Memorandum submitted by the Aldersgate
Group
INTRODUCTION
The Aldersgate Group (AG) is a coalition of
private, public and third sector organisations who believe that
high environmental standards are essential for long term economic
growth and international competitiveness.
COMMISSION STATEMENT
REPORT
1. The Aldersgate Group's recently published
report, Commission Statement, is a study based on interviews
with all the former members of the Commission on Environmental
Markets and Economic Performance (CEMEP). This body was originally
established by the UK Government in the light of the Stern Review
to make detailed proposals to ensure the UK is in the best possible
position to seize the new opportunities of the low carbon economy.
It published its findings in November 2007[21]
and the Government officially welcomed and responded to the 24 detailed
recommendations the following May.[22]
A year on, Commission Statement reviews government performance
to date and makes recommendations for achieving a credible and
ambitious low carbon industrial strategy and economy.
2. In terms of developing the necessary
skills, the Government acknowledged in its response to CEMEP that
the "jobs of today will not be the jobs of tomorrow"[23]
and that the UK must ensure that it is well equipped to respond
to the anticipated scale of market opportunity in environmental
markets. It is clear that a more coherent and joined up approach
is required if the UK is to realise these ambitions and deliver
the skills required in every sector of the economy.
ADDRESSING THE
SKILLS GAP
3. CEMEP notes that one in three firms in
the environmental sector are being hampered by a shortage of skilled
staff, from those needed to install new technology to scientists
and engineers. Government has responded to this challenge by creating
a new National Skills Academy for Power, which will address current
and future skills shortages to ensure a secure supply of electricity,
and a new Sector Skills Compact to deliver more highly skilled
and qualified workers in the nuclear, petroleum and oil and gas
industries. However, the skills gap still represents a major barrier
to UK success in environmental markets, particularly in renewable
and low carbon energy generation. As such, Commissioner Frances
O'Grady, Deputy General Secretary at TUC stated:
"There have been genuine steps forward in
terms of developing a vision and identifying skill requirements
both now and in five to ten years down the line. But there needs
to be more certainty. Renewable companies will not scale up unless
they can be sure the workforce will have the expertise to deliver."
4. To take one example, there is a major
risk that the grid infrastructure needed to meet the 2020 renewables
target will not be built due to a shortage of suitably skilled
labour. In an open letter dated 13 February 2009, John Overton
from the Electricity Networks Strategy Group declared:
"The availability of the suitably skilled
people needed to deliver these network projects represents a major
risk, as many of the people with the necessary skills are approaching
retirement. Moreover, the lead time through training to full competence
is long—five years or more. On top of this, there is a limited
capacity to train people. The sector will need to attract new
people that have the necessary skills, education and training."[24]
The new National Skills Academy for Power must
address these skills gaps without delay to ensure the UK can compete
globally in environmental markets. Commissioner Jim Skea attributed
these skills shortages to a "persistent lack of high level
leadership", particularly in addressing post-graduate, high
skilled, apprentice level training.
DEVELOPING AN
INNOVATIVE SUPPLY-LED
APPROACH
5. The demand-led approach to skills has
dominated policy thinking in recent years. However, the Government
has recognised the limitations of this strategy and recent research
commissioned by Defra finds demand for environmental skills "is
not being articulated by many employers and as a result the current
'demand-led' skills delivery framework is ill equipped to anticipate
and respond".[25]
Hence, the Government has modified its approach to anticipate
future growth in certain economic sectors[26]
and must continue to do this (with some developments outlined
in the previous section). Accordingly, Commissioner Frances O'Grady
stated that:
"Climate change is the classic and most
deadly example of market failure and this must be reflected in
the Government's skills strategy. The market cannot be left to
its own devices. Government intervention is required to plan and
invest in our skills future, with businesses also contributing
their fair share of resources."
GOVERNMENT LEADERSHIP
6. CEMEP acknowledged that beyond narrow,
specialist environmental knowledge, a prerequisite of a low carbon
and resource efficient economy is a workforce that is "sustainability
literate" across the board, from formal education, to working
professionals and the mainstream civil service. The sheer scale
and cross-cutting nature of this challenge should not be underestimated,
but progress is hampered by a "glacial pace of change"
according to Commissioner Peter Young, Chairman of the Aldersgate
Group. This was echoed by Commissioner Paul Noon, General Secretary
at Prospect, who stated that although there has been progress
in the right direction, it has been slow, and suggested the need
for "an overarching road map detailing where we want to be
in the future and how we are going to get there."
7. Moreover, Commissioners were concerned
that there does not seem to be effective ownership of the low
carbon skills agenda within Government. CEMEP envisaged a leadership
role for the UK Commission on Employment and Skills (UKCES), the
body that ensures that employment and skills systems contribute
to the highest levels of productivity. However, the Government
has since decided that other priorities, such as the simplification
of the entire skills system, should take precedence and it would
not be desirable to divert effort from the core mission of UKCES
at an early stage of its development. Commissioners suggested
that this view needs to be balanced with the immense implications
of the environmental transition for every UK business and the
need for greater responsibility to formulate strategies, gather
intelligence and develop key drivers. It is hoped that the Government
might reconsider the role that UKCES could play in the near future,
or ensure another or new body takes responsibility going forward.
8. DIUS have also set up a cross departmental
advisory group on low carbon skills but this does not involve
wider stakeholders. Trade unions, businesses and NGOs must be
fully engaged in the development of the low carbon skills agenda
as they have a large responsibility for its implementation and
ultimate success.
STIMULATING GREEN
EMPLOYMENT IN
THE RECESSION
9. As proponents of a "Green New Deal"
have argued, investment in green public infrastructure would stimulate
employment and economic growth in the short term and ensure the
UK workforce gain the necessary skills and expertise to compete
in a low carbon, resource efficient economy in the medium and
long term. Commissioner Tom Delay, Chief Executive of the Carbon
Trust, stated that "a green stimulus during the recession
is attractive to taxpayers and a good use of their money. Energy
efficiency schemes in particular could create a large number of
jobs and build up the skills in the workforce that will help drive
the move to a prosperous low carbon economy."
10. To take one example, Commissioner James
Brathwaite, Chairman of SEEDA, stressed the need for "big
programmes that would have a big impact". For example, a
street by street home insulation programme for social housing
that was on a scale to the conversion to "high speed gas"
of the 1960s would "create thousands of jobs, develop low
carbon skills and re-invigorate the construction sector during
the recession". To deliver current and future environment
policy, the Government must ensure it has the capacity in the
system.
TRAINING PUBLIC
PROCURERS
11. Public procurement was identified by
Commissioners as a massively underused lever for progression towards
a low carbon, resource efficient economy. The UK's £150 billion
per annum public procurement budget represents a major opportunity
to boost competitiveness and stimulate the market for environmental
technologies. As carbon increasingly becomes a material commodity
and global pressures progressively demand greater resource efficiency,
there is no room for short terminism, and analysis of full life-cycle
costs can save money in the future.
12. A recent report by the Innovation, Universities,
Science and Skills Committee found that Government, in key policy
areas of several departments, does not have sufficient in-house
engineering expertise. In no uncertain terms, Committee members
"were shocked to discover that engineering advice had been
lacking in the formulation of policies as important and diverse
as eco-towns, renewable energy and large IT projects".[27]
Commissioner David Fisk from Imperial College observed that "while
procurement professionals are very good at contract negotiation,
greater analytical engineering skills are necessary to assess
innovative and provocative bids". The Government should address
this deficiency without delay, providing real opportunities in
terms of career progression, and strengthen links between the
public and private sectors through secondments.
13. More widely, there needs to be a comprehensive
transformation in public sector attitudes towards procurement.
If procurers are seen as "buying tomorrow's answers to today's
problems", as proposed by Commissioner Dr Jack Frost, it
would attract the personnel, resources and senior management attention
that would lead to the sweeping cultural changes required. While
there has been progress in setting sufficient standards, the more
challenging task of implementation has been "like pushing
a boulder up a hill" according to Commissioner Frances O'Grady.
As with the wider skills agenda, nothing can be achieved overnight
but an injection of urgency will be crucial for the Government
to realise its ambitions to lead the low carbon, resource efficient
economy.
TRANSITIONAL POLICIES
14. The CEMEP report, alongside the more
recent Low Carbon Economy publications that follow it, make clear
that environmental standards are important today for economic
efficiency as well as public protection. Good environmental regulation
is an economic as well as a social imperative. While, in the past,
the design of environmental regulation had to consider the best
way of delivering environmental benefits for the public, it now
also has to consider how it can best deliver economic benefits.
Thus, the role of good regulation in forcing the pace of industrial
change should be a central element of economic policy, underpinned
by a strong blend of the necessary economic and technical skills
in government and the regulators.
15. As CEMEP made clear, these economic
benefits arise not only from better regulation but the deliberate
design of supporting infrastructure to enable the desired transition
to be made in the most economically beneficial way. So, for example,
low-carbon targets in the domestic sector need to be supported
by investment in the supply chain, skills, and new technology;
or the recent Budget incentives for offshore wind need to go hand-in-hand
with explicit development of UK-based engineering and construction
capacity. Demand side policy must be matched by development on
the supply side.
16. This interaction between demand side
and supply side needs much greater focus within Government. In
reality, both must advance together because each promotes the
progress of the other. This is particularly true, for example,
in the case of employment, where a sudden hike in standards may
not be met by rapid job creation, because industry is either unprepared
or not able to respond effectively; in these circumstances new
jobs may in fact be exported while old ones dwindle. Where there
is good infrastructure support for new standards, employment patterns
respond much more flexibly and the very creation of new opportunities
encourages both employers and labour to support and encourage
further change.
17. The very nature of this interaction
creates a number of additional, complex challenges for government.
Individual CEMEP recommendations cannot be pursued in isolation—there
needs to be strategic, overarching and responsive systems in place
to ensure key regulatory drivers are supported by corresponding
supply side measures and that they reinforce each other, underpinning
its success and ensuring benefits to the UK economy are maximised.
Winners should be picked in the sense of viewing industrial
policy and competitive strengths in a more pragmatic and considered
way, building up capabilities and expertise in targeted sectors
such as offshore wind and carbon capture and storage. Simultaneously,
winners should not be picked in the CEMEP interpretation,
ie relying on one type of technology or demonstration project
within a sector which requires the development of the best solution
from a whole "family" of technologies.
LOW CARBON
INDUSTRIAL STRATEGY
18. As the Government publishes and then
develops its Low Carbon Industrial Strategy, the message from
the panel of experts who initiated the process is clear: the
starting point must not be a blank page. A wealth of expertise,
time and resources went into producing the CEMEP recommendations
which are still relevant despite the current economic crisis.
These should be fully incorporated into the Low Carbon Industrial
Strategy.
19. The Low Carbon Industrial Strategy must
set out in some detail how the capacity to create and grow skills
to at least match the ensuing jobs and supply chains generated
by the strategy are captured for the UK economy. There must be
wide engagement with stakeholders to gain the traction and momentum
necessary so that the workforce becomes a driver not a barrier
for the implementation of the strategy. Policies must address
both the quality and quantity of job creation that will be needed.
Many of the recommendations of CEMEP remain sound for ensuring
this is the case.
LONG TERM
POLICY FRAMEWORK
20. More widely, the Aldersgate Group argue
in Green Foundations 2009 that far from presenting a crisis
for environmental policy making, the challenges posed by the economic
recession and financial crisis actually reinforce the urgent need
to accelerate the transition to a low-carbon, resource efficient
economy, and align economic, environmental and societal benefits.
It draws on a rapidly growing body of new evidence and research
that substantiates a positive interaction between high environmental
standards and economic growth—enabling companies to become
more efficient and productive, and creating new opportunities
to secure the jobs and wealth of the future.
21. In particular, environmental regulation
stimulates innovation and presents new business opportunities,
not just in the high-growth environmental sector, but other sectors
too. In many cases, the creation of these new jobs and new markets
are driven entirely by the policy framework set by government.
22. At the EU level, challenging environmental
targets for 2020 are viewed by European Commission President,
Jose Manuel Barroso, as "an opportunity that should create
thousands of new businesses and millions of jobs in Europe".[28]
The earlier Europe moves, the greater the opportunity to use its
skills and technology to boost innovation and growth through exploiting
first mover advantage, progressing an European eco-industry that
already accounts for 3.4 million jobs and has an annual turnover
over €227 billion.[29]
23. This was reinforced recently by the
Climate Change Committee[30]
who state:
"In some sectors of the economy…
there may be opportunities for the UK to gain competitive advantage
from being a leader in specific technologies with potential for
global deployment. To the extent that this is true, the UK will
not only create new employment opportunities, but also higher
income from high-productivity, high-skilled jobs.
Countries or economic regions which are early
adopters of specific technologies often gain competitive advantage
from the creation of self-reinforcing clusters of research, development
and manufacturing expenditure. Competitive advantage can sometimes
therefore arise as a by product of stretching environmental standards.
At the overall European economy level, a commitment to high environmental
standards has helped nurture European leadership in a wide range
of high-technology sectors. And at national level, specific policy
commitments to low-carbon energy development have helped create
Danish and German leadership in wind turbine manufacture, and
Japanese and German leadership in solar photovoltaic cells.
One implication of this is that the UK should
support ambitious emissions reduction targets at the European
level, since this will drive Europe-wide productivity growth.
This will benefit the UK economy whether or not UK companies are
specifically involved in the relevant technology, both because
non-UK companies may develop or manufacture in the UK, or because
higher European productivity and incomes will tend to stimulate
demand for goods or services in which the UK does have a competitive
advantage.
But it is also possible to identify specific
sectors where the UK itself may be well placed to develop competitive
advantage if the UK's carbon reduction commitments create strong
demand for technical innovation. Key potential sectors are offshore
wind energy, wave and tidal, and auto-engines. Development of
these and other industries would therefore provide economic benefits
to meeting carbon budgets in addition to environmental benefits."
THE ENVIRONMENTAL
SECTOR
24. The Government recently commissioned
independent research[31]
to determine the scale of the environmental sector. It finds that
the global environmental goods and services sector is currently
valued at £3 trillion and growth is forecast to continue
despite the current economic difficulties. The UK is the world's
sixth largest low carbon and environmental economy, employing
over 880,000 people, with an additional 400,000 jobs
expected to be created over the next eight years. However, there
is still much room for improvement. The UK only has 3.5% global
market share and pre-recession was exporting five times less than
Germany, a major European competitor.
25. There is considerable body of evidence
which finds that the transition to a low carbon and resource efficient
economy is a net creator of jobs. For example, research by the
London School of Economics finds that in the short-term, "renewables
are more labour-intensive than conventional energy, both in terms
of manufacture and, to a lesser extent, the operation of facilities.
A switch to low-carbon technologies should thus lead to net job
creation".[32]
Similarly, a recent report by Deutsche Bank states:
"The Apollo Alliance estimates that every
$1 million invested in the US in energy efficiency projects
creates 21.5 new jobs, as compared to only 11.5 jobs
for new natural gas generation. The University of California Berkeley's
Renewable and Appropriate Energy Laboratory also finds that renewable
energy technologies create more jobs per average megawatt of power
generated and per dollar invested than coal or natural gas. Finally,
a 2008 Center for American Progress report states that a
$100 billion investment in clean energy and efficiency would
result in two million new jobs, whereas a similar investment in
old energy would only create around 540,000 jobs."[33]
26. The UK Government estimates that the
expansion in renewable energy set out in the UK Renewable Energy
Strategy has the potential to generate 160,000 new jobs in
the sector by 2020.[34]
GREEN STIMULUS
PACKAGES
27. The 2009 Budget failed to include
an ambitious public spending programme that would help stimulate
employment and falling demand during the recession. As specified
by the TUC, the projects implemented as part of this programme
should be "labour intensive (to ensure they maximise impact
on unemployment) and they must focus on turning the UK into one
of the most advanced and industrially diverse low carbon economies
in the world."[35]
28. In relation to these benchmarks, the
2009 Budget was a missed opportunity. HSBC[36]
estimate that in total, the new measures announced takes the UK's
green investment fund to over USD 3.7 billion (increasing
the percentage of the green component of the stimulus to around
10.6%). This is below the global average (around 15%) and in real
terms considerably less than competitors such as China, the United
States and France. As such, it will limit the impact of green
job creation, economic development and environmental protection
in the UK and put at risk the UK's ambitions to be a world leader
in green technologies. Commenting on the Budget, Lord Nicholas
Stern stated that the additional green expenditure must be "the
initial first step along the path towards a major structural shift
in policy which we trust will follow over the coming decade".[37]
29. Despite a relatively low level of public
sector investment, there were a number of encouraging announcements
in the 2009 Budget. For example, the additional support for
offshore wind through the Renewables Obligation will ensure that
projects that have stalled due to financial difficulties should
be in a position to proceed (creating jobs and boosting economic
growth). Additionally, targeted support mechanisms for renewables
must be bold and sufficiently joined up to prevent job losses
and bankruptcies during the recession.
ENERGY AND
RESOURCE EFFICIENCY
30. Projects in energy efficiency are particularly
desirable as they are good for business (with potential savings
of billions of pounds a year), the economy (utilising funds for
more productive means) and the environment. Resource efficiency
should be aggressively pursued in light of the recession as it
will save households and businesses money on their bills, protect
the economy against future rises in energy, water and waste costs,
create jobs and ensure that the UK will be more competitive when
growth returns.
31. Energy efficiency projects can be implemented
relatively quickly (unlike more complex infrastructure projects)
and so have a more immediate impact on employment creation. Such
schemes are also an opportunity to re-skill those currently unable
to find work in the construction sector. These benefits are recognised
in research by the London School of Economics, which finds that
"many energy efficiency measures would be particularly effective
as part of a fiscal stimulus, as they could be implemented quickly
and would be relatively labour-intensive", as well as having
"a low rate of leakage into imports, increasing the domestic
fiscal multiplier".[38]
32. Research for the Centre for Energy,
Resources and Economic Stability (CERES) finds that "efficiency
measures have enabled California households to redirect their
expenditures toward other goods and services, creating about 1.5 million
FTE jobs with a total payroll of $45 billion, driven by well-documented
household energy savings of $56 billion from 1972-2006. As
a result of energy efficiency, California reduced its energy import
dependence and directed a greater percentage of its consumption
to instate, employment-intensive goods and services, whose supply
chains also largely reside within the state, creating a 'multiplier'
effect of job generation".[39]
Furthermore, the American Council for an Energy-Efficient Economy
(ACEEE)[40]
finds that energy efficiency supports 1.6 million jobs in
the US alone and has halved energy consumption per dollar of economic
output since 1970.
33. Considering the potential of energy
and resource efficiency to drive job creation, Government policy
should be more immediate in focus. The announcement in the Budget
of £365 million of new spending for energy efficiency
across the economy is not bold enough. While the Government's
Heat and Energy Saving Strategy[41]
sets a number of ambitious targets, such as cost-effective energy
saving measures to be installed in all UK households by 2030,
there is a lack of immediacy and urgency.
3 June 2009
21 HM Government (November 2007) Commission on Environmental
Markets and Economic Performance. Back
22
HM Government (May 2008) Unlocking Talent: Building a low carbon
economy. Back
23
HM Government (May 2008) Unlocking Talent: Building a low carbon
economy, p14. Back
24
www.ensg.gov.uk/assets/ensg_pwg_chairmans_report_final.pdf Back
25
Pro EnviRo (2008) Skills for a Low Carbon and Resource Efficient
Economy: A review of evidence. Back
26
HM Government (April 2009) New Industry, New Jobs: Building Britain's
future, p15. Back
27
Innovation, Universities, Science and Skills Committee (March
2009) Engineering: turning ideas into reality. Back
28
European Commission (23 January 2008) Press Release: Boosting
growth and jobs by meeting our climate change commitments, Brussels. Back
29
European Commission Communication (23 January 2008) Back
30
The Climate Change Committee (December 2008) Building a Low-Carbon
Economy-The UK's contribution to tackling climate change, p379. Back
31
Innovas (March 2009) Low Carbon and Environmental Goods and Services:
an industry analysis. Back
32
Fankhauser, S, Sehlleier, F & Stern, N (2008) Climate change,
innovation and jobs, Back
33
Deutsche Bank (2008b): Economic stimulus: the case for "green"
infrastructure, energy security and "green" jobs. Back
34
HM Government (June 2008) UK Renewable Energy Strategy. Back
35
TUC (3 April 2009) A Budget for jobs and green growth Back
36
HSBC Global Research (22 April 2009) Green Stimulus: Round
1 to Asia Back
37
www.guardian.co.uk/uk/2009/apr/22/budget-low-carbon-economy Back
38
Alex Bowen, Sam Fankhauser, Nicholas Stern and Dimitri Zenghelis
(February 2009) An Outline of the Case for a "Green"
Stimulus. Back
39
Roland-Holst, D (2008): Energy efficiency, innovation, and job
creation in California. Back
40
Laitner, John A & Ehrhardt-Martinez, Karen (May 2008) The
Size of the U.S. Energy Efficiency Market: Generating a More Complete
Picture, Washington. Back
41
HM Government (February 2009) Heat and Energy Saving Strategy
Consultation Document. Back
| 
