Climate Change Levy (Hansard, 17 May 2000)

§ Mrs. Fiona Jones
To ask the Secretary of State for the Environment, Transport and the Regions what representations he has received in relation to the proposed Climate Change Levy being applied to combined heat and power where electricity sales made to licensed suppliers are subsequently sold on to business consumers; and what representations he has received on the effect on future investment in combined heat and power by commercial investors. [122150]

§ Mr. Meacher
Thirty-five responses to the Government's proposals in the consultation document, "A Quality Assurance Programme for Combined Heat and Power", commented on the proposed arrangements for sale of electricity from combined heat and power installations to other users, in relation to the Climate Change Levy. One company has informed the Government that it has decided to defer its decision to proceed with two CHP proposals, citing a number of factors including the proposed provisions for the operation of the Climate Change Levy.

§ Mr. Nicholas Winterton
To ask the Secretary of State for the Environment, Transport and the Regions what proposals he has to extend the number of industrial sectors able to enter into negotiated agreements with Government in respect of the Climate Change Levy; and what particular plans he has to extend negotiated agreements to those manufacturing sectors currently excluded. [122123]

§ Mr. Meacher
In his Budget statement on 21 March 2000, my right hon. Friend the Chancellor of the Exchequer confirmed that negotiated agreements will be open to those installations operating processes covered by Parts Al and A2 of the forthcoming Pollution Prevention and Control Regulations.
A final consultation paper on these Regulations was recently published, by the Department of Environment, Transport and the Regions, with the objective of laying the Regulations in Parliament before the summer recess. As part of these wider consultations on the Regulations, and as is set out in the consultation paper, the Government are considering which processes currently covered by Part B of the PPC Regulations should, given their environmental effects, be more appropriately regulated under Part A2. Any processes that do move to regulation under Part A2 will become eligible for entry into the agreements.
139W

§ Mr. Nicholas Winterton
To ask the Secretary of State for the Environment, Transport and the Regions what assessment he has made of the compatibility of the principle of rebates contained in the Climate Change Levy negotiated agreements with the European Commission's draft guidelines on state aid for environmental protection; and if he will make a statement. [122124]

§ Mr. Meacher
The Climate Change Levy agreements seek to deliver significant improvements in energy efficiency in exchange for a reduction in the standard rate of levy. This reduction counts as operating aid and is the subject of a current State Aids notification. The Government have linked the availability of the aid to helping to achieve an important environmental policy objective that the Commission shares: ie, the need to reduce emissions of greenhouse gases. The Government believe they have prepared a robust, balanced case which will deliver significant environmental benefits while also helping to safeguard international competitiveness.
In parallel, the European Commission's draft revised guidelines on State Aids for environment protection are being discussed with member states. The UK is playing a full part in these discussions and I understand the current draft is being revised further in the light of member states' comments.

§ Mr. Burgon
To ask the Secretary of State for the Environment, Transport and the Regions what decisions he has come to following the Government's consultation on the proposed CHP Quality Assurance programme, in relation to the exemption of Good Quality CHP from the Climate Change Levy; and if he will make a statement. [123005]

§ Mr. Meacher
The Chancellor announced in the pre-Budget Report in November 1999 that Good Quality CHP was to be exempted from the Climate Change Levy. The Government's proposals for determining 'Good Quality' were set out in the consultation paper "CHPQA—A Quality Assurance Programme for Combined Heat and Power", issued in January.
Over 130 detailed responses to the proposals were received. There was general agreement that the proposed Quality Index (QI) approach provided a sound basis for measuring the thermal efficiency and environmental quality of the range of CHP installations of different sizes, type and fuel use, and for determining eligibility for exemption from the Climate Change Levy, and for other purposes. The consultation also identified a number of detailed improvements to the proposals.
There was also general agreement that a QI score of 100 was the appropriate level at and above which installations should be eligible for full exemption from Climate Change Levy—that is to say, exemption of all heat and of all generated electricity used on site or sold directly to other users. There will be an interim commissioning period of 12 months for industrial installations, and 24 months for community heating installations, during which the threshold will be a QI of 95.
There was also agreement that the proposed CHP Equivalent Generation Limit (CHP EGL) methodology provided a robust basis for determining the entitlement to partial Levy exemption for installations with a QI of less than 100. But respondents argued that the datum used in 140W the calculation of CHP EGL for a scheme should be 100, rather than the figure of 110 in the consultation proposals, and the Government accept the case for this.
Special provisions for simplified metering and monitoring arrangements for small-scale CHP schemes will apply to installations of 2 MWe or less, representing almost 90 per cent. of installations, rather than 1 MWe as previously proposed.
The operation of CHPQA will be reviewed in the light of experience. Any changes made will apply to subsequent CHP developments, and will not be applied retrospectively to existing CHP schemes.
The provisions for exemptions from the electricity supply licensing requirements are relevant to the operation of direct sale of electricity from Good Quality CHP. The Department of Trade and Industry's document, "Electricity (Class Exemption from the Requirements for a Licence) Order 1997 Proposed Amendments" sought views on possible changes, to facilitate CHP and other embedded generation. DTI are now considering responses, and will announce their conclusions shortly.
I am grateful for the valuable contribution from CHP users and suppliers and other interested parties in developing these arrangements for the detailed operation of CHP's exemption from the Climate Change Levy—a measure which gives crucial recognition to the environmental, climate change and other benefits of CHP, alongside the exemption of Good Quality CHP from business rates and Government's other supporting initiatives.
My Department will shortly publish a detailed consultation response, setting out the decisions in full. Meantime, I have placed a note with further details of the key elements in the Library.