02 Jul 2015, 00:05
Ladies and Gentlemen, welcome to the fifth annual BusinessGreen Leaders Awards.
Tonight we are here for two reasons: to celebrate the success of the green economy;
and to provide a living example of how, when the Committee on Climate Change said earlier this week the UK's buildings were not well prepared for heat waves, it was not lying.
The countdown to the point where you can all take off your bow ties, slip off your high heels, and go outside starts now.
However, tonight's experiment in heat stress is very much a distraction from the main event. The main reason we are here is, of course, to celebrate the green economy.
When we launched these awards back in 2010 we celebrated with around 200 green executives, many of whom were quite frankly more than a little nervous about how the fallout from global financial crisis would impact their business.
Five years on, tonight we welcome 500 executives, entrepreneurs, campaigners, and politicians to what has become the UK's largest and most prestigious green business awards - not to mention the foremost celebration of the burgeoning strength of the green economy.
More coveted than Iron Man's electric Tesla,
more sustainable than Caroline Lucas' bag for life,
more desirable than Leonardo Di Caprio's beard,
the BusinessGreen Leaders Awards have become a shining example of how the green industrial revolution is entering the corporate mainstream.
However, we can take no credit for the success of these awards.
If these awards have grown it is because you have grown.
We can argue about the precise figures, but whichever way you cut it, the green economy has experienced a remarkably successful five years.
In the UK renewable energy generation has trebled, emissions have fallen and energy efficiency has continued its inexorable march.
The green economy, as classified by the Office for National Statistics, is now worth over £55bn, and employs over a third of a million people.
Globally, clean energy technologies have emerged as the fastest growing source of new power and there is remarkable new evidence the rate of growth in energy demand is slowing.
Crucially, this surge in investment has seen clean energy prices plummet, with some estimates suggesting the cost of solar power has pretty much halved in the five years these awards have been running. Although I am not sure we can claim a direct correlation.
Politically, from Beijing to Washington, from Mexico City to Johannesburg, from Brussels to London ever more ambitious policies for tackling climate change have emerged.
So much so that the arguments against climate action now look about as credible and as beleaguered as a FIFA election.
Intellectually, concepts such as the carbon bubble, smart cities, net zero emissions, and the circular economy have gained traction in a way only the most zealous of optimists would have expected even two or three years ago.
Green businesses can now draw on a truly compelling vision for how they can help create a healthier and more prosperous economy.
Most importantly, in boardrooms around the world sustainability has defied the predictions of those who said it could not survive in tough economic times and has pushed its way up the agenda.
Virtually every large business in the world today now boasts ambitious sustainability strategies.
More so than ever before, green business thinking is mainstream business thinking.
Each of these trends are evident this evening in the entries considered by our expert panel of judges.
One of the things that quickly became apparent during the judging process was that this has been the most competitive year yet for these awards.
I mentioned there were around 500 of you here this evening, but hundreds more of your colleagues and competitors would loved to have joined you tonight.
For every entry that made the shortlist, two failed to make the cut. And as a result the quality of the entries up for consideration was truly remarkable.
So, as I say every year, if you are unlucky enough not to emerge as a winner this time around, y'know, just be cool.
Kanye West style stage invasions will not be tolerated.
The theme of this year's awards is action, and the other thing that stood out about the entries was the manner in which leading businesses have shifted from talking about ambitious sustainability initiatives to genuinely delivering them, at scale and at pace.
This should come as no surprise, because when you look across the green economy it is evident we have moved into an exciting new deployment phase.
A phase when the groundwork has been laid and clean technologies are being installed, policies are being rubberstamped, and green contracts are being signed.
As these are annual awards I really should illustrate this by talking about the remarkable achievements that have been delivered over the past 12 months -
the multi-billion dollar clean tech investments, the blue chips such as H&M and Unilever and Apple that doubled down on their commitment to sustainability, even the solar-powered flights that were completed - but there were so many of these milestones and besides, you can read about them all on BusinessGreen.
Assuming of course you have a BusinessGreen subscription, which if you don't you really should. We'll talk afterwards, it really is a very good website.
Instead of trying to cram a whole year into five minutes, what I thought I'd do instead is talk about the developments that have occurred in this past month.
In just the last 30 days:
The G7 has declared it wants the globally economy to fully decarbonise this century.
The Pope has preached we must transform the global economy to combat global warming.
US companies gathered at the White House to reveal the latest $4bn round of clean energy investment.
Lego went from being Greenpeace's latest bete noir to building a new sustainable materials centre, presumably not made from Lego blocks.
IKEA pledged to invest another €1bn in renewable energy and climate adaptation measures.
Down the road in Dalston plans have been unveiled for the world's biggest green tower block, or plyscraper if you will.
It was confirmed the global solar industry smashed records last year, as global capacity hit 178GW.
Sales data revealed demand for electric cars jumped 366 per cent in the first quarter of the year, while last weekend world's fastest electric cars came to Battersea as
Formula E completed its first highly successful season.
And on a sunny Saturday last month, UK wind turbines and solar panels met a record-breaking 40 per cent of demand, almost forcing coal off the grid.
Best of all, new data from both the IEA and BP suggested that for the first time in recent history emissions growth stalled, even as economic growth continued.
The tipping point we have all been working towards, some of you for your entire professional lives, may, perhaps, have been reached.
All of this has happened in the last month. And as those of you who read BusinessGreen regularly will know, pretty much every month is like this at the moment.
It may be imperceptible to those outside the green economy, but for those in the know something has tangibly changed.
Now, it is absolutely crucial not to get carried away by the step change in progress that is underway.
Yes, it is time for the now traditional moment of utter misery to start our evening of celebration.
Set against the baseline of where the green economy was five years ago it is true that we are doing remarkably well.
Set against the baseline of where the climate crisis requires us to be it is equally clear we are doing catastrophically badly.
We all know the scale of the challenge is immense, but we are still all too often guilty of under-estimating it.
We need to change almost everything.
We need to fully decarbonise the energy we use and much of the transport we rely on.
We need to transform the materials we consume and throw away on a daily basis.
And even then, if the latest science is to be believed, which it is, we need to find ways of actually reducing the concentration of greenhouse gases in the atmosphere later this century.
We need technologies that have barely been invented yet. And here's the real kicker, we need them as soon as possible.
Here is a scary thought to consider before your starters arrive. We are closer in history to the era of Britpop and Tony Blair's election victory than the point at which the UK power sector needs to be fully decarbonised.
We are closer in history to Bohemian Rhapsody and the advent of Thatcherism than we are to the point at which the UK will, supposedly, have cut emissions by 80 per cent.
As I argued in a recent blog, Bob Dylan and the Rolling Stones have been touring for longer than we now have to deliver a near fully decarbonised global economy.
Which means Justin Bieber and Olly Murs could one day be touring in a net zero emission world. A bitter-sweet image for you there.
The scale of the task is daunting and should never be underestimated.
But look around you.
Look around you tonight at the companies, organisations, and individuals that are already demonstrating how greener ways of doing businesses are both possible and profitable.
Look around you as you walk down the street and see the solar panels, the electric cars, the green spaces that confirm clean technologies and sustainable cities are feasible and attractive.
Look around you as the world's leading politicians and thinkers declare that just because our past prosperity has been built on fossil fuels and pollution it does not mean it always has to be that way.
This is what we mean by green business action.
This is what we mean when we say the green economy has stepped up a gear.
This is what we mean by a new phase of the green industrial revolution.
And it is you, our BusinessGreen Leaders, who should be thanked for delivering this new era.
Because it is you who over the past five year years have provided the foundations the green economy is now building on.
There is much work to be done if we are to successfully tackle the daunting environmental challenges we face and deliver on the promise of a healthier, safer, and more prosperous world.
But what you and your colleagues have done is demonstrate a sustainable economy is possible and that clean technologies can work.
In doing so you have given us that most precious of political, corporate, and human commodities: hope.
Whether it turns out to be a straw to clutch at or an opportunity to grasp, only time will tell.
But one thing is clear, the commitment amongst the green business community to delivering what one US president once memorably described as "the hope, the belief, the conviction in a better life, a better world, beyond the horizon" - and what another US President simply called the 'audacity of hope' - that commitment is as palpably strong as ever.
It is for that commitment and hard work that I would like to ask you all to raise a glass in celebration and thanks to all of you, our BusinessGreen Leaders.
Thank you so much to the BusinessGreen team for making this evening possible.
Thank you to our sponsors, the Crown Estate, SunEdison, social media sponsor Karlson UK, and of course lead sponsor Aecom. It has to be said that without them this evening genuinely would not happen. We are hugely grateful.
And most of all, thank you to everyone here for your continued support of BusinessGreen.
Please have a great evening.
Please join with our 48,000 Twitter followers and make use of our Tweetwall throughout the night using the hashtag BGawards.
Although please don't spend so long staring at your phones, because you will miss our excellent compere for the night Miles Jupp.
Most of all though please join me in celebrating all our winners, highly commended, and shortlisted entries this evening. You truly are leading the way in the most important economic transformation of our century. You deserve to be celebrated and, tonight, that is what we will do.
01 Jul 2015, 10:47
For the next five months all roads lead not to Rome, but to Paris.
After more than two decades of negotiations the UN climate change talks are winding towards one of their periodic crunch points. In fact, it is possible to argue (and people have) that this December's Paris Summit will be the most important meeting in the history of human civilisation. That may sound over the top for a series of talks that so frequently disappoint, but if the optimists are right and Paris delivers what it is supposed to, the meeting will become instantly hyperbole-resistant. Regardless of what happens – civilisation shaping commitment to global decarbonisation, tragic failure of international diplomacy, or, most likely, something in between – this is a very big deal.
That is why BusinessGreen is from today stepping up our coverage of the Road to Paris (and perhaps more importantly, the Road from Paris) with the launch of a new content hub. Brought to you in association with PwC, the hub will not only keep you updated on all the latest news from the Paris negotiations, it will also provide in-depth analysis of the business impact the talks will unleash.
Like climate change as a whole, the Paris Summit is not commonly understood as a business story, but it is one of the biggest business issues of our generation. As such, we'll be doing our best to ensure the green business community, which will be so crucial to delivering on the vision world leaders sign up to in Paris, is as informed as possible. Whether it is the direct business impacts that will come from national emissions plans and global carbon market agreements or the indirect impacts that will be felt through mounting public and political interest in climate change, we'll be covering it.
From aviation to energy and IT to retail, we will explore the implications of the summit for a raft of different sectors, we'll analyse the policy detail within a business context, and invite leading commentators from around the world to offer their take on the economic and commercial consequences of the talks. Thanks to PwC's support, we'll be able to provide an in-depth look at what the summit means to businesses and we will also be inviting all our readers to comment and contribute, providing their insight as to why Paris matters to them.
Because if one thing is clear about the Paris Summit it is that, regardless of what its detractors say, it matters.
As with any history-shaping event, the summit is already open to multiple interpretations and the battle to establish a dominant narrative will only escalate in the coming months. There are those who think the future of civilisation rests solely on the shoulders of the negotiators in Paris and those who think it a first-class-lounge sideshow to real-world decarbonisation efforts already under way at a national and sub-national level. There are those who think a successful summit must deliver a legally binding treaty with a global carbon price, explicit carbon targets, and $100bn of funding a year for the developing world (bizarrely, this group includes both green NGO idealists and climate sceptics who are preparing to brand the whole process a failure if it delivers anything less than this deliberately high bar). Then there are those who believe the already-secured commitments to national emissions reduction programmes, or INDCs in the UN's will-sapping jargon, mean the talks will end in success, even if the other deeply vexed issues that can be collected together under the banner of "climate justice" are kicked along the road yet again.
The difficulty for businesses, investors, and entrepreneurs analysing the run-up to and the fallout from Paris is that all these viewpoints are valid to varying degrees. As so often in politics, life, and the climate debate, the truth lies in the grey area in the middle.
But ultimately the Paris Summit matters, not for the detail of the eventual compromise agreement that the diplomats pull out of the acronym soup they have been stirring for the past 20 years, but for the impact it can and will have on the ground. The UN negotiations in themselves never reduced one tonne of emissions. In fact, as their climate-sceptic detractors are always quick to point out, the air-conditioned, conference centre-loving caravan has an elephantine carbon footprint of its own. The UN negotiations are only important in the context of the clean tech investments they mobilise, the forests they protect, the low-carbon infrastructure they enable, the green policies they unleash.
Consequently, the debate between top-down and bottom-up climate action is a false one. It is not an either/or choice, it is a symbiotic relationship with the headline-grabbing hopes for a global treaty and the community, city, state, and national-level action needed to actually decarbonise the global economy. Each climate-related project delivered increases the chances of an international policy framework; each step towards a global deal makes it easier to deliver green infrastructure outside the hallowed ground of the UN-commandeered conference halls.
This is why, above all else, the Paris Summit is a business story, an economic story, and a technology story. If it cannot accelerate significantly the global green industrial revolution that is already under way then it will have failed, regardless of the finer detail. That is the bar that has to be cleared. As such, it is worth remembering immediately after the Paris Summit as the politicians and the commentariat debate whether the talks have been a success or failure that the only honest answer to that question is the same as the one former Chinese premier Zhou Enlai reportedly gave in response to the question about the impact of the French Revolution of 1789: 'It is too soon to tell'.
That said, the eventual deal (and there will be an agreement, even if it is of the face-saving variety) will have an immediate impact on green investment and business prospects. As such, every business, large and small, would be advised to keep a close eye on the talks and their likely implications. From energy costs to clean tech opportunities and investment risk to consumer demand, the Paris Summit is likely to have sizeable long-term implications for the climate the world's businesses have to operate in throughout the first half of this century and beyond. That is why hundreds of high-profile businesses are now calling for an ambitious treaty to be agreed, confident in the knowledge that climate change represents a threat to their operations and a global agreement will help them tackle that threat and turn it into an opportunity.
Despite the daunting scale of the climate challenge and the past failure of the UN talks, there are reasons to be optimistic.
The proposed system of national action plans or INDCs appears, at last, to have broken the deadlock over emissions targets and eased some of the tension over rich/poor world responsibility. Consequently, the talks are said to be being undertaken in a more conciliatory atmosphere than at any point in their history. A comprehensive agreement on forest protection has already been agreed. Bilateral agreements between key players China, the US, Brazil, India, and the EU, are abounding.
That much has become obvious this week, as China has announced plans for $6.6tr of low carbon investment and the US and Brazil have committed to sourcing a fifth of their power from renewables within 15 years. The new system of INDCs, while far from perfect, represents a hugely important breakthrough, as it raises the prospect of all nations adopting a long term approach akin to the UK's Climate Change Act. Businesses and investors are getting relatively clear signals about the direction of policy travel in favour of decarbonisation and green investment, making it easier for them to mobilise investment. As China, the US, Brazil, the EU, and others are proving, every new INDC style commitment contains within it the creation of massive new markets and commercial opportunities. Long term, the INDCs confirm once again you are better off investing clean power and electric cars than coal and deforestation.
Obviously, the battle over funding for developing world climate adaptation and decarbonisation will be more intense than ever and the shadow of Vladimir Putin looms over the talks much as it looms over any discussion of geopolitics these days. Moreover, it is clear the INDCs on their own will not deliver deep enough emissions cuts and as such a system for reviewing and strengthening national plans is essential. But that said, the EU and a number of other economies have shown that medium emissions targets are there to be beaten, sometimes comfortably.
The Paris Summit will not deliver enough – how could it, when you consider the full scale of the challenge? But a system of national emissions-reduction plans and the prospect of a global framework for strengthening them is not nothing. In fact, it is far more than anyone could have hoped for in the immediate wake of the Copenhagen Summit in 2009 and the national focus promises to make it easier to ensure these policy plans deliver tangible results.
Most important of all, though, is that the context in which the talks are taking place has been transformed. About a year after the Copenhagen Summit I had dinner with Yvo De Boer, the diplomat who chaired the fateful talks and deserves immense credit for keeping the show on the road even as the failure to deliver a global deal threatened to scupper the chances of a credible treaty for a generation. He was understandably downbeat at the talk's inability to deliver the treaty that had been hoped for, but he was also resigned to the fact a truly ambitious deal was impossible at that point once it became clear a handful of the key players had not yet bought into the argument that green economic growth and low-carbon development was both possible and desirable. As ever, the issue came down to the economy, stupid.
Six years on and some important things have changed. Renewable energy costs have plummeted and from Washington to Beijing (and let's not kid ourselves, those are the two capitals that matter most) there is a growing confidence a modern economy built on clean technology is possible. This time around green growth is not a promise, it is a reality – as witnessed, perhaps, by the IEA data showing global emissions stalled last year even as GDP continued to rise.
This recent green economic progress is set to be maintained regardless of what happens in Paris; green businesses will continue to prosper. But the summit will help determine the pace at which its development continues and whether the gap between the emissions reductions that are needed and the reductions that are delivered is bridgeable. That is why we'll be treating the Paris Summit as one of the biggest business stories of our generation. That is why all roads lead to Paris and why the road we take from Paris is so important for the global economy, and yes, even the history of civilisation.
30 Jun 2015, 06:56
Once again the warning lights are flashing on the dashboard of the green economy. In its diplomatic and courteous fashion, today's Committee on Climate Change (CCC) progress report tells the government what anyone with experience of the green economy has been telling them for about 18 months now: good progress has been made but it is now being jeopardised because too many crucial decisions that should have been made in the last parliament got kicked down the road. On a number of crucial fronts the low carbon sector is close to running on empty. Decisions cannot be deferred any longer if the UK is to meet its legally binding emissions targets and maximise the economic benefits from the green industrial base it has started to build.
As an independent body the CCC's tone is inevitably more balanced than that of a green NGO or renewables industry lobby group. For example, it is quick to note how "the energy intensity of the global economy fell by 2.3 per cent in 2014, more than double the average rate of reduction over the last decade" and highlights how UK emissions have fallen over the past seven years, and dropped a whopping, if weather affected, eight per cent last year. But in asserting how UK emissions reductions are not yet in line with what is required and setting out a series of ambitious policy recommendations, the CCC reaches precisely the same conclusion as many green NGOs. Namely that "action is needed in this Parliament to ensure the pace of emissions reduction accelerates whilst supporting economic growth". Or, to put it more bluntly, things need to get a lot better, fast.
The CCC's five main recommendations are eminently sensible and should be adopted by the government without delay. Setting carbon targets for the post 2020 period and extending the levy control framework through to 2025 gives the clean energy sector the long term policy certainty it desperately needs and partially solves the funding crisis that credible sources insist currently faces the next wave of clean energy developments. An energy efficiency and low carbon heat masterplan is desperately needed. Support for low carbon transport must continue. Climate resilience needs to be much nearer the top of the list of considerations for new infrastructure projects. And land and water management has to improve if the UK's natural capital is not to be permanently eroded.
The government will find it extremely hard not to agree with these recommendations in principle, not least because failure to do so without an extremely compelling justification would put it in breach of the Climate Change Act. The problem, as always, is how to practically move the pace of decarbonisation up a gear and ensure the relatively vague targets and action plans the CCC is calling for translate into action on the ground. There is a reason why so many of the decisions the government now needs to take with regards climate and clean energy policies have been delayed until the last possible moment. Funding and successfully delivering many of these policies remains a challenge.
The government in general, and the Department of Energy and Climate Change (DECC) in particular, now faces an extremely challenging 12 months. So much so that it is hard not to read some tacit criticism of the previous administration in the CCC's assertion that a host of crucial decisions need taking "as soon as possible". Many of the challenges faced by the low carbon economy could and should have been resolved six to 12 months ago.
Take the CCC's recommendation for the power sector: "As soon as possible, set the government's carbon objective for the power sector in the 2020s and extend funding under the Levy Control Framework to match project timelines (e.g. to 2025 with rolling annual updates)". Contained within that simple sentence is the requirement to negotiate a new LCF settlement with the Treasury, push the ridiculously long-running Hinkley Point and CCS competition sagas to a completion, agree a new carbon budget, deliver EU emissions trading scheme reforms, ensure the attack on onshore wind farms doesn't dent confidence in other forms of renewables, and work out where a punch-drunk UK fracking industry fits into this equation. The energy efficiency to-do list is equally daunting and requires ministers to work out what they are doing with both the ECO scheme and the Renewable Heat Incentive as a matter of urgency. Looming over each of these decisions is the crucial question of cost effectiveness? How can the government honour its manifesto commitment to cost effective decarbonisation and ensure these policies are delivered in a way that does not penalise bill payers and industry?
The good news for Amber Rudd and her team is that the answers are available. IPPR's recent report on the government's electricity market reform programme identified a number of areas where the cost of clean energy could be slashed, while Policy Exchange is also working on a number of ideas for tackling the LCF budget crisis. Labour's much-maligned manifesto contained some promising thinking on energy efficiency policy reforms designed to drastically increase the number of home upgrades without adding to green levies. Meanwhile, the Sustainable Energy Association is pushing a bill that aims to bolster the rate of green building improvements and the Energy Bill Revolution continues to show energy efficiency as an infrastructure priority delivers more bang for the buck than many of the projects unquestioningly waved through by the Treasury. On a related note, even some Times columnists think it is time to raise fuel duty.
The answers are there, the question is whether the government is willing to seize them. The signs from the first few months of Cameron's one nation government, it must be said, are not overly encouraging. We are pretty much half way through the crucial first 100 days of the Conservative administration, but rather than hitting the ground running in a bid to address the pressing issues the CCC highlights, the absence of a credible energy and climate section in the Tory manifesto has meant the government has hit the ground strolling - in the wrong direction. There have been some warm words on the importance of climate change and some encouraging appointments of modernisers to key green roles. But this has been more than offset by the fact the government's first two big energy and climate policy interventions have been a senseless and costly halt to onshore wind farm development and a continuation of the public opinion defying fracking love-in.
The hope is having pulled off a shock victory the Conservatives are now looking to rush through the one high profile energy policy they had in the manifesto (even if a fair few Tories accept halting onshore wind development is in complete contradiction to the commitment to cost effective emissions reductions) before developing a more ambitious and coherent climate strategy based on genuine cost effective decarbonisation through the summer and autumn. The government could then crank out a series of positive announcements on the LCF, carbon budget, CCS, electric cars, tidal energy, offshore wind, renewable heat, energy efficiency, and perhaps even Hinkley Point in the run up to the Paris Summit.
That is the hope, because as the CCC today makes clear, failure to deliver significant progress over the next six months would put the health of the UK's green economy, its international credibility, and its legally binding emissions reductions efforts in jeopardy. The warning lights are flashing. Amber Rudd needs to respond - and fast.
18 Jun 2015, 15:04
Here is a question: will Amber Rudd be delighted or disappointed if the onshore wind industry grinds to a complete halt from next year?
Given the new energy and climate change secretary this morning announced an early end to subsidy support for new onshore wind farms through the Renewables Obligation (RO), confirmed plans to give local councils greater say over planning approval for the largest wind farms, and hinted strongly that the onshore wind farms will also be locked out of the contract for difference (CfD) mechanism, this might strike as a facetious question – it is pretty clear the government wants to kill the industry.
But the confusing signals emanating from DECC as it strives to square the instruction to cut emissions as cost effectively as possible with the instruction to halt the development of one of the most cost-effective sources of clean energy, mean it is fair to ask whether or not ministers really want to see an end to new onshore wind projects in the UK.
Rudd may have just delivered a suite of policies purposefully designed to deliver on the Tory manifesto promise to "halt the spread of onshore wind farms", but she also declared this morning that part of the government's "long-term plan to keep the lights on and our homes warm, power the economy with cleaner energy, and keep bills as low as possible for hard-working families" involved a commitment to "help technologies stand on their own two feet, not encourage a reliance on public subsidies".
Consequently, it is fair to assume Rudd wants the withdrawal of subsidies for new onshore wind farms to be seen as an example of ministerial tough love, a well-intentioned attempt to help wind energy developers that have become overly reliant on subsidies "stand on their own two feet". As such, it would be similarly fair to assume that if Rudd has miscalculated and subsidies are being withdrawn before the industry can survive without them, then she will be sorely disappointed if no more wind farms are built after next year.
Then again, maybe we should apply a literal interpretation. Perhaps Rudd is drawing attention to the fact turbines do not have two feet and deserve to fall over.
What now awaits is a course of events that is all too familiar for the UK's renewable energy industry. There will be a surge in project activity as developers rush to meet a subsidy cut deadline, a likely legal challenge to keep the lawyers' fees flowing and the story in the headlines, and a fallout period as project activity slows and we wait to see if the industry has been killed off as the doom-mongers fear or recalibrated to engineer a recovery based on reduced subsidies.
The renewables and energy efficiency industries have not always helped themselves in the past by crying wolf at the start of this cycle, only for cost reductions, corporate resilience and public demand to allow them to bounce back strongly. But this time looks different. When we accuse people of crying wolf, we often forget that at the end of the fable the boy's sheep do get eaten.
There are some straws for the wind industry to cling on to this morning. Up to 5.2GW of new projects could be built through the "grace period" exemptions to the RO deadline, which means any anti-wind farm campaigners who think the government's pledge to end new developments means there will be an immediate halt to projects are going to be left furious. Legal action could open the door for a few more projects, particularly if State Aid rules force ministers to rethink onshore wind farms' ability to access the CfD regime. And most importantly, sub-5MW projects could yet proceed under the existing feed-in tariff scheme.
However, these minor concessions to a sector that employs thousands of people and delivers power at a lower cost than virtually any other source of clean energy will be of scant comfort to the industry as it prepares to be forced out of existence.
The reality is that if Rudd really wants the industry to stand on its own two feet and prosper without subsidies, she has made this move a few years too early. There is a roadmap for the industry to deliver unsubsidised cost-competitive power in the UK by 2020, but for the next few years at least projects simply will not get built without some form of support. The industry is heading for the deep freeze, which regardless of Rudd's attempt at conciliatory words this morning is what the Tory manifesto always intended.
The talk of cutting the industry free from the dead hand of state support looks ever more like a distraction from the true reason why onshore wind farms are being singled out for special treatment: a rump of Conservative voters in rural seats do not like the look of wind turbines and the government values their opinion over the majority of people who want the lowest cost clean power available. The net result of this decision is we will get significantly less clean power for the money we all pay through the green levies on our bills. For a government nominally committed to cutting emissions at the lowest cost, this is a palpably ridiculous decision.
In all the thousands of words emanating from the Conservative Party about wind energy in recent years, one question has never been adequately answered. What exactly is wrong with the current system, which auctions subsidies to ensure they remain as low as possible and is governed by a remarkably robust planning system that almost invariably blocks inappropriately located projects?
However, the real tragedy of the government's decision is neither the confusing concealment of the true reason for the war on wind, nor the contradictions inherent in blocking the development of a popular sector while clearing the way for much less popular fracking projects.
The real tragedy is the timing. These changes come at the point when public interest in climate action has been piqued by the Pope and the Paris Summit, when the government has hit upon a politically credible plan for low-cost decarbonisation and, most crucially, when the new CfD auctioning system promises to sharply push down the cost of onshore wind energy and all other forms of renewables.
After years of complex negotiations, the UK has a framework that with some minor tweaks could push clean energy over the line and into the realms of cost competitiveness. A technology neutral subsidy auction system that incorporates energy saving as well as generation – coupled with ring-fenced support for those less mature technologies with the potential to deliver cost competitiveness – would slash the overall cost of decarbonisation. Concerns over visual impact and an over-abundance of certain technologies could be handled, as they are currently, by a democratic planning system. Throw in some of the reforms suggested this week by think tank IPPR and the recipe is there for the accelerated deployment of clean technologies and a sharp reduction in emissions at a much lower cost than the current price tag.
A truly pragmatic, one nation, centre right government would commit fully to low-cost decarbonisation and let all emissions cutting technologies compete on a level playing field. If exceptions needed to be granted and special circumstances applied to certain technologies, then ministers should offer a transparent explanation as to why.
Instead, in its first major energy policy intervention, the government has all but killed off a prospering industry, set a precedent whereby every opponent of any energy-related project will feel massively emboldened, pushed up the cost of decarbonisation while promising to do the opposite, undermined its welcome recent commitments to prioritise climate action on the world stage, and dealt a major blow to infrastructure investor confidence. And all because a relatively small minority of voters thinks wind turbines are ugly.
11 Jun 2015, 11:48
One of the more remarkable aspects of the global divestment campaign is the manner in which it has enjoyed significant success while being so commonly misunderstood and frequently misrepresented.
For two reasons - one well-intentioned, the other categorically not - fossil fuel divestment has been widely characterised as an ethical, moral and absolutist crusade against an irresponsible polluting enemy. In fact, it is a much more nuanced trend rooted in the dispassionate world of investment returns and corporate risk management, but sadly that was never going to generate headlines.
The first explanation for the misapprehensions that dog the divestment movement is provided by the very campaigners who successfully pushed the concept up the political and boardroom agenda. A complex argument centred on variable stranded asset risks and the likelihood of what Al Gore refers to as "multiple pathways to stranding" playing out is not the easiest sell to the wider public, so campaign group 350.org and the Guardian condensed the argument down to a simple mantra: 'keep it in the ground'.
This approach has proven effective, fuelling public interest and successfully cranking up pressure on public-facing organisations while convincing the more progressive pension funds and billionaire investors to divest from fossil fuel assets. It has also deliberately drawn parallels with morally motivated divestment campaigns, such as those against South African apartheid, further bolstering the impression that the primary reasons to divest are ethical.
However, the focus on ditching any and all fossil fuel assets has, in some respects, played into the hands of the fossil fuel companies and their apologists, who have been able to misrepresent divestment as a hypocritical attempt to bring fossil fuel production to an immediate halt and deny developing economies access to much-needed power.
Which brings us to the second reason divestment remains poorly understood: fossil fuel industry misinformation. As I've argued before, the fossil fuel industry response to the argument that its valuations are based on assets that we cannot burn if we are to stand a reasonable chance of meeting internationally agreed climate change targets boils down to 'we are going to burn it anyway'.
But while the more arrogantly reckless end of the industry (Exxon, we're looking at you) is happily trotting out this nihilistic argument, the rest of the industry has sought a more credible line in response to warnings of stranded assets. The unanswerable logic of the carbon bubble has forced it to plump for a deliberately confusing mixture of greater transparency in its climate-related reporting, vague dismissals of the divestment argument as a 'red herring' and repeated attempts to mischaracterise stranded asset warnings as a call for a sharp halt to all fossil fuel production, while presenting fossil fuel development as the only way to meet emerging economy power demands.
The reality is that these wilfully confusing arguments conceal a fascinating and nuanced reality - one that should have every fossil fuel company on the planet deeply worried.
Fossil fuel divestment and the carbon bubble is not a binary campaign requiring investors to make a simple hold/offload decision. Rather it is a prism through which investors make numerous investment choices, ditching the highest-risk assets based on a more comprehensive understanding of financial risk than investors have typically displayed in the past.
Some investors will undoubtedly see fossil fuel divestment as an ethical choice akin to apartheid and will want to exclude all carbon-intensive assets from their operations. But many will assess carbon-related risks on a case-by-case basis and divest some firms while retaining others. Hence, the decisions by the Norwegian Sovereign Wealth Fund, the Church of England and Oxford University to divest coal-rich companies from their portfolios looks to be a more significant trend with a greater chance of becoming a mainstream investment practice than full-blown divestment of all fossil fuel assets. This is not just an environmentally responsible decision, it is a financially responsible decision given demand for coal in the world's largest markets is stalling, valuations of coal companies have performed woefully and any tightening of climate policies will hit coal first and hardest. A lot of coal assets still look overvalued - it is a good time to get out.
This tiered approach to divestment demonstrates how those (including London Mayor Boris Johnson) suggesting that full-blown fossil fuel divestment will push the energy industry and the global economy off a cliff edge are so wide of the mark. But any oil and gas companies tempted to breathe a sigh of relief should not be celebrating just yet. The primary focus of financially motivated divestment will be coal, but it will spread very quickly to any capital and carbon-intensive projects that would see returns compromised if tighter regulations or alternative clean technologies prove successful. More risk-averse investors are already looking to divest assets linked to tar sands, Arctic drilling and other costly exploration projects. The list of companies that face credible divestment risks will only lengthen over time.
Divestment is not a simplistic all-or-nothing punt, it is a complex decision-making matrix. But over time the end result will be the same: any investors with an interest in long-term returns will gradually ditch carbon-intensive assets and shift towards more sustainable investments that evidence increasingly suggests offer safer and more attractive returns.
It is against this backdrop that the fossil fuel industry's two great strategic missteps become obvious. First, as has been well-documented by Carbon Tracker, too many oil majors are continuing to invest in carbon and capital-intensive assets that are loaded with risk and could struggle to deliver promised returns if regulations tighten, oil prices remain low or clean technologies continue to prosper. But, second, they have also singularly failed to diversify their business model and guard against the risk presented by clean energy alternatives eating their lunch.
Yesterday's BP Statistical Review confirmed growth in consumption of coal, oil and even gas were all below the 10-year average last year, while growth in global demand for energy was also well below the long-term average and evidence continued to mount that the link between energy demand, emissions and economic growth is being decoupled. Historically speaking, shale gas and the oil price crash will prove a blip; the big long-term trends in the energy sector are the surge in renewables capacity (admittedly from a low base) and the drastic improvements in energy efficiency. These trends are increasingly obvious, and yet still the oil majors (with arguably one or two exceptions) soft-pedal with their efforts to exploit this revolution and deliver their own large-scale clean energy offerings.
As former Shell exec James Smith, now of the Carbon Trust, has repeatedly argued, the failure of the oil and gas industry to step up investment in carbon capture, hydrogen and other clean technologies represents the most appalling short-sightedness.
Divestment may all too often be misunderstood, but it is easy to understand why the fossil fuel industry does not represent a good long-term investment. It is loaded with risk and is guilty of ignoring a technology transition that is staring it in the face. Widespread, full-blown divestment is a good few years away yet, but it is coming and the only way for the fossil fuel industry to avoid it is to divest itself through the development of credible sustainable business models.
Some within the oil and gas industry ignore this reality; others acknowledge it, but appear to hope that the transformation won't come for another 40 or 50 years. As BP's Bob Dudley observed yesterday: "Our task as an industry is to meet today's challenges while continuing to invest to meet tomorrow's demand, safely and sustainably." Amen, to that. Now all that is required is for the industry to recognise that over-reliance on unabated fossil fuels is neither safe nor sustainable, nor a good long-term investment proposition.
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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray
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