Accelerating the Transition: what should be the priorities for the next government?
Thursday 29th April 2010
Lord Chris Smith, Chairman of the Environment Agency opened the meeting, noting “one of the interesting things about the current election campaign is that the environment … has been virtually non-existent in the campaign discussions.”
Lord Smith felt this was both good and bad news: good, because it is indicative of broad consensus across the political spectrum about the challenge posed by climate change and the tasks which need to be undertaken. Bad, because these issues are nevertheless not being discussed with the voters.
This lack of airtime does not make the work less important and Lord Smith noted that the Aldersgate Group, “has been at the forefront in bringing together the worlds of policymaking and business” and is keen that the work “should continue, and should accelerate.” The report being launched is thus titled “Accelerating the Transition.”
Professor Sir David King said that the priorities for the new government “first and foremost … [must] set out a forty-year programme to de-fossilise our economy.”
He warned that “short-term gains may be attractive politically, but they’re not the measures that will deliver” and short-termism will not ensure that the transition to a low carbon economy is achieved, “with the greatest advantage to our wellbeing and to our economy.” The long-term view, therefore, is what needs to be tackled in the first 100 days of the new government.
When it comes to de-fossilising the economy, Sir David insisted that “Britain is peculiarly advantaged”. In universities across the country there are professors “who have already picked up on this challenge and … are seeking alternatives to the fossilised energy economy.” In science and technology “Britain is remarkably strong, second only to the United States in terms of total output of science”, when measured in terms of publications, citations and prizes won. The manufacturing sector upon which the Industrial Revolution was founded “arose from that strength in our science base. I think there is a new opportunity for a smart new manufacturing sector to emerge … essentially a low carbon manufacturing sector.”
Beyond the universities, Sir David challenged the audience, “How many people here realise that we have the highest density of small high-tech companies in that golden triangle between Oxford, Cambridge and London, in Europe, and quite possibly in the world?” For an example, there are small companies producing photovoltaics placed on plastics instead of silicon, which will be “fantastically cheap” and “we’re ahead of the world in terms of plastics replacing silicon in your computer as well. Imagine this … we will have ceramics, plastics and paint as photovoltaics – what else do architects need to put on the outside of their buildings? We have massive opportunities in front of us”, but to help development of the low carbon technologies of the future “takes enormous courage from government and I’m afraid that we haven’t seen that to date.”
Sir David called for the next government to take courageous action to ensure that these new low carbon technologies are pulled through to the marketplace. Firstly, he advocated a high penalty on carbon dioxide in the form of a tax on top of the European carbon trading price. “I believe that penalty ought to be around €100/tonne and if the government in the next 100 days announced €50/tonne I would give a low-voiced cheer.”
Secondly he called for government procurement funds, currently worth £150 billion a year, to be used: “What if 1% of that was assigned to low carbon products from these new industries? It would pull through a whole range of industries right into the marketplace and we would begin to get into the second British phase as the world’s leading manufacturing country.”
Richard Evans, President of PepsiCo UK & Ireland and one of the Aldersgate Group’s newest members, discussed the business perspective to decarbonising the economy.
PepsiCo has set itself demanding environmental targets: “Over the next ten years we’ve said we will make our business fossil-fuel free and unplug our largest factories from the mains water supply … We’re going to send nothing to landfill across our entire supply chain while our packaging will be recyclable, biodegradable or renewable.” Mr Evans believed that it is “absolutely essential for our long-term prosperity and growth that we achieve those goals.”
Mr Evans commented, “It does strike me, as we gather pace along this path, that the scale of ambition that we have for the UK business is beginning to outstrip the policy framework within which we operate.” Big businesses largely know what they should do, and are taking the steps to do it, “but we’ve also got an undeniable business case: it’s in our direct interest to invest in mitigating the risks we face.”
But businesses need support from government, in the form of relative certainty and practical policy frameworks. Relative certainty will come with a floor price on carbon, enabling businesses to plan ahead, and a tax system that encourages green behaviour. Moreover, “If we have a financial stick, how about a financial carrot for business? Many businesses are absolutely convinced of the case for transitioning to a low carbon economy but are thwarted by lack of funds needed to kick-start the process, so incentives for investment in green technologies could be an incredibly powerful tool. They will be critical if UK businesses are to be able to remain competitive in a global economy.”
David Kennedy, Chief Executive of the Committee on Climate Change noted that there is no low carbon economy in practice anywhere in the world, but “we’re very well placed to build a UK low carbon economy and show other countries that it can go hand in hand with growth and prosperity.”
In terms of what has been achieved, the Climate Change Act was a major step and “we’ve talked a good game for many years, but”, Mr Kennedy warned, “if you look at the emissions data for the period when we’ve talked a good game, 2003-07 … emissions didn’t really go down. Carbon dioxide went down about half a percent every year”, in comparison with the required reduction of 3% every year. Emissions have, of course dropped since 2008, but “I don’t think it’s because we suddenly got a load of policies delivering sustainable emissions reductions across the economy.” The recession has reduced emissions, so as we come out of recession “we need a step change here in the UK.”
So what is it that will drive a step change? We need three key new policies: a national programme for residential energy efficiency improvement; a roadmap to decarbonise the power sector which “is the key to wider economy decarbonisation”; and a battery-charging network in place to cater for the electric cars and vans which are beginning to come to market.
“So in terms of going forward, what we need now is political will to drive through an implementing framework … This is not going to happen from the bottom up, it’s not going to be driven just by the businesses or just by individuals or just by households.” Progress will depend upon political will and leadership.
Gavin Patterson, Chief Executive of BT Retail discussed what the low carbon economy means in terms of industry, and business policy.
Mr Patterson concurred with Mr Kennedy, that there was a danger of “all talk, no action” and one clear way forward is to “seize the opportunity around services.” The industrial base of the UK has changed and we are now more of a service economy, “but there are as many opportunities around services as there are around manufacturing”, as BT exemplifies. For example there is video conferencing and teleconferencing, “a perfect business to own when there’s a problem like a volcano stopping everyone from flying.” During the eruption in Iceland, BT’s conferencing business went up by 35% “simply because nobody could fly, so it’s the perfect example of seizing an opportunity and turning it into a new business.”
BT has also taken the opportunity to promote home working and has “over ten thousand home workers now; they each save over one tonne of CO2 in a year” and allows BT to drive down carbon emissions and costs, while “we find that the employees are more productive and happier.”
Mr Patterson insisted that “if we can seize opportunities like this and sell associated expertise and services around the world, we’ll be at the forefront of the creation of new jobs.”
Peter Young, Chairman of the Aldersgate Group (AG) warned that the new government is going to be dominated by reducing the financial deficit of £167 billion. We have to “make sure that solving that financial deficit problem is carried out through and with, solving our environmental deficit.”
Many of the AG’s recommendations in previous reports have now been picked up more widely, such as the Green Investment Bank (GIB) that has received cross-party support. Mr Young insisted “we need to move fast. The AG wants to see an immediate consultation out on the GIB and there are a lot of good ideas in the City about how to get it really motoring. We want a shadow institution to be established right away.” Extra funding could be provided if the next stage of the EU ETS is based entirely on auctioned permits, which could raise £40 billion by 2020. “If we put that into the Green Investment Bank, we’re actually starting to get the kind of leverage that we need.”
Mr Young agreed with Mr Evans’ call for a green tax shift: “Only 7% of our taxation is related to environment at the moment; we’d like to see that doubled by 2020.” The Treasury, an immensely powerful institution, should also be used more effectively. Their current commitment in terms of the climate change plan is to make sure the Treasury offices are saving 10% of their carbon emissions. “We would suggest that taxation and spending announcement be part of the Treasury’s carbon budget, so the Treasury organises those in a way that is consistent with all the things we’ve been hearing tonight rather than being antagonistic.”
Mr Young thanked all speakers, the sponsor MITIE and all members and other stakeholders who contributed to the report. He concluded “I really do look for your support in making the next 100 days the key turning point in the economic fortunes and direction of the UK.”