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Lord Jenkin of Roding: My Lords, I, too, support the amendment. I do so following the noble Lord, Lord Ezra, who for some years was one of the few voices in this Chamber who consistently argued for the expansion of combined heat and power. My noble friend Lady Miller of Hendon has made a compelling case, to which I hope the Minister will listen.

I shall make one central point. When the White Paper was published last year it was widely interpreted as having set out a new approach to a low carbon energy policy. Indeed, in paragraph 1.18 of that White Paper, under the heading:

"The goals of our new energy policy",

the first goal, printed in bold, was,

"to put ourselves on a path to cut the UK's carbon dioxide emissions—the main contributor to global warming—by some 60 per cent by about 2050".

When the Royal Commission published that figure there was much scepticism, but that target has become a central plank of the Government's aspirations—I use that word because we recognise that they cannot be more than that at this stage. There it is—the first goal is to reduce CO2 emissions.

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The next page contains the proposals for how that will be achieved. Under the heading,

"How we will achieve our goals"—

that is, the goal of reducing carbon emissions—paragraph 1.29 states:

"We believe it is possible to achieve this goal by reducing the amount of energy we consume, together with"—

these are the key words—

"a substantial increase in renewable energy".

So, there is the goal—the end, as it were—of reducing carbon dioxide, and the means: the increase in renewables. As my noble friend Lady Miller said, sight has been lost of the ends and the means have now become the primary target. They have become the goal. CHP is a technology that can achieve a marked increase in energy efficiency, by either reducing emissions for the same amount of output or increasing output with no increase in emissions; but receives no support. I shall weary the House by quoting, yet again, the words of the noble Lord, Lord Whitty, in Grand Committee:

"We need to ensure that the renewables target is met and not undermined by anything that we do to CHP".—[Official Report, 10/2/04; col. GC 528.]

That position stands the policy on its head. The means have become the ends—and there are other such examples that will be considered later—where a perfectly satisfactory and proven way of reducing carbon dioxide and the CO2 equivalent is being denied the help that it deserves in order to save the Government's face as they head towards their targets for wind power.

What has happened? The CHPA made an interesting statement that capacity in CHP fell last year for the first time since 1991. That sits alongside an announcement from Defra, the noble Lord's own department, last week on 25 March, which said:

"Statistics published today by Defra show that carbon dioxide emissions increased by 1.5 per cent during 2003".

What could be madder than that? My noble friend called it "creative book keeping", but, with great respect to her, it is much worse than that: it is standing the policy on its head, confusing the ends with the means and ensuring that the Government will not achieve their first goal, which I quoted from the White Paper; namely, the reduction of CO2.

It is nonsense to refuse to support CHP in order not to blunt the incentive for windmills, but that is what the Government are doing and why I support my noble friend's amendment. I hope that she will press it to a Division.

4 p.m.

Lord Peyton of Yeovil: My Lords, I too support my noble friend's amendment. I admire her persistence, eloquence and vigour and the way that she has sustained those qualities having gone through the anaesthetic experience of proceedings in Grand Committee in the Moses Room. I do not know how your Lordships can summon the patience to go

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through that dreary business when the Committee's teeth are removed and you are told at the beginning that you have no power to amend the Bill but that you must go through it and discuss it and take what pleasure, enjoyment or satisfaction you can from government explanations.

I have some sympathy with the noble Lord, Lord Whitty. I cannot understand why he instead of the Department of Trade and Industry has been saddled with this Bill. I thought that energy was subject to the DTI. I regarded the White Paper as a product of the DTI and I cannot for the life of me understand why the DTI is not here to answer for it. The explanation that occurs to me is the natural inborn coyness of the Secretary of State, who probably knows awfully little about electricity and does not care much about security of supply; perhaps she will be out of office when the penalties arrive.

The Government, particularly the DTI, have a sort of yearning. In case the Minister is under any misapprehension, I must tell him that my admiration, respect and regard for the DTI is extremely limited. It seems to suffer from the ambition of wishing to tell people what to do while at the same time taking little responsibility.

The Government and Ofgem have materially and substantially reorganised or been responsible for the reorganisation of the electricity market in our country. In the course of doing so they have reshaped it. The investment target of 10 gigawatts by 2010, which they accepted in their White Paper, has been rendered impossible to achieve. In the past two years, my understanding is that 2.7 million gigawatts have been put on hold, with the result that that target has become virtually unattainable, so the future security of supply has been jeopardised.

I do not understand how the Government have allowed such an important subject to be buried in the DTI, which is responsible for many other matters. As a result, they have put this vital matter into jeopardy. I hope that the Government will accept the powerful arguments of my noble friends Lady Miller and Lord Jenkin and the noble Lord, Lord Ezra, so that they show at least a gleam of sense in wishing to go in the direction which they stated in the White Paper.

Baroness Miller of Chilthorne Domer: My Lords, I am pleased to have my name to the amendment. Nothing is more important than cutting our carbon dioxide emissions. The Government's chief scientist says how important that is in counteracting climate change, which he views as the greatest threat.

We have heard that not only have the Government failed in their target but carbon emissions have increased by 1.5 per cent. In response, the Environment Minister Mr Elliot Morley said on Thursday that the Government would be reviewing UK climate change programme measures and policies to try to introduce new measures

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and policies so that climate change might be tackled more effectively. By writing this amendment into the Bill we will help the Government to do just that.

Lord Whitty: My Lords, I am grateful for some important speeches, not least from the noble Baroness, Lady Miller of Hendon, and the noble Lord, Lord Ezra, who has long been an advocate on the matter. I turn first to the intervention of the noble Lord, Lord Peyton, which was also enlightening but shows us that there is a misapprehension on the part of the Opposition Benches—he is not the only one to suggest it.

The energy White Paper, the Bill and our energy policies as a whole are a product of the whole Government. Nothing is buried, as he put it, in one department. We are all party to these policies and that is why we present them across government as a whole: the DTI, Defra, the Treasury and everyone else is engaged in their delivery.

CHP is an area that can clearly make major contributions towards a lower carbon economy. That is why the Government have set a target for it and supported it in a number of ways set out in the energy White Paper and since, fiscally in terms of support and the Government's commitment for their own estate and so forth.

The achievement of the Government's strategy on energy requires us to deliver on CHP and renewables. We cannot trade one against the other. The noble Lord, Lord Jenkin, argues that we should not maintain the renewables target at the expense of CHP and accuses us of doing the opposite. But both are necessary.

Lord Jenkin of Roding: My Lords, I do not know whether the noble Lord was asleep at that point, because I never said anything of the sort. I was quoting him as saying that he could not give help to CHP because he saw it as a threat to renewables.

Lord Whitty: My Lords, exactly. The logical conclusion is that the noble Lord would prefer us to adopt a policy in relation to CHP that undermined the target on renewables. I am saying to the House that we should do both. We have a target to meet our objectives for renewables and a target to meet our objectives in relation to CHP. I agree to a large extent with the noble Baroness, Lady Miller, that we need to redouble our efforts in support of CHP and that we need to ensure that we deliver the target of 10 gigawatts of CHP by 2010—not to the extent that she implied, but we are short of meeting that target at the moment. She is undoubtedly right that there has been some serious setback to the momentum on CHP, but the latest estimates suggest that even on current policies and current price matters we would be delivering about 8.5 gigawatts of CHP by 2010 and therefore the gap is achievable. Provided that we can focus support for CHP, we intend to deliver 10GW of CHP in line with our target.

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CHP is not, as a result of the renewables obligation, discriminated against. Every form of power generation must meet the renewables obligation, whether it is coal, oil, gas nuclear or CHP. It is not discriminated against.

The noble Baroness has half an argument on the initial stages of the NETA proceedings, which probably disadvantaged CHP to some extent in terms of the supplier to the National Grid. However, that has been rectified by Ofgem so, that apparent discrimination has been removed.

The noble Baroness is wrong to say that the ILEX report says that it would have no effect on the ROCs' structure. In fact, it says that the effect on ROCs prices, and therefore the proper operation of the market in that area, will be about 5 per cent. We consider that it might be somewhat larger, but 5 per cent is a significant effect on the ROCs market. Indeed, it is almost the equivalent effect created by the TXU shortfall, to which the noble Lord, Lord Jenkin, rightly drew our attention on the previous amendment. If it has an effect of that magnitude, surely we should take it seriously. The fact of the matter is that CHP, although a hugely more efficient form of fossil fuel, is a fossil fuel. It is therefore odd to take it in a way that undermines the achievement of the renewables obligation.

In closing, the noble Baroness referred to the views of another trade association. The only way in which the amendment could stack up would be to increase the size of the renewables obligation to compensate for the effect which the removal of the CHP from that obligation would cause. That is not in the amendment before us. It is more logical, but it would impose an effect on the rest of consumers and industry. The noble Baroness also referred to the cost of achieving the renewables obligation more generally.

The noble Baroness, Lady Miller, the noble Lord, Lord Ezra, and others referred to the strategy on CHP. We will bring together into the CHP strategy all the measures in support of CHP through the fiscal process and any new measures. I can assure the noble Lord, Lord Ezra, that it will slip a little from 1 April, but will be in place immediately after Easter. Therefore, the degree of government support for CHP will be clear.

While I am deeply sympathetic with the need to support CHP, the amendment has serious problems which undermine the renewables obligation and thereby the achievement of the carbons target. We should not be favouring one means of achieving—and we are talking about means—by acting detrimentally towards another. We need CHP and renewables in order to meet what we have set out in the energy White Paper. This amendment would distort that achievement and does not of itself contain rectifying measures to offset that negative effect. I therefore consider that we should not go down this road.

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