Will Budget 2012 scrap more green policies?
The Chancellor’s dictum that environmental regulation is bad for business is gaining hold. In the past few days, the Business Secretary is reported to have lobbied him to scrap the Carbon Reduction Commitment (CRC) in the Budget. The CRC requires 20,000 large service sector employers to take their share of the energy savings.
Now, a leaked DECC letter to the EU wants it to scrap binding renewables targets when phase 1 ends on 2020. “Renewables, nuclear and carbon capture and storage (should) all be competing freely against each other in the years to come,” DECC argues. Nothing is more likely to deter those who would invest in the new and innovative renewable projects than policy uncertainty.
In recent months media reports have focused on the impact of support for alternative energy, particularly renewables, on consumer prices. Some of this coverage is explicitly anti-renewables, intended to entertain rather than inform. But the impacts on costs have been exaggerated. A leading example is the widely quoted and misleading report from the Policy Exchange (PX) which maintains that the full cost to households of UK renewable energy policies alone (not all low carbon policies) in 2020 will be £400 per year. This estimate found its way to the Daily Mail, the Telegraph, ITV and of course Nigel Lawson’s Global Warming Policy Foundation.
The PX data is in stark contrast to DECC’s headline finding that government policies will decrease bills by 7% in 2020 relative to ‘business as usual’. And it is far higher than that of the independent committee on climate change. The CCC estimates the cost of all low carbon policies to be around £130 per household in 2020.
The PX may be right to argue for more and better data. But its own figures are either essentially guesswork or a gross overestimate of aspects of renewables costs, like transmission investments, or undervalue the benefits of cost reductions from large scale deployment of solar, wind, wave and other emerging technologies.
Of course, the PX will help create a self fulfilling prophecy, whereby a climate of uncertainty, both anti regulation and anti government intervention, will deter investors and ruin real green job opportunities.
Meanwhile, the Business Secretary, widely quoted as calling for a properly articulated industrial strategy, apparently wants to scrap the carbon reduction scheme. This requires around 20,000 UK companies with energy bills over £500,000 a year, including factories, supermarkets and hotel chains, to measure and pay for each tonne of CO2 they emit.
The scheme was envisaged by Labour as a way to recycle revenues from sales of permits into energy efficiency schemes and reward good performers. The Coalition first turned it into a 740 million green tax. Then, with firms complaining about complexity as well, now seems set on abolishing it altogether.
One consequence may well be greater burdens on energy intensive manufacturers who are already carrying an overburden of climate policy. A properly developed green economic strategy would be welcome.