New policies needed to deliver low carbon at the lowest cost in run-up to Paris

Despite the recent criticisms of government policy, internationally the UK is still seen as a leader on climate change. The motherland of the industrial revolution has been at the forefront of dealing with its potentially devastating environmental and economic consequences.

Our reputation on climate change has been built up for over a quarter of a century: from Margaret Thatcher’s groundbreaking 1989 speech on global warming to the UN; to the huge cross-party support that passed the world’s first climate change legislation in 2008, with 463 MPs voting for it and just three against.

Not only is this the right thing to do, it also pays dividends – both diplomatically and economically. It has created opportunities for British businesses, brought in foreign investment and opened doors for trade deals.

The growth of the low carbon economy has been a real success story over a period where many other sectors have struggled or stagnated. Official 2013 figures, released in March this year, show that it was directly responsible for 460,000 jobs and a contribution of £45 billion to GDP. The number of jobs has been growing at 3.6 percent a year and the value to the economy at 8.7 percent.

But since the current government has come into power it has been a turbulent few months for businesses in the sector. In the run up to global climate negotiations in Paris this December a lot of policy has been swept away, but very little has yet been put in place to replace it.

Feed-in-tariffs for solar power have been drastically reduced. Promised subsidies for large scale renewables projects are being removed a year earlier than expected. Planning permission has been rejected by DECC for major new wind farms, both onshore and offshore. Funding for renewable heat has been scaled back. Regulations requiring developers to build zero carbon homes have been scrapped. Road tax banding that incentivised the purchase of lower emissions vehicles has been watered down. The coalition’s flagship energy efficiency programme, the Green Deal, has been scrapped. And the government’s share in the Green Investment Bank are being sold into the private sector, which risks it becoming just another bank.

These decisions aren’t all bad – in fact some are very sensible. The Green Deal was only having a tiny fraction of its intended impact and needed to go back to the drawing board. But taken together these decisions have shaken the confidence of companies and investors in the UK as a place to do low carbon business.

Quite rightly, the talk alongside all these changes has been all about the need to reduce carbon emissions in the most cost-effective way possible. This means making sure that the taxpayer’s investment today will create a prosperous, low carbon economy for tomorrow. To do this prudently means balancing investment in the future against the cost to the taxpayer today at a time of restricted public spending.

Well-designed new policies will need to be implemented soon to replace and improve what has been lost if we are going to reduce carbon emissions and maintain a resilient energy system. Without greater certainty for investors progress in key sectors is likely to stall, while international rivals such as Germany and China continue their aggressive investment into low carbon technologies and clean energy.

Most importantly we need to put in place a clear policy framework to drive a step change in energy efficiency. This can lower household bills, improve business competitiveness and help the public sector save money so it can direct its limited budget towards frontline services. Reducing overall energy demand also directly impacts the need to build new energy infrastructure, helping to save money and keep the lights on.

We now have well over a decade of experience that tells us this is the best way to reduce carbon emissions at the lowest cost, providing good returns on investment and value to the economy. We also have a far better idea now of what mixture of taxation, regulation and incentives will prove to be most effective. For example, based on our previous experience a £15 million programme supporting industrial energy efficiency could unlock energy savings of more than £140 million.

Alongside this there is a need for continuing support for low carbon technology, both in innovation and deployment. This needs focus on those technologies that can meet the UK’s needs for electricity, transport and heat at the same time as benefitting our economy.

This means recognising the long-term value in technologies and helping businesses to grow. The first wind turbine to generate electricity was invented in Scotland in 1887, but today none of the major manufacturers of wind turbines are British. Graphene, the miracle material that has a number of exciting potential low carbon applications was discovered at the University of Manchester, but today less than one percent of graphene-related patents are first filed in the UK. Almost half are filed in China and the individual company leading the pack is Samsung.

Now is the time to restore confidence that the UK is – and will continue to be – a leader on climate change. We need a sensible new set of policies that will help the country to meet its carbon emissions reduction targets and create long-term economic value, without putting undue strain on the public purse.


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