HL Deb 09 July 2002 vol 637 cc560-2

2.51 p.m.

Lord Dormand of Easington

asked Her Majesty's Government:

What is their long-term policy for the coal industry, including the import of foreign coal.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, the Government's long-term policy for the coal industry is being reviewed in the context of the new European coal state aid regulation. This allows countries to pay operating and investment aid. However, as with the current European rules, it prohibits state aid from allowing the price of subsidised coal to undercut international competition. As long as the competition is fair, we welcome the security and flexibility that the geopolitical diversity of coal suppliers provides.

Lord Dormand of Easington

My Lords, is my noble friend confirming that an agreement was recently reached in the European Union on state subsidies for deep-mined coal? If so, will he confirm that this country was fully involved in those talks and committed to the results? As the present aid scheme, as he knows, ran out last month, there has been urgent concern that the gap between operation of the new agreement and expiration of the old one might well lead to the closure of another six pits in this country. Will my noble friend confirm that the Government's policy is that coal will continue to play a major part in this country's energy mix, particularly as the demand for coal is now growing?

Lord Sainsbury of Turville

My Lords, we were very pleased to be part of reaching the agreement, on 7th June, on the new European coal state aid regime. We fought very hard to secure the flexibility to pay investment aid and I am delighted that we were successful in that regard. The new rules will come into effect immediately after expiry of the European Coal and Steel Community treaty on 23rd July. Coal will continue to play a major part in our energy policy, but on the basis of the ability to draw on coal supplies from around the world.

The Lord Bishop of Hereford

My Lords, is the Minister aware that in 2001, after decreasing for a number of years, CO2 emissions in the UK increased because power generators switched from gas to cheap imported coal? Have the Government any plans actively to dissuade the generators from using cheap imported coal—even though such plans might risk provoking the wrath of the noble Lord, Lord Peyton of Yeovil, as they would involve twisting the arm of an independent organisation? Does the Minister agree that reducing CO2 emissions must be the priority in this instance?

Lord Sainsbury of Turville

My Lords, reducing emissions is clearly one of the key objectives of our energy policy. One should always remember, however, that energy policy has a number of objectives: cost is one, environmental impact another, and energy security the third. Within that, we are very keen to promote the use of clean coal technology which is very relevant to this issue.

Lord Marsh

My Lords, in May 2002 alone, international coal production increased by more than 5 per cent, caused largely by the opening up of new capacity in China where wage levels are rather lower than they are in Europe. Do we really believe, as we have done in the past in other industries of this type, that there is any likelihood of reversing the trend of a steady reduction in British coal capacity?

Lord Sainsbury of Turville

My Lords, I think that the issue of the future of individual coal-mines ultimately has to be a matter for the owners of those mines. We can only make certain that there is a fair market internationally for British coal and that British coal is not penalised by subsidies for other countries. That is what we are concerned to do.

Lord Ezra

My Lords, following the question of the right reverend Prelate the Bishop of Hereford on CO2 emissions, does the Minister agree that the future of coal is closely linked with overcoming the current environmental objections to it, and that the most effective way of doing that is to develop the process of clean coal technology associated with CO2 recovery and storage? When will we have an effective demonstration plant to that effect in the United Kingdom? It would have enormous export potential.

Lord Sainsbury of Turville

My Lords, the future of coal is closely linked with the question of its environmental impact. As the noble Lord will recall, we conducted a review of the possibility of a clean coal technology demonstration plant. We found that most of the available technologies have already been fully demonstrated. So there is really a very small case for a demonstration project. However, the review also concluded that there is a case for modest support for retrofitting more efficient combustion plant technology in existing power stations, particularly to help to demonstrate the technology and to support exports—the point that the noble Lord raised. We are pursuing how best to take that particular project forward.

Lord Hardy of Wath

My Lords, does my noble friend agree that it is desirable to maintain a sufficiently large coal industry in Britain to sustain our mining engineering technology industry? It currently has a considerable international opportunity, especially given its skill in safe mining, a need demonstrated only the other day by the disaster in the Ukraine.

Lord Sainsbury of Turville

My Lords, it is very difficult to argue that we should maintain the coal industry for the purpose of maintaining the coal mining technology industry which depends upon it. I think that we have to examine this issue fairly and squarely and try to sustain our coal industry. However, it will be sustained only if it can operate on an economic basis. I think that that has to be the first consideration.

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