The Ecologist

HM Chancellor George Osborne gazing happily at his vision of the future, courtesy of Ealing Studios. Sadly, the device has a fault - and it's actually taking him back to the 1950s. Photo: PA / HM Treasury via Flickr (CC BY-NC-ND).
HM Chancellor George Osborne gazing happily at his vision of the future, courtesy of Ealing Studios. Sadly, the device has a fault - and it's actually taking him back to the 1950s. Photo: PA / HM Treasury via Flickr (CC BY-NC-ND).
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Osborne's systematic devastation of the UK's sustainable future

David Lowry & Oliver Tickell

26th November 2015

The 'Autumn Statement' delivered with such aplomb by the Chancellor is yet another attack on the UK's sustainable future, write David Lowry & Oliver Tickell - cutting energy efficiency funds just as tens of thousands are set to die of cold this winter, betting £250m on pointless nuclear research, and raiding the renewables budget to fund subsidies to nuclear power and fossil fuels.

How will a disempowered DECC accelerate the transition to a low-carbon economy? And how can the UK lead internationally if we are cutting funding to improve the energy efficiency of our homes? The Government must do better than this.

You might not have spotted it under his 'conjurer pulling magic rabbits out of a hat' presentation in Parliament yesterday.

But beneath the smoke, mirrors and deliberate confusion, Chancellor George Osborne unveiled a devastating attack on what little remains of sustainability in government policies.

In his Comprehensive Spending Review and Autumn Statement yesterday, he slashed the budgets of the two key green departments, DEFRA and DECC by 22% and 15% respectively.

He even failed to reveal to MPs in his Parliamentary Statement that, barely days before the major Climate Change Conference in Paris next week, he was cancelling the £1bn competition for carbon capture and storage (CCS) technology - only six months before it was due to be awarded.

In the process, and wholly without warning or consultation, he broke a pledge in the Conservative party's election manifesto - and condemned his ever-loyal energy secretary Amber Rudd to enter naked into the COP21 climate conference chamber in Paris.

The announcement was sheepishly slipped out instead on a Stock Exchange news site, with the statement: "Following the chancellor's autumn statement, HM government confirms that the £1bn ring-fenced capital budget for the CCS competition is no longer available. We will engage closely with the bidders on the implications of this decision for them."

A devasting impact

The move has been greeted with widespread shock and dismay. "This is devastating", said Dr Luke Warren, chief executive of the CCS Association. "Moving the goalposts just at the time when a four-year competition is about to conclude is an appalling way to do business. It is a real blow to confidence for companies investing in CCS. This technology is critical for the UK's economic, industrial and climate policies."

The UK government's own climate advisors, the Committee on Climate Change, argued in a report released last month, 'Power sector scenarios for the fifth carbon budget': "CCS is very important for reducing emissions across the economy and could almost halve the cost of meeting the 2050 target in the [UK's] Climate Change Act."

Shell responded by saying its own CCS project at Peterhead in Scotland was now dead and its CCS work would henceforth be based in other countries: "Shell remains committed to CCS - as our involvement in demonstration projects in other parts of the world shows - and we view it as an important part of a low-carbon energy future."

Claire Jakobsson of the manufacturers' organization EEF, said CCS could have saved the UK £32bn a year by 2050 and abandoning the competition was a false economy: "In choosing to save a relatively small sum of taxpayer money in 2015, the government is unnecessarily committing vast amount of future energy consumers' money."

Jenifer Baxter of the Institution of Mechanical Engineers added: "Without CCS this will mean we are locking ourselves into relying on unabated fossil fuel power for generations to come."

And even for those who are sceptical of CCS, the surprise move only emphasises the hazard for investors in the UK energy sector, aleady bleeding from the wounds inflicted by the Osborne-Rudd attacks on renewable energy: 'do not trust this government to keep its promises.'

Slash and burn

In other regressive moves, the Chancellor decided to cut Government-backed schemes to promote energy efficiency and low carbon technology. He slashed spending on home energy efficiency by a whopping 83%, amounting to £132m, in winding up the energy company obligation (ECO) scheme.

Friends of the Earth economics campaigner David Powell observed: "The Chancellor's green-bashing is a further reminder that our environment is not safe in his hands ... on the day that new figures revealed over 43,000 excess winter deaths last year, the Chancellor's callous cuts to home insulation schemes is an attack on the most vulnerable people."

On the RHI the Spending Review states: "The government will increase funding for the Renewable Heat Incentive (RHI) to £1.15 billion by 2020-21, while reforming the scheme to deliver better value for money. By the end of the Parliament the government expects to have incentivised enough additional renewable heat to warm the equivalent of over 500,000 homes."

But analysts calculate that far from increasing the RHI budget, the Chancellor will actually implement a cut of 40% - some £700m- which the Chancellor dubs "savings". The Solar Trade Association observed:

"It's not clear yet exactly where these savings come from. There will also be budgetary caps providing a backstop on expenditure, meaning that if the forecast expenditure reaches the agreed budget, the Secretary of State will be able to take action to suspend the scheme to new applications."

Kathy McVeigh, board member of the Solar Trade Association and Managing Director of Northern Ireland-based solar thermal business Cool Sky, commented: "We welcome the fact that the Renewable Heat Incentive will remain, despite the ominous rumours before the Spending Review. Amber Rudd has done well to protect the renewable heat sector.

"However deployment to date of solar thermal under the RHI has been disappointing. We look forward to working with DECC to implement some of the measures we have recommended to increase the uptake of solar thermal, including making it eligible on new build, removing the need for a Green Deal assessment and providing support for solar space heating and hybrid PV and thermal."

"The chancellor is slashing renewables and energy efficiency investment, and eliminating CCS funding, making it almost impossible to meet our carbon budgets", Sepi Golzari-Munro of thinktank E3G commented, caustically. "Rather than building the low-carbon infrastructure fit for the future, he has doubled down on building the infrastructure of the past."

But lo and behold! £250 million for nuclear power!

Osborne also said that The Spending Review and Autumn Statement doubles spend on energy innovation. However most of the money - £250 million over five years - is to go into an "ambitious nuclear research and development programme" into 'small modular reactors' (SMRs) - widely promoted by the nuclear industry as the 'next big thing' despite the lack of any demand for the technology or any prototype.

According to the statement the research "will revive the UK's nuclear expertise and position the UK as a global leader in innovative nuclear technologies. This will include a competition to identify the best value small modular reactor design for the UK. This will pave the way towards building one of the world's first small modular reactors in the UK in the 2020s. Detailed plans for the competition will be brought forward early next year."

In a written Parliamentary answer to Labour backbench MP Paul Flynn on 29th October, energy minister Andrea Leadsom admitted to numerous meeting his industry representativies: "Officials within my Department have met Westinghouse on two occasions to receive their proposal on SMRs. ...and it will be considered as part of Government's wider work on SMRs which includes evidence building through the techno-economic assessment and engagement with SMR vendors where appropriate."

In another answer to Flynn the previous day, Leadsom had responded: "A range of studies has been commissioned by the Department of Energy and Climate Change in order to deliver a techno-economic assessment of small modular reactors.

"The organisations currently under contract to deliver projects for the techno economic assessment are: Atkins Limited (contracted on 22/7/15); Energy Technologies Institute LLP (contracted on 3/8/15); National Nuclear Laboratory Limited (contracted on 3/8/15); Checkendon Hill Ltd (contracted on 25/6/15); and Ernst and Young LLP (contracted on 201/10/15)."

So there we go again. All the new renewables and enabling technologies like the 'smart grid', batteries and other electricity storage systems are left out in the cold - while the government once again bets the farm on a failed, discredited 1950s dream of 'energy too cheap to meter'.

Another covert raid on renewables exposed

In another sneak attack on renewables yesterday highlighted in a blog post by David Toke, the Treasury re-defined payments to gas, coal and nuclear generators under the 'capacity mechanism' to put them under the renewable energy budget raised from energy users bills, known as the Levy Control Framework.

"In a move that will astonish many the Treasury have decided to count payments to existing fossil and nuclear power stations for providing capacity as 'environmental' levies'", writes Toke. "Real environmental spending will fall as result and be replaced by payments for polluting power stations ...

"Given that the 'levy control framework' (LCF) is capped by the Treasury, and given that the cost of capacity provision will inexorably rise, funding for renewables and energy efficiency will increasingly be crowded out by subsidies to fossil fuel power stations and nuclear power ...

"So now we have a new policy - to extend a phrase used by the PM's office before the 2015 General election - 'cut the green crap'  - and spend it on brown crap instead! This is not a joke. The inclusion of the capacity mechanism under environmental levies is very serious indeed.

"This is because many believe that spending on the capacity mechanism will mushroom - and do so well beyond the figures mentioned in the Treasury below. This is a very serious, perhaps mortal, blow for any UK programme to carry on reducing carbon emissions beyond 2020 or even 2018."

2.7 Environmental levies

£ billion

Outturn Forecast

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
Carbon reduction commitment 0.6 0.7 0.7 0.5 0.5 0.5 0.5
Warm homes discount1 0.0 0.3 0.3 0.3 0.3 0.3 0.3
Feed-in tariffs1,2 0.0 1.3 1.5 1.7 1.9 2.1 2.2
Renewables obligation2 3.1 3.9 4.6 5.4 5.9 6.0 6.2
Contracts for difference 0.0 0.0 0.2 0.5 1.1 2.2 2.8
Capacity market 0.0 0.0 0.0 0.0 0.6 1.0 1.1
Environmental levies 3.6 6.2 7.3 8.5 10.3 12.2 13.1
Note: This is consistent with the 'Environmental levies' line in Table 4.6 of the November 2015 Economic and fiscal outlook.
1 The ONS have yet to include Warm Homes Discount and Feed-in Tariffs in their outturn numbers.
2 Forecasts do not include the outcomes of the consulatations on feed-in-tariffs or renewables obligation that have yet to be decided.

Chart 2.7, Economic and fiscal outlook supplementary fiscal tables - November 2015.

Bullish on climate - but where's the beef?

The Spending Review and Autumn Statement did send out positive signals on climate, promising "to push for a strong global climate change agreement in Paris this December, to keep the goal of limiting global warming to 2 degrees above pre-industrial levels firmly within reach", while delivering "a 50% increase in funding over the next 5 years for developing countries to tackle and adapt to climate change."

Of course it's one thing to sign a climate deal, and quite another to deliver on it - as the government is finding with its 15% by 2020 EU renewable energy target, set to be undershot by 15%. And as for the funding increase to help developing countries with climate change, that's fine, but only really means a re-allocation of the existing aid budget.

But where it really counts - domestic policy to actually cut our own emissions - everything is going the other way. In addition to the measures just announced, the government's main policy is to shift from coal to gas while hammering renewables, while subsidising and supporting oil and gas production in law - in the process locking the UK into fossil fuels for another generation when we should be aiming for total decarbonisation.

Bu the government drives on with its nonsensical policies, while even denying that the policies exist. At Prime Minister's Questions yesterday, Labour leader Jeremy Corbyn led with questions on renewable energy:

"This week, 55 Labour councils have made a commitment for their areas to be run entirely on green energy by 2050. With the Paris climate talks just days away, will the Prime Minister join me in commending those councils, and will he call on all Conservative councils to do the same?"

Answering from a parallel reality in which everything in the garden is rosy, Mr Cameron said: "I certainly commend all councils for wanting to promote green energy, and we have made that easier in our country by having the feed-in tariffs and the other measures, particularly solar power and wind power.

"We will be taking part in the Paris talks because it is absolutely vital to get that global deal, but we have to make sure that we take action locally as well as globally. I would make the point that if you compare the last Parliament with the previous Parliament, we saw something like a trebling of the installation of renewable electricity."

To which Corbyn responded: "The problem with the Prime Minister's answer is that the gap between Britain's 2020 target and our current share of renewable energy is the biggest in the European Union. Some of the decisions he has made recently include cutting support for solar panels on home and industrial projects, scrapping the green deal, cutting support for wind turbines, putting a new tax on renewable energy, increasing subsidy for diesel generators.

"Is it any wonder that the chief scientist of the United Nations environment programme has criticised Britain for going backwards on renewable energy?"


Losing out on jobs and growth

WWF-UK Chief Executive David Nussbaum condemned the harsh cuts in green spending: "Failure to invest in the natural environment that underpins our economy means the UK will lose out on growth, jobs and international competitiveness - the very issues that George Osborne is so exercised about.

It's good that the Chancellor has protected budgets for forests and national parks but it's now vital that the Government sets out how it will work with businesses and communities to protect our natural resources, including our seas and rivers, through its 25 year plan for nature.

"Today's cuts will imperil the environment and undermine the economy. And as we approach the Paris talks, an extensive road building programme sends a depressing signal about the gap between what the UK says on the international stage and what it is prepared to invest in at home.

"How will a depleted Defra have the muscle within Whitehall to stand up for our natural world, at a time when 60% of UK species are in decline? How will a disempowered DECC accelerate the essential transition to a low-carbon economy? And how can the UK lead internationally if we are cutting funding to improve the energy efficiency of our homes?

"The Government must do better than this if it is to live up to its aspiration to leave nature in a better state than it was when it took office."



Dr David Lowry is senior research fellow at the Institute for Resource and Security Studies, Cambridge, Massachusetts, USA.

Oliver Tickell edits The Ecologist.


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