by Gareth Stace, Head of Climate & Environment Policy
28. July 2010 15:37
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 2oC) 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.