Carbon budget compromises put the economy as well as the environment at risk

After many weeks’ pressure from environmental groups and amidst much fanfare from Downing Street, the Tory-led Coalition Government is now expected to sign up to a compromised version of the Committee on Climate Change’s recommendations for a fourth carbon budget. The last minute caveats that have been introduced give the UK a get-out clause that allows targets to be abandoned if other European Countries backslide on their emission reduction targets and promise support for carbon intensive industries in the meantime. This might seem a reasonable compromise in order to heal the rift in the cabinet and get the carbon budget agreed, unfortunately it offers little help to the people of Britain facing escalating oil prices, fails to give the right signals to low-carbon investors and risks us loosing the main benefits of pressing ahead with this green industrial revolution.  Most worryingly of all, it demonstrates how little this government really understands about the importance of a low-carbon future for the UK’s economy.

The idea behind the caveats is easy to understand – at a time when growth is the priority and cutting red-tape is your focus, why would you want to burden UK businesses with additional regulation?  Making sure that our economy remains on a level playing field with the rest of Europe is a reasonable thing to do, right?  Well only if you think that legislation that helps move us to a low carbon economy before others is a burden or competitive disadvantage.  But the evidence suggests otherwise. DECC Minister Greg Barker pointed out, shortly after the election last year, that the global market for low carbon goods and services is currently valued at £3.2 trillion and estimated to grow to over £4 trillion by 2015.  But we will be competing with the rest of the world to get these industries and jobs. Recent research by Defra has also found that when the food and drink industry operate more sustainably – using resources more efficiently and creating less waste – costs can be driven down, allowing UK businesses to compete more effectively in the global market.  While this is unlikely to be true across all sectors and there will undoubtedly be some losers in the move to a low carbon economy, the Global Climate Network have assessed that the move will result in a net gain in jobs.  Far from being a burden that makes us less competitive with the rest of Europe, surely legislation that encourages us to be ready earlier will give us a competitive advantage when it comes to winning these jobs? Wind Turbine manufacturer Vestas seemed to think so earlier this week, when they told the government that the 2000 jobs they hoped to bring to the UK would only come through if they could see a genuine commitment to low carbon industries.

The caveats also suggests that the government still hasn’t understood that a low carbon economy is also the most resilient future economy for the UK.  There is growing evidence that thankfully the markets have got it though.  For instance, the recent research by A.T. Kearney which has found that greener businesses are currently able to access capital at much more favourable rates precisely because they are assessed as being exposed to fewer risks.  A perfect if surprising example of this in action is the way in which the organic food market has survived the economic downturn so successfully because the industry has been more insulated against fluctuating oil and food prices. And the Government’s own research has found that the UK’s low Carbon market defied wider market trends in 2009, to grow by an average of 4.3% while other sectors were contracting.  The Committee for Climate Change’s recommendations are trying to steer us on a clear path towards these calmer waters but the government’s caveat risks the economy running adrift again and again in the future.

But perhaps most importantly, the caveats shows how little the Government understands about the scale of the change needed.  The caveats makes sense if you think that building an economy for Britain in the 21st Century is about gently balancing the advantages of the old oil-dependent economy with the opportunities of the low carbon future.  But as a net-importer of oil and with oil prices being predicted to reach as high as $195 a barrel by 2020, there is a very real prospect that if we keep our dependency on oil then food and transport will become unaffordable for many people in the UK.  Unless the government is committing to massive and long-term public subsidies for oil-guzzling industries or citizens, to keep the country fed and on the go, they need to wake up an realise that we are facing nothing short of an industrial revolution here.  Arguing that we can’t afford it in the current economy is like the business that stuck to typewriters because computers were so much more expensive. The Government’s caveats to the carbon budget might quieten down some loud screams from the industries that aren’t ready for this revolution, but they might as well be backing the slide-rule industry.  In enacting the compromise, the Government will be will be turning their back on the challenge of our generation and asking our children to compete in the 21st Century with an economy built for the 18th Century. The Cabinet might think that the Committee for Climate Change’s recommendations are all about caring for the environment.  In truth, they’re very much about the UK’s economic success.





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