As the GIB coalition argues today:

“GIB legislation is a pillar in the development of a low carbon economy. The bill must be strengthened to cement its operational independence and green mission. The bank has been prevented from borrowing independently and high carbon investment is not ruled out.  If the bank cannot borrow it has no hope of acting as a major catalyst for growth and job creation when the UK is in the midst of an economic crisis.”

KfW’s green drive was borne out of a coalition of unions, community and business organisations, led by the German trade union confederation (DGB). The DGB developed with the affiliated unions a programme to renovate existing buildings by energy saving and energy efficiency measures, with the annual work programme exceeding 300,000 jobs in recent years. Since 2001, KfW loans have helped insulate over 2m homes.

The KfW is serious about meeting Germany’s climate change targets of a 40% cut by 2020 and 80-95% by 2050, so it decided to deal with housing without delay. The same needs to happen in the UK. The key is very low interest rates, currently 1-2%. These are delivered via KfW’s top credit rating, topped up by further government subsidy of the interest rate. In 2011, the state put in just under €1bn, which KfW turned into €6.5bn in loans, which created a total investment of €18.5bn – that’s a 20-fold leverage on the state subsidy.

A last word to Richard Barwell, RBS economist quoted in today’s FT:

“The Germans have found a way of channeling cheap funds to SMEs [through the KfW] without breaching State Aid rules. We should copy it.”

We need to know the numbers:

• how much new clean energy capacity needed up to 2030 from renewables, clean fossil fuels and nuclear power.
• the forward plan for carbon capture & storage projects.
• the contract prices available to investors.
• the long term cost of carbon.
• how the annual billions raised in carbon taxes will be recycled to industry and
  consumers for the green economy.
• the jobs and skills required to deliver clean energy to 2030.

By 2030, carbon emissions from power generation must fall to a tenth of today’s levels: from about 540 grammes of carbon dioxide per kilowatt hour (540gCO2/kWh) now to 50gCO2/kWh in 2030.

Concerns for the TUC and its Clean Coal Task Group as the Bill goes into a pre-legislative scrutiny include the danger of a new dash for gas. An emissions standard set too high will permit new gas fired power stations to be built with no carbon capture stipulations until the mid-2030s. Power station standards should enforce CCS on new coal and gas stations from the outset. We need early clarity on how CCS projects for fossil fuel power stations will be supported.  And an energy efficiency incentive is required to encourage firms that cut their energy use.

The jobs and skills opportunities for the power industry and its supply chains are enormous:

• 35,000 new employees up to the mid-2020s in the nuclear power sector that have to be recruited, trained and developed.
• 110,000 jobs in renewables now, and set to rise to 400,000 jobs to meet the 2020 renewable energy targets.
• 100,000 jobs across the UK by 2030 in CCS networks, worth £6.5 billion to the UK’s economy, if applied to our heavy industries and power stations in industrial areas.

According to the Green Economy report from the All Party Environmental Audit Committee, “There appears to be little priority in Government attached to moving to a green economy.” The government’s electricity market reforms provide a unique opportunity to link energy and industry policy and signal a commitment to growth through green investment. Alongside the Energy Bill, the government should heed their advice and set out a plan for energy jobs and growth.

An extra one million households in England alone fell into the fuel poverty trap this year: there are 3.9 million fuel poor households in England, up from 3.5 million in 2010. And new evidence from ACE shows that the government is cutting in half the budget to make fuel poor homes energy efficient, despite evidence that this is the most effective way to bring homes out of fuel poverty.

There will be no public expenditure in energy efficiency next year. The briefing released by the Association for the Conservation of Energy (ACE) today shows that in 2009/10 investment in energy efficiency targeted at fuel poor households was at a recent high of over £1.1bn. Investment in energy efficiency, has suffered cuts of 17-18% for two years and will have been slashed by over 50% of the 2009/10 levels next year. Total expenditure targeted on alleviating fuel poverty has been cut by almost 30% in 3 years.

The Devolved Nations have protected, if not increased, budgets.

• the Welsh Assembly Government funds have recently been confirmed for its main programmes to 2016 respectively.
• the Scottish fuel poverty budget is set to rise 56% in three years from £54.5m in 2011/12 to £85.1m in 2014/15. Even this huge increase in Scottish investment is not considered to be adequate to the task of eradicating fuel poverty by 2016.

The TUC and a number of trade unions have joined the 84 organisations now backing the Energy Bill Revolution, a campaign asking for carbon tax revenues to be used to make homes highly energy efficient.  From next year the Government will be collecting over £2 billion in carbon tax every year, rising to £4 billion by 2020 and £7 billion by 2027. This is enough to super-insulate over 600,000 homes a year, bringing 9 out of 10 homes out of fuel poverty. It could also quadruple carbon emission savings from households compared to the Governments new energy efficiency policies and create up to 200,000 more jobs.

The new alliance estimates that across the whole of the UK there are now over 6 million households in fuel poverty and that this will rise further as gas prices are projected to increase this year.

The NAO queried the cost-effectiveness of a tenth of the 219 projects endorsed by Ministers. However, the £33K average was in line with similar government schemes, and the RGF awards were appropriately targeted at vulnerable regions.

1,000 firms applied for funds, promising 328,000 jobs. A fifth succeeded. It’s worth looking at the NAO report, released on 11 May and buried under the day’s anti-austerity headlines in France, Greece and elsewhere.

The Coalition set up the £2.4bn Regional Growth Fund to encourage private sector enterprise focussing on “those areas and communities that are currently dependent on the public sector make the transition to sustainable private sector led growth and prosperity.”  The RGF was intended to help the private sector fill the gap left by public sector job cuts. The Office for Budget responsibility forecast that 710,000 jobs in the public sector could be lost between 2011 and 2017.

The Fund’s initial £1.4bn pot was allocated in two funding rounds (see table). A further £1bn was provided for in the 2011 Autumn Statement, with a third bidding round closing in June 2012. The £2.4bn budget is split between DCLG (80%) and BIS.

Bidders estimated that 64,000 of the jobs, around 20%, would be created or safeguarded directly, with the remaining 264,000, or 80 per cent, being indirect.

The government expects to agree final offer letters securing about 117,000 full
time equivalent jobs (providing work for at least 30 hours a week). However, the NAO says not all the jobs created or safeguarded, whether direct or indirect, will be ‘additional’. “Some would probably have been created or safeguarded anyway, because there is always a possibility that firms might have made the investment without public support, or would have found alternative support. Also, assisting one firm could generate a competitive advantage over its rivals, decreasing competition in the wider market.”

Taking these factors into account, the NAO concludes that the first £1.4bn of the RGF could “create, safeguard or support” the equivalent of 41,000 additional full time private sector jobs in the economy for seven years, including 13,000 direct jobs from
supported projects and 28,000 “indirect” jobs through supply chains and “knock-on effects in the wider economy”.

The Fund supports a wide range of projects, from automotive and business support and finance initiatives to ports, waste and energy infrastructure. Overall, the projects were more likely to be located in vulnerable areas of high unemployment and
“vulnerable to public sector job losses”, principally the North and Midlands.

£33K average cost per job. The average cost of each of the expected 41,000 net jobs created or safeguarded is £33,000 (range £4,000 to over £200,000). This is significantly higher than the £28,000 cost per job achieved by the Regional Development Agencies. The NAO is critical of the poor value for money of about a tenth of the approved schemes. The 27 least cost effective projects will average £106,000 per additional job. No Ministerial limit was placed on the cost per job.  “Making a significant number of less cost-effective awards reduced the cost-effectiveness of the Fund overall.”

Leverage. The ratio of private-to-public investment averaged around £6 of private investment expected for every £1 of public investment from the Fund. This ‘leverage’ ranged from similarly varies between individual projects and programmes, from less than £1 of private investment expected per £1 from the Fund, to over £19.

It’s too soon to say what the Fund’s overall contribution will be to rebalancing the economy in any particular region. If Minister’s heed the NAO advice on value for money, the combined £2.4bn RGF, including round 3, could eventually support 70,000 jobs. This assumes the Ministers sustain an average cost of £33K per job. The Fund could also leverage say six times that amount or around £14bn.

Green Investment Bank. It’s worth comparing the RGF’s achievements with the Green Investment Bank. The GIB has an initial £3bn capitalisation which, according to Budget 2011, will leverage an extra £15bn of private sector investment over the course of the parliament. This 5:1 ratio seems consistent with the leverage achieved by the RGF. However, the GIB is likely to lean towards capital intensive investments; for example, the first £100m tranche of its funds will be available to support bids for low carbon technologies from the energy intensive industries.

Welcome though the GIB’s £3bn contribution will be for the green economy, it is unlikely to match the RGF for jobs created.

Unless the government manages to develop a compelling growth story to its Electricity Market Reforms, we can look forward to an Energy Bill under attack from the anti-wind farm brigades.

The key aim of the Green Investment Bank is to take on the riskier end of investing in new, low carbon technologies, some of it tried and tested in operational terms but not on the market. One aspect of risk is availability of capital. A large proportion of UK companies operating in the energy intensive industries like steel or chemicals are subsidiaries of global organisations. They compete internally for capital investment.  Higher costs and risks make it more difficult to justify internal group investment in the UK.

But the Green Investment Bank is seen as potential source of capital for energy efficiency projects among small and medium firms in other energy hungry sectors like ceramics. In the joint TUC-EIUG study, Technology innovation, the British Ceramic Confederation reported that the GIB “was potentially useful as a provider of capital for energy efficiency projects with proven technologies …The recession had run down cash in many companies compared with many European competitors (who were able to use temporary short time working compensation schemes). Many UK banks would also not lend to extend overdrafts even to expand production or help credit as firms pulled out of the recession – so the UK Government needed to recognise that conventional finance is often not available for this type of work.”

Potentially, the Green Investment Bank could drive renewable energy investments and industrial growth as potential source of capital for energy efficiency projects.

Those in the renewables industry who feared that the new  government subsidy for offshore oil & gas world deter investment in renewables have so quickly been proven right.

How  we pay for the new £3bn oil & gas field allowance

Five weeks after the tax break announced by the Chancellor, Shell  has pulled out of investing in North Sea wind farms. Simon Henry, finance director  at Shell, is reported as saying Shell “can’t make the numbers” add up to  justify building them. That contrasts with onshore turbines in America where it  controls almost 1 gigawatt of wind power. He says the British government should support an industry that is “already successful” – such as oil and  gas – as much as chase a renewable power sector that is “still  trying to become profitable”. He’ll be happy then.

Want the details? As our HMRC table shows, in Budget 2012, the Chancellor announced a new £3bn “field allowance” for particularly deep oil  & gas fields with sizeable reserves, targeted at the West of Shetland, as  part of the Government’s strategy to encourage further investment in the  region. Over the next five years to 2017, this will cost the Treasury a net  loss of revenues of £60m. As the impact assessment below shows, the first two  years of the scheme (2012-2014) involve £155m in tax reliefs to the industry.

Because the scheme is expected to stimulate investment which in turn should generate revenues, the investment is then partially offset by revenues of £95m in the last three years to 2017. The Treasury expects these revenue flows to continue into the next spending review period, but no data is provided.

PS: the HMRC carbon impact assessment says just this: “Oil and gas production installations produce carbon emissions.” Light touch regulation indeed.

When we have a made a commitment to a project we will always honour it in full: the widely-reported difficulties with government support for solar power under the Feed-In Tariffs (FITs) have sapped confidence and jobs. As the Renewable Energy Association (REA) commented, two years in to the new government, when it has been vital to sustain momentum, we are still waiting for key parts of the policy framework. The REA wants the Government to take more care to understand the many economic benefits of renewable energy investment, including jobs. Renewables account for 110,000 UK jobs, seven times more than David Cameron thinks.

Renewable energy is still relatively expensive. ..we need to get costs down: renewable energy added £20 to household energy bills in 2011. During 2011 average energy bills rose £170. Nuclear decommissioning and waste management cost taxpayers £7 billion in 2010. A recent special report by The Economist entitled ‘the Dream that Failed’ stated that ‘nuclear has been getting more expensive whereas renewables are getting cheaper.’ Analysis by Ofgem and the Committee on Climate Change shows these bill increases were overwhelmingly due to fossil fuel price rises.

A pioneering Carbon Capture and Storage programme: the government cancelled the UK’s pioneering CCS project last October. As the TUC pointed out in its Roadmap for Coal (2012), “Current policy aims to deliver the first CCS plant by around 2016, with the other three plants coming on stream by 2018. The total CCS capacity envisaged under the demonstration proposals is only 1.6 GW, (compared to the total UK capacity of 28 GW). There is serious concern that slippage to the above dates will result in a delay to the CCS deployment programme.”

This will result in coal burn in existing power stations ceasing before new CCS plants are ready to replace them, and as a result will cause the UK to lose all its coal production and infrastructure capacity.

At a time of recession, when higher gas prices are leaving families and businesses struggling with their energy bills, the PM seems to have missed an opportunity to set out the green economy as answers to these pressing domestic issues.

“We should make more strongly the business case for going green. Efficiency policies are unashamedly good for growth – using less resources lowers operating costs and frees up capital.”

But as we blogged earlier, deep funding cuts are seriously damaging progress towards eliminating fuel poverty. Now, a Parliamentary Answer to his Shadow Minister, Caroline Flint, seems to suggest that one third of the budget was unspent for the last financial year, 2011-12, £50.6 million:

Bear with us. According to Hansard (Citation: HC Deb, 23 April 2012, c620W) the energy minister, Greg Barker, confirmed that the original budget for Warm Front and associated fuel poverty expenditure for 2011-12 was £110m. During 2011-12 total expenditure was almost £108 million with a further £0.6 million committed but not yet paid. Therefore, of the original Warm Front budget £1.4 million was unspent.

But, the budget was increased by £35 million during the year as a result of £25 million allocated to support the completion of outstanding works from 2010-11,  with a further £10 million provided by the Department of Health. The energy department also received agreed rebates from Carillion Energy Services of nearly £14 million. These rebates were used to offset expenditure in 2011-12 bringing a total reported expenditure for the year to £94.4 million. Against the new budget of £145 million for 2011-12, £50.6 million was unspent.

Renewable sectors growth rates (%) 2009-2010

Source: Renewable energy: Made in Britain, 2012.

According to the Renewable Energy Association (REA) report, Renewable energy: Made in Britain,  total UK turnover for all renewables and their supply chains in 2010/11 was around £12.5 billion.

The UK’s 6,500 renewable energy companies now employ over 110,000 workers. Publicly funded incentives for renewables deployment have therefore been highly effective at leveraging in private investment. In this new study, presenting the facts of its contribution to economic recovery, jobs, skills and Treasury revenues, the industry stands up for itself. The question is, When will the government do the same?

Here are two barriers the report highlights:

Technology support: Some technologies require “urgent policy attention, due to policy failures, or lack of political support for, biomass CHP, dedicated biomass, onshore wind, solar thermal, liquid biofuels, on-farm anaerobic digestion and deep geothermal. Likewise some important mid-sized investors, including the commercial and public sectors, risk falling through the emerging policy framework which is polarised towards targeting either big utility or micro domestic investors.”

Skills shortages: “BIS could transform this threat into a vast national employment opportunity. Given market failures, the current approach to the skills challenge is inadequate and risks failing to optimise employment benefits at a time of worrying outlook for unemployment. At the high-skills end of the renewable energy sector we face a demographic time bomb. More care is needed to provide clear career entry paths into renewable energy for young people, unemployed people and those transferring from the traditional energy industries. As with many engineering and
infrastructure sectors, renewable energy falls short with respect to recruiting women and ethnic minorities.”

Fast forward, then to next week’s meeting of the Green Economy Council (1 May), due to debate the UK’s skills strategy, with, naturally, a focus on green growth. A standout point from research by the Skills for a Green Economy Group centres on the need for government ownership and “single point” leadership. Fast growing sectors like renewables lack the capacity to train for future growth – that’s the role of government. The REA puts it this way:

“Many of our members are coping with a policy framework in which
determination to minimise subsidy, with potentially self-defeating haste,
appears to be the only certainty. This leaves no ‘fat’ to invest in skills. Out
in the real world our SME members are more likely to be dealing with pressing
problems, such as access to finance, than engaging strategically with employer
groups on future skills needs. For small and innovative companies staff
turnover can be high and there can be a reluctance to invest scarce resources
in personnel that may be poached by competitors. Where growth is strong, and it
needs to be in renewable energy, staff are needed urgently – companies cannot
afford for new recruits to undertake months of training.”

On the National Opposition to Windfarms (NOW) website you can register your support by ticking a box, but not your opposition!

NOW says: “No developer will build windfarms without subsidies.” True. But the batty Charter’s neo-liberal economist forgets that fossil fuels get four times the renewables’ subsidy of £1.4bn a year. We support the UK fossil fuel industry by £3,63bn a year, mostly in the form of VAT breaks. Osborne has just announced £3bn more in tax breaks to support North Sea oil and gas exploration.

Who leads NOW? Step forward founder Baron Carlile of Berriew, Alexander Charles Carlile, a barrister and previously a Liberal Democrat MP. Yet energy Minister Greg Barker says there had been an ‘unbalanced’ approach to the controversial turbines and vowed there would be no significant expansion of farms.

As NOW well knows, the renewables industry is held back by policy uncertainty created by the now Liberal and Conservative consensus that loathes any form of public support to get new industries going. As next week’s report will show, vested political and industrial interests are devilling away at investor confidence.

The hard economic reality is this – as Anjum has blogged :

• UK lost over 400,000 manufacturing jobs in the past four years.
• Construction lost 281,000 jobs over the same period.

NOW doesn’t appear to understand that every wind farm project creates jobs and skills for the UK. It has to assess the impact the development will have on the environment as part of its planning application. This doesn’t include just its impact on local ecosystems, but on heritage sites, on landscapes and other forms of amenity. This is balanced against the contribution the wind farm can make to our need for sustainable supplies of clean power. NOW cites a single study that finds wind farms have a limited impact on the nesting grounds of some species of birds as evidence for the sweeping statement that wind farms ‘kill birds and compromise wildlife habitats’. This stands in stark contrast to a joint report from RSPB, Greenpeace and WWF – all of whom support appropriately sited wind farms.

Under former Energy and Climate Change Secretary Chris Huhne, around 10,000 onshore turbines were planned in order to meet EU targets, with thousands more planned offshore.

But a source close to the Department for Energy and Climate Change said of the Minister’s comemnts, there was ‘no U-turn on wind farms’, adding: ‘This is not a change in policy.’

The US project featured at a TUC green workplaces  workshop in Durban during the UN’s climate change conference in Deceember 2011. The union projects involve joint discussions they initiate with management. Union members analyse energy use in the building’s energy systems (heating, lighting) and in production process. They identify waste and come up with solutions to maximize efficiency and minimize resource use.

The work stems from an innovative partnership with the Environmental Defense Fund (EDF) which worked with IUE-CWA on a pilot program to have front line workers conduct the energy efficiency “Treasure Hunts.” The White House Council on Environmental Quality worked to select individuals for the award who are
leading important efforts to increase the use of renewable energy, driving out
energy waste, greening supply chains, and/or adopt other strategies to improve
sustainability.

“Cutting waste, reducing energy use and operating more sustainably translates to less pollution and lower utility bills for businesses across the country,” said
Nancy Sutley, Chair of the White House Council on Environmental Quality. “The
leaders we’ve selected as Champions of Change are proving that sustainable
practices work for companies’ bottom lines, and work for the health of American
communities.”

Companies that have participated in the program include Cobasys in Ohio, CCL Container in Pennsylvania, Sheboygan Paper Box in Wisconsin and CG Power in Missouri. More information on the Treasure Hunts here. Union
President James Clark said: “I believe manufacturing is the backbone of our
economy and our country needs manufacturing to be strong. That’s why as
president of IUE-CWA I’ve made it my mission to bring innovative and
progressive programs to our shop floors – programs that make our plants more
competitive and more efficient.”

IUE-CWA’s focus is not only on green products but on greening the process. As part of that goal, the union entered into the groundbreaking partnership with EDF last
year, the first time EDF has partnered with a trade union.

“Ultimately, IUE-CWA sees this project as a way to catalyze a wider energy-efficiency initiative among the entire labor movement,” Clark said, “which would bring immense environmental benefits and improve the competiveness of  U.S. manufacturing.”

IUE-CWA has 45,000 members at over 300 manufacturing plants across the United States. Clark’s union, which is the Industrial Division of the Communications Workers of America (CWA), has not only emerged as a leading advocate for energy
efficiency in manufacturing, but has led a program to involve unions for the
first time in the direct identification and implementation of these opportunities.

Here’s how we work this out. In 2010-11, the budget for Warm Front was £345m and for CERT as a whole, £1.3bn. According to DECC, half of the CERT budget (53%) is spent on fuel poverty Priority Groups, so that’s £689m. Add to that the whole of the £116.7m Community Energy Saving Programme (CESP) and you reach a total on fuel poverty and priority groups of vulnerable households of £1,150.7m.

New money of £540m is therefore only 47% of previous government expenditure.

This week Clegg said “We will be requiring the energy companies to provide at least £540m to fund energy saving improvements in the worst-off homes”. ACE estimates that Clegg’s £540m figure was in fact only an increase in the share of the Affordable Warmth part of the new Energy Company Obligation (ECO) budget. The £1.3bn ECO budget for home energy efficiency and the Green Deal stays the same.

The DPM added: “Low-income and vulnerable homes, older people, people with disabilities .. These are the households most at risk of fuel poverty. And there will be specific support for the most deprived areas. We expect the investment to help 180,000 fuel poor households a year, delivering the lasting improvements that will make their homes cheaper to heat – for good.”

Or not. This year’s meagre £110m allocation for the Warm Front homes insulation scheme was underspent by £25m and won’t be carried forward to next year. The unspent money could have helped 15,000 fuel poor households. Instead of handing it back to the Treasury, the Deputy Prime Minister could have announced that the
underspend would be added to this year’s budget for Warm Front. That budget has
sunk from £540m to £345m to £110m to just £100m. From 2013, publicly funded
home insulation schemes come to a halt.

ECO obliges the big energy suppliers to provide extra support needed for hard to treat homes, and the lowest income and vulnerable households. ECO support will be available for costly measures such as solid wall insulation. But it’s not enough. ACE rightly says the budget for the fuel poor and vulnerable households is still massively short of the amounts needed to tackle fuel poverty.

The potential for power and industry clusters sharing expensive carbon capture technology is well known in industrial regions like Yorkshire & Humber, Teesside, the East Irish Sea and east coast of Scotland. But, if DECC is really serious about capturing CO2 from steel or chemical plant, its consultation paper fails to say how:

“We will consider incentives that might drive deployment of industrial CCS following completion of the work we intend to take forward to identify the current state of innovation and the barriers to deployment.”

“When?” is the other question many in industry will ask.

Meanwhile, companies in Yorkshire are bidding for a share of the £1bn grants – carried over from last year so it’s not new money. Yorkshire power companies want to make the region the UK’s “carbon capture capital” by securing a major share of £1bn in Government funding. 2Co Energy and a consortium based around the Drax power station are both bidding for projects that could be linked by pipelines taking CO2 to the North Sea. The competition follows the collapse last year of the Longannet power station bid. The CCS Roadmap aims to reach at least ten power stations worth CCS by 2030 (20 to 30 MW), as proposed by the CCSA.

The University of Leeds will be one of ten to be part of a new £13m CCS research centre. Capture Power, a joint venture from Drax, Alstom and BOC is putting forward the “White Rose CCS Project”, a new plant on the Drax site burning coal and biomass, for a share of the £1bn. In a separate bid, 2Co Energy is looking for the Government to support its plans for the Don Valley Power Project, a new coal-fired power station in South Yorkshire.

2Co Energy is developing the Don Valley Power Project which would power 1m homes with more than 90% of C02 used to help in oil drilling in the North Sea before being stored. Global conglomerate Samsung last week announced it was taking a 15% stake in the Don Valley Power Project which 2Co bought out of administration last year.

Dr Stephen Brown, director of strategy and innovation at CO2Sense, said:

“The Government has moved away from concentrating on single end-to-end projects and is now inviting applications from projects that can demonstrate links with other projects through, for example, shared transport pipelines and storage infrastructure. Yorkshire and the Humber is already well advanced in this area, and should be top of the list for the government funding.”

The CCS competition includes:

• £1bn capital funding, and additional support, subject to affordability, through low carbon Contracts for Difference;
• £125m funding for Research and Development, including a new £13m UK CCS Research Centre;
• planned long term Contracts for Difference through Electricity Market Reforms;
• commitments to working with industry to address other important areas including developing skills and the supply chain, storage and assisting the development of CCS infrastructure; and
• a focus on international engagement, in particular on learning from other projects around the world to help accelerate cost reduction in the UK.

The Government has recognised that only with a firm long-term policy, coupled with clear financing mechanisms, will enable CCS to fulfil its role in reducing emissions and decarbonise the power AND industry sectors by 2030. It’s frustrating to see huge jobs forecasts such as “creating potentially more than 100,000 jobs by 2030”. It’s the here and now that matters with CCS. We still lack a plan for the first 5 years – with plain and simple CCS incentives encouraging industry and power companies to work on joint projects. That’s where the big prizes on jobs and skills will be found.

Last week George Osborne told MPs in his Budget speech that: “Gas is cheap, has much less carbon than coal and will be the largest single source of our electricity in the coming years.” But escapes from gas fields – or oil pipelines – don’t carry a carbon tax penalty. The EU’s emissions trading scheme (ETS) regulates the combustion and processing of fossil fuels, not leakages on any scale. The leak could run for six months, by which time some 70,000 tonnes of CO2 will have been emitted to air.

Consumers are already pay a price. DECC says production from Elgin and the connected Franklin site, which has also been shut, account for about 3% of the UK’s gas supply. So far, the leakage has prompted a 1.5% rise in wholesale gas prices. It’s the most serious incident in the North Sea since Piper Alpha. RMT offshore organiser Jake Molloy commented that Total had acted very swiftly in getting everyone off but the potential still exists for catastrophic devastation if the gas cloud ignites.

The chancellor prompted a new “dash for gas” in the Budget.  The energy secretary will set out a new gas generation strategy in the autumn.

Meanwhile, there’s the matter of good environmental stewardship of increasingly scarce resources. A sheen on the water is present near the platform, estimated to extend over 1.85 square miles and measure between two and 20 tonnes in volume. There’s a commercial penalty for mismanagement. On Tuesday, Total’s shares fell 6pc in Paris, wiping more than €5.5bn (£4.6bn) off the company’s value and analysts said a worst-case scenario could see costs for Total running to billions of dollars. An Investec analysis says a relief well could cost $50m, but in a worst-case scenario, multi-billions of dollars”.

Climate change is driven by the accumulation in the atmosphere of greenhouse gases that trap the sun’s heat. In February 2005, the Exeter international conference on climate change learnt from one leading scientist that developed countries were using the atmosphere as an “unpriced waste dump.” Time to tax carbon leakage.

George Osborne also increased the allowance for small oil and gas fields to £150 million. This was backed by “a new gas generation strategy” to secure investment in gas fired power stations.

We suspect that the total green tax take is actually much higher, though the environmental tax figures are not all in one place. But according to the OBR, combined receipts from four environmental taxes – climate change levy (CCL), aggregates levy, landfill tax Emissions Trading Scheme (ETS) – are expected to increase from £2.4 billion in 2011-12 to £5.9 billion in 2016-17. This rise primarily reflects the introduction of the carbon price floor in 2013-14 starting at £9.55 a tonne of CO2, as well as the new round (Phase 3) of the ETS in 2013. This will auction a higher number of allowances.

Add to this the revenues from the Carbon Reduction Commitment (CRC). The CRC is likely to bring in about £700m in 2011-12, about the same as last year. In June, the largest service sector organisations check in to buy their CO2 allowances at £12 a tonne, set by the Chancellor in this week’s Budget. CRC revenues look likely to rise to £1bn by 2016-17.

As the Coalition agreement said: “The Government believes that the tax system needs to be reformed to make it more competitive, simpler, greener and fairer.”

In a Budget that looked back to the golden age of fossil fuels, the Chancellor announced a new £3 billion allowance for deep oil & gas field exploration off the Shetlands, and a new allowance for small fields of £150 million.  This was backed by “a new gas generation strategy” to secure investment in gas fired power stations.

Second, in a nod and a wink to the anti-wind farm campaign by 100 of his backbenchers, he blanked support for renewables and offered no reprieve in the cuts for the emerging solar power industry. No new announcements to back jobs in onshore and offshore wind projects.

Third, he assured the largest service sector employers, like retailers and hoteliers that he would scrap a new carbon charge if he couldn’t secure “major savings”. Major employers have clearly found the sympathetic ear of the Business Secretary. The Carbon Reduction Commitment (CRC) is due to cost service employers like Tesco £12 a tonne of CO2 from July 2012.  The government will either greatly simplify this tax or scrap it. Osborne took a similar line as in the Autumn Statement about the government burdening businesses “with endless social and environmental goals – however worthy in their own right.”

Budget 2012 is unrecognisable from the vision the Aldersgate Group submitted to the Chancellor in a pre-Budget letter, of a “credible growth strategy that catalyses investment in renewables and energy efficiency, spurring the economic recovery.” The group said the UK was “falling behind in the green economy race, investing 0.15% of GDP in clean energy, compared to 1.4% in Germany.”

In brief, the Budget:

• will raise up to £1.6bn a year from the new carbon tax, at £9.55 a tonne from April 2013.
• Sticks to a commitment in the Autumn Statement to support energy intensive industries, but with just £20m a year relief from the Climate Change Levy.
• Helps Combined Heat and Power installations by offsetting a Budget cut of a year ago with relief from the carbon tax (we think).

However, the cost burden of climate change policies on manufacturers rises to £165m a year by 2016.  And as we write, it’s not clear where the £3.15bn subsidy to
the North Sea oil & gas industry features in the Budget book. The oil & gas figures in our table suggest significant savings, not costs, so we’ll check this possible error?

A new gas strategy is promised for the autumn “to ensure investment in this sector comes forward.” Worries about the lights going out are exacerbated by delays to the UK’s only carbon capture & storage scheme at Longannet. No new clean coal investment will come forward until CCS technology is proven for coal.  But there are no such such worries for gas, it seems. Meanwhile, on Saturday afternoon, the Energy Secretary, Ed Davey, slipped out plans to boost investment in gas-fired power stations that will allow them to emit high levels of CO2 until 2045.

Davey said that the emissions standard for gas powered stations would be 450 grammes of carbon dioxide emitted for every kilowatt hour of electricity generated. This is over 4 times the 2030 level recommended by the independent committee on
climate change. He hopes for legislation in the next Session of Parliament.  He may be in for a tough fight if he doesnt commit to capturing CO2 from gas-fired installations.

Finally, Craig Bennett at Friends of the Earth argued today that tax breaks for the oil & gas industry were shocking: after months of government complaining about subsidies to renewables, Osborne hands out billions of subsidies for deepwater drilling. This will do nothing to get us off the hook of high fossil fuel prices.

• No more anti-green rhetoric.
• Boost support for renewable power industries.
• Put the £billions in new green taxes to create jobs.
• Recommit support for 4 carbon capture projects.
• Tackle our rising carbon emissions.

First, some fresh and substantial commitments to the green economy. At the very least this means none of the damaging rhetoric that featured in the Chancellor’s Autumn Statement, about burdening businesses “with endless social and environmental goals – however worthy in their own right – then not only will we not achieve those goals, but businesses will fail, jobs will be lost, and our country will be poorer.” Or this one: “We are not going to save the planet by shutting down our steel mills, aluminum smelters and paper manufacturers. All we will be doing is exporting valuable jobs out of Britain.”

Second, boost support for investment in renewable energy. We haven’t got the balance right between renewables and fossil fuels. Fossil fuels received a subsidy of £3.63bn in 2010, according to a new OECD study, compared with £1.4bn for renewables. Gas, which dominates home heating and electricity generation in the UK, received about £3bn in subsidy, with oil getting £500m and coal £72m. Almost 90% of the fossil fuel subsidy comes from the reduced rate of VAT paid by households. If such price cuts were intended to reduce energy costs for poorer households, they are a blunt tool, with many better-off people also gaining.

The Chancellor should renew support for solar power systems by lifting the funding cap in Budget 2012 and let the industry to grow its many thousands of new, green jobs. But, we suspect that we will be told about further support for oil and gas companies.

Thirdly, commit to putting the billions in new green taxes to useful purposes: tackle
fuel poverty, create thousands of jobs in homes insulation, and support our
energy intensive industries. The Chancellor will pull in £740m from the new
carbon tax in 2013-2014. This plus sales of emissions allowances to heavy
industry and energy companies will raise over £3bn a year from 2014. Put that
money to work.

Fourth, recommit support for the UK’s four carbon capture & storage projects. This has to include a not just a clear commitment to allocating the first £1bn this year for a project to replace the cancelled Longannet scheme, but clear commitments in this Spending review period to the other three projects which feature in the Coalition’s manifesto: “We will continue public sector investment in carbon capture and storage (CCS) technology for four coal-fired power stations.”

Finally, recommit to tackling our rising carbon emissions. Budget may well announce further support from oil & gas exploration, in the form of enhanced capital allowances or tax reliefs. The UK’s greenhouse gas emissions rose by 3.1% in 2010 , the first in almost a decade, due to increased home heating during a cold winter and shutdowns at nuclear power stations. We relied heavily on electricity from coal and gas fired power stations. Yet the new Environment Secretary has just this week guaranteed that investors in new gas-fired power stations can sustain their emissions at the current levels until 2045.

Meanwhile, a new petition from the Energy Bill Revolution, which the TUC and a number of trade unions are backing, wants the Government to use the increasing amount of money it gets from carbon taxes to help make homes super-energy efficient and create thousands of new jobs in home insulation, renewable energy and modern boilers.

 Professor Hill estimates that the “fuel poverty gap” – already three-quarters
higher than in 2003 – will rise by a further half, to £1.7 billion by 2016.
This means fuel poor households will face costs nearly £600 a year higher on
average than better-off households with typical costs.  

Friends of the Earth welcomes the review, arguing that “however you define fuel poverty, improving energy efficiency for people on low incomes is the answer.” FoE has again questioned the governments proposed cuts to homes insulation and energy efficiency schemes.  

National Energy Action expressed a similar view. The Government is committed to the eradication of fuel poverty for all households in England by 2016. However,
rising energy prices, inadequately resourced programmes and “failure to implement a coherent strategy” means that fuel poverty has continued to increase and currently affects more than 5 million households.

 Low income and homes’ energy inefficiency overlaps in 3 ways:

• Poverty- because households with high energy costs living in poverty faced extra costs to keep warm above those with much higher incomes, adding up to £1.1 billion. These costs are largely outside their control as they imply huge      expenditure by landlords on energy efficiency.
• Health and well-being – because low temperature living contributes not just to 27,000 “excess winter deaths” each year, but to a much larger number of incidents of ill-health demands on the NHS.
• Carbon reduction – because energy inefficiency of the homes of those living in
  fuel poverty adds to carbon emissions. And those same families are least      able to afford to pay for home improvements. 

Green Party MP Caroline Lucas, Co-chair of the All Party Parliamentary Fuel Poverty and Energy Efficiency Group, urged the Government to prioritise measures to
completely eradicate fuel poverty. Investing more in retrofitting poor quality
housing stock means we can help lift some of the poorest households out of fuel
poverty as well as create and sustain thousands of skilled green jobs in the
energy efficiency industry. These range from high level engineering and
manufacturing, to lower skilled installation and advice provision. This is also
about creating new opportunities for young people to get them into the kind of
training and apprenticeships that will help deliver real social change in a
green economy – with actual jobs at the end of it.

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.

The solar industry expects the cost of solar panels to fall as the market expands, and the various trades involved, from consultants and electricians to roofers and surveyors gain expertise in this growing industry.

A typical domestic  installation provides about 14 day’s work for the various trades and professionals involved, and aside from panel manufacture, most of which are imported, this is local employment funded by a national tariff. But domestic manufacturers like Sharp in Wrexham clearly stand to gain as the industry grows.

Sharp Solar opened its new Renewable Energy Academy  in Wrexham to reach out to building and home maintenance professionals across the UK. The Academy aims to train those interested in entering into the solar panel installation market, which is expected to be worth £500 million a year by 2015. The module manufacturer, which recently expanded its production lines and announced 300 new jobs at Wrexham, claims it is the PV manufacturer to integrate a training academy with its production facilities. Sharp expects that the factory will train 25 to 50 people a month, giving electricians, roofers, building contractors and heating engineers the chance to change career and move into the renewable energy sector.

Sharp recently commissioned research into UK homeowners’ views of solar PV:

• 56% of homeowners would install solar panels on their home.
• 86% would only trust an accredited installer to do the job.
• 62% were aware of the Government’s feed-in tariff scheme.
• 48% more likely to install solar as a result of the FIT incentive.

Sharp says it is experiencing an exponential rise in UK solar installations, so to meet that demand is  looking for the UK’s tradespeople to sign-up for the Sharp Renewable Energy Academy, where they can learn comprehensive, high-quality solar
installation skills and gain a valuable advantage over other installers in the
growing renewable energy industry. According to Element Energy’s recent report  on the impact of the review, the feed-in tariff is generating £275 million in taxes from national insurance, VAT, and income tax alone – and Friends of the Earth estimates this rises to at least £338 million if corporation tax is included. Once again, evidence that smart public investment like the FIT creates jobs and revenues.