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Yeo: Action on climate change

Speech to the Council for Sustainable Energy

"I am here to explain how a Conservative Government would lead Britain's response to the challenge of climate change.

It is an opportunity to build on the principles set out by Michael Howard last September when he reminded us what previous Conservative Governments achieved in relation to the Environment.

He left no-one in any doubt about his own personal commitment to build on that track record.

I share that commitment. For both of us it is rooted in our experience of Government.

Michael played a key role in persuading the Americans to take the crucial first step of accepting the Rio agreement. I was myself Minister of Environment under the inspired leadership of John Gummer.

I was convinced by climate change science more than a decade ago and I am even more convinced today.

But Michael and I recognise that it is not enough to talk about commitment. We criticise this Government for not backing up good statements of intent with a coherent and credible plan of action.

We will not fall into the same trap.

That is why I welcome this opportunity to set out what we will do in Government.

In that spirit, let me cut through the usual preamble to a political speech on climate change. This audience does not need to be lectured on the scale of the challenge or the consequences of failure.

Only last month fresh, unequivocal evidence of man-made global warming in the oceans was presented to the American Association for the Advancement of Science.

The evidence presented recently at Exeter revealed a situation worse than previously thought. The impacts of climate change are already being observed in a variety of sectors. Ecosystems are already showing the effects. Changes to polar ice and glaciers and rainfall regimes have already occurred.

The pace at which freshwater ice has melted in the Arctic over the last forty years is alarming. We are warned about the risk of significantly higher sea levels. Just as worrying are the possible consequences for the flow of the Gulf Stream which keeps Britain several degrees warmer than it would otherwise be.

As the science becomes clearer and stronger; it is time to move the debate on. Politicians can no longer take refuge in warm words. We need a more urgent response on behalf of future generations. It is time for a different approach.

Let me start with what is going wrong.

Current leadership can't see the way forward.

Governments cannot find the path that takes the world on beyond the Kyoto agreement. They do not give the impression of trying very hard. After all, the decisions are difficult and the political return not immediate. The sense of drift is aggravated by a lack of accountability. The EU is on course to fail the first small step that is Kyoto, and will do so with impunity.

Yes, I know the difficulties of reaching agreement on the way forward. Any plan is fatally undermined without the full engagement of the United States. And to succeed any plan must also bind in the emerging giants - China, India, Brazil - while recognising that their perspective and priorities are different.

It is a situation that calls out for leadership, and here we come to the second problem.

There is one country that is uniquely well placed to show leadership on climate change.

A country that showed leadership in the past under a previous Prime Minister.

A country that will be one of the few to meet its original Kyoto target, largely because of the enlightened policies of a previous government. A country whose economy is the fourth largest in the world and one which is uniquely placed to prove that economic success is compatible with cutting emissions.

Its Prime Minister has done much to support America and has identified climate change as a political priority.

That country is Britain. The problem is that we are in danger of throwing that opportunity away.

Despite the momentum given by the Conservative led 'dash for gas', CO2 emissions have actually risen since 1997.

Britain rightly took a lead in setting ambitious long-term targets but has not backed them up with a serious plan of delivery. Our credibility has been damaged.

We took a lead on the key principle of emissions trading only to see our entry into the EU system shambolically undermined by a last minute intervention by Downing Street. Another blow to our credibility.

Instead of demonstrating how Government could be joined up in the interests of sustainability, Labour policy is too often a jumble of contradictions.

They stopped building roads but John Prescott's house-building programme covers the countryside with concrete and increases flood risk.

(Meanwhile he demolishes sound Victorian terraces.)

So much for sustainable communities.

In short there was a chance to establish Britain as a role-model but that chance is being squandered.

Stronger signals to the market

The third problem stems from this failure of leadership. Around the world, governments have failed to send a strong enough signal to the market.

We believe that consumer power is the key to achieving lasting change in the way we use our natural resources. However, both consumers and business need to be more fully engaged with the problem.

Look at our own experience here in the UK.

In the UK a DFT 2002 survey showed that only one in eight people make a connection between flying and climate change.

The latest figures from the Energy Savings Trust show that emissions from new cars outside the company car sector are going up not down.

And society remains profoundly apathetic in the face of the opportunity to save energy at home and work.

If our mature and informed society can't find the motivation to adjust its habits to achieve a more stable climate, then how can we expect consumers in the developing world to do so as they climb the ladder of aspiration?

Identifying the problems is easy.

But the scale of the challenge facing governments is great. I do not claim that any party or country has a monopoly of wisdom on this subject. The problem and its solutions cross borders and party lines.

In that spirit let me set out what we think is the right path for Britain to take and promote to other nations. If a Labour government were re-elected and took this path, we would support them, and try to establish cross-party consensus.

What will we do differently?

Putting our house in order

Our priority will be to set Britain's house in order before lecturing others. We will show that CO2 emissions can be cut at little or no cost to economic growth. Prove that and the ball will begin to roll faster, not least in terms of engaging the co-operation of the USA.

We want Britain to deliver a plan of action supported by a robust process of accountability. Then and only then can we present ourselves as a role-model for other countries.

To get our own house in order, we would focus on three things:

Firstly we would change the approach to targets. It was right for Government to set more ambitious targets for Britain than the Kyoto protocol required. I confirm our support for the specific targets in relation to Co2 emissions for 2010; 2020 and 2050. But targets are meaningless without a map to reach them and without real accountability. Both are lacking today which is why I have yet to meet anyone who thinks Britain is on track to meet the Government's 2010 target, let alone 2050.

So we will break down the targets into shorter term milestones, and back them with clearer and more transparent plans for achieving them.

Secondly, we will increase the ability of Parliament to hold Government to account. The Environmental Audit Committee is already exposing weaknesses in current policy. We will strengthen its role through the provision of more formal, frequent and adequately resourced audit support from the National Audit Office.

Thirdly, we will require Government to publish an annual report on progress in reducing carbon emissions and to respond to the final report of the Environmental Audit Committee.

These steps may make life harder for Ministers, including Conservative ministers, but they will build in a level of accountability to Parliament and the country that is wholly lacking at present.

Our second area of focus on the domestic front takes us from process into policy.

Energy efficiency at the heart

Energy efficiency must be at the heart of our response to climate change. For too long energy efficiency has been the Cinderella of Environment policy.

Energy efficiency is the no-regrets policy that even sceptics can adopt. After all who here wants to waste energy? At a time when the world needs to build consensus around a policy model, promoting energy efficiency is a good place to start.

It is the least controversial.

It is the cheapest and fastest way to reduce emissions.

It can engage consumers in their day to day lives. The message that you can save money and the planet at the same time is powerful.

And for countries like Britain who will become energy importers, it addresses the challenge of energy security.

Last and not least it is the policy that most clearly proves you need not sacrifice growth to cut emissions.

Britain should lead the way in proving that. After all, there is huge scope to improve the energy efficiency of British homes and offices.

But despite two Treasury consultations on economic instruments to improve household energy efficiency nothing has emerged.

Over a quarter of our CO2 emissions seep out of our homes.

Our housing stock is relatively old and inefficient, on average three times worse than German homes.

There are 9 million unfilled cavity walls in the UK and 6 million uninsulated solid wall houses.

Two-thirds of our new homes fail to meet regulatory standards for energy efficiency.

The flip side of this opportunity is the risk of carrying on down the path of apathy. We are storing up significant problems.

The Government projects population growth of 4 million by 2050. That growth combined with the trend to smaller households will increase demand for energy.

What will we do differently from the Government?

In September, Michael Howard flagged the idea of fiscal incentives to stimulate investment in domestic energy efficiency. He mentioned that we were consulting on a proposal to cut stamp duty for houses which meet specific energy efficiency targets. That consultation led us to a better approach which I am pleased to announce today.

Adjusting stamp duty would only help when homes are bought or sold. That is not enough. We need to transform attitudes towards energy efficiency and break through consumer apathy. That requires more incentives offered to a wider audience in a more compelling way. It must include landlords in the rented sector and the huge number of small commercial enterprises whose behaviour has been unaffected by the Climate Change Levy.

To achieve this we will reform the Energy Efficiency Commitment - the EEC.

Promoting energy efficiency in the home

The EEC is the main policy for promoting energy efficiency in the home. It requires gas and electricity supply companies to pay for a given level of home energy efficiency work each year. But the EEC is a closed shop managed by the very companies who have the least commercial interest in helping householders save energy.

We will transform the EEC into a market-based mechanism in which more players promote and undertake energy efficiency improvements in the home, including major retailers, property management companies and mortgage lenders.

The new market will work through tradable credits issued on the basis of energy efficiency work undertaken. The credits will have value because each year the gas and electricity companies will be obliged to buy a given number at a minimum price. Our reforms won't result in anyone paying more for their gas or electricity than under the existing EEC, a key consideration while Britain suffers the highest levels of fuel poverty in Western Europe.

What will change is the vigour with which energy efficiency is promoted to the public - there will be genuine competition, powered by the flow of hundreds of millions of pounds every year. How competing suppliers use this money to promote energy efficiency will be up to them. For instance, they could offer 100% discounts, cash-back deals or green mortgages. The most successful will earn the most credits.

Turning now to the workplace.

Currently, the Climate Change Levy - the CCL - is the main policy aimed at promoting energy efficiency in the workplace. It raises £800 million a year for the Government - we see it as a stealth tax which has failed to influence most businesses.

Our long-term aim is to replace what we see as an ineffective stick (the CCL) with a large carrot in the form of a substantially increased EEC that will cover commercial and residential sectors alike.

The extended EEC could provide hundred of millions of pounds in extra funding for energy efficiency, but without increasing overall energy bills for business- this is because the EEC would not be extended until the CCL had been abolished.

No business will lose out financially because the changes will be funded out of the tax cut. The items funded by the CCL, such as the excellent work of the Carbon Trust, will still be funded centrally by the Government.

Benefits

To summarise, our policy has three primary benefits:

Firstly, without increasing the size of the stick, it hands out more carrots for energy efficiency.

Secondly, the incentives are not confined to a closed shop of energy suppliers, but extend to those with the greatest interest and expertise in marketing energy efficiency improvements.

And, thirdly, the incentives are made available to the widest possible range of people - homeowners, people who rent, landlords, businesses, voluntary groups and public sector institutions.

Ladies and gentlemen, we need to get serious about energy efficiency and this is a serious policy for doing so.

In addition to this reform, we must send a stronger message to the construction industry. Our objective will be zero emissions from new build. This cannot happen overnight but Government should develop in partnership with the industry, a realistic road map towards that goal, reinforced by more rigorous enforcement of existing regulation. We can tighten up in two areas, firstly by improving the quality control of the way Approved Inspectors sign off new developments, and secondly by making sure that local authorities understand the priority that a Conservative Government attaches to energy efficiency.

Government lacks credibility unless it leads by example, as we ourselves have done by ensuring that our new headquarters in Victoria Street is carbon neutral. Government sits on a vast real estate portfolio which ought to set the standard as far as possible. Lights blazing all night in Whitehall are a symptom of how far from that ideal we are.

The third leg of our strategy to set the British house in order builds on this need to send stronger and more consistent signals to the market.

Signals to Business

Business attitudes are critical because they shape consumer demand, drive prosperity and so influence public policy. It's time to talk to Business about the environment and their responsibilities to it in a new way. One that recognises that business increasingly sees the environmental agenda more as an opportunity than a cost.

We should encourage this. Business needs more clarity of direction from Government. Regulation has its part to play but we can do much more at the national, European and global level to grow markets for new technologies that bring with them a Win Win.

The chance to cut our dependence on fossil fuels and make money out of it.

That is the way to engage the Americans.

Again Government should lead by signalling long-term support for new markets that can transform our use of natural resources.

We'll start with the motorcar.

Road transport makes up around 21% of total man-made carbon dioxide emissions in the UK and the Government itself expects those emissions to grow 10% between 2000 -2010. This is a problem we will tackle.

For 7 years, Labour has tried to punish the motorist. That policy has failed.

Our approach is different. We will encourage British motorists to make Greener Choices.

The Institute for European Environmental Policy shows the UK has among the highest average CO2 emissions for new cars in the EU. Recent analysis by the Energy Savings Trust shows that CO2 emissions from privately purchased new cars are rising. Further measures impacting on private buyers are needed to complement the company car tax regime.

There is considerable scope to expand the market for the new breed of clean cars that run on electric, hybrid, and LPG technologies. They offer 30-50% emission savings on the best performing cars in their class but make up only 0.2% of the total vehicle fleet.

The last Conservative Government made green fuels cheaper through differential fuel duties. The next one will make the least polluting cars cheaper to own. Labour have made the link between VED and CO2 emissions but only very timidly. We will go much further.

A Conservative Government will cut Vehicle Excise Duty (VED) on new cars in the existing DVLA bands C to Triple AAA. Tax cuts will range from £10 in Band C to £65 in Band AAA. In 2004, it is estimated that over 1.8 million car owners would have benefited from these tax cuts.

They will be combined with a commitment to double the existing DfT funded grants for buying cleaner vehicles and fitting emission reducing equipment. Taken together, the policy will triple the value of Government incentives for British motorists to make Greener Choices.

We will reinforce this market signal with a greener Government procurement policy.

Between them, the Inland Revenue, Customs and Excise and the Home Office have 5,836 vehicles. Just 183 of them use alternative power. The next Conservative Government will make it a point of principle for every car purchased by a government department to be the most fuel efficient or best alternative fuel car available.

It isn't just to reduce emissions that we want a bigger market for the cleanest cars. We want the big manufacturers to recognise a genuine global market opportunity and accelerate the technology. Look at China.

Currently China has only eight vehicles per thousand residents, compared to the average in Western Europe of 584. On current trends it will be the largest car market in the world within a generation. Bells should be ringing both about the threat and the opportunity.

We can also do more to develop the market for the greenest fuels. They offer the chance to reduce emissions and provide more commercial opportunities for our agricultural sector. Another Win Win. So we support the principle of a renewable fuel obligation. It is time to review the framework of fuel differentials to ensure that a coherent, long-term framework is in place to support the greenest fuels.

Sometimes carrot needs to be accompanied by stick.

Most discussion about road emissions focuses naturally on the car. However one third of road emissions come from new LGVs and HGVs who have largely escaped pressure to clean up their act. Britain should lead in promoting a voluntary agreement to reduce emissions from LGVs and HGVs, following the successful precedent of the 1995 EU voluntary agreement on new cars. That agreement has experienced difficulties but has been a factor in the progress in improving the fuel and carbon efficiency of new cars.

That progress gives me confidence we are on course to solve the problem on the road. It is less easy to see how technology can deal with aviation - the fastest growing source of emissions. Because of the international nature of the industry one country cannot act effectively on its own.

But that is not an excuse for ducking the challenge as this government has done. In fact by accepting at face value the growth projections of the industry and sanctioning major airport expansion, Labour is failing to act sustainably.

For our part, we support the inclusion of aviation in the next stage of a robust EU emissions trading scheme. That is a stepping stone towards the global scheme that is needed. However the devil is in the detail and progress is too slow. Just in the last few days, we have heard the sound of feet being dragged and experience tells us that consensus will be built around a low hurdle for the industry to jump. We will use our best endeavours to make sure that aviation is included in the EU emissions trading scheme before further runway expansion of airports in the South East takes place.

The other industry that needs a more coherent message is the energy sector.

We support the target of generating 10% of our energy from renewable sources by 2010 but see little prospect of achieving that target under the current strategy. The Renewables Obligation is an efficient mechanism for incentivising investment in onshore wind as the lowest cost technology today. However that technology is flawed by its unreliability and its impact on our landscape and therefore on public opinion. Combined with the limitations of our transmission and distribution network, it is unlikely that onshore wind will take us where we need to be. Therefore why place all our eggs in one basket, particularly when Germany is pulling back from its wind programme? Energy consumers will pay an extra £42 billion on their fuel bills to meet the renewable energy target by 2027. That is a lot of money to place on a single bet. Much better to promote a wider base of renewable energy technologies that play to our natural advantages and which offer potential commercial advantage for Britain.

There is a case for adjusting the Renewables Obligation. Of course investment markets need long-term stability and clarity of message. Reforming the RO is only justified if you can trigger substantial amounts of new energy so we will consult on how to adjust the RO to give greater support to other technologies which are deployable at scale. Today the obvious candidate is offshore wind. We will also review the fragmented grant programme for less mature technologies such as wave and tidal power and will support solar power through both regulation and Government procurement policy.

We must avoid repeating the current shambles of a Government which preaches the importance of renewable energy while withdrawing support from the photovoltaic cell programme.

We strongly support microgeneration, an excellent way to bring energy generation closer to people and link the environment with our own energy consumption. We have always favoured CHP and are concerned that targets are missed, output is lower and 64 plants mothballed. We will put CHP back on the agenda and work with local authorities to correct the market obstacles which are stalling uptake.

One of the strongest signals Government could send is a willingness to look seriously at the limitations of our transmission and distribution network and the need to bring energy production closer to people and smaller in scale.

In aiming to source more energy from clean, renewable sources, we should not ignore the chance to clean up the way we produce energy from fossil fuels.

Look at where the world's big coal reserves are. USA, Pakistan, China, India. Look at the projected energy demand of those countries. Consider the growing issue of energy security and the pressure to continue using coal. 'Clean Coal' and the wider application of the technology to capture and store carbon are fundamental to the debate.

Capital costs are high but when deployed in partnership with oil companies who can use CO2 to enhance recovery of oil, this technology offers another Win Win. It can be cheap against renewables and it can extend the life of oil fields. When applied to biomass fuel combustion, the holy grail of negative carbon emissions is in sight. There is a big prize here.

The question for us is "To what degree should Britain be setting a strategic lead?"

The Government is expected to announce shortly a carbon abatement strategy.

It must not focus just on short-term, marginal efficiency gains. An effective Emissions Trading Scheme should incentivise industry to find those improvements. Britain should be looking ahead at the opportunity to replace or refit our outdated coal fired power plants with clean gasification technologies. Technology that combines the potential to capture Co2 with the longer term potential to produce hydrogen. There should be a more active dialogue with the oil industry to explore the potential of our offshore carbon storage potential. We should support carbon capture and storage demonstration projects in industrial facilities which have plenty of CO2. We should co-operate with other countries to build knowledge and encourage innovation.

Signals to consumers

It is not just business that needs stronger and more consistent signals from Government. We can do more to win the hearts and minds of consumers. Their day to day decisions shape our use of natural resources and we must make sure their choices are fully informed.

This does not involve rocket science or grand gestures but a process of education through simple measures that connect with people on a regular basis.

So our programme to triple the value of incentives to buy the greenest cars will be complemented by colour coding tax discs linked to CO2 emission bands. These will remind motorists and their families daily about the impact of the choice they made. The name Vehicle Excise Duty is itself a wasted opportunity and we will change it.

We will apply similar principles to aviation, where the need to inform the consumer is urgent. Again the name Air Passenger Duty makes no link between flying and emissions so we will change it. We will give strong encouragement to the aviation industry to include on air travel documents and relevant advertising information on emissions per journey and will seek an EU wide voluntary agreement in support of this.

When it comes to shaping public needs and attitudes, too little attention is paid to how we use our land. I have always believed that Planning is linked with our management of the Environment. Under Labour planning policy has been inconsistent with sustainability. Let me give you three examples of how we would change planning guidance in the interests of the environment.

We will give local communities a much greater say over wind farms and other renewable energy projects. The public must be happy with the development of renewable energy, and this means not feeling it has been shoved down their throats. If you want to put up a wind farm, make the case and win the argument.

For too long land use planning has forced us into our cars. We will change guidance to create a stronger presumption in favour of brownfield development near rail stations.

The Government is bent on building a huge number of new houses, many on Greenfield sites and some in areas of known flood risk. In their planning, the sustainability agenda is way down the list of priorities. We will change planning guidance to make sure that development takes more account of flood risk.

We want Britain to set the right example.

In delivering a coherent plan for cutting Co2 emissions, our resolve must be stiffened by greater accountability.

In demonstrating that CO2 reductions are compatible with economic growth, not least by more energy efficiency.

In sending strong and consistent signals to business and consumers.

In the lead that Government gives by its own actions.

However it makes no sense to look at this challenge exclusively through the narrow perspective of the UK, particularly as we only represent 2% of global emissions.

There is no value in us setting a lead if others do not follow.

International agreement

So having put our own house in order, our second overarching strategic priority must be to secure international agreement on a robust post Kyoto framework.

We believe it is time the EU stood up and was counted. It has an historic opportunity to lead this initiative.

There is a limit to what Britain can achieve on her own but it could be a strong driver of change with a constructive and clear position on the way forward.

We should build a coalition of the willing within the EU to take full advantage of the leverage that the Single Market gives us.

This fits with our vision of what the EU should do. Maximise the potential of the single market. Promote co-operation on issues that cross borders.

To be fair to the Prime Minister, he sees the opportunity. But where is the beef? So far all he has offered is some classic spin around a Blair brand called Kyoto Lite which has been rightly greeted with derision.

We want the EU to shape and sell a post Kyoto framework to stabilise the climate based on the 'contract and converge principle'. Such an agreement must include the developing nations and recognise their pressure to grow.

To be successful that framework needs to accept that lower Co2 reductions need not come at the expense of growth. The core policy shift is towards more efficient use of energy, and the development of markets for technology that transform the efficiency of the supply side. To engage business and consumers we must move away from cost and sacrifice towards benefits and opportunities.

We should learn from the first phase of Kyoto and insist on more accountability and transparency. One suggestion is for the UN Commission on Sustainable Development to assume responsibility for measuring and publishing national performance on CO2 reductions.

In addition to building the coalition of the willing around a new agreement, the EU can take practical steps to put words into action.

A robust EU emissions trading scheme can be a template for a global scheme or a network of carbon trading relationships.

Greater cooperation on renewable energy policy could enhance its appeal to both business and consumer.

Europe should be stretching hands across the Atlantic to transfer technology and best practice, at least with those US States who have the political will and vision to take a lead.

That spirit of partnership should be extended to the Emerging Giants. Let me give you an example.

One of the most intractable problems we face is how to arrest the damage done by more than 300 million slash and burn farmers worldwide, each one clearing about a hectare of forest a year. Given that as much as 40% of the planet's carbon is stored in forest vegetation, this is important. How encouraging then to read the story of Mike Hands, a British tropical ecologist, who has dedicated 20 years to finding an alternative method of cultivation that would keep the soil fertile so that farmers could stay on the same land. In 1998, he finally secured £2m of funding from the European Economic Council to prove the success of his pioneering Inga alley cropping technique in Honduras.

He has done exactly that only to find that funding has run out just when he was getting an overwhelming local response. Given the potential to save rainforest, it is absurd that this type of innovation is not being rewarded.

I would go further.

We will support the proposal to include the environmental impact of world trade in the next round of WTO regulation. Now that CAP reform links subsidies to protecting the environment, is there not a case for using it to incentivise the production of crops for biofuels?

With the voluntary agreement on reducing emissions from new cars expiring in 2008, why is there no agreement for HGVs and LGVs?

Given the importance of clean coal technology, should we not harness US support for a large scale demonstration project of a clean coal power plant in India or China?

As a Party we are rightly not shy to criticise where Europe is heading. But in the case of Climate Change the EU can play a constructive and possibly decisive role.

Conclusion

In conclusion, the Conservative Party wants Britain to put its house in order. We want Britain and the EU to seize an historic opportunity of leadership on climate change.

The challenge is global, complex and urgent. The world is seeking leadership. It's not too late for Britain to restore its natural authority on a subject which Margaret Thatcher first brought into the political mainstream.

I don't question Tony Blair's good intentions but his Government will not move past the rhetoric. Disillusion is widespread. It is not just the Conservative party that believes he is failing this challenge.

It is time for a change in attitude and approach.

This issue should cross party lines. In that spirit I have given you today an idea of the direction we think Britain should go.

If the Prime Minister moves in our direction, then we will support him.

If he does not, then we will continue to make the case for change.

This General Election may not be decided on the issue of which Party can be trusted to manage climate change effectively.

But whoever wins will have to grip this problem much more firmly than it has been for the last eight years.

All politicians, whatever their colours, must understand that the time for warm words has passed."

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