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Yorkshire in the City

Malcolm Wicks MP,  Minister of State for Energy
Guildhall,  19 June 2008

Malcolm Wicks MP, Minister of State for Energy

I’m grateful to the Yorkshire Society as hosts, and to all the sponsors and supporters of what I think is a very worthwhile event today.

The current very high oil prices have brought energy issues to the front of everyone’s mind. We all experience these prices - most directly at the petrol pumps - but most people also understand that they are driven by global markets.

The huge increase in global energy demand, resulting largely from the very welcome growth of economies like China’s, is set to continue. The International Energy Agency predicts 50% growth in global energy demand by 2030 – with China and India accounting for nearly half of that.

The problem is that the supply side has struggled to keep up. Increasing production capability takes time, human effort, and huge financial investment.

Production from existing sources can be maximised, however, and I welcome the recent announcement by Saudi Arabia that it will increase its oil output to the highest level since 1981. It’s commitments like this that we believe our work on the international scene is helping to secure.

In the meantime, high energy prices do affect the most vulnerable in our society. Fuel poverty came down year on year from 1997 for many years, but it is now an area where we have had to redouble our efforts.

So, in the Budget, the Chancellor increased the Winter Fuel payment for this year. We have also persuaded the energy supply companies to triple their spend on social programmes to £150m per year.

The concern over fossil fuel prices is an immediate issue, but as a Government we also look to the longer term. And in the field of energy policy, we have the weighty responsibility of tackling what I consider to be two of the great challenges of the 21st century: energy security and climate change.

Energy Security

The global supply and demand issues I’ve already talked about are a vivid demonstration of the energy security challenge.

The UK is now a net importer of oil, and by 2020 we will be importing the majority of our gas.

And given the concentration of the world’s remaining fossil fuel reserves in regions such as the Middle East and Russia, we clearly need to avoid over-dependence on any one region for our supplies.

Climate Change

Climate change, meanwhile, means we have to cut carbon dioxide emissions from energy production.

The IEA predicts that under current policies, global CO2 emissions will rise nearly 60% by 2030.

And Sir Nicholas Stern’s report set out the economic imperative of addressing the problem quickly - if we wait, we risk wiping at least 5% from global GDP each year.

Our strategy

Faced with these twin challenges, we must move as quickly as possible to decarbonise the economy.

So we are the first Government in the world legislating to impose a binding target for reducing CO2 emissions on ourselves - we’ve committed to a 60% reduction in CO2 by 2050, and will consider tightening that target up to 80%.

The EU Emissions Trading Scheme is vital as we work to meet that binding target. It puts a price on carbon, giving industry both an incentive and a mechanism to cut its emissions in the most cost-effective way.

We are working to reform the Scheme, to make it more effective and to bring in aviation and carbon capture in the future.

Energy efficiency is vital. Seemingly small changes - insulating homes so they’re cheaper to heat, replacing light-bulbs with energy-efficient ones, simply turning the TV off rather than leaving it on standby – can make a big difference.

But energy still needs to be generated.

So we need to bring on low-carbon sources such as renewables and nuclear. We have huge momentum in renewables now. This year we expect to become the world’s leading country in terms of installed offshore wind capacity.

And we are studying the feasibility of harnessing the tidal power of the river Severn, whose estuary has the second largest tidal range in the world, capable of meeting 5% of the UK’s electricity needs.

And, in the next couple of weeks, we will launch a major consultation on our strategy to make the further step-change we need in order to meet our share of the EU target of 20% renewable energy by 2020.

Developing technologies such as biomass are crucial to this work. I know that important work is being done in Yorkshire in this area, not least by the Yorkshire and Humber Energy Forum, which published its “Vision for Biomass”.

Nuclear power is a low-carbon energy source and, in January, we announced our decision in favour of new nuclear power stations.

But even with new nuclear, and with further major increases in renewable generation, we will still need to burn some fossil fuels for decades to come - and so, more importantly, will countries like China, where coal use in particular is growing very rapidly.

This is why carbon capture and storage (or CCS) technology is so important. The British Government is supporting the world’s first commercial-scale demonstration project for post-combustion CCS on a coal-fired plant. CCS technology has the potential to capture 90% of carbon emissions, and is a crucial tool in the global fight against climate change.

I would like to congratulate Yorkshire Forward, one of the sponsors of this event, for its work in forming the CCS Partnership for Yorkshire and Humber, which is at the forefront of work on CCS in the English regions.

I have mentioned in passing only a couple of important initiatives in Yorkshire in the field of energy, but I know that there are many more, including at Yorkshire’s excellent universities.

But I hope I’ve been able to give you some insight into the UK’s energy policy, and I wish you well for the rest of the day.