HC Deb 20 May 1991 vol 191 cc740-53

10 pm

The Parliamentary Under-Secretary of State for Energy (Mr. Colin Moynihan)

I beg to move,

That this House takes note of European Community Document No. 4936/91 on a European Energy Charter; and welcomes proposals for a Charter designed to promote an open, liberal and non-discriminatory energy market throughout Europe and to assist in restructuring the energy sectors of Eastern Europe and the Soviet Union on a market basis. I am glad that we have the opportunity to debate the proposal for a European energy charter. The Select Committee on European Legislation regarded the communication as being politically important. It was right to do so. Scutiny debates are frequently about the impact of the European Commission proposal on the United Kingdom or on the 12 member states of the Community. This one is different. It covers the whole of Europe— east and west, north and south.

No European energy policy can be forged in the 1990s or beyond if it does not take account of the emerging democracies of eastern Europe or of the changes taking place in the Soviet Union. They have suffered from all the vices of central planning, but none of the virtues of competition and free trade. Getting the energy industries right throughout the east, not least in the Soviet Union, which is so rich in natural resources, could be a catalyst for the transformation of their whole economies and their environments.

I believe that a European energy charter can provide a key to that transformation. It can bring major benefits to eastern Europe and the Soviet Union while also helping the more established European democracies, inside and outside the European Community. It can go further than the internal market by liberalising the energy sector across the whole of Europe.

The United Kingdom market and the United Kingdom have been in the forefront of the development of the internal market in energy and in other areas. The charter give us an important and welcome opportunity to go further in the energy sector, to cover more countries and to establish more liberal arrangements. The United Kingdom is one of the most competitive energy markets in the world. The Government have some of the greatest experience in supervising energy in all its forms, including the supervision of the successful development of the North sea oil and gas sector, the operation of electricity and gas networks with open access and the successful promotion of the efficient use of energy.

British companies have the experience of making successful investments in such an energy market and in providing equipment and services to that market. The charter could give us great opportunities in assisting other countries to liberalise their energy sectors and in creating new opportunities and openings for British companies to invest and export profitably.

Last year at the European Community summit in Dublin, the Dutch Prime Minister, Mr. Lubbers, imaginatively proposed an energy Community to cover energy issues throughout the continent of Europe. The United Kingdom supported that proposal. We saw it and still see it as an opportunity to assist the transition of the countries of eastern Europe and the Soviet Union to market-based economies, particularly in the vital energy sector, and as an opportunity for further liberalisation throughout Europe. It reflects our policies on free markets and competition at home in the European Community and we are grateful to the Dutch for their idea and the work that they have done in developing it.

After some informal discussion, the European Commission was asked to produce a draft on a possible charter. In February it did so and tonight we are debating its communication to the Council. It is only a first draft of the charter and potential signatories will need to negotiate and agree a mutually acceptable text. We hope that this process might be complete by the end of the year.

The charter would provide an agreed set of principles relating to energy and energy trade. It is envisaged that a series of protocols negotiated individually, and covering specific sectors and issues, would then be attached to the charter. These intergovernmental agreements would provide the framework and the climate of confidence that would allow and encourage the commercial investment from outside the former eastern bloc that the countries of eastern Europe and the Soviet Union now need to attract. The protocols should also contain the details necessary for freer energy markets within and between the signatories.

We have two main objectives for the charter. First, we wish to assist the Soviet Union and eastern Europe in their transition to multi-based economies. This will help their political reform and will increase their economic efficiency. It will also bring us major benefits, both commercially and in terms of the environment. Secondly, we wish to increase energy liberalisation in the more established democracies, both inside and outside the Community. Freer trade and increased competition would improve both economic and energy efficiency. They would extend consumer choice and enhance security of supply. They would reduce discrimination against our companies when they operate overseas. The charter can provide us with new commercial opportunities by removing some of the existing barriers to trade.

The charter and the associated protocols are likely to cover a number of areas. Oil and gas are likely to be areas of particular interest. The United Kingdom has developed substantial expertise, thanks to our experience in the North sea. We have ensured that it has been explored and developed successfully through sensible licensing and a tax regime that encourages further exploration and investment. We have considerable expertise in the implementation of the necessary safety and environmental regulations, and British companies have shown themselves to be competitive in providing equipment and services in the market that we have established here.

Mr. John Browne (Winchester)

My hon. Friend has mentioned tax incentives and the environment. Does he accept that one of the greatest sources of new energy is energy conservation? Does the charter take this into account, particularly with regard to rebates for people, companies and Governments throughout the European Community, as well as in eastern and central Europe, that invest in energy conservation?

Mr. Moynihan

The charter does not take it into account, but there are opportunities for protocols to concentrate on energy efficiency schemes. In due course, it might be necessary for this House to consider, possibly in detail, the impact of such protocols. However, at this stage we are considering the broad principles of the charter. It is intended that it will refer to energy efficiency measures and their importance, without going into the very important detail to which my hon. Friend has referred.

The charter gives us the opportunity to pass on our expertise to other countries, and to create new opportunities for British companies. In both gas and electricity, we have created competitive markets in production and supply. We have also shown that security of supply can be maintained, even enhanced, by such competition and by providing third-party access to networks. Such access will be necessary elsewhere if energy trade is to expand throughout Europe, and if co-operation and security are to be increased. Here again, we have been in the forefront. Our companies have the necessary expertise and the charter will give them opportunities to operate outside the United Kingdom.

In renewable energy, too, we have managed to move beyond the theoretical and research stages. The non-fossil-fuel obligation has brought forward new and exciting projects on a commercial and competitive basis. This experience will give the companies here that have developed such projects a firm basis to do so elsewhere. The charter is one way of enhancing their opportunities.

These are only some of the ways in which the charter and liberalised energy markets will help us. Even before we consider the serious problems created by central planning in what was the Eastern bloc, there is wide recognition of the fact that the energy sectors of the Soviet Union and eastern Europe face severe difficulties. They are suffering from inefficiency and lack of investment. In some areas, there is concern over safety. Most visible are the very high levels of pollution caused by energy production, distribution and use. Given the fundamental importance of the performance of the energy sector to those economies, their Governments and those wishing to assist them have correctly identified energy as a priority area for future action. But if investment is to come, enterprises in the west need to be reassured about the economic and legal environment in which they will operate.

The USSR is the world's largest producer of oil and gas and possesses vast undeveloped resources. The oil sector is in as serious a decline as any in the Soviet Union. Some commentators have speculated that, unless there is a real improvement in the efficiency of energy production, refining, distribution and consumption, the Soviet Union could become a net importer of oil well before the the end of the decade. It needs to increase its hard currency export earnings. One way of doing so is to improve energy production, which is one of the few sectors where it has a real chance to earn more from a product that it possesses in great quantities and for which there is a large external market. It must also reduce the burden of inefficient, wasteful consumption.

If we can help energy production in the Soviet Union to become more efficient, we, too, will' gain. Increased exports of Soviet oil and gas wil make world energy markets more competitive in the future and will reduce the diversity of potential sources of supply. Future energy costs should be lower and the security of energy supplies should increase so that the Soviet Union becomes less dependent on supplies from a single region.

The decline in the Soviet economy has many causes— technical, economical and political— but the problems are unlikely to be resolved without western investment and technology. Such investment is likely to be made only when western companies have sufficient assurance that the risks are not excessive. The proposed charter will help to provide a framework for that and create the necessary climate of confidence.

Many eastern European countries faced severe difficulties this winter due to their dependence on imported energy supplies, especially from the Soviet Union and the Gulf. Freer trade may have helped them to diversify their sources of supply and may have given them greater security. We have played our part recently by amending our oil export guidelines, following their requests, to enable North sea oil to be sold to eastern Europe and elsewhere. Freer trade would also help producers by assuring them that they can find markets for their production without being forced to sell it too cheaply. We hope that free trade in energy would be reinforced by the proposed charter, not only in Europe but throughout the world.

The change to market-based pricing for energy is important throughout Europe. Eastern European countries faced difficulties in obtaining Soviet oil deliveries and, from the beginning of this year they were forced to pay world prices for Soviet energy. Before that, energy prices were well below the world rate and its use was wasteful. One of the best spurs for the efficient use of energy is proper pricing so that consumers can decide how to use it most efficiently.

The structure of energy pricing can be as important as the overall level. In parts of the Soviet Union, energy is provided to households for a fixed payment and there is often no facility for metering it. Naturally, there is little or no incentive for individuals to save energy or to use energy-saving measures such as thermostats. If a room is too hot, the easiest solution is to open a window. In the absence of individual heating controls, that may be the only solution. This may seem tangential to our debate, but it illustrates the significance of proper energy pricing, whether to individual homes or to industry.

The inefficient use of energy in industry is probably more significant. Under a centrally planned economy, heavy users of energy in industry have had little incentive to use energy sensibly. But if energy can be improved, some of the horrific pollution in the east can be avoided. Therefore, the charter seeks greater emphasis on market-based pricing for energy.

Improvements in the energy sector require investment. Capital and expertise are required to overhaul ailing energy economies in the east, but they cannot be found from internal sources alone. Western Governments have provided funds to help economic restructuring and development, including in the energy sector. However, that will not be sufficient. Government bureaucracies are least capable when attempting to discover or produce oil, gas or coal. Most energy is consumed by industry, commerce and individuals.

Ultimately, it will be companies and enterprises and their investment that will provide the capital and skills for new, more efficient, safer and less-polluting energy equipment, both for production and use. That, too, will create new opportunities for British companies. The charter will need to emphasise the vital role of the commercial sector, both in providing investment and taking the necessary action to improve efficiency.

The fifth anniversary of the Chernobyl accident underlines the fact that the safety issue can cross national borders. The same is true of the environmental impact of the energy sector. All forms of energy production affect the environment in one way or another, and a large number of international initiatives have been undertaken to reduce some of the effects. The Soviet Union and the eastern European countries are parties to a number of those.

The proposed charter should not try to replace or duplicate such arrangements, but, by stimulating investement in modern technology at all stages of the fuel cycle, the charter can assist and make a major contribution to environmental improvement. Some people in the Soviet Union and eastern Europe may be suspicious of the charter, fearing that it could be an attempt by the west to take control of their energy resources, but that is not our aim. Britain has as much interest as anyone in maintaining the principle of national sovereignty over natural resources.

Principles should be stated in the charter. Individual countries should have the right to determine how fast, and in what manner, their own resources are developed. Once the Government have decided that, the opportunity to invest in such development should be open and non-discriminatory. Non-discrimination is another principle which we shall seek in the charter. Companies should be free to invest and provide equipment and services, regardless of which country they originally came from.

Given the expertise and experience in the United Kingdom, the charter will create new opportunities for British companies and increase competition and efficiency wherever it is applied. There is no doubt that the details will need to be negotiated, with some countries looking for joint ventures with local enterprises, while others are prepared to accept 100 per cent. subsidiaries established under local regulations. Whatever the details, the energy sector, both east and west, cannot afford artificial barriers to international co-operation, trade and the transfer of investment and technology.

The problems of eastern Europe and the Soviet Union are an important part of the reason why we support the charter, but not the whole reason. Some of the problems that I have identified also apply, to a lesser extent, elsewhere in Europe. We, too, will benefit by showing that our energy sectors operate in a sensible, open and liberal framework. The charter proposal is an important idea, designed both to assist transition in the east in the energy sector and to liberalise energy in the rest of Europe. It will create new opportunities for those moving away from central planning and towards the market. It will also create new opportunities for British companies operating in any part of Europe.

One of the charter's major objectives is to help regenerate the economies of the Soviet Union and eastern Europe through market principles by concentrating on a sector where there is already a substantial international market and where they have scope to make substantial foreign exchange benefits by increasing exports or reducing imports. Another objective is to provide the political security necessary to attract our companies to invest in those countries. The principles are those of an open, liberal and competitive market, and follow the principles that guide our own energy policy. The fruits of success can be enormous in terms of economic prosperity, political stability and environmental improvements.

The United Kingdom has much to offer the Soviet Union and eastern Europe, based on our success in the oil, gas, electricity, nuclear, new and renewable energy and energy efficiency spheres. The charter will create new opportunities for our companies, with their experience in all those sectors. We have been in the forefront of opening up energy markets in the European Community. If successful, the charter will enable us to extend its objectives throughout Europe and beyond. Therefore, I commend the motion and the charter to the House.

10.18 pm
Mr. Rhodri Morgan (Cardiff, West)

We have listened to the Minister for 17 minutes. He will not be surprised that my reading of the charter and my welcome for it are somewhat different from his. He mentioned the words" liberal" or "liberalisation" 14 times, the same number of times as the Secretary of State for Health in his notorious broadcast about the alleged big lie used in the Monmouth by-election. I wondered whether the Minister would carry on in the same vein by coming out with a phrase about "opt-out power stations" not being connected to the national grid.

It is fair to say that anybody reading the document objectively would ask whether it would solve the energy problems of Europe and, if so, which parts of it would make the biggest contribution. I want to return to other themes that have been hitting the headlines in the past few weeks. It is fair to say that politics, as we have learnt over the past few days, is a dirty game. I always remember Montgomery being asked on television in 1956 why he had not followed the well-trodden path of Eisenhower, who had become President of the United States, and gone into politics. He replied that war was a very dirty game, but when compared to politics— and left us to draw our own conclusions. When one compares war or politics to energy, one can say that energy is the dirtiest game of all. By that, I simply mean environmental pollution which is a side-effect of almost all forms of energy.

The hon. Member for Winchester (Mr. Browne) asked the Minister whether energy efficiency played a part in the energy charter and the Minister said that it did not really, but that such proposals would be in the protocols. I differ from the Minister in my reading of the document. Energy efficiency is underplayed a bit, but it is included extensively. Point 3 refers to optimum use of energy and environmental protection, which will imply— the development of new and renewable energy sources;— greater energy savings;— measures to combat pollution. One cannot sum up the problems of energy, as seen by the man or woman in the street, more neatly than that.

Mr. Moynihan

In fairness, I am sure that the hon. Gentleman will recall that my hon. Friend the Member for Winchester (Mr. Browne) intervened on a specific group of measures on energy efficiency. The charter overall pays important respects to energy efficiency. Which specific measures are implemented will be matters for negotiation in the protocol. That was the point that I made to my hon. Friend.

Mr. Morgan

The Minister must not get over-excited about the point. I agree with him to the extent that I believe that energy efficiency should play a larger part in the charter. The Minister described what he thought the charter contained: 99 per cent. opening up of, or liberalisation of, or freeing up of— to use the Minister's buzz words— energy markets on a non-discriminatory, transparent and non-national basis compared with 1 per cent. of other problem-solving measures. That description is wide of the mark. However, I should like there to be even more reference to energy and to the environmental side effects simply because that is what the population of Europe will expect of the charter.

If we asked the population of Europe what the No. 1 problem was, they would not say that it was the inability of Austrian investors to get shares in the Portuguese electricity industry without an assurance about being able to have their dividends remitted in hard currencies. People would say that that was rubbish and had nothing to do with the matter. They would say that they wanted to be reasonably sure that there was not a second Chernobyl, ready to pop off at any minute, hiding in eastern Europe or that brown coal or lignite production would not cause acidification and kill forests in Germany, Scotland or Wales when the east wind blew. Such environmental problems are of concern, combined with the possibility of far higher electricity prices if we introduce a carbon tax. Such a tax may prevent Bangladesh again being completely flooded as the oceans rise— if global warming is a reality rather than just a scientific theory, as it is now. Those are the big energy talking points. The European energy charter points towards them, but it should point towards them with a little more emphasis.

The Minister's premature triumphalism about the United Kingdom recipe for the development of energy is completely misplaced. Neither in Britain nor elsewhere in Europe is there a real solution to the problem of what energy gives us in a combination of naturally competitive activities such as oil refineries and natural monopolies such as local distribution networks or long-distance transmission networks. What do we do with natural monopolies? Do we keep, say, local wire networks under public control or municipal control, or do we pass the monopolies over to the private sector— for example, the oil refining industry or electricity generating companies, which we could call naturally competitive? To achieve maximum energy efficiency gains, we could say that they should be integrated with the natural monopolies on the wires side of the business. Those are the big questions for people in the energy industry in the next 10 years.

The charter does not examine those questions in as much detail as it should. The Minister's interpretation does not examine them at all. Those are big issues, given the natural tendency of the treaty of Rome or a Euratom-based body such as the European Commission to look at Europe simply as a device for the removal of trade barriers. The treaty of Rome also provides for the 12 countries of the European Community to come together on an ad hoc basis— this matter is outside the treaty of Rome, although we can see it colouring the treaty— with the major leap into the east, which we must welcome. As the Minister rightly said, the pollution problems of energy production recognise no national boundaries and no European Community boundaries. In that leap to the east, can the 12 countries of Europe plus the others in the east come together constructively to solve the real problems of the future of energy production?

I am disappointed that the document does not mention global warming. China and India will need to be included. In the document there is the slightest tangential reference to third world countries. That is important. There is a brief reference to clean coal technology. If we manage to perfect clean coal technology and if clean coal technology is one solution to the problem of global warming through, for example, the pressurised fluidised bed combustion system, the passing of that new clean coal technology to China and India may be the biggest single contribution to the solution of the global warming problem over the next 25 years. The combined technological and financial resources of the 12 countries of the Community can contribute to solving the planet's No. 1 environmental problem. That is an important item. The relationship with the third world is mentioned tangentially. It is a big issue. It is played down a little, and we want it to be played up again when the document is transformed into protocols.

Another problem that needs a higher profile is energy efficiency. The document states that we need some organisation to disseminate technology, new techniques and new methods of promoting energy efficiency. We are on all fours on that point. If bright ideas are evolved in other countries, we want them to be transmitted here. The tone of the Minister's remark was somewhat Kiplingesque. It assumed that the flow of new ideas and technology was almost by right from this country to other countries and was not two way. That smacks of a British-centred view of the world. For instance, we would hope for an inward flow of technology from other sources in respect of more energy-efficient use of combined heat and power, coal generation and the incineration of municipal refuse. In the past months, German municipal electricity utilities, in combination with their linked parent generating companies, have approved substantial new CHP schemes in certain cities in Germany. We are terribly slow. Apart from the construction of the Slough power station, we have no projects in combined heat and power. We would welcome some inward flow of technology.

Municipal refuse incineration for electricity generating purposes is another area where we are slow to develop. A municipal incineration plant has been approved in Munich. We would like to think that that will prove that such plants can succeed, even in an environmentally fussy country such as Germany. If so, such plants will become acceptable in Britain. That is a matter in which we expect an inward flow of technology.

We are pleased that the new Franco-British consortium of one of the subsidiaries of GEC and its French partner Alsthom is combining all its resources to design and manufacture turbine generators. The consortium intends to invest in Grimethorpe. That is one of the sadly neglected areas of clean coal technology which came close to marketabilty but has been left to wither. Fortunately, the Anglo-French consortium has announced that it will put a couple of million pounds towards the project.

We hope that if it is proved that the Grimethorpe project can operate at a fully marketable size the technology will flow outwards from Britain to China, India, the Soviet Union, and so on. However, the flow of technology is not all one way. The Minister made a big mistake in presenting it as such and implying that we were taking on the white man's burden and assisting the poor old Soviet Union to sort out its energy problems, vast as those problems are. There may well be things that we could learn from other countries and it pays occasionally to be a little modest so that we draw from both sides as well as grasp the commercial opportunities that we hope will come from developments such as those at Grimethorpe.

The charter is not all about liberalisation. It is about energy efficiency and transfer of technology both ways. It is not all about teaching the poor, state-controlled, centrally planned economies how to gain the benefits of liberalisation. There are real energy problems. Privatisation is not the sole policy or the sole aim of policy when dealing with issues such as acid rain and seeking to introduce combined heat and power to double fuel efficiency from the typical mid to high 30 per cent. to the 70 per cent. fuel efficiency conversion ratios that we should look for by the beginning of the new millennium, in nine years.

Clean coal, more suitable uses for municipal refuse than disposal in landfill sites and other matters are also mentioned in the charter. However, the charter is biased towards liberalisation. It does not treat energy efficiency as a sufficiently high priority. We do not agree with the Minister's interpretation that the charter is 99 per cent. about liberalisation. We see it as a proper subject involving walking the tightrope of the obsession of the treaty of Rome and removing trade barriers. The treaty of Rome is all about establishing level playing fields for competition. That is fair enough in activities where competition is the natural way of allocating resources in the best possible way. In other activities there are natural monopolies and resource efficiency is paramount. Energy is inherently a dirty form of economic activity. The profile of energy efficiency and other issues must be raised in the charter. From the Minister's speech it seems that there is not much chance that that will be done.

10.33 pm
Mr. Simon Hughes (Southwark and Bermondsey)

For many years of my life, I have made a non-self-interested case for fair votes and proportional representation. Tonight I have been persuaded to make a much more self-interested case. Under a fair system, my party would have its due 150 Members, and one person could have spoken in the London Underground debate at 7 o'clock, another person would have spoken in the environmental assessment debate, and someone else would have spoken on the European energy charter. Under the present regime, one person has to speak in all three debates. I apologise to the House. I am equally sad because it is getting near to bed time, and well past supper time, and I have not yet had a chance to eat. As a result, I shall have to miss the Adjournment debate of the hon. Member for Vauxhall (Miss Hoey), but I may say in advance that I imagine I shall support what she has to say about safety on London buses.

The proposal by the Dutch Government some months ago for a Europe-wide energy charter begins the second phase of the development of Europe from the same starting point as that with which the post-war development of Europe began. The founding fathers of the European Community decided that the best building block on which to construct a Community was a joint energy policy.

The mechanism used was the European Coal and Steel Community. They believed that pooling the resources of coal and steel would prevent warfare. They placed under one organisation's control the two prerequisites for arms and defence manufacture. They saw a common coal and steel policy, for France and Germany particularly, as the way to peace. Eventually, of course, those two countries were joined by four and eventually by 10 others. Thus, it is interesting that this, the proposed first pan-European energy policy, is being used as the first building block for what might eventually be a Community stretching throughout the countries of Europe, with responsibility for many matters apart from energy.

I am an ardent supporter of the European Community. In general, I support its economic propositions, although certain difficulties are associated with them. I welcome this debate because it allows us, in a multi-party fashion, to assist the Government's response to the proposals for an energy charter. We should support the idea of such a charter; but I, like the hon. Member for Cardiff, West (Mr. Morgan), take the view that some of the ideas on which it is based go off in the wrong direction.

Title 1 of the objectives listed on page 9— after the inevitable preamble— reads as follows: With a view to improving security of supply on the most satisfactory economic basis and developing energy activities with due regard for the environment, the signatories agree to promote the construction of a large European energy market. I would not agree with that as a first objective. It is right to accept that there is a large European energy market, but not as a first objective. That should concern securing the best possible energy use by reducing and sharing energy, not just by developing more sources of supply.

My three guiding principles would be somewhat different. The Foundation of a sustainable European energy charter should begin with the careful conservation of all the energy resources of the continent. We should reduce total consumption and change the balance of our primary sources of supply. Secondly, we should use the proposed market to provide the most efficient allocation mechanism as between Community countries. Thirdly, we must develop renewable resources more.

Very recently, I learned through a parliamentary answer that Britain's energy consumption rose by 0. 7 per cent. last year over the year before, while GDP fell by 0. 5 per cent. That, I believe, is the first time that consumption has ever risen while GDP has fallen, and that statistic mirrors the steady decline of the United Kingdom's energy ratio. One of the criticisms levelled by many at the Government is that we do not have a proper national energy strategy. It is wonderful to have a European energy charter, but it would be quite a good idea to have a national energy strategy as well.

The draft charter for Europe allows us to review our energy policy at home. I hope that one of the consequences will be a review of our energy requirements, our supply capacity and our scope for reducing energy consumption. Perhaps we can carry out such a review in the context of the continent of Europe as a whole. Energy saving requires not just targets but tax incentives, grants and penalties that will inhibit high-energy-consuming practices. We need local and national levels of energy consumption that will lead to a reduction. That can be done by setting maximum targets and trying to stay below them.

All that must be done on the level playing field that we hear so much about, and we must make sure that there are no artificial barriers. A European initiative on cross-boundary funding of conservation projects could emerge from the charter and a review. We could pool our cash resources and our expertise and ensure fair treatment in the search for conservation.

Common labelling of household goods would ensure that people recognised energy-efficient white goods. The white goods consumer revolution would become a green goods revolution. People would reduce their use of energy-demanding washing machines and dishwashers, and would have a firm base on which to choose the best sort of machinery to have in the home.

We could make sure that Britain and the continent made more use of energy-efficient light bulbs and a whole range of other consumer products. The European experience can educate Britain and the whole of Europe. I endorse the Minister's view about the potential of eastern Europe for making a contribution to saving energy. We need a common strategy to deal with the adverse environmental consequences.

On a visit to Cracow in southern Poland, I saw the result on that beautiful mediaeval city of pollution from the nearby smelting works. Some countries in eastern Europe have used energy in an unsound way and have caused enormous pollution. A common environmental objective could benefit eastern Europe.

Conservation strategy has enormous potential for creating jobs. The Association for the Conservation of Energy has given the Department of the Environment and the Department of Energy properly calculated projections which show that 155,000 jobs could be created in Britain in energy conservation technology and activity. Parliamentary answers show that, over the next decade, we have a potential market of about £50 billion-worth of energy efficiency technology. Across Europe, about £250 billion is likely to be spent on energy abatement technology. There are massive opportunities for job creation and energy reduction. Energy conservation should be central to the charter.

Next, let us be bold about using the market and adopt the proposal for Community levels for emission ceilings and licences. Targets could be set in Europe and pilot programmes started for international initiatives. Licences could be issued to producer countries to keep within the targets. That is one way to lessen the greenhouse effect.

The hon. Member for Cardiff, West accepted, and I have heard Ministers say that they accept, that we must be realistic about energy charges. The proposal in the Community for a carbon or energy tax is gathering momentum, and I and my colleages support it. We grossly underpay for the energy that we consume. My party believes that we should pay much more for the non-renewable sources of energy that we, both in this country and across our continent, consume every day. It would be a good idea to have that strategy built into a European energy charter. By all means let us have the real market, but we should use it to make sure that the real costs of energy are paid for by the citizens of this wealthy part of the world.

Thirdly, we must also develop renewables, and state that much more authoritatively as an objective within the charter. I am surprised that this is so much ignored in the charter, because the Dutch are good about renewable energy—windmills are the symbol of the Netherlands, and are practical ways to produce energy as well. Last year, only 0. 01 per cent. of Government expenditure went on developing renewable energy sources. Germany, Greece, Holland, Sweden and Switzerland spent double that.

The charter gives us an opportunity to rectify the oversights of recent years in terms of the fossil fuel levy. I know that the Government are thinking about it. At Energy questions last week, I heard the replies to my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) about what is happening in Scotland. We could review the lifetime of the fossil fuel levy of eight years. We could change the proposal— the Government's proposal— put it in the context of Europe, and make sure that we have a far better ratio for payback, to enhance renewable energy, both here and in Europe.

This take-note debate is an opportunity for the Government to take advice, to go back and negotiate. I hope that they will negotiate for a tough energy charter, not just one that acknowledges that environmental policy depends on good energy policy, but one that does much more to ensure that the energy charter is a European environmental charter as well.

10.46 pm
Mr. Moynihan

The hon. Member for Southwark and Bermondsey (Mr. Hughes) was right— this is an opportunity for Ministers to listen to the views put forward by hon. Members, to take note of them and to use them in discussions on the development of the charter. The hon. Member misinterpreted the emphasis that I placed on the protection of the environment, which is one of the major points that has been made this evening. I can give him the firm undertaking that environmental considerations will be given full weight in the charter. That is vital, and I touched on some of the ways that the environment will be affected by the charter. Modernisation of gas transmission and distribution networks would, for example, reduce the levels of leaks of methane, which is not only dangerous locally but is a significant contributor to the greenhouse effect. I have heard the hon. Gentleman make that point before.

The building in eastern Europe of new power stations with modern equipment can reduce sulphur dioxide emissions, which result from the burning of lignite, or brown coal. This will reduce the impact of acid rain locally and regionally. Greater efficiency in the conversion and use of all forms of energy will help to stabilise carbon dioxide production, which affects the global environment. All these features can benefit from an effective charter and it is vital that emphasis is rightly placed, and continues to be placed by those working on the charter, on the environment, energy efficiency and safety improvements in the energy sector.

I take the points made both by the hon. Gentleman and the hon. Member for Cardiff, West (Mr. Morgan). I understand that their comments were not a criticism of the Government's position, but were reflections on what should be given greater priority in the drafting and the objectives of the title, which was read out by the hon. Member for Southwark and Bermondsey. As he rightly pointed out, the first of the three major objectives is primarily concerned with the free market in energy and the expansion of trade in energy. I concentrated in some detail — I hope to the benefit of the House— on how we interpreted that.

The second of the objectives is co-operation and co-ordination in energy. That has considerable impact on the technical aspects and economic data. I agree that this is not all one way. I am sorry that the hon. Member for Southwark and Bermondsey gave that impression. We can benefit a great deal from the charter, and from the expertise of, and technological developments in, other countries, not least on renewables.

I have been one of the greatest advocates of the non-fossil fuel obligation and have been much involved in pushing it forward. I attach the greatest importance to renewable sources of energy in terms of both diversity and security of supply. The environmental impact of renewable sources of energy is one of my major priorities.

The hon. Member for Cardiff, West talked about incineration and the effect of the German projects. With my Parliamentary Private Secretary, the hon. Member for Nuneaton (Mr. Stevens)— as always, my hon. Friend is sitting quietly behind me—I shall visit Edmonton to see the incinerator projects there, which have important benefits for north London. Only recently I went to Brent to see the Chalk Hill project. The waste from the estate is used to generate heat. The entire heating system is fuelled by the waste that is generated by the residents. We must examine more projects of that sort. Exchange of information within the charter will present us with an opportunity to move forward.

Mr. Morgan

Does the Minister envisage acceptance of a carbon tax? Does he envisage that within the United Kingdom we shall gradually extend the nuclear levy, which is in effect a carbon tax, so that there is an extension of municipal waste incineration and so forth? If so, does he agree with the policy of the Liberal Democrats, which we do not?

Mr. Moynihan

The hon. Gentleman knows the Government's position on a carbon tax. I do not agree with the argument that it should be extended across the board. I recognise that if the United Kingdom is to meet the high standards that are required for the environment—standards are becoming increasingly high—while taking account of production, we must take the opportunities that the charter presents for setting high environmental standards, which will be reflected in the charges that are passed on to the consumer. That is an essential prerequisite to achieving higher environmental standards throughout Europe. Any country that is a signatory to the charter will not be prevented from setting higher standards. I hope that we shall achieve—this is one of the objectives set out in one of the protocols—high environmental standards. As I have said, those standards will have to be paid for, and the cost will have to be passed on to the consumer, who demands them and recognises their importance if we are to secure an enhanced environmental quality of life.

I take on board the importance that has been attached to conservation and to renewables. We shall consider these matters carefully when presenting our case for further detailed discussion.

Finally, I recognise the importance that the hon. Member for Cardiff, West has attached to safety improvements, clean coal technology, energy efficiency and renewable energy sources, which are covered by the third part of the title. I accept that the priority is not as high as hon. Members would like, and we shall bear that much in mind when it comes to moving forward with what I believe is a welcome and important initiative in the energy sector.

Question put and agreed to.

Resolved, That this House takes note of European Community Document No. 4936/91 on a European Energy Charter:, and welcomes proposals for a Charter designed to promote an open, liberal and non-discriminatory energy market throughout Europe and to assist in restructuring the energy sectors of Eastern Europe and the Soviet Union on a market basis.