Select Committee on Environmental Audit Second Report


PRE-BUDGET 2000: FUELLING THE DEBATE

The Long Term Strategy

Moving to a low carbon economy

83. There has been a significant reduction in UK carbon dioxide emissions over the last decade driven mainly by the switch from oil to gas. However, emission levels are forecast to start rising again around 2010.[159] This increase reflects current expectations about when existing power stations will close and assumes that our energy demands will continue to grow with only small improvements in energy intensity and rising traffic levels.[160] The Government estimates that greenhouse gas emissions from the transport sector will rise by 20% on 1990 levels by 2010 and 33% on 1990 levels by 2020. The Government's latest review of the UK's progress towards sustainable development also predicts a 17% growth in road traffic in England during the period 2000-2010.[161]

84. The WWF believes that "urgent action is needed to tackle emissions from the transport sector if the UK is to meet its emission reduction targets and be in a position to make the deeper cuts needed in the future".[162] The Royal Commission on Environmental Pollution has predicted that the UK will have to reduce carbon dioxide emissions by 60% by 2050 if we are to slow down the pace of change.[163] Mr Timms acknowledged that the targets set at Kyoto were not going to be the end of the story. He told the Committee that the Climate Change Programme, and the measures that the Government had already taken, would achieve the Kyoto objectives and go beyond them "and then we shall need to do some completely fresh thinking about where we go in the longer term".[164]

85. The Government's climate change programme acknowledges that, in the longer term, global, greenhouse gas emissions may need to be reduced by 60-70% to avoid dangerous climate change with developed countries perhaps needing to make even deeper cuts of over 90%. The Government recognises that this will ultimately require a move away from fossil fuels to a low carbon economy.[165]

86. Most witnesses agreed on the key stages of evolution that motor car will undergo in the future: ultra clean vehicles by 2005, breaking the 100 mile per gallon barrier, and then to carbon-free emission—with hydrogen technology as the front runner. The oil and motor industry seems to be agreed that hydrogen is likely to be the fuel of the future.[166] However, there is no real consensus on how the UK might get to a hydrogen economy, what type of hydrogen systems should be used (and therefore the supply infrastructures that will be required), and what, if any, interim steps are necessary.

87. BMW believes that hydrogen should be used as a direct internal combustion engine fuel to replace petrol and has recently manufactured fifteen cars equipped with hydrogen fuel tanks.[167] These also use hydrogen to power an on-board fuel cell which replaces the car battery. Other manufacturers are developing hydrogen fuel cells to enable the car to generate sufficient electricity to drive the whole vehicle. Fuel cells work on the principle that energy is released on the electro-chemical conversion of hydrogen and oxygen into water. Instead of burning the hydrogen fuel as in an internal combustion engine, the fuel cell uses a catalyst to promote the conversion and produce electrical energy.[168]

88. The AA told the Committee that moving directly to a hydrogen economy was a "very optimistic strategy"[169] and that there were suitable intermediates that should be considered. These could include obtaining hydrogen from petrol or methanol, or using natural gas in compressed or liquid form.[170] BP cautioned that it was important to keep a variety of options open as we do not know where technology will ultimately lead us and what issues will arise as we investigate the complete life cycle of various fuels and vehicles.[171]

89. Hydrogen is an attractive option as an alternative fuel because it does not produce carbon dioxide and other conventional pollutants associated with fossil fuels. However, on a "well to wheel" basis it is important to consider the greenhouse gas emissions associated with the various routes which can be used to deliver the hydrogen to a fuel cell (as discussed above). BMW suggests that in the longer term the source of hydrogen should be sustainable and fuel stations should be set up to provide compressed and liquid hydrogen to the motorist.[172] The key issues then become the storage and handling of the fuel.

Present Government Initiatives

90. The Government's Climate Change Programme states:

91. The Government has said that it is putting this policy into practice with the establishment of the Carbon Trust, funded partly by the Climate Change Levy. The Trust is charged with accelerating the take-up of low carbon technologies and other energy saving measures by business and other levy payers. However, the Government "has in mind" to establish an overarching co-ordinating framework to bring together the delivery of low carbon programmes. It has asked the Advisory Committee on Business and the Environment (ACBE) to advise and consult on this framework.[174]

92. In terms of looking at low carbon options in the transport sector, the Government has pledged to more than double its annual expenditure on the development of greener cars. In November 2000, the Deputy Prime Minister, John Prescott, announced a £69 million package of investment for 2001-2004 for domestic measures to tackle pollution and to promote cleaner, greener vehicles and fuels. This announcement was in response to the final report of the Cleaner Vehicles Task Force. The task force was set up in 1997 to encourage the development manufacture and purchase of cleaner, more fuel-efficient, quieter and less resource intensive vehicles. £9 million of this extra investment for 2001-2004 will be used to support the introduction of technologies such as fuel cell and hybrid vehicles which the Government believes offer "significant benefits for both local air quality and climate change".[175]

93. The Cleaner Vehicle Task Force provided advice to the Government regarding a list of short/medium term measures regarding alternative fuels and engine technologies. In response to the Task Force's final report, the Government said it would continue to encourage development of new technologies which reduce environmental impacts through the Foresight Vehicle Development Programme. A fourth call was announced on 1 September 2000 inviting proposals for research into methods to increase the efficiency of road vehicles with both conventional and alternative powertrain including battery-, hybrid- and fuel cell-electric systems.

Powershift

  94. The Powershift programme is run by the Energy Savings Trust and provides grants to convert cars and lorries to cleaner fuels, notably Liquid Petroleum Gas (LPG) and Compressed Natural Gas (CNG). It funds between 25-75% of the additional cost of buying a vehicle using alternative fuel.[176] The Government has pledged £30 million for this ongoing programme as part of the £69 million package announced in November 2000. This is expected to support the purchase of around 35,000 vehicles including gas and electric vehicles.[177] Much of the evidence which the Committee received praised the Powershift programme and some would welcome additional funding.[178]

Green Fuel Challenge

  95. In the November Pre-Budget Report, the Chancellor announced the establishment of a Green Fuel Challenge. Under the challenge industry is invited to come forward with proposals for practical alternative fuels offering significant environmental benefits. The Chancellor will consider these proposals and announce major reductions in duty rates for the most promising alternative fuels in Budget 2000. The proposals will form the basis of an environmental assessment by the DETR to feed into the Chancellor's consideration. Ultimately, this will result in a hierarchy of fuel duties differentiated by environmental criteria.

96. There was some concern from our witnesses that the Challenge was not open to fuels which required new supporting infrastructure therefore there was no opportunity to present the benefits of hydrogen within this initiative. However, in a recent debate on Greening Government, Mr Meacher confirmed that the challenge was "not confined to existing infrastructure" and that the Treasury would consider appropriate fiscal support measures if industry, voluntary or community groups could present viable practical proposals.[179]

97. It is clear that whichever the preferred fuels, past experience indicates that long-term fiscal signals will need to be maintained to provide the necessary certainty so that industry and consumers can plan and invest against a particular tax regime. In the UK there have been incentives to encourage autogas for five years but the market is only now beginning to take off. BP told the Committee that the importance of long-term policy had been well demonstrated by the situation in New Zealand where there were very large fiscal incentives for gas and LPG vehicles—the largest penetration in the world. However, when they moved away from these incentives, the initiative virtually collapsed overnight.[180]

98. The Committee welcomes the Chancellor's Green Fuel Challenge as positive, fiscal incentive to bring new fuels to market. The "well to wheel" approach should help to ensure that the environmental and social trade-offs are clear for whichever fuels are chosen.

Building the foundations for change

99. The various Government initiatives discussed above have been welcomed by business and NGOs alike but many remain critical that these do not constitute a clear Government strategy for a future economy based on alternatives to fossil fuels. Mr Malcolm Fergusson from IEEP felt that recent developments on VED, company car tax, Powershift and the Green Fuels Challenge could be described as elements of a long-term strategy but they didn't actually amount to a strategy or the long term signals that people need.[181]

100. In the immediate wake of the Pre-Budget 2000 report, the Managing Director of BMW's UK sales organisation commented that there was "little evidence of long-term thinking in some of the taxation policies on Vehicle Excise Duty and on company car tax". Mr Bernard Carey, Director of BMW Group's London Liaison Office, told the Committee that BMW was "looking for more commitment from Government, of whatever hue, to long-term policies on achieving an economy based on alternative fuels".[182] BMW would like to be more involved with Government and get Government more involved with the industry and suppliers of fuels and systems to make the alternative energy economy happen rather than just trying to push people towards it.[183]

101. BMW would clearly like the UK to be as pro-active as Germany. In 1999, the German Government, at the instigation of BMW, Daimler Benz and other companies set up an initiative for future fuels, the Traffic Energy Strategy. It included fuel suppliers, natural gas providers and others and looked at 84 different ways of producing fuel for transport including biomass to make a decision on the future of fuel. It ended up with a short list of three: hydrogen, natural gas and methanol with a slight preference for hydrogen.

102. BP and BMW told the Committee that his sort of evaluation and discussion had not taken place in the UK. For example, BMW felt that there was no real forum or industry body which represented hydrogen "even as a thought".[184] Although the UK Government's own Cleaner Vehicles Task Force looked at longer-term alternative fuels, the main focus has been to look at more immediate alternatives and to reduce carbon dioxide emissions from transport. This was reflected in the final conclusions which concentrated on incentives to accelerate LPG to market through helpful changes in Government policy. For example in relation to tax or planning.

103. The Committee notes the Environment Minister's assurance that the Green Fuel Challenge is not formally restricted to fuels relying on existing infrastructures. However, the Committee recommends that the Government seeks a suitable forum to debate and develop a long-term strategy for alternatives to fossil fuels in road transport and the policy changes which would be needed to realise such a strategy.

104. The Committee recommends that the Government encourages ACBE to consider how the work of bodies such as the Cleaner Vehicles Task Force, Foresight Vehicle Programme and Carbon Trust, supported by the assessments resulting from the Green Fuels Challenge, could be co-ordinated to this end in the course of its work to develop a new framework for promoting the low carbon economy. This framework needs to take account of tax and spending decisions designed to encourage the use of hydrogen and other forms of transport with lower carbon emissions.


159  Climate Change: The UK Programme, DETR, November 2000, p57, para 17 Back

160  Ibid Back

161  Achieving a better quality of life: Review of progress towards sustainable development, Government annual report 2000, DETR, January 2001, p52. Back

162  Ev p91 Back

163  Energy: The Changing Climate, 22nd Report of the Royal Commission on Environmental Pollution, Rec 5, 16 June 2000 Back

164  Q4 Back

165  Climate Change:The UK Programme, November 2000, p9, para19 Back

166  Q283 Back

167  Ev p48 Back

168  Ev p101, para 22 Back

169  Q193 Back

170  Ev p48 Back

171  Q236. BP are increasingly looking to provide alternative fuels such as LPG/Autogas. BP is also a member of the California Fuel Cell Partnership. See Ev p45 Back

172  Ev p48  Back

173  Climate change: The UK Programme, November 2000, DETR, p29, para 20 Back

174  Ibid, p30, para 22 Back

175  DETR Press Release 707, Boost for cleaner, more efficient vehicles, 20 November 2000 Back

176  Ev p100, para 19 Back

177  DETR Press Release 707, Boost for cleaner, more efficient vehicles, 20 November 2000 Back

178  Ev p51 Back

179  HC Deb, 18 January 2001, c175 WH Back

180  Q261 Back

181  Q238 Back

182  Q230 Back

183  Q230 Back

184  Q273 Back


 
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