Environmental Audit Committee - Green EconomyWritten evidence submitted by the Office of the City Remembrancer City of London Corporation


1. The City Corporation welcomes the opportunity to contribute to the Committee’s inquiry.

2. In 2006, the City Corporation, along with BP, Forum for the Future, Gresham College and Z/Yen Consulting, launched The London Accord, a collaborative research project intended to share thinking on climate change mitigation, evaluate opportunities for investment and provide a better understanding of the role of public policy in this area. The project attracted interest from a wide number of leading City organisations who lent their research teams to support the project. The product was a series of papers incorporating both the wider agenda (energy security and environmental sustainability) as well as specific investment research. Since its launch additional papers have been added covering topics as diverse as Genetically Modified Organisms, Food and Corporate Social Responsibility. The Accord continues to grow as more organisations donate research free of charge, and with over 45 research papers available for download.

The nature of barriers preventing the transition to a green economy

3. Recognition that the green economy is merely part of the mainstream economy is a good place to start. As long as the market for environmental goods and services is labelled differently, it will not be considered part of the mainstream and will not receive the support it requires. Fundamentally, the majority of firms operating in a market valued at over £100 billion have their roots in more traditional sectors such as light engineering, waste management, water management, construction or professional services. Many of them are small and medium sized enterprises with much to gain from this new growth area.

The approach required to deliver a green economy, and the aspects of the current economic model that require development, eliminating and/or new approaches found

4. The primary requirement for the development of a new technological area is the development of a policy environment that is transparent in its motivations, long-term in its thinking and clear with regards to desired outcomes. There is also a need to eliminate of perverse incentives, such as subsidies and price signals that encourage unsustainable behaviour, short-term spending limits which discourage investment in sustainable development and inappropriate measures or indicators of success.

What tensions might there be between economic growth and the green economy?

5. This question illustrates the mind set which may be acting as a barrier to growth in this area. In line with para three above, it could be argued that there should be no tension as there is no such thing as the “green economy”, there is just the economy. In 1910 no one spoke about the “internal combustion economy”, yet the changes wrought by the widespread use of fossil fuels caused a seismic shift in society. The growth in the market for “eco-tech” or Environmental Services and Goods (ESG) is directly correlated to global macro-economic and demographic/environmental trends. The need to address these challenges creates economic opportunity.

Would “greening” the economy deliver the outcomes needed?

6. There are three primary drivers pushing the economy towards consideration this model; Energy Costs, Climate Change and the Economic Downturn.

The cost of energy will see an inexorable rise over the next decade due to peak oil and rising demand. The International Energy Agency projects China’s net oil imports alone will jump to 13.1 million barrels per day by 2030, up from 3.5 million barrels per day in 2006. To this end, investment is needed in energy generation and supply infrastructure, innovation is required from businesses in the field of energy efficient products and services and changes are required in public attitudes to energy consumption . The scale of the investment required to meet UK climate change and renewable energy targets is unprecedented, with estimates of investment required reaching £550 billion between now and 2020. In contrast, only £11 billion was invested in Britain’s “dash for gas” during the 1990s, and that was considered transformational at the time.

Climate change action is enshrined in law, through the Climate Change Act. This lays out stringent national targets for reducing greenhouse gas emissions. However it is worth noting that the issues of climate change and energy efficiency have a very strong synergy with the issue of energy security and over- reliance on imported gas and oil. To this end the development of low carbon goods and services has the potential to benefit UK exports as the demand for low carbon grows in overseas markets such as China.

The issue of the economic downturn is more complex. Developing a Low Carbon Economy has become a central feature of rhetoric by politicians across the globe. There is a recognition that as the 21st century progresses the world is on the threshold of a “post industrial revolution” where technological advances will overturn the development paradigms of the 20th century and new types of infrastructure, goods and services will replace heavy industry as drivers of industrial growth.

7. Environmental pressures—climate change, population growth, resource, food and water scarcity, have resulted in a complex set of international, regional and national protocols and laws which have opened up new markets for environmental goods and services. Developed nations are now increasingly active in these new markets, which is likely to determine their economic strengths over the next few decades.

Priorities for action, including those sectors of the economy crucial for creating the conditions for a green economy

8. There are a number of areas where targeted action could help facilitate the green economy including, as a first step, conducting in depth research to identify where the UK is leading and what opportunities there are to support firms. Stringent environmental performance standards on new infrastructure development will encourage growth in the ESG Sector. One example could be the development of a new benchmark based on BREEAM1 for the environmental performance of new buildings and infrastructure.

9. Guidance and standards on procurement should be produced for the public sector Through their procurement strategies, the public sector can, potentially, play a major role in supporting local businesses. The development of a coherent national policy framework which mandates the inclusion of carbon emissions within tender considerations would enhance the opportunities available to the ESG sector. The development of regional Eco-Parks coupled with targeted tax incentives and grants could enable ESG SMEs to benefit from clustering effects. In addition, the skills gap in the ESG sector needs to be addressed. Consultation with employers, consumers and training providers, combined with links to schemes such as National Apprenticeships Skills and training could fill this gap.

10. Currently a number of key sectors within ESG are experiencing very rapid growth. These include

Eco-tech and engineering:

Cooling, and water saving technology.

Novel materials, photovoltaics, fuel cells and biofuels.

Carbon capture and storage.

Renewable energy and energy saving technologies.

Clean automotive technology.

Agribusiness and Genetically Modified Organisms (GMOs)—The rising cost of energy and scarcity of productive agricultural land has led to a marked increase in global food prices. Technologies which enhance crop yields in the face of changing climate, new “eco-friendly” pesticides and Genetically Modified Organisms have therefore become an increasingly lucrative market. Recent changes in policy within the EU have opened the door to GMOs, and the use of tank bred GMOs to create plastics and pharmaceuticals is a growing field.

Energy and Carbon Management—Rising energy prices, reduced profits and a number of current and forthcoming pieces of legislation (European Building Energy Performance Directive, Carbon Reduction Commitment) have increased the profile of this issue. Organisations with large estates employ energy managers (specialist engineers) to manage operations and energy purchasing, smaller organisations contract in specialist consultancies. There is also interest in energy efficiency and Carbon Avoidance Technologies (CAT).

Carbon Finance and Carbon Trading—this is a major strength for the City of London and set to increase in importance as the ESG sector expands and Australian and Chinese domestic trading systems come are launched.

The role of consumers, businesses, non-government organisations, and international bodies in delivering, and stimulating demand for, a green economy

11. Consumers should be assisted in supporting the low carbon economy through the provision of appropriate consumer information on the performance of products. Businesses should be encouraged to seek out opportunities within this sector. International bodies such as the WTO should agree performance standards for products and services.

Whether any models that more closely resemble a green economy exist elsewhere that the UK should aspire to

12. Korea is leading the world in pursuing a low carbon future, with significant investment across industrial sectors and, despite its consumption of fossil fuels, China is also the world’s largest investor in renewable energy.

How the UK’s policies to deliver a green economy relate to actions needed to deliver the global green economy (a theme of the June 2012 Rio Summit)

13. The UK is a global trading nation and is regarded as a leader in the field of climate change policy. To this end it is essential to ensure that eminence is maintained.

7 September 2011

1 Building Research Establishment Environmental Assessment Method—an assessment to measure the sustainability of new non-domestic buildings in the UK

Prepared 18th May 2012