ECC REPORT: ENERGY OBJECTIVES FOR 1990

HL Deb 01 May 1980 vol 408 cc1462-505

6.47 p.m.

Lord SHERFIELD rose to move, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and convergence of the policies of Member States (35th Report, H.L. 166). The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. In July last year your Select Committee reported on an earlier version of the EEC communication, Energy Objectives for 1990. At that time we were anxious to get an important document on to the Floor of the House before the Recess and we took relatively little evidence, but we did have a well-attended and interesting debate on 23rd July. By then the Commission had already published a second and more comprehensive communication, with the same title but with the addition of the significant words "and the Convergence of Policies of Member States", plus a draft resolution.

This time your committee decided to make a report in some depth, and, since previous reports on this subject had been rather critical of the Commission, to endeavour to make a constructive contribution to the problem of energy policy in Europe. The result is before your Lordships. Here I want to express my thanks to my colleagues on the subcommittee which drew up the report, to our two specialist advisers and to our clerk. All of them worked very hard and gave me invaluable support.

Your committee took evidence from the Department of Energy, from the nationalised industries concerned with energy, from the European Environmental Bureau, which submitted a very well argued and informative paper, and from the United Kingdom members of the European Parliament. We were assisted informally by an official of the European Commission, and we had a wealth of written evidence from the major oil companies and others. For all these contributions I express my gratitude.

Your committee set out to establish, on the basis of the Commission's communication, what the European Economic Community is, could or should be doing about energy policy. Some time back the Commission tried to promote a common energy policy for Europe. But the present communication recognises in effect that this is not at present politically feasible, since each Government is determined to be master of its own house. The Commission now lays emphasis on aiming at the highest possible degree of convergence of policies, and the resolution sets out five objectives at which to aim. They are listed in paragraph 2 of the report and are subject to two overriding considerations: first, to reduce the energy coefficient—that is the ratio between the growth of energy consumption and economic growth—to below 0.7, since, I believe, revised to 0.8; and secondly, to restrict the level of net oil imports to a named figure. The five objectives are: to promote energy savings; to step up coal production; to restore the nuclear programmes to their original level; to increase indigenous hydrocarbon production to the maximum extent; and to ensure that pricing policies reflect rising supply costs.

In such a fast-moving and vital area of policy a report such as this can do no more than fix the situation at a given point in time, in the knowledge that it will be subject to change before it is published. In one sense that is true of this report. For example, the forecasts for energy production in Europe have been twice revised in a downward direction, and only yesterday the Commission produced a revised resolution, a much shorter draft, which concentrates on two what are now called "priority areas"—that is, energy saving and the rational use of energy, and the reduction of oil consump- tion and oil imports. In this resolution the Member States are requested to submit their energy policy programmes up to 1990 annually to the Commission, who will then make a critical examination of them. But, in another sense, the situation has been slow moving, for the communication before the House, which was published in June 1979, has still not been considered by the Energy Council. I shall return to that point later.

Your Lordships' committee concluded that the scope for Community action could broadly be classified under three headings. First, matters requiring negotiation in international institutions in which the Community is represented. Secondly, matters benefiting from convergence of national policies pursued through the negotiation and the adoption of agreed objectives. Thirdly, matters appropriate to a common policy.

The first function is obvious, and has been successfully performed at summit meetings and in the International Energy Agency. As regards the second—convergence—your Lordships' committee considered three ways of promoting it—namely, to set joint targets; to align pricing policies; and to implement and monitor national conservation programmes in order to ensure the highest standard of energy saving and efficient use.

As regards the setting of joint targets, there was some difference of view among our witnesses as to whether that was a helpful practice. The Department of Energy was inclined to throw some doubt on this, but most of our other witnesses thought that they were useful. There was, however, a good deal of criticism of the practice of the Commission in predicting the achievement of targets by simply adding up the figures received from member countries instead of applying a critical faculty and producing their own estimates. Your Lordships' committee agrees with that criticism. The current practice leads to chronic undershooting of the real figures, especially in the nuclear field, and therefore to self-deception.

Finally, our witnesses were almost unanimous in thinking that the Commission was not looking far enough ahead and the European Environmental Bureau was particularly emphatic on this point. The Commission should produce estimates at least up to the year 2000. Perhaps the noble Earl who is to reply would like to make some comment both on the question of targets, and on that of the time-scale?

As regards the third point—the scope for common action—a common energy policy is distinguished from convergence of policies by the application of Community resources or the acceptance of Community legislation, with or without budgetary support. One class of project falling under this head includes developments involving a long timescale, high cost and high risk. The classic example is nuclear fusion, where there is already a well-developed Community research programme whose realisation, however, falls outside the timescales under consideration. Other cases are the fast reactor, nuclear waste disposal, and reprocessing, which are appropriate for Community collaboration, if not for a joint programme. Your committee urges in particular that there should be collaboration on fast reactor development. Can the noble Earl say anything more about this tonight?

Another subject is energy distribution and the possible strengthening of the European energy infrastructure, but here the scope for savings seems to be limited. Energy conservation is another matter on which your Lordships' committee thinks the Commission could do more by financing research, development and demonstration projects, and by encouraging national programmes. Your Lordships had a well-attended debate on energy conservation on 19th March, introduced by the noble Earl, Lord Lauderdale. That debate dealt mainly with domestic policy, but nevertheless I need not pursue this subject tonight, except perhaps to say that the Commission, after a shaky start, seems now to be getting a better grip on the subject and that the emphasis laid on the rational use of energy in the new Commission Resolution, to which I have just referred, is, I hope, an encouraging sign.

Perhaps the most urgent need in Europe is to improve the security of supplies, and that means the development of indigenous resources, especially coal, as the British and German coal industries have great potential for increased production. Your Lordships' committee considers that there is a strong case for additional Community aid to the coal industry by way of subsidies, control of imports, and, more particularly, of aid for additional investment. In this connection they strongly support the recent proposal of the Secretary of State for Energy for investment grants. I should like to ask the noble Earl what, if any, progress has been made on this matter.

The committee also feel that the Commission might do more to gain public acceptance of the need for increased energy production. They have taken some steps in this direction already in the nuclear field and they might, we think, do more and extend the action to include coal production and use.

Lastly, there are the oil and gas resources of the North Sea, which are of immediate interest to other member States. It is recognised that this is a British responsibility, subject to the schemes of the International Energy Agency and the EEC for the disposal of oil in an emergency. However, the benefits already accruing to the member States under our present management policies are insufficiently recognised. The committee doubt whether Her Majesty's Government would undertake further commitments to their partners in the prevailing uncertainty. Nevertheless, the committee recommend that the Government should take Community needs and policies into account when planning their depletion policy and they comment that aid in the development of the British coal industry would be of assistance in this connection.

There is one further point. We were informed towards the end of our inquiry that consideration was being given in the Commission to a possible Community tax on oil imports. The Commissioner for Energy, Dr. Brunner, made a statement about this and it was favourably received in the European Parliament. I understand that variants of this proposal are still floating about. I ask the Minister whether he thinks that there is anything in this approach and whether he has any comment on it.

What of the immediate future? Your Lordships' committee observes that six years after the 1973–74 oil crisis only 1.5 per cent. of the Community budget was being devoted to energy, though I think that this may now have risen to 2 per cent. It further observes that the energy Ministers have still not considered the 1990 objectives communication although it was published in June of last year, which really does not indicate any great sense of urgency.

Therefore, in conclusion, let me quote some sentences from two important paragraphs in our report which look forward. The first is from paragraph 35: The Committee recognise that … there has recently been some modest increase in Community expenditure on energy R & D",

which may be reflected in the small increase in the percentage of the Community budget devoted to that purpose. I continue: Nevertheless they strongly support the Commission's desire to allocate more of the Community's budget to energy and they hope that the U.K. will in future benefit from Community support for coal production investments. The structure of the Community Budget is ill suited to contemporary European problems and a large increase in the resources allocated to energy is justified. It is essential that funds made available should not simply finance developments that would have occurred in any case; they must be used to create new opportunities".

Then I quote from paragraph 44: Since 1973, the Community has made some progress in defining the areas of potential Community effort but has not shown itself capable of action … It is clear to the Committee that the principal responsibility for this lies with the Council of Ministers, the members of which are responsible to national parliaments and are not judged for their positive contributions to Community politics; minor … national interests are often put before major, tangible Community interests. There has therefore been no institution with political authority which can view matters in a European perspective ".

I ask the Minister in his reply to comment on these two statements. Further, I ask him to enlarge, if he can, on the outcome of the discussion on energy at the Council's recent meeting in Luxembourg. It was reassuring to hear that the Ministers had found time to deal with this question, for it is only from the Council that the main and much-needed political impetus can come. Certain matters seem to have been referred to the energy Ministers who are, I think, meeting on 13th May. Can the Minister tell us anything about the agenda and prospects for that meeting, with particular reference to the revised draft resolution to which I have referred? Is there a new initiative, and has he hopes that after a year of inaction progress can now be expected? My Lords, I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on energy objectives for 1990 and coverage of the policies of Member States (35th Report, H.L. 166).—(Lord Sherfield.)

7.3 p.m.

Lord STRABOLGI

My Lords, from this side of the House I should like to say how grateful we are to the noble Lord, Lord Sherfield, for moving that the House takes note of this report. I had the privilege of serving on the sub-committee under, if I may say so, the noble Lord's able and distinguished chairmanship, and, as the noble Lord has said, we were well served by our technical advisers and our clerk. I should also like to add my thanks to his to all those who gave evidence either written or oral.

The present Commission document sets out proposals only to 1990, and I must add my regrets to those of the noble Lord, Lord Sherfield, that the period was not extended to at least the year 2000, which would have meant a more realistic time-span. There can be no dispute about the general policy objectives, particularly those to step up energy saving measures, to increase coal output, and to develop the nuclear programme, although—as the committee has pointed out on previous occasions—the Commission should not rely too much on the present achievements of the nuclear construction programme.

It is also to be regretted that the Community has made so little progress in agreeing an energy policy, beyond a few comparatively minor proposals. We must surely add our support to the EEC Economic and Social Committee which last November called for greater convergence on nuclear policies, regretted that the Community measures to promote the production of coal had still not been approved, and emphasised the need for better public education on the instability of the oil market.

The underlying instability of oil supplies from the Middle East has been brought home with a vengeance by the troubles in Iran and the current dispute with Saudi Arabia. But even if, happily, we achieve some stability in that area, as the Commission points out, we are still faced with the fact that by 1985—which is just five years away—world demand for OPEC oil could be in excess of OPEC production by 150 million tonnes to 200 million tonnes a year.

From the Community viewpoint the crisis caused by an energy shortage will be further deepened because Greece, Portugal and Spain—three countries that are likely to join the Community before 1990—are all energy importers. I note from the recent Government Statement following the Luxembourg meeting of the European Council of Ministers, which was mentioned by the noble Lord, Lord Sherfield, that at its next meeting in Venice the Energy Council intends to review the current policies of Member States on the replacement of oil by other fuels; on the development of nuclear power, and on conservation. I should also like to support the noble Lord, Lord Sherfield, in asking the Government whether they can elaborate on that.

With regard to nuclear power, within a few decades there is the prospect of a world uranium shortage. I am glad to note that the Commission is encouraging uranium exploration within the Community. We welcome the present Government's decision to go ahead with the Labour Government's plan for two AGRs, but has not the time come when we should be thinking urgently about the fast breeder? Can we afford to wait much longer before a decision is made? Already, as the Secretary of State for Energy admitted recently in another place, Britain is in the position where the amount of electricity generated from the nuclear power available to her by the year 2000 will be less than that available to the French and to the Germans in 1985. I understand that the Government are considering whether there should be international collaboration over the fast breeder; and in its report the committee suggests—as the noble Lord, Lord Sherfield, has pointed out—that this could be beneficial.

I believe that the United Kingdom Atomic Energy Authority, in conjunction with the nuclear and electricity supply industries, is examining possible ways for collaboration with our European partners on the fast breeder. Perhaps when the noble Earl, Lord Gowrie, comes to reply he could let the House know the present position.

I should like to support most strongly what the noble Lord, Lord Sherfield, has said with regard to coal. The report points out the importance of our coal industry to the whole Community and suggests that it seems reasonable for the Community to give some aid to the industry. The committee particularly favour aid to investment in coal-burning plant and in electricity generation, as well as aid to new mining capacity. Perhaps the noble Earl, Lord Gowrie, will comment on this aspect of the report.

I hope that the House is not going to be told by the noble Earl that this is not for the Government but is a matter for the NCB, because I believe that this is an area where the Government need to play their part in conjuction with the board and with our European partners. Certainly the considerable recent investment in our collieries of £600 million a year is beginning to bring its reward, and the output in Britain's coal mines continues to rise, with both productivity and output records being achieved in February. Judging by the coal industry's provisional results for 1979–80, this has been a most impressive year altogether of resurgence for coal, and it is an achievement that brings much credit on the 300,000 people—miners and surface workers alike—who work in this great national industry.

I want finally to turn again to the question of producing SNG and oil from coal by the particular extracting processes that are not new—the Germans were able to do this to an extent during the last war, and the South Africans have been doing it for some years—but which have been developed to an advanced level at the National Coal Board's coal research station at Stoke Orchard, near Cheltenham, which I had the pleasure of visiting last year. Perhaps I may say en passant that in the days before coal nationalisation none of the privately owned collieries did any research of this kind. This vital research work, on which our future depends, by the NCB is surely an added justification, if justification were needed, for the nationalisation of our coal industry.

I hope that we are not going to be told that coal liquefaction is a matter for the board and not for the Government, because the Government should have a part to play in this vital development. The last Government granted a large proportion of the cost for the design and feasibility studies. Can the present Government tell the House when they think that the liquefaction process will be sufficiently advanced to be used on a national scale? Will this be early enough to fill the breach when the oil begins to run out? What are the environmental and planning considerations involved? How many conversion stations will be needed throughout the United Kingdom? And is it envisaged that these will be sufficient for our requirements only, or is it the intention to export oil from coal to our partners in the Community?

I know that the Government are apt to shy away from central planning, but here surely is a case where we need a national plan now for producing petrol, diesel, and aircraft fuel from coal. On the question of cost, it has been estimated that with rising oil prices the project should be economically feasible on a national scale by about 1995, which is just about when we shall need to start replacing North Sea oil with other fuels. Therefore, we have not got very long before the oil runs out and we shall need this alternative form of fuel if this country, and indeed most of the EEC, is not to grind to a halt. I think the Government—and I hope that the noble Earl will be able to do this—should give the House a report on the current position.

7.15 p.m.

Lord TANLAW

My Lords, we, too, from these Benches are most grateful to the noble Lord, Lord Sherfield, for bringing this report before your Lordships' House. I agree with his comments and what he said in view of his disappointment about the apparent lack of urgency that has been shown by the Commission in bringing this report further forward. A time-lag of a year is one which in our view cannot be overlooked, because it is the lack of the sense of urgency which is the main point of the intervention I make today.

The short-fall in Europe which has been expected to occur in the late 1980s could happen tomorrow. The political events, as has been said by the noble Lord, Lord Strabolgi, in the past week in Iran, and their repercussions in the neighbouring countries and now London, do not bode well for continuity of supply to the oil-importing nations of Western Europe. Therefore, the title of the report which we are debating should perhaps be altered to allow for these latest developments, and should read the "Commission Communication on Energy Objectives for the 1980s" rather than for the 1990s. I say this because the underlying assumptions that have been made on all the future energy predictions have been that there will be a gradual slowing down of oil supply to the Community, with perhaps only minor interruptions, but with no major stoppages for political or military reasons.

Unfortunately, it would appear that unless the present situation in the Gulf region returns to normal very shortly, which I believe to be most unlikely, then future energy predictions must assume as from today that there could be total stoppages in supply of fuel oil to all Western nations from time to time. Therefore, some of the actions recommended in this report for the late 1980s or early 1990s in anticipation of predicted oil shortages should now be brought forward and implemented as soon as possible if there are not to be very serious effects on both industry and society in the Free World.

The noble Lord, Lord Sherfield, referred to the evidence submitted by the European Environmental Bureau on Conservation. We, too, take up the point that the projection for this report was too short and should have gone on into the next century. Their recommendations in the areas of conservation are ones that should be implemented not in the 1990s but right now, in the 1980s. The other important area which, in my view, was not fully covered in the report is that of substitution. May I say a word about this because there has been a false assumption, which was repeated in his report by one of its witnesses, that electricity cannot make a very large contribution to substituting for imported oil. I disagree with this view, in that it is even now technically possible by using electrical furnaces to produce steel. It is also possible to replace space heating by electrical means.

I fully accept that electricity is not the most efficient use of energy conversion through the heat and transmission losses involved, and I have said this from these Benches on other occasions. However, in the context of the new circumstances in which I believe we find ourselves today, it is not so much a question of whether the source of energy is efficient but whether it will be available at all. In which case I would ask Her Majesty's Government's view as to what changes in energy policy are being considered to implement wherever possible the substitution of electric power for fuel oil.

Such a policy would of course require in the United Kingdom the CEGB to re-estimate yet again their future consumption loads for the next 20 years, and by implementing such a policy they would have to be greatly revised upwards. I accept the evidence given by the oil companies in the appendices attached to the report that oil should be considered the balancing fuel; but what if the oil is not allowed to leave the ground for the political and military reasons that f have mentioned? Then the whole delicate structure of the Free World economy is thrown off balance unless there is an adequate conservation and substitution policy already in operation throughout the whole Community.

Noble Lords will appreciate that these are general comments and might appear even controversial, which they are not intended to be but merely cautious. The one question that has not been raised or already asked, except in the vaguest terms within the report, is, what kind of society will exist in Western Europe by the year 2000 on the basis of the current energy policies? It is my view that it should be stated quite clearly that there will be be no alternative to an all-electric society for the first part of the next century. There are just no other sources of energy available to maintain existing living standards in the West, or to uplift the very low standards of the Third World.

It may be of interest to noble Lords to know that if the people of the developing world are to have parity in electrical consumption with us—that is, half a kilowatt capacity per head—they will require a total supply of at least twice that which is available in the whole Western world today. Even when alter- native energy strategies begin to make their contribution to the energy equation 20 years from now, they will do so mainly by contributing electricity. I am asking the Government today to say quite openly that a world without oil and gas will mainly be one which is powered by electricity in the 21st century. It would be most helpful if they were prepared to say so now, or alternatively explain what other source of power is going to provide the needs of life, public transport and industrial energy during this period.

The particular aspect of the report which is relevant to these remarks is that the time has come for the Community, including the United Kingdom, to cut down the spending of money on academic papers on energy conservation from universities, consultants and the like and to divert these funds instead into the production of workable prototypes which can be properly evaluated. There is no more time for theoretical work, certainly in the public transport field, if a substitution policy of using electrical power is to be of any use. We must have some prototypes, and if I give an example in an area with which I am familiar—that is, the electric traction field, in which I have an interest—perhaps the Government will see what I mean.

The technology of electric traction is well known, as—and this is mentioned in the report—that of windmills, and there is little more to be gained by pure academic research into these areas. What is missing is the hardware for evaluation when the time comes and there is no more fuel oil for transport. The Commission has the power and funds to execute such a policy with known technology. There can be no merit in delaying decisions to go ahead on a whole range of projects concerned with conservation and substitution. They have already been put before them. Postponing these decisions could put the whole future way of life of the Community in jeopardy.

Closer to home—this may sound almost parochial in the wide terms in which I and noble Lords have been speaking tonight—I wish to make a suggestion to the Government which need not involve the expenditure of extra funds in this area. If they divert some of the sums already committed for academic research and use them for the production of prototypes rather than paper in this country, they too could be making a contribution to the Community. There is another area in which Her Majesty's Government could be of assistance in preparing for disruptions in public transport due to the possible interruptions, to which I have referred, in oil supply in the future. This would be by advancing special sums or grants to local authorities for the creation of trolleybus, tramcar and other similar means of public transport in both urban and rural areas which could be used for evaluation purposes and at the same time provide a public service.

To give an example of this, I think Blackpool has the only existing tramway system in this country, but it is in urgent need of repair and maintenance if it is to continue to provide any form of public service. The Government cuts in local government expenditure will almost certainly mean that this service will be suspended and the vehicles sold as scrap. However, by the injection of a special grant of about only £50,000 I understand that it would be quite feasible to update this system of transport and at the same time use it as a test track for evaluation purposes. It this tramway is allowed to fall into disrepair, the Government may be forced within a few years to build and establish, at far greater cost, their own test track to evaluate the practicability of the reintroduction of tramcar, trolleybus and other electric vehicle systems throughout the country.

I hope the Minister will answer that when he replies, because he must be aware that in the Community there are modern and extremely efficient tramcar and trolleybus systems already in operation, and therefore if we have to use them in this country it would be a tragedy if we have to use European technology and European vehicles when we could be using our own. Unfortunately, the British Airports Authority is not using electric vehicles built in this country but is having to use expertise from the United States, simply because there are no prototypes for evaluation for their services. There is almost a surfeit of British technology amassed over the years which, without further research, could be used for this purpose, provided there was some incentive for a local authority to construct an economical electrical transport system. Already we hear that London Transport wishes to extend the electric trains system from Aldersgate into the new development area of Dockland. Their concern is to how to do it. This would be an excellent area in which perhaps the Government, in conjucntion with London Transport, could use this as an experimental service for the future, for the 1990s and beyond with which the report is concerned.

There is a minor point which I find almost incredible; the difficulties passengers can experience in transferring from British Rail to the public bus services. Why is it that bus stations appear to be situated so far away from railway stations? And why is there such an infrequency of bus routes that travel past a railway station? This aspect was touched on in another report, The Social Consequences of Rail Closures. If we are to work towards a policy of conservation or integration of transport systems for the future, why is it, for instance, that at Preston the only means of getting to the bus station from the railway station is to take a taxi at a minimum fare of £1.50? It seems to me that this is an area where the Government could look to the local authorities for assistance in a policy of energy conservation for the future, simply by establishing public transport stations that are close to one another so that transfers can be made for an integrated transport policy. The motorcar has made the economics of providing such a service today totally unreal; but many people believe, as I do, that the high cost or the intermittent availability of motor fuel in the Community will necessitate people using public transport as a main means of getting from one place to another.

The Select Committee went on to some details of the arguments covered by Gerald Leach and the need for a low energy strategy, which implies that there is little requirement or place for nuclear power stations. Surely there is now an even greater need for a nuclear element as part of the Community's energy policy. Indeed, some countries have no alternative but to go along this route. We in the United Kingdom are committed to building nuclear power stations, subject to the safety provisions which the Government have undertaken to satisfy through a public inquiry. In view of the present urgency of the implementation of a substitution policy, may I ask Her Majesty's Government to bring forward the date of these public inquiries so that the nuclear programme can be commenced at an earlier date than is apparent at the moment? Further, will Her Majesty's Government consider at the same time instigating the public inquiry regarding the safety of the fast reactor, so that promising developments in this field may not be held up due to hesitation from the general public about the safety aspects involved in this process of electricity generation?

However one looks at it, I see no advantage in delaying these public inquiries, even if it is only to satisfy the current disquiet that many people feel—that many Liberals have—about the future of the nuclear industry. I am sure it will be satisfied by public inquiry. It is interesting to note that the report touches on this and says that some countries within the Community wish that they had used this method of public inquiry before going ahead with the construction of their nuclear programmes because of the doubts it left with the general public most affected by these programmes. These doubts must be resolved, and the sooner they are, the better it will be for the establishment of a workable energy policy for the United Kingdom and the European Community as a whole.

7.28 p.m.

The Earl of BESSBOROUGH

My Lords, we must be grateful to the noble Lord, Lord Sherfield, for presenting this report so clearly and concisely, and I wish to say as a member of the committee that the noble Lord is a most effective chairman and that we are very fortunate to have him as our leader. I need hardly say that I have no reservations whatever about the report and agree fully with its contents and conclusions, especially, as the noble Lord, Lord Strabolgi, said, that the Community should publish objectives for the year 2000 as soon as possible and, above all—the third main recommendation—that much greater resources should be allocated to energy policy, including conservation, the development of indigenous coal, its liquefaction and, perhaps most important of all, as Lord Sherfield said, the fast breeder reactor.

In regard to increasing the amount of funds available for energy research of various kinds on various projects, what I most regret is that, although the Commission and the European Parliament take, I think, a similar view, there seems in recent months to have been no political will in the Energy Council to achieve these ends. I think that the noble Lord, Lord Sherfield, made that point.

I should like to pay tribute to the work of the Energy Director-General in the Commission and to my old colleagues in the European Parliament, who gave evidence to us, for the important work that they have done in striving to achieve an energy policy. But unfortunately—as I think we now all know—the Council does not seem to go along with them in their views. Indeed, my impression is that recent Energy Council meetings, in the last three or four years, have been very ineffective. Some people have said that they are almost going backwards, that each meeting is almost worse than the last. I regret having heard this. At all events little progress has been made in developing an energy policy.

In regard to allocating much greater resources, I have been contemplating how best this could be done, since the publication of the report, and I have read with great interest two recent communications from the Commission to the Council on energy policy and fiscal instruments for raising Community revenues from energy. These communications were published on 20th March, a month after our committee's report was ordered to be published. They are Com80/150/final, and 153/final. They are most interesting and illuminating documents. They are public documents, but I stress that they are of course only communications, and not even definite proposals by the Commission. However, I believe that they are most useful papers for the purposes of discussion, and that is why I raise them.

As the first document says, the case for common Community policies is strong. When the Coal and Steel Community, and later the European Economic Community and Euratom were set up, the need for energy policy as such was not clearly foreseen. At that time coal occupied a more important place than it now does, and nuclear energy seemed to be the main energy source for the future. Thus although powers in respect of coal and nuclear energy were attributed to the Community, no specific power was attributed in respect of energy as a whole. Nevertheless, as the Commission says, achievement of the political, economic, and social objectives of the Community as defined in the Treaties are increasingly conditioned by the supply of energy; and I agree with the Commission that there can hardly be a true common market without common policies in that field.

I know that some progress has been made following acceptance of the Commission's proposals on reprocessing of nuclear waste, nuclear waste disposal, and indeed fast breeder technology. But more work is necessary to establish consistent environmental and security standards for nuclear power stations within the Community.

There are, as the Commission adds, two particular areas in which action might now be considered: an energy price and tax policy, and increased energy investment, as the noble Lord, Lord Sherfield, has said. We all know that the Community's paramount need is to become less dependent on external supplies of oil. But at present the different fiscal policies followed by member Governments scarcely promote the greater independence which the Community needs. Indeed, part of recent oil price increases have in effect been carried on national budgets. This may have helped to hold inflation in the short term, but it has had unhappy consequences, including a reduction of the investment to save energy and develop new sources.

The different ways in which prices are fixed in each member State, the different systems of taxation, the different weighting given to energy in such features as the cost of living indices, have created trade distortions between member States and indeed distorted consumption within them. I agree very much with the Commission that progressive harmonisation of energy prices and taxes within the Community is essential. In so far as investment is concerned, this differs greatly among member States in the various forms of energy, according to the circumstances.

We might bear in mind that during the period 1980 to 1990 (the period we are thinking about) member States plan—these are the estimates—to spend in total over 400 billion European currency units on energy, or up to two per cent. of the Community's gross domestic product (the GDP). Although about 40 per cent. of all Community financing goes into the energy sector through the European investment bank, Euratom and the European Coal and Steel Community, this amounts to only about 4 per cent.—as opposed to 40 per cent. of all energy finance. This must be markedly insufficient in the long term, and in my view an expanded Community programme of investment support is absolutely essential—as I think the noble Lord, Lord Sherfield, agrees—and above all, it is essential in promoting coal and nuclear power, the exploitation of which is vital to meet our future needs.

As well as the development of synthetic fuels and other renewable resources, there should be increased investment in proven technologies and in more advanced technologies; for example, in deeper sea oil drilling. Many of your Lordships may have seen that interesting and most effective BBC documentary on Tuesday night, about life in the North Sea. I know—and I think the point came through in that programme—that some large oil companies have come to welcome EEC assistance in this respect.

The Commission seems to consider that the additional investment required in the 1980s to hold down oil imports to their present level could be in the order of 50 to 100 billion European currency units, or between a quarter and a half per cent. of the Community GDP.

I recognise that in general terms the energy industry is capable of financing itself, but with the growing importance of research in advanced technology, the long lead times, and long pay-back periods, there is a substantial need for such additional finance; and here the Commission paper—there is more than one paper, I need hardly add—has some interesting suggestions to make regarding the form of such support primarily to supplement national programmes. Maybe a mixture of grants and subsidies for loans would be appropriate. But how would these be financed?

Revenue under the Community's existing system of own resources would certainly have to be increased. This might be done by introducing, as the noble Lord, Lord Sherfield, suggested, a specific Community energy tax. It might be a tax on consumption of energy, either in all its forms or on oil, or on specific oil products. Or it might be a tax on production of energy in general, or oil in particular. Or, perhaps—I put this last—it might be a duty or levy on oil imports. If substantial funds—funds which would be part of the Community's own resources—could be raised by taxes of this kind, this would make contributions to the Common Agricultural Policy appear much less inflated, and display, perhaps, a slightly more balanced Community budget. Member States might also, in those circumstances, receive Community-produced oil—that is to say, from the North Sea—at preferential rates. A Community initiative of this kind would also be designed to help further policies already publicly advocated by the OPEC countries to reduce consumption of oil and extend the life of the world's oil resources.

I should be most interested to hear the Government's comments on these ideas, if they are ready to give them, which have been produced by the Commission, as well as on the precise fiscal instruments which might be used. We know that three types of tax do at present apply to energy. First, of course, on consumption—that is to say, VAT—second, special excises on consumption; and, thirdly, Customs duties. I should be particularly interested to know whether the Treasury and the Energy Department have any preliminary views on extending levies or taxes of these kinds, and/or whether, for example, a hybrid formula combining a Community Customs duty on imported crude with identical but nationally-imposed levies on internal crude oil production would be appropriate.

Coming to the end of my remarks, I am sorry that I have perhaps broken somewhat new ground here, but I thought these points were worth discussing. I should like to say how important I consider it to be to revive the dialogue between the European Community and the OPEC countries. The official Euro-Arab dialogue does not seem to have been operating very effectively in recent years, and that is why I have been happy to keep contacts alive as a co-chairman of the informal Euro-Arab Dialogue. I hope that Sir Donald Maitland, the newly-appointed Permanent Secretary to the Department of Energy, with his unrivalled experience of the Arab world as well as a permanent head of our delegation in Brussels, will be able to play a part in revivifying that dialogue. I think this is the most remarkable and imaginative appointment of one of Lord Sherfield's former colleagues, and it is an appointment on which I consider the Government, and indeed Sir Donald Maitland himself, should be warmly congratulated.

I also wanted to ask about what happened in Luxembourg. I read the Financial Times today where it was said that the Prime Minister made certain concessions to other Member States on the energy front. I do not know whether or not the noble Earl, Lord Gowrie, can say anything on this; but, in conclusion, my main message has been that we must increase the Community's own resources for these purposes, and I hope that this Select Committee report is approved by your Lordships, because that is one of its main recommendations. I hope the report may have some effect, not only on any future proposals which may be made by the Commission, perhaps in agreement with the European Parliament, but above all on the Ministers representing their Governments on the Energy Council.

7.45 p.m.

Lord FLOWERS

My Lords, I have few points to make, so I shall be brief. First, however, I, too, should like to say how enjoyable it is to serve on Sub-Committee F under the vigorous chairmanship of the noble Lord, Lord Sherfield, and to thank him for initiating this debate on our report. The report itself, and several noble Lords, have stressed that in matters of energy policy the Community has too close a time horizon. Its vision extends no further than 1990, only 10 years away. To be sure, there are very serious short-term problems, as the noble Lord, Lord Tanlaw, has said, but we must not be entirely mesmerised by that. Allowing for all the normal planning procedures, as well as the construction and commissioning phases, it takes about 10 years, with a bit of luck, to build a major power station, whether fossil- or nuclear-fuelled. It takes 10 years to open up a new colliery. It would prob- ably take 10 years to provide for a major district heating scheme in present-day London.

On the other side of the coin, it takes about 10 years to rehabilitate a site used for colliery waste. It will take much longer than 10 years to prove, let alone to develop on any significant scale, the so-called renewable sources of energy, such as wind or wave power, which might be applicable in this country. Fusion, which many of us hope may prove to be the ultimate energy source, is several decades away. As for conventional nuclear power, the extent of its contribution and the major technological directions it should take depend, as the noble Lord, Lord Strabolgi, has implied, upon the uranium supply position around the turn of the century—20 years away—and upon whether fast breeder reactors can be shown by then to be acceptable.

My Lords, if the Community fixes its eyes on 1990, only 10 years away, there is really little more it can do than tot up and report upon the decisions that have already been taken by the Member States, and wring its hands about the present instabilities of the oil-producing world. It can hardly contribute to new policy directions, or offer leadership. It seems to me that energy questions should be central to the European Community for political, as much as for economic, reasons, and that the Community should back a vigorous energy policy with funds, as the noble Earl, Lord Bessborough, has argued so eloquently. If so, it is essential that the Community should extend its concern as soon as possible to the end of the century, and beyond. Twenty years is the minimum; 10 years is so short that it can even mislead. I should have thought that this was made abundantly clear by the report of the World Energy Conference, as well as by the evidence submitted to us.

I have mentioned the important contribution to energy supply that may be made by nuclear energy. Indeed, the draft Council Resolution annexed to our report envisages that an increase in the use of solid fuels and of nuclear energy should together cover 70 to 75 per cent. of electricity production. However, this same resolution specifically urges in paragraph 2.d.—and I quote—the restoration of nuclear energy programmes as far as possible in fully satisfactory conditions of safety". I am somewhat disturbed to find in the revised draft resolution since transmitted to us by the Secretary of State for Energy on 28th April, to which the noble Lord, Lord Sherfield, has already referred, that this important phrase has been omitted. I should have thought it still important to emphasise that nuclear programmes should proceed only under conditions of adequate safety. In this connection I should like to draw to your Lordships' attention the very important article by Sir Alan Cottrell which appeared in the Financial Times on 15th April. In it, Sir Alan, who is a world authority on the strength of materials, makes very clear his view that much remains to be done before we should accept the safety case for that most favoured nuclear system, the pressurised water reactor.

But Sir Alan makes another point, too—and I quote—asking: With the commercial fast breeder reactor (FBR) quite properly claiming its place as yet another project ready for launching, would we have the scientific and engineering manpower to handle four different commercial reactor systems—Magnox, AGR, PWR, FBR—with full mastery in all cases? I have to declare that I am a part-time member of the Atomic Energy Authority, although not one who has always spoken as my fellow members might have wished. But I do not think I shall cause much additional offence if I now say that I agree with Sir Alan that four systems are a bit too much for us to be handling simultaneously, especially if safety is to be given proper attention, as it must. I also believe that we should do our best to demonstrate the safe operation and economic performance of the FBR system by the year 2000 in case we should need it beyond that.

I have personally been greatly impressed by the progress made at Dounreay and elsewhere in recent years, but even so I doubt whether we can really commercialise this system on our own. It seems to me that it is foolish for us to be in competition with our European partners in something so complex and so expensive, intended for so small a market for many years to come, although, of course, with great potential in the long term. I therefore hope that full co-operation on the development of a common FBR system can soon be an accepted part of European energy policy. There is much that British engineers can contribute, and much for us all to gain by sharing the burden. After all, we have successfully developed the Urenco centrifuge plant in that fashion; we are working together on the JET fusion project. We must try to develop FBRs that way, too.

My Lords, nuclear power has seemed so unacceptable in many quarters that the Commission of the European Communities has rightly seen fit to devote considerable attention to trying to improve its image. It has held discussion meetings; hut, more important, it has organised collaborative programmes on reactor safety and on nuclear waste disposal. As we say in paragraph 41 of our report: An important aspect of energy policy is to gain public acceptance for its implementation". It is not enough just to rely upon the great public inquiries like Windscale and the Vale of Belvoir.

I must be careful what I say now, because I am chairman of the Standing Commission on Energy and the Environment and we are deeply engaged in a study of the future of the coal industry in this country. But the draft resolution before us today urges Europe to increase its production and use of coal. Due to inadequate environmental policies the results of doing that in the past are only too evident in many parts of this country and abroad, in the form of derelict land, decaying buildings and the residues of subsidence. Of course, the modern coal industry has no intention of repeating those mistakes, but ordinary people must be forgiven for thinking that more of the past is what they are in for as long as those relics remain so vividly before us. Like the noble Lord, Lord Sherfield, I would hope that the Community, in urging us to use more coal, would recognise just as with nuclear power the need to make it acceptable. They could help to remove past dereliction by recognising the problem, by proposing concerted actions and by financial assistance to the regions most affected.

My last point concerns the third leg of the "coconuke policy", conservation. I fear we are much too complacent about conservation in this country especially if we wish to reduce the energy coefficient. By way of contrast the noble Lord, Lord Sherfield, and I were privileged to be guests of the Danish Ambassador earlier this week when we heard about the development of district heating schemes in Denmark from their Minister of Energy and from the chairman of their Board of District Heating. It seems that the Danes now have about 380 district heating schemes supplying 35 per cent. of their dwellings (about 700,000 dwellings) and that 70 per cent. of their electricity is now derived from combined heat and power stations, half of it provided during the last 10 years.

At the risk of contradicting something I said at the beginning of my remarks, it does seem that the Danes are able to get on with the job faster than we seem to think that we can here, and without enormous disruption. Of course, climatic conditions are not the same in our two countries, nor does Denmark have indigenous natural gas as an alternative form of space heating. But if energy conservation is as important as we say it is, and as the Community says it is, we should not be using gas for heating when reject heat can be used instead at a reasonable price; and in Denmark they say that it can. I therefore hope that the Minister may be able to say something encouraging about whether the Government have plans to introduce an experimental district heating scheme dependent upon combined heat and power generation.

7.56 p.m.

The Earl of LAUDERDALE

My Lords, I too, should like to join with other noble Lords in saying how much we are in debt to the noble Lord, Lord Sherfield, for his urbane and discriminating leadership of this committee which is now operating at higher gear and to better purpose than it has ever done. On the subject matter of our debate, I must confess to getting a certain feeling of déjà vu. I am reminded of a lady of 95 in Caithness who once said, "All these long years I have heard the wind blow and never seen it yet". We are going over familiar ground and the context of this debate has inevitably become the meeting at Luxembourg. So much so, that one wonders whether perhaps they may not have had a "peek", as we say in Scotland, at the galley proofs of our report. They have focused on energy saving; so have we. They have focused on coal; so have we. They have referred obliquely to North Sea output; and so have we. It looks from the Luxembourg communiqué as if our country has moved (at any rate, a little) on the North Sea oil front towards the wishes of our Continental partners. If that be so, God be praised!

If the Summit did try to inject some energy into the Energy Council in order to accelerate the long majestic march of energy divine, better still! Here it would be churlish not to follow my noble friend Lord Bessborough in saluting the imaginative appointment to the Department of Energy of my kinsman, Sir Donald Maitland, who is quite the most distinguished member of the clan of which I am proud to be Chief. His gift for the Arabic tongue has a very obvious relevance to the political context of his appointment.

If the Energy Ministers do meet and do get down to business and if they pass the current draft resolution which is under discussion, modified (as Lord Sherfield has said) from the text originally presented to us, then it will be the Commission's job to report on members' progress towards convergence. If so, our country can find itself "in the dog-house" on the matter of energy savings. It is far too soon for this Government to boast that last autumn's rise in petrol prices has "caused"—as one ministerial statement tried to suggest—petrol savings on the road. One quarter's figures after a very mild winter—figures which were trotted out in our last debate—tell us nothing. In any case, it is costs in real terms that matter. Therefore, the tendency for the present Administration to hide behind the argument that rising prices will accomplish energy savings as well as, or better than, any administrative or legal measures is, I believe, gravely mistaken. To argue that we have no money is to miss the point. Financial stringency means little in the abstract. The question is not about volumes of investment but about its cost-effectiveness. Nor will intelligent people readily believe if they are told not only that the famous leaked memorandum, Minutes of the Ministers on Energy Conservation Committee of 6th and 14th February, about the cost of conservation policy, is a fake, but that nothing remotely like it is in the record. That will be very difficult for intelligent people to believe. On the face of it, the 11 Ministers involved treat conservation as a relatively minor political side show. Someone seems to have suggested that this Ministers on Energy Conservation Group would remain useless until there was a political will fully in evidence from the Prime Minister's office.

Until there are convincing statistical trends to show the reverse, we have only figures up until 1978 or mid-1979 to go on, and they show a very serious rise in energy consumption over recent years, despite an almost stagnant economy. These figures have been quoted before. There is no point in repeating them. But when we debated this matter on 19th March, they were listed and at least 10 different areas for energy saving action were suggested. They were ignored. As somebody once said, it is not the ape nor the tiger in man that I fear, it is the donkey. How we could expect results from a mish-mash of 11 Ministers with the Treasury taking a keen interest passes my comprehension. The set-up is something like a quintet for eight instruments.

Unless the management of energy saving is made over to a high powered task group with direct access to the Prime Minister it is difficult to see serious progress being made. Since the Prime Minister put her name to the communiqué in Luxembourg, and since she had already declared herself forcefully on energy conservation in her speech to the Foreign Policy Association in York before Christmas, we can reasonably hope that this matter will come to her attention.

On the subject of coal, to which there has been some reference in this debate already, evidence before us showed that it would certainly be technically possible to raise United Kingdom output well beyond the target of 135 million tonnes per annum looked for in the mid-1980s—subject to investment. It is relevant to quote our committee's report on Coal, the First Report of the Session 1978–79, paragraphs 25 and 26. The committee said: Given a stronger lead, the NCB, as the executive organ in the United Kingdom, and the Council, in respect of the Community, may take coal more seriously, and the many undoubted problems are more likely to be solved. Acceptance that only a less ambitious target is practicable may, the Committee feel, be self-fulfilling. Greater drive, enthusiasm and optimism in the attitude of the Government, and of the governments of other Member States, might inspire better results. Then it goes on: But our problem in 2010 may not be to cover our total energy needs at the lowest cost, but to cover them at all. My Lords, there are now new mining technologies available—in particular the development of new oil drilling techniques for use both on land and below the sea. They promise to make the possibility of underground gasification a more attractive subject for study and consideration than as recently as five or even four years ago. If major United States' companies like Atlantic Richfield and Gulf find it worth buying Soviet technology in underground gasification there must be much more in it than has hitherto been admitted by the National Coal Board. Pending this Government's Coal Industry Bill, there is little more that one can do than leave the matter there. We are still waiting to see what the Government's policy is.

We suggested in our report that it would be well if the Commission could look ahead to some such target year as A.D. 2000, and would do so without simply totting up the results of national intentions. Noble Lords may not be aware that on 17th April the London office of the European Communities Commission published a background report based on the new Commission document about coal (COM(80) 117 Final), and looking forward to the year 2000. I can only tell your Lordships that that document, for what it is worth, managed to raise the figure of European coal output as between 1990 and the year 2000 by a factor of two. It did the same with nuclear power, the same with hydro and the same with solid fuel imports. It did so on the basis of a forecast annual growth rate of between 2 per cent. and 3 per cent., which is nothing if not optimistic.

We have said in our report, in the nicest possible way, that it would be well if the Commission could do more than just tot up the national figures, but could give us a serious, independent critique. This latest case, a purported picture of the coal situation at the end of the century, underlines our case.

There are other areas in the energy field on which one could well look forward to some indication of the Govern- ment's policy. But since the Luxembourg communiqué, in almost direct alignment with our own report, is focused so sharply on energy saving I believe that tonight we are entitled to something more satisfactory than the information that we were given in reply to the debate of 19th March. If we are not, I suspect others as well as myself will be fortified in a growing belief that even the most serious debates on substantial matters in your Lordships' House resemble nothing so much as a barrage of marshmallow against ramparts of cotton wool.

8.9 p.m.

Lord IRONSIDE

My Lords, I should also like to thank the noble Lord, Lord Sherfield, for introducing this Motion. The new Commission document tries to identify the very important objective issues in energy, but regrettably they are conceived from a rather subjective and fragmented base, over which there is no proper Community control mechanism in the form of some intervention machinery which could be used to steer the Community rapidly in the right direction. The European Coal and Steel Community and the Euratom machinery have not, over the years, achieved any lasting impression on Europe, but they show a form of intervention which could provide a useful function in the energy field. However, I imagine it is too late to remould these two treaties, but they obviously have some further uses.

On the question of treaties, we have similar problems in the NATO alliance where the overall picture has been based on the same diversity of building bricks. If all the building bricks were standard types and the same choice was available to all members, we might probably have more effective defences. As an example, all States have their own air forces but some import their own aircraft, some design and export them and others get together to design and use them on a common basis. The object is defence in Western Europe.

In energy defence, all Member States have their own energy industries; most import primary fuels. Here in the United Kingdom we are nearly self-sufficient and we export them, and a few States trade in energy and energy equipment. But, for example, we have not yet seen the birth of a European electricity super grid. Oil and gas gathering grids are appearing in places and actions of these kinds must add to security in energy defence. I think it is regrettable that so little progress has been made in formulating energy policy to present a united front in Europe to the rest of the world. We now see the Commission edging towards convergence as being the next best method of achieving objectives. There is a policy of convergence in NATO and this is now being proposed in the EEC for energy, but basically there is no difference in principle.

Our recent debates have shown the difficulties that the Government encounter with weapons standardisation in Europe, and there will be just as many stumbling blocks in energy. Good intentions, I think, will be found everywhere along the road—not to hell but to the heaven of fusion, where the heat in the chamber is certainly no less fierce. In NATO, if Big Brother is the USA, then in EEC energy Big Brother is the United Kingdom for the time being: and I think we have to exercise our role in a careful and considered way so that we serve our own distinctive interests within the framework of the Treaty of Rome.

The convergence policy which is now proposed by the Commission in the energy field makes some sense in the circumstances, just so long as the Commission bring greater pressure to bear in making it work and the Council of Ministers are also prepared to adopt the resolution on energy objectives. On previous occasions, many of the action programmes have been based on Council resolutions, which I think have been useful launching pads.

However, within this resolution, the philosophy of energy dissociation is carried forward as one of the objectives, and the energy coefficient of 0.7 is proposed. Compared with 0.8 last time, I think there is some danger that, on the one hand, if there is a crusade of energy dissociation it could have a counterproductive effect on making the energy convergence policy work which is aimed at linking energy issues with the increase of industrial prosperity and the GNP. I think there is a real danger of advancing the dissociation arguments too strongly in the face of trying to achieve convergence objectives. As we have seen, there are many factors other than straightforward efficiency in energy which have a direct bearing on economic growth and future prosperity. That point was the subject of one of our recent debates on deciding about energy policy, which was introduced by the right reverend Prelate the Bishop of Durham.

If one compares the convergent actions now proposed following the energy policy guidelines which have already been put forward in the last Commission proposal on 1990 objectives, we still find that the emphasis on energy conservation and the better mix of primary energy sources to reduce oil imports is still paramount, but the new convergence proposal also has other useful pointers, including the development of Community trade in energy products and to organise all energy developments in an orderly fashion, working towards a 50 per cent. self-sufficiency and restricting oil imports to the 1978 level of 470 million tonnes.

This raises the question of targets and in the evidence taken by the committee it was shown very clearly that, on the one hand, the Commission was not looking far enough ahead and, on the other hand, the targets proposed were ill defined. The point here is that if you try to generalise when so much control in the energy industry rests with Member States you risk not producing any effective programmes which are likely to be successful. The efforts required from each country are different and, in my opinion, this is a critical factor which the Commission should take account of if they are to make any progress in the energy field.

If we look at the way that motor manufacturers have agreed to improve performance voluntarily by 1985, we can see that this is happening in spite of anything that takes place in the Commission's decision-making machinery. The Commission must use some finesse in developing its role in the energy field. If we look at the large electricity producers who are prime energy users of coal, nuclear and oil. we find that equipment suppliers are in fact planning for improved power station performance and thermal efficiency. For example, fluidised bed combustion techniques are coming forward and hybrid power stations are being produced.

It is clear that further carefully planned intervention in these areas by the Commission would be very helpful. The supra-national intervention which has come out of the Tokyo Summit is an important factor for justifying any Community initiative, but I think that very large sums of money need to be injected through the Community instruments into selected areas such as combustion, liquefaction and gasification. There are long lead-times, as has already been said; and the Commission is well placed to give major hacking. The European Coal and Steel Community coal members have requested aid for some large new projects and I think that is good, but very much more is needed.

The committee has supported the Commission's proposal to increase research and development and also demonstration—and I think that demonstration is needed in the energy field more than in any other, because you have to prove to potential users that the system you have developed is economically viable. I think the noble Lord, Lord Tanlaw, said that there is a real need now for more prototypes and more hardware around the place. I was fascinated by what he had to say about tramways and that we should look further into their use—but how can we, when we have to comply with the Tramways Act of 1876, which was drawn up for horse-drawn traffic? Perhaps might ask my noble friend Lord Gowrie whether he has any plans for repealing this Act. In any case he may be able to say whether the Government are genuinely going to look at tramways and at public transport in these areas, because they are used on the Continent with great effect. The argument is that they are capital intensive and therefore you need to have considerable investment resources in order to get such projects under way. However, I hope he will be able to say something about that.

It is all very well designing a fluidised bed combustion system for power stations, but you have to be able to demonstrate to potential customers in many other countries that you have a workable and economic system to offer. The only way to show this is to demonstrate the product in a power station, and that means Governments taking a risk too. The Commission has shown that it is ready to support demonstration projects in the energy field and it is well placed to support the very large projects.

I now come back to targets. We find that the heavy electrical industries in all the Member States are geared to their home markets. There is virtually no Community internal market operating in the heavy electrical equipment. The heavy electrical industries are fighting to survive, and I am very much encouraged by the statement of the Secretary of State for Energy about the power station ordering programme over the next 10 years, which will allow the United Kingdom heavy electrical industry to plan ahead.

The United Kingdom Government have therefore given targets to industry and, despite the evidence we received that fixed numerical targets are not favoured, here we have an example of the Government setting positive targets for a 10-year period. I can fully understand why some witnesses do not wish to set fixed targets, because experience has shown that one needs to keep one's options open and to exercise some flexibility in planning. In fact, it is obviously very desirable to up-date any targets every year, but the fact is that targets provide a very great incentive for us all to work to.

I think that we welcome the Commission's renewed attempt to define energy policy, but there is a need for action programmes in all Member States, as well as action by the Commission. The lead times are long in all cases and I think we have as much to learn here from the Commission's deliberations as any other Member State. I hope that we can implement our own energy programme in such a way that there is continuity of thought, policy and action, which is not put at risk by successive Governments. Energy is not a party political issue. It concerns all of us in the same way, from the day we are born to the day we die, and our successors afterwards.

8.21 p.m.

Lord SWINFEN

My Lords, I must apologise to the House for not putting my name down for this debate, but originally I had not intended to speak. I was for a time a co-opted member of Sub-Committee F, under the chairmanship of the noble Lord, Lord Sherfield, and grew extremely concerned at the very obvious shortage of energy towards the end of this century, and also the very considerable length of time that it takes to bring in new energy sources. I wonder whether it would be possible for a committee to be set up of members of all parties, to advise not only the present Government but successive Governments on energy policy, so that there will be a continuous policy from one Administration to another.

8.22 p.m.

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)

My Lords, all the Members of your Lordships' House who served on the committee have paid tribute to the chairmanship of the noble Lord, Lord Sherfield. I did not, of course, have the privilege of serving on the committee, but I should like to pay tribute to him for the way in which he introduced the admirable report and today's debate. I should like to say how greatly the Government appreciate the committee's work and how much we expect to learn from it. I am particularly glad that the committee did not confine themselves to a narrow examination of the particular Commission document, but rather used that document to take a more wide-ranging look at the development of energy policy in the Community into the 1990s.

As discussions proceed between Member States, and as events themselves move on, precise judgments, and even the nature of the questions we ask and the way we identify the problems, inevitably change. We have only to think of developments in the world oil market since the Commission first published their report in June last year. We have only to think of the renewed uncertainties, which many noble Lords have mentioned in this evening's debate, in the Middle East today—in Iran or elsewhere. We have only to think of these things to realise that too much precision is not the right approach when talking not only about these uncertainties, but also about a wide range of time and about the future. So it is to the broad spectrum of development and intention that we have to look when we consider these issues; but I acknowledge that they are of great importance not only to our own country but to the whole Community.

I want, therefore, to speak in terms of the broad issues and not confine my remarks solely to the Community, because, of course, the Community's energy problem is part of the world's energy problem, and to solve it requires solutions within the Community and decisions which also have to be taken in other international fora, and which will, of course, effectively influence anything going on within the Community itself.

For instance, the decisions taken on energy at the Tokyo Summit meeting followed, as your committee's report recognises and welcomes, the ground work which was prepared at the meeting of the European Council in Strasbourg just a week before the Tokyo meeting. Then, again, the Tokyo Summit decisions have much in common with the ground covered in the new proposed Resolution on 1990 Objectives, where progress within the Community continues to be closely aligned with progress on the international front, as the Tokyo decisions are followed up in parallel in both the Community and the IEA. Community energy objectives, therefore, and Community energy policy cannot realistically be determined, except in this context of wider international co-operation.

We must recognise, too, that all Member States already have in being their own substantial energy programmes. In the United Kingdom the Government, together with the nationalised industries and the private sector, are undertaking immense investment in coal, oil and gas, nuclear power and energy conservation, all of which are essential if we are to secure a better energy future. The Government's appointment last week of Mr. Rooney, as director of the National Nuclear Corporation, has given new impetus to the development of our nuclear power policy. Together with our announcement last December of a programme of nuclear power station orders for the years from 1982, and the CEGB's issue last week of a letter of intent concerning the pressurised water reactor, we believe that our nuclear industry is well placed to make a full contribution to future energy supplies.

As noble Lords have already recognised, we have just introduced the Coal Industry Bill and I shall have a word or two to say about coal in a minute. The Bill embodies the Government's strategy for the coal industry of reducing dependence on Government support, and turning it into a viable, efficient and competitive industry which will make a vital contribution to our future energy needs. To this end, it is intended to raise the limits on the National Coal Board's borrowing powers from the current level of £2,200 million to £3,400 million, with the option of increasing that already large sum to £4,200 million, enabling the board to continue its investment programme under the Plan for Coal. Noble Lords will be aware that only this afternoon the Government announced our decisions on the seventh round of offshore licensing. This will provide new opportunities for companies to extend the search for oil and gas resources, and contribute to our aim of increasing exploration activity on the United Kingdom Continental Shelf.

So these national efforts play a vital part in the achievement of the Community's energy objectives, as they are inevitably affected by them. I welcome the recognition in the committee's report that other Member States derive substantial benefit from our growing oil production, and from the important part which our coal production plays in reducing the Community's dependence on imported energy. I also welcome the committee's recognition that the main lines of the Community's energy policy must inevitably remain within the control of national Governments and Parliaments.

Although the main thrust of Community energy developments has, as I said, to lie with Member States' national programmes, these can, of course, be complemented usefully by Community-level action where that can make its own distinct contribution. Existing examples are the research and development programme for energy savings and alternative energies, and, of course, the major Joint European Torus project for fusion development. Community-level action may also be appropriate for problems which, because of their nature, require co-ordinated action; for instance, the Community's arrangements to complement the IEA's crisis oil-sharing plans. Community action can also be valuable in areas where energy policy impetus is needed, but where action by individual Member States might create distortions of competition within the Community, or where health and safety is concerned. The recent Directives on energy labelling and gas appliances come into this category.

Lastly, and also of great importance, is the Community's role in facilitating in-depth discussion and agreement on areas of mutual interest. This concerns not only the major international issues, but also the exchange of ideas and experience at a practical level. The setting of Community objectives is an integral part and expression of this process.

Such statements of agreed objectives play a useful part, as I have said, in reinforcing common resolve and impetus to save energy and to reduce our dependence on imported energy and on oil. These broad objectives and guidelines are a useful framework for the valuable continuing examination and discussion of Member States' individual energy programmes to which I have referred. But these objectives must be realistic.

The noble Lord, Lord Sherfield, asked what our view was on setting precise targets, and other noble Lords have echoed his question. We believe that the important thing is to concentrate on and to achieve the central policy aims, that is, saving energy and reducing oil consumption and oil imports. We think that is rather more important than trying to fix over-precise quantified sectoral targets. That is particularly true when we are dealing with a date so far ahead and hedged about with so many political and other uncertainties as the year 1990. The forecasts on which the analysis in the Commission paper is based were produced before last year's oil supply difficulties and price rises, and they are now considerably out of date. The unreliability of forecasts does not invalidate the need for a long-term assessment of the choices available to us, but it means that we must not place a great weight on them which they cannot and will not bear. As my right honourable friend the Secretary of State for Energy said when the Commission document was debated in another place last October, rather than trying to arrive at precise, quantified targets for 10 years ahead, we should concentrate on pursuing policies that are fully adequate to the needs of the situation.

That is the approach that the Government have urged in discussion of the proposed draft resolution on 1990 Energy Objectives. The Energy Council meeting planned for 13th May will be Ministers' first opportunity to address this question. I am glad to tell the House that the current basis of discussion in Brussels is a much shorter and simpler draft resolution. This draft concentrates on the two broad objectives of saving energy and reducing oil consumption and oil imports. But it still contains some attempt to define in figures where we should be trying to get to in 1990. It will be for the Energy Council to consider whether this is sensible and, if they decide that it is, how firm any such guidelines should be. A copy of this text, which was suggested by the Italian Presidency, has been laid before Parliament, together with an updating explanatory memorandum by my right honourable friend, the Secretary of State for Energy.

May I come now to some of the individual points made in the debate? As I said in my opening remarks, the Government believe that British nuclear industries, particularly with the PWR and the AGR, are well placed at present to make a full contribution to future energy supplies. Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about the fast reactor and they mentioned very properly the uncertainty of uranium supplies that may obtain by the end of the century. I have made it quite clear in this House in many debates that I am a strong pro fast reactor man. That is why it is a constant sadness to me that I cannot give the House more information at this point than to say that we are still taking advice from the Atomic Energy Authority and others concerned. There is a natural impatience, shared by all of us who are fast breeder men—if that is not a somewhat tactless term, as my noble friend, Lord Mowbray's chortle reminds me—and it is a natural sadness to us that we cannot make an announcement at the moment. But, as I made clear in February, these are complex and highly sensitive issues and we have to reach any decisions most carefully.

Meanwhile I have been asked, on the specific issue of collaboration within the Community, what the prospects are for Community collaboration on the fast reactor. The most important existing collaboration on the Continental mainland is based on an organisation called SERENA, which owns the technology of the full-scale fast reactor, known also as the "Super Phénix", now under construction in France. France and Germany have been the leading interests in this body, but other European countries are also involved. Clearly, the possibility of collaboration with SERENA is one of the options for fast reactor policy that the Government are considering at present.

The noble Lord, Lord Sherfield, asked me whether the Government agreed with the committee's view—and I refer to paragraph 35 of its report—that a large increase in the resources of the Community budget allocated to energy would be justified, and I think that point was also taken up in the last intervention by my noble friend on the Back-Bench.

I think that the strength of Community energy policy cannot be measured solely, or even primarily, by the amount of Community finance. The main thrust comes, as I think the committee recognised, and will continue to come, through the national programmes of Member States. Nevertheless we have some encouraging instances of co-operation. JET has been mentioned, and there is the case of the nuclear industries and collaboration in programmes there: for instance, the URENCO, which is the nuclear fuel enrichment project existing between the United Kingdom, Holland and Germany, and also the United Reprocessing Company formed by France, Germany and the United Kingdom for reprocessing nuclear fuel. I take Lord Flowers's point, that this is an indication that we may have examples pointing the way to fast breeder reactor co-operation.

Both the noble Lord, Lord Sherfield, and the noble Lord, Lord Strabolgi, asked me about coal, and investment in the United Kingdom coal industry. The National Coal Board alone in the Western European countries is undertaking a massive 10-year programme of investment. The programme is aimed at creating a new industry out of an old through modernisation and the provision of efficient, highly productive capacity. This has indeed reversed the decline which the British coal industry saw during the 1960s and early 1970s, and I think it provides a sound base for expansion. I believe that, as the noble Lord, Lord Strabolgi, recognised, it is a tribute to the National Coal Board that in the financial year just ended deep-mined output at 109 million tons was for the first time since 1963 higher than in the previous year. The noble Lord, Lord Strabolgi, said that it was a most impressive year altogether for resurgence in coal. I am quoting his words.

I have paid tribute to the National Coal Board, but I think I must also pay some tribute to my right honourable friend the Chancellor of the Exchequer; and if anyone hesitates to think that direct tax cuts have not had an effect in this economy, they should go and talk to miners, as I have done. The board has now approved or is committed to, virtually all of the projects which form its programme; its capital expenditure is now running at more than £600 million a year and it is directed towards that objective.

The noble Lord, Lord Strabolgi, asked me whether coal liquefaction was sufficiently advanced to be used on a national scale. Technology being developed by the NCB is approaching the point now where a decision to build pilot plants of 25 tonnes per day capacity will soon have to be taken. If this work goes ahead progressive development should have the technology ready for commercial use at about the turn of the century. Present views of the North Sea oil production profile suggests that this coal development falls within the general time-scale to meet our needs. If the need to apply oil from coal technology arose earlier we would probably turn to one of the United States' processes, which is now in the large pilot development stage, involving coal throughputs of hundreds of tonnes per day.

I was asked what the environmental and planning implications of coal liquefaction plants were. A commercial scale oil-from-coal plant would need to combine the coal and solid residue handling operations of a modern power station with the processing units similar to those in a large oil refinery or a petro-chemical plant and the liquid effluent treatment of a modern coke oven battery. The environmental and planning requirements for these kinds of undertakings are well known, so they would not be very different. Sulphur in the coal will be largely recovered as elemental sulphur, or sulphuric acid, depending on the process used. As coal liquefaction processes operate at high-pressure and elevated temperature, there will need to be a high integrity of containment. Leakage of inflammable substances or compounds associated with known health hazards will not, in our view, be significant.

The noble Lord, Lord Sherfield, asked me what progress there was on the proposal by the Secretary of State for Energy for Community support for coal production. It is a matter of regret to the Government that so far there has been no progress in the consideration of these proposals from which, as your committee recognise in paragraph 40 of their report, the whole Community would derive a benefit, because the United Kingdom's coal production, and its use by us, reduces in toto Community demand for oil.

Both the noble Lord, Lord Tanlaw, and my noble friend Lord Ironside were, if I may say so, a little bullish about Community funds. The noble Lord, Lord Tanlaw, said that the Commission has the power and the funds to go ahead with electricity traction prototypes. As we all know, the position on the Community budget, the position on VAT revenues, is difficult at the moment; but I take the point that we need prototypes rather than paper. I hope that the local council in Blackpool, if it is still tomorrow in Tory hands, will listen to what the noble Lord has said about the tramways.

The noble Lord, Lord Tanlaw, raised, as he has done in previous debates, the issue of electric vehicles. I was particularly interested in this because I made a ministerial visit the other day to the firm of Lucas. I was collected, with quite a large and weighty staff, at the station and driven for some miles in Lucas's admirable prototype electrical vehicle, so I am glad to see that a major private company is moving in there. Due to the weight and efficiency of the batteries available, at present electric vehicles are generally inferior, if not in performance in range a least, to cars. But it is becoming generally accepted that in the long term, as world oil reserves decline, a major portion of surface transport will have to be powered by electricity. We are therefore anxious to encourage the development of electrical transport, and several programmes have received Government funding. These include development of sodium sulphur and nickels in batteries, development on the one ton van, traction motors, to which the noble Lord referred, and controller and drive system optimisation. And the fund testing of vehicles by the Greater London Council continues.

My noble friend Lord Bessborough kindly gave me notice that he had to leave, but I thought it might interest your Lordships if I answered his question about the Financial Times report, as various noble Lords have made reference to the Luxembourg summit. We have made no firm commitments, but we recognise that it is quite understandable that other Community countries are anxious about their oil supplies. I have explained earlier the important contribution that we are already making, and will continue to make there.

My noble friend Lord Bessborough also asked me about the Commission's energy initiative. The European Council had little discussion of the Commission's paper on Community energy policy at Luxembourg, although I acknowledge that the paper is an interesting contribution to thinking on the development of energy co-operation in the Community. But the matter wes remitted to the Energy Council of Ministers and we are ready constructively to examine in that Council all practical proposals for co-operation in the longer term. I am sure that in. those deliberations not only the committee's report but tonight's debate will prove to be most valuable.

The noble Lord, Lord Flowers, asked me about district heating, a subject upon which I gave an answer to a Starred Question from the noble Viscount, Lord Hanworth, about a week ago. As I said then, we have considered carefully the issues raised in the Marshall report on CHP and we are adopting a programme to establish what specific locations are suitable for the development of CHP. In the industrial field, where CHP is already established, the Government will, as the Marshall Report recommends, encourage the development of schemes, but we believe that the main impetus at the moment will come from industry for the implementation of economically attractive industrial combined heating and power schemes. There are of course some in existence, and I quite agree with noble Lords who think that we should move as fast as possible here.

I was castigated, as usual, by my noble friend Lord Lauderdale who shares some of my own impatience with the inevitable caution with which Governments move in a field which changes, if not day by day, sometimes month by month and certainly year by year. I am glad to echo his and others' tribute to Sir Donald Maitland and the pleasure that the House felt in his appointment. I have the pleasure of knowing and having stayed with Sir Donald Maitland. I am afraid that there is going to be a considerable problem for me, with Donald in the department and Patrick on the Back-Benches. I shall be a pig in the middle in the formidable doctrinal clashes in the Clan Maitland, but I certainly look forward to it.

My noble friend raised, as he has done before, questions on energy pricing. We believe in a policy of economic energy pricing under which prices recover their full resource costs. I think that we have put other people's money where our mouth is in respect of the gas and electricity industries at that level. I take the point that the real costs of gasoline may not have risen to the same degree, but we must also recognise the immense debt to Western economies which the OPEC price rises and the new terms of trade for energy have taken. We must adapt them, surely, bit by bit in that regard.

Finally, Lord Ironside's knowledge and experience of the Community's energy research programme underwrote his valuable contribution to the debate. I will draw the points he made on defence issues to my defence colleagues. On the question of the repeal of the Tramways Act, I am not going to look a gift-horse in the mouth, though I rather suspect that it may be of the Trojan variety and I am going to be non-committal about it this evening.

Perhaps I may close by giving an indication of the Government's positive response to a subject which the Committee has dealt with so positively. I think I can do no better than to quote the words of the Secretary of State for Energy last autumn in another place. My right honourable friend said: The likelihood—clearly there are no certainties in this area—is that by the year 2000 oil will be confined to its premium uses, which are mainly transport and feedstock for the petrochemical industry. A smaller proportion of our overall energy needs at the turn of the century will have to be supplied by oil, and a growing proportion of our economic development will be fuelled by coal and nuclear power. We face a formidable task: how best to ensure the transition from a largely oil-based economy to a broadly energy-based economy. That is the immediate task. That is why the nine Member States at Strasbourg and the seven summit countries at Tokyo in June established agreement—and they were right to do so on certain priorities. Notable amongst them were the need to restrain demand for oil in the medium term and to press ahead with investment in the production and use of alternatives to oil, principally coal and nuclear power and renewable sources, to develop their longer term potential". I hope that my right honourable friend's words are an earnest that the Government's thinking is very much in line with the valuable work of the committee.

8.50 p.m.

Lord SHERFIELD

My Lords, in concluding this debate I should like, first, to thank noble Lords for the kind words that they have used about myself, and to reciprocate by thanking them for making the effort to take part in a debate in that most unattractive hour—the dinner hour.

I think there has been a considerable consensus among those of us who have taken part and some interesting specific suggestions have been put forward.

I should like to thank the noble Earl, Lord Gowrie, for the trouble he has taken in giving us such a full and wide-ranging reply to the debate. I feel that there may now be a prospect of some advance in European energy policy at the next meeting of the Energy Council. I am sure that my committee will follow the developments with interest and will, if occasion demands, possibly bring some further matters before the House. But at the moment all I need to do is to beg leave to withdraw my Motion.

On Question, Motion, by leave, withdrawn.