Climate changer

Posted On: 
28th November 2013

Ed Davey is the pragmatic optimist at DECC. Nearly two years into one of the hottest jobs in Government, can he take the political heat out of fuel bills and fracking, while saving the planet?

“It’s very exciting, I’m really enjoying it. There’s a lot of noise, but in politics you want to be where the noise is, don’t you? You don’t want to go where it’s all quiet.”

 Ed Davey is up for a fight. And with the raucous row over fuel bills dominating the Westminster narrative, it seems that the Secretary of State for Energy and Climate Change needn’t worry about avoiding a quiet life.

From green energy to fracking, from nuclear power to climate change controversies, not a day seems to go past without a loud slanging match on his turf. Yet as he endures noises off from Tory backbench sceptics, Labour attack dogs and concerned environmentalists, Davey clearly relishes the hubbub.

 Nearly two years since he took up his Cabinet role (on the back of the cacophonous demise of Chris Huhne), the Liberal Democrat minister knows that energy is a key component of the cost-of-living battleground of the next election.

 Seen by many Conservative minsters as a man they could do business with more easily than his predecessor, Davey is a pragmatist who nevertheless has some firm red lines on green policy. Having seen off John Hayes as his climate-sceptic Minister of State, he insists the Lib Dems are putting their environmental stamp on the Government.

And with the Autumn Statement set to unveil the details of how the Coalition will reform green levies on bills, he makes clear progress has been made behind the scenes in Whitehall. While being careful not to pre-empt the Chancellor, Davey says: “I wouldn’t say it’s a done deal, but we are getting much closer.”

Although some in DECC were taken by surprise at the Prime Minister’s announcement in PMQs that he wanted a review of the levies, the Secretary of State is now sanguine.

“I’m completely open to the idea of looking at the levies on the bills, which is what we are doing at the moment. Because it’s one part, it’s a small part and we need to be seen and we need to achieve those measures [on bills].”

“I’m really about outcomes, I’m not attached to a particular way of doing it. What I want to make sure is we are tackling fuel poverty, we are investing in green energy and we are tackling climate change. That’s what I’m interested in. If we can make the policies I’ve inherited better, well I’m up for it.”

He insists however that the purely environmental measures will be unchanged. “In terms of the review, I would simply say that on an average dual fuel bill, about 9% comes from Government policy. That divides into ‘strict green levies’ and what I call ‘social green levies’. And the strict green levies are effectively 4% and that’s the renewable obligations certificate, it’s the feed-in tariffs and it’s the Chancellor’s carbon price floor. That’s not been touched. The green energy levies are critical to the renewable electricity aspiration we have and our renewable energy target for 2020. It’s critical to get the transition to a low carbon economy going, so they are not changing.”

But Davey does suggest that the other elements of the bills are up for grabs and gives a strong hint that general taxation is the favoured route.

“What we have been focusing on is the 5% [of Government-imposed costs], which is the social green levies, some of which is a pure redistributive mechanism called the Warm Home Discount – which is just giving money to the two million poorest. It’s very important, £135 quid off the bills. We introduced that and we are very proud of it.

“But the question is should you do that through imposing a £12 plus some other costs on consumer bills? Or could you do it through taxation? Now, taxation is more progressive.”

What did he make of the Prime Minister’s alleged order to an aide to ‘get rid of all the green crap’? He smiles. “We seem at one in the Government in that we clearly support anaerobic digestion [a green way to get energy from sewage]…I’ll leave it at that”.

He is adamant that he will not agree to cuts in the Energy Companies Obligation, or ECO as it is known. “ECO is the other bit, the 4%. I made it clear that there are key parts of ECO which are about tackling fuel poverty. And there’s no way as a Liberal Democrat, as a minister, I can cut the average person’s bills on the back of the poorest. Just not going there. So we’ve laid down from day one a really clear marker. We are up for reform of ECO, we are up for trying to ensure we can meet our carbon emission goals as efficiently as possible, as cheaply as possible, we’ve been having those conversations with the energy companies all the time. What you will not see is any slowdown in our efforts to tackle fuel poverty.”

One suggestion that has been floated is that the Treasury would rather see the ECO funded by cuts to departments rather than by raiding general taxation. But Davey says flatly: “We haven’t been having those conversations, it’s just not been said.”

The minister sounds more than a little weary at the attention Ed Miliband has been getting for his bill freeze plan. “You’ve got to remember that bills have been my top priority, it’s been my top priority from Day One. We’ve got to help consumers and industry with bills, we’ve got to get investment to both get the energy security situation sorted, which we are doing, and to make a low carbon transition. And we’ve got to sort out the international position on climate change. Those are the three priorities and have been from Day One.”

On that first day in post, Davey told his officials that a former consumer affairs minister he’d be keen on getting collective switching going. “That’s been driven by me personally for the whole period, so it’s not as if the bills issue is a new issue for us. Miliband may have discovered it in his conference speech but we’ve been on the case,” he says.

“What’s really pleasing is that since the Big Six have announced their prices, there’s been a lot of people leaving the Big Six to go to smaller suppliers, which is competition working.” Figures show that from October to mid-November, the number has topped 100,000 “which is quite some movement in a short time.” The figures are set to be even bigger when released in January with some ‘astronomical’ increases for one or two smaller suppliers.

Davey says he’s pushed quite hard a ‘Secure and Promote’ [a new licensing regime to improve ‘liquidity’ in the wholesale market] set of proposals which Ofgem put forward. “They are coming into being in the first half of next year and this is a major, major reform of the wholesale market, which hardly anyone is talking about.”

Miliband has not been so quiet, of course. Davey says that “a lot of energy is complicated” but the Coalition has “got a radical series of proposals which will drive down profits without affecting investment”.

“The problem with Labour’s approach, which is a very regulatory approach, price freezes et al, is a) it won’t actually deliver because the energy companies will put their prices up beforehand. Hello? How long did it take them to work that out?

“And b) it will undermine competition because in a price freeze if wholesale prices go up and you are having to trade at a loss because the government won’t let you put your prices up, the Big six will be able to manage it with their balance sheets, small suppliers will go out of business. Labour’s policy is about the worst policy you could imagine. It may be politically popular. I accept they’ve gone for a good, populist policy but actually it’s a bad populist policy.”

Davey is keen to stress that he wants to help, not harm, the UK’s energy-intensive industries. Analytical by nature, he recently looked at a study explaining the biggest different in relative energy prices between the US and Europe: shale gas.

“If you got rid of all the EU’s climate change package, it wouldn’t help you. You’d still be left with a very, very significant relative price effect from shale gas. So we’ve got to think really carefully about that. You don’t want to ditch things that will help you long term.”

He stresses that his climate change policies are as much about energy security – “We are importing stuff from Qatar” – as helping the planet.

As with his backing for nuclear energy, Davey doesn’t meet the usual Lib Dem stereotype on Brussels either. He says that while the EU can do a powerful job, progress on getting a Single Energy Market has been “lamentable”. “Although we’ve got the third energy package from the EU, the interconnections are just hopeless. We’ve got to really improve that, it would make a big step forward and make prices more secure.”

But shale gas is the other big win that is possible. “We’ve got to go for shale in Europe,” he says. So is his mind finally made up now on the controversial energy source?

“My caution on shale was only to make sure we did the analysis right and we don’t jump wildly in without knowing what the downsides are. We’ve done loads of analysis and I’m completely convinced now that shale gas definitely offers you two things: it offers you energy security and it offers you a climate change win. And it might, if the whole of Europe does it, offer us a price benefit. That’s unlikely in the short term, it’s unlikely in the medium term, it might happen in the long term, so we shouldn’t throw that option away.”

The Energy Secretary asked his chief scientist David Mackay to do analysis of the carbon footprint comparing shale with the energy used to extract and ship liquefied natural gas transport to Britain on big ships. Shale worked out as having a smaller footprint. “I think you can create a response to North American phenomenon of shale gas which is a credible one…without ditching stuff you need on climate change,” he says.

As for global warming, Davey treats the ‘energy’ and the ‘climate change’ parts of his title equally seriously.  Some countries have in the past few weeks signalled a move away from previous emissions targets, from Australian premier Tony Abbott to the Canadian government and, most significant of all, Japan dropping its 2020 target.

The Minister says it’s important not to ‘misread’ recent announcements.  “For Japan, in the light of Fukushima, you knew they were going to make some changes, and their changes are more about 2020, not 2030 or 2050. Let’s see what they announce on 2030, because I think they have a short-term issue not a long-term issue, they still remain very, very ambitious on climate change.”

On the wider issue of the pace of global warming, he has just returned from talks in Warsaw that saw “a pretty good agreement” despite “scratchiness” between some nations. Davey is optimistic, saying the key talks set for 2015 are “going in a very good direction”. 

Part of the reason is the Obama administration’s commitment to the cause and he says “the US has been in a better place than it has ever been”. On a recent Washington trip, he found Gina McCarthy of the Environmental Protection Agency and Energy Secretary Ernest Moniz were taking real action, backed up by the President’s envoy, Todd Stern. The President’s own inauguration speech and a big speech this summer proved ‘he could not be clearer’ on the need to tackle climate change.

“And he’s backed by Secretary of State Kerry who frankly discovered climate change before Al Gore did. So you have an American Presidency, and American administration that is really ambitious in a way we’ve never seen before. Yes they have constraints and they are clear, the Republicans in Congress, but a lot of what they are able to deliver is through executive orders,” he says.

What about China?  “You’ve got to look at what China is doing rather than what China is saying. China is doing huge amounts. It’s investing more in renewables than any other country.” The Chinese are tackling their coal power station issue too.

“Their leadership have talked about an ecological civilisation. China gets it. And it gets it because air pollution is hurting its people, because of environmental degradation generally – air and water – hurting its people, creating social unrest. Environmental reasons caused more unrest in cities and towns in China than probably any other issue.” With a lot of big cities like Shanghai low lying at the end of big rivers, the flooding issues are potentially huge too. 

But does everyone in Britain ‘get it’? There are some who say that at a time of austerity, green policy is a luxury, an almost ‘airy fairy’ distraction.

“There is nothing airy fairy about the climate change issue; it is real, it is present,” Davey says. “You might even call it an imminent danger. Except that imminent danger suggests it’s not already happening.  It’s happening. When you go to these climate change talks you see people suffering from the effects of climate change far more than we are.”

But in the UK too, he says “talk to farmers” and one can find “we are suffering from the effect of climate change”. “They may not all sign up to the IPCC figures but they know something is happening”. 

“The tragedy of the Philippines typhoon was not that there is any evidence yet to prove that climate change is making storms more frequent or even more intense. What we do know is because the sea levels have risen, the storm surge and impact of the sea on low-lying areas is much more dramatic. So, we are pretty sure, though I believe on going on the scientific evidence unlike some, we have to study it, but people feel one of the reasons why the Philippines was such a disaster was because of rising sea levels caused by climate change. That is not airy fairy.”

Does he think some of this Conservative critics are simply unscientific?  “There are many Tories who share my view, the Liberal Democrat view, the Labour Party view, and I think the wider public view and the scientific view that climate change is happening. And you may think this is odd but I know because I’ve talked to them, there are an awful lot of Conservatives who understand that climate change is a real and present danger and we have to tackle it.

“There are some who don’t and I wish they looked at the science. And didn’t pick and choose from the science and looked at the science as a whole. Because I find that when you look at the impact on glaciers, the impact on the north pole, the impact on sea levels, the acidification of the oceans, the extreme weather events, the global temperature, the temperature of the oceans, the science is compelling.”

Speaking of looking at the science, what does Davey think of Michael Fallon describing the debate over climate change as “theology”, as he did to The House magazine this year?  The Minister is pointed in reply: “Michael’s responsibilities aren’t on the climate change area. They are on energy kit and nuclear and shale gas – and he’s doing a very good job.”

He is similarly deadpan about remarks by Owen Paterson to a Tory party conference fringe event in which the Environment Secretary praised the merits of global warming, such as fewer people dying in winter and ‘longer growing seasons’.

“I always think, unfortunately, while you can point to one or two things which would appear in the short term to help, the negatives outweigh them by a country mile,” he says. Paterson is the minister in charge of ‘adaptation’ to climate change. “Owen argues very strongly for more money for flood defences. So he must be defending against something,” he says.

Davey seems as optimistic about his own party’s electoral prospects as he is about tackling global warming. Asked if he worries about the Liberal Democrats getting squeezed in next year’s European and local elections in London (his own local council in Kingston is under threat from the Tories), he sees a glass half full.

“Obviously, we will have the European elections and we could have a big UKIP vote. But I think a lot of the politics next May is going to be local.”

He says it won’t be easy but in some areas of the capital, Lib Dems could take seats back from Labour that were lost in 2010 because of the general election effect. “I think it’s all to play for.”

As for 2015 and beyond, some in the party have suggested Davey could be the man to replace Nick Clegg whenever he decides to step down. Will the mantra of the Energy Secretary, who was once interviewed for a job with MI6, be a Bond-like ‘never say never again’? He laughs at the question, but then adds: “I am an arch fan, an arch loyalist of Nick and was very much involved in his leadership campaign and would very much like him to stay as leader for a long, long time.

“We are a democratic party. I don’t think Nick or any Parliamentarian would choose the next leader of the Liberal Democrats, so I think the party, when it comes to it, which I hope is a long way away, will go through that process.”

But he’s not ruling it out?  “I’m not thinking about it. We are about to have our second child in February, which we are very excited about, our first child is quite disabled so he takes up a lot of our time, he’s a fantastic little chap but with extra demands. And I’m a Cabinet minister.

“So I’ve got a few things to think about and I don’t worry about things in the future. Let them take care of themselves. I am keen to make sure a job for my constituents, a good job as Secretary of State and keep my wife happy.”

It’s a good job Ed Davey likes noise. It sounds like he’s going to experience a fair bit more in coming months, at home and at work. And he needn’t worry about having a quiet life for some time yet.  

DAVEY ON…LABOUR’S BILL FREEZE

“Labour’s policy is a con, it’s bad for competition and it’s bad for investment.”

DAVEY ON…NATIONAL GRID WARNINGS ON INVESTMENT

“I don’t see a drying up of investment. We hope to announce quite shortly some rather big new investments that are going forward.”

DAVEY ON…OFFSHORE WIND

"My first day I opened the world’s largest offshore windfarm. This summer I opened with the Prime Minister the next world’s largest offshore windfarm. The following week I consented what will be the next world’s largest offshore windfarm. We are seeing a lot of them open, a lot under construction."

DAVEY ON… ‘GREEN DEAL’ NUMBERS

“100,000 people have said I’d like an assessment for a Green Deal, nobody can tell me that’s a bad number.”

DAVEY ON…’GREEN DEAL’ FLAWS

“I’ve always thought that asking companies who want to sell energy to help people save it, I never thought that was a terribly good model."