‘(1)Section 33BC of the Gas Act 1986 (c. 44) (promotion of the efficient use by consumers of gas) is amended as follows.

(2)In subsection (1)—

(a)for “energy efficiency target” substitute “carbon emissions reduction target”, and

(b)for “an “energy efficiency obligation”” substitute “a “carbon emissions reduction obligation””.

(3)For subsection (2) substitute—

“(2)In this section “carbon emissions reduction target” means a target for the promotion of—

(a)measures for improving energy efficiency, that is to say, efficiency in the use by consumers of electricity, gas conveyed through pipes or any other source of energy which is specified in the order;

(b)if the order so provides—

(i)measures for increasing the amount of electricity generated, or heat produced, by microgeneration;

(ii)any other measures of a description specified in the order for increasing the amount of electricity generated, or heat produced, using low-emissions sources or technologies;

(iii)measures for reducing the consumption of such energy as is mentioned in paragraph (a).”

(4)After subsection (12), add—

“(13)In this section “microgeneration” and “plant” have the same meanings as in section 82 of the Energy Act 2004 (Secretary of State’s strategy for promotion of microgeneration).

(14)For the purposes of subsection (2)(b)(ii), electricity is generated, or heat is produced, using low-emissions sources or technologies if it is generated, or produced, by plant which relies wholly or mainly on a source of energy or a technology mentioned in subsection (7) of section 82 of the Energy Act 2004.”.’.—[Malcolm Wicks.]

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following: Government new clause 32—Promotion of reductions in carbon emissions: electricity distributors and suppliers.

Government new clause 33—Consequential amendments.

Government new schedule 1—Amendments consequential on sections (Promotion of reductions in carbon emissions: gas transporters and suppliers) and (Promotion of reductions in carbon emissions: electricity distributors and suppliers).

The aim of the new clauses is to provide more flexibility to energy suppliers in the ways in which they can meet their obligations under the Electricity Act 1989 and the Gas Act 1986. Under existing legislation, electricity and gas suppliers are required to achieve targets for the promotion of improvements in energy efficiency. The 2004 energy efficiency obligation order provides for the improvements to be achieved for domestic consumers in Great Britain. The obligation is commonly known as the energy efficiency commitment or, in the trade, as the EEC. It is open to suppliers how they meet their targets by, for example, encouraging and assisting household consumers to take up measures such as cavity wall insulation and energy-efficient lighting and appliances.

The EEC has proved to be a successful instrument and is a key contributor to the reduction of carbon emissions under the climate change programme in the household sector. Energy suppliers convincingly met their targets for the first phase of the EEC from April 2002 to March 2005. By carrying forward activity, they started work early on the current phase of the EEC from April 2005 to March 2008, which requires broadly double the level of activity.

We are thinking ahead to the third phase of the obligations on suppliers, which will run from April 2008 to March 2011. Throughout 2006, we will engage in discussions with a wide range of stakeholders to feed into the development of proposals that will be set out in a statutory consultation in spring 2007. The target for the new obligations and the framework for the scheme, which is administered by Ofgem, will be set by order towards the end of 2007. Although the targets placed on suppliers are achievable, we recognise that they present a challenge to them. As a result, we would like the opportunity to provide suppliers with as much flexibility as possible in the range of measures that they can employ to meet their targets.

The new clauses would enable the Secretary of State to require suppliers to achieve a carbon emissions reduction target. That is defined as a target for the promotion of measures for improving energy efficiency and, if provided by order, certain other measures—for increasing the amount of electricity generated or heat produced by microgeneration; any other measures specified in the order for increasing the amount of electricity generated or heat produced using low-emission sources or technologies; and measures for reducing the consumption of energy.

The current energy efficiency target on suppliers is often expressed in terms of carbon emission reductions and, thus, the new approach would provide a more effective way in which to join up measures in respect of carbon abatement objectives. We propose to consult stakeholders before making provision for the carbon   emissions reduction target to include the promotion of measures that are additional to the promotion of energy efficiency improvements. However, the new clause would provide additional flexibility to energy suppliers and support a more joined-up approach to carbon abatement in the household sector.

I have already stated this afternoon that Conservative Members consider that there is a case for creating a much more holistic and flexible approach to energy regulation. I certainly recognise that in respect of the energy efficiency commitment from 2008 to 2011 the Minister’s proposal to provide greater flexibility and the type of measures that suppliers can employ to meet their targets, such as microgeneration, renewables, smart metering and behavioural measures, is welcome. I understand that DEFRA Ministers have agreed that we should be able to take the opportunity to enable microgeneration and other carbon reduction measures to be counted, allowing the EEC to become a much more innovative and flexible instrument in the future. We want to encourage flexibility and innovation, so I support this small measure. I would like it to be accepted as a principle and extended to the whole energy regime.

Has the Minister considered changing the way in which infrastructure charges are levied by gas transportation companies, particularly with regard to new developments? For example, when a new housing estate is being built, an infrastructure charge is levied on the house builder by the gas company for supplying that estate with gas pipelines. The same applies to electricity. As a way of encouraging energy efficiency, could there not be a mechanism by which the infrastructure charge for a house or houses that are accredited as energy efficient is less than the charge for a house or houses that fail to be accredited?

The hon. Member for Bexhill and Battle described the provisions as a small measure which he welcomed. I think we should not be too modest about them, because they are significant. Bringing microgeneration into the energy efficiency commitment will provide a major boost to the microgeneration industry and microgeneration take-up in this country. Including the provision will send such a clear message to the industry that it will have a positive response from those with an interest in the matter.

I understand that the provisions will apply throughout Great Britain and perhaps the Minister will confirm that, either now or later. They may be the most significant part of the Bill when it finishes its passage through Parliament, and I welcome the Government’s initiative in moving the new clauses.

I also welcome the new clauses and hope that they will be included in the Bill and that the Bill progresses. It is a sad commentary on our proceedings that the hon. Member for Edinburgh,   North and Leith may be right in saying that these measures may turn out to be the most significant part of the Bill, because many of the other good bits may have been removed. Nevertheless, we should give credit where it is due. On this occasion I think the Government are right and I welcome the additions to the Bill.

It might be appropriate to respond to a couple of the specific points that have been mentioned.

The hon. Member for Kettering (Mr. Hollobone) asked about new house construction and whether there could be some reward for those that are built to a high standard. He was not suggesting this, but it is not a matter for the EEC obligation. I am not saying that I will bring forward a great proposal, but if it is acceptable I will reflect on what he said and write to him.

I can confirm to my hon. Friend the Member for Edinburgh, North and Leith that the measures apply to Great Britain. With that, I hope that the Committee will support the new clauses.

Question put and agreed to.

Clause read a Second time, and added to the Bill.