Going green? We need to talk about the Plan for growth
Alongside, the Budget, the Treasury has published a plan for growth combing some things new – pricing carbon at £30 a tonne and funding carbon capture from general taxation – and some recycled ideas. As Tim has blogged on these pages, there are aspects to today’s Plan for Growth that the TUC can and should welcome. The Green Economy Council is rightly seen as a key initiative. And we look forward to the Roadmap to a Green Economy signalled (again) in the plan for growth. But is there enough green policy here to make a plan out if it?
- To encourage investment in low-carbon power, a carbon price floor for electricity generation starts from 1 April 2013. The carbon price floor will open at around £16 per tonne of carbon dioxide and move to a target price of carbon of £30 per tonne in 2020. The carbon price support rates for 2013-14 will be equivalent to £4.94 per tonne of carbon dioxide.
- The Government will not introduce the CCS levy, but will instead fund four CCS demonstration plant from general taxation. The Government intends to introduce relief for carbon capture and storage and combined heat and power (CHP).
- The Green Investment Bank – getting initial capitalisation of £3 billion, and to begin operation in 2012-13, a year earlier than previously anticipated. Government investment alongside private finance should mean that there is in the region of an additional £18 billion of investment in green infrastructure by 2014-15 as a result of the GIB.
But as much as £110bn of green infrastructure development is needed to enable the transition to a green economy – not including new low carbon echnologies for industry. Meanwhile, energy intensive businesses are seriously worried about a high CO2 price:
Impacts on business of CO2 price and Climate change levy rebates:
|Carbon price floor from 2013-14 with £30/tonne of CO2 target Tax||0||0||+£740m||£1,070m||+£1,410m|
|Climate Change Agreements: reform tax||0||0||-£40m||-£50m||-£50m|
The climate change levy discount on electricity for CCA participants will benefit industry by up to £50m a year, increasing from 65 to 80 per cent from April 2013 to continue to support energy intensive businesses exposed to international competition. A consultation on proposals to simplify the agreements will be published by summer 2011.
But the CO2 price floor is more problematic, and costly, for energy intensive industries. Following consultation, a carbon price floor for electricity generation will be introduced from 1 April 2013. The carbon price floor will start at around £16 per tonne of carbon dioxide and follow a linear path to £30 per tonne in 2020 to drive investment in the low-carbon power sector. The carbon price support rates for 2013-14 will be equivalent to £4.94 per tonne of carbon dioxide. This will cost industry – especially in the energy intensive sectors – over £1bn by 2014.
Other parts of the Growth plan bring together announcements already made on the Green Deal (100,000 jobs); the Renewable Heat Incentive, to encourage £7.5 billion investment in the nondomestic sector in low-carbon heat; feed-in tariffs, boosting the market for micro-generation of renewable electricity; £5000 incentives to reduce the up-front costs of ultra-low emission vehicles; and “leveraging government’s £236 billion public procurement power to help drive new markets in green products and services,” though no details are provided on exactly what has been achieved through procurement (if it had, we would probably have been told).
For this plan to work, two things are required:
- An industry roundtable for the energy intensive industries. Until government understands the combined impacts of its policies on steel making, or glass, or ceramics, or chemicals, cement, brick and other manufacturers, it will continue to cause uncertainty. A chemical industry representative at the House of Commons on Monday evening this week (the first meeting of a new All party Group on energy intensive industries) spoke for all those present, saying, “What we need is an industry strategy”. The growth plan isn’t that strategy.
- More work with industry and unions to get carbon capture projects on the ground. For this, too, government needs to listen, and take action now on all 4 CCS projects – including carbon capture for both power and industry.
Then we could talk about an industrial plan for growth.