Something slightly overlooked in the Budget this week, was the clear sign that government will not be looking to reduce the number of sectors that are currently eligible to enter into a Climate Change Agreement (CCA), once the current scheme ends in 2013.

The specific CCA HMRC briefing, issued on Wednesday, states “The Government announces that the CCA scheme will be extended to 2023 and the 54 participating sectors will continue to be eligible for the scheme.”

I believe that government had held fairly developed internal discussions about reducing the number of sectors that might be eligible to enter into a CCA from 2013. But, speaking to a few government officials since Wednesday, the message was that government had, for now, decided against this.

We think Government could go further. In fact, EEF believes there is room to expand CCAs to cover more manufacturing sectors to incentivise energy efficiency, a key policy position that we set out last June in our report ‘Changing the Climate for Manufacturers’, only weeks after the Coalition came to power.

Within all the myriad of speculation of what will be in the Budget later today, I hear that government might use compliance with the revised Energy Taxation Directive, which is due to enter into force from 2013, as an excuse for introducing the Carbon Price Floor tax on the generation of electricity in the same year.

Surely the Chancellor can’t use this as justification of introducing a unilateral UK carbon tax as they are mutually exclusive.

The Energy Taxation Directive proposes an EU wide minimum tax of €20 per tonne of CO2 on direct emissions, levied at the end user. But crucially emissions covered under the EU Emissions Trading Scheme are excluded from this tax. Yet it is these emissions that are targeted by the proposed Carbon Price Floor. The Treasury proposed to levy this tax upstream on the electricity generators on the fuels they use to generate electricity. These emissions are also caught by the EU Emissions Trading Scheme and therefore excluded from the Energy Taxation Directive.

British business can expect to save a staggering £23 billion a year through low-cost/no-cost methods simply by improving the way they use energy and water and by reducing waste, according to a new report which emerged from the environment department on Friday.

It’s a huge number. And it’s significantly higher than the £6.4 billion estimated by consultants Oakdene Hollins and Grant Thornton when they initially conducted the study in 2006. Yet the numbers keep on growing. On top of the £23bn low-cost savings, those opportunities with a payback greater than one year have been estimated at an additional £33 billion.  

We must be careful about interpreting the report literally. It was not based on any site-audit data. Nor did it use any case studies. The figures were developed by using existing data from a variety of sources. But they do serve a useful reminder that lean manufacturing and resource efficiency can potentially have a profound impact on competitiveness.

But over £55 billion worth of savings? You would have thought manufacturing, of all sectors, would be alert to those kinds of savings. But of course there are a range of factors that prevent businesses from realising the fruits of resource efficiency. The researchers in fact have created four lists of reasons. These range from access to finance to difficulties implementing changes because of the need of specialist advice to the prevalence of behavioural barriers, or because businesses simply are not aware of (or have access to) information about the costs and benefits of particular measures. 

Either way, it smarts to be told all this at the same time as the government is stripping away many of the business support schemes it had developed in an attempt to overcome these entrenched barriers. While our training on resource efficiency effectively deals with the information gaps the researchers referred to, last week, the Carbon Trust, in an address to EEF's Climate and Environment Policy Committee, confirmed it would no longer be offering its free on-site energy audits, would be discontinuing the well-received Industrial Energy Efficiency Accelerator and scrapping its 0% interest-free loans*. In short, the Carbon Trust is now offering very little (bar its frequently excellent publications) to business.

While it is true the Trust has its funding cut by £50m, it is also true that this brings its funding in line with what it received three years ago. Yes, some of the Carbon Trust’s offerings to business needed reform – but to scrap (what seems like) everything? I can’t help feel that if the Carbon Trust vacated its plush offices in central London it could a better start to address the funding “shortage” without cutting services to business. Sure this would prove to deliver greater levels of resource efficiency?

* A new “green finance deal” worth £550m has been announced over the next three years, to businesses of all sizes, from 4 April 2011 following a deal between the Carbon Trust and Siemens Financial Services Ltd. Interest rate levels have not been confirmed. See here for more information.  

If there’s one thing we know for certain, it is that the private sector needs certainty. Certainty of future policy direction. Certainty of how government actions will impact their business operations and costs. Certainty not just for the short term, but for the long term, that can be factored into business investment and planning cycles that reach far out into the future.

Although the publication of the European Commission low-carbon roadmap on Tuesday (8 March 2011) was welcome because we finally received confirmation that the Commission will not pursue an emissions reduction target of -30%, it nevertheless provides only partial certainty.

Whilst the political road to Tuesday’s announcement has been a rocky one, it ended with an almost sensible outcome with the Commission finally acknowledging a firm evidence base is needed ahead of any target announcements being made. We have gone from DG Climate Action “leading the way” by forcing the EU to move to tighter top down targets for 2020, to sensible voices in other parts of the Commission and Member States calling for a better understand of what such a move might do to the EU manufacturing sector. Therefore, for now, the 2020 target remains at 20%.

But what is still highly uncertain is the intention by the Commission to consider setting aside a significant amount of carbon allowances in the third phase of the emissions trading scheme (ETS), which begins in 2013 and runs until 2020. Why can’t the Commission just tell us: Is it going to take some 800 million allowances permanently out of the system or not? Whilst we firmly believe that this is a market and should be left as one, the uncertainty of whether the market is going to be artificially tempered with or not is even more unwelcome than disrupting the market itself.

Surely such indecisiveness will not help us meet our climate change goals, but delay action and make Europe an uncertain place for future investments.

The coalition government have slammed on the brakes for the planned extension of civil sanctions to the environmental permitting regime. Or rather Oliver Letwin has.

Civil sanctions, being trail-blazed by the Environment Agency, allows it to exact certain powers without the hassle of going to court. These range from fixed monetary notices and stop notices to restoration notices and "enforcement undertakings." The latter being an agreed course of corrective action to bring a company back into compliance without having to face prosecution.

But while the Agency can apply its new powers to some offences there are some important exceptions - not least environmental permitting. Secondary legislation enabling this to take effect from 6 April was due to be laid before Parliament this month. But Letwin is not convinced this is the way forward. Progress, therefore, has been halted.

This is not the only area where Letwin is making his mark. In his capacity as minister for government policy at the Cabinet Office he is reading everything that is passing his desk and isn’t afraid of halting the progress of policy if it doesn’t stack up, according to sources in Whitehall.

Let’s hope so. We wrote to him last week highlighting the findings of our 2010 telephone survey of members which found half of those interviewed thought the sheer burden of regulation was a barrier to growth. We highlighted how the poor quality of impact assessments required a change in policy-making culture and that even a small increase in the transparency of how impact assessments are developed would help restore credibility in the system.

No more plainly is this evident than in climate change regulation. Currently, government is reforming Climate Change Agreements and the CRC Energy Efficiency Scheme. New duties to report greenhouse gas emissions are being considered. Alongside this a carbon floor price and energy market reforms. We are concerned that this work is being carried out in a piecemeal way, and we have had little evidence or reassurance that the impact of the work in this area is being considered strategically. The recent consultation on the carbon floor price did not even seek to understand the potential impacts on manufacturing (see a summary of our response here).

Let’s hope that Letwin kicks this into touch. We need a strategic vision. We need certainty of policy direction. And we need to see climate change and energy policy implemented cost effectively if manufacturing in the UK is to remain viable for the many.