapped and very little in the way of a wholesale comprehensive policy to decarbonise those sectors. Those uncapped sectors are largely serviced by the oil and gas industry; that is, the transport and heating sectors, in so far as heating is used in buildings, as opposed to primary manufacture and production. Those uncapped sectors, which affect the oil and gas industry, are a very important part of what we need to get our heads around and what we need to address as we look at our targets, because clearly our targets are economy-wide. They are set out in the carbon budgets we have set ourselves to meet our requirements under the Climate Change Act.
In the way we currently treat the carbon budgets, the uncapped sectors actually cause us the greatest difficulty because we do not have an EU-wide emissions trading scheme or low-carbon incentives in the form of CFDs, and we have fewer levers. We have the renewable transport fuel obligation and the renewable heat incentive, both of which, as the names suggest, incentivise investment only into renewables. They do not do anything for carbon capture and storage in those transport and heat sectors, and nor would they for nuclear. I happen to believe that in the future, we will probably be able to deliver nuclear into those sectors. We are not there yet, but we are close to being able to see how CCS could contribute in those sectors. I should say again that CCS is the broad technology that includes CCU, which would give us a number of technologies to work from.
We have a curious situation where we have a relatively challenging target on the uncapped sectors but almost no comprehensive policies to incentivise decarbonisation. This is where Amendment 78A comes in. This idea was discussed in Committee. It may be ahead of its time and we may need some more discussions. I very much look forward to the department facilitating such discussions after the Bill leaves this House. The fundamental question is: how can we get to a more market-based form of incentive to help decarbonise
heat and transport? I do not think we can rely on renewable heat incentives paid for by taxpayers, and nor is the renewable transport fuel obligation is the answer. There has to be something much more technology-neutral and market-friendly, whereby industries and the private sector can find and select the best projects to help with that task.
The idea we debated in Committee was that we would ask providers and importers of fossil fuels into the UK—whether they are extracting here from the North Sea or onshore, or importing from overseas—to invest in projects which permanently stored and reduced emissions. We have come back with Amendment 78A as a reworked version of that. It is not the perfect wording by any means—it is still a probing amendment—but we felt it important to re-table it because there is the germ of an idea here which will help the Government, and the UK in its move towards economic growth, to harness the power and ingenuity of the private sector in delivering us least-cost decarbonisation.
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The idea, simply put, is that we would require a very small portion of the emissions embedded in those oil and gas products to be certifiably stored, and that would then rise over time. It would be entirely up to the importers and extractors to decide how they would meet that obligation and it would certainly not apply just to UK extractors; it would also apply to imported fuels so as not to distort. I think there is a great deal of merit in exploring that idea further. As I said, Amendment 78A is still a probing amendment but I hope that, following on from the Bill and in the spirit of collaboration that has now emerged on this issue, we can look at that and perhaps incorporate it into the strategy referred to in Amendment 72, which is intended to be a comprehensive strategy.
I am delighted that carbon negativity has come up, and I am grateful to the noble Lords, Lord Oxburgh and Lord Howell, for mentioning it. It is an anomaly. As I mentioned, we have these carbon budgets, and both the inventory submitted at international negotiations and our own budgets would credit negative emissions if we had the right mechanism to do so. We could be helping to meet our targets through the use of carbon-negative technologies, both domestically and internationally, if we could just find a way to certify that and make sure that it was done well. It is certainly not beyond our wit to be able to certify such things. If you move in the world of engineering solutions to climate change, as I do, you meet many people who already have or are very close to having projects that deliver carbon-negative emissions. One I am particularly fond of—it is near to where I live in Cambridgeshire—is the Carbon 8 company, which takes hazardous waste from an incinerator, combines it with CO2 derived from a biomass plant and turns it into a permanent aggregate which is then made into building materials that can be used to build buildings and infrastructure.