It could have been worse, but Osborne's green cuts still raise alarm bells

I suppose we should be grateful for small mercies. Given the scale of the cuts handed out to other departments, the £85m in savings that the Department of Energy and Climate Change (DECC) will have to deliver this year should prove relatively manageable. No one likes to see their budget cut, but a reduction in spending of 2.5 per cent should be achievable without too much harm done to key services.

Things are slightly worse at the Department of Food, Environment and Rural Affairs (Defra), which has been tasked with slashing its budget by 5.5 per cent, equating to cuts of £162m. But overall the two main environmental departments have escaped the first swing of Osborne's axe in reasonable shape, when you consider some departments are losing an arm and a leg.

The problem, to paraphrase Labour's argument about the wider economy, is that any money taken out of the low-carbon economy at this time threatens to derail the entire transition.

An anticipated one per cent cut in the budget at the Carbon Trust and Energy Saving Trust might not frighten the horses and it is undoubtedly true that both quangos could improve their efficiency, but any reduction in budgets is likely to impact the work of both of these crucial agencies in some way.

Similarly, cutting the Environmental Transformation Fund (ETF) by £34m will not make a huge difference to a low-carbon economic transition that will require billions of pounds of investment over the next decade. But it will certainly impact those firms and research projects that currently have grant applications in with the ETF. DECC can point to the forthcoming low-carbon infrastructure bank and confidently predict that it will help pick up some of the funding slack, but there is still no date for the launch of the bank, nor any real detail on how it will operate.

More worrying still is Defra's ominously vague pledge to deliver "savings within the delivery of selected programmes". As BusinessGreen.com revealed last year, the department has form in this area, having responded to a previous billion-pound budget shortfall by quietly axing unglamorous business support services dedicated to improving waste and resource management. Expect low-profile environmental projects focused on those small and medium-sized businesses that are least likely to kick up a fuss and operating in areas such as waste, recycling and energy efficiency to quietly disappear over the next six months.

But the bigger fear springs not from the current cuts, but the threat of what is to come. The Green Alliance and the Corporate Leaders Group on Climate Change were right to point out today that it is more important that the government sets out a clear policy framework to drive private sector investment in low-carbon technologies than it is for it to continue to throw direct funding at the sector, particularly given the current state of public finances.

But direct funding forms part of that policy framework, helps to establish confidence in the low-carbon sector and drives high-risk emerging technologies towards commercial viability.

If, as now seems likely, DECC, Defra and their related ecosystem of agencies and programmes face deep and sustained budget cuts in the autumn, then there is little doubt that it will have a detrimental effect on the emerging low-carbon economy.

It is difficult to argue for special cases at a time when the coalition government is convinced that everyone must share the pain of the coming austerity measures. But the UK has already suffered in comparison to other countries with regard to the proportion of its economic stimulus that was targeted at low-carbon projects, and any further cuts could see our burgeoning competitiveness in emerging clean tech markets compromised.

David Cameron has said he wants this to be the "greenest government" in history, but such an ambition will never be realised on the cheap. Climate change programmes should be added to the small list of areas protected from spending cuts, and if the UK government really can't afford to increase investment in this critical area, then perhaps it is already time to make good on that Conservative manifesto pledge to raise green taxes.