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Lord Wade of Chorlton: The noble Lord, Lord Ezra, referred to the importance of taking account of environmental matters, and he referred to the Shell platform. Yet surely here was an instance when all the facts concerning the scientific nature and the environmental benefits of the disposal of the platform were taken into account, but there was an emotional response to those matters. It is important to understand that when we include these phrases in legislation we are dealing with what is scientifically sustainable and with courses of action that are sensible in environmental terms and are based on scientific evidence, and not with emotional evidence that often holds sway. History tells us that an emotional response works against the interests of society as a whole.

Lord Peston: This is an interesting set of amendments and it is the nearest we get to placing the Bill in the context of energy policy and long-term development. I would say immediately to the noble Lord, Lord Wade, that I take a hard-headed view as to how we approach the environment. We must consider environmental damage, but we must also consider the cost side. I believe there is nothing between us on that. As regards the oil rig that was mentioned, one could argue whether that matter was examined correctly at any stage. However, I take it that there is no suggestion from the noble Earl, Lord Cranbrook—there is certainly no suggestion from the rest of us—that one can achieve what one wants with the environment without cost. That is not what we are arguing. I do not think that there is a free ride as regards the environment other than if we approach the environment correctly, that will be enormously beneficial, in particular to our successors. The environmental damage that we suffer was inflicted by our predecessors who did not consider these issues carefully. That is certainly the meaning I give to what the noble Earl refers to as sustainable development. I believe that that involves taking a view into the future and asking ourselves whether we take properly into account, in considering the needs of the future, the costs placed on future generations.

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I agree with the noble Earl that it has long been recognised that one of the weaknesses of the uncontrolled free market is that it does not lead to an optimal outcome. That does not mean that one destroys the free market; it merely means that one modifies its workings in certain circumstances to improve the outcome. I hope that we are all in agreement on that. I believe that my noble friend Lady Hilton of Eggardon will deal with our Amendment No. 16, which falls within this context, but I want it to be dealt with separately.

I wish to refer to two matters. The main one concerns whether the noble Earl has anything to add—we always use government figures anyway—on recoverable gas reserves in all their different forms: that is, the proven reserves, the probable reserves and the possible reserves. Is it still the department's view that, on perhaps the most pessimistic assumptions, we have, at present rates of use, some 35 years of reserves, or, more optimistically, that we might get as much as 45 years of gas reserves? I am not a great believer in these long-term forecasts anyway. I can still remember, as can other Members of the Committee, the first time I heard that North Sea gas had been discovered. I remember that the reaction was, "Hoorah, there is gas in the North Sea, but we are going to use it up before you can look round". As far as I know, although we have been using it up at a tremendous rate we still seem to have lots of it. I am never as pessimistic as others in this regard. This reminds me of the estimates that economists made of coal reserves in the 19th century. The economists proved to everyone's satisfaction that we would run out of coal in about the first quarter of the 20th century. As it is, quite the reverse has happened and we ended up with far more coal than anyone was ever able to find a use for.

I am not pessimistic as regards gas, but that does not mean that I do not take the question of reserves seriously. I hope that when the noble Earl replies he will say whether there is any more up-to-date information he can give us on that. I also hope that he will say whether he regards it as being within the remit of the director, as already stated, to consider matters of this kind. Perhaps the noble Earl could say whether he thinks Amendment No. 18 standing in my name and that of my noble friend Lord Haskel is not needed from that point of view because the director would make this provision anyway. I hope the noble Earl will be able to say that. Essentially I am trying to be as supportive as I can. I am enormously looking forward to hearing the subtleties of the difference between Amendments Nos. 20 and 22, because I do not think I could write an exam answer on the difference in meaning between those two amendments. Subject to that, my desire has been to be as helpful as I can on this.

Lord Wade of Chorlton: I wish to make one further comment on the point that the noble Lord, Lord Peston, has just made. Past progress shows us that sustainable development is not just a matter of trying to conserve the resources we already have; it is also a matter of allowing society to find solutions to the changing needs for resources and the changing costs of resources. I should strike a note of caution as regards these kinds of amendments. Although, on the one hand, they appear to be helpful in terms of protecting what we have, at the same time we must be careful that they do not limit the

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development of technology and new business methods to find solutions which deal with people's needs in a different way. It is interesting to note that throughout history we have always satisfied people's needs to a greater rather than to a lesser extent, and we have provided the free market to do that.

Lord Peston: I agree with the noble Lord, Lord Wade. I am certain that in perhaps 50 years from now when we are all long gone—perhaps not all of us; the younger Peers present will still be with us, assuming they are still Members of this Chamber or its successor body—people in this Chamber will wonder why we wasted time discussing whether gas would run out when they know that the only fuel one uses is something I cannot even think of. The noble Lord is quite right in that regard. However, that does not mean that one neglects a valuable asset while one has it. There are two sides to this matter. The world is always surprising us but this is a valuable asset and we do not wish to see it wasted. I do not think there is any difference between us on that.

Earl Ferrers: The noble Lord, Lord Ezra, said that he was not quite certain what the physical environment was. I am bound to tell him that I knew the additional word would upset the noble Lord, Lord Peston. We considered it all and we thought that we had better satisfy the noble Lord. Had he been more on the ball and put down the amendment himself, I would have been able to accept it. However, he did not do that, and he accuses me of not accepting amendments.

Lord Peston: I would never doubt the noble Earl's word. I take it he is telling me that if I had tabled the amendment, that would not have been regarded as automatically to be rejected.

Earl Ferrers: My admiration for the noble Lord, Lord Peston, would have increased even more had he put it down. However, as he did not, my admiration drops a rung or two down the ladder, but it is still high. It is, I am bound to say, an unrivalled pleasure to share the sponsorship of an amendment with my noble friend Lord Cranbrook. I share his view that it is necessary to include a definition of the environment. The change was also suggested by the Energy Saving Trust which has held a number of helpful meetings with my department. This provision does meet its concern that the use of the term "physical environment" might be taken not to include the atmosphere.

The noble Lord, Lord Peston, said that he was entranced by the subtleties of the difference between the two amendments. I am bound to say that I am a little fascinated by that but only marginally, because I am not quite certain what the difference is. However, I have no doubt that my noble friend will tell me, as he will tell the rest of the Committee later.

The use of the definition of the word "environment" from the Environmental Protection Act, which was also used in the Railways Act 1993, will make it clear that the effects which the director and the Secretary of State must take into account include damage to the atmosphere resulting from the leakage of methane. Therefore, I am glad that my noble friend and I share a common view on that.

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I fear, however, that I cannot be so encouraging about my noble friend's suggestion that the director should have a statutory duty to take account of the objective of achieving sustainable development. The Government attach great importance to that principle. We believe that the Bill will promote sustainable development by harnessing the forces of the profit motive to provide incentives for the efficient use of gas and not the wasteful use of it, which is anti-social to the environment. There is also a specific duty in relation to the efficient use of gas which covers energy efficiency matters. Condition 16 of the draft licence requires energy efficiency advice to be provided. Those measures, together with others in the Bill, will help promote a sustainable development, although the words may not appear on the face of the Bill.

I am afraid that one particular difficulty with my noble friend's proposal is the lack of a satisfactory definition of "sustainable development". The 1995 Act, referred to in the amendment, leaves the matter to guidance from the Secretary of State. While that may be entirely appropriate for an environmental regulator such as the new environment agency, it would cause difficulties in the case of an economic regulator. That is because it could cut across the principle of an independent regulator and, having regard to the breadth of the regulator's powers, that could cause unacceptable uncertainty.

The noble Lord, Lord Peston, wants me to say that his Amendment No. 18 is unnecessary. I did not do that because I feared that the noble Lord might be upset but I believe that I can satisfy him about that. It is unnecessary. He mentioned in his amendment three specific matters to which the director should have regard in performing her duties. In broad terms, those were oil reserves, the Rio Summit of 1992 and funding the Energy Saving Trust.

I should remind the Committee that the introduction of competition will in itself provide a spur to energy efficiency. While a monopoly supplier has no financial incentive to reduce the overall size of the market, competing suppliers are interested only in increasing their slice of the market, not in the overall size. The Bill, which also allows for suppliers to compete to sell energy packages—warm houses, as it were, rather than therms of gas—therefore removes a major disincentive to energy efficiency.

Amendment No. 18 suggests that the director should have regard to official estimates of the amount of discovered and recoverable reserves of gas. That proposition rather reminds one of the 1970s arguments over depletion policy which the party opposite talked about. We believe that such issues are for the market to resolve. In any event, if the director were to consider the question of gas reserves she might well think there was no need to worry about energy efficiency, as the amount of new gas found on the United Kingdom continental shelf has been greater than production in recent years, despite the fact that production has been rising more quickly each year.

The question of whether the director should have regard to the "Rio commitments" was discussed in another place, when it was noted that the Government expect to achieve those targets, with some considerable margin, by the year 2000. That will be done through a variety of measures which are already in place. Placing a

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duty on the director to consider that might therefore also have the perverse effect of encouraging a relaxation of effort on energy efficiency.

The question of the funding of projects through the Energy Saving Trust has now been resolved by the announcement by the Secretary of State for the Environment on 11th May that he was making £25 million available annually to the EST between 1996 and when the gas and electricity markets are fully liberalised. That will enable the EST to promote innovative pump-priming schemes which are designed to take advantage of and enhance the effectiveness of the developing competitive markets for energy and energy services. Those measures will be able to operate without raising gas prices, which would have been the only way the regulator could have funded the trust.

I hope that I have been able to persuade the noble Lord, Lord Peston, that Amendment No. 18 is not necessary.

5.30 p.m.

Lord Ezra: With regard to Amendment No. 17, the noble Earl told us that he is not disposed to accept the objective of achieving sustainable development. I have no doubt that the noble Earl, Lord Cranbrook, will deal with that. But the Minister did not indicate whether he would accept the first part of the amendment which adds the words:

    "and the use of gas conveyed through pipes".

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