Policy Exchange published a report ‘Greener, Cheaper’ on Tuesday, 27 July. The report highlights that the costs of reducing carbon are too high and more focus must be placed on delivering our global aims, to reduce carbon in the atmosphere, at least cost.

The report argues that it is time for those who take the threat seriously also take the costs seriously. Taking carbon out of the economy will be difficult and expensive, and policies which increase costs for British consumers and British businesses without improving the outcome are extremely unhelpful.

The report echoes many of the points that EEF raised in its report ‘Changing the Climate for Manufacturers’, published 21 June, such as “Current policies are complicated, overlap each other and wasteful”. Policy Exchange also states that “a streamlined carbon tax that will be more effective, more efficient and better for Britain”. The main theme of the EEF report was to call for a carbon tax to replace the Climate Change Levy.  Both organisations commented that the CRC Energy Efficiency Scheme is too complex and must be reformed.

Government is certainly listening to these messages, as Economic Secretary to the Treasury, Justine Greening MP was the key note speaker at the launch event and seem to support the main themes of the report. This echoes the feedback that EEF received from its report, that government saw our publication as saying the right things at the right time.

Chris Huhne said yesterday, "I am publishing analysis on the impact of energy and climate change policies on both household and business energy bills up to 2020, and will continue to do so on an annual basis". 
 

This is a piece of welcome news from the Energy Statement that the Secretary of State gave yesterday (27 July 2010). The true cost of policy burdens on manufacturers must be fully understood in order to deliver both a low carbon future and maintain a vibrant manufacturing sector in the UK.

Alongside the announcement, DECC published a full statement that lists no fewer than 32 actions that, as well as the above (action 7), include:

Action 15: In the autumn, the Government will publish proposals to reform the climate change levy in order to provide more certainty and support to the carbon price. Subject to the outcome of that consultation, the Government intends to bring forward relevant legislation in Finance Bill 2011.

Action 16: We are pressing for the EU to move from the current 20% target to a 30% target for GHG emission reductions by 2020.

As for government publishing it proposals to reform the Climate Change Levy (CCL), I have heard very little and suspect that the details of such a plan are still being debated between HMT and DECC. EEF set out its proposals in our recent report ‘Changing the Climate for Manufacturers’, where we called for the CCL to be transformed into a carbon tax, in order to provide certainty, transparency and clarity to both manufacturers and new nuclear investment.

Looking at action 16, I am increasingly worried that the coalition government is walking blindly into adopting unilateral targets. Chris Huhne, along with his French and German counterparts, recently published an article in the FT (15 July 2010) calling for such a move. The rational for unilaterally tightening the EU target is that it “make[s] good business sense” and that “If we stick to a 20 per cent cut, Europe is likely to lose the race to compete in the low-carbon world to countries such as China, Japan or the US – all of which are looking to create a more attractive environment for low-carbon investment”.

I think it should be pointed out that, unlike the EU, China and the US do not have absolute carbon targets and therefore I would ask, why the EU needs to tighten its carbon target, in order not to lost the race [to compete in the low-carbon world] against the two largest global carbon emitters. There doesn’t seem to be a correlation between tough targets and low carbon investment. Therefore something else is driving this investment.

There is a danger that if the EU does tighten its target and thus increase cost to EU industry, that it won’t be the EU industry that supplies the EU with low carbon goods, but the US and China, as they won’t be burdened with the same cost increases that their EU competitors are subjected to.

Government must now step back, take stock of the aim (to limit global temperature to increases to no more than 2^oC) and to understand how we can achieve this aim globally in the simplest and cheapest way in order to avoid the dangers we face from climate change.

After years of the same from the Department that deals with waste within government, we may now be seeing a real shake up of this ‘stuck in the mud’ area, for the benefit of the environment and business.

One of the first things that Caroline Spelman (Environment Secretary) did in her new post within Defra, was to call for a full review of waste policy. This is welcome, as for too long government has listened too much to the waste industry and been too afraid of Brussels to really be bold on how the UK views resource use and waste.

Waste policy affects all manufacturers and is still seen by EEF members as a biggest environmental issue to their businesses. Ahead of the election in May, the Tories were committing themselves to simplifying waste policy, to enable businesses to see value in materials that are discarded. With the focus more on resource use, rather than on waste at the end of the line.

The Defra Waste Review is due to be published within the next week and will really give EEF a chance to influence future UK resource management policy. Yes I said resource management policy and not waste, as waste is the wrong word here. EEF believe that government must now develop a Resource Management Strategy.

I believe that the politicians wish this to happen, but I am less convinced that Defra Officials are willing to ‘break the mould’. At a BIS meeting yesterday (26 July 2010) on the Waste Review, I challenged a senior Defra Official for the narrow focus of only thinking about waste within the review, rather than looking wider, namely, resource use. His reply was that he sees the Waste Review as only looking at waste and anything wider than that would be too much. My clear message to Defra is that it needs to think much wider.

This may be all academic, as I believe we saw a struggle for power at this BIS meeting, between Defra and BIS, as to which department is driving the debate on waste. There was much discussion in the corridors of the meeting, that waste policy should be moved from Defra to BIS. I can see the merit in this view and certainly believe that the two departments must work closer together here, with new blood bringing in a fresh view of what could be achieved if government has the will.

In a paper published in November 2009, EEF called for the following (link below):

1. A clear and long-term resource management strategy.
2. Waste legislation and guidance must be simplified to allow business to fully contribute to sustainable waste and resource management
3. Facilitate speedy delivery of the necessary infrastructure and services to facilitate the recovery of useful resources from all waste streams.
4. Provide targeted advice and support to encourage business resource efficiency through eco-design, process re-engineering and R&D funding.
5. Encourage resource use optimisation across product/material life-cycles by the government’s ability to stimulate demand for resource efficient products.

The findings of the government review will be published in Spring 2011.

WasteStrategy2007twoyearsonFINAL_pdf_.pdf (76.50 kb)

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