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UK is out on a limb over green agenda

BRITISH businesses are committed to tackling climate change, but their ambition is being thwarted by the failure of politicians at home and abroad to provide certainty for investors.

BRITISH businesses are committed to tackling climate change, but their ambition is being thwarted by the failure of politicians at home and abroad to provide certainty for investors.

In the UK, we acted early and boldly. The Government signed up to the EU-wide climate change framework, including emissions trading scheme and a renewables target. At home, it introduced a Climate Change Act, setting out binding carbon reduction targets.

We wanted to show leadership. We said “you need to be green to grow.” We wanted first-mover advantage. We acted on the expectation of a global deal to address our competitiveness concerns.

We acted without realising what was around the corner economically.

Now we find an emissions trading scheme that isn’t delivering the carbon price we need to encourage investment in green technologies, while the renewables target has skewed the economics of our energy market. The Government’s solution was to introduce its own carbon floor price and other complex measures to encourage much-needed investment in low-carbon power, and to make sure we can keep the lights on.

But investors are struggling to understand how to invest against the proposed framework while the resulting costs could damage parts of our manufacturing sector.

The Government has also tried to set a carbon price for businesses not covered by the EU trading scheme through the carbon reduction commitment. It’s been tinkered with so much that now it’s just a straightforward tax, adding to bottom-line costs and doing nothing to help businesses achieve their green goals.

Meanwhile exciting plans for the Green Deal to encourage energy efficiency in our housing stock, which could be a huge boost for the construction sector, could falter because of lack of demand from cash-strapped householders and understandable reluctance from financiers to take the risk of underwriting the scheme.

So today, despite our green ambitions, economic and political realities bite. We find ourselves not ahead of the pack, but out on a limb. We’ve got no international deal, no global carbon price, no meaningful EU price and the UK tying itself in costly green policy knots.

The UK is in danger of straining to hit its targets but missing the point: that we need an economy that’s low carbon and competitive.

Two years ago, we asked world leaders to go to Copenhagen and get that agreement, and to give us that certainty. They came back empty-handed. They tried again at Cancun, and again they didn’t succeed. Patience is wearing thin. Last year saw the highest level of carbon emissions in history, and yet a global agreement seems further away.

To maintain momentum, the CBI is calling for two main outcomes from Durban:

First, certainty that the Kyoto carbon markets will persist even if the protocol expires.

And second, getting carbon finance flowing across the world, to places where it can encourage energy efficiency and help countries leapfrog high-carbon development and go straight for those green technologies. This will give the global economy the boost it needs.

But that can’t be the end of it. Investors can’t stake their trust – and their money - on vague promises of future action.

:: Sarah Green is regional director of CBI North East

 

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