Green policy takes two steps forward, one step back

The green economy is making great progress and new carbon targets promise a further boost, but constant policy setbacks are not helping

25 Jul 2014, 13:31

It has been a disorientating week for the green economy as good news and bad news has wrestled for supremacy in a confusing battle that has left observers simultaneously delighted and despairing. It is a bit like watching a Commonwealth Games judo bout without knowing any of the rules, only to find that said rules can change every 30 seconds, and that the eventual prize could be either a gold medal or a criminal conviction. Suffice to say, people are feeling confused.

Let's start with the good news. The week started with confirmation the UK's fourth carbon budget would be retained in its current form, bringing to an end uncertainty over the future of the target and reasserting the political classes' support for the long term decarbonisation of the UK economy. This was followed by proposals from the European Commission for a new energy efficiency target, which may have fallen short of the level of ambition green groups wanted but did provide further reassurance the EU remains committed to climate action. The triumvirate of encouraging green policy announcements was completed when the UK set out its new strategy for tackling fuel poverty and enhancing energy efficiency post-2020, outlining plans for new legal targets and minimum building standards to address the issue.

Each of these policies may have their detractors and all could be more ambitious, but they offer green businesses and investors yet more evidence that decarbonisation policies are set to continue post-2020.

Meanwhile, there was yet another poll indicating that the public is overwhelmingly in favour of clean energy deployment and the now familiar march of positive stories detailing how clean technologies are fast maturing and big businesses are embracing more sustainable operating models. Particular highlights this week included Frost and Sullivan's confident predictions solar revenues will double by 2020 to $137bn, Sainsbury's innovative £200m green loan and its ambitious clean tech roll out, and Mars' revelation it is planning a global renewable energy investment drive of a similar order of magnitude to IKEA's €1bn commitment.

So everything is looking up, right? Having finalised emissions targets for the mid-2020s and processed the Committee on Climate Change's warnings that the country is not on track to meet those targets Ministers have surely begun work on beefing up the UK's low carbon ambition? Well, not exactly. Instead, in a disorderly flurry of announcements designed to clear the decks before the summer recess the government has revealed that policies covering everything from energy efficiency to clean energy investment and resource security to nuclear waste disposal are, if not in disarray exactly, then looking extremely frayed around the edges.

Take the confirmation this week from DECC that £205m will be made available each year to support the new contracts for difference (CfD) clean energy subsidy regime. This should have been a welcome clarification of how the primary mechanism for ensuring the UK meets its renewable energy and decarbonisation targets through to 2020 and beyond will operate. Instead it has left virtually the entire renewables industry wondering whether there is enough money to go round and whether Ministers are being entirely serious when they say they want to deliver decarbonisation at the lowest cost.

As the Telegraph reported, the decision to earmark £155m for immature technologies such as offshore wind means the government is likely to be able to confirm support for just one of the five offshore wind farms in the pipeline this year. Meanwhile, the decision to assign just £50m for contracts that will be auctioned to onshore wind, solar, and other mature clean technologies places serious constraints on these sectors, despite the fact they can deliver clean energy at a much lower cost than the offshore wind projects the government evidently favours. Add in the continuing uncertainty over the future of the UK's long-awaited "nuclear renaissance" - underlined this week by the relaunch of the previously thwarted attempt to identify a location for a nuclear waste facility - and the promise of policy certainty that accompanied the passage of the Energy Act looks as illusory as ever.

Of course, there are still encouraging signs that clean energy investment has increased substantially in recent years and it remains vital that the government retains tight control over the subsidy pot for fear of a backlash over the impact on energy bills. And yet, the whole electricity market reform programme is looking increasingly confused. If cost and decarbonisation are the top two priorities, why are the lowest cost renewables getting a smaller slice of the subsidy pot, and why have we not seen more rapid progress on carbon pricing and subsidy auctions, both of which will help cut costs? If cementing the UK's position as a leader in offshore wind is also a priority, why are there not sufficient funds to deliver the projects in the pipeline in a timely manner? If phasing out unabated coal represents the most effective means of cutting carbon, why is the government ignoring the loopholes that will allow coal power to continue well into the 2020s and why is it raising the prospect of subsidies for the industry through its new capacity mechanism? If the cash really isn't available to deliver the next wave of big clean energy projects, why spend years talking up the need for these projects and encouraging businesses to invest in their development? These questions urgently need answering, if the electricity market reform strategy is to ever deliver on its promise.

All of which brings us to another crucial question: if investing in new energy capacity, be it high or low carbon, is so expensive, why is there not much more focus on cost effective energy efficiency improvements?

The government's energy efficiency strategy has been a conveyor belt of crises in recent years as constant policy changes have led to a slump in insulation rates and thousands of lost jobs. And this week brought a series of further blows to the punch-drunk energy efficiency sector as the government first trumpeted the success of its latest Green Deal incentives, only to close the fund three days later after receiving £70m worth of applications for the crazily generous grants in less than a week. As one industry source complained to me this morning, the whole thing "smacks of amatuer hour" and it is hardly suprising Labour wants the Public Accounts Committee to investigate. Add in the on-going scandal, confirmed this week, that is the Big Six's pocketing of a windfall from the changes to the ECO scheme, and the fact that the promising new energy efficiency targets for the 2020s are fatally undermined by proposed legislation that only requires ministers to deliver improvements that are "reasonably practicable" and you can understand why efficiency firms are today oscillating between anger and despair.

It always feels a little uncomfortable criticising Ministers and policies that are clearly well-intentioned, but the chopping and changing of energy efficiency schemes and incentives and the see-sawing between restrictively tight cost controls and staggering largesse with taxpayers' money is little short of incompetent. This is no way to build an industry. It is no way to tackle fuel poverty. And it is no way to deliver emissions savings. The most cost effective means of decarbonisation is being hampered at every turn by policy confusion and cravenly short term political expedience - jobs and livelihoods are being lost as a result.

Although, at least Ministers seem interested in improving the UK's energy efficiency, however flawed the policies they have enacted. As MPs concluded this week, more than four years into the parliament and the government's resource security and waste strategy still "lacks ambition and leadership", resulting in a "throwaway society" that leaves remarkably accessible economic and environmental gains unrealised. Owen Paterson's controversial handling of the floods and badger culls, coupled with his combustible temperament, may have lost him his job, but virtually anyone you speak to in the waste industry could have told you his disregard for resource policy was arguably the biggest failing of his time in office.

The simple fact is that while the setting of climate change targets and carbon budgets is hugely welcome, it is also the easy part. If they are to be delivered you need a bold, ambitious, co-ordinated, and competent effort from government and businesses. You can't set an emissions target and then deny the economy the policies it needs to meet the target. You can't talk up the importance of cost-effective decarbonisation and then threaten to block onshore wind farms and deliver a policy train wreck for the solar and energy efficiency projects that deliver low cost carbon savings. You can't tout the merits of not "picking winners" and then attempt to do precisely that in almost every aspect of energy policy. And most of all you can't identify climate change as an existential threat and then fail to deliver a co-ordinated response that is commensurate to the challenge.

I remain of the view that the coalition has delivered more progress on the green economy than it is given credit for, not least in the form of the continued growth of the sector and the huge surge in clean energy investment. Moreover, there are undoubtedly aspects of the government's green policy landscape that have proven highly effective. But as the government moves into its final year the past week demonstrates how several of the coalition's green gains are in serious danger of unravelling.

For green businesses the only response is to keep on keeping on. Growing numbers of mainstream businesses, like Mars and Sainsbury's and many others, realise decarbonisation and climate resilience make sense regardless of the policy landscape. Virtually every clean tech firm understands that the policy environment becomes a million times easier if they can continue to deliver the cost reductions that increasingly allow clean technologies to compete with high carbon alternatives on cost. Every policy change and funding cut of the past few years has prompted understandable howls of protests from those affected, but for the most part green businesses and have survived and are continuing to innovate and grow. The latest round of policy setbacks will not derail the green economy, it is far too established for that.

And yet it is also about time that Ministers realised once and for all that decarbonisation and the huge benefits that come with it would be much simpler to achieve if they genuinely prioritised green policies, genuinely prioritised the most cost effective means of cutting carbon, and genuinely prioritised policy stability. If the government really wants to be remembered as the greenest ever it needs to end the boom and bust cycle and bring an end to the two steps forward, one step back approach that defines the UK's decarbonisation journey. Politics is ultimately about choices. Having chosen to the set an ambitious carbon target for the 2020s it is time the government chose to deliver on it.

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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