Workplace emissions must be cut, or firms could face tax penalties
So now we know what the low carbon future will look like. After months of consultation, the government has unveiled a package of measures aimed at sharply reducing emissions and establishing the UK as a global leader in the provision of green technologies and services.
It's an ambitious plan. Lead by the Department of Energy and Climate Change, Ministers are seeking an 18 per cent cut in carbon emissions by 2020. Meanwhile the Department of Business Industry and Skills has announced a £405m investment programme to support jobs in the low carbon goods and services sector.
Few would argue with the government's intentions. If the worst effects of climate change are to be avoided, pollution from fossil fuels must be cut and as Business Secretary Peter Mandelson put it: "There is no high-carbon future." More open to debate is the route that ministers have chosen to deliver on that goal.
A particular bone of contention is the renewables strategy. Under the Low Carbon Transition Plan, the government expects 30 per cent of the UK's energy to be derived from renewable sources—such as wind, wave, solar—by 2020, with a further 10 per cent coming from nuclear and clean coal. The move away from oil and gas to low carbon alternatives will inevitably mean an increase in energy prices, raising fears that UK business will become less competitive.
Companies working in energy intensive sectors are particularly vulnerable and manufacturers organisation the EEF has questioned the decision to prioritise renewable sources. "We don't think the government has taken the most cost-effective approach to de-carbonisation," says Roger Salomone, an EEF energy adviser. "We would advocate greater use of nuclear and clean coal within the overall mix."
It's not simply a matter of cost. Nuclear power is controversial, but the technology is tried and tested. Equally, even without carbon capture, Salomone says modern coal-fired power plants are already capable of reducing emissions by 20 per cent when compared to older stations. In contrast, it's not entirely certain whether renewables technologies can produce a third of the UK's energy requirement. "30 per cent is a challenging figure," says Salomone. There is, therefore, a risk that the de-carbonisation strategy in its current form will cost more while failing to deliver the necessary reductions.
In addition to a move towards green power generation, the government is seeking a 10 per cent cut in workplace emissions by 2010. The primary tool of policy here is the Carbon Reduction Commitment (CRC) system. From 2010, businesses such as retail chains and banks will be required to monitor and report their energy consumption figures, with those who fail to do so facing tax penalties. The figures will be made available for public scrutiny, along with sector-by-sector league tables highlighting the best and worst performers.
James Wild, director of Insight at the Carbon Trust, expects to see energy issues rising up the boardroom agenda as a result. "There are huge drivers," he says. "Rising prices and the introduction of CRCs will incentivise companies to become much more energy efficient." Wild advises that all businesses introduce carbon management strategies. "It should be a part of the wider corporate strategy," he says.
Indeed, the government has been at pains to point out the opportunities that are likely to be generated as Britain makes the transition from carbon-hungry to carbon-frugal. The Department for Business Industry and Skills estimates that the UK's green services sector is currently worth around £3bn, a figure that is set to grow by 4 per cent per year over the next six years, creating 400,000 jobs. To support that trend, government is to invest £405m in the development of low carbon industries. Projects earmarked for cash include a wave hub to harness tidal power and an environmental industries cluster in the South West.
Jeffrey Thomas, CEO of Ark Continuity, a company providing energy efficient data-centres, welcomes the package, saying that the direction outlined by the government validates his own company's focus on sustainable technology. "We used debt to build the business and the banks that have backed us and other stakeholders can see we're in the right place."
It's a view that's echoed by Alan Wallace, investment director at Venture Capital Trust Octopus Ventures. He sees increasing opportunities for companies working in sectors such as home and workplace energy efficiency and waste management and says the government's transition plans provide more certainty for investors. "It defines the sort of world we're moving into. Investors know it's a world that's not going to go away. It's a new paradigm."
Hugh Goulbourne, solicitor in the Low Carbon Practice of law firm Cobbets argues that the UK's bid to take the lead on carbon will result in overseas demand for British skills. "The government is putting the UK at the forefront developing a low carbon economy. That will mean a lot of expertise being developed in the UK both in terms of the technology and in services such as energy emissions trading. That expertise will be exportable."
The government's strategy has certainly not pleased everyone and energy costs will certainly rise, but the upside may well be greater energy efficiency within companies and a much-needed boost for UK jobs.
Posted 22 July 2009 : Director.co.uk
