28 Jul 2015, 14:00
Over the past few weeks, I've written extensively on the government's all-out assault on the UK's green policy framework and its ongoing failure to detail how it will twist the resulting wreckage into the credible decarbonisation strategy it promised. So now it is time for something even more dispiriting. Ladies and gentlemen, I give you the Labour leadership race and its failure to say anything of interest on the biggest security challenge and most compelling economic opportunity of our times.
I know it has become de rigueur to condemn the Labour leadership race for its failure to deal with big issues or offer a compelling vision for the UK's economic development, beyond Jeremy Corbyn's bold assumption that what voters really want is a dose of unreconstructed socialism. But the inability of any of the leadership candidates, including Corbyn, to sketch out a compelling vision for a green, sustainable, and low carbon economy is truly remarkable and massively disappointing for those who want to see decarbonisation pushed up the political agenda.
I'll admit I haven't watched every minute of the Labour leadership hustings, because who wants to intrude on private grief? But judging by the media coverage to date none of the candidates has gone out of their way to make climate action an explicit part of their pitch to the party or the country. Where they have sketched out their thinking on climate change it has evidently failed to excite.
Liz Kendall gave an intriguing interview arguing Labour needed to define itself through its response to big issues such as "globalisation, climate change, our ageing population and the threat of extremism". Both Kendall and Yvette Cooper namechecked climate change as one of the biggest threats facing the UK. Andy Burnham has praised the 'carbon bubble' concept and indicated he wants a moratorium on fracking. And Corbyn has made it clear he backs climate action and does not agree with his brother, climate sceptic weatherman Piers Corbyn, when it comes to the causes of climate change. Bold climate policies and a compelling vision for decarbonising the UK and creating a world-leading clean tech hub have been notable by their absence.
For a centre left vision on how to generate political capital from the public's growing interest in climate change and clean technology we have to cross the Atlantic to see how Obama is winning plaudits for his Clean Power Plan and Hillary Clinton is this week detailing how she thinks voters want more, not less, renewable power. Clinton's pledge to install half a billion solar panels (not personally, obviously) and generate enough renewable power for every home in the US is precisely the kind of populist yet plausible clean tech pitch Labour's leadership hopefuls seem strangely reluctant to embrace.
The low profile of the green economy from the Labour leadership race is bizarre for three important and inter-related reasons.
First, from a narrow electoral perspective the trauma that befell Labour in May saw over one million left-leaning voters back the Greens and virtually all of Scotland endorse an SNP platform that majored on clean technology and green growth. Meanwhile, in England the party failed to do nearly enough to reach out to centrist voters, build business support, and exploit uncertainty about the Tories' motives and plans. It seems pretty self-evident an Obama/Clinton style clean tech pitch could help on all of these fronts.
Secondly, in case Labour had not noticed the government is using the opposition's summer of polite debate/vicious in-fighting (delete as appropriate) to push through a host of controversial reforms that were largely unencumbered by anything as infra dig as a democratically endorsed manifesto commitment. Front and centre in this policy blitzkrieg is a high profile attack on a host of environmental policies. The failure of any of the Labour leadership candidates to launch a single effective counter-attack on the government's assault on the green business sector is strategically and tactically naïve. The government is being allowed to push through changes that were not included in the Tory manifesto and which will do considerable damage to the UK's decarbonisation efforts with little in the way of meaningful political opposition.
Thirdly, and most importantly, as Clinton has evidently concluded, a genuinely ambitious clean tech and climate change strategy is a very good look for a centre-left party seeking office. The most frustrating aspect of the Labour leadership campaign is that the more centrist candidates appear to have reached much the same conclusion (witness Cooper and Kendall's declaration climate change is one of the biggest threats facing the UK), but then failed to follow it up with the inspiring, clear rhetoric and eye-catching policies a leadership race demands, leaving the stage clear for Corbyn to press the party's social justice buttons.
Writing on Twitter yesterday, former Labour adviser Theo Bertram argued "the right/centre of Labour needs to enthuse supporters, not write letters to each other, wishing people wouldn't support Corbyn". As numerous commentators have noted in recent weeks, Labour tends to win when it promises to deliver an essential national project sprinkled with a dusting of inspirational idealism: Atlee's welfare state, NHS, and post-war settlement, Wilson's white heat of technology and the swinging sixties, Blair's pledge to rebuild and reform decrepit public services enthused with some Cool Britannia confidence. The UK's necessary decarbonisation and the promise of improved quality of life implicit in so much millennial environmentalism offers such a project in spades. Labour has flirted with it in the past through the Climate Change Act and Miliband's quiet commitment to the green economy, but is still failing to seize this most obvious of opportunities.
Best of all, a Labour leader who made climate action one of their defining priorities would discover both a lever for tackling the welfare, business, and austerity challenges the party seems to have little new to say about, and a route out of the self-defeating prism that attempts to fit candidates' every move onto an increasingly meaningless left-right spectrum - a spectrum that will collapse in on itself the day people realise perhaps binary divisions are not always the best way to organise a complex world. (Is carbon pricing a left-wing tax raid or a right-wing harnessing of market forces? Are social enterprises a lefty exercise in charity re-branding or right-wing expansionism for conventional business thinking? Is renewable energy a mechanism for libertarian independence or communal mutualism? And, yes, I am aware questioning the value of the left-right spectrum is a very centre left, New Labour/centre right, Cameroon thing to do).
If you look at several of the key issues that have left Labour stuck in a never-ending battle between its heart and its head it is clear there is a potential green answer. It is possible to reach out to "aspirational voters" with a pitch based on good green jobs, clean technologies, and capitalism with a purpose. It is possible to love-bomb the alienated business community by offering an ambitious yet credible low carbon infrastructure programme, without compromising your criticism of irresponsible businesses. It is possible to simultaneously address the inter-locking challenges posed by fuel poverty and the giant housing benefit budget with a zero carbon building and energy efficiency retrofit programme. Most of all, it is possible to offer a much more nuanced and effective response to austerity by combining a clear commitment to cuts in certain areas with a Green Investment Bank-led infrastructure investment programme designed to benefit both voters today and future generations.
The avalanche of think pieces offering Labour advice on where to go next are good at sketching out visions, and much less good at offering any real practical suggestions. So what would a compelling centre-left climate strategy actually look like?
Obama and Clinton offer a good template, with eye-catching commitments for half a billion solar panels and a willingness to take on the coal industry. Half a billion solar panels might be a bit rich for the UK, but how about a solar array on every school and a Royal Commission on the carbon bubble and the future of the North Sea and UK fracking? How about a proper community energy strategy and an effective pay-as-you-save energy efficiency scheme? How about a serious debate with business leaders about the merits and pitfalls of quarterly reporting and the need to build climate resilience? How about a pledge to take George Osborne's northern powerhouse vision and show once and for all that you cannot power a 21st century economic powerhouse with 20th century energy and transport infrastructure?
This is the start of what a compelling centre-left green offer looks like. In reality it does not look much different to a compelling centre-right offer (witness Angela Merkel's continuing position as ‘The Climate Chancellor'), but that is kind of the point. Ambitious action on climate change represents a centrist and pragmatic strategy built around sensible regulation, effective risk management, technology innovation and much-needed investment, but it is none the weaker, nor less inspiring for that. Best of all, as Merkel and Obama have shown, such a vision offers the Labour leadership candidates an opportunity to spin idealism as pragmatism, and vice versa - a talent they all desperately need to master.
The failure of the Labour leadership candidates to emulate their front-running counterpart on the other side of the Pond and deliver such a vision remains one of the biggest mysteries of a logic-deficient political summer.
24 Jul 2015, 15:51
Where does the decision to strangle the Green Deal sit in the dramatically competitive race to claim the title of the government's most self-defeating, short-sighted, and environmentally damaging green policy move? Could it yet come through on the rails to take the title or will it get lost in the crowded field alongside the shock clean energy tax hikes and scrapped green building standards? Assessing the runners and riders at the end of a week that was about as bleak and unrelenting as a Leonard Cohen sings Radiohead album, it is clear we are in for a photo finish.
Trailing at the back of the field is the reasserted commitment to push for an ambitious deal in Paris and today's news the government is backing the inelegantly named 'Friends of Fossil Fuel Subsidy Reform' group (I bet they throw the best dinner parties). As the one policy in the running for the alternative title of most promising green policy move, it doesn't have a hope in this particular race.
Also lagging behind the rest of the field are the various reviews; the pledges to take the microscope to the feed-in tariff, energy efficiency policy framework, overlapping carbon pricing schemes, and the Renewable Heat Incentive. Each of the reviews may create a modicum more uncertainty for investors, but the policies they are targeting have undoubted flaws and any new government should dispassionately assess where improvements could be made.
Next up, things get crowded as the bulk of the field jostle for position, each in with a chance of taking the title and with many of the runners boosted by the element of surprise provided by their democracy-trolling absence from the Conservative election manifesto.
There at the back of the crowd is the Green Investment Bank privatisation, held back by the fact the bank will remain a viable and effective investor, but still in the running thanks to the huge lost opportunity evident in the government's decision to stop the bank borrowing at ultra-low rates.
Then there's the Chancellor's decision to slap a Climate Change Levy on renewable energy, a move memorably described by Friends of the Earth like sticking an alcohol tax on apple juice. You can't really call a tax hike retroactive, but the blow for clean energy investor confidence is much the same as a retroactive policy move.
At the shoulder of the renewable energy tax hike is the change to Vehicles Excise Duty that seems purposefully designed to make low carbon cars less attractive, at a time when the government insists it is committed to their roll out.
Then comes the wave of moves to restrict clean energy subsidies (I told you it was a crowded field). They may struggle to take the title on the grounds there is a case for curbing renewable energy subsidy costs. But then again the case is neither as compelling, nor as clear cut, as the government suggests given energy bills are currently falling and projections suggest the UK is still on track to remain within the 'headroom' for its LCF clean energy budget.
The moves to halt Renewables Obligation subsidies for wind and solar definitely have a shot at the title, given how both technologies can now generate power at a lower cost than alternative power sources that remain in favour.
The end to biomass grandfathering is also in with a shout, given the extent messing with grandfather rights makes infrastructure investors nervous. And the stopping of pre-accreditation for the feed-in tariff scheme could make a bid for the title, thanks to its sheer sneakiness and its clear contradiction of the government's previous stated desire to encourage commercial rooftop solar arrays.
Running in alongside all these measures is the staggeringly short-sighted and damaging decision to delay the next wave of contract for difference auctions. A mechanism that has been shown to deliver significant clean energy cost reductions has been dealt a serious blow, and all to save a relatively modest sum of money that we cannot yet be sure we even need to save.
However, currently leading the field has to be the decision to axe Zero Carbon Building standards. A policy 10 years in the making with widespread support and an unanswerable economic rationale, killed without warning to appease a handful of housebuilders on the largely spurious grounds it will lead to fractionally lower prices for new homes.
Where does the shock move to stop issuing new Green Deal plans join the race? Pretty near the front, I'd argue. The Green Deal was far from perfect, but this move will slow down the rate of energy efficiency improvements still further, even though they represent the most cost effective means of cutting emissions. It has come with no warning and will result in significant numbers of businesses that had invested in good faith seriously out of pocket.
It is also worth nothing the axing of the Green Deal was aided by one of the other runners in the race, the GIB privatisation. It was GIB's decision last year not to back the Green Deal Finance Company, a decision informed by pressure to lend on commercial terms and its continued inability to borrow, that left the scheme reliant on the government.
The key question now is whether the race is nearly run? Has the government completed its month-long assault on green policies or is there more bad news to come?
There is no way of knowing, but there are signs in Amber Rudd's climate change speech this morning that she genuinely wants to build a new, more cost effective, decarbonisation strategy that is tightly focused on pro-market and pro-business policies - a strategy that will allow the UK to meet its carbon targets and retain its position as a leading clean tech hub. My understanding is there remains a genuine desire within DECC and the wider government to deliver just such a strategy and a more coherent vision should start to emerge from the autumn.
The problem is that for narrow and short term political reasons Rudd will have to build this new strategy from the smouldering wreckage the government has created in the past month - wreckage that has badly dented investor confidence, forced up the cost of capital, slowed the pace of clean tech investment and UK emissions reductions, and reinvigorated the climate sceptic wing of the Conservative Party.
The desire to appease the austerian automatons in the Treasury who insist there is no more money left (or rather no more money left for things they don't like) and the desire to take advantage of an AWOL opposition obviously prompted DECC to get all the pain out of the way in one go and opt for a scorched earth policy.
It might have made sense politically, but the damage wreaked to businesses that had until a few weeks ago been doing Ministers' bidding and striving to make these policies work is pretty incalculable. You could argue they should have been wary of policy-based investments, and it is a valid truism that policies always come with risk attached, but these businesses were working to deliver on a strategic decarbonisation goal all parties had signed up for. There was nothing in the Conservative manifesto to suggest quite such an aggressive attack on policies that, while imperfect, were largely working. The green business community, indeed the UK business community as a whole, deserved better.
It did not have to be this way. There was obviously a middle path available between the continuation of green policies that if left unreformed would have become too costly and the tearing down of a policy framework that retained plenty of strengths.
For example, tighter planning regulations could have dealt with the 'problem', perceived or otherwise, of excessive wind farm development without Ministers tying themselves in knots preaching cost-effectiveness while scrapping subsidies for the most cost effective source of clean energy. A fast-track review of the feed-in tariff could have been used to curb subsidies without the need for damaging changes to the scheme that will undermine business interest in onsite renewables. A remarkably modest loan from a government-owned GIB could have kept the Green Deal ticking over while the review of energy efficiency policies was completed - a review that will almost certainly conclude pay-as-you-save schemes and tighter building standards represent the most cost effective best way of tackling emissions and fuel poverty. The sale of a 49 per cent stake in the GIB, could have raised the capital the bank needed for the next few years while ensuring the government retained the all important controlling stake.
Most of all, Ministers could have presented all of this as a responsible and cost-effective reform agenda that would cut clean energy subsidies over time and prioritise action on energy efficiency. They could have said, 'yes, there are concerns we may stretch the clean energy budget, but energy bills are falling, the total impact on bills of building a cleaner energy system is modest, and our reforms will bring costs under control in a timely manner'. They could have said, 'we are repairing the roof while the sun is shining and driving much needed investment in modern energy infrastructure'. They could have said, 'the next round of contract auctions will prove our approach is working, pushing clean energy projects ever closer to the point where subsidies are withdrawn'. If they wanted to look really tough, they could even have said, 'yes, some developers have secured excessive returns, but we are clawing those back through the tax system and will use the revenue to fund R&D in ever more cost effective sources of clean energy'.
Instead, for the want of relatively modest sums of money that would pay back many times over in the long term, the bathwater has been lost and babies are everywhere. Jobs will be lost, investment momentum will be squandered, and as the government itself admits emissions will be higher and new homes will cost more to run. Businesses will be left waiting for months, perhaps years, for the new policy framework to take shape. Many will be loath to trust in government investment signals in the future. Meanwhile, our key international competitors will continue to accelerate investment in the modern clean technologies that will deliver healthier and more sustainable economies. And all thanks to a blitzkrieg approach that may help the Chancellor appeal to the backbenchers he wants to carry him into Number 10, but does little but harm to the UK's investment climate.
The only hope now for the UK's green economy is that the race for the title of worst green policy move has now been run (for me, the twin attack on energy efficiency policies takes joint first place by a nose) and the focus will now seriously turn to building something ambitious and credible out of the wreckage. The tragedy is that rather than transitioning towards a Conservative climate policy in a way that retained a degree of investor confidence, narrow political tactics and short-sighted Treasury orthodoxy means the new government's supposedly cost-effective decarbonisation strategy has got off to the shakiest of starts.
22 Jul 2015, 14:53
Is £9.1bn a lot of money, because I just don't know anymore? I mean, obviously, it is a huge, Scrooge McDuck vault-filling, amount of cash. But is it a lot of money if what you get in return is a modern, clean, potentially unsubsidised energy system, such as the one the last government promised to build by 2020?
I honestly don't know. I mean, it is not a lot of money compared to the £124bn (and a lot more besides) the government handed to banks in the wake of the financial crisis. It is a fraction of the €86bn bailout currently being negotiated for Greece. It is less than a quarter of the £42.6bn budget required to help us travel between Birmingham and London 30 minutes faster. It is not a huge sum of money compared to the £12bn of uncosted welfare cuts announced during the election and the £8bn that was magically found for the NHS presumably to help it cope with deaths attributed to air pollution, cold homes, that sort of thing. And it is in the same ballpark as the London Olympics, which, in fairness, did give us a memorable fortnight and a nice new stadium.
It doesn't seem like much when set against Lord Stern's estimate today that we will have to invest two per cent of GDP in transitioning to a low carbon economy, and even then it still results in much lower economic costs than if we did nothing to tackle climate change. In this light, £9.1bn seems good value if the result really is revitalised energy infrastructure, the emergence of a cost-competitive domestic clean energy sector, and the creation of a global clean tech hub, not to mention a reduction in air pollution and climate risks.
But then again, £9.1bn is a hell of a lot of money if you genuinely can't afford to heat your home and your share of it - an estimated £20 a year on top of the costs that were already anticipated - pushes you into your overdraft. It is a large sum of money to justify when you consider it is raised through a regressive charge on energy bills that means the poorest households pay a higher proportion of their income. It is a much bigger sum than it needed to be when you look at how policy mis-steps by the last government mean a chunk of the budget is continuing to deliver extremely high returns to those who first spotted the investment opportunity enabled by the government's initial subsidy largesse. And it is a pretty considerable sum compared to the cost of decarbonisation had the previous government focused more on delivering much more cost effective energy efficiency savings.
Although, before anyone attempts to address whether £9.1bn is a lot of money, we also need to ask whether it is a relevant amount of money? Because, as DECC officials have admitted, it is impossible to be certain predictions the UK's clean energy support budget, or LCF in the jargon, will exceed the £7.6bn target and reach £9.1bn by 2020 are accurate as too many variables are in play.
As RenewableUK's Dr Gordon Edge makes clear today, we can't even make an informed assessment as to whether the government's projections are solid because DECC will not show its workings. Casual observers - investors, developers, those whose jobs depend on the renewables industry - are left having to guestimate whether the government's projections for the budget is accurate or, as some informed experts believe, overly pessimistic.
But if we put this arcane technical debate to one aside and take the government's figures at face value, it is still worth asking is £9.1bn a lot of money? The answer to this question is crucial, because it is Ministers' fear that the LCF will hit its £9.1bn 'headroom' hard limit that justifies all the recent efforts to slow the rate of deployment of renewable energy technologies, including today's expected proposed changes to solar subsidies and shock moves to reform the feed-in tariff incentive scheme and end dilute biomass subsidies.
The answer, of course, depends on your circumstances, the extent to which you regard action to tackle climate change as an investment or a cost, the confidence you have in industry predictions renewables will be able to operate without subsidy in the 2020s, how concerned you are about the impact of energy bills on competitiveness, whether you think fuel poverty is best tackled with short or long term measures, and the value you attach to cleaner air and the creation of a UK clean tech sector, not to mention several other variables.
Is the LCF a case study in mismanaged government largesse or a relatively modest investment in cleaner and more resilient infrastructure? The answer, ultimately, is it's both.
As a climate hawk I'd argue while there is absolutely no doubt some of the projected £9.1bn could have been better spent, it represents a justified and necessary investment if the UK is to build a modern, decarbonised energy system (although I'm also painfully aware this argument risks you looking cavalier about the impact on fuel poverty, even if you have a record of arguing for much more ambitious policies to improve the energy efficiency of fuel poor households).
The government has obviously taken a different view. Ministers have deemed £9.1bn, if that is indeed what the continuation of current policies will cost, is too much money. This is a legitimate and reasonable conclusion to reach, even if it somewhat negates previous Prime Ministerial claims that you regard climate change as an existential threat to the UK, which in the case of increased flood risks necessitates a 'money no object' response.
The problem for the UK renewables industry, not to mention the wider infrastructure sector and the government's credibility as a global leader on climate change, is the government's efforts to bring the LCF budget under control have all the clear cut elegance of a Jeremy Corbyn suit. The panicked moves to end key subsidy support for solar farms, delay the next wave of contract for difference auctions, use every tool available to halt onshore wind farms, review the feed-in tariff, mess with grandfathering conditions, and axe pre-accreditation rules in a way that will have a devastating impact on an onsite renewables sector that only a few months ago ministers said was a priority, will not only take heat out of the renewables market as the government hopes, it will also lead to higher emissions and deal a massive blow to investor confidence that will take years to heal.
As Ovo Energy's Jessica Lennard observed on Twitter this morning, "Ministers often talk about a 'responsible, managed approach' to N.Sea O&G decommissioning. Shame they don't apply same to green subsidies".
Confusion now reigns supreme. Anyone doubting this simply has to ask themselves if a financial director at a company keen to cut its emissions would currently sign off on a rooftop solar installation, knowing that something as simple as the timing of the project could result in much lower returns than anticipated when you gave it the green light. A handful of developers may be able to build onshore wind and solar projects without subsidy at some point between now and 2020, as Energy and Climate Change Secretary Amber Rudd predicts, but the scale of the build out will be much less than had been previously planned. At the same time, rightly or wrongly, it looks as if support will continue to flow towards more costly offshore wind and nuclear projects, not to mention polluting fossil fuel plants through the capacity mechanism.
Meanwhile, the UK's carbon and renewable energy targets are at serious risk of being missed, the Prime Minister and the opposition appear to have completely absented themselves from the debate about the future of the UK's decarbonisation efforts, and pretty much the only people who are happy with the current policy moves are those who think all efforts to tackle climate change are a scam.
The sole hope for the UK's renewable energy industry, not to mention the wider green economy, is that as with much of the rest of the government's agenda ministers are looking to get the pain out of the way early before building a coherent and credible new path forward. There are some flickering signs that this may well indeed be the case. DECC today was at pains to point out that news on a new CfD allocation and the extension of the LCF post 2020 will be announced in the coming months. A review of energy efficiency, renewable heat, and feed-in tariff policies all hold out the hope of a new policy framework that will ensure the UK's long term climate goals are met. Amber Rudd has repeatedly stressed the government will not give up on its emissions targets and does not strike as if she went into politics to oversee a five year contraction in some of the UK's most exciting new industries.
There remain a few crumbs of comfort for the renewables sector, fuelled, as ever, by the realisation global renewable energy costs continue to plummet and the case for fossil fuel investment looks ever more shaky. But a route forward can only be delivered if the government quickly sets out a coherent decarbonisation vision that provides much clearer investment signals than the current policy morass.
Ministers could start by recognising constant criticism of green businesses needs to be leavened by an appreciation of the crucial role they play in meeting the UK's carbon targets. And they could also acknowledge that while £9.1bn of green policy 'costs' seems excessive, a well-managed £9.1bn investment programme carefully tailored for those cost-effective clean energy technologies that are genuinely close to standing on their own two feet is not just good value, it is essential to the UK's long term health and prosperity in a decarbonising world.
There is no doubt subsidies could be cut in a way that allows a reasonable pace of deployment to continue, just as there is no doubt the necessary cash could be found to bail out the LCF if only Ministers backed up their rhetoric on climate action with a recognition low carbon investment is justified by significant, wide-ranging, and long term environmental and economic benefits. Is £9.1bn a lot of money? It depends how you look at it and what you get in return.
20 Jul 2015, 12:28
There is no way of spinning it, the first two and a half months of the new parliament have not been kind to the UK's green economy. In fact, they seem to be reaching playground bully levels of unkind.
The appointment of Tory modernisers to key environmental positions and the reassertion of the government's commitment to the Climate Change Act meant environmentalist's worst fears about a climate sceptic coup at CCHQ proved unfounded, but that has been pretty much the only positive development green businesses and investors have seen since May.
Instead of the strategy for delivering cost-effective decarbonisation that was promised, low carbon industries have received a series of policy blows, many of which were not mandated by anything as democratically legitimate as a manifesto commitment.
Taxes on renewable energy have been increased, incentives for electric cars have been diluted, the onshore wind industry has been halted (and at least one company has closed), the Green Investment Bank is being prepped for privatisation, zero carbon home standards have been torched along with the energy bill savings that would have resulted, promises on fracking safeguards have been reneged upon, environmental regulations are in the firing line, the spending axe looms at DECC and Defra, a review of carbon taxes threatens further policy uncertainty, the row over energy bills has been reignited amidst fears there is little money left for the next round of clean energy projects, and now the government has let it be known further cuts to subsidies are on the way as part of a "big reset" of current policies.
Worst of all, the Committee of Climate Change confirmed what many within the green economy have feared for several years: the UK is no longer on track to meet its carbon targets for the mid-2020s.
Far from responding with a clear plan for putting the UK back on track, the government's environmental policy priorities currently seem to be stopping wind farms, promoting fracking, and finding a way to tweak the Fox Hunting Ban to allow fox hunting. Hug a husky, it is not. The poor mutt is currently cowering in the corner, fearing it is about to sent to the dogs' home in the sky.
Last week, I argued in responding to these body blows green businesses needed to pick themselves up, dust themselves off, and focus ever harder on demonstrating cost effective decarbonisation is both possible and desirable. In essence, they have to prove the Chancellor right when he argues clean technologies should compete without recourse to subsidy.
But while this long term project must continue it is equally clear without ambitious and effective policy action the UK will now struggle to meet its mid-term climate change targets, forgoing billions of pounds of investment in much needed infrastructure in the process, letting the country's position as a clean tech hub slip, and ensuring Ministers turn up in Paris with about as much credibility as an Exxon executive at a climate march.
So, what needs to be done? As MPs depart on their lengthy summer recess, what policies should the government be working on to ensure that by the time parliament returns in the autumn the credible cost effective decarbonisation strategy that was promised in the manifesto actually materialises? Many of the environmental and climate challenges the UK faces are borderline intractable and generational in their time-frames, but there are a number of short term steps Ministers can and should take. So, in the tradition of policy briefing documents everywhere, here is a five point plan for Amber Rudd and co to consider:
1. Efficiency, efficiency, efficiency
The UK's energy efficiency strategy is in crisis, the number of efficiency upgrades being carried out is well down on its peak and there are serious concerns the market driven by the Energy Company Obligation (ECO) scheme is about to grind to a halt. And yet, as Policy Exchange's Richard Howard observes, this is the one policy area that cuts both carbon emissions and energy bills. It is far cheaper in the long run to reduce the amount of energy we use than build ever more generating capacity. Government needs to stop talking about energy efficiency, and actually re-prioritise its activities so energy saving is regarded as just as important as generation. Action on energy efficiency has to be the defining hallmark of any cost effective decarbonisation strategy.
Best of all for Conservative ministers, energy efficiency is, by definition, a productivity story. It is about doing more with less and at lower cost. A comprehensive energy efficiency strategy focused as much on businesses as households could help tackle the 'productivity puzzle/crisis' the Chancellor is wrestling with.
What does this mean in practice? Firstly, the decision to scrap zero carbon home standards needs to be reversed. It is not too late for green-minded Tories to learn from their Eurosceptic brethren and demonstrate that a majority of 12 requires the government to compromise occasionally. The justification for such a rebellion is obvious. The government was elected on a platform of cost effective decarbonisation, nothing is more cost effective than installing energy saving measures at the lowest cost point, the point of construction. Moreover, hundreds of businesses never wanted the rules scrapped, and unlike those lobbying for the weakening of efficiency standards, they have the confidence to make their case in public.
The EU decision to restore A-G energy labels for appliances also needs to be fast-tracked and demand management schemes need to be given a bigger role to play in the new capacity market.
But most of all, domestic, corporate, and public sector energy efficiency schemes all need to beefed up. The Salix scheme's pay-as-you-save financing model should be expanded and the Green Deal and ECO schemes need to be made much more attractive, ideally by making energy efficiency a national infrastructure priority.
How to do this without breaking already over-stretched budgets? Well, one of the few bright spots in Labour's election campaign was a package of reforms to energy efficiency policy that promised to improve five million homes in 10 years and all within the current spending envelope. The Tories should continue their ‘Worker's Party' gambit and steal it pretty much wholesale.
2. Don't be frit on the LCF and auctions
Auctioning clean energy subsidy contracts works. It has worked in other countries and the first wave of contracts worked here (even if there are legitimate concerns the current regime does not suit mid-sized solar farm developers). Competition pushes down prices and encourages innovation - Conservatives should instinctively understand this. Far from being subject to speculation about its immediate future, as is the case now, a system of contract auctions should be at the heart of any centre-right, cost-effective decarbonisation strategy.
The problem, of course, is Ministers are concerned the budget for this programme of auctions has already been spent. Firstly, they need to recognise this is simply not the case. As Green Alliance's Dustin Benton makes plain, there is headroom in the Levy Control Framework (LCF) budget that allows for the programme to continue.
Secondly, they need to recognise that if the budget is tight it makes much more sense in the long run to free up some more LCF budget by extending it into the 2020s than bear the long term costs that would come with tearing up the current plans and triggering another investment hiatus - not least because capacity pressure means that if we stop building new clean energy capacity we are going to have to find some other capacity from somewhere.
As one industry insider observes, "messing with electricity market reform now will just create another round of gluts and cliff edges for developers", which would be a strange move from a government that prides itself on efficient markets.
Once the future of the LCF and contract auctions are assured it is essential to look at ways of ensuring billpayers' money that is more wisely spent than it has been in the past. That means embracing Policy Exchange's calls for more focus on mature and lower cost clean energy technologies (ideally including onshore wind) and drawing on IPPR's recommendations for state to share some more of the early stage project risk. It may also mean re-opening the debate about how to make green levies less regressive by securing more of the required investment from general taxation, rather than billpayers.
3. Simplify the policy landscape and clear the in-tray
This is easier said than done, but there are far too many policy loose ends from the last parliament that are undermining investor confidence, pushing up the cost of capital, and delaying much needed new infrastructure.
Most notably, Carbon Capture and Storage (CCS) demonstration funding needs to be awarded this summer, particularly given CCS is apparently critical to the Prime Minister's decarbonisation vision. Similarly, the nuclear saga needs to be brought to an end one way or another, and if that means Ministers deciding they cannot justify a subsidy contract of £90/MWh plus at a time when they are preaching cost effective decarbonisation, then so be it.
Beyond that decisions need to be made on the future of the RHI and the level of support offered through the feed-in tariff (tough calls may be necessary in both these areas, but it should be possible to cut subsidies while allowing the sectors to continue to grow). Additionally, the opportunity offered by a review of carbon tax policies needs to be seized to deliver a simpler and more effective carbon pricing regime for businesses - after all, pricing externalities remains one of the most cost effective ways of harnessing the market to cut emissions.
Finally, the fifth carbon budget needs finalising, which should be easy - the government supports the Climate Change Act, so take the Committee on Climate Change's recommendations for a new target and rubberstamp them.
4. Make sure Green Investment Bank 'privatisation' bolsters green investment
The government has proven pretty successful in spinning the proposed privatisation of the Green Investment Bank (GIB) as a necessary move that will free the bank to go from strength to strength, and there is little doubt it will remain an effective and important institution regardless of its ownership status. But equally there are valid concerns about whether full privatisation is strictly necessary or desirable, unless, that is, your only consideration is state-shrinking ideological purity.
Green investment urgently needs to be mobilised at the lowest possible cost and there is little doubt a GIB with a large, preferably majority, government stake helps do that. It can back emerging technologies, reduce the cost of capital, and foster confidence across the sector that the government has skin in the game in the way a private bank never will, and all while turning a profit for the taxpayer.
Given the Chancellor has once again quietly delayed his deficit reduction goals why not relax the arbitrary block on the GIB borrowing at ultra-low rates and let it raise funds that way. There is a strong argument that we should not borrow excessively and make future generations pick up the bill, but what if you are borrowing to help protect future generations?
Sell off a stake by all means, but the government must retain control over one of the few genuine green success stories of the last parliament, particularly given the GIB has such a big role to play in both the energy efficiency and clean energy generation components of this new plan.
5. Change the narrative
It is hardly surprising some Conservative MPs are hostile to the concept of clean energy when it is only ever discussed as a cost, rather than an investment. The entire debate should not be restricted to a narrow story about subsidies, important as they are. This is a story about innovation and technology and security and, of course, climate change. If it weren't for climate change, we could just go on burning coal, but climate change is a real and present threat, so we can't.
As a famous Conservative prime minister was fond of saying, there is no alternative. We need clean energy and in the absence of a carbon price that makes fossil fuel generators pay for the full cost of their pollution that means alternative policy mechanisms such as subsidies and standards. Subsidies were justified when the banks threatened to take down the economic system, they are justified now our industrial economy threatens to take down the climate system.
Ministers need to make it clear the current policy regime is not about subsidising rentier renewables companies, it is about driving investment in the resilient clean energy infrastructure we desperately need. Policies should be reformed, but they cannot be torched.
What the government should be enabling is an investment programme for a modern, competitive, and healthy economy. It is the means of delivering the power that will drive the Northern Powerhouse.
The energy delivered from this investment programme will continue to get cheaper and in an ideal world there would be a less regressive means of funding it, but it is already very cost effective when you consider all of the long term costs and understand the implications of an alternative investment programme based on fossil fuels. Significantly less than a £1 a day per household to build a modern clean energy system that we have no choice but to build is actually very good value, Ministers should not be afraid to say so. Make sensible reforms to current subsidies and it will become better value still.
The government is more than happy to use taxpayer's money and bold policy reforms to enable infrastructure it deems to be in the national interest, be it roads, airports, high speed rail or fracking. The Prime Minister needs to make it explicit clean energy is in the national interest and there is no alternative to driving investment in this most exciting of sectors.
Equally, Ministers cannot expect to be taken seriously if they keep saying they care about climate change and want to play a leading role in Paris at the same time as attacking clean technologies as nothing but a cost. By accident or design (and let's be honest, it is probably the latter) Ministers are currently fuelling the impression they want to roll back and generally weaken the UK's green ambition. If they are serious about mobilising much needed investment and creating a competitive modern economy the Chancellor and the Prime Minister need to use some of their currently overflowing political capital to underline their commitment to decarbonisation and more clearly explain how their green economic strategy will deliver it at as low a cost as possible. Currently, incoherence and contradiction reins supreme, but it cannot continue indefinitely (assuming, of course, a demoralised and near mute opposition and punch drunk green business community eventually gets their acts together).
Delivering these five proposals will not be easy, but they would be in line with the Conservative's manifesto commitment and their wider economic priorities. They would ensure emissions targets are met and investment in the UK's clean tech sector continues to grow. And most of all they would cut the overall cost of decarbonisation by focusing on the most cost effective technologies and delivering the policy and political stability the sector is currently being denied.
It is time the green economy was given some good news from a government that purports to regard it as essential to the UK's future.
14 Jul 2015, 15:07
It doesn't look any better at a few days' distance, does it? Last week's flurry of environmental policy announcements amounted to a series of body blows to the green economy that will make it ever harder to deliver on the government's stated goal of limiting temperature rises to 2C. An effective climate strategy that delivers on Ministers' promise of cost effective decarbonisation might yet be built out of the confused wreckage that is the current low carbon policy regime, but for now the policy signals for those who want to deliver cleaner infrastructure and business models look decidedly weaker than they did two and half months ago.
Why did the Chancellor and the Prime Minister do it? (And don't buy into the narrative this is all George Osborne's doing, David Cameron does retain some influence over what his government does). Why did they effectively increase taxes on clean power, while cutting taxes for fossil fuels? Why did they ditch even the pretence of a commitment to shifting taxation from incomes to pollution? Why did they weaken incentives for cleaner vehicles? Why did they scrap zero carbon home standards? Why did they announce the privatisation of the Green Investment Bank? Why are they embracing road-building and airport expansion while shunting rail electrification plans into a siding? Why are they doing all this at the same time as insisting the government will "continue to promote the low carbon investment and innovation needed to support global action on climate change"?
The answer reminds me of the punchline to the vulgar old joke about the nature of canine personal grooming habits: because they can.
The Conservative government's move to water down or scrap a host of green policies has been enabled by two of the environmental movement's perennial failings. Firstly, the failure to convert a generally high levels of public support for environmental causes into a sufficiently large, engaged, vocal, and mainstream constituency means there is next to no political penalty the government has to pay for policies that damage the green economy. From fracking to Heathrow and foxes to badgers, green campaign groups have proven very effective at blocking certain policies and projects, but they have proven much less effective at harnessing public and political support for the large scale low carbon transition that is required.
Secondly, the clean energy sector has failed to make the big picture climate change arguments that justify special treatment for an emerging industry. Traditionally, industries built on subsidies get very good at defending them, to the point where these subsidies become so entrenched they are barely recognised as government support. So the banking industry successfully argues 'give us massive bail outs or we'll take down the economy', the fossil fuel industry says 'hand us our tax breaks and state subsidies or we'll take our jobs and energy elsewhere', and the agricultural industry warns 'keep the EU cash flowing or we'll leave your milk to go sour and blockade your roads with burning sheep'.
Partly because it genuinely wants to operate without subsidies and partly because it is battling incumbent operators who have spent decades perfecting their subsidy justifying narrative, the clean energy industry has never been as effective at convincing policymakers that it justifiably qualifies as a special case (with the exception of the nuclear and cleaner branches of the fossil fuel sectors, obviously). The failure to convince centre-right policy makers that if it weren't for climate change we could simply go on burning coal and that it is the threat presented by climate risks that necessitates targeted policies to mobilise clean energy investment has always left the industry vulnerable to the kind of policy setbacks now emanating from the Treasury.
The green economy needs to tackle both these long standing weaknesses. Support for the low carbon transition must become ever more vocal and the link between government's welcome commitments to climate action and specific measures on the ground to drive decarbonisation needs to become far more explicit. However, these are long term, almost generational, challenges. The key question presented by last week's policy moves and the general stepping up of the government's opposition to various clean technologies is how to respond in the coming weeks and months.
The easy (and in many ways justified) answer is to succumb to righteous outrage.
"Making renewable electricity pay a carbon tax is like making apple juice pay an alcohol tax," said Friends of the Earth of the decision to extend the Climate Change Levy to renewable power. A "considerable concern" and a move to "disincentivise take up of low emission vehicles", said the SMMT of the changes to vehicle excise duty. "Short-sighted, unnecessary, retrograde and damaging to the house building industry", said the Green Building Council of the scrapping of zero carbon home standards. Cameron might as well go "hug a coal power station", said former Energy and Climate Change Secretary Ed Davey of the budget as a whole.
By far the worst aspect of many of these policy changes is the shakiness of the mandate under which they are being made.
The decision to end support for new onshore wind farms at the same time as backing cost effective decarbonisation might not make much sense, but it was part of a manifesto that did not make much sense. The Tories said they would halt onshore wind farm development, they won the election, and now they are working to halt onshore wind farm development. You might not agree with it, but it is fair enough. In fact, in many ways it would be wrong of the government not to deliver on its promise.
But many of the changes announced last week were either only vaguely hinted at in the manifesto or not mentioned at all. Given the way in which any study you wish to look at shows building energy efficiency measures installed at the point of construction and carbon pricing that penalises polluters represent two of the most cost effective ways of cutting emissions you could argue some of these moves run directly counter to the manifesto's central climate policy pledge.
With characteristic chutzpah the Chancellor has seized the opportunity to boost tax revenues at the green economy's expense while buying himself favour with those backbenchers who are instinctively hostile to the idea of low carbon industrial policy, safe in the knowledge a weak opposition and largely compliant media won't make a fuss or highlight the increasingly contradictory nature of the government's climate strategy.
Unfortunately, outrage, however cathartic, will not get you very far. Green businesses need to find a way to work with and around the Chancellor to ensure they continue to prosper, and despite the many worrying signals from the budget, opportunities to do so still abound.
The last parliament was about providing the foundations for decarbonisation and the government got its programme half right, delivering policies that helped mobilise investment but were too often undermined by weak execution (the Green Deal, CCS funding, smart meter roll out) or insufficient cost control (Levy Control Framework, Final Investment Decision enabling process). This parliament is supposedly about cost effective decarbonisation, and the early signs are the government is again getting it half right, making the right noises about the potential for competitive clean tech but then making contradictory policy moves (halting development of cost effective onshore wind, making negligible progress on energy efficiency, increasing taxes on renewables).
Green businesses need to take the government's aspiration to deliver cost effective decarbonisation at face value and demonstrate how they can deliver on it. That means making more noise about the rapid reduction in the cost of renewables and the high economic cost of fossil fuels. That means showing how clever policy moves could cut costs further (recent work by IPPR and Policy Exchange reveals there is ample room for further cost reductions). That means supporting greater competition between different forms of emissions reduction and recognising that a review of complex overlapping carbon tax and energy efficiency schemes need not necessarily translate into a watering down. That means demonstrating how extending the LCF clean energy budget is more cost effective than torching the UK's low carbon energy programme at a time when contract auctions are starting to push down costs. And that means showing how a Green Investment Bank that retains a significant government stake could help lower the cost of capital for green infrastructure.
Ultimately though, green businesses need to prove the Chancellor right. From low carbon vehicles to renewable energy taxes Osborne's policy moves are nominally justified by the argument green technologies can increasingly "stand on their own two feet" and prosper with lower levels of policy support. Osborne apparently reckons higher taxes on renewable energy will not stop growing numbers of businesses investing in clean power, weaker energy efficiency standards won't stop construction firms embracing greener building techniques, higher costs for those purchasing low carbon vehicles won't undermine the appeal of greener cars, and lower taxes on fossil fuels won't make it harder to meet international climate goals.
These are heroic, perhaps even naïve and reckless, assumptions. Moreover, it will be doubly difficult for green businesses to prove them justified when their counterparts in the US, Germany, Japan, and China continue to be supported by policy measures that recognise the economic, environmental, and commercial value of nurturing emerging clean industries and providing green investors with clear investment signals. But, in some respects, Osborne may be right. Electric cars remain compelling propositions even if the taxes on them increase, many companies will see the value in sourcing 100 per cent renewables even if there is a fiscal penalty for doing so, the case for cutting carbon emissions remains unanswerable even if certain narrow policies makes it harder to deliver.
Green businesses have no choice but to embrace the self-sufficiency challenge the Chancellor wants to set, not least because the alternative is to watch the UK's position as a clean tech hub and green industrial pioneer go up in smoke.
ABOUT JAMES' BLOG
Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray