Lots of anger reported today at the government’s delay at arriving at a decision on mandatory greenhouse gas reporting. Industry is reported as “blasting” the government for the “unacceptable” delays. At EEF, however, we are very pleased that the government has taken the bold moving of not rushing the decision.

Just to recap. You may recall that under the Climate Change Act the Secretary of State must make regulations to mandate greenhouse gas reporting or lay before Parliament a report explaining why such regulations have not been made. Defra opted for the latter. The report, presented to Parliament yesterday, says that Defra is still considering the analysis of responses to last year’s public consultation. It adds that evidence gathering has taken a lot longer than anticipated. No timeframe for a decision to be made was put forward.

We hope this means that the government is minded to take a more strategic approach. Particularly given the announcement in last week’s budget that CRC might not be around for much longer.  Climate change policies do not work in isolation (something our members know too often, many are subject to three different regimes – CRC, Climate Change Agreements and the EU ETS). We have been campaigning hard for the government to take a step back and take a more strategic view of the policy landscape. Our call for one carbon reduction scheme for manufacturers was set out in last year’s Green and Growth report.

While we believe that greenhouse gas reporting can play a role to play in enabling companies to identify, manage and reduce their emissions. However set against the existing complex policy framework it has the potential for creating a compliance headache for manufacturers which does little to help us meet our climate goals.

The government now needs to look at the potential for greenhouse gas reporting as part of a wider review of existing policies and schemes – which must also consider whether the CRC has a future role to play.

Defra’s Resource Security Action Plan, published last week, comes as the issue of accessing and securing raw materials rises quickly up the manufacturing agenda. Earlier this year we surveyed executives to find out what they perceived as the biggest threats to growth. The Eurozone crisis? Access to finance? Accessing the right skills? Perhaps surprisingly 80% of respondents said access to raw materials was a risk to growth. One in three said it was their top risk.

Why? Well there are probably a number of reasons for this emerging as a critical risk. For one, the chemical’s legislation REACH means that supply (and use of) certain chemicals which are deemed to be “of high concern” is uncertain. In addition, 2013 sees the next tranche of registrations of chemicals. This time chemical manufacturers are required to register dossiers for all chemicals placed on the market between 10 and 1000 tonnes. For some the costs of pulling together the dossier might outweigh its market value. We certainly saw some substances being withdrawn from the market during the previous registration round. There’s a good chance we will see the same again in 2013.

There is also increasing competition and demand for certain materials. A lot of attention has been paid to rare earths whose supply is risky due as worldwide production is concentrated in a few countries, demand is expected to grow rapidly, they are not widely recovered nor are they easy to substitute. The US Department of Energy said in its latest critical materials strategy that a number of rare earth materials were heading for critical levels in short-term supply and predicted there could be problems in the supply chain imminently. Many of these materials will play a crucial role in the very type of manufacturing the government is keen on growing – high value manufacturing as well as low carbon and green technology.

But supply risks are not just limited to rare earths. Material price fluctuations in part reflect growing demand from the emerging markets. A recent analysis by FTSE350 profit warnings in 2011 found nearly a third was attributed to rising resource prices. Rising demand is creating other impacts. I heard of one manufacturer whose supply of titanium oxide, a substance which is used as a white pigment in plastics, stopped completely as everything was now being sent to China. Equally, manufacturers are growing wary of having to source raw material from the Far East. One member highlighted how it was sourcing recovered plastics from China as it could not find the quality it needed in the UK. Relying on this supply was making the company nervous.

So it was welcome news to hear that the Defra was developing a Resource Security Action Plan. Certainly it is something our international competitors are taking extremely seriously. Japan is treating recycling as a key strategy for bridging the gap between demand for rare earths and their supply and has earmarked Y42 billion (roughly $550 million) for the development of rare earth recycling. It has also earmarked $65m to help manufacturers reduce their reliance and consumption of these materials. This month, Germany has forged a rare earth and technology swap with Kazakhstan – a strategic partnership worth some €3 billion. It has already signed a similar deal with Mongolia. In the US, some $31.6m has been invested into 14 research projects to study ways to reduce or eliminate use of rare earth elements. At least a dozen bills have been introduced into Congress supporting the development of a domestic rare-earth industry. China, meanwhile, which holds most of the world’s operational rare earth mines, has been taking steps to limit exports and enhancing domestic consumption.

It is against the responses by our international competitors that it is best to view the outcome of the government’s action plan. The new actions which the government has committed to include:

-          An innovation challenge to fund closed loop economy projects in the next financial year. To be coordinated between the Technology Strategy Board through the Small Business Research Initiative.

-          Government will explore the feasibility of applying the principle of Individual Producer Responsibility to waste electronic and electrical equipment (WEEE).

-          Government will look to expand on the data it collects on WEEE treatment and recycling

-          A new critical materials dashboard will be launched to better provide companies with the information they need to manage resource risks to their operations. This will be launched by January 2013.

-          Material flow analysis will be developed, looking initially at WEEE ‘hot spots’

-          WRAP will conduct demonstration trials of critical material recovery through WEEE treatment

-          A new industry consortium, convened by Green Alliance, will address resource opportunities and concerns, disseminate leadership thinking and provide a forum for policy innovation.

This is a reasonable first step. But there are some serious drawbacks. For one, the funding through the innovation challenge is just £200k. While some might think that we should be thankful for that in today’s economic climate it is worth noting, as one waste pundit highlighted this week, that Eric Pickles has been given £200 million to persuade local councils to return to weekly household waste collections. The amount dedicated to support industry is paltry compared to commitments in Japan and the US. The other is that it is seriously WEEE-focused. At the moment we collect and treat just 16% of small WEEE. We need to recycle many more of these products to get a critical amount of material to make more sophisticated recycling technologies to be viable.

We would like government to take a much broader view of resources. We need a resource strategy that looks to extract all the valuable, reusable materials contained in the products and materials we throw away and to minimise what we produce in the first instance. It needs to consider all the materials needed to create a healthy, vibrant manufacturing industry and consider how these materials flow through the economy. At the heart of these considerations must be resource security, resource quality and incentives to encourage more resource efficiency.

As the dust settles on another Budget, Fergus McReynolds, Senior Climate & Environment Policy Adviser at EEF looks at the impact on green policies of a Budget designed to support growth.

The overall picture for green policies was a bit of a mixed bag; the government reiterated their commitment to investment in a world-leading energy sector and restated that renewables are a crucial part of the energy mix for the UK. However the Chancellor committed to being “alert to the costs we are asking families and businesses to bear”, saying that “Environmentally sustainable has to be fiscally sustainable too”. This supports EEF’s view, presented in our Green and Growth report, that renewables are an essential part of the mix, but policy should be should focus on decarbonising the grid and not prescribe the route. A leaked letter to the EU Commission last week shows that the government agrees.

The Chancellor also highlighted that the Green Investment Bank's pathfinder – UK Green Investments – is now open for business, with over 20 individual projects under active consideration including in renewable energy, waste management and energy efficiency and is on track to make its first investments next month.

On specific policies; the Government have stuck with their trajectory for the Carbon Price Floor. This will almost double the rate of the 'Carbon Price Support' levied on fossil fuels used for power generation from 2013 to 2014. The decision locks the UK into a system with higher energy taxes than our competitors, regardless of the European carbon price. This is yet another unilateral increase in carbon taxation, coming at a time when the economy is still in recovery, and will only serve to widen further the gap between electricity prices in the UK and those in our competitors in Europe.

At current prices, this will see the rate go from £4.94 per tonne of CO2 in 2013/14 to £9.55 per tonne in 2014/15. A tax on this scale would push industrial electricity prices up a further 6-7% on top of the host of existing policy measures already adding to energy costs.

The decision also directly contradicts the government’s stance that the UK will go no faster than our partners in Europe and hamper its plans to rebalance the economy. The more government policies push up the cost of operating in the UK, the harder it will be for manufacturers to invest, create jobs and compete in global markets. A silver lining in this Budget announcement is that the Government have decided rightly to provide an exemption for input fuels used to generate heat in good quality combined heat and power plants and the exclusion of small scale electricity generation of two megawatts capacity and less.

There was better news on the CRC Energy Efficiency Scheme, with the announcement that the Government will seek major savings in the administrative cost of the Commitment for business from this “cumbersome, bureaucratic” policy that “imposes unnecessary cost on business”, the Chancellor went on to say that “if those cannot be found, I will bring forward proposals this autumn to replace the revenues with an alternative environmental tax.”

We welcome this review of the CRC; the scheme is overly burdensome, costly and provides no guarantee of carbon reductions. However, we feel that no amount of tinkering with this doomed tax on British business will ever make it work and therefore the Government should scrap the scheme in the autumn, as part of a holistic review of green polices ahead of the next Comprehensive Spending Review.

Overall this was an interesting Budget for green policies, but perhaps not as interesting as we might have hoped.

In 2011, Thailand experienced its worst floods in over 50 years. More than 600 people died and its manufacturing industry in affected regions was devastated. GDP shrank by 9 per cent compared to what it had been a year earlier. While the flood waters have receded and some business is beginning to resume, the threat of future flooding looms. Thailand’s science and technology minister, Plodprasop Surasawadi, told a Thai newspaper that he was “one million percent sure" there would be flooding again next year. He added that “this is a natural phenomenon that you cannot escape. We are living in a period of climate change.”

When manufacturers think about the impact of the climate on business continuity, flooding is perhaps one of the more obvious risks that spring to mind. But a climate change risk assessment for the UK, published by government late January, warns that a greater frequency of supply chain disruption and fluctuations in water availability are also risks to businesses as a result of changing weather patterns (something water abstracting manufacturers in the south east of England will be all to alert to with river levels at frighteningly low levels).

In short, it identifies six key challenges that manufacturers are likely to wrestle with: supply chain disruption, protection and maintenance of assets, operational integrity and process functionability, access to markets and shifting demand, regulatory compliance and business reputation. It warns that while a number of businesses, predominantly national and multi-national corporations, are taking climate change risks seriously, they are in the minority. It adds that manufacturers also have an opportunity to deliver products to help others adapt to the impacts of climate change.

Government is now working on a National Adaptation Programme, which is due to be published next year, which will respond to the high priority risks and opportunities that have been identified. Government wants to hear from manufacturers as it develops the programme: what are the most urgent areas for action for your business? What actions you are already taking to address risks? What are the key barriers that stop you addressing risk? And what new or innovative actions or opportunities have you explored for addressing risks.

Want to take part? Visit Defra’s web-forum at http://engage.defra.gov.uk/nap