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No subsidy for shale gas, says PM

David Cameron has insisted the Government is not subsidising the controversial exploitation of shale gas, despite a tax regime designed to support the fracking industry.

The Prime Minister said the industry will "have to make a profit in order to succeed" but defended measures aimed at promoting fracking, which he said had the potential to provide gas for the country for 30 years.

Mr Cameron stood by his assertion that he was leading the "greenest government ever", but warned against pushing ahead with plans to aggressively cut carbon emissions in a way which could lead to soaring household bills.

Appearing in front of the Liaison Committee of senior MPs he was challenged on the tax breaks offered to the fracking industry.

Joan Walley, the chairman of the Environmental Audit Committee, said: "I'm not quite sure why the Government is subsidising fracking because it's not a new technology is it? There are tax breaks which are far superior to other forms of energy."

But Mr Cameron told her: "We are not subsidising fracking with a guaranteed pence-per-kilowatt hour. What we are saying is, as we stand today there are no unconventional gas wells in Britain and yet the Bowland shale, some of the other shale reserves, have the potential to provide gas for this country maybe for as long as 30 years.

"It's a nascent industry. We are not giving it a subsidy, we are just saying effectively that there should be a tax regime on this industry that encourages it to get going and, crucially, encourages it to get going and to reward local communities.

"As soon as a well is dug that's £100,000 for the local community and then 1% of the revenues - not 1% of the profit, 1% of the revenues - can go to the local community which could be as much as £10 million for a pod of wells.

"Plus the fact ... if this happened in your area we are saying that 100% of the business rates should be retained by the local authority. This could be £1 million or £2 million."

Asked whether that "amounts to a bribe", the Prime Minister said: "It means the community benefits from the development of a resource and I think that is very important if we are going to see this industry develop.

"We should do this in a very calm, rational, sensible and scientifically-based way. But I wouldn't argue that those are big, unfair subsidies.

"This industry is going to have to make a profit in order to succeed, but the way you tax a new industry is different to the way you tax an existing industry."

At a regular appearance in front of the body, made up of the chairs of Commons select committees, Mr Cameron defended his Government's record.

"The claim to be the greenest government ever is based on the fact that we have this climate change legislation, that we have put in place and followed and set out these carbon budgets and as a result you have seen further reductions in carbon emissions, you have seen aggressive targets for the future, the first new nuclear plant for a generation at Hinkley C, we have more than doubled our capacity in renewable electricity over the last four years alone.

"So I think there's a lot of good things being done."

The fifth carbon budget is due to be set in 2016, and Mr Cameron said he would resist measures which could increase heating and fuel bills.

"I hope we can continue with this carbon budgeting process, the only note of caution I would add is we have to make this decision in 2016 and my only hesitations have been that I want to see carbon reduced at the lowest cost.

"Sometimes we need to know whether some of the new technologies we are being told about really will appear."

One of the stumbling blocks was the development of carbon capture and storage (CCS) technologies, which can help clean up the emissions from fossil fuel power plants but "we haven't yet got a workable system".

The Prime Minister said: "In terms of the North Sea, this is a valuable and vital industry for the UK. I believe that hydrocarbons have a role to play in the international energy system.

"I hope that carbon capture and storage is going to come about and so it may be that for many years to come gas will still play a role in our electricity supply.

"I believe it should. I believe those people who say 'let's decarbonise irrespective of whether carbon capture and storage works', I think that's a difficult view to take because to make the electricity system add up without any gas you will have to have an enormous amount of highly subsidised renewables and quite a large amount of semi-subsidised nuclear.

"I think that could lead to very expensive electricity bills for your consumers and mine.

"I don't want to see that, that's why I don't commit to the decarbonisation targets that sometimes people want me to until we know about CCS."

Mr Cameron is also expected to face questions a bout the Government's efforts to tackle the threat posed by extremists during the session.

Mr Cameron insisted the public was "fed up" with onshore windfarms and said the country did not need any more subsidised turbines on land.

"Let's get rid of the subsidy, put them into the planning system. If they can make their case, they will make their case," he said.

"I suspect they won't and we'll have a reasonable amount of onshore wind, we'll have safer electricity supplies as a result but enough is enough and I'm very clear about that."

Mr Cameron urged scientists to publicly help to bust myths about unpopular issues such as nuclear and fracking.

He told MPs: "I think there are some myths we need to get over - the myth that fracking would be a disaster for the environment, the myth that GM technology means we are all going to be eating fish flavoured tomatoes, the myth that nuclear power is inherently unstable and we shouldn't pursue it.

"These are myths that we need to confront if we are going to be a successful science-based country in the future."

But he criticised scientists for sometimes failing to give the Government proper warning about major issues, such as ash dieback, a fungal disease that has devastated Britain's ash trees.

He said: "Sometimes we have had things that have happened about which I don't think we've had significant enough scientific warning."

Mr Cameron claimed green groups were opposed to fracking simply because it is gas. He said: "They are opposing it with a sort of religiosity which I think is frankly wrong."

Mr Cameron defended the decision to allow the aid budget to be used for climate finance.

Asked if he was concerned that it meant the UK could end up being used to support "wind turbines in Turkey, rather than schools in Somalia", he replied: "Obviously any fund we give money to we should work as hard as we can to make sure it doesn't waste that money and it's spent in the right way."

Mr Cameron repeated his prediction that the UK's first fracking wells could be developed by the end of 2015.

"I am hopeful that the first wells will be dug next year," he told the committee. "I think it really does need to happen. We have been talking about this for long enough."

He added: "We should be examining this industry and seeing what it can do for British jobs, British companies, British energy efficiency and British energy security.

"My objection to the green groups is that they don't want to hear any of these arguments, because they can't bear any new carbon-based energy source coming on stream."

Mr Cameron predicted that the fracking industry would be "seen in a different light" once people had the chance to see the first wells in operation and assess for themselves how little disruption they cause.

"At the moment, I think we all know from our constituency mailbags people are very worried about it and I think they will go on being worried about it until they can see that there is much less to worry about than they thought."

Craig Bennett, director of policy and campaigns at Friends of the Earth, said: "If only the Prime Minister had a science-based approach to policy-making he would know that it isn't possible to tackle climate change whilst brazenly subsidising dirty fossil fuels. He has lost any pretence at his promise this will be the greenest government ever.'

"Fracking is so unpopular while renewable energy enjoys massive public support. The Prime Minister is backing the wrong horse."

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