Cameron's CCS cheerleading only highlights how he has failed the sector

17 Dec 2014

Smoking chimney emitting pollution

I've already written extensively on the flaws in David Cameron's performance before the Liaison Committee as part of our live blog, but one final point deserves to be made.

This is the third time the Prime Minister has been quizzed by the Liaison Committee about the UK's longer term decarbonisation plans - the first was in late 2012 and the second in early 2014 - and it is the third time he has refused to be drawn on decarbonisation targets for the 2020s on the grounds we need to wait and see if carbon capture and storage (CCS) technology can prove effective first.

This argument has always had its flaws in so much as it embraces the risk of the UK locking in new fossil fuel infrastructure, such as fracking projects and North Sea oil and gas expansion, that will make it extremely difficult to meet legally binding emissions targets if CCS proves to be a crock (or just very expensive). But it could also be argued that it just about held water, in so much as you wouldn't want to block fossil fuel investment now in the event CCS proves a cost effective form of clean energy, which it one day might.

The problem for Cameron is that his position begs a follow up question: if CCS is so important, what progress have you made on delivering CCS in the UK? The answer, sadly, is very little.

The CCS-reliant argument Cameron presented in the middle of the parliament looks a lot weaker towards the end of a parliament when his government is still yet to award a contract for a $1bn CCS demonstration project, has seen a number of projects fall by the wayside, and has singularly failed to offer the sector the political love, attention, and tax breaks showered upon the similarly nascent fracking industry. The CCS industry has been waiting for more than five years to get off the ground (plans were already underway during the last government), it has complained over and over again it needs more support and a clearer long term policy framework for after the initial demonstration project gets built, and it has shown internationally that projects can and do work. And still it waits.

We are left facing a choice, either Cameron is being economical with the actualite when he says he is serious about tackling climate change or he is being incompetent in his failure to deliver greater progress on a technology he regards as critical to climate action. I'm not sure which is worse. Either way he is being reckless in his insistence that wider long term decarbonisation plans cannot be finalised until he is satisfied about the efficacy of CCS.

The reality is that Cameron's triangulation on the issue of longer term carbon targets looks ever more like a cynical attempt to mobilise ever more fossil fuel investment while nominally staying true to the Conservative's stated green goals - an attempt that is working judging by recent figures showing the extent to which high carbon project have started to dominate the UK infrastructure pipeline. If the Prime Minister had strained every sinew to get CCS online then he would deserve the benefit of the doubt, but he hasn't, so he doesn't.

Instead, by crossing its fingers and hoping for the best on CCS the Conservatives have been able to justify watering down the energy efficiency efforts and denigrating the onshore wind and solar farm development that we know works as a means of cutting carbon emissions in an increasingly cost effective manner.

Yesterday's bad-mouthing wind farms for narrow political purposes and the failure to offer adequate assurances about fracking impacts were bad, but the contradictions at the heart of what passes for Cameron's post-2020 decarbonisation strategy were even worse.

The problem for Cameron is his current stance cannot hold indefinitely. If he forms the next government one of his tasks next year will be to consider the Committee on Climate Change's recommendation for the fifth carbon budget that runs through to 2032. By then he will be hoping a CCS project will finally be underway and he will be able to point to it and show how the continued expansion of the UK's on and offshore oil and gas industry is compatible with steep cuts in emissions. However, given his government's woeful track record on CCS to date he should not hold his breath. He might end up needing those onshore wind farms that he erroneously thinks most people are fed up with after all.

Lima deal paves path to pragmatic and imperfect Paris Treaty

15 Dec 2014

Paris at night

Ultimately, it all ended just as you'd expected. The final few days of the Lima Climate Summit were as predictable, familiar, and derivative as a One Direction album. Early progress stalled, negotiations got bogged down on technical issues that even some of the diplomats in the room would admit in their darker moments they struggle to keep track of, the chair intervened and banged heads together, a compromise deal that pleased no-one was finalised after two nights of talks, the text was gavelled through by insomniacs in crumpled suits who vaguely resembled the ministers who started the process two weeks before, and then the spin operation began with some hailing historic success and others bemoaning an impending apocalypse. For Lima, read Cancun, or Durban or Warsaw, or indeed any of the cities that have staged the climate diplomacy caravan over the past 20 years.

And yet, this cynical characterisation of the UN talks, while technically accurate, misses something important. This year, like each of the years since the 2009 Copenhagen Summit, progress was made towards a new international climate change agreement, further signals were sent to the global business and investment community that climate action is now the norm, and a framework for a new Paris Climate Treaty was advanced. Amidst the fractious fallout from the on-going rows over inadequate climate funding and "common but differentiated responsibilities" it is crucial to remember these three points.

Watching from afar, one of the most notable aspects of the Lima Summit was the extent to which the key foundation for a Paris Agreement, already dubbed the Paris Alliance, are largely agreed and uncontested. The proposals that will see every nation produce climate action plans, or Intended Nationally Determined Contributions (INDCs) in the jargon, appear to have been accepted across the board. Instead arguments focused on how these INDCs will be monitored and whether developing nations should submit them on the basis of "common but differentiated responsibility" or "in light of [their] national circumstances" - a distinction that is crucial to those involved in the talks, even if any outside observer taking those words on face value would conclude they mean basically the same thing.

This consensus in favour of INDCs represents great news for green businesses everywhere. They may be voluntary and the precise contents of the plans may be vague, but the Lima deal raises the prospect of each and every country producing a climate action plan. Many of these national plans will be based on legally binding emissions reductions targets, while all of them will serve to mobilise increased investment in clean technology. It is notable that the name adopted for the Lima agreement, the Lima Call for Climate Action, foregrounds the focus on tangible climate action provided by these promised national commitments. This has to be seen as a positive development.

Moreover, the agreement around INDCs highlights the oft-forgotten truth of the UN climate talks: any eventual agreement will not magically reduce greenhouse gas emissions, it will only prove successful in so much as it provides a policy framework that serves to accelerate decarbonisation. The primary purpose of the talks is to provide this framework. There are other important and contentious purposes, ranging from strengthening global climate adaptation efforts and providing climate funding for developing nations through to acknowledging the "loss and damage" these nations will incur from climate impacts. But without action on decarbonisation these talks are nothing. It is in this respect national climate action plans are such an important step forward. Anyone doubting this fact should consider the huge increase in European investment in clean technology and the gradual reductions in emissions that have been achieved since 2007, when the bloc adopted an energy and climate action plan that was effectively a forerunner for the INDC approach.

Criticism of this strategy justifiably centres on the fact asking nations to present their plans for tackling climate change boils down to a "we'll do what we can" commitment. As numerous environmental campaigners have observed, we already know the INDC pledges that are in the pipeline will not go far enough and will still leave the world staring down the barrel of more than 2C of warming.

But "we'll do what we can" is not nothing. Rather it could represent the kind of long term global commitment to decarbonisation that green businesses have been craving. These long term commitments should help further mobilise investment and slash the cost of clean technologies to a level where governments feel comfortable strengthening their action plans still further. Just because the pledges initially contained within the promised INDCs will not deliver a 2C world does not necessarily mean that a 2C world cannot yet be delivered.

A "we'll do what we can" Paris Treaty may sound depressingly defeatist, but it is likely to contain within it a Chinese pledge to peak its emissions, an EU pledge to slash emissions 40 per cent, a US pledge to double the rate of its decarbonisation, and an Indian pledge to funnel billions of dollars into solar technology. Even two years ago, green businesses and investors would have bitten off the hand of any policymaker offering such a wide range of credible climate policy commitments.

Following the Lima Summit, the foundations for a Paris Agreement appear to be in place. It seems increasingly likely Paris will deliver a system of INDCs, coupled with a vague mechanism for monitoring and updating these national action plans that will inevitably be deemed insufficiently robust. I'd also predict some tangible progress on those parts of the negotiations where quiet improvements have been being made for several years, such as deforestation and carbon offsets. Most importantly of all there are hugely encouraging signs a bold new target for delivering net zero emissions will be discussed and could even be finalised, given the already agreed 2C target logically demands a long term emissions goal.

And what of the rest of the issues being discussed? The issues that once again proved too difficult for negotiators in Lima?

It is around this point you would expect the truckload of caveats that have to come with any upbeat assessment of the UN climate talks, and I am not about to disappoint. The distance that remains between the various negotiating camps on the topics of climate funding and measurement, reporting, and verification continue to look all but unbridgeable. Progress on technology transfer and the highly controversial topic of 'loss and damage' looks equally challenging.

If world leaders can be corralled into attending the Paris Summit they may be willing to move from the entrenched positions that their negotiating teams have dug themselves into over the years. But equally it is hard to envisage how nations can move from vague talk about how to mobilise $100bn of climate funding a year from 2020 to the formal plan developing nations want to see, particularly when a large chunk of that funding would be likely to come from politically toxic carbon taxes. Similarly, rich nations are simply not going to agree to as formulation around 'loss and damage' that leaves the door open for compensation claims, while China and India appear equally resistant to calls for robust independent mechanisms for measuring emissions. A Republican victory in 2016's Presidential election could see the whole process plunged into crisis, regardless of what happens in Paris.

These deep divisions, coupled with the inherent dysfunction of some of the negotiating procedures, will create a volatile cocktail that could see the Paris Summit collapse at any time. Even if a formulation is reached that commits nations to the new system of INDCs, delivers more action on climate funding, and resolves differences over the legal and technical details that would determine the success or failure of any treaty, the harsh reality remains that the world remains a long way from delivering the emissions reductions that are needed.

And yet, while it may not be enough, such a treaty would be an historic step in the right direction.

Not only do the imminent INDCs hold out the promise of tangible climate action, they also demonstrate the extent to which commentators and campaigners are wrong to suggest that next year's Paris Summit represents a be all and end all for the climate. The promised treaty is an enabling mechanism for decarbonisation, a means of making investment in low carbon infrastructure easier - and as such tackling climate change without it will be far harder. But a system of national climate action plans shows that with or without a treaty, the world's biggest and most influential economies are committed to green policies that drive low carbon investment. They are committed to phasing out carbon emissions and accelerating clean technology deployment. They are, for all their many differences, agreed on the need to transform their economies for the better. Just as they are agreed on the fact that this transformation can be made in a way they boosts health and living standards.

Businesses and investors need to realise that while the flawed nature of the UN talks may appear wearingly familiar, every year that the negotiations refuse to collapse further entrenches the global political consensus in favour of decarbonisation. A Paris Alliance, imperfect and insufficient as it will inevitably be, will further solidify that consensus. We will need to go further and faster, but Lima shows that governments around the world are more committed than ever to the climate action that is enabling a green business revolution.

The Treasury data doesn't lie: The UK's green infrastructure strategy is under threat

09 Dec 2014

Chancellor George Osborne presenting the 2013 Budget in the traditional red box

For much of the past four years I have been part of that vanishingly small group of environmental commentators who think the government has not got the credit it deserves for its green efforts. Yes, numerous mistakes have been made, and yes, the government's low carbon policies have rarely been commensurate with the scale of the climate crisis; but on balance I'd argue the coalition has just about honoured David Cameron's pledge to lead the greenest government ever.

The extent to which this is a minority viewpoint was hammered home last week when I chaired the Environmental Industries Commission's Annual Conference. Charles Perry of green consultancy Anthesis Group asked how many people in the room would score the government more than five out of 10 against its stated goal of becoming the "greenest ever". Around 180 green executives sat on their hands - as I raised mine. I gave the government 5.5 out of 10.

The argument, which is not quite as incredible as many environmental campaigners would have you believe, goes something like this: any government of a modern industrial nation in 2014 is by default likely to be the greenest ever, as international climate change commitments, the drastic fall in the cost of clean technologies, and public and scientific pressure to take climate change seriously force ministers to deliver green policies that are ambitious by historic standards. Consequently, the passage of an Energy Act designed to deliver a surge in clean energy investment, the formation of the Green Investment Bank, the launch of an albeit flawed energy efficiency financing scheme, the introduction of the Carbon Reduction Commitment tax, the retention of the fourth carbon budget, and, most importantly, the compliance with the current carbon budget, the record levels of renewables investment and the continued growth of the green economy mean it is possible to argue this government is the greenest ever. It has been consistently greener than Gordon Brown with his Climate Change Act, Margaret Thatcher with her warnings about climate change, or even Clement Attlee and Anthony Eden with their National Parks and Clean Air Acts.

This government has failed to adequately address many environmental challenges and risks leaving the UK lagging far behind the US, Germany, and China in the global clean tech race, but it has also laid some of the foundations necessary for the next phase of decarbonisation.

However, this rose-tinted assessment took an almighty battering this weekend with the publication of Green Alliance's latest analysis of the Treasury's infrastructure pipeline. It showed for the first time since these figures were released in 2012 investment in fossil fuel infrastructure will outstrip clean energy spending this year. For anyone who cares about clean energy (which according to separate government polls constitutes about two thirds of the population), the data makes for depressing reading: the share of expected infrastructure spending on fossil fuel energy this year has increased from the eight per cent that was originally expected to 61 per cent; spending on low carbon energy has been revised down from £24.9bn to £9.8bn; projected spending on renewables for the period from 2015 to 2020 has been revised down by £9.3bn; projected spending on roads for the same period has soared from £1.6bn to £32.7bn, pushing the share of transport spending on roads and airports up from eight per cent to 36 per cent.

As Green Alliance's Matthew Spencer observed yesterday, "a series of short term decisions is unpicking long term plans to modernise our economy". "We find ourselves with an National Infrastructure Plan seriously at odds with our national interest, one that could reverse the modernisation of our economy," he added.

There are still some silver linings to this grey cloud of noxious pollution. The figures suggest that as the government's electricity market reform programme starts to take effect low carbon infrastructure spending will once again start to dominate the pipeline throughout the second half of the decade. Meanwhile, our continued adherence to EU and domestic emissions targets mean clean technology will become ever more dominant through the 2020s. It is also important to remember climate change and decarbonisation are not parochial issues, the harm done to low carbon investment by the changing nature of the UK's infrastructure pipeline is massively outweighed by the benefits arising from Germany's new green strategy and the US-China climate pact, not to mention the growing confidence a global climate agreement could be finalised next year.

However, the drastic recovery in high carbon infrastructure spending orchestrated by the government provides a timely reminder that simply setting carbon budgets does not magically mean they will be met. Instead, faced with the chronic and yet under-reported failure of his growth and deficit reduction plans, Chancellor George Osborne released the high carbon spending tap and through North Sea tax breaks and road building turned a carefully calibrated infrastructure plan that was designed to be compatible with the UK's long term climate change goals into a polluters' bonanza. He didn't have to tear up the Climate Change Act or the government's clean energy plans, and nor would he have wanted to, but a handful of relatively minor infrastructure and tax decisions risk having much the same result.

It is at this point that most environmentalists lay the blame for this reversion to 1980s infrastructure policies solely at the door of Osborne's Treasury, but sadly it is not as simple as boot out the Chancellor and his fracking obsession and watch the infrastructure pipeline revert to the shiny green state of 2012.

Firstly, the fossil fuel investments the government has enabled this year and is planning for the next five years lock in infrastructure that will make it ever harder to decarbonise through the 2020s. Once roads are built, they will be used. Once North Sea oil and gas fields and fracking wells are opened up, the fossil fuels they produce will be burnt.

Secondly, the coalition's quiet U-turn on the content of the infrastructure pipeline is as much the result of structural decision-making in Whitehall as political choices at Conservative HQ.

The most vocal cheerleader for North Sea oil and gas tax breaks in the past year has been not Osborne, but his supposedly green Lib Dem colleague Danny Alexander, who now fully deserves his share of the blame for failing to impose the junior coalition party's green ethos on the UK's infrastructure priorities. For all Labour's increasingly encouraging commitment to decarbonisation and Ed Miliband's prioritising of climate action, does anyone seriously think Ed Balls would not have dusted off the road-building and North Sea tax breaks himself? A Labour government may well create a more encouraging investment climate for renewables and tighten shale gas regulations, but there are few signs Balls would revoke Osborne's oil and gas tax breaks, shelve his new roads, or be any less conflicted about new runways?

The blow to green infrastructure detailed by Green Alliance is as much a function of the political class' default position of reverting to the infrastructure of the 20th century when times are tough as it is a function of Osborne's particular enthusiasm for pollutocrats.

The key question, as always, is what can be done to get the UK's infrastructure plans back on track? The current strategy is not yet catastrophic, but to adopt the Prime Minister's recent turn of phrase, the lights are flashing on the dashboard for the UK's green economy.

The answer is that those modern businesses who want to drive the development of a low carbon economy (and this includes the membership of the CBI) need to join with those politicians and NGOs who are increasingly frustrated by the primacy of short term tactics over long term strategy and decry each and every one of those relatively small policy decisions that run counter to the UK's long term decarbonisation strategy.

That does not mean opposing each and every high carbon project, after all we will still need oil and gas for several decades to come, while not every new road project is inherently unjustified, particularly at a time when low emission vehicles are proving their viability.

However, it is essential these projects fit into a credible infrastructure pipeline that avoids locking in technologies we need to be phasing out and prioritises cleaner alternatives wherever possible. Consequently, it is not credible to dish out tax breaks to North Sea oil and gas or green light fracking projects without a coherent strategy to deliver carbon capture and storage and boost national energy efficiency. It is not credible for Ed Davey to warn about a carbon bubble at a time when his colleague, Danny Alexander, is praising policies to get every drop of oil out of the North Sea and failing to even mention climate change. It is not credible to drastically change the nature of the UK's infrastructure pipeline without having a public debate about why this has been done and what the implications are for decarbonisation efforts throughout the 2020s - decarbonisation efforts, remember, that all three main parties are signed up to and which an international climate change agreement may soon make essential.

This government has been greener than it has been given credit for. But in the final months of its term in office it now risks torching its green credentials through a short term reversion to 1980s infrastructure thinking that threatens to reverse much of the encouraging progress the green economy has made in recent years.

The business community needs to remind all politicians once again that the opportunities presented by clean technology and the challenge presented by climate change means there is now a new way of doing infrastructure. A way of doing infrastructure that still boosts the economy and the UK's productivity, but does it in a way that does not do immense damage to the environment and our clean tech competitiveness. Realise that, and this government will be the greenest ever. And the one that succeeds it will be greener still - just as it should be.

Farage deserves to be called out for his self-confessed climate change ignorance

05 Dec 2014


Nigel Farage said something ridiculous this week, or rather he said something else ridiculous this week.

Prior to suggesting "it isn't too difficult to breastfeed a baby in a way that's not openly ostentatious" the UKIP leader reportedly offered one of his periodic takes on the latest climate science. As you would expect, it was about as well informed as his views on modern parenting, even if the less high profile comments on global warming failed to spark questions as to the precise nature of the experiences that qualify him to judge the correlation between breast-feeding difficulty and ostentation.

Answering questions from young people at a Leaders Live event in London, Farage reportedly responded to a question about whether he believed in climate change with an answer that suggested he had wrestled with one of the most widely reported and closely analysed phenomena of our age and concluded he had no idea what he thought. "Do I believe in global warming? I have no idea," Farage said, an answer which at least had the benefit of honesty even if it runs counter to the old Neil deGrasse Tyson truism that "the good thing about science is that it's true whether or not you believe in it".

Farage then went on to offer some utterly bizarre non-sequiturs that suggested he cannot even be bothered to try and properly master the climate sceptic arguments he would obviously like to adhere to. "The IPCC (Intergovernmental Panel on Climate Change) was set up to prove global warming, so it is doing its job," he said. "Since the 1970s temperatures are warmer now than they were. But I remember that in the early 70s the consensus then was we would be going in for a period of global cooling. Be careful of the scientific consensus." What, no spin about a global warming 'pause'? No nuanced argument about how it may be more cost effective to prioritise climate adaptation? Just a garbled recollection that some scientists once thought temperatures may cool, as if all the best scientific inquiry simply ceases once scientists have identified a trend that fits with your ideology.

In fairness, this is not even close to the most ridiculous thing Farage has said about climate change. For that we have to go back to his performance on one of those relatively rare occasions he turned up in the European Parliament, during which he lambasted Commission President José Manuel Barroso for his pushing through green policies at a time when some US scientists were predicting we are "going into a period of between 15 and 30 years of global cooling". To support this claim Farage offered two photos of the Arctic ice cap showing that the more recent year showed more ice than the previous year, as if this was the smoking gun disproving decades of scientific evidence. In fact, for Farage these two data points were so compelling that when Barroso responded by highlighting how the vast majority of scientists are concerned about manmade global warming the UKIP leader thought he would win this particular debate by grinning and ostentatiously holding up his two satellite images in a manner that would make anyone who values the scientific process deeply uncomfortable.

As always with Farage it is tempting to ignore this scientific illiteracy and gloss over the anti-clean tech, Climate Change Act repealing policies it informs, just as it is tempting to ignore the racism and sexism the UKIP leader occasionally spouts (and if you cannot see that sneering "you know what the difference is" about different nationalities is racist or accept that suggesting women attempting to feed their babies should sit in a corner is sexist I can't help you).

But the three main political parties, the business community, and the vast majority of people who would never countenance voting for UKIP have tried ignoring the party's more ridiculous and offensive policies and statements for several years and it hasn't really worked. As a growing number of political commentators have begun to observe, the answer for the mainstream parties lies not in trying to emulate the insurgent UKIP, but in taking it on and arguing long and loud about the many flaws in its policies and the misinformation and divisiveness it peddles. Climate policy is just one of the many, many areas where UKIP's recklessness deserves to be interrogated.

Earlier this week, both the CBI's John Cridland and Green Alliance's Matthew Spencer told an audience of green executives at the Environmental Industries Commission Annual Conference that while most voters do not consider environmental issues directly when putting a cross in a box they tend to regard it as a basic competence issue when assessing political leaders. Climate change may not be a top priority for voters, but numerous polls have shown majorities of the public are concerned about climate risks, place huge value in their environment, and are broadly in favour of clean technologies. Serious political leaders know this and know that a credible position on environmental issues is essential if they want to be taken seriously by both the public and the business community. Farage's position on climate change and complete lack of a position on other environmental issues is one of many policies that demonstrate he is not a serious political leader.

As the mainstream political leaders continue to thrash around for a strategy for tackling UKIP, they should consider the weaknesses inherent in an apparently libertarian party that wants to block renewable energy projects regardless of what local communities may want, as well as the ridiculousness of a leader who reckons two photos of the Arctic can somehow be taken as evidence climate change isn't worth worrying about. They should also declare publicly that if you want to be taken seriously as a politician you need to have a serious response to serious challenges - simply shrugging your shoulders and saying you have "no idea" what you think is not good enough.

Is E.ON about to become a green corporate powerhouse?

01 Dec 2014

E.ON smart meter

It is possible to overstate the significance of E.ON's surprise announcement that it is to split itself in two in a bid to refocus the business on renewables, smart grids, and energy efficiency. After all, the company is not about to shutter its coal and gas plants, while the management is at pains to point out that the new 20,000-strong spun out fossil fuel, nuclear and hydro business will still have a crucial role to play in the transition to a low carbon economy. In addition, there are no guarantees that this drastic shake-up of one of Europe's largest utilities will work. And it is the renewables company that will be laden with E.ON's existing debts, granting the new fossil fuel-focused firm with the freedom to invest once again in expansion. It is also worth noting that the energy market remains staggeringly volatile and complex and E.ON is attempting to make its "bold new beginning" from a position of not inconsiderable financial stress.

But those caveats aside, the decision by one of the Big Six to align itself so explicitly with the transition to a low carbon economy still feels like a watershed moment. In one stroke of a pen, E.ON will soon recreate itself as a 40,000-strong green corporate powerhouse focused exclusively on renewables generation, distribution networks, with a particular focus on smart grids, and services for its 33 million customers, which translates as smart meters, energy efficiency upgrades, and microgeneration installation and maintenance.

The reasoning behind this dramatic bet on the primacy of renewables in E.ON's core markets reads like it was written by Greenpeace, rather than the board of one of Europe's largest utilities. "We are convinced that it's necessary to respond to dramatically altered global energy markets, technical innovation, and more diverse customer expectations with a bold new beginning," said chief executive Johannes Teyssen. "E.ON's existing broad business model can no longer properly address these new challenges. Therefore, we want to set up our business significantly different. E.ON will tap the growth potential created by the transformation of the energy world."

E.ON will "place a particular emphasis" on wind energy and "strengthen" its solar business, while making energy distribution networks smarter "so that customers can take advantage of new products and services in areas like energy efficiency and distributed generation", continued the company.

This new vision has numerous implications, almost all of which are encouraging for the green economy. Firstly, it throws some more investment muscle behind Europe's low carbon transition with the company confirming it will increase capex for next year by €500m on top of the €4.3bn already planned for 2015. This, in turn, tilts the Brussels, Berlin and Westminster lobbying battlefields a few degrees in favour of clean energy and away from fossil fuels. One of the many fascinating questions raised by E.ON's new strategy is how long will it remain a member of those industry lobby groups that pay lip service to the idea of decarbonisation while quietly arguing against green policies?

E.ON's bold decision also creates overnight a case study that everyone in the European utility sector will be watching with hawk-like vigilance. In recent years, I've lost count of the number of times executives at Big Six energy companies have explained their desire to see their companies become energy services firms. Now one of them looks set to back up this rhetoric with real action. We are about to find out if a giant energy company can profitably reinvent itself as a green energy services powerhouse.

One of the reasons E.ON is confident it can make this transition is that it will start to give customers what growing numbers say they want. The new renewables-focused E.ON will continue to sell its customers a mix of fossil fuel and renewable energy, but it would stand to reason that this mix will now start to decarbonise at a faster rate. Meanwhile, this greener energy will be offered alongside smart meters, onsite generation technologies, and other services, all of which are designed to give people easier access to the clean energy that a majority of people in the UK and Germany consistently say they want. This transition is also likely to be mirrored in the business market, where E.ON and the rest of the Big Six have spent several years watching large blue chip clients get increasingly frustrated at the inability of mainstream suppliers to give them the green power they want.

Most importantly, however, the new strategy is a massive vote of confidence in the EU's energy and climate change strategy and the general direction of travel for energy policy across the bloc. In splitting the company, E.ON is to an extent hedging its bets and backing both the renewables and the fossil fuel horses. But the balance of the workforces at the revamped E.ON and the new spun off business indicates where the board sees the long term future lying.

For years, many within the energy industry have continued to invest huge sums in fossil fuel infrastructure on the assumption that Europe's politicians were bluffing when they said the bloc would have to rapidly decarbonise. When that bet started to look shaky they spent millions more on lobbying to try and ensure politicians did indeed end up bluffing. E.ON's planned transformation is what happens when a large company recognises that policymakers aren't bluffing, clean technology improvements aren't slowing, and the transition to a low carbon economy is really happening.

It is possible to overstate the significance of E.ON's transformation, but it could yet prove to be an important turning point in Europe's transition to a genuinely low carbon economy.

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