How green was the budget? What the trade bodies say
Organisations that represent the environmental sector and other concerned businesses have not embraced yesterday's budget with open arms, though there is some enthusiasm for the idea of a Green Investment Bank.
Environmental Industries Commission
Danny Stevens, policy director, said: “For years the Government has failed to make proper use of fiscal measures to encourage the purchase of environmental goods and services.
“With this year’s Budget it has missed yet another opportunity to put an effective price on pollution through the tax regime and, therefore, done little to encourage investment in environmentally sustainable behaviour.
“This could have been achieved at a low cost to the Treasury through innovative funding mechanisms such as Tax Increment Financing; mobilising private sector investment through, inter alia, an Environmental Investment Institution; and targeted fiscal and monetary incentives for green technologies.
“The Green Investment Bank is a welcome step forward but, in reality, by simply announcing its intention to consult later in the year on establishing the bank, the Government has made little more than a tentative step forward, at a time when huge strides are needed.
“By now the UK should be well advanced in making the transition to a low carbon, resource efficient economy. We should be leading the world in attracting investment in high growth environmental industries, not simply consulting on it.
“The Bank also risks institutionalising the Government’s narrow understanding of the economic opportunities of “green investment”.
By limiting the Bank’s mandate to the low carbon sector, the Government risks forfeiting the huge investment opportunities that exist across the whole of the environmental sector.
The global environmental marketplace is currently worth over £3.2 trillion, and unless urgent action is taken to secure other, equally important, environmental and sustainability investment opportunities for British business, it is likely we will have to make the transition to a low carbon, resource efficient economy with technologies supplied from countries such as Germany, the USA, Japan and Korea which are continuing to put in place ambitious support measures for their environmental industries. This would be disastrous for our international competitiveness.”
Richard Lambert, CBI director-general, on measures to encourage a low-carbon economy: “Given the scale of investment needed for a low-carbon economy, we’re pleased to see the Government thinking about how to attract private capital.
“A green investment bank, reform of the electricity market and investment in ports’ capacity to attract off-shore wind manufacturers would be steps in the right direction.
But time is of the essence, and we need to see decisive action by the end of the year to convince companies to locate large-scale, low-carbon investments in the UK.
“But it is disappointing that the Government did not follow up with more support for household energy efficiency, and is pressing ahead and increasing the energy tax on manufacturing by £50m when it should be focusing on how manufacturers can be a part of a low-carbon economy.
“We are pleased that proposed changes to the landfill tax have not gone ahead. This would have cost business £1bn over the next five years with no additional environmental benefit.”
The Institution of Civil Engineers
Tom Foulkes, director general, on the creation of a Green Investment Bank: “A £2bn Green Investment Bank (GIB) is certainly a good start – we have been calling for new thinking on how to unlock the long term sources of funding needed to finance infrastructure for some time.
However, as Infrastructure UK has acknowledged, the UK will need to invest £40-50bn per annum in infrastructure, so with a starting fund of only £2bn clearly there is some way to go.
“It is vital therefore, that when Government says that this funding is just a start – it means it – and that it continues to work with industry to increase the volume of investment.
“This must take into account the need for investment across a whole range of sectors including water, waste and flood defences.
“The development of a National Infrastructure Framework is a very welcome step – decisions on the UK’s infrastructure development cannot be made in isolation – they must be based on the long term needs identified across the sectors.
“We are keen to play an active role in the Framework and work with Infrastructure UK on how this new bank can deliver a sustainable funding solution for future infrastructure.”
Commenting on the £66 million investment in ports for offshore wind manufacturers – He said:
“If we are to remain a world leader in the offshore wind industry, the UK must develop a supply chain with enough capacity to support rapid expansion of the sector over the next decade. Port infrastructure will be crucial to achieving this and therefore ICE welcome’s the investment in UK ports as a first step towards unlocking further private investment in creating coastal manufacturing hubs.
“However this is only one area of investment needed to fully develop the domestic supply chain. We will also need to build manufacturing capacity in other key areas such as installation vessels, foundations and cables to transport the energy onshore. Government will need to put further measures in place to give these industries the confidence to invest in supporting the offshore programme.”
Commenting on the commitment to reform the energy market to provide clean, secure and affordable energy in the long-term, he said:
“Broadly speaking we obviously welcome any reforms that will drive the UK towards a sustainable, decarbonised energy network in future and will look forward to the 2011 white paper. In the meantime however Government must focus on finalising the energy NPSs and facilitating the upscaling of low carbon technologies such as wind, nuclear and carbon capture and sequestration.
Time is ticking for the UK to address our security of supply crisis and we can’t afford to sit round waiting for further consultation, we need action.”
Commenting on the £270m in 2010-11 for 20,000 more university places, largely in key subjects like science, technology, engineering and maths, he continued:
“As we make the shift towards a low carbon economy there will be a growing need for skilled engineers in emerging technologies, especially within the energy sector. Skills shortages have already been identified in key areas including offshore wind, nuclear energy and marine and tidal technologies and in the interim we will have to import engineers to fill these gaps.
“The additional university places in today’s Budget will help plug this gap and ensure we are well-equipped to deliver a new generation of low carbon infrastructure, however universities must also receive sustained long-term funding over and beyond this announcement.
“There is little point however in investing in skills if there are no jobs for the future graduates to go to. There must be a secure environment to give industry the confidence to invest in its workforce.”
The Combined Heat and Power Association
The CPHA welcomed the focus on development of sustainable infrastructure announced in 2010 budget.
Graham Meeks, director, said: “We welcome the renewed focus on low carbon infrastructure as we follow a sustainable road to economic recovery.
“The Green Investment Bank, if properly funded, could be fundamental in bringing forward a range of projects where the market alone has difficulty in delivering.
“District heating networks will have a key role in securing our 2020 renewable energy targets and in decarbonising our national heat supply by 2050.
“The Government’s Energy Markets Assessment, published alongside today’s Budget, has indentified the importance of capture of waste heat in delivering a decarbonised UK, and the roll out of district heating networks will in turn be vital in making this happen.
“Today there is no sustained capital funding framework for this flexible, low-carbon infrastructure, so the Green Investment Bank could provide a valuable route to delivery.”
Food and Drink Federation
Julian Hunt, director of communications at the Food and Drink Federation, said: “Clearly we are disappointed that the Chancellor is cutting the rebate available to members under the Climate Change Agreement – a move that will cost our sector £8m a year in additional levy payments.
“At the same time, he has provided no clarity about the potential impact on industry of new green fiscal measures such as the Renewable Heat Incentive.”
< b>The Aldersgate Group
The Aldersgate Group, a coalition of big businesses, NGOs, MPs and others that promote the economic case for high environmental standards said it supports the Budget announcement for a Green Investment Bank.
Peter Young, chairman, said: “The new Green Investment Bank is rightly at the heart of the Government’s growth and jobs strategy. This will help leverage private sector funds at sufficient scale to deliver a swift and competitive transition to a low carbon economy.”
“The initial £2 billion of equity is a good start but must be rapidly scaled up over the next Parliament. The total low carbon investment needed by 2020 is at least £250 billion, leading to more secure jobs and a more prosperous future.”
British Property Federation
Liz Peace, chief executive said: ‘We welcome the commitment in today’s Budget to introduce a Green Investment Bank, and its accompanying initial focus, and investment in, the necessary infrastructure to deliver viable off-shore wind.
“While energy efficiency and reduction in energy demand from commercial buildings is vital, it is only through an accompanying decarbonisation of energy supplies that we will reach the Government’s ambitious carbon budget targets for 2050. We look forward to commenting in the forthcoming consultation in the summer.”
Renwable Energy Association
REA welcomed the confirmation of a new Green Investment Bank to support green energy projects. REA has been campaigning for the measure as part of Transform UK.
CEO Gaynor Hartnell said; “It’s important the Green Bank is sufficiently capitalised and supports renewable energy in all forms and at all scales. The bank could help to optimise manufacturing and job creation opportunities across the full range of renewable technologies.”
Also announced was a £60m fund for offshore wind manufacturers to develop port sites to help manufacturing companies locate facilities in the UK. This will be allocated after a competition, the details of which will follow shortly.
Gaynor Hartnell said, “While there in plenty in the budget on green investment, we expected more to address the growing skills gap right across the renewables industry.”
An announcement was also due on biomass ‘grandfathering’ under the Renewables Obligation, but this has now been delayed until next week.
Gaynor Hartnell commented, “This is an absolutely vital issue for the industry. Government has today given some indication of its proposed solution and we will be scrutinising these in detail. The crucial test will be whether the statement due on Tuesday does enough to unlock the billions of pounds of planned investments that have been stalled since before Christmas.”
The government published the initial assessment of its Energy Market review, which invites further consultation on future options to increase investor confidence in low carbon industry. This comes alongside Infrastructure UK’s report on a Strategy for national infrastructure which underlines the costs associated with renewable investment, given perceived risks. Both consultations will continue into summer.
Government announced that it will continue to review funding for the Renewable Heat Incentive delaying today’s expected announcement. They confirm that renewable heat generated for domestic use will not be subject to income tax.
Proposed changes to the Enhanced Capital Allowances announced for ‘biomass air heaters’ do not go far enough. REA has been pressing for all renewable heat technologies to be eligible for ECA’s
Renewable companies could benefit from the ‘UK Finance for Growth’ launched to streamline Government SME finance and provide access to a £4bn range of financial support products for businesses. RBS and Lloyds will provide a total of £94bn of new business loans – nearly half to SMEs.
Transport – The abolition of the fuel duty rebate for biofuels (announced Budget 2008) is confirmed. The extension of the rebate for biodiesel made from used cooking oil for the next two years is also confirmed (announced Pre-Budget Report 2009).
Gaynor Hartnell said, “Although we welcome the partial extension of the rebate, we are disappointed that it has not been extended to include tallow or high blend biofuels. We also have real concerns that loopholes in the plans could flood the market, undermining the small UK producers the policy aims to support.”
REA had also hoped for a commitment to increase support for Wave and Tidal in England and Wales and for a timetable to resolve the Feed-in Tariff deadlock for farm-scale AD.
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