Is this simultaneously the greenest and dirtiest budget in recent history?

James Murray
@James_BG
22 November 2017

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Pledges on EVs and plastic pollution are welcome, but Hammond has failed to accelerate a coal phase-out while gambling on further renewables' cost-reductions

What's better: a chancellor who slags off the green economy at every turn but then quietly enables a trebling in renewables capacity and deep cuts in emissions (albeit with his arm twisted by colleagues), or a chancellor who hymns the importance of planetary protection and inspiring clean tech, but risks a hiatus in clean energy deployment and continues to back fossil fuels to the hilt?

Under George Osborne, environmentalists got used to Budget speeches defined by unveiled criticism of the cost of decarbonisation and praise for fracking and fossil fuels, which were then partially offset by the introduction of higher carbon taxes and relatively solid support for clean power and electric vehicles.

Under Philip Hammond, the attacks on the green economy have been consigned to history. In contrast, the Chancellor today confirmed he remains an effusive cheerleader for climate action. "We cannot keep our promise to the next generation to build an economy fit for the future, unless we ensure our planet has a future," he declared, in between rattling off a host of eye-catching and welcome green policy moves.

But for all the welcome support for electric vehicles and the promise to protect our children's lungs and our seabirds' wings, Hammond also stuck unerringly to his predecessor's pro fossil fuel strategy of freezing fuel duty and chucking tax breaks at North Sea rigs. Moreover, there was no under-the-radar succour for the clean energy sector to be found hidden in the Budget documents - quite the opposite in fact. For all his staid image, Hammond today indulged in a gamble with the UK's decarbonisation efforts that may come off, but may end up making an absolute mockery of his promise to "ensure our planet has a future".

First, the good news. As had been expected, this budget provided serious support for electric vehicles - £400m more for EV charging networks, £100m for sales incentives, more tax breaks for corporate uses, and more money for R&D. This is a big deal. EVs have an outsized role to play in the low carbon economy. They are a powerful symbol of the cleaner, more attractive infrastructure we have to build. They are extremely popular with the public and can help generate buzz for the wider decarbonisation project. They deliver multiple emission reduction, air quality, and jobs benefits. And they sit at the heart of the smart grids that will enable power sector decarbonisation. Hammond is to be praised for recognising this opportunity and pursuing it.

Similarly, the review of how to tackle single use plastic is both good for the environment and good politics. Having floated the idea (pun intended) it is hard to see how Ministers can row back on some form of levy to curb levels of plastic waste. Wider support for new R&D and business model innovation will also be needed, but again the government deserves credit for acting swiftly to tackle a major problem.

Both measures are also supported by Hammond's welcome rhetoric on the importance of R&D and innovation. He may not have specifically mentioned clean tech in his paean to emerging technologies, but the sector should be an obvious beneficiary of increased government R&D funding, especially given the Clean Growth Strategy's focus on innovation.

The new measures to tackle air pollution are much less clear cut. The promise of a £220m Clean Air Fund and higher taxes on the dirtiest diesel vehicles are welcome, but all the government's modelling suggests the best way to tackle urban air pollution is through 'Toxicity charges', which could be backed by targeted scrappage schemes. Hammond declared today that we "owe it to our children that the air they breathe is clean", which is admirable, but why then did he boast of freezing fuel duty and Air Passenger Duty? And why did he boast of not raising taxes on dirty diesel vans?

Actually, we know the answer to that one, because he admitted it was to stop the "headline writers limbering up". There will now be no headlines about Hammond attacking white van man or woman. But presumably what he meant to say is 'we owe it to our children that the air they breathe is clean of emissions from cars, just cars, got that? Vans are fine, they emit nothing but rosewater and fairy dust'.

Overall though, this was a remarkably green speech by Budget standards. It sends an encouraging signal to investors and businesses that the government's commitment to both the Paris Agreement and its new Clean Growth Strategy remains solid, despite all the other complex challenges it is dealing with. It also suggests that we could see a race to the top on environment policy in the coming years, with all the main parties recognising these issues are critical to the suddenly crucial under 40 demographic.

However, there are two significant problems with this budget, one specific and one sweeping in its reach.

For all the exciting moves to tackle plastic and air pollution, the biggest single emission reduction measure contained in this budget was meant to be the long overdue decision on the future of the carbon price floor and the clean power support mechanism called the Levy Control Framework (LCF). But on both fronts the government has hedged its bets and ducked the ambitious move that would have driven rapid decarbonisation, increased the chances of meeting the emissions reductions goals the UK is still set to miss, and maximised clean energy investment.

The government insists keeping the carbon price floor at around the current level until coal is off the grid is sufficient to drive the continued switch away from coal. But some experts disagree that the price signal is high enough, especially if coal prices fall and gas prices rise. Meanwhile, everyone agrees the current carbon price does nothing to deter investment in gas capacity which will have to follow coal off the grid at some point.

There are reasons to be sanguine about this. The government has said it will phase out coal by 2025 and has reserved the opportunity to hike the price at some point in the future if it looks like this target will be missed. But any climate hawk will argue that it is less than ideal that the leader of the global effort to phase out coal power has ducked the chance to accelerate its timetable for ditching the most polluting source of electricity generation.

This lack of ambition is even more apparent in the extension of the current £557m budget for clean power auctions until 2025. You can see why the government has done it. Renewables costs are falling fasts and the last thing this government is another row about the rising cost of 'green levies'. The small print can also be interpreted as potentially allowing for new auctions to support onshore wind and solar at some point, as well as subsidy-free CfDs. Some industry insiders remain optimistic they can keep decarbonisation efforts on course under this proposed policy regime.

But others are now warning of an investment hiatus. The amount of funding to decarbonise the UK's power supplies have been spread even thinner and there is still no clarity on how the cheapest forms of renewables will get to market. If the government's calculations on how much of the LCF has already been spent are wrong - and some informed observers think they are - or if renewables fail to deliver deep cost reductions then the entire foundation of the UK's decarbonisation plans for the next seven years could be in jeopardy.

This is high stakes stuff, and the sense that the government is gambling with its decarbonisation programme is only amplified by the unforgivable absence of any new thinking on how to improve energy efficiency and support renewable heat in the Budget. The urgency created by the Clean Growth Strategy and the latest UN Summit looks to once again be at risk of dissipating on the shores of Treasury orthodoxy and intransigence.

All of which brings us to the other big problem with Hammond's 'green' Budget. You used to be able to just about get away with 'all of the above' energy and environmental policies - declarations that promised to support clean and dirty tech or vowed to tackle climate change while ignoring its causes. But you really can't anymore. Global emissions could be rising again, just when they should be falling. Clean tech industries are transforming the world, as Hammond acknowledged, but that means supporting them to the hilt, not aiding their rivals while toying with half measures.

Hammond's gamble may just about pay off. Renewables developers may deliver the power that is needed at a lower than expected cost and coal may be forced off the grid sharpish. Electric vehicles could transform the auto industry and at some point a government might recognise the unerring logic of a national energy efficiency programme. But this Budget was not the genuinely ambitious push to build on the Clean Growth Strategy that was needed. It could turn out to be an extremely green Budget. Then again, depending on market volatility, it could throw a lifeline to coal and deliver a crippling hiatus in renewables investment. If that happens, it could turn out to be one of the dirtiest Budgets in recent years, regardless of any boost for electric vehicles.

I would always favour a Chancellor who recognises the importance of protecting the environment and publicly makes the case for doing so. But if you want to be really fit for the future then you have to back it up across the board and not revert to the tired cautious orthodoxy and fossil fuel addiction of the past.