Businesses have a huge role to play if Osborne's vision for a "gas hub" that crowds out renewables investment is to be blocked
When the history of climate change in the UK is written, probably from a bunker somewhere in Northern Scandinavia, the last few months will be noted as the moment when the country's admirable political consensus on the need to tackle climate threats and build a green economy finally shattered.
The UK does not have the world's most vibrant green economy - how can it when the government has managed to engineer the second serious recession in three years - but it does have several advantages that has made the country a highly attractive proposition for green businesses and investors.
We boast excellent natural renewable energy resources, an admirable science and engineering skills base, and, while it might not be at its most popular right now, the City of London gives green businesses access to significant levels of capital and financial expertise. But most of all we had a remarkably solid political consensus on the need to tackle climate change and nurture the development of a green economy.
Our political leaders obviously differed on which precise policies would best drive green growth, but there was a broad agreement that climate change represents an existential threat to the global economy and as such a greener economic settlement is required. This consensus, coupled with significant support from business and civil society, enabled the passage of the world's first Climate Change Act, laid the foundations for a series of progressive green policies, and helped cement the green economy's position as one of the fastest growing sectors in our otherwise moribund economy.
But, in the space of a few short months, Chancellor George Osborne has shattered that consensus - a consensus that was hard-won, carefully nurtured, and essential to all of our economic and environmental futures.
In attempting a coup of UK energy policy that would have foisted his vision to turn the country into a "gas hub" upon us all, the Chancellor has repoliticised an array of environmental and economic issues. Politicians may argue about the finer points of green policy, but in the interests of tackling climate change and improving energy security there should be a cross-party consensus on the desirability of cost effective low carbon technologies over high carbon alternatives.
Energy and Climate Change Secretary Ed Davey did a good job yesterday at drawing a veil over the disagreements that have marred the last few weeks, talking of "misunderstandings" with the Treasury, reiterating that UK wants to see investment in both gas and renewables, and stressing that the "debate" on whether to allow unabated gas-fired power plants post 2030 will continue in the autumn and will be based on evidence rather than politics.
But looking past Davey's warm words the political fight over the past month has been brutal.
There have been late night meetings, last ditch compromises, leaked documents from all sides, and plenty of bruised reputations. The Treasury has broken every rule in the book on good governance, re-opening deals that were finalised last year, ignoring evidence and consultation responses, linking renewables and gas policy in a way that both sides of the debate agree is detrimental to investor certainty, and attempting to interfere in issues of intricate policy detail that are clearly the domain of the Secretary of State for Energy and Climate Change.
It must have been more than a little embarrassing yesterday for Davey to have to answer the question "who is responsible for UK energy policy", and I am told senior Lib Dems are privately furious at the way Osborne tried to bounce them into signing up to a gas-land vision that would effectively torch the party's green credentials.
None of this should detract from the fact that the Lib Dems pulled off a significant, if qualified victory, yesterday.
The concessions that had to be handed to the Treasury in the form of completely unnecessary calls for evidence on costs for wind and solar energy will do the renewables sector no favours and will further fuel the impression that investors cannot be 100 per cent certain of the medium-term policy environment. But Davey did a good job of reassuring people that changes are very unlikely and if they do come committed investments will be protected.
Equally, the proposed consultations on tidying up the overlap between the RO and feed-in tariff regimes may look like house-keeping, but it could represent a major blow to mid-sized projects and further add to the sense that the government is not interested in supporting the kind of community-scale projects that can challenge the Big Six's dominance.
But these caveats aside, this is a generally good package of support that will drive investment over the next four years. Expect a rush of sub-5MW solar, wind, and anaerobic digestion projects over the next six months as developers try to get projects up and running before any further changes to the scheme, followed by four years when biomass and onshore and offshore wind continue to cement their position as one of the UK's fastest growing energy categories. Davey is right: billions of pounds will be invested and hundreds of thousands of jobs will be created.
Moreover, it is great to see Davey and the Lib Dems resisting Osborne's demands and demonstrating that if they stick to their guns that they can secure support for a green economy that the Chancellor obviously has little or no interest in.
But despite this victory it is also clear that there is now going to be an almighty row in the autumn over numerous aspects of the Energy Bill, not least the proposals for a decarbonisation target for the electricity sector, which according to spin-meisters in the Treasury will now never see the light of day. The Chancellor is effectively attempting to tear up the Climate Change Act and fire the trigger on a full scale dash for gas - the mood music for green investors is appalling.
Davey yesterday tried to downplay the row, pointing out that DECC's strategy has always been to keep its options open by supporting a balanced energy mix featuring renewables, nuclear, carbon capture and storage, and some gas. He has a point, but this is now all a question of scale. DECC wants a balanced mix that takes advantage of our relatively modest domestic gas reserves and sees some unabated gas, but plenty more being used in harness with CCS or as back up power. Osborne, as laid bare by his bullying letter to Davey, wants a "gas hub" with unabated gas a "core" part of our energy mix for decades to come. The green NGOs are not exaggerating: this is a fight for the credibility of the Climate Change Act, the future of the low carbon economy, and the chance to lead the world in emerging green technologies. If all barriers to gas are removed and rapid investment is authorised over the next 10 years, then it will indisputably crowd out investment in lower carbon alternatives, including nuclear and CCS, as well as renewables.
The big question for green businesses and investors now is what happens next?
In the short term, the answer has to be a surge in investment in low carbon projects. Yes, the Chancellor is not helping and the political risk will probably add to the price of capital. But the renewables obligation, the soon-to-be-launched Green Deal, and the government's various other green policies are good enough to drive investment.
In the medium term, businesses have a huge role to play in ensuring that this autumn's battle for the future of the UK's energy policy is won by those who respect the need to curb carbon emissions and build a green economy.
One of the biggest positives to come out of the recent row between Davey and Osborne was that plenty of businesses and industry groups, including the influential CBI, wanted to see a deal that protected renewables. The gas industry lobbyists may have been in the chancellor's ear, but plenty of progressive businesses made it known publicly that they did not want the green agenda to be derailed. The business community is the one sector that has the leverage to convince the Treasury to rethink its anti-green stance, and perhaps even convince the Prime Minister (disappointingly absent throughout this row) that he needs a new Chancellor. With figures having just confirmed the UK's economy is performing even worse than had been expected, now is the perfect time for green businesses to unite and vocally make the case for low carbon investment.
Finally, in the long term green businesses desperately need a strategy of depoliticisation. It will be difficult to publicly condemn the Chancellor, while also urging people to try and take the political heat out of the debate, but that is what has to be done. Both economically and environmentally this issue is far too important to be politicised, particularly when there are strong centre-left and centre-right ideas that will be essential to the development of a successful green economy. But the past 12 months have shown worrying signs that we are seeing the Tea Party-fication of British politics when it comes to climate change and green business - this is a trend that the green economy simply cannot afford.
We need to work out a way to get back to that period when there was explicit cross party support for the need to tackle climate change and develop more sustainable business models. A period that gave us the current broadly positive policy environment, the foundations for some of the UK's fastest growing green business, and the Climate Change Act - a piece of legislation that is thankfully now the main barrier to Osborne delivering his fossilised vision for Gas-land UK.
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