Growth gets lost in a conundrum
Still searching for a growth strategy, the Government should take a fresh look at the Stern review for a coherent plan for green recovery. Instead, announcements last weekend rowed in opposite directions. The Prime Minister pledged (6 March) to get every regulator and bureaucrat “off the backs of business”. But the Environment Secretary promised a national “Carbon Plan” aimed at “getting off the oil hook”, with oil approaching £2 a litre. As Ministers struggle with the conundrum of plans vs bonfires vs greenest government ever, it’s worth a glance back to the Stern Review on the economics of climate change.
Stern’s study matched the science-based evidence of climate change with a meaningful economic response. He said, “Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen.” The three pillars of his economic model to tackle climate change were:
- Establish a carbon price, “through tax, trading or regulation”.
- Support development of low-carbon and high-efficiency technologies on an urgent timescale.
- Remove barriers to behavioural change – particularly important in encouraging the take-up of opportunities for energy efficiency.
None of this is about wholesale deregulation, the “one-in, one-out” approach Ministers refer to. It’s about an intelligent, green industrial strategy.
First, carbon pricing. This is already government policy. So Ministers who talk down regulation and the role of good government are in danger of adding to the sense of public disbelief in the role of government in tackling climate change at all. The TUC welcomes the notion of an effective CO2 price to drive investment. The key question is getting the CO2 price right, so that we don’t drive jobs out of the UK. This is entirely for government to get right, and we fear they have not been listening. Stern said, “Putting an appropriate price on carbon – explicitly through tax or trading, or implicitly through regulation – means that people are faced with the full social cost of their actions. This will lead individuals and businesses to switch away from high-carbon goods and services, and to invest in low-carbon alternatives.”
Two: Public support for low carbon technologies. This is also at a crossroads. The Committee on Climate Change said, “Current levels of public expenditure for RD&D should be regarded as a minimum and cuts would be detrimental to the achievement of our climate goals and the new Government’s objective to build a green economy. UK energy RD&D funding is low by international standards, and international funding is low relative to benchmarks proposed by the Stern Review.”
Three: removing barriers to behavioural change. This includes a lack of reliable information and the cost of low carbon alternatives. “Regulatory measures can play a powerful role in cutting through these complexities, and providing clarity and certainty. Minimum standards for buildings and appliances have proved a cost-effective way to improve performance, where price signals alone may be too muted to have a significant impact.”
So it’s worrying that early signposts on the Coalition’s green economy roadmap question whether, for example, to implement regulations by April 2012 on corporate reporting of greenhouse gas emissions. “Top priorities” for reform include waste regulations, product standards, food chain (voluntary approaches), biodiversity, marine environment and the built environment.