Green Economy

Green Stimulus

As part of the fiscal stimulus, the Pre Budget Report announces that the Government will provide “£535 million of accelerated capital spending and additional resources to promote its environmental objectives and support low-carbon growth.”

It is expected that this will help sustain and expand the estimated 350,000 jobs in the low-carbon sector.

The ‘Green Stimulus’ includes £60 million to provide 16,000 social houses with energy efficiency and heating measures.

Green Jobs

The Pre-Budget Report concludes that over the next 20 years, more than one million people could be employed in the UK’s environmental industries.

Early in 2009 the government will publish a Low-Carbon Industrial Strategy which will aim to help businesses adapt to the low carbon economy and respond to the growing market opportunities.

The Pre Budget Report announces that the alongside Low-Carbon Industrial Strategy, the government will publish a Low-Carbon Marketing Strategy “promoting the UK as a global hub for low-carbon solutions.”

The UK Economy: Addressing Long-Term Strategic Challenges

Alongside the Pre-Budget Report the Government has published a series of supplementary documents.

The report ‘The UK Economy: Addressing Long-Term Strategic Challenges’ looks at how the Government aims to secure economic stability over the long-term – including the impact of environmental change on the economy. The report concludes that the “drive for a low carbon economy opens up many opportunities for growth, and the opportunity for more and better jobs.”

In addition to setting out the Government’s high-level environmental objectives – such as securing agreement on an international framework for tackling climate change, finalising the EU climate package (including the EU Emissions Trading Scheme) and the Climate Change Bill, the report looks at the macroeconomic impacts of environmental change. The report highlights that the macroeconomic costs for the UK of meeting a 20 per cent reduction in greenhouse gas emissions in 2020 would be a 0.4 per cent reduction in the level of GDP.

The report also looks at the “implications and opportunities of a low-carbon economy” including the observation that “infrastructure being put in place in the next decade will need to be resilient to changes in environmental conditions in the longer term.”

The report also highlights that the EU Emissions Trading Scheme and other carbon control measures expected up to 2020 will have negligible impact on international competitiveness.

The report also highlights the action Government is taking to support low carbon industries:

  • Removing barriers to investment – the report highlights amendments to the planning system (through a new Planning Bill) to support “renewables, nuclear, and carbon capture and storage.” The report also highlights incentives for households, businesses and the public sector to improve energy efficiency through the measures such as the Carbon Emissions Reduction Target and the Carbon Reduction Commitment.
  • Enabling the supply chain and skills base to develop – the report highlights the forthcoming Low Carbon Industrial Strategy which “aims to help businesses adapt to the low carbon economy and respond to the growing market opportunities which will be created.”
  • Supporting innovation in low carbon technologies – for example through the forthcoming Renewable Energy Strategy.
  • Regulatory Reform

    The Pre Budget Report highlights the government’s proposals to introduce ‘Regulatory Budgets.’

    Regulatory budgets would set out the cost of new regulation that can be introduced in a given period. It is currently proposed that a budget period would last three to five years. Furthermore, a reporting process would be implemented to hold Departments to account if they exceed their budgets.

    Reforming the EU Budget

    The Pre-Budget Report announces that the government is calling for the EU Budget to be reformed to ensure that it supports Member States in ensuring “the EU has the skills to compete in a low-carbon, global economy, maximising the opportunities for growth and jobs.”


    Landfill Tax Exemption

    The Pre Budget Report highlights that the government has legislated to phase out the landfill tax exemption for waste arising from the clearance of contaminated land.

    “The revenue derived from removing this exemption will be used to extend land remediation relief. The exemption will be phased out by 1 April 2012.”

    Land Remediation Relief

    Draft legislation to extend land remediation relief to expenditure on long-term derelict land was published for consultation alongside the Pre Budget Report.

    The legislation confirms that the costs of eradicating Japanese Knotweed will qualify for relief.

    Renewable Transport Fuels

    Renewable Transport Fuel Obligation

    The Pre Budget Report highlights the conclusions of the recent Gallagher review and the current consultation on the Renewable Transport Fuels Obligation (RTFO) Order 2009. The consultation document proposes slowing down the rate of increase to the biofuels targets under the RTFO to an increase of 0.5% per year, reaching a target of 5% in 2013/14.

    An amendment to the consultation was recently published following the identification of a drafting error in the original RTFO Order.


    Competition and Innovation in Water Markets

    The Pre Budget Report highlights the recent publication of the interim report of the Cave Review for Competition and Innovation in Water Markets.

    The interim report sets out the Review’s findings on the costs and benefits of further competition and innovation, and where appropriate how they should be introduced. The review is due to deliver its final recommendations in the spring of 2009.

    Government’s Initial Response to the Interim Report of the Cave Review

    The Pre Budget Report announces a series of measures to extend and enhance retail competition in the water markets for large non-domestic customers in England, including:

  • Lowering the usage threshold above which businesses and other non-domestic customers are eligible to switch supplier from 50 ML to 5 ML
  • Extending the competition regime to retail wastewater services
  • Removing the current access pricing arrangement for water from legislation (replacing it with simplified criteria to be introduced by Ofwat)
  • Introducing nationally agreed codes to be coordinated by Ofwat in conjunction with stakeholders.
  • Sustainable Buildings & Energy Efficiency

    Low Carbon Buildings

    The Pre Budget Report announces that the “Government will shortly bring forward proposals to support householders and businesses further in improving the energy efficiency of their properties, and installing low carbon heating in existing buildings. In addition, the Government will also shortly set out its proposals for new zero-carbon homes and non-domestic buildings.”

    Estimated Carbon Savings

    The Pre Budget Report estimates that 13 million tonnes of carbon dioxide has been saved from (i) the Carbon Emission Reduction Target (this includes the impact of the proposed 20 per cent increase in the target – see below) , (ii) zero carbon homes6 and (iii) the Energy Performance of Buildings Directive.

    Funding for energy efficiency in low income households

    The Pre Budget Report announced £100 million of new funding for Warm Front in addition to bringing forward £50 million of spending on the programme.

    Bringing Forward Investment in Housing – including energy efficiency measures

    The Pre Budget Report announces that the government will bring forward £775 million of housing and regeneration investment. including £200 million on Decent Homes programmes to fund improvements and improve energy efficiency in 24,000 council homes.

    Bringing Forward Investment in Schools – including energy efficiency measures

    The Pre Budget Report announces that the government will bring forward £800 million of investment under the priority schools capital programmes in 2009-10.

    The report states that this could bring forward energy-saving measures in around 140 secondary schools.

    Carbon Emission Reduction Target

    The Pre Budget Report highlights the government’s recent announcement that as part of the recent Home Energy Saving Programme- a package of measures to help households reduce their energy use as a way of dealing with rising fuel prices – the Government proposed a 20 per cent increase in the Carbon Emission Reduction Target. In order for the increase to be implemented further legislation will be required.

    Other announcements in the Home Energy Saving Programme include:

  • Every household will qualify for at least 50 per cent off loft and cavity wall insulation and a range of other energy saving devices such as low energy lightbulbs, real time displays and energy saverplugs. 11 million lower income and pensioner households qualify for these free of charge.
  • The launch of a Community Energy Saving Programme in around 100 fuel-poor areas to go street-by-street through communities offering free and discounted central heating, energy efficiency measures and benefit checks.
  • Landlords Energy Saving Allowance

    The Landlords Energy Saving Allowance provides an allowance of up to £1,500 for landlords who invest in improvements such as cavity wall and loft insulation.

    The Pre Budget Report highlights that the Allowance was expanded to corporate landlords from 8 July 2008.

    Climate Change Agreements

    The Pre Budget Report highlights that the government will shortly consult on the form and content of new Climate Change Agreements (CCA), including a proposal to split CCA targets where they overlap with EU ETS. This proposal will not result in a change to eligibility for the Climate Change Levy discount.

    ‘Carbon Budgets’

    The Climate Change Bill will establish a framework of five-yearly ‘Carbon Budgets.’

    The Pre Budget Report highlights that the government will set the levels of the first three carbon budgets, covering the period 2008 to 2022, alongside Budget 2009. The Climate Change Bill also requires the Government to set out its policies and proposals to meet carbon budgets – this will be published “mid-2009.”

    Smart Meters

    During the passage of the Energy Bill, the government committed to mandating a roll out of electricity and gas smart meters to all households. It is expected that smart meters would available to all by the end of 2020.

    Renewables Obligation

    The Pre Budget Report announces that the government will retain the Renewables Obligation – and will extend it until at least 2037.

    Carbon Trading

    Auctioning of Carbon Allowances

    The Pre Budget Report highlights that the UK auctioned carbon allowances under Phase II of the EU Emissions Trading Scheme on 19 November – four million allowances were auctioned, raising £54 million.

    Global Carbon Markets

    The Pre Budget Report reiterates the government’s commitment to a global carbon market and highlights that the Climate Change Bill will allow the UK to purchase international credits to meet the new five-yearly carbon budgets.

    Financing for Climate Change

    The Pre Budget Report states that one of the key priorities for the government in 2009 will be to build an international consensus on “financing for climate change.”

    Business and Innovation

    Technology Strategy Board

    The Pre Budget Report announces that the Technology Strategy Board will report to the government in advance of the 2009 Annual Innovation Report, on the better use of innovative technologies in key areas of government procurement, including:

  • Construction
  • Low-carbon vehicles
  • Business waste management
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