Budget 2014: The need for a real green industrial policy has never been clearer

It would be easy to join the chorus of green anguish prompted by Chancellor George Osborne's Budget for polluters; easy and hugely tempting. After all, this was a budget that made no mention of climate change, despite the fact the Prime Minister regards it as "one of the most serious threats" the UK faces. A budget that promises to wring "every drop of oil we can" from the North Sea, despite the fact climate scientists are near united in warning we have to start leaving fossil fuels in the ground. And a budget that froze the government's largest carbon tax, despite the fact it was Osborne that introduced the measure, it was the government that promised policy stability for clean energy investors, and it was clear that the move will tilt the energy market in favour of carbon intensive coal-fired generation.

The floods and the debate they sparked have evidently been completely forgotten, this felt like the dirtiest budget of this parliament.

However, while there would be a certain cathartic pleasure in raging against a Chancellor whose public stance towards the green economy alternates between indifferent and hostile, the reality is that the energy policy changes announced today will go ahead. The huge £7bn support package handed to energy intensive industries will be delivered and the freeze in the carbon price floor will undermine investment in clean energy and lead to increased reliance on coal power.

This begs two important questions for the green economy. The first is the perennial question as to how can the clean energy and low carbon sectors can convince political leaders of all shades of their long term merits, while continuing to deliver the steep cost reductions that will allow them to maximise investment over the coming years? The second is how do we develop a real green industrial strategy that ensures that despite the carbon tax freeze and the hefty compensation measures offered to carbon intensive businesses the UK continues to make the transition to a low carbon industrial base?

Speaking to a government source earlier today, they downplayed the risk that the Budget would undermine decarbonisation efforts and allow a renaissance for coal. The carbon price floor freeze and accompanying compensation was justified because of competitiveness fears, they argued, and besides, even if the economics of coal do now look more attractive the UK's overarching carbon budgets mean we have to deliver deep cuts in emissions through the mid-2020s and beyond regardless of today's changes.

That is all well and good, the carbon budgets are designed to deliver exactly that long term certainty. But Osborne's assault on energy costs raises serious questions about how we comply with those carbon budgets when one of the main policies for driving the transition from coal to cleaner energy has been watered down and the financial pressure on industry to curb energy use has also been diluted.

The Budget makes it clearer than ever that the UK (and indeed all other industrialised countries) desperately needs a much more ambitious strategy for cutting emissions from those heavy industries that will always struggle with high energy costs. Encouragingly, there is some work underway in this area. The UK is slowly edging forward with its much-delayed £1bn carbon capture and storage project and the Chancellor's promise of a carbon price floor tax break for manufacturers who install ultra-efficient combined heat and power systems shows how compensation measures could be used to drive investment in cleaner technologies.

Moreover, manufacturers' association EEF revealed last year how industry is working with government on a series of ambitious decarbonisation research and development roadmaps, designed to explore how heavy industry can deliver the steep emission reductions needed in the coming decades.

However, it is fair to say that industry lobbying for increased support for low carbon R&D has been nowhere near as vocal as it has been throughout the ultimately successful campaign to secure cuts to carbon taxes and increases to compensation payouts. UK R&D spend across the industrial and energy industries continues to lag behind many other nations, which is even more worrying than it sounds when you realise global R&D spend is still failing to deliver the scale of emission reductions we need. Many executives within the industrial community are fully committed to delivering a low carbon transition, but it is self evident this transition is not happening fast enough. Does anyone have confidence that the majority of industrial firms will now take the increased compensation they have just secured and invest a large chunk of it in the next generation R&D and technologies that will ensure they comply with the UK's long term carbon targets?

It is clear that Osborne had to do something about the threat to competitiveness posed by energy costs that were in danger of accelerating away from those enjoyed by international rivals. But what is so concerning about the budget is the manner in which he watered down key policies that were helping to drive the transition to the low carbon economy but offered no new measures to compensate for the boost offered to coal power and heavy industry.

Where was the tightening of the emissions performance standard to ensure coal really does start to go offline? Where was the increase in support for renewables, nuclear and gas to ensure planned investment is not eroded by the effect of a lower than expected carbon price floor? Where was the increased funding for CCS and low carbon manufacturing R&D to ensure that, despite the weaker price signal, investment in cutting long term emissions remains an absolute priority for heavy industry?

All of this was missing, as ultimately this Budget proved once again that we have a Chancellor who has little interest in tackling climate risks, driving green investment, or building a truly resilient economy. And that is worth complaining about.

Further reading

Green Budget 2014: At a glance

• Policy
• 19 March 2014

Budget 2014: The green business reaction

• Policy
• 19 March 2014

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