Businesses don't invest in dead tech - so what's the government playing at?

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Labour's Barry Gardiner argues the message from the Paris Summit is clear: governments must back the technologies of the future

Nobody invested in gaslight after Edison invented the light bulb, nor in minicasettes after Philips started producing CDs. Businesses just don't invest in dying technology - only governments, it seems, are that stupid.
To continue investing in old tech at the expense of efficient, less polluting ones is just not a legitimate business model.

It doesn't matter how much fossil fuel we have left in the ground. After all, the Stone Age didn't end because of a shortage of stone. Within this century, fossil fuels will have had their day.

Tackling climate change is not optional. To stay below 2C warming, the vast majority of our existing fossil fuel reserves can't be burned. Industries have already extracted more than we can ever use if we're to meet our binding limits - and the increasingly adopted 1.5C figure will necessitate still stricter contraints.

The Bank of England and the Financial Stability Board are not talking about the risk of stranded assets from an ethical standpoint but because of the risks that climate change poses to our long-term prosperity.

Our future is low carbon and adapting our energy consumption accordingly should be an urgent economic priority - the more we press pause, the steeper future emission cuts will have to be. And the more expensive they will be to make. To delay the transition - or worse, step backwards - is economically, as well as environmentally, illiterate.

Yet in 2015 the UK Government announced it is:

  • stopping all subsidies to onshore win;
  • proposing to cut back solar subsidies by almost 90 per cent;
  • killing off its Green Deal energy efficiency program without any more effective replacement;
  • changing the vehicle excise duty to impose a tax on cleaner vehicles
  • privatising the Green Investment Bank, and seeking to remove its green mandate;
  • binning its Zero Carbon Homes commitment, and cutting back energy efficiency spending;
  • pocketing the £1bn originally promised to develop Carbon Capture and Storage projects;
  • subsidising gas stations, existing coal stations, and even the dirtiest diesel-powered generating capacity.

So what is the government playing at?

Right when we urgently need more money flowing away from polluting industries and into low-carbon solutions, the government is busy doing the opposite.

Between 2013-14, it ploughed an eye-watering £6bn into fossil fuels - far outweighing its subsidies for renewables (even before the most recent cuts).

The Committee on Climate Change says gas stations must be almost entirely off the grid in around 20 years time. So who would invest in the creation of the government's newly-announced gas fired power stations - with a lifespan of 30 to 40 years - without enormous government subsidies and guarantees?

The government continues to peddle a false choice: environment or economy.

The UK government couldn't be more at odds with the world's business leaders, who were gathered this week in Paris for the COP21 Sustainable Innovation Forum.

I spoke with many of them - and they categorically reject the Chancellor's motto: that what's good for the environment is bad for business. They know that a clean sustainable economic model creates investment opportunities and jobs, and they're eager to embrace the huge economic benefits that will flow from it.

There's good cause for optimism.

Between 2010-13, employment in the UK offshore wind sector grew by eight per cent each year. For onshore it was 10 per cent. Solar was double that. This compares with growth in general national employment of only 1.6 per cent per annum. In 2013, the UK low carbon sector, including its supply chain, employed more than 400,000 people. A recent report by Cambridge Econometrics found that, over the next 20 years, offshore wind alone could increase UK GDP by £20bn a year by 2030 and create 70,000 more jobs.

We can meet our legally binding (and climate-critical) emission limits - but we cannot do it whilst slashing renewables and persisting with huge taxpayer subsidies of fossil fuels.

The data speaks for itself - as does the government's own advisor. Even the Secretary of State has had to admit we're falling 10 per cent short on our legally-binding (and climate crucial) emissions reduction target for the 4th Carbon Budget.

This came just days before the Paris Summit, where the Prime Minister had the gall to wax lyrical about climate obligations to our grandchildren.
And it came just hours before the Committee on Climate Change announced even stronger targets in the fifth carbon budget. Meanwhile, the government shamelessly announced yet further fossil fuel subsidies in the capacity auction this week - with approximately 2GW expected to go to one of the most polluting forms of capacity, diesel generation.

The Policy Framework matters

All the businesses and investors at COP21 were very clear on this crucial point: government can help the transition of our economic model only if it adopts a consistent, coherent, credible policy framework. That means:

  • clear long and medium term targets;
  • an end to perverse subsidies for fossil fuels;
  • clear support for the energy sources of the future;
  • support for carbon capture and storage;
  • regulatory certainty with no sudden damaging impacts on return on investment;
  • strong support for research and development in the sector;
  • energy efficiency standards that are going to drive innovation.

This year, for the first time ever, the UK fell out of the top 10 countries for investment in Low Carbon infrastructure - precisely because the government has failed on all these counts.

It's on track to becoming the government that stopped British business taking its place at the forefront of the Clean Industrial Revolution that will characterise the 21st Century.

If Britain is to restore its reputation as a business leader and an economic powerhouse, the government needs to give its energy policies a major policy overhaul.

It's time for the UK to get on board: responsible, sustainable investment doesn't cost the earth, but delaying it just might.

Barry Gardiner is Labour's Shadow Energy and Climate Change Minister

This article is part of BusinessGreen's Road to Paris hub, hosted in association with PwC.

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