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Ripcord: to pull or not to pull?

by Fergus McReynolds, Senior Climate and Environment Policy Adviser 2. July 2013 12:42

Today marks the launch of the Committee on Climate Change call for evidence on the forthcoming review of the fourth Carbon Budget. This fires the starting pistol of what I expect to be a long running and difficult debate on whether the UK should be adopting out of step targets, or recognising our ability to reduced UK GHG emissions at an affordable cost. At a cost that will encourage others, globally to follow suit and deliver a long lasting downward trend in global emissions.

When the government adopted the fourth carbon budget in 20x11, it was a midst a row on the competitiveness  risk of unilateral action on Climate Change and the strong rhetoric from some parts of government that it was essential that the UK goes no faster or slower than the rest of Europe. In the end it was agreed, in what was seen by many as a compromise that the fourth carbon budget would be reviewed in 2014. However, what is becoming less clear now as the review approaches, are its terms.

At the time, Business Secretary, Vince Cable that warned against agreeing to aggressive level of cuts that could undermine the UK’s “attractiveness as a place to do business”. Now Lord Deben, Chair of the Committee on Climate Change has written to Ed Davey to “warn” him that the evidence underpinning the fourth budget had not changed and to some extent pre-empting the review suggesting that very little will change. In response DECC said it would review the CCC advise on the fourth carbon budget early next year.

So a review and a review of the review, the decision in 2014 will be a tough one for various departments within government

But is this another sign that the CCC and Lord Deben are increasingly out of touch on this issue and are setting themselves up for an almighty battle with the government. Only last week, Lord Deben suggested that solicitors’ offices had done more to improve their energy efficiency than “terrible polluters” (Energy Intensive Sectors). The evidence in fact, shows that emissions from the industrial sector have almost halved in the last 15 years. What is true is that energy saving potential in the industrial sector is getting harder to find, and over the next 15 years it may well be easier for these solicitors’ offices to find energy saving potential, than sectors that have been improving efficiency for decades. However, if we are going to meet our long term emissions targets we need a coordinated approach.

An approach with government, industry and CCC working together to find solutions, not one that pits government, NGOs, industry and the CCC against each other.
Whatever the terms of the review of the fourth carbon budget, it is clear that the UK should take a close look at the cumulative impact of all its climate change policy, both unilateral and multilateral, and assess the risk of competitiveness.

The argument for tough emissions targets is that the UK has to set an example. However I can’t think of any country or region in the world that will follow the lead of climate change policies that risk their industrial competitiveness. What the UK needs to do is show real leadership and prove that we can still meet our challenging targets while growing, rebalancing our economy and being competitive on a global stage.

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‘One-size-fits-all’ climate policy does not work says Minister

by Fergus McReynolds, Senior Climate and Environment Policy Adviser 5. October 2011 09:59

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.

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Changing seasons of the CCA

by Fergus McReynolds, Senior Climate and Environment Policy Adviser 8. September 2011 08:54

With the best of the summer behind us, DECC has now published its eagerly awaited consultation on the future of the Climate Change Agreements. CCA consultations appear to developing an interesting definition of the seasons with this consultation announced in the Budget for the summer, following an autumn consultation in December last year. That aside the substance of the consultation is nothing new to the CCA community having been briefed a number of times by the succession of DECC officials. However some of the additions have surprised me.

Chief amongst these is the proposal that the Environment Agency should act as the administrator of the CCAs in England. Although the proposal to appoint an administrator came as no surprise, I feel it flies in the face of the coalition government’s stated goal of reducing the administration and cost burden on industry.

I had expected something on reducing the burden on government, but we had been assured that no decision had been made as to who would administer the scheme. I understand the government’s desire to reduce costs, but I’m concerned that a move to a new administrator risks the loss of expertise both within government and industry.

I also can’t see how the additional administrative burden required to transfer all the data, history, and knowledge of the agreements of 10,000 sites to a new administrator won’t add costs and complexity.

I feel strongly, and have argued that the sector associations, who have over 10 years of experience in managing the scheme and working with their respective industries, would be best placed to take on the role of administrating the scheme. This would of course require a robust audit process, but I think it represents the best opportunity to reduce cost and administrative burden for both industry and government.

Another gripe is the decision to not allow trading in the CCA, although again not surprised by government’s proposal, I am disappointed that the CCA started as a trading system and should continue as a traded system. However, we have lobbied tirelessly on this and government knows our position well.  

Those concerns aside there are many positives and I broadly support many of the recommendations set out in the consultation, for example the proposal of two year (24 month) target periods will not only ensure government’s desire for participants to be continually measured, but reduces the burden of annual reporting.

All in all it looks like this will be an interesting consultation.

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CRC Simplified but DECC must try harder

hdrury@eef.org.uk by hdrury@eef.org.uk 1. July 2011 16:01

Since its launch in 2009, the CRC has faced much criticism, not least by ourselves.  Many have long argued that the CRC is too complex, that this goes against the coalition’s commitments to simplify taxation and reduce regulatory burden. 

 

And last year, when the Government announced that revenue from CRC will not be recycled to companies, many accused the Government of introducing a ‘stealth tax’ and removing one of the only incentives in CRC.

 

Earlier this year DECC published a series of informal discussion papers for priority areas for CRC reform following complaints from stakeholders.  These focussed on simplification, overlap with other climate change schemes, and unnatural grouping of companies.

 

And so, finally, yesterday DECC announced the simplification of the CRC Energy Efficiency Scheme.  This long awaited announcement did go some way to simplification and although EEF are happy to see there are attempts to simplify the scheme, DECC could have gone further.

 

Yes, we are happy to see that some of the most complicated parts of the CRC have been removed, for example the qualification rules, which will now focus on only half hourly electricity meters and the flexibility of how you disaggregate.

 

We are happy to see that there will be two sales of allowances per year and that they will be fixed price and not cap and trade.

 

The blanket CCA exemption is welcomed as making it easier for companies to understand whether they are in or out.  However, read on a little further and you read ‘…there may be a requirement for the level of the threshold…to be revisited to ensure the bulk of the coverage of the scheme is retained’.  EEF are concerned this is a signal to lower the threshold of CRC in future meaning more companies who are not au fait with the complexities (that yes still exist) will be caught under the scheme meaning a new generation of participants who will struggle to get their heads around the scheme.

 

CRC is now essentially a tax, but could do without the League Tables that add no value whatsoever and provide no comparable data.  Gareth Stace, EEF Head of Climate and Environment stated in ENDS yesterday:

 

“The CRC is now essentially a straightforward tax and government must ensure that the only reporting requirements on employers are those that are needed to ensure that the correct amount of tax is paid.” 

There will be a consultation in 2012 on these proposals, until then there is a call for feedback on today’s announcements by September.  EEF will be responding to this to push DECC to go that bit further and truly provide something that is simplified.

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Greg Barker says the right things, but will DECC do the right things

by Gareth Stace, Head of Climate & Environment Policy 11. May 2011 17:30

I attended an excellent round table discussion this morning organised by Reform, where Greg Barker, the Climate Change Minister was the main speaker.

It was very encouraging to hear a DECC minister say things like “manufacturing is vital to rebalancing the economy” and “more must be done to support manufacturers”. For too long now EEF has been trying to get the message across that in order to have a UK low carbon economy, you need to have a vibrant economy, one which manufacturing, even energy intensive manufacturing, is supported and encouraged by government.

The short term test for government is what is said next week in terms of how it responds to the fourth Carbon Budget (2023-2027) recommendations from the Committee on Climate Change. Will it adopt the proposed budget of 1950 MtCO2e, that incorporates a tightening of the UK targets to 2020 which would replicate an EU move to -30% to 2020. If it does without any caveats, then we are in trouble and totally out of step with the rest of Europe, let alone the rest of the World. The unilateral cost increases to our economy would be significant and certainly not encourage investment in the UK. More so, it would provide a low carbon market that only overseas based companies (who aren’t subjected to costly climate change policy) could capitalise on.

We need long term policy certainty that aligns itself with investment cycles of industry. We need targets to be realistic and affordable, as deindustrialisation is not the answer and we need government to be working with manufacturing to ensure that the UK manufacturing base grows in a low carbon way and is seen as world class.

Government is saying the right things, but the coming months will be the test to find out if it will do the right things. Mr Barker, if you mean what you say, then we as manufacturers welcome that DECC is listening to our concerns.

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Energy reforms are mixed bag - EEF

by Gareth Stace, Head of Climate & Environment Policy 16. December 2010 14:35

Today both DECC & HM Treasury published energy market reform, CCL and Carbon Price proposals in two separate consultation documents. As you can see below, our media release sees these proposals as a mixed bag. Whilst the energy market reforms should now provide new nuclear and low carbon investors with a stronger and predictable carbon price, the “Carbon Price Floor” Consultation from Treasury seems to add yet another layer of costs onto UK manufactures. We therefore may see a ready UK market that overseas competitors can take full advantage from:

Energy reforms are mixed bag - EEF

Electricity market reforms to provide certainty and signal to investors but carbon price mechanism to increase costs and threaten industrial competitiveness

EEF, the manufacturers’ organisation has given a mixed response to today’s package of energy reforms.

Whilst it believes the electricity market reforms will provide a more predictable and cost effective approach to supporting low carbon energy, proposals for the carbon price support mechanism will increase the costs to manufacturers and threaten the ability of companies to invest for growth.

Commenting, EEF Director of Policy, Steve Radley, said:

“Today’s reforms are likely to prove counter-productive. On the one hand government has provided a more predictable and cost effective approach to energy policy which should benefit both investors and consumers.

“It has also fired the starting gun for a policy that will prove the right market signal for investment in low carbon power generation to provide long term energy security.

“However, these reforms come at a significant price for UK manufacturers, including those who want to invest in low carbon technologies. The government’s own impact assessment shows the carbon price reforms will damage competitiveness for over a decade but it offers no solutions that will mitigate this.

“Manufacturers will have to bear the costs and complexities of three different types of carbon and energy taxation (1). Government must now address how it plans to address the loss in competitiveness by working with industry to reform other aspects of climate policy such as the Carbon Reduction Commitment and Climate Change Levy.”

 

ENDS

Notes to Editors

1.The three types of carbon and energy taxation are:

·         Climate Change Levy

·         Carbon Reduction Commitment

·         Carbon Support Price Mechanism (as proposed)

2. EEF, the manufacturers’ organisation is the representative body for UK manufacturing. The EEF has a growing membership of almost 6,000 companies of all sizes, employing some 900,000 people from every sector of engineering, manufacturing, engineering construction and technology-based industries.

EEF welcomes CRC consultation, but only as a first step to further reform

by Gareth Stace, Head of Climate & Environment Policy 18. November 2010 09:33

EEF welcomes the government consultation on changing certain aspects of the CRC Energy Efficiency Scheme, as a first step in unravelling the complex, confusing and costly, broader climate change policy landscape.

Commenting, Gareth Stace, Head of Climate & Environment said “this extended window in the run up to the second phase will allow government to make more strategic changes to the wider climate change policy landscape, rather than tinkering around the edges in a piecemeal fashion. If government doesn’t address the issue from a more macro level, then we are in danger of increasing complexity, not reducing it, both for CRC and other climate change policy measures.

“Government now has the chance to get it right and act upon its rhetoric of certainty, simplicity and transparency in order to accelerate the move to a low carbon economy, by sending the right signals to manufacturers and to the market. To this end, government should look to the forthcoming consultation for reform of the Climate Change Levy as inestimably linked to any changes made to CRC.

“Manufacturers believe that government must view any new climate change measures and taxes in the totality of the many costs pressures on business and must not be seen in isolation.”

EEF previously expressed concern that allowance revenues from the CRC Energy Efficiency Scheme, projected to be up to £1 billion a year, will be used to support the public finances rather than recycled to CRC participants. We said in the strongest terms that it sent a worrying signal about how the government intends to engage with the private sector going forward.

EEF welcomes the government decision on the dropping the requirement for organisations who are not required to register as participants to make information disclosures. Saying, “This is a logical step towards simplification. Companies have wasted valuable time and thousands of pounds, just proving to the Environment Agency that they are not caught by CRC. This was bureaucracy gone mad.

“Overall, this consultation should be seen as the start of CRC simplification, not the end.”

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Was the Lord Marland response worth the wait?

by Gareth Stace, Head of Climate & Environment Policy 12. November 2010 16:11

Back in the summer, Lord Marland, Parliamentary Under Secretary of State at DECC, wrote to stakeholders asking for suggestions as to how the burdens imposed by policies and regulations associated with energy and climate change could be amended, reduced or removed. EEF warmly welcomed this refreshing engagement from the new coalition government, seeing it as the new age in how government intended to work with us going forward.

Fortunately, EEF had recently published our vision for UK climate change policy and therefore we were able to set out our views in full. This week, Lord Marland has published his response to this consultation (see responses below).

So was it worth the wait? On the whole, I don’t think so, however the response should not be seen in isolation. I believe that many of the views that stakeholders sent into DECC, will have been viewed with interest by more than just the Marland consultation team and therefore will be feeding into the general government policy process.

The government response didn’t contain much beyond summarising the views DECC received from the 90 organisations that bothered to share policy views. I would have liked to see something bolder, but could DECC have achieved this through this mechanism, as much of what is wrong about UK climate change policy is shortly to be consulted upon through various separate consultations from both DECC and HM Treasury.

Of course I am being too hard on this government response. Looking at it from another angle, this sort of response could be just what we need. The paper looks at all DECC policy in the round, rather than in silo.

Is this a missed opportunity, where DECC could have used this project to look at the policy burden across the department. Then recommended sweeping strategic changes in order to achieve the goal of reducing UK greenhouse gas emissions at least cost to the economy in a certain, simplistic and transparent way.

I would be interested to hear your views on this government response, am I being to flippant on a Friday afternoon here?

Reducing Red Tape letter.pdf (81.86 kb)

Summary of responses.pdf (76.33 kb)

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Fresh Approach from the Minister on Climate Change Policy

by Gareth Stace, Head of Climate & Environment Policy 16. September 2010 11:12

We had a meeting this week with Gregory Barker, the Minister of State for Climate Change within DECC. It was a refreshing meeting and a welcome change from the last administration. I am coming round to believing my earlier view that this government seems to accept that the climate change policy landscape is crowded, confused and overlapping. This is something that we highlighted in our recent report on UK climate change policy. The report called on the coalition government to reduce the burden of climate change policy by simplifying the mismatch landscape that has grown over the last ten years.

 

Simplification was high on the Minister’s agenda and in line with the recommendations set out in our report. Again in line with the EEF position, the Minister was receptive to the concerns of manufacturers on competitiveness and carbon leakage. There was a real acceptance that industry, even carbon intensive industry, is vital to the UK economy and particularly to the emerging low carbon manufacturing sector.

 

However, all my positive views might change come 20 October, when government publishes its Comprehensive Spending Review and with it, detailed climate change policy intension. Of importance will be how it intends to reform the Climate Change Levy into a potential carbon tax. During our meeting with Gregory Barker, we were at pains to point out that although we support moves for a carbon tax, we do not wish to see an increase in the overall climate change policy cost burden to manufacturers resulting from such a move.

 

Finally, the Minister stated he wanted his department to work closely with industry rather than at length, via consultations. The test here will be whether government consults with us ahead of any formal announcement in October. I know that we would be keen to work with his department on how to change the CRC Energy Efficiency Scheme into something more workable and business friendly. This will be high on the agenda when we meet with DECC later today.

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Government acknowledges significant reform of CRC is badly needed

by Gareth Stace, Head of Climate & Environment Policy 9. September 2010 11:33

With just days to go until the registration deadline for the Carbon Reduction Commitment Energy Efficiency Scheme (CRC) at the end of September, Gregory Barker, the climate change minister is calling for radical reform of this much maligned scheme.

 

This is welcome news, that the new government can plainly see the scheme is far too complex and costly and Gregory Barker is bold enough to consider making significant changes in order to achieve the aims of the scheme, but with much less burden on firms, as they continue to recover from the recession.

 

I hear from the Department for Energy and Climate Change (DECC), that the whole scheme is up for review, but there may be a particular focus on simplifying the way in which an organisation defines itself and making it easier for those organisations to opt out of the scheme, if some of their sites are caught by other climate change legislation.

 

Another simple change the minister should consider is not requiring firms that aren’t even in the scheme to pay nearly a thousand pounds, just to confirm this. That is without the administrative burden that this un-necessary task imposes on those organisations.

 

If this is the way that DECC is moving, then perhaps we are closer now to a climate change policy landscape that is cost effective, that aims to achieve realistic goals at least cost and does not undermine the competitiveness of UK/EU manufacturing sectors. Something that EEF has been calling for and I hope that now, something that government is alive to.

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