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Memorandum submitted by the Association of Chartered Certified Accountants (ACCA) (GJS29)
1.0 Introduction 1.1 The Association of Chartered Certified Accountants (ACCA) welcomes the opportunity to respond to the Environmental Audit Committee's inquiry into the prospects for green jobs and policies aimed at increasing employment in environmental industries. Our global footprint and expertise puts us in a strong position to comment on these issues.
1.2 ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people around the world who seek a rewarding career in accountancy, finance and management.
1.3 ACCA has its headquarters in London and 141,330 of our members, students and affiliates are based in the UK. Globally, we support our 131,500 members and 362,000 students throughout their careers, providing services through a network of 82 offices and centres around the world.
1.4 We have been actively involved in the unfolding debate on corporate social responsibility since 1990, helping businesses and organisations realise the growing importance of sustainability to them. In particular, we have promoted transparency and best practice by championing the extension of corporate reporting to include the social and environmental aspects of a business.
1.5 In 2002 ACCA became the first professional body to be awarded the prestigious Queen's Award for Sustainable Development. We are also members of the advisory group of the Climate Disclosure Standards Board and of the Executive Board of the 'Accounting for Sustainability' project launched by HRH the Prince of Wales.
1.6 Figures show that the UK green goods and services sector is already the 6th biggest in the world, worth £107bn per annum and employing over 880,000 people in the UK[1].
2.0 Summary of key points 1. The move to a low carbon economy should be done as quickly as possible and with collaborative international effort unseen on a global scale before.
2. The 'green' component of the UK's stimulus package should be at least 20% of the total, consistent with the recommendations of Lord Nicholas Stern. The announced stimulus has not therefore taken advantage of the opportunity to reinvigorate the economy with green growth and jobs.
3. ACCA believes that the Treasury should publish an assessment of the net impacts of its fiscal stimulus package on the environment.
4. ACCA welcomes the 2009 Budget as the first low-carbon budget, and supports the government on the adoption of an ambitious emissions target for 2020. Investing in the green economy is an effective way to stimulate economic recovery, boost investment and create jobs. The Government must continue this momentum.
5. ACCA believes that funding pledges will need to be sustained over time and backed by coherent policy if the Government's long-term targets are to be met. While many of the measures announced in the Budget are a step in the right direction, they are not yet enough to achieve the announced 34 per cent greenhouse gas reduction target by 2020. For example, unless financial support for renewables announced in the 2009 Budget is accompanied by policies and measures aimed at improving both the planning system and the grid, the UK is likely to miss its renewable energy goals of 15 per cent by 2020.
6. The UK has a significant opportunity to become a world leader in low carbon technologies such as wind, tidal, carbon capture and storage and clean vehicles. However, this cannot be achieved without clearer, stronger and longer-term commitments and policies from Government.
7. ACCA believes that the Low Carbon Industrial Strategy (LCIS) represents the Government's greatest commitment so far to making a low carbon economy happen, but that it does not yet contain enough concrete proposals.
8. ACCA believes that the Government has to provide industry with the right set of regulations, Government grants and other incentives, and to create the investment climate that will encourage the investment of private capital required to build a low carbon economy. This means consistency, clarity and certainty in the implementation of policy and legislation. This is the only way we can green the economy in the midst of a recession.
9. Many of the points in the LCIS focus on the longer term, such as the establishment of new nuclear power plants. ACCA believes that there needs to be a greater focus in the LCIS on policies that make a difference immediately, and that the Government needs to ensure that it is agile enough to ensure that the planning system and the incentives enable developments to take place.
10. The UK will not be able to take advantage of the emerging environmental industries market unless we have the right skills base and policies to promote future growth in the country's environmental industry. We recommend that the Government outline its plans to develop the skills base for the UK's environmental industries in the form of an environmental industry growth strategy.
3.0 How can the UK maximise the environmentally positive opportunities arising from changes in public spending intended to help tackle the recession?
3.1 While politicians struggle to retain votes and work economies out of recession, it is crucial that they acknowledge the climate crisis as well. Acting early, as key policy documents, economic forecasts and project proposals are urging, will raise our chances of diverting catastrophe at a reduced financial and environmental cost, while building a strong green economy.
3.2 To have any chance of reversing climate change, moving to a low-carbon economy is key. A low carbon economy - one that relies very little on fossil fuels and energy sources with high greenhouse gas emissions - will improve the planet's success rate of tackling the climate predicament. It can be done. Masdar City in Abu Dhabi is under construction and aspires to be the world's first zero-carbon, zero-waste city powered entirely by renewable energy sources. Britain has set the pace by setting a legal target of 80% reduction in carbon emissions by 2050 (1990 baseline). The move to a low carbon economy should be done as quickly as possible and with collaborative international effort unseen on a global scale before.
3.3 HSBC has published a report[2] ranking 17 countries by the green elements of their economic-stimulus packages. South Korea has set aside 81 per cent of its fiscal stimulus to investing in a green economy. China has allocated 38 per cent and the US 12 per cent, behind Germany and France. The UK, however, is investing just 7 per cent of its stimulus in green areas.
3.4 April 2009 saw the UK's first low carbon Budget. The Chancellor committed over £1.4 billion of extra targeted support to the low-carbon sector, to help combat climate change and support low carbon industries and "green collar jobs". ACCA welcomes this and supports the government on the adoption of an ambitious emissions target for 2020. Investing in the green economy is an effective way to stimulate economic recovery, boost investment and create jobs. The Government must continue this momentum.
3.5 ACCA believes that funding pledges will need to be sustained over time and backed by coherent policy if the Government's long-term targets are to be met. While many of the measures announced in the Budget are a step in the right direction they are not yet enough to achieve the announced 34 per cent greenhouse gas reduction target by 2020.
3.6 Of the various measures in the Budget 2009, ACCA particularly welcomes the additional boost for renewables supported by the boost for Renewable Obligation Certificates (ROCs) and new investment from the European Investment Bank (EIB) aimed at relieving project finance. However, unless this financial support is accompanied by policies and measures aimed at improving both the planning system and the grid, the UK is likely to miss its renewable energy goals of 15 per cent by 2020.
3.7 Energy efficiency is a significant short-term opportunity for the UK to reduce emissions, but the £375 million to support energy and resource efficiency in businesses, public buildings and households over the next two years, and £70 million for decentralised small-scale and community low-carbon energy announced in the 2009 Budget is insufficient, especially in the absence of tighter fuel efficiency standards for vehicles and appliances.
3.8 More attention should also be focused on establishing the policies needed for renewable heat and micro-generation. These are not yet in place, and far greater funding is needed to make them viable for households and small businesses.
3.9 The UK has a significant opportunity to become a world leader in low carbon technologies such as wind, tidal, carbon capture and storage and clean vehicles. However, this cannot be achieved without clearer, stronger and longer-term commitments and policies from Government.
4.0 To what extent will the Government's long-term policy framework, including environmental regulations, tax changes or new market instruments, encourage low-carbon investment and increase employment in environmental industries and their associated supply chains?
4.1 The global financial crisis and spreading economic downturn, the associated volatile markets and extensive job loses, the unprecedented collaborative £3 trillion finance sector bailout have all led to the question: what type of future does the green economy have?
4.2 For pessimists, the current economic downturn has substantially delayed green economy plans, with governments now pre-occupied with the recession and focusing on fiscal stimulus measures. The phenomenal financial bailout has prevented any large scale investment in climate change mitigation and the green energy sector. The economic downturn will lead to a decline in direct investments and reduce the rigour of future climate change legislation and environmental taxes to protect the competitiveness of industry in the dire financial climate.
4.3 For optimists, the twin crunches of climate and finance has led to a unique and incredible opportunity to re-build the global markets with systems sympathetic to climate change, that value societal and environmental costs, and that are sustainable in the truest sense. The trillion dollar banking sector bailout is proof that governments can work together, quickly, to help resolve global catastrophes. The green labour market will thrive within the green economy, the future of the planet will improve, and equity among society will begin to become re-balanced.
4.4 One group of eminent optimists, the Green New Deal Group, has prepared a substantial and technically robust proposal to governments in order to 'pull the world back from economic and environmental meltdown'. Their work has been inspired by Roosevelt's New Deal that was launched to halt the Great Depression of the 1930's. Structural changes to international financial and taxation systems, together with calls to invest in energy systems, are comprehensively proposed. Their agenda, which requires action at local, national, regional and global levels, includes calls for:
· executing a bold vision for, and investing in, a low-carbon energy system · creating and training a 'carbon army' of workers · ensuring more realistic fossil fuel prices that include the cost to the environment · re-regulating the domestic financial system
4.5 The UN and leading economists have recently launched a similar reform package - their Green Economy Initiative (GEI) - which aims to 'mobilise and re-focus the global economy towards investments in clean technologies and natural infrastructure to combat climate change and trigger an employment boom in the 21st century'. The project has identified changing patterns of employment and investment resulting from efforts to reduce climate change and its effects are already generating new jobs in many sectors and economies, and could create millions more in both developed and developing countries.
5.0 The economic and social benefits of planned green investments and the extent to which the changes in spending will contribute to sustainable development and environmental protection.
5.1 The 2008 Pre-Budget Report announced a £535m package of fiscal stimulus measures designed to tackle economic and environmental problems simultaneously. However, very little of the £3bn total stimulus was focused on green technologies and most of the announced funding was already committed elsewhere. At the same time, a significant amount of it was used for road building and widening, rather than on investment in public transport. At the same time, the Government has taken the decision to go ahead with a third runway at Heathrow, something which calls into question the consistency and credibility of the Government's policies on climate change and which will hamper the country's ability to meet climate change targets. ACCA believes that the Treasury should publish an assessment of the net impacts of its fiscal stimulus package on the environment.
5.2 Through a purely economic lens, the Stern review - published in October 2006 - estimated that "business as usual" would incur a 5-10 per cent loss of global GDP. When taking into account other issues such as impact on the environment and human health, total estimated cost of climate change increases to a 20 per cent reduction in consumption per head. Alternatively, taking some immediate drastic action to stabilise carbon emissions by 2050 was estimated to be at a cost of about around 1 per cent of GDP - significantly less than the "business as usual" scenario.
5.3 The Stern Review found that, by 2050, investment in energy security and environmental clean-up technologies, a fundamental part of the fabric of a low-carbon economy, would be over US$13 trillion. The proliferation of new industries and employment would be overwhelming.
5.4 Despite the recession, a number of governments and corporations are already harnessing the potential gains that green-collar investment can bring:
· In a bid to stimulate the Australian economy, its Prime Minister, Kevin Rudd, has called for a 'solar revolution' and has provided an A$500 million fund to promote renewable energy.
· The new US President, Barack Obama, has made an encouraging start. He has recruited Nobel prize-winning physicist Steve Chu as the next energy secretary. Chu promoted research on biofuels, solar power and energy efficiency in his previous roles. The President has also appointed one of the world's leading climate change experts, John Holdren, as director of the White House Office of Science and Technology Policy.
· Portugal has emerged as an unexpected success story in terms of the transition to a low carbon economy. Using existing hydro technology and cutting edge wind, solar and tidal technologies, they confidently predict 31 per cent of energy requirements coming from renewables by 2020.
· British Telecom plc (BT) is the UK's biggest customer of green electricity. It has recently announced it will build its own wind farms which will be operational by 2012 and provide 25% of its UK electricity needs by 2016. BT has a comprehensive, detailed climate change strategy covering its operations, customers, employees and suppliers. In 2007, its chief executive pledged to lead in the business response to climate change.
· Wal-Mart Stores Inc. has established a partnership with many of its suppliers to facilitate the creation of green jobs in the United States. At an inaugural meeting of the Wal-Mart Green Jobs Council, participants identified their top catalysts for creating green jobs.
5.5 The Government should ensure that it looks at and learns from best practice from around the world.
6.0 Will the green fiscal stimulus maximise employment opportunities in environmental industries, and what is the nature of the jobs that might be created?
6.1 The 'green' component of the UK's stimulus package should be at least 20% of the total, consistent with the recommendations of Lord Nicholas Stern. The announced stimulus has not therefore taken advantage of the opportunity to reinvigorate the economy with green growth and jobs.
6.2 The United Nations has predicted an acceleration of green job creation in the years ahead, as well as the creation of a large number of jobs across many sectors. This coincides with Lord Stern's calculation that a 'massive shift towards low-carbon technologies will be accompanied a shift in employment patterns' and that '25 million people will be working in these sectors by 2050'.
6.3 The term 'green-collar' has been described in various ways, but the clearest is perhaps this definition from the UN:
'Green jobs are those in positions in agricultural, manufacturing, R&D, administrative, and service activities aimed at alleviating the myriad of environmental threats faced by humanity. Specifically, but not exclusively, this includes jobs that help protect and restore ecosystems and biodiversity, reduce energy, materials, and water consumption through high efficiency and avoidance strategies, de‑carbonise the economy, and minimise or altogether avoid generation of all forms of waste and pollution.'
6.4 The typical green economy industries include renewables, energy efficiency in buildings, organic agriculture and sustainable transportation. Many jobs already exist in energy-efficiency, sustainability and corporate social responsibility sector.
6.5 As 'green' investment continues, particular sectors where the UK is likely to benefit include, for example (this is not an exhaustive list):
· Specialist construction (for example, constructing wind farms) · Construction (including building new, energy efficient or eco homes and retrofitting the UKs existing housing stock and places of business) · Energy efficiency (such as installing solar panels, roofers, insulation installers, building inspectors) · Research and technology, especially in terms of software, machinery and equipment (such as coming up with new ways to build efficient biofuel engines, smart metering and other green technology developments) · Transport (including those required to expand and maintain public transport systems, e.g. civil engineers, building service engineers and electricians) · Financial services (for example, accountants, to assist with carbon forecasting, accounting and management etc.) · The same jobs as people are currently employed in (for example, machine operators in factories, people transporting goods etc.)
National Examples:
· Germany is a low-carbon, green economy success story, already employing a quarter of a million people in the renewables sector alone with a turnover of 24 billion Euros. Predictions push the renewables workforce figure up to 710,000 by 2030. A UNEP report in 2008[3] predicts that Germany's renewable energy sector will be larger than the automobile and machine manufacturing in the next ten years.
· Australia's national science agency, CSIRO, has explored the skills, innovation and workforce dimensions of the transition in Australia to a low carbon society. The key results have found that achieving rapid transition to sustainability would have no detrimental impact on national employment. Employment in sectors with high potential environmental impacts will grow strongly, with increases of more than 10% over ten years. This will add 230,000-340,000 new jobs in the transport, construction, agriculture, manufacturing and mining sectors.
· The USA's House and Senate have recently approved Obama's economic stimulus package. A healthy US$100 billion will be allocated to energy efficiency and renewables' programmes, including $20 billion of tax breaks, $30 billion for investing in smart grid technologies and $10 billion to spend improving the energy efficiency of public sector buildings. A further $16 billion has been pledged to be used on mass transit and high-speed rail link projects.
· The American Solar Energy Society has predicted as much as a quarter of the US workforce could have a 'green job' by 2030.
7.0 What does the Low Carbon Industrial Strategy need to deliver, how, and by when?
7.1 BERR and DECC have published the LCIS. The document highlights a range of companies in the UK that are already taking advantage of low carbon opportunities, and sets out the scope and ambition of the Government's plans. It aims for 'step changes' in four key areas, namely: improved energy efficiency; the development of an energy infrastructure for a low carbon future; the establishment of the UK as a global leader in the development and production of low carbon vehicles; and the positioning of the UK as the best place to locate and develop a low carbon business by developing its skills, infrastructure, procurement, research and development.
7.2 ACCA believes that the LCIS represents the Government's greatest commitment so far to making a low carbon economy happen, but that it does not yet contain enough concrete proposals. We acknowledge though, and welcome, that BERR and DECC are gathering input from businesses and other interested parties before a final strategy document is published in the summer.
7.3 ACCA believes that the Government has to provide industry with the right set of regulations, Government grants and other incentives, and to create the investment climate that will encourage the investment of private capital required to build a low carbon economy. This means consistency, clarity and certainty in the implementation of policy and legislation. This is the only way we can green the economy in the midst of a recession.
7.4 Many of the points in the LCIS focus on the longer term, such as the establishment of new nuclear power plants, which are unlikely to be built for at least 10 years, and which only begin to produce low carbon energy once they have been switched on (until that point in their construction release huge amounts of greenhouse gas emissions).
7.5 ACCA believes that there needs to be a greater focus in the LCIS on policies that make a difference immediately, and that the Government needs to ensure that it is agile enough to ensure that the planning system and the incentives enable developments to take place.
8.0 Do you have any comment on the skills base for the UK environmental industries, and the effectiveness of Government policies to improve and enlarge it?
8.1 The UK will not be able to take advantage of the emerging environmental industries market unless we have the right skills base and policies to promote future growth in the country's environmental industry. The Government outlined its views in its publication Building a low Carbon economy Unlocking Innovation and Skills[4], which acknowledges the need to develop a skilled workforce and create partnerships with businesses and education institutions, as well as stating that the Government has to set a long-term policy framework.
8.2 We recommend that the Government outline its plans to develop the skills base for the UK's environmental industries in the form of an environmental industry growth strategy.
8.3 ACCA further believes that there should be an increase in financial support to universities and scientific institutions for research and development into innovative environmental technologies. This would assist in developing the skills required.
8.4 ACCA would support the Government taking a formal approach to facilitating high-quality training, for example, in ensuring sustainable construction. We also note that many of the companies involved in the environmental sector are small, medium and micro companies, which are often among the most innovative. There should be a special focus on supporting these enterprises with training.
8.5 Further, ACCA believes that promoting career opportunities in the environmental sector, especially amongst young people in schools, colleges and universities, through support for industrial placements and developing vocational qualifications, would particularly assist in developing skills over the long-term.
8.6 The environmental sector, (apart from in the services sector), is in many cases a highly qualified sector in terms of technical and scientific skills (geologists, engineers, microbiologists etc). These areas would benefit from particular support.
28 May 2009 [1] http://www.berr.gov.uk/files/file50254.pdf [2] http://globaldashboard.org/wp-content/uploads/2009/HSBC_Green_New_Deal.pdf |