13 Aug 2015, 09:36
On his recent trip to Asia, David Cameron declared the first majority Conservative government in 20 years was wasting no time in delivering its agenda, adding everyone in his government knows "if they're not sure which approach to take, it's all in the good book, the manifesto".
It was the kind of throw away comment victorious Prime Ministers make, but it still must have left ministers working on the crucial topics of energy, the environment, and climate change mightily confused. Ministers at DECC and Defra consulting the 'good book' would find little to help them beyond promises to 'halt' onshore wind farms, go all out for shale gas, implement some marine protection zones, and keep delivering on the UK's legally binding carbon targets in a cost effective manner. Even Tory sources have privately acknowledged the manifesto offers less of a coherent programme for building a modern low carbon economy, and more a vague placeholder for Ministers, stitched together with red meat for your stereotypical wind turbine-loathing, fox-hunting rural Tory voter.
The result of a manifesto with environmental policy holes big enough to sail an oil tanker through has been an all-out assault on green policies. Wind farm subsidies have been halted, solar farm subsidies look to be going the same way, other renewable energy subsidies are under review and the popular feed-in tariff scheme is to be made harder to access, the award of crucial clean energy contracts has been delayed, rail electrification plans were shelved, zero carbon home standards have been axed, the Green Deal energy efficiency scheme has been scuppered, taxes on renewable energy have been hiked, the planning decisions for fracking projects will be fast-tracked, and the Green Investment Bank is being prepared for privatisation. Cameron is right about one thing, his government certainly hasn't let the grass grow.
Green businesses and campaigners are understandably outraged. One senior business executive voiced fears the Prime Minister is taking the UK back to the dark ages on green issues, while another seasoned campaigner reckons "the past few months mark the worst period for environmental policy that I have seen in my 30 years' work in this field".
It may not be quite that bad. Tory sources are justified when they suggest any incoming government would have moved to curb renewable energy subsidies as technology costs come down and pressure on the Treasury's agreed clean energy budget mounts. Similarly, energy efficiency policy in the UK has been a mess for years and a re-think is long overdue.
But any merits found in the government's bonfire of the greenery are more than offset by the manner in which controversial changes have been managed. The self-evident contradictions contained in the government's pledge to embrace cost effective decarbonisation at the same time as deliberately slowing the roll out of onshore wind and solar farms that deliver power at a lower cost than more favoured offshore wind and nuclear power fuels the impression any pretence at a technology-neutral, evidence-based approach has been ditched. The decision to axe key energy efficiency policies without lining up a replacement has left a black hole where the most important component of any decarbonisation strategy should be. The willingness to rush through a host of reforms that were absent the manifesto, several of which undermine returns from existing clean energy projects, dealt a major blow to investor confidence. Moreover, the shock and awe flurry of announcements has established a narrative, rightly or wrongly, that the government is on an anti-green crusade.
The impact on the UK's green business community - for so long one of the few genuine success stories in a bleak economic landscape - has been considerable. Investors will inevitably respond to shock policy moves by putting up the price of capital, uncertainty reigns over the government's flagship clean energy and energy efficiency programmes, legal action against a number of the government's decisions is being seriously considered. All the while, Germany, the US and China continue to step up clean tech investment, toxic air brings about tens of thousands of deaths a year, and climate change looms both as diplomatic challenge at this year's Paris Summit and an existential threat for the global economy. Investment is being undermined, one of the most exciting parts of the economy is being compromised, and the UK's efforts to tackle climate change are left looking slimmer than one of George Osborne's new suits.
The demolition of much of the previous government's green policy landscape has been done with Cameron's say so, but without any sort of public comment from the Prime Minister. Unless I have missed something, during his first 100 days, Cameron has made one comment on an environmental issue and that was to send his condolences to the family of Cecil the Lion, condemning hunting for sport at the same time as trying to finagle a relaxation of the fox hunting ban through the Commons. On the finer points of energy and climate policy, our press conference averse premier remains as enigmatic as ever.
All of which has left anyone with an interest in the environment asking, whatever happened to Dave's husky? Is it dead, dying, or just resting?
The ever vocal climate sceptics in Conservative ranks think the Cameron is on the run, lacks the stomach for a fight to defend his green legacy, and besides will soon be replaced by a Chancellor who has cultivated a reputation for cosying up to pollutocrats. Labour, in brief breaks from its own existential crisis, is keen to put its spin on this narrative, arguing Conservative environmental policy has become an ideologically motivated exercise in trashing renewables and belittling climate risks.
However, there is a counter-argument. Whitehall sources insist the Conservative leadership was seriously burned by the 2014 row over energy bills and as such makes no apologies about prioritising steps to bring the cost of green levies under much tighter control. But at the same time Cameron and his Energy and Climate Change Secretary Amber Rudd are said to be as committed as ever to tackling climate change. Consequently, work is underway on a new strategy that will continue to prioritise decarbonisation efforts, albeit with greater focus on competition between different technologies.
The promise of a new strategy holds out some hope for green businesses and investors, currently reeling from the government's failure to transition to this new strategy in a phased manner backed by the democratic mandate offered by clear manifesto commitments. But it also presents a challenge for Cameron. This parliament was always going to be the point at which decarbonisation efforts started to gather pace and the impacts, both in terms of long term benefits and short term costs, became more obvious. Developing a strategy that appeals to the public, keeps Tory backbenchers onside, and mobilises much needed investment in green infrastructure will require considerable political muscle and policy innovation. To date, Cameron has shown little inclination to back up his warm words on climate change with any serious political capital. That will have to change if he is to ensure the UK builds on, rather than squanders, its position as a clean tech hub.
The first 100 days of the Cameron government have been as bleak as the air around a coal-fired power plant for green businesses and environmental causes. If the Prime Minister wishes to repair a reputation he once valued as an environmentally conscious moderniser and ensure he has a credible platform to speak from at this December's Paris Climate Summit he needs to use the next 100 days to prove the husky is alive and well. He should start by delivering the credible, cost effective, coherent decarbonisation strategy that should have taken pride of place in his 'good book' in the first place.
03 Aug 2015, 17:18
Has Barack Obama just secured his legacy? For all the undoubted and inevitable disappointments of his time in office, the Nobel Prize winning, healthcare reform delivering, Great Depression avoiding, dual election winning first African-American President, already has a track record that stands comparison with the vast, vast majority of his 43 predecessors.
But could his Clean Power Plan secure Obama a legacy that echoes through the ages, establishing him as the world leader who sparks the crucial deployment phase for the global low carbon economy? We'll have to wait 30 or 40 years to find out, but the chances of Obama being remembered as a globally significant figure in the multi-generational battle to tackle climate change will today receive a massive boost.
Obama might have taken the best part of seven years to get from the point when he was elected on the promise of delivering meaningful action to cut US greenhouse gas emissions to today's announcement of rules requiring a 32 per cent cut in power plant emissions. He might have blotted his copybook with many environmentalists through his vacillating on the KeystoneXL pipeline, his failure to take a stronger line on fracking, and worst of all his support for Arctic drilling. But when White House adviser Brian Deese said the new EPA rules marked the "biggest step that any single president has made to curb the carbon pollution that is fueling climate change" he wasn't exaggerating. The rules and the politically savvy manner in which the Obama administration have circumnavigated Congress - which has too often sought to condemn itself to irrelevance in this debate through its scientifically illiterate throwing of metaphorical and actual snowballs - represents an historic achievement.
The detail of the announcement is, of course, hugely important. The decision to increase the overall target to a 32 per cent cut in emissions from power plants while giving states a couple of extra years to comply with the rules looks like a good trade off. Meanwhile, the focus on renewables represents great news for clean tech developers and less good news for frackers (who will inevitably still benefit from the restrictions on coal emissions). The move to give states freedom to introduce their own flexible plans - backed by a strong legal threat to impose plans on those that refuse to draw up their own - is a political and administrative masterstroke. It may create a patchwork of regulations and clean energy policy regimes across the US that could create challenges for some business and investors, but it also promises a race to the top amongst progressive states while guaranteeing some form of action across the board.
The legal and political saga the regulations will play in to is also hugely important. The EPA and the Obama administration can expect to come under sustained legal attack over the new rules. But officials appear remarkably confident the plan is built on the strong foundations provided by the 2007 ruling that greenhouse gas emissions are a threat to human health and can be regulated under the Clean Air Act. As long as that ruling holds, the EPA is under a legal obligation to act to curb emissions. Those seeking to neuter the rules appear to have no answer to this legal reality.
Meanwhile, politically Obama and, perhaps more importantly given the point in the electoral cycle, Hillary Clinton have evidently concluded there are more votes in delivering climate action than opposing it. The polls indicate they are making a smart bet. In contrast, the Republican Party continue to allow opposition to clean energy investment and outright climate denialism to play a central role in the on-going psychodrama that is the Party's continued experiment in how best to destroy the GOP's election-winning coalition of voters. As with so much of the Republican's Fox News led agenda, the Party has found a way to fire up its base while ignoring the fact it alienates the centrist voters needed to secure the White House.
The caveats are also hugely important. As with anything in politics there is a risk that the long term stability and ambition promised by these regulations proves illusory. Legal action could delay the rules, even if it seems unlikely at this stage they can be overturned. A shock Republican victory next year (and looking at the field of candidates so far, it would be a shock) could scupper the regulations. Some recalcitrant states will no doubt test the limit of the law and simply refuse to deliver clean power investment programmes. The fossil fuel industry and its allies in heavy industry will not give up without a fight and some firms will no doubt double down on the lobbying dark arts in an attempt to defeat the plan, rather than respond to the new reality and step up investment in clean tech R&D. Most importantly, Obama's plan is still not compatible with the scale of deep emissions reductions many scientists warn us are needed.
Obama's legacy is not secured just yet, even if it is notable that much of the opposition to the rules is so confused it cannot work out whether to attack them for being unworkable or for bringing about the end of high carbon energy industries.
However, the most important aspect of Obama's Clean Power Plan is to be found not in the legalese detail of the rules, nor the inside the beltway political battles it triggers, but in the mood music it creates, the investment signals it sends.
The Clean Power Plan is just the latest, and arguably most high profile, addition to a global trend. Namely, the march of policies and pledges that confirm decarbonisation is now one of the defining long-term economic and infrastructure goals of the world's greatest economies. The EU is signed up to a similar goal to cut emissions 30 per cent by 2030, China is deploying policies and investment to ensure it ensures emissions peak around the same time, and now the US has backed up vehicle emissions standards with a commitment to transform its energy sector.
The Obama plan also further strengthens the climate policy approach du jour. In giving state governments the freedom to develop decarbonisation policies that work for them, the plan consciously echoes both the UN's proposed system of national climate action plans or INDCs and the EU's long-standing and largely successful emissions reduction efforts. It is increasingly clear governments are settling on a flexible climate policy approach that works (albeit at too slow a pace), combining efficiency measures and clean technologies in a way that curbs emissions without undermining growth. Recent data suggesting a decoupling at a global level of economic and emissions growth offers further evidence this model can hopefully work at a planetary scale.
This system of national and regional programmes is a long way short of being perfect and it cannot be said often enough that current emissions targets are not in line with what the science recommends. But nor is it nothing. The Obama plan and the growing optimism around the Paris talks promise to deliver clear, long term decarbonisation commitments in every major economy in the world coupled with coherent programmes for moving towards that ambitious goal.
Businesses and investors assessing this trend dispassionately will come to the same conclusion: what these economic superpowers are trying to achieve is supremely challenging, but they can't all be lying when they say they are serious about delivering decarbonisation. Obama's plan offers yet another reminder the balance of power in favour of clean technology over polluting fuels is shifting, and at an historically rapid clip. Good intentions are finally being translated into good policies. Investors, innovators, and entrepreneurs are already responding (witness the large number of big businesses publicly backing Obama's plan). Today's developments will ensure ever more savvy firms rush to join them, be it through the direct development of clean technology or an awareness of the need to embrace energy and resource efficiency.
It is this wave of clean tech development and deployment that could yet emerge as Obama's enduring legacy. If it does so, the Clean Power Plan, imperfect and insufficiently ambitious as it remains, may yet go down in history as one of the defining turning points in mankind's efforts to tackle climate change. It really is that big a deal.
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.
ABOUT JAMES' BLOG
Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray