UK Government publishes ‘The Clean Growth Strategy’

DBEIS sets out “an ambitious blueprint for a low carbon future”

Clean growth now at the heart of the UK’s Industrial Strategy

November 22nd 2017

As part of its legal requirements under the Climate Change Act of 2008, the UK Government published a new Clean Growth Strategy last month, designed to “grow our national income while cutting greenhouse gas emissions.” In its Executive Summary, the Department for Business, Energy and Industrial Strategy (DBEIS) says: “Achieving clean growth, while ensuring an affordable energy supply for businesses and consumers, is at the heart of the UK’s Industrial Strategy. It will increase our productivity, create good jobs, boost earning power for people right across the country, and help protect the climate and environment upon which we and future generations depend.” [1]

The UK’s legal requirements under the Climate Change Act 2008

The Climate Change Act of 2008 committed the UK to reduce greenhouse gas emissions by a minimum of 80% by 2050 when compared to 1990 levels, to be achieved by setting five-year caps on emissions known as carbon budgets. The Clean Growth Strategy is designed to meet the fourth and fifth carbon budgets, covering the years 2023 to 2027 and 2028 to 2032 respectively. The fifth carbon budget was set in July 2016 and requires a 57% average reduction in carbon emissions across the UK, compared to the 1990 baseline. The 165-page strategy document sets out a total of 50 key policies and proposals designed to meet those targets.

The Government says that, in the context of meeting the UK’s legal requirements under the Climate Change Act, its approach to reducing carbon emissions has two guiding objectives: firstly, “to meet our domestic commitments at the lowest possible net cost to UK taxpayers, consumers and businesses”; and secondly, “to maximise the social and economic benefits for the UK from this transition”. The document also says that, in order to meet these objectives, “the UK will need to nurture low carbon technologies, processes and systems that are as cheap as possible.” It continues:

“We need to do this for several reasons. First, we need to protect our businesses and households from high energy costs. Second, if we can develop low cost, low carbon technologies in the UK, we can secure the most industrial and economic advantage from the global transition to a low carbon economy. Third, if we want to see other countries, particularly developing countries, follow our example, we need low carbon technologies to be cheaper and to offer more value than high carbon ones.”

The 50 policies and proposals cover all sectors that are responsible for carbon emissions. The sectors and policies are as follows:

• Business and Industry (25% of the UK’s total carbon emissions): 9 policies;
• Transport (24%): 10 policies;
• Power (21%): 6 policies;
• Natural Resources (15%): 7 policies;
• Homes (13%): 11 policies;
• Public Sector (2%): 3 policies.

Further policies include: setting up a Green Finance Task Force that will provide recommendations on how to deliver the public and private investment needed to meet the UK’s carbon budgets, and “working with businesses and civil society to introduce a ‘Green Great Britain’ week to promote clean growth.”

On transport, the policies are partly a response to the seven-year legal battle over the UK’s failure to meet EU targets for reducing nitrogen dioxide emissions, as we discussed in a recent article – see: ‘Air Pollution in the UK – Seven years of illegal NO2 emissions’. They include: ending the sale of new conventional petrol and diesel cars and vans by 2040; supporting the take-up of ultra low emission vehicles; investing in the infrastructure to support electric vehicle charging networks; accelerating the uptake of low emission taxis and buses; establishing a new Centre for Connected and Autonomous Vehicles; and investing in research and innovation in low carbon transport technology and fuels.

Improving energy efficiency

With regard to business and industry, the key policies include: a package of measures to support businesses in improving their energy efficiency; establishing an industrial energy efficiency scheme to help large companies reduce their energy use; publishing industrial decarbonisation and energy efficiency action plans for seven of the most energy-intensive industrial sectors; developing a strategic approach to greenhouse gas removal technologies; supporting the recycling of heat produced in industrial processes; phasing out the installation of high carbon forms of fossil fuel heating in new and existing businesses currently off the gas grid, starting with new build; and investment in research and innovation in energy, resource and process efficiency. The policies also include “demonstrating international leadership in carbon capture usage and storage by collaborating with our global partners and investing up to £100 million in leading edge technologies and industrial innovation to drive down costs.” The Government’s ambition is to have the option of deploying carbon capture usage and storage at scale in the UK, “and to maximise its industrial opportunity.”

The Clean Growth Strategy also sets out proposals to improve the energy efficiency of residential properties and to roll out low carbon heating, including: building and extending heat networks across the country; phasing out the installation of high carbon fossil fuel heating in new and existing homes currently off the gas grid, starting with new homes; improving the standards of new boilers; and investing in low carbon heating by reforming the Renewable Heat Incentive. On reducing the public sector’s carbon emissions, the policies include setting tighter targets for central government for 2020, and introducing a voluntary target of a 30% reduction by 2020 for the wider public sector.

“Making sure our energy is affordable”

On power, the Government says it attaches great importance “to making sure our energy is affordable”. With that aim in mind, it has commissioned an independent review into the cost of energy led by Dieter Helm, Professor of Energy Policy at Oxford University, which will recommend ways “to deliver the government’s carbon targets and ensure security of supply at minimum cost to both industry and domestic consumers.” [2] The Government says it wants to reduce energy costs for households and businesses by a number of measures, including smart meters and a draft bill that will require Ofgem to impose a cap on standard variable and default tariffs across the whole energy market. The proposals on power also include: phasing out the use of coal by 2025; delivering new nuclear power through Hinkley Point; improving the route to market for renewable technologies such as offshore wind; and investing around £900 million in research and innovation, including research on bioenergy, and methods to further reduce the cost of renewables, such as innovation in offshore wind turbine blade technology and foundations.

“Enhancing the benefits and value of our natural resources”

The Clean Growth Strategy includes seven policies and proposals designed to “enhance the benefits and value of our natural resources.” The first is a new system of future agricultural support, given the UK’s imminent departure from the EU. The new system will focus on “delivering better environmental outcomes, including addressing climate change more directly.” The second proposal concerns the Government’s aspirations regarding tree planting, as mentioned in a recent article (see: ‘Future of EU Nature Directives still uncertain following appointment of new Environment Secretary’). The plan is to establish “a new network of forests in England including new woodland on farmland” and to fund “larger-scale woodland and forest creation, in support of our commitment to plant 11 million trees, and to increase the amount of UK timber used in construction.” A third proposal is for a £10 million capital grant scheme to support peat restoration.

Three policies are concerned with waste management. Firstly, the Government has set a target of zero avoidable waste by 2050, which will “maximise the value we extract from our resources, and minimise the negative environmental and carbon impacts associated with their extraction, use and disposal.” Secondly, it aims to publish a new Resources and Waste Strategy, which will make the UK “a world leader in terms of competitiveness, resource productivity and resource efficiency.” Thirdly, it also wants to explore new and innovative ways to manage landfill emissions. A further proposal is to invest £99 million in innovative technology and research for agri-tech, land use, greenhouse gas removal technologies, and waste and resource efficiency.

Progress on cutting carbon emissions

The first chapter of the Clean Growth Strategy is titled ‘UK Leadership and Progress’. The Department for Business, Energy and Industrial Strategy (DBEIS) says UK emissions fell by 6% in 2016 compared to the year before. Overall, it says, emissions have been cut by 42% since 1990 while the economy has grown by 67%, demonstrating that progress towards a low carbon economy has not come at the expense of economic growth:

“Some of the largest falls in emissions since 1990 have been seen in the power sector, where emissions have fallen by almost 50% as the UK has switched away from coal and increased the share of renewables and gas in electricity generation. In 2016 nearly 25% of the UK’s electricity generation was provided by renewables, and on 7 June this year renewable energy sources supplied over 50% of UK electricity for the first time in history.”

There have also been significant reductions in waste and industry, “driven partly by a change in the UK’s economic structure from manufacturing to services but also by a large reduction in waste going to landfill.” Looking at the six sectors over the 25-year period from 1990 to 2015, the emission reductions break down as follows: natural resources by 50%; power by 49%; business and industry by 47%; the public sector by 40%; homes by 20%; and transport by 2%, giving an average reduction overall of 38%.

The falling costs of renewables

The DBEIS says progress has been aided by the falling costs of many low carbon technologies globally, “coupled with accelerating momentum in the deployment of the technologies we need to reduce emissions, as a result of early policy action by the UK, other governments, and substantial public and private sector investment.” It notes, for example, that the cost of solar cells has fallen by 80% since 2008, “meaning we are now beginning to see solar deployment in the UK without government support.” On wind power, it notes that the cost of onshore wind has fallen by 50% since 2009, while the cost of offshore wind has fallen even faster: “In the UK, government investment has helped to deliver a 50% drop in costs [in offshore wind] over just the last two years.” The result of this global investment is that “wind and solar energy are increasingly cost competitive with coal and gas in many countries.”

“An enormous economic opportunity”

On leadership, the DBEIS says that the UK played a central role in securing the 2015 Paris Agreement, “in which, for the first time, 195 countries (representing over 90% of global economic activity) agreed stretching national targets to keep the global temperature rise below 2 degrees. The actions and investments that will be needed to meet the Paris commitments will ensure the shift to clean growth will be at the forefront of policy and economic decisions made by governments and businesses in the coming decades. This creates enormous potential economic opportunity…”

The DBEIS argues that capturing a part of the global opportunity while continuing to drive down the UK’s own carbon emissions could provide “a real national economic boost”. It estimates that the UK’s low carbon economy could grow by 11% per year between 2015 and 2030, four times faster than the rest of the economy. It also estimates that a low carbon economy could deliver “between £60 billion and £170 billion of export sales of goods and services by 2030”. Technological innovation has helped to create new jobs, industries and companies in the UK, it says. The Office for National Statistics estimates that there are now more than 430,000 jobs in low carbon businesses and their supply chains, “employing people in locations right across the country”. The DBEIS says the innovation and investment needed to further reduce carbon emissions can create more “high-value” jobs as well as export opportunities.

“Leaving the environment in a better state”

Summarising the Government’s next steps, the DBEIS says that many of the future actions it will be taking will be set out in its 25 Year Environment Plan, which will be designed to be a sister document to the Clean Growth Strategy, and in its long-term strategy for the UK’s transition to zero road vehicle emissions (see: ‘Air Pollution in the UK – Seven years of illegal NO2 emissions’). “Taken together,” it continues, “these set out the Government’s approach to fulfilling its commitment to leave the environment in a better state than it inherited. Along with the Industrial Strategy White Paper, to be published later in 2017, these will form a critical part of our future progress.” [3]

RSPB welcomes the PM’s pledge on the natural environment

Martin Harper, the RSPB’s Director of Conservation, said in a blog post that he was particularly heartened to see that clean growth is now being placed at the centre of the UK’s industrial strategy, and to see the Prime Minister’s acknowledgement in her Foreword to the Strategy that “we cannot sacrifice our natural environment”. [4] He said the RSPB’s engagement in the climate change debate is focused on the impact of climate change on the natural world, “and how we can ensure that actions to tackle climate change do not exacerbate wildlife loss.” In this context, he continues, “it was pleasing to see that the Clean Growth Strategy acknowledges the cost to nature of climate change and of poor infrastructure planning. The strategy also picked up on the climate benefits and other public benefits that nature can provide.” He then sets out three priority areas where the RSPB will be working with government “to ensure good outcomes for wildlife and the climate”. These are wind energy, land use, and bioenergy.

Offshore Wind: The dangers in “a drive towards lowest-cost”

On the proposal for a significant increase in offshore wind, Martin Harper says it is crucial that developments are sited carefully in order to avoid conflict with the seabirds and marine mammals that live off our coasts. “A drive towards lowest-cost could mean that wildlife is side-lined in site selection processes as priority is given to ‘easy’ near-shore locations,” he warns. He also expressed concern over onshore wind projects on remote Scottish islands, which include “some of the most important places in the UK for wildlife, with internationally significant populations of birds and sensitive habitats like peat lands.” On the other hand, he says the RSPB supports investment in floating offshore wind: “With its ability to be located in deeper water, away from bird breeding and feeding areas, we see considerable potential for large amounts of clean energy to be generated in harmony with nature,” he says.

Planting trees in the wrong places “can have a harmful effect on wildlife”

On land use, he welcomes the Government’s pledge to design a new system of agricultural support that places the natural environment at its core, and also welcomes a number of measures that will help conservation such as peat restoration, efficient chemical fertiliser use and soil management. On tree planting however, he is more cautious, stressing that while planting the right trees in the right places can benefit wildlife, planting trees in the wrong places can have a harmful effect. This is an issue that we have discussed in recent articles. A report on the causes of wildlife decline in the UK says that one of the drivers of change is forestry, which has had a positive and a negative effect on wildlife. While an increase in afforestation has increased the habitat for species using coniferous plantations and woodland edges, this has also reduced the habitat that plantations replace, particularly lowland heaths and upland habitats – see: ‘The State of Nature 2016 – New report examines the causes of wildlife decline in the UK’. Concerns have also been expressed about a consultation on lowering the threshold for afforestation projects, which could see trees planted in the wrong places – see: ‘Environmental Impact Assessments and Afforestation Projects’ in the article ‘EU Nature Directives “fit for purpose,” says Commission’.

Bioenergy: A limited role?

On a related note, Martin Harper says the RSPB has had concerns for several years over the role of biomass in our energy system. “Driving energy from organic matter (bioenergy) in an environmentally friendly way is a tricky one,” he says. “Felling trees, or converting land to crops, can harm special places for wildlife as well as, perversely, having negative climate impacts.” He says that, while the strategy downplays the role of biomass for electricity production, it gives biomass “an absolutely central role” in plans for decarbonising the industrial sector. As mentioned above, the policies on business and industry include publishing industrial decarbonisation and energy efficiency action plans for seven of the most energy-intensive industrial sectors, while the policies on power include investing around £900 million in research and innovation, such as research on bioenergy. Martin Harper says there is a large body of evidence to show the Government that bioenergy has a limited role, and the RSPB is planning to point this out while encouraging a focus only on truly sustainable supplies. He also says there are environmental risks in generating heat by wood burning and by using purpose-grown crops such as maize.

Money Matters

To achieve its ambitions, the Government plans to spend around £14 billion in total, according to the figures presented alongside the various proposals, including investment in research and innovation. Perhaps it is not surprising then that the first key policy is to “develop world-leading Green Finance capabilities,” including the establishment of a Green Finance Task Force that will provide recommendations on how to deliver the public and private investment needed to meet the UK’s carbon budgets. The Clean Growth Strategy acknowledges the challenge of managing the impact of leaving the EU, but deals only with regulatory details, and it fails to mention the uncertainty surrounding the economic impact. Will the finance necessary to fulfil its ambitions be forthcoming, or will the Clean Growth Strategy, or parts of it at least, remain a wish list?

A clue to answering this question is provided by a recurring emphasis in the strategy, namely: “Every action that we take to cut emissions must be done while ensuring our economy remains competitive.” A recent article in the Independent highlights this very point. Ian Johnston, Environment Correspondent, describes a government plan to give the UK’s most energy-intensive industries a £130 million exemption from the climate change levy because having to pay extra “can undermine competitiveness”. [5] He quotes from a document produced by DBEIS in July this year, which explains the reasoning for the exemption. It states:

“The Renewables Obligation (RO) is one of the policies that Government has put in place to incentivise investment in renewable electricity generation. The costs of these schemes are borne by electricity bill payers. For energy-intensive industries (EIIs), this can undermine competitiveness, as competing businesses in other countries may not be subject to similar energy and climate change policy costs. The Government has sought to lessen the cost disadvantage faced by EIIs as a result of energy and climate change policy costs, relative to their EU and international competitors, through a compensation scheme. A move to an exemption scheme is proposed in order to increase the certainty and effectiveness of support to EIIs.” [6]

Environmental campaigners have said the result of this policy means that some of the biggest polluters will pay less, while ordinary customers will end up making up the difference. Ian Johnston quotes Gareth Redmond-King, Head of Climate and Energy Policy at WWF-UK, who said the decision would reward firms that are contributing more than most to global warming: “It will add money to household bills and heap costs onto small businesses,” he said. “These costs would otherwise have been borne by large businesses, but now will be redistributed to be paid for by those who may already be struggling with high energy costs. Whilst energy intensive industries are important to our economy, they also contribute huge amounts of greenhouse gases to UK emissions. It is only right that they pay their fair share to support the building of the cleaner, greener energy infrastructure that we need for our future.”

A further example of the Government’s emphasis on competitiveness is its treatment of tidal power, which receives only the briefest of mentions in the Clean Growth Strategy. On page 99, we read: “We want to see more people investing in solar without government support and are currently considering options for our approach to small-scale low carbon generation beyond 2019, and will provide an update later this year. More nascent technologies such as wave, tidal stream and tidal range, could also have a role in the long-term decarbonisation of the UK, but they will need to demonstrate how they can compete with other forms of generation.” A review into tidal power, published earlier this year, recommended that a small-scale pilot project at Swansea Bay should commence as soon as possible, but negotiations were still continuing over the costs of energy delivery, the amount of subsidy required, and the environmental impact of the project: see ‘Tidal lagoon review says UK should set up a Tidal Power Authority’. From the Clean Growth Strategy, we gather that tidal power is basically too expensive an option at present to be taken seriously.

From this economic perspective then, it is somewhat surprising to see that the Government wants to demonstrate “international leadership in carbon capture usage and storage by collaborating with our global partners and investing up to £100 million in leading edge technologies and industrial innovation to drive down costs.” As we reported in 2015, a carbon capture and storage facility had been under development at Peterhead in Scotland by Shell and the energy company SSE, who said this would be the world’s first full-scale carbon capture and storage project: “Up to ten million tonnes of carbon dioxide emissions could be captured from the Peterhead Power Station and transported by pipeline offshore for long-term storage deep under the North Sea” – see the article: ‘Carbon capture and storage – CCSA publishes report’. The companies were looking for government funding to develop a commercial scheme. However, in November 2015, the Government announced the withdrawal of funding for the CCS Commercialisation Competition which had seeded the project. Following the announcement, Shell issued a press release which said that the Peterhead CSS project would not now proceed. It seemed then that carbon capture was another technology to be unceremoniously ditched following a spending review.

In conclusion, given the Government’s track record of funding renewable technologies, and given the current uncertainty over the economic impact of EU withdrawal, the Clean Growth Strategy, though undoubtedly ambitious, does raise two questions: one, whether the funding necessary to achieve its ambitions will be forthcoming; and two, whether the pledge to “leave the environment in a better state” will be outweighed by the drive to enforce competitiveness by choosing the lowest-cost option. [7]

Acknowledgement

Photograph: Peterhead Power Station, Aberdeenshire, seen from the sea © Copyright James Allan and licensed for reuse under this Creative Commons Licence. In October 2015, Shell announced it would no longer be pursuing a carbon capture and storage (CCS) facility at Peterhead, following the Government’s decision to withdraw funding for CCS commercialisation projects. See Shell’s press release: ‘Peterhead CCS Project announcement’.

Notes

[1] See The Clean Growth Strategy: Leading the way to a low carbon future, HM Government, 12/10/2017, available as a PDF document from: https://www.gov.uk/government/publications/clean-growth-strategy.

[2] On his website, Dieter Helm says: “Professor Dieter Helm is an economist specialising in utilities, infrastructure, regulation and the environment, and concentrating on the energy, water, communications and transport sectors primarily in Britain and Europe. He is a Professor at the University of Oxford and Fellow of New College, Oxford. In December 2015, Dieter was reappointed as Independent Chair of the Natural Capital Committee.” Dieter Helm’s review of energy costs was published on October 25th 2017. The Executive Summary states: “This review has two main findings. The first is that the cost of energy is significantly higher than it needs to be to meet the government’s objectives and, in particular, to be consistent with the Climate Change Act and to ensure security of supply. The second is that energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market, as it undergoes profound technical change.” See http://www.dieterhelm.co.uk.

[3] A 25 year plan for the natural environment was proposed by Defra (the Department for the Environment, Food and Rural Affairs) two years ago, as discussed in the ENA article, ‘Defra responds to recommendations of Natural Capital Committee’. The pledge to ‘leave the environment in a better state’ is an extended wording of the Environment Agency’s motto, “Creating a better place”.

[4] Martin Harper, ‘The new Clean Growth Strategy: for nature and for the climate?’, RSPB, 19/10/2017. Retrieved from: http://www.rspb.org.uk/community/ourwork/b/martinharper/archive/2017/10/19/the-new-clean-growth-strategy-does-it-fulfil-its-potential.aspx. The Prime Minster’s Foreword says: “This Government is determined to leave our natural environment in a better condition than we found it. Clean growth is not an option, but a duty we owe to the next generation, and economic growth has to go hand-in-hand with greater protection for our forests and beaches, clean air and places of outstanding natural beauty.”

[5] Ian Johnston, ‘UK’s most energy-intensive companies to get £130m exemption from climate change fund’, The Independent, 20/07/2017. Retrieved from: http://www.independent.co.uk/environment/uk-energy-intensive-pollution-companies-climate-change-fund-exemption-targets-regulation-global-a7851326.html.

[6] ‘Moving from compensation to exemption from the costs of the Renewables Obligation for energy-intensive industries’, DBEIS Impact Assessment, 19/07/2017. Retrieved as a PDF document from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/630246/EII_Exemption_RO_and_FIT_IA_Final_Stage_V1.6_3_.pdf.

[7] Writing a few days before the strategy’s publication, Jonathan Church, climate lawyer at Client Earth, says that the plans to reduce emissions are nine months overdue. He goes on to point out past failures to comply with the legal requirements of the Climate Change Act: “The difference between the emissions reductions needed to hit the fourth carbon budget, and the reductions that current policies will produce, is a legal failure and a clear breach of the Act,” he says. “The continued success of the Climate Change Act depends on the government complying with sections 13 and 14 of the Act. These require a plan that sets out a clear intended route to meeting the carbon budgets that have been set. In this respect, the 2011 Carbon Plan – the predecessor of the Clean Growth Strategy – was inadequate.” A significant problem in the past has been the Government’s failure to track progress against the plan, he says. Looking ahead, he says the proof of the pudding will be in the eating; “not just on arrival, but how it guides and drives government policy-making in the years ahead. When it comes to reviving the Climate Change Act, publication of the Clean Growth Strategy – after a long, long, long wait – is only the end of the beginning.” See: Jonathan Church, ‘UK Clean Growth Strategy is imminent – is this the end of the beginning?’, Client Earth, 09/10/2017. Retrieved from: https://www.clientearth.org/uk-clean-growth-strategy-is-imminent-is-this-the-end-of-the-beginning/.

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