"We need a new Green Industrial Revolution"

Over the past 12 months environmental issues have steadily risen up the boardroom agenda. Whilst price, quality and service remain key battlegrounds for corporate Britain, the Green agenda is now firmly on the table as well.

This shift in attitude reflects rising levels of public concern about what we are doing to the environment, locally as well as globally. It also points to a more aspirational consumer attitude: the environmental and ethical values attached to products suddenly matter a lot more. The fact that this is not just fluff was underlined by the Stern Review on Climate Change which was published last year. Stern expressed in cold economic data what many of us instinctively knew anyway: that the long term costs of inaction on climate change would be far greater than the costs of action now. He suggested that whilst the impact of unmitigated climate change could shrink the global economy by 20 per cent, taking timely action would cost just 1 per cent of global GDP.

The old battle between saving the planet and saving the bottom line is well and truly over. Whilst it is undeniable that mankind’s relentless exploitation of the Earth’s natural resources for the past two hundred years got us into the present mess, it is now generally accepted that only capitalism can get us out of it. As Jonathon Porritt has memorably said, "capitalism is the only show in town". Only free markets can capture the ingenuity and intellect of individuals to go out and find the solutions to the problems we face.

And the rewards these solutions provide are great. Stern calculated that the markets for low carbon energy products are likely to be worth "at least $500 billion per year by 2050", a sum equivalent to the current value of global tourism.

We need a new Green Industrial Revolution; and we need Britain to be at its forefront. At present we are missing out on this huge and growing world market. Other nations have taken the lead in the greening of their economies, whilst the UK currently languishes, for example, at the bottom of the EU renewable energy league table. This lacklustre performance is putting at risk the competitiveness of all UK businesses, particularly as we struggle to cut the rising costs of energy and waste.

Half hearted – and often half-baked - government regulation has failed to stimulate large scale development of renewable technologies and green businesses. For example, although the government's Renewables Obligation provides enough subsidy to make onshore wind profitable (when it doesn't fall foul of the planning system), it does not do nearly enough for other technologies. As a result, the enormous potential of offshore wind, biomass, wave, tidal and solar power is being sidelined.

The government's job is not to pick winners, but to put in place a long term, stable framework to drive investment in clean and green technologies. Exhortation will not be enough. We need to rebalance the tax system to favour green behaviour and penalise pollution, and to use targeted regulation to create new market opportunities. Above all, we need to put a price on carbon across the economy.

That's why we have recommended replacing the government's Climate Change Levy, which sounds great but is, in truth, simply a blunt tax on industry's use of electricity, with a Carbon Levy, which does what it says on the label. It's also why we advocated converting Air Passenger Duty (a tax on passengers) to a tax on the pollution caused by flying. I am pleased that the Government has adopted this idea.

Inconsistency has been a real problem. The Low Carbon Building Programme (LCBP) is a case in point. Since changes were introduced to the scheme in the last Budget there has been a 90 per cent drop in the amount of money paid out to support Solar PV schemes, and the number of people applying for help has fallen by two-thirds. The predictable result has been damaging uncertainty and the prospect of bankruptcies in this nascent industry.

However, taxation and regulation can only go so far. If we are to maintain our international competitiveness and help to reduce global carbon emissions, we need to think internationally. The EU Emissions Trading Scheme is by no means perfect, but its underlying principle is sound. To succeed it must be more open, transparent and accountable and we must tighten the limits on the number of permits that are issued. Only then will the market work to change behaviour.

A properly structured emissions trading system should be capable of producing an equitable, effective means of addressing climate change, and of bringing forward the necessary investment in clean technologies without distorting competition.

The good news is that, despite the messy inconsistencies of present Government policy, the market has made progress on its own. The fact that the British public wants to go green has not been lost on business. According to a poll conducted by the Energy Savings Trust in April of this year, 80 per cent of the public believe that climate change is having a serious impact on the UK, and 70 per cent of people actively want to help tackle it.

To meet this demand, Supermarkets for example are actively competing with each other to be the greenest. Responsible industrialists themselves have recognised their duty to the environment, and are beginning to invest in clean, new technologies and products. BP for example has saved a massive $1.5 billion by improving efficiency and cutting emissions, for an initial investment of only $20 million. I fully support this behaviour. By cutting down on emissions, businesses have found that not only can they save money, but they have a powerful marketing tool to attract new business.

There is clear evidence that business and individuals are prepared to play their part. In the absence of consistent, clear and long term signals from Government, however, goodwill alone will be insufficient to meet both the challenges and the opportunities which our environment now presents.

Peter Ainsworth MP is shadow environment secretary for the Conservative Party