Memorandum submitted by the Department
for Business, Enterprise and Regulatory Reform (BERR), Department
of Energy and Climate Change (DECC), Department for Innovation,
Universities and Skills (DIUS), and the Department for Environment,
Food and Rural Affairs (Defra)
1. INTRODUCTION
1.1 The Government welcomes the new inquiry
on "Green jobs and skills" and the opportunity to set
out its strategy to ensure the UK economy is well positioned to
take full advantage of the future opportunities arising from the
global shift towards low carbon.
1.2 In the sections below we aim to set out:
— how Government action will seek to enable
investment and employment in sectors that offer future growth
opportunities;
— the wider contribution of our policies
to sustainable development and environmental protection; and
— how we are taking action to support the
skills base for the UK environmental industries.
SUMMARY
— The global shift to a low carbon economy
represents significant global opportunities for the UK, and holds
out the prospect of a "low carbon resource efficient recovery"
and a more sustainable longer term future. — Our shift to
low carbon will change every aspect of our lives, our work, our
society and our living environment in line with the principles
and shared priorities of the UK's Sustainable Development Strategy
"Securing the Future". Our policy also acknowledges
the fact that the resource efficiency agenda is much wider than
just low carbon and energy efficiency.
— We have provided a strong long-term policy
framework that provides clear signals to the market on our long-term
priorities and have created greater investor confidence about
the future prospects for UK business sectors.
— Budget 2009 indicated how we aim to fund
this strategic vision, providing a package of supply-side and
demand-side measures to ensure Britain's future competitiveness
in the future low carbon economy.
— Much has already been achieved in developing
our Low Carbon Industrial Strategy. In summer 2009, we will set
out in more detail how we will enable the UK to seize the economic
opportunities arising from the global shift to low carbon.
— We are working in partnership with leading
edge employers to inform our policy and action, drawing on their
experience of low carbon skills. The UK Commission for Employment
and Skills, HEFCE and the new Skills Funding Agency (from 2010)
will have key roles to play in articulating demand, building capacity
and incentivising the skills system.
— As new and established businesses grow
to meet the opportunities in the new economy, these changes will
ensure they are able to get the skilled workers they need in the
right place and at the right time
2. BACKGROUND
2.1 The global Low Carbon and Environmental
Goods and Services (LCEGS)[1]
market is estimated to be over £3 trillion.[2]
The UK accounted for 3.5% of the global market amounting to about
£107 billion. This makes it the world's sixth largest low
carbon and environmental economy. If the global low carbon and
environmental market grows in line with expected UK LCEGS market
growth, it could increase by 45% in value by 2015, creating significant
opportunities for UK businesses. It is estimated that the value
of the UK LCEGS market could grow by another £45 billion
by the middle of the next decade. A rough estimate of growth in
employment in the LCEGS market over the same period indicates
that there could be a potential increase in the number of employees
across the LCEGS sectors by around 400,000 to a total of 1.2 million.[3]
2.2 As with most developed economies, in the
UK, the impact of the economic downturn has manifested itself
in the form of collapsing business confidence, shrinking venture
capital flows, a severe reduction in consumer demand and a market
decline in international trade flows. For the low-carbon and environmental
sector, the recession has had a significant impact on the forecast
growth rates. However, although they have decreased, forecast
growth rates for the sector are still positive and increasing
over the years to 2014-15.[4]
2.3 In terms of global investment flows
into the clean-tech sector, new investment rose to $155 billion
in 2008 in spite of the economic crisis, following three years
of very strong growth[5]
but fell again in the first quarter of 2009, declining to around
$13.3 billion—the lowest quarterly value since the first
quarter of 2006.
2.4 The downwards adjustment of growth forecasts
in recent months, however, are much less severe in the low carbon
sectors compared to other sectors, such as construction and retail.
The projected growth rates for Renewable Energy and Low Carbon
activities is forecast to exceed growth in the more established
Environmental sector, where many technologies are already mature.
It is anticipated that as economic uncertainty is reduced and
investment funds start to flow again these growth forecasts will
start to rise. If these forecasts are correct a significant proportion
of this growth will be generated by renewable energy activities.
We are well positioned to gain comparative advantage in key areas
of the environmental supply chain through exporting to developing
nations looking to upgrade their current infrastructure.
3. THE POLICY
FRAMEWORK FOR
A LOW
CARBON RESOURCE
EFFICIENT ECONOMY
The Long-term Policy Framework
3.1 In order to meet our 2050 goals and
create a prosperous low carbon resource efficient economy, we
need to create the conditions for businesses to innovate and to
compete for the opportunities created by the global shift towards
low carbon products and services. The Government has provided
a strong long-term policy framework. This sends clear signals
to the market and helps provide investor confidence about the
future prospects for low carbon resource efficient economic activity.
Elements include:
— World's first Climate Change Act, which
sets binding targets for reducing green house gas emissions by
80% by 2050 and commits us to carbon budgets; — EU Emissions
Trading Scheme, which covers almost half of all emissions;
— the mandatory emissions trading scheme covering
large business and public sector organisations in the UK; and
— Climate Change Levy and the renewables
obligation.
Developing a Low Carbon Industrial Strategy (LCIS)
3.2 The legal requirement to reduce carbon
emissions by 80% by 2050 will affect the activity of businesses
in all sectors. Therefore, the Government's Low Carbon Industrial
Strategy is not about creating a wholly separate part of the economy,
but about the transformation of the whole economy. The low carbon
economy will change our industrial landscape, our supply chain,
and the way in which we all work and consume. It will also require
a strengthening of core skills in the labour market as well as
the development of new skills to enable people to adjust to new
low carbon products and services.
3.3 The Low Carbon Industrial Strategy (LCIS)
aims to ensure the UK maximises the economic benefits from this
shift to low carbon by providing a clear framework for Government
policy and investment.
3.4 Much has already been achieved in developing
the LCIS:
— In March 2009, Government launched The
Low Carbon Industrial Strategy, A vision at the Low Carbon
Summit. This illustrated our vision for our low carbon industrial
strategy[6]
setting out the key policy drivers:
— promoting energy efficiency to save businesses,
consumers and the public sector money;
— putting in place the energy infrastructure
for the UK's low carbon future;
— making the UK a world leader in the development
and production of low carbon vehicles and
— making the UK the best place to locate
and develop a low carbon business.
— On 16 April 2009, we published Ultra-Low
Carbon Vehicles in the UK. This set out how the Government
will work with industry to enable the UK to become a global leader
in the development and production of ultra-low carbon vehicles
(see paragraph 4.4 below for details).
3.5 Budget 2009 indicated how we aim to
fund this strategic vision, providing a package of supply-side
and demand-side measures to ensure Britain's future competitiveness
in the future low carbon resource efficient economy.
3.6 The key low carbon budget measures included:
— £405 million to help establish the
UK as a market leader in renewables technology and advanced green
manufacturing in the next two years. This will provide supply
side support for the development and deployment of low carbon
technologies such as wind and marine energy and will help attract
and protect investment in the UK's low carbon supply chain.
— £50 million extra for the Technology
Strategy Board to significantly expand its work with business,
fostering innovation and new technologies, such as low-carbon
technologies and advanced manufacturing.
— £375 million to help households
and businesses with energy and resource efficiency including:
— £100 million of new funding for
Carbon Trust existing loans scheme to business. This should enable
the scheme to reach around 3,500 SMEs, helping them make savings
on energy bills of £23 million per year whilst increasing
demand for low carbon solutions.
— £65 million of loans for energy
efficiency measures in public buildings, delivered through the
Carbon Trust Salix scheme in England. This will support 3,000
projects in schools, hospitals and other public sector buildings.
This will save the public sector £13 million a year in bills
and increase demand in the construction sector.
— An uplift in Renewable Obligation banding
for offshore wind for projects closing over the next two years,
worth £3.5 billion over lifetime of projects, to protect
£9 billion of investment, and power up to 2.8 million homes
while easing the access to finance and supporting continued investment.
— £4 billion of new capital made available
through the European Investment Bank (EIB) to provide supply side
support to renewable energy projects with a view to bring forward
£1 billion of consented small and medium-sized UK renewables
projects to deployment.
— £90 million more to fund engineering
and design studies for Carbon Capture and Storage (CCS) in way
of helping to maximise UK's potential to be a world leader in
this market.
— Support for increased use of Combined
Heat and Power (CHP) providing further demand stimulus for the
UKs low carbon businesses and workers.
— Further tailoring of the transport regulatory
framework such as the lowering the carbon threshold for company
car tax (5g CO2 per km less for the 15% band) to encourage the
demand for low carbon vehicles.
3.7 Following the Budget, Government published
Investing in a Low Carbon Britain. This set out, in broad
terms, how Government intends to target the investment announced
at the budget to provide real help now for businesses and households
while creating and sustaining the jobs that will contribute to
the UK's prosperity in a new low carbon world. It illustrated
key sectors where the UK has the potential to take a leading global
role, because of our natural resources, strong tradition, skills
base or other advantages. These include:
— Offshore wind generation.
— Carbon capture and storage.
4. PROMOTING
LOW CARBON
INVESTMENT AND
EMPLOYMENT IN
KEY SECTORS
4.1 In line with "Building Britain's
Future—New Industry, New Jobs", published on 20
April, the Government's Low Carbon Industrial Strategy will seek
to make targeted investment where there are key future economic
opportunities for Britain, and where government action can make
an impact. As part of the strategy, we are examining barriers
and opportunities across the economy. Below are a few of the key
sectors.
4.2 Offshore wind generation and Marine energy
4.2.1 Renewable energy will be an essential part
of the world's future energy mix. Britain is in the position to
acquire a comparative advantage in certain areas, particularly
in offshore wind and marine energy. Building on our natural advantages,
"Investing in a Low Carbon Britain" set out the
Government's commitment to support delivery of projects to make
the UK a centre of excellence in close-to-market innovation in
technologies such as offshore wind, wave and tidal energy. In
doing so, we want industry to have the facilities to develop and
demonstrate its technologies, helping to establish its manufacturing
and supply chains in the UK.
4.2.2 The UK possesses a unique level of
marine energy resources. The UK has an estimated practical wave
resource of around 50TWh/y of electricity a year and a practical
tidal stream resource is around 18TWh/y. This represents around
50% of Europe's tidal energy resource (10-15% of the global resource)
and 35% of Europe's wave energy resource. The sector is still
at a very early stage of development but the Carbon Trust has
estimated that marine energy has the potential supply up to 20%
of the current UK electricity demand. We anticipate that around
1-2 GW could be deployed by 2020 and 30-50GW deployed by 2050.
The UK is also seen as a focus for wave and tidal technologies,
and the world's first commercial scale tidal turbine (SeaGen)
and the world's first commercial-scale wave energy array (Pelamis),
both British technologies, were deployed in 2008.
4.2.3 Similarly the UK is currently No 1
in the world for operating offshore wind farms with 598MW and
it is vital we maintain competitive advantage in this area. We
are very much on track to remain in the lead, with another 444MW
due to finish construction this year, almost doubling our capacity.
This will take us over the 1GW mark—and we have existing
plans for up to 8GW to be operating by 2014.
4.3 Nuclear energy
4.3.1 In the Nuclear White Paper in January
2008 the Government made a clear commitment to Nuclear power as
part of the future energy mix for the UK. This domestic UK nuclear
revival will provide significant business opportunities for those
in the nuclear industry and for those involved in the supply of
goods and services required for the construction, maintenance
and decommissioning of nuclear power stations.
4.3.2 To date, energy companies have announced
plans to construct 12.4GW of new nuclear capacity in the UK alone,
so the potential opportunity for UK businesses is sizeable. We
estimate that each new nuclear power station will create up to
9,000 jobs during construction and operation, many of them highly
skilled. The construction work on the first new nuclear power
station is expected to begin around 2013.
4.3.3 The global renaissance in nuclear
power[7]
will open up significant global[8]
opportunities to UK businesses. Government is working to ensure
that UK businesses can compete effectively in the supply chain
for new nuclear power stations both here and globally. This includes
helping domestic firms to understand more about the potential
opportunities available to them and to understand the quality
standards they need to comply with in order to compete in the
nuclear supply chain.
4.4 Low carbon vehicles
4.4.1 The Automotive sector is a mature
industry that must be transformed to play its role in a low carbon
economy. The Government's ambition is to make the UK a world leading
location to develop, demonstrate, manufacture and use Ultra Low
Carbon Vehicles. This will create new opportunities for vehicle
manufacturers and the supply chain, the energy sector and infrastructure
developers.
4.4.2 Ultra-Low Carbon Vehicles[9]
in the UK brought together a comprehensive range of policies developed
by Government with the potential to deliver its vision up to the
end of 2014. Policies on Ultra-Low Carbon Vehicles include:
— £140 million Technology Strategy
Board's Low Carbon Vehicle Innovation Platform—funding
from the TSB, DFT, Advantage West Midlands, One North East and
the EPSRC to accelerate industry investment in low carbon vehicle
commercialisation, to build partnerships to address technical
challenges, to increase UK-sourced products offered to the market
through research, development and demonstration.
— TSB ULCV demonstration competition—placing
more than 200 ultra-low carbon vehicles on UK roads within the
next 18 months—putting internationally leading numbers of
ultra-low carbon vehicles on UK roads with real consumers driving
real vehicles.
— £230 million consumer incentives—stimulating
demand. From 2011, as vehicles become available to the mass market,
DfT plans to provide funds to reduce the price by £2,000-£,000
for electric and plug in hybrid electric vehicles.
— £20 million DfT Infrastructure
challenge competition—to support the development of
lead cities and regions to start the processes of building infrastructure.
— £20 million low carbon van procurement
programme—showing public sector leadership through our
procurement decisions.
4.5 Carbon capture and storage
4.5.1 The Government has set out a clear
policy framework to support the development of CCS. In the Budget,
support for CCS was extended to include financial support, via
a levy mechanism, for up to four CCS demonstration plants including
the current competition. Further proposals include the need for
every new coal power station to test CCS on a defined portion
of capacity (not less than 300MW), and install CCS within five
years once it has been independently judged to be technically
and economically viable. A consultation document setting out these
proposals in more detail will be published in summer 2009 alongside
an Environmental Report.
4.5.2 CCS could offer significant job opportunities
in the UK. The move from demonstration to deployment includes
opportunities for design consultancies, manufacturers, system
integrators, programme managers and professional services firms.
The UK will benefit from being at the forefront of a technology
that could create a multi-billion global market. Research suggests
that carbon abatement technologies, including CCS, could sustain
50,000 jobs by 2030.
5. THE LOW
CARBON INDUSTRIAL
STRATEGY—NEXT
STEPS
5.1 In summer 2009, we will set out in more
detail how the Government will enable the UK to seize the economic
opportunities arising from the global shift to low carbon. It
will build on the priorities identified in Investing in Low
Carbon Britain in April.
5.2 The strategy will set out our view of where
future business opportunities lie. It will set out how we aim
to address key challenges and barriers from R&D to pre-commercial
development. It will also set out our plans to help mature industry
that needs support in maximising opportunities due to market failures
and regulatory barriers.
5.3 We will also set out the opportunities
and challenges that lie across the wider economy, including energy
efficiency, putting in place the energy infrastructure for the
UK's low carbon future, support for a "smart" grid,
and the potential impacts on wider infrastructure including transport
and ICT and the impact on wider resource efficiency.
5.4 In summary, the Low Carbon Industrial
Strategy, building on what we have announced so far, will explain
how we intend to use Government policy and funding leavers to
address market failures and ensure businesses in the UK are equipped
to maximise their competitive advantage to secure benefits from
the global shift to low carbon.
6. NON-CARBON
RESOURCE EFFICIENCY:
WIDER CONTRIBUTION
TO SUSTAINABLE
DEVELOPMENT AND
ENVIRONMENTAL PROTECTION
6.1 The low carbon drive aims to create
an economic recovery and a future that is more resource efficient
and more sustainable for the longer term. This shift will change
every aspect of our lives, our work, our society and our living
environment and bring these more in tune with the principles and
shared priorities of the UK's Sustainable Development Strategy
"Securing the Future". Low carbon living goes hand in
hand with protecting and enhancing our wider natural resources,
such as clean water, air, and biodiversity and the natural ecosystem
goods and services and move us towards "one planet living"
while securing benefits to people's health, wellbeing and quality
of life.
6.2 The shift to low carbon and resource efficency
as supported through significant provision in Budget announcements
will be vital to meeting the long term challenge of climate change
and help prevent the most severe impacts of climate change. However,
past greenhouse gas emissions necessitates that we also prepare
for climate change impacts that are now inevitable. We, are, therefore,
working to increase the resilience of the UK's economy, infrastructure
and communities to the impacts of climate change and to secure
much needed skills across the construction and engineering sectors.
Government's zero carbon homes initiative, for instance, will
transform the way that new homes and other buildings are constructed
over the next decade.
6.3 The resource efficiency agenda is much
wider than just low carbon and energy efficiency. The wider resources
of the natural environment are often undervalued for the services
they provide—for example the benefit for the UK obtained
from the regulation of marine ecosystems for gas and climate regulation
is up to £8.5 billion per annum. That is why the government
is undertaking work to better value ecosystems and biodiversity.
With the increasing pressures on natural resources there is an
opportunity for businesses across the economy to use resources
such as water and raw materials more efficiently, and in doing
so to reduce costs and increase competitiveness. Reducing waste
and seeing waste as a resource, is a key component of this wider
resource agenda. In the Budget 2009 we have allocated an additional
£10 million funding for 2009-10 for the development of anaerobic
digestion and in vessel composting facilities for food waste across
the UK providing supply side assistance for UK businesses.
7. THE SKILLS
BASE FOR
THE UK ENVIRONMENTAL
INDUSTRIES
7.1 In 2007 CEMEP[10]
concluded that reliable forecasts of future job prospects in low
carbon markets were not available. In 2009 the Defra Review
of Evidence concluded that there was latent demand for low
carbon skills, but that demand was not being articulated by employers
and, as a result, the skills system was ill-equipped to respond.
7.2 In Building a Better Britain: New Industry,
New Jobs we set out a commitment to a new activism from Government,
working strategically to complement the market and position the
UK to take full advantage of its competitive strengths. This active
approach to developing our skills base will be particularly important
where skills capabilities determine the UK's ability to secure
jobs at the top end of global value chains—and where UK
business and their employees need the skills to compete for government
procurement or the demand created by other significant government
action.
7.3 Government is committed to routinely
considering and addressing skills issues through public procurement—both
in letting new contracts, and working with existing contractors
on a voluntary basis. Within that overarching commitment, we have
been working with public sector clients and suppliers in individual
sectors to shape more specific commitments that will help address
the particular skills issues in those sectors.
7.4 DIUS and OGC recently published Promoting
Skills through Public Procurement, a new guide to provide
procurers across the public sector with practical advice on how
skills and training can be embedded in public procurement in a
way that is consistent with EU rules and the value for money framework.
We will shortly be bringing forward further sector specific commitments
in those areas where we believe public procurement can act as
a real and significant lever for action to address skills gaps
and shortages.
7.5 We will do more to forecast and identify
these skills needs in areas such as low carbon by developing with
employers, Sector Skills councils and the UK Commission for Employment
and Skills (UKCES) the capability to collect, process and deploy
intelligence on skills needs in key sectors and markets quickly
and effectively. From 2010 our new Skills Funding Agency (SFA)
will then ensure that the skills system has the capacity and funding
available rapidly to support development in areas of strategic
importance to the economy, such as low carbon—and we will
also ensure our universities have clear incentives to respond
quickly to support these areas of potential growth, including
by evolving our current funding models.
7.6 We have recruited a Strategic Advisory
Group of leading edge employers to help Government set the benchmark
for the skills system. Key recommendations include recognising
that businesses cannot deal effectively with skills issues until
they have understood the business benefits arising from resource
efficient ways of working, and there is significant potential
for collaboration among employers based on existing supply chains,
supported by Sector Skills Councils.
7.7 We are currently looking at how we can
develop our current demand-led funding system so that it is more
responsive to emerging demand for skills, including low carbon,
through increasing the flexibility of funding in-year to respond
to these demands. The development of our demand-led system will
create a stock of training providers with the responsive capacity
to best adapt to future markets.
7.8 In addition we are also developing further
reforms in order to support the concept of skills activism, and
to strengthen the link between developments in emerging markets,
like low carbon, and skills development. We need a new funding
system that will give the Skills Funding Agency the ability to
make funds available in order to move the system in the required
strategic direction determined by Government—such as towards
sectors like low carbon—whilst also ensuring there are sufficient
funds available to meet emerging "here and now" demand
in-year. We are exploring different options for how this could
be achieved.
7.9 Later this year we will publish a Higher
Education Framework setting out how the higher education sector
will be incentivised to support this agenda, including by evolving
our current funding models; and an Active Skills paper detailing
how the wider skills system will support these developing policies.
We will work with the UK CES to develop the capability to collect,
process and deploy information on low carbon skills needs quickly
and effectively; and we will establish a new Skills Funding Agency
to deliver the low carbon skills solutions we need.
7.10 As new and established businesses grow
to meet the opportunities in the new economy, these changes will
ensure they are able to get the skilled workers they need in the
right place and at the right time.
June 2009
1 The environmental sector includes more traditional
environmental activities such as pollution control, waste and
water treatment and recycling, renewable energies, nuclear, and
emerging low-carbon areas, such as building technologies, carbon
finance, alternative fuels and CCS. Back
2
Low Carbon and Environmental Goods and Services: an industry analysis,
INNOVAS, March 2009. Back
3
This rough estimate of growth in employment levels is done by
linking potential growth in employment levels to forecast growth
in market values for the sector on a pro rata basis. Back
4
Forecast annual growth rates for the LCEGS sector for the period
up to 2014-15 done in August 2008 ranged from 6-16%. Forecasts
carried out in December 2008 for the same period ranged from 5-6%,
whereas forecasts from March 2009 ranged from 4-6%. Back
5
From 2004 to 2007 average growth in new investment was approximately
65% per annum. Back
6
Low Carbon Industrial Strategy, A vision, March 2009. Back
7
It has been estimated that as many as 12 new nuclear power stations
could be build worldwide by 2030. Estimates by the Nuclear Energy
Agency suggest that between 23-54 nuclear reactors are expected
to be built worldwide between 2030-50 and Deutsche Bank consider
that there are around 232 reactors currently planned worldwide. Back
8
We estimate that a twin reactor with a capacity of 1.6GW costs
about £2.8 billion to build and that about 70% of the supply
chain could be provided by UK companies. Back
9
Ultra-Low Carbon Vehicles in the UK, April 2009. Back
10
Commission for Environmental Markets and Economic Performance. Back
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