Evidence presented by Mr Andrew Simms - New Economics Foundation, Dr Douglas Parr - Greenpeace.

Q17 Sir Robert Smith: Have you looked at when the Chancellor last hit the North Sea with tax changes, the loss of investment that came to the North Sea as a result?

Mr Simms: We have looked at a number of international examples and we were interested to find that China, for example, had used a windfall tax on its own sources, that the US had done it in the 1980s, and that windfall taxes have been used successfully on a number of occasions.

Q18 Mr. Dave Anderson: Can you put a figure on how much you would expect to raise in windfall tax?

Mr Simms: I can, but I would like to come back to that with you because we last looked at it in detail a few years ago. We do have a report called Hooked on Oil, which has some figures in it. I could not give you the figures off the top of my head but I would be very happy to forward that.

Q19 Paddy Tipping: Let us move on and pick up a point that you were making earlier on, which is about the local networks and decentralisation of generation. How would you get that into place and how would we fund it?

Mr Simms: Fortunately, and I am sure the Committee is aware of this, there is a number of quite successful examples, such as Woking, that have already been there, and there is a level of detail, knowledge and understanding of how to work through local authorities. That is not my specialisation but that has been looked at in great detail. Again, the report I referred to earlier that Greenpeace produced on decentralised energy has wrestled with some of the difficulties of planning. I have referred the Committee to that report, and also to the work of some of the renewables trade associations that have been looking in great detail at the planning obstacles and the planning hurdles to doing that. What was the second part of your question?

Q20 Mr. Dave Anderson: Let me just take that on a bit. In your report you say that this is going to cost £50 billion. Where is that money coming from?

Mr Simms: Where is the money coming from? There is a range of estimates on what we should be spending at the moment. I noticed that Lord Stern, with the percentage of GDP he thinks we should be spending on effecting this transition, has come up with a figure that translates to about £11 billion a year. I noticed the Sustainable Development Commission have quoted £30 billion for the next few number of years. We have quoted the figure of £50 billion, which is also the figure that IPPR came up with in one of their reports. Where is this money to come from? I think it is to come from a range of sources. I think it is to come from public, private and individual sources. We have alluded to the Government now being in a position, through public ownership or substantial public involvement in some of the major banks, to be able to influence their investment portfolios. We see there being an important role of leveraging private resources into this process of transition. We have alluded to the windfall tax. We have also alluded to the role of green taxation. Here there is a problem and I do not understate it because it is something that is always an issue with the Treasury. We think to win the public case for increased green taxation, that taxation would have to be hypothecated; it will have to be linked to the desired outcomes, otherwise it is very hard to win the argument in public; people might think it is just another form of backdoor taxation. We see as being perhaps the biggest win encouraging some of the major institutional investors, like the pension funds, to start looking to the renewable technologies maybe not as being opportunities for spectacular returns but as being opportunities for safe, secure and long-term returns. I think one of the greatest challenges we have in the investment community is lengthening their time horizons and the investment in environmental transformation and energy transition is certainly one of those. We also see there being great potential for innovative new financial mechanisms, such as green bonds. We have written to the Secretary of State, Mr Miliband, advising that the Government might like to consider a green investment task force that would bring together a range of institutional investors and individuals ranging from banks that have specialised in this area, like HSBC, Rathbone Greenbank in the UK, a sustainable investment forum, to look at the scope for innovative new bond and gilt-like mechanisms to raise funds, some of which may appear on the public borrowing books and some of which would not. I have alluded earlier to Trident, perhaps slightly flippantly; I did not mean it to be that way because I think there are some very real political decisions that do need to be taken where major capital items are concerned, like Trident, which have huge opportunity costs, should we continue to go ahead with something like that when we know we have the challenges of environmental and energy transition in front of us. I would see there being a mixture of public, private and individual sources. If I found available a pension product that was specifically dedicated towards investing in renewable energy technologies, I would choose it. I cannot actually find one at the moment. Someone will now turn round to me probably after this meeting and give me a list of seven but I have not found one yet. I think there is an appetite for it and I think there is actually quite a diverse range of sources that we can go to.

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Q31 Mr. Dave Anderson: You do not mention carbon capture in your reports, as far as I am aware. Do you think it has a role to play in developing a low-carbon economy?

Mr Simms: The issues to do with carbon capture and storage are in the way that we have touched on mutual priorities around the table, so far. I do not rule out carbon capture and storage and I believe that we have to look for the most sure, guaranteed and effective ways to both reduce emissions, generate the electricity and get the power that we need to run the country. There are many question marks that hang over carbon capture and storage. I think it is right that people have argued that, should we consider any new coal-generating capacity, those plants should come ready. I note that the ones that have been discussed at the moment (I think the figures show) are geared up to capture somewhere between one-seventh and one-quarter of emissions from new plant. I think the signal it sends from the UK, for us to be considering a new generation of coal-fired power stations which are not completely ready to capture and store their own carbon, is a bad one for a developing world and countries like India and China, which sit on vast reserves of very dirty brown coal. I would prefer strongly that the UK did not go down the route of new coal-fired capacity because I think we have got to bite the bullet and jump. That said, it is also still very early days for the technology. I have spoken to people who work in the industry who refer to the fact that the geological safety and soundness of structures after you have taken out X per cent and are thinking to use them for sequestration is still not a thoroughly understood process. So I think we should be cautious before we trust to it too much.

Q32 Mr. Dave Anderson: What about the demonstration projects to test this?

Mr Simms: I have no problem with the demonstration project. What I would have a problem with is the use of demonstration projects as a slight-of-hand with which to introduce a wave of new coal-fired generating capacity which cannot be guaranteed will be effectively incorporated with comprehensive carbon capture and storage. It is difficult, and the politics of it, I think, have been somewhat opaque to date. I think the effort that it took to get to the point of insisting that any new plant should be ready even with the trial element is demonstrative of some of the power struggles that have been going on behind the scenes, which makes me nervous.

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Q60 Mr. Dave Anderson: In your evidence to us you mentioned that you are concerned that the development of CCS would possibly impede opportunities for renewable energy. Can you expand on that?

Dr Parr: Yes, I think there are two areas where we see that potential: one is the level of support that carbon capture and storage would require from the taxpayer. As I see it, both of the main parties are now advocating something where it is paid directly by either the taxpayer or by bill-payer rather than by the utilities. In a world of finite resources you would have to worry about whether that would be taking money from other incentive schemes for other technologies. So that is one area. The other area is that we see the future of the power grid as one that is rather more dynamic, responsive - "smart" is the conventional term. Again, as we understand it, carbon capture and storage would have to be run pretty much at base load to make the most of the investment. So the potential for conflict with very large amounts of renewable energy on the grid is there, just as identified by EDF in their submission on the renewable energy strategy.

Q61 Mr. Dave Anderson: Is not the reality that if we want to keep a balanced energy mix and we want to maintain base load then coal is an inevitable part of that mix? If we accept the fact that we cannot go on in the way we have then we have got to develop CCS, we have to accept the inevitability of burning coal?

Dr Parr: I think we have to look at where we are in the development of CCS and where we will be in, say, another decade, because the work that we did jointly with WWF and done for us by Pöyry Energy Consulting says that over the period to 2020 if we meet our targets that we have committed to under the EU Directives, both on energy efficiency and on renewable development, then there is, as things stand, no current need for conventional generating capacity over that timescale. I think for CCS we have to be very clear about what our objectives are in developing it, and for the moment there is no absolute need for us to develop new coal capacity with or without CCS.

Q62 Mr. Dave Anderson: Can I just be clear on what you have just said? If everything is done by 2020 there would be no need for conventional - are you saying we will not need coal, we will not need gas, we would not need ----

Dr Parr: We would need new gas, we would not need new coal. That was done for us by Pöyry Energy Consulting, and I would be very happy to send it to you.

Mr. Dave Anderson: I would be very happy to see it.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

Promoted by Paul Foy on behalf of Dave Anderson, both of St Cuthbert's Church Hall, Shibdon Road, Blaydon, NE21 5PT