Budget 2016: 10 green pledges we all want to hear George Osborne make
From retaining mandatory carbon reporting requirements and confirming support for renewables through to supporting SMEs on energy efficiency and developing a thriving circular economy - is today the day that Chancellor George Osborne finally announces a Climate Budget that delivers on the UK Government's big green promises?
Since last year’s Summer Budget – when Osborne failed to deliver any good news for edie readers – the Tories have dealt a series of shocking body blows to the green economy that make it even more surprising that the Paris goal for net-zero carbon emissions will apparently be enshrined in UK law, as announced by Energy Minister Andrea Leadsom earlier this week.
It was Leadsom herself who recently said she was “sick and tired” of the barrage of complaints being fired at her Department for Energy & Climate Change (DECC) over punitive cuts to renewable energy subsidies. Prime Minister David Cameron has also branded the criticism from green groups, industry associations, opposition parties and other political figureheads “total, utter nonsense”.
But if there is one word that summarises all of the key asks being put to Chancellor Osborne from the individuals and organisations in the green business wishlist below, it’s ‘clarity’.
Whether it is clarity over CCS funding, the future of the Levy Control Framework or progress on low-carbon heat and transport – green policy has become shrouded in confusion, with a ‘chop-and-change’ approach seemingly threatening the UK’s ability to meet its energy security and climate objectives and denting investor confidence.
Faced with a slowing economy and challenging public finances, Osborne will undoubtedly focus his eighth Budget on balancing the books, with a squeeze on welfare spending, reforms on business rates and a crackdown on tax avoidance all expected to be discussed today, along with the rumoured development of a high-speed railway line to the north. But will Osborne have time to dedicate any part of today’s speech to the green economy?
Budget 2016: What should George Osborne say?
Osborne used last autumn’s Spending Review to confirm sharp departmental cuts to DECC and Defra, but energy and environmental policy was otherwise mostly overlooked.
This time around, sustainability professionals and industry bodies have high hopes for positive mentions of the likes of mandatory carbon reporting, energy efficiency frameworks and the Paris climate agreement. But expectations of any actual pledges being made by Osborne on the green economy are understandably low.
edie has spoken to a number of CSR leaders and green groups for their hopes and expectations for today’s Budget, generating the following wishlist of pledges that we all want to hear Osborne make.
1) “My Deputy Speaker, we will retain our market-leading carbon reporting requirements.”
Perhaps the biggest wish on this among sustainability and CSR professionals is for the Government to keep mandatory carbon reporting requirements, which require listed companies to report annually on their global greenhouse gas emissions.
The Government has reviewed carbon reporting regulations as part of its consultation on business energy efficiency policies, after a consultation from the Treasury suggested replacing the carbon reduction commitment with a new energy consumption tax under a single reporting framework, designed “through the prism of the Energy Savings Opportunity Scheme (ESOS)”.
In a letter published in The Independent last week, representatives from Aviva, BT, M&S, the National Grid and a host of other businesses argue that the Government should keep the mandatory carbon reporting requirements first introduced in 2013, because they provide standardised and comparable information to institutional investors.
M&S’s director of Plan A Mike Barry – who signed that letter – told edie: “We believe mandatory carbon reporting drives carbon literacy in business as well as offering transparency to investors and stakeholders. This in turn drives low carbon innovation without micro-managing business and second guessing outcomes. It’s an efficient and effective way of delivering low carbon change.”
Another of the signatories, Aldersgate Group chief executive Nick Molho, added: “These requirements have been essential in driving greater business productivity and providing material information to institutional investors to guide their fund management decisions. Removing or weakening them would make no economic or environmental sense and would go against the growing international trend towards greater corporate disclosure of greenhouse gas emissions.”
The Government is expected to publish its full response to the energy reporting consultation in line with today’s Budget.
2) “We will set out the Levy Control Framework beyond 2020/21, and a timeframe for Contracts for Difference.”
The Levy Control Framework (LCF) aims to protect consumers by capping total subsidies for low-carbon energy generation until 2020. Last summer, DECC withdrew subsidies for some forms of renewable generation, following the revelation it had overspent the £7.6bn budget for the LCF by a projected £1.5bn.
Now, the Government is being called upon to review the LCF “as a matter of urgency”, and set out a budget post-2020 “as soon as possible” to encourage investment across a range of technologies, as there is currently a lack of transparency and “no forward view” on which to base investment.
RenewableUK’s deputy chief executive Maf Smith told edie: “We hope the Chancellor will use the Budget to set out the LCF beyond 2020/21, so that renewable energy developers can plan projects into the next decade and attract the investment they need.
“To engender full confidence, this needs to be accompanied by both a robust and detailed methodology showing how the Treasury has arrived at its figures, and a reform of LCF accounting so that the ‘buying power’ of the budget is not so sensitive to wholesale price movement. Such moves will help to reduce the cost of capital and deliver best value for money.”
Meanwhile, a specific date still hasn’t been set for the next contracts for difference auction, which is due to take place at some point in 2016. “Investors need the certainty of a route to market and it remains very unclear,” said the Renewable Energy Association’s head of policy James Court.
3) “We will today ramp up our efforts to tackle air quality.”
It is quite fitting that the Chancellor will be speaking today in Westminster – which has reportedly failed to meet targets to cut its own pollution footprint – in London – which had breached annual pollution limits just one week into 2016.
Time is certainly of the essence for the Government to act. Environmental law firm ClientEarth recently sent a final legal warning to Defra, informing the Department it will commence legal action if drastic improvements aren’t made to the UK’s ‘woeful’ approach to tackling air pollution.
ClientEarth chief executive James Thornton said: “Despite an order from the UK’s highest court, despite tens of thousands of premature deaths in this country every year and despite clear evidence to show that air pollution has a terrible effect on the health of vulnerable groups like children, the Government has consistently ducked its responsibility to ensure our right to clean air. We have had to issue this legal warning to the Government because of its failure to produce a plan that would bring air pollution down as soon as possible.”
Richard Howard, head of environment and energy at Policy Exchange, added: “If we are to clean up air pollution, then Government needs to recognise that diesel is the primary cause of the problem, and to promote a shift to alternatives. This needs to be done in a way which does not unduly penalise existing diesel drivers, who bought their vehicle in good faith, and gives motorists sufficient time to respond.
“Instead of increasing diesel fuel duty or banning diesels from city centres, the government should look to increase taxes on new diesel cars and offer scrappage grants to take old polluting diesels off the road.”
4) “We will STOP removing bricks from our ‘Jenga tower’ of green policies.”
UK energy and environment policy is in crisis – as pretty much everyone in the energy industry and green economy now agrees. The Tory regime has torn apart a raft of green policies without any credible replacements to date, and we remain off-track to meet our fourth and fifth carbon budgets.
As a case in point, we’ve heard that there will be “future misery” for UK homeowners if the Government doesn’t reverse its decision to remove the zero-carbon homes requirement – something not mentioned in DECC’s plans at all. And we’ve heard that the UK “must try harder” to attract investment in renewables – following a series of punitive changes to various subsidy mechanisms. (View a full timeline of the Conservative Party’s green policy changes and announcements here).
The Energy Saving Trust’s chief executive Phillip Sellwood recently likened to a game of Jenga – “everyone is pulling a brick out of the wall, but no one wants to be the last person to pull the brick because the whole edifice comes crashing down,” he said.
In a blog post earlier in the year, Friends of the Earth campaigner Henry Chown said: “The Chancellor has repeatedly been a block to the green economy. He has slashed vital solar subsidies, costing thousands of jobs, and he’s provided huge tax breaks for fossil fuels such as North Sea oil and gas.
“Now, he must give us a Budget that delivers on the Government’s climate promises.”
5) “The time for Britain to move towards a thriving circular economy is NOW.”
The vast majority of sustainability professionals have already agreed that more research and action is needed from the Government to publicise the economic case for a circular economy.
Recent research carried out by Imperial College London on behalf of waste management firm Veolia found that a fully-functioning circular economy would add around £2.9bn to UK GDP every year, as well as creating new jobs and significantly reducing the country’s environmental impact.
The European Commission last year launched its much-anticipated circular economy package, including weakened recycling targets, tools to halve food waste by 2030, and measures to promote reparability in the design phase of products. But the UK continues to lag behind many other EU Member States when it comes to developing a circular economy, with a notable lack of cooperation between Government and industry.
Charlotte Morton, chief executive of the Anaerobic Digestion and Bio-resources Association (ADBA), is urging Osborne to recognise the Committee on Climate Change’s recommendations in their fifth Carbon Budget, which urge action to support on-farm AD and divert biodegradable waste from landfill if the UK is to meet its carbon targets.
“Centrally driven support for separate food waste collection schemes will be an especially important step towards developing a thriving UK circular economy,” Morton said.
6) “We will provide more support for SMEs to improve energy efficiency.”
Representing an annual turnover of £1.8trn and nearly 50% of all private sector turnover, time-pressured SMEs across the UK are missing out on big energy savings due to a lack of support and incentives from Government to improve energy efficiency.
So says the Carbon Trust’s managing director Richard Rugg, who told edie: “This is fundamental problem that needs to be addressed as energy efficiency in SMEs is an important lever in increasing UK SME competitiveness through the driving down of overheads.
“We know from experience that without some form of direct assistance SMEs are unlikely to implement any energy efficiency measures. This can be changed through impartial and practical advice and better access to finance.
“At present, most energy policy is focused on larger businesses and consumers, so we would like to see action taken in the Budget that actively promotes resource efficiency across our SME community.”
7) “We will make a U-turn on our ‘disappointing and damaging’ CCS cancellation.”
The potential for gas in the UK energy mix is reportedly “very limited” without CCS – something DECC mentioned just once in its recent 5000-word grand plan, after the sudden scrapping of £1bn CCS funding.
Energy and Climate Change Committee (ECC) Chair Angus MacNeil recently labelled that CCS announcement “the latest in a series of snap decisions that have damaged confidence in the Government’s energy policy”.
“If we don’t invest in the infrastructure needed for carbon capture and storage technology now, it could be much more expensive to meet our climate change targets in the future,” said MacNeil. “Gas-fired power stations pump out less carbon dioxide than ones burning coal, but they are still too polluting.
“If the Government is committed to the climate change pledges made in Paris, it cannot afford to sit back and simply wait and see if CCS will be deployed when it is needed. Getting the infrastructure in place takes time and the Government needs to ensure that we can start fitting gas-fired power stations with carbon capture and storage technology in the 2020s.
A recent ECC report warned that DECC’s lack of communication prior to – and in the aftermath of – the CCS cancellation has damaged investor confidence and muddied the waters in the wake of that historic Paris climate agreement.
8) “The UK will become a world-leader on energy storage.”
Ever since Tesla’s unveiling of its domestic Powerwall battery packs (due in the UK any time now), the world has become primed for an energy storage ‘megashift’.
The supply-side (energy generators and providers) has an obvious need for energy storage, as the technology can be used to balance the variable outputs of renewable sources, but the report says the biggest growth could come from the demand side, as consumers and businesses install batteries to store excess power from onsite and rooftop renewables.
A recent report from the Carbon Trust revealed that the implementation of energy storage systems could contribute £2.4bn to UK electricity system savings by 2030, but only if a range of ‘necessary regulatory reforms’ are introduced to steady the UK’s energy market.
The Trust’s director of innovation Andrew Lever is hoping Osborne will provide some positive comments on the potential of energy storage in the UK’s transition to a low-carbon future.
“An urgent rethink is needed so we can address and overcome the broken value chain of energy storage, which is essential if Britain is to provide low carbon energy at the lowest cost to the consumer,” Lever said.
“Energy storage has long been seen as a panacea for a low carbon energy sector in the UK, offering a suite of services to balance the system, make electricity networks more efficient and help the UK to meet its carbon targets at the lowest cost.”
9) “My Deputy Speaker, we should vote IN on the EU Referendum.”
This is perhaps the least likely wish to come true on this list, but it is something edie readers certainly feel passionate about. A recent readers’ poll, included within our ‘how the green economy will vote’ article (1 March) revealed that 81% of 161 respondents would be voting to remain in the EU, with just 15% saying they will vote for Brexit, and 4% undecided
Forum for the Future’s James Goodman previously told us a British exit from the EU would be a “mistake for sustainability in the UK”, while Friends of the Earth campaigner Sam Lowe said now is simply not the time to “pull up the drawbridge” and try and tackle sustainability and the environment alone.
To date, a host of high-profile energy and environment politicians have attempted to sway the tide by announcing their own voting intentions ahead of the referendum. Energy Secretary Amber Rudd and Energy Minister Matthew Hancock have both sided with Prime Minister David Cameron’s wishes to remain within a ‘reformed’ EU, while Environment Secretary Liz Truss cited global market uncertainty – especially for farmers – as a reason why Britain shouldn’t “leap into the dark” with a Brexit.
Could George Osborne follow suit today?
10) “We will replicate the climate ambition we displayed in Paris here in the UK.”
Energy Minister Leadsom’s announcement that the UK will enshrine in law a long-term goal of reducing its carbon emissions to zero – as called for in last year’s historic Paris climate deal – has come as a big, but welcome, surprise.
At Paris, nearly 200 countries promised to try to bring global emissions down from peak levels as soon as possible. More significantly, they pledged “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”.
The UK is already legally bound by the Climate Change Act to reduce emissions 80% by 2050, but a law mandating a 100% cut would mark a dramatic increase in ambition. Business groups have welcomed the announcements, and are hoping Osborne will today echo the level of ambition on climate change that was distilled in the Paris accord.
UK Green Building Council chief executive Julie Hirigoyen said: “We wish that the Government would recognise its own performance gap when it comes to sustainability in the built environment. Despite purporting to demonstrate environmental leadership off the back of the Paris agreement, the Government has cut back key incentives and regulatory signals to the industry.”
Will Paris get a mention in the 2016 Budget? Will any of the above topics get a mention? Or will Osborne deliver another Budget that leaves us all asking more questions than answers?
Stay tuned to edie for full Budget coverage (from 12:30pm) and follow us on Twitter @edie using #Budget2016 for live updates for green business.
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