Speaking at the Renewable UK Conference yesterday, Chris Huhne, spoke of the need for a good mix of energy sources going forward and ‘flexible energy portfolio’.  This is certainly something we support and welcome the news of growth of the renewables sector, but is a one percentile increase year on year going to get us to our 30 percent target by the end of the decade?

As Huhne states, this requires a fourfold increase and as he rightly says ‘this will not be easy’ and ‘will require clear thinking’.

Clear thinking to me would be to assess whether the UK policy approach is truly the best one to get us there.  Having a target for renewable energy is not the best option.  Huhne states he does not want to pick favourites, however, this is exactly what a renewables target does. 

He states we can’t rely on one source, yet his speech seems to focus mainly on off-shore wind.  The CCC report published in May of this year found that by 2020 off-shore wind will still be 60 percent more expensive than new nuclear and 20 percent more than CCS. 

The decision on what energy mix the UK has should be left to the market to decide how best to decarbonise, rather than limiting options with a renewables target.

This does not make us naysayers or sceptics, we support the push to decarbonising our energy sources and reducing energy costs – the coalition should not just carry on with an obligation that the previous administration agreed to without fully assessing alternative approaches.  As we have long argues, manufacturing is at the heart of this transition as evidenced by the firms Huhne spoke of in his speech.

Last night’s lively debate on the BBC’s flagship Newsnight programme saw Energy and Climate Minister Greg Baker, Green MP Caroline Lucas and EEF’s Policy Director Steve Radley tackle the difficult question of balancing a move to a green economy and promoting the growth of UK manufacturing.

Steve Radley and Greg Baker agreed that the government must work with industry to achieve the ambitious targets set out in the Government’s carbon budgets.  

The programme will be available on the BBC’s iPlayer for the next seven days.

http://www.bbc.co.uk/iplayer/episode/b015yr4p/Newsnight_11_10_2011/

The Environmental Audit Committee has today published a report saying that the Government’s “schizophrenic attitude” to climate policy was undermining confidence and long term certainty.

The report comes just a week after the Chancellor, George Osborne, speech at the Conservative party conference, in which he said that the UK should cut “carbon emissions no slower but also no faster than our fellow countries in Europe”.

Both statements revolve around the decision by the Government to review the fourth carbon budget in 2014. Although the report rightly acknowledges the very serious threat to economic growth that climate change policy could have on the UK manufacturing sector, the committee insists that the recommended carbon budgets, should be regarded as an absolute minimum.

But is there merit in a review the carbon budget targets in 2014? Any target adopted must reflect what is achievable at a cost which can be sustained. Surely damaging the UK economy without achieving significant global GHG reductions is not the way forward. Indeed in his speech at the party conference the Chancellor aid that “a decade of environmental laws and regulations are piling costs on the energy bills of households and companies” and that the UK is “not going to save the planet by putting our country out of business”.

What is needed from the UK is to provide a leadership role, one that shows that decarbonising and growing the economy go hand in hand. We need policy decisions that are based on a robust and agreed evidence base. It can be argued that policy making without the full evidence has led to the current policy landscape that is often confused, conflicting and costly.

The simple answer to question of Have we got the balance right on climate change? was re-evaluating the approach to climate change policy because the ‘one-size-fits-all’ approach of the previous Government did not work. This was the message from Climate Change Minister Greg Barker.

Speaking at  the EEF sponsored fringe event with the Enterprise Forum at the Conservative party conference, the minister said that in terms of rebalancing the economy, DECC did its part in ‘rediscovering the importance of making more things and making Britain a hub for manufacturing’ but felt the green economy was more than just clean, green technology innovation. He said these were ‘tough times’ financially and for the green agenda and that the green economy was not insulated from other market factors the economy was facing.

The event, titled “Carrot or stick? Have we got the balance right on climate change?” also included panellists Steve Radley, EEF Director of Policy; Tim Morris, Head of Climate Change at Tata Steel; and Dustin Benton, Senior Policy Adviser at the Green Alliance. The event was chaired by Andrew Cumpsty, Chairman of the Enterprise Forum, and was well attended with representatives from industry, trade bodies, the media as well as Conservative party members.

The Minister welcomed the broad cross party support for climate change policies, but argued that the previous government had too narrow a focus on short term carbon targets without considering wider impact on the economy.

Barker argued that ‘green politics 2.0’ was about taking the green agenda beyond a ‘silo’ of a small part of economy and embedding it across the wider economy. Importantly, he stated that he wanted to ensure that advanced manufacturing was not de-emphasised or sent abroad as result of UK climate change policies.

Following these remarks, EEF’s Steve Radley argued that green and growth policies should go hand in hand. He noted that half of EEF’s members saw big opportunities in being in being part of the supply chain for green industries, and that the key question was whether the conditions are right to invest. He pointed out that manufacturers were becoming increasingly mobile and that companies of all sizes were being encouraged to look at alternative locations partly due to energy costs in the UK.

Dustin Benton from the Green Alliance said there was a case to make for regulation. In the context of electricity market reform, he said that contract for difference feed-in tariffs were a potentially ‘big carrot’ but warned that emissions performance standards and the carbon floor price had the potential to be ‘big sticks’. He argued that raising the CFP was effective, but suggested the recycling of carbon floor price incomes would be a good idea.

Tim Morris from Tata Steel stated that energy intensive industries such as steel and ceramics would be the backbone of a low carbon economy. He said Tata was deeply committed to combating climate change, with lots of investment going into research and development, and pointed out that an important precursor to achieving a low carbon economy was the consideration of an international context for energy intensive industries.

He called on the Government should do more to support the UK’s supply chains, and in terms of ‘sticks’ he said that a level playing field was important and criticised the CFP for making the UK less competitive than it’s European neighbours.

After an interesting Q & A, the Minister stated that manufacturing must be at the centre of the UK economy and that it was important that Government is on the side of advanced manufacturing.

The European Parliament’s Environment Committee today voted to support a collection target for Waste Electrical and Electronic Equipement (WEEE) of 85% by 2016. This is poles apart from the Councils position who support a 65% target based on goods going on sale, to be phased in to most EU countries by 2020.

This disparity now means that the Council and the Environment Committee will now have to start a negotiation process in order to seek agreement. Knowing that it was unlikely that agreement could be reached without the negotiations, is the Parliament playing for room?

Under the EU’s co-decision procedure, both the Council of Member State Ministers and the European Parliament must agree on new legislation and if they can’t agree they both must enter a negotiation process where enviably compromises are made.

By setting their stall as far from the Council as possible the Environment Committee have a greater room for negation and more scope for trade-offs. With the current state of play in co-decision is it likely that we will increasingly see this type of approach from the Parliament’s Committees?

The Parliament also agreed to introduce a separate target for re-use of 5%, this is again does not appear in the Councils proposals.

The proof however will be in what is or isn’t agreed in advance of the vote at the plenary Parliament meeting in January 2012.

Today’s vote also saw the Environment Committee in favor of a central EU registration system and a ban on exports of waste electrical and electronic equipment to non-OECD countries.

I must say, it should be an interesting first Cabinet meeting, when Osborne and Huhne face each other, following on from setting out their positions on climate change policy from very different angles.

The Chancellor’s intervention into reality is welcome relief to a manufacturing sector that can deliver on low carbon innovation, but, as he says, “a decade of environmental laws and regulations are piling costs on the energy bills of households and companies”. George Osborne has hit the nail on the head by stating clearly, “We’re not going to save the planet by putting our country out of business”.

Globally we have a major problem, we need to reduce the concentration of carbon in the atmosphere and we need to make this happen sooner than we all realise. To achieve this aim, we need to accept that manufacturers will provide much of the low carbon solution.

Even Chris Huhne knows this to be true, as he envies the Chinese, installing wind turbines across the South China Sea, building 28 nuclear power stations in the time it will take us to build one and building 10,000 miles of high speed rail. All three of these projects have Energy Intensive Industries (EII) at the very heart of them.

Raising costs to EII in the EU by increasing our 2020 target will not “represent a real incentive for innovation and action in the international context” as Huhne said in 2010. We believe that what makes good business sense is, providing the right incentives and business environment so that investment in low carbon technologies takes place here in the UK and not in regions of the world that are not subjected to the same levels of policy costs that our EII are experiencing today.

An example close to home is that climate change and environment taxes for EII in the UK are four times that of Germany. How does this encourage multinational companies to choose the UK as the place to invest.

The Chancellor’s view that we should not be going faster than the rest of the EU in setting targets, is the right one. We need to lead by example, yes, with that example showing that we lead on innovation, support and success, not on who can set the highest costs to meet our much needed targets.

Amongst a speech mainly aimed at rural growth, Caroline Spelman Secretary of State for Defra, also spoke about the need for ‘green growth’.  She spoke about the savings that could be untapped – to the sum of £23billion – but there is no mention of the support that should be given to business to achieve this. It is one thing knowing there is a saving to be made, it is quite another thing to know how to make these savings.  We fully support this agenda but more needs to be done to help unlock these opportunities rather than keep going with the current policies that add costs to UK manufacturing that hinder UK investment – policies her peer Charles Hendry Minister of State at DECC is pursuing. 

It is not just about creating ‘green’ jobs in the changing energy generation portfolio and keeping costs low for consumers, it is also about keeping those manufacturing jobs that produce these low carbon technologies and fostering them so they can grow.  Increasing costs on UK production - that other competing countries do not have to endure - does not achieve this.

So in order to make ‘Made in Britain’ matter, we need to ensure we have the right conditions to make this a reality; otherwise we just end up with more ‘Made in China’.

MP for Linlithgow and East Falkirk, Michael Connarty recently spoke at Labour Fringe Event and asked whether the Green Economy was costing the UK jobs.  He stated that the increased costs of production caused by the many climate change policies imposed on businesses was causing production to move elsewhere (where there are cheaper costs and less environmental regulation).

One would ask whether this is a real and tangible disadvantage; with UK climate change and environment taxes, after rebate/relief for the most energy intensive sectors, being a whopping 400% higher than those same sectors in Germany. That is just the difference within the EU, let alone the rest of the world, not subjected to climate change costs.

“Manufacturing is at the heart of the economic recovery” stated Connarty. 

This is true and should not be forgotten. Manufacturers are the solution to climate change, by providing the technologies and equipment for a low carbon future.  Manufacturers are already taking steps to reduce their environmental impact and many are trialling innovative ways to do this.  But the fact remains that if they must produce in an environment that makes them uncompetitive, it make it much more difficult to attract investment here in the UK, where organisations have the means to invest elsewhere.

What we need is an environment where this is recognised and manufacturing is supported to innovate and invest in new technologies to reduce their environmental impact – something Connarty called on the Coalition to recognise.  In order to lead on the world stage, manufacturers need to invest in a low carbon future.