Green statements and cosmic jokes

It feels like something of a cosmic joke that a British Chancellor would finally deliver a genuinely serious economic statement on climate change and sustainability just hours before the latest round of Brexit vote dramas knocked his intervention so far off the front pages it could almost trouble the sports' section.

Many MPs may agree climate change and the development of a 21st century green economy is of far greater long term importance to the UK than Brexit, but that cannot stop them turning the latter into an headline-grabbing, attention-sapping, political and constitutional train wreck. Which is a shame, because yesterday afternoon Philip Hammond delivered one of the greenest speeches by anyone from the Treasury in years - it would be nice to think people noticed.

It was easily the greenest Commons Statement by a sitting Chancellor since George Osborne announced the Carbon Floor Price way back in the 2011 heyday of 'Hug a Husky' Cameronism. And given the last Tory Chancellor was never one for green cheerleading, always diluting his environmental rhetoric with some love for fossil fuels, it was arguably the greenest Treasury Statement since Gordon Brown was laying the foundations for the Stern Review, the Climate Change Act, and electricity market reform well over a decade ago.

However, such is the scale of the climate crisis and so patchy is the government's policy track record that not even the greenest Spring Statement or Budget in over a decade is enough to secure universal praise. The response yesterday ran the full gamut from accusations of "fiddling while the planet burned" from some green campaigners, through a warm but caveated welcome from sustainable business groups, to a celebratory hailing of the Chancellor's "unbelievably great green announcements" from some Conservative colleagues.

So which was it, a betrayal of future generations, a welcome if underfunded step forward, or a hugely important turning point? The answer, as always, is a bit of all three. 

There is no doubt the case for the prosecution is compelling. Shadow Chancellor John McDonnell's accusation that this was all a bit rich coming from a government that has scrapped so many decarbonisation policies stung because it was entirely fair. Measures to improve the efficiency of new homes are welcome, but the government axed similar measures back in 2015 to appease a handful of lobbyists - who is to say this ambition won't be watered down again?

More broadly the government has had years to do more to support energy efficiency measures for small businesses, tackle aviation emissions, and get a grip on the crisis in biodiversity and has done little to nothing. Hammond's new found support for the green economy is great, but he is going to be furious when he finds out which Party has been in charge the past nine years. 

And the critique of Hammond's new green policy push does not stop there. There are still numerous other policy areas beyond new build homes where UK policies are well short of the decarbonisation trajectory required to meet our legal targets. Where were the urgently needed measures to improve the efficiency of existing buildings, tackle shipping emissions, properly turbo charge EV adoption, enable the development of the cheapest form of renewables, make the smart grid a reality, and start planning for a net zero emission target with immediate effect? It is notable that anything that would have cost additional money or required much civil service muscle has once again been kicked down the road.

The result is a patchwork of welcome but disjointed measures that seeks to tag a clean economy onto a fossil fuel economy without really challenging polluting incumbents, nor moving anywhere near far or fast enough to deploy genuinely clean technologies. And that is before you consider the chances of it being delivered as promised when the government and the Prime Minister look broken, the likely candidates to replace Theresa May are either indifferent or hostile to climate action, and the economy teeters on the edge of an abyss while the Conservative Party deals with its internecine psychodramas. 

However, if the critics have a point there is also a more generous interpretation that businesses need to consider.

Hammond's declaration that sustainability should be built "into the heart" of the UK economy and his assertion that the protests and warnings from young people fearful for their future have to heard are a big deal, regardless of the Brexit noises off and the tenuous nature of his grip on the keys to Number 11.

It is further evidence the School Strikers have struck a nerve and that more savvy politicians have recognised their electoral import. The tenor of Hammond's speech and the wide-ranging nature of his new policy interventions, coming on the back of the Offshore Wind Sector Deal, previous funding for electric vehicles, and Michael Gove's hyperactive policy spree at Defra, feels like part of an encouraging trend. Even amidst the Brexit madness things are edging forward. 

And then there is the policy detail itself. Yes, there is lots of devil in the detail as always and plenty of room for disappointment. And yes, there were no additional funds and nothing that could be described as redolent of a climate emergency response. But the three different options proposed for new small business energy efficiency schemes could all dramatically improve the efficiency of literally thousands of businesses. The mooted schemes for new green loans, energy efficiency auctions, and/or obligations could prove genuinely transformative if they are funded and executed correctly.

Similarly, biodiversity offsetting and natural capital thinking may remain hugely controversial, but the prospect of Sir Partha Dasgupta coming forward with a biodiversity based version of the Stern Review could have a huge impact on how the Treasury responds to threats to the natural world. There are risks with such approaches, but there are also opportunities that are not to be easily dismissed.

Yes, a government endorsed carbon offset scheme does feel tokenistic, especially when set against the on-going failure to properly fund low carbon aviation R&D. But the proposals for a greener gas grid and enhanced ocean protection are welcome steps forward.

And then there is the hugely encouraging commitment to introduce a Future Homes Standard that would end the use of gas heating in new build homes from 2025. It may be frustrating that the replacement for the Zero Carbon Homes Standard comes a decade after it was scrapped, but this is still a massively important move. It sends a crystal clear signal to developers of heat pumps and other low emission technologies that the market will be there for them from the mid-2020s, if not sooner, providing them with the confidence to invest, scale up, and in the process bring down costs. It shows the Treasury is willing to face down the inevitable criticism of a move to 'ban boilers' from the Usual Suspects (who were surprisingly quiet, probably because they were too busy plotting how to crash the economy next month). And it demonstrates there is a willingness to adopt the CCC's advice, albeit somewhat belatedly. 

It is this last point that could prove to be the most important. If the government concludes that the only sufficient way to respond to the protests from young activists - protests which are only going to grow - is to take expert advice on board then bolder policies on a host of different fronts could be in the pipeline. How can a government that purports to take the School Strikers and green businesses seriously oppose likely recommendations for a net zero emission target? How can it fail to come forward with a credible plan to meet that era-defining net zero goal? How can it not introduce the policies to make that plan a reality?

There is still plenty of room for delay, obfuscation, and backlash. Equally there is no doubt that parts of the Treasury will remain resistant to many of the green policy measures that will be required, as evidenced by its reportedly obstructive stance on parts of the post-Brexit Environment Bill. But slowly the most important department in government is evolving its position and recognising the central importance of the green economy.

Hammond may have framed his announcements with an ideological debate about the role of the state and the importance of innovation and market economies, but while the need to draw a political dividing line will always remain this debate remains something of a frustrating distraction. The term market economy is so capacious it takes in everything from nominally communist economies to European social democracies to US-style capitalism to Wild West kleptocracies. Some of Hammond's colleagues would decry his carbon taxes and building standards as a Commie plot and government over-reach. Some of his opponents would decry them as a capitalist plot and neoliberal racketeering, at the same time as basically supporting carbon taxes and stronger regulations, just with a slightly more statist twist. It is an ideological row almost perfectly designed to distract from the serious day-to-day business of decarbonising as fast as possible. 

Yesterday's statement was inadequate in the face of the climate threat, frustrating in its failure to deliver a full spectrum policy push, and disappointing for its lack of financial punch. But it was still a welcome, pragmatic, and sizeable step forward that signals the next phase of green economic development could be just around the corner. Assuming, of course, Brexit doesn't take down every progressive policy and last iota of business confidence with it.

The cosmos may be playing a joke, but the green economy could have the last laugh.

This post first appeared as part of BusinessGreen's exclusive daily Overnight Briefing, which is available to all subscribers

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