The Chancellor is right to want cost-effective action to tackle climate change, but that means delivering the policies that accelerate decarbonisation
Welcome to the global fight to tackle the catastrophic risk that is man-made climate change, it is great to have you on board.
The entire green business and NGO community will have been delighted to hear you assert this week that you believe "climate change is happening [and] that it's caused by human beings".
This is a hugely welcome intervention, not least because your previous reluctance to speak publicly on this issue had fuelled speculation your friend and adviser Lord Lawson had convinced you climate change isn't a serious threat. Your colleagues on the green wing of the Conservative Party - those who once convinced you to assert that "if I become Chancellor, the Treasury will become a green ally, not a foe" - always maintained you were fully committed to delivering action on climate change. But you'll no doubt be aware your insistence the UK should not lead efforts to cut emissions and your team's willingness to brief the press about your hostility to green policies has fuelled speculation you do not regard climate change as a major issue. It is good to know this is categorically not the case, even if it has taken catastrophic floods for you and your colleagues to start talking about climate change again.
It is also good to know that you want to see action taken to "do what we can to prevent" climate change. This is a hugely welcome development, although I will admit to a twinge of concern at your throw away suggestion that "if we can't prevent" climate change we need to mitigate against it through adaptation measures. Improving climate resilience is essential and your decision to approve cuts to flood defence spending will no doubt go down as one of the coalition's biggest errors, but succumbing to the belief that we "can't prevent" climate change and should focus on adaptation is a one-way ticket to the kind of 4C world that it will be virtually impossible to adapt to. Having clearly committed yourself to action on climate change now is not the time for even a scintilla of defeatism.
Most of all though, it is great to hear that you have a vision for how the UK should decarbonise - it is a vision the entire green economy and almost every green NGO can get on board with. When you say "let's try and do this in as cheap a possible way as we can", you will find almost every environmentalist in the country will be nodding along in agreement.
I have to inform you that you are mistakenly under the impression that people somehow disagree with this over-arching strategy. We can perhaps quibble over the use of the word "cheap", as delivering something as important as the re-engineering of our economy on the cheap risks a shoddy transition that does not harness the technological and business innovation that will maximise economic, environmental, and health benefits. But if you substitute in the term "cost-effective" then the entire green economy is on your side with this vision.
Businesses and NGOs alike understand that a green transition will only be achieved if the cost of clean technologies continue to fall and the short term costs associated with green infrastructure investment are kept as low as possible. Again, we can argue that the polluting technologies that have driven climate change are themselves too cheap and should be made to meet the full cost of their impacts - that we should price the externalities associated with fossil fuels, as your Treasury economists would put it. But regardless of the outcome of this debate there is an acceptance that the cost-effectiveness of the low carbon transition needs to be maximised at every turn.
Consequently, there is the potential here for the restoration of the kind of political consensus on climate action that has been sorely lacking for much of this parliament. A consensus whereby the leaders of all main parties compete to find the best way to drive a cost-effective low carbon transition that will tackle climate change risks, deliver economic growth, and improve the UK's competitiveness. Having visited China and no doubt heard about its world leading clean tech sector you will be all too aware of the urgency with which the UK must seize this economic opportunity.
Unfortunately, your comments yesterday revealed one small potential flaw in your climate change strategy. If you want to deliver a cost-effective low carbon transition you need to pursue policies that deliver a cost-effective low carbon transition - and sadly, to date, the evidence that you are willing to do this is decidedly patchy.
You chose to highlight two areas where you think decarbonisation can be delivered in a "cheap" manner - fracking and nuclear power - and accuse critics of these two approaches of being "ideological" in their opposition. Specifically, you stated: "Let's not be too theological about which technology we use - let's get the right mix. For example, there are people in the green movement who oppose civil nuclear power for I would think rather ideological reasons but it's clearly a low-carbon source of energy generation. Equally shale gas has done incredible things to reduce US carbon emissions and there are parts of the environmental movement who don't like that, again for rather ideological reasons. I would say let's see more fracking and shale gas in Europe, in the UK and in China."
Now you are right that some environmentalists can be a little "ideological" in their efforts to ensure the planet remains habitable for civilisation, and in some instances this ideological rigidity can prove unhelpful. But it is wrong to dismiss all opposition to fracking and nuclear as "ideological" when much of the criticism aimed at these two technologies is driven by your central concern: cost effectiveness.
There is, as you will be well aware, an argument that says shale gas can act as a low cost "bridge" fuel as we transition to a low carbon economy, I have some sympathy for this argument. But there is also an argument that if we invest too much in a new generation of gas infrastructure it could become a stranded asset as many climate scientists believe we need to secure steeper cuts in emissions over the next two decades than can be delivered by a heavily gas reliant economy. Shale gas can probably play some role in a low carbon economy, but engineering a shale gas boom could end up proving extremely costly from both a financial and climate perspective.
Equally, there are long-standing arguments that claim next generation nuclear technologies can deliver deep cuts in emissions at a low cost - again, I have some sympathy with these arguments. But there are also concerns that when you consider all the costs associated with nuclear it is anything but "cheap". In fact, simply judging nuclear using the strike price support levels you have approved shows that it is more expensive than onshore wind power, is almost certainly going to be more expensive than solar power by the early 2020s, and is definitely more expensive than energy efficiency measures.
Which brings me to another crucial issue. There are plenty of cheap and cost effective technologies and policies that will drive a low carbon transition, but the fact is your record on supporting these technologies and policies is decidedly mixed.
Take energy efficiency. Every available analysis shows energy efficiency measures are not only the most cost effective way of cutting greenhouse gas emissions, they also help to tackle fuel poverty and lower energy costs. And yet your government's changes to the ECO energy efficiency scheme effectively cut spending on such measures, while you have failed to provide the similar Green Deal scheme with the financial backing it needs if it is to have a national impact.
Or take flood defences. The past few weeks have made abundantly clear that investments in flood defences are cost-effective in the long run, but your government cut the budgets for such schemes and is still imposing significant job cuts on the agency tasked with tackling flood risk.
Or take wind and solar farms. Onshore wind farms are the lowest cost form of renewable energy and solar PV projects offer the fastest falling cost reduction curve, but your government has undermined welcome support for these technologies with barely concealed hostility from Ministers and a planning regime that is not fit for purpose.
Or take the promise of a decarbonisation target for the power sector. You have blocked its early adoption in order to aid continued investment in fossil fuels, despite the independent Committee on Climate Change concluding it is a cost effective policy that will help keep the UK on track to meet its carbon targets.
Or take carbon pricing and environmental taxes. Many of your favourite think tanks and economists will tell you that the most cost effective way to deliver action on climate change is to put a consistent and rising price on carbon emissions and let the market determine the least cost means of decarbonising. It is clear you understand this principle and have taken some positive steps to price carbon, but then you allow your officials to raise the prospect of cuts to the carbon floor price and deliver virtually no progress on the coalition's promised shift from income to environmental taxes.
Unfortunately this list could go on and on, but I am sure you get the idea.
You may be right to argue that nuclear power and fracking can help deliver "cheap" reductions in greenhouse gas emissions and responsible green businesses will happily engage with you in this debate. But there is a much wider array of technologies and policies that can also deliver cost effective emission reductions. Some of these, like energy efficiency, are obvious. Others, such as research and development funding for innovative renewable technologies, subsidies for clean energy, grants for electric vehicles, or tougher emissions standards on coal plants, might not appear to be cheap at first glance, but they are absolutely cost effective when set against the scale of climate change risks and the fact these policies are all designed to bring down the cost of emerging clean technologies.
As Chancellor of the Exchequer there is a huge opportunity for you to use the next Budget "do what we can to prevent" the climate change you acknowledge is man-made. Despite plenty of setbacks, your government has already made significant progress in driving investment in clean technologies and ensuring the UK continues to play a leading role in the global green economy. Now is the time to build on this progress with a new wave of cost-effective green policies. Policies that prioritise energy efficiency and low cost renewables, support research and development that will bring down the cost of next generation clean tech, increase the use of environmental taxes, regulations and incentives to encourage green investment (if you haven't read it yet, the recent report on resource efficiency published by your colleagues in the 2020 Group has some good ideas on how to do this), and enhance climate resilience.
The harsh reality of politics is that if you don't embrace these policies your rivals will, as they realise voters who are reeling from floods and are hugely supportive of the green economy will reward politicians who offering a compelling plan for tackling climate change.
The onus is on you to engage fully with all these technologies and policies as you pursue the most cost effective means of delivering the decarbonisation we urgently need. Because if ideological opposition to fracking and nuclear is not helpful, nor is ideological opposition to renewables and clean technologies. If you want to join the fight against climate change, this is the place to start.
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