Written evidence submitted by The Environmental
BUDGETARY KICK-START FOR A GREEN ECONOMY
The Environmental Industries Commission (EIC) EIC
was launched in 1995 to give the UK's environmental technology
and services industry a strong and effective voice with Government.
With over 230 Member companies EIC has grown to be
the largest trade association in Europe for the environmental
technology and services (ETS) industry. It enjoys the support
of leading politicians from all three major parties, as well as
industrialists, trade union leaders, environmentalists and academics.
The EIC and its members work to provide solutions
to meet environmental standards set by government legislation.
We work with government to strengthen the UKs policy framework.
This work ensures that the Government's intentions to put the
economic benefits of environmental protection at the heart of
its plans for growth. This framework ensures that the governments
environmental targets are realised and the UK have cleaner air,
water and land.
We the Environmental Industries Commission (EIC)
and its 230 members companies are delighted to have the opportunity
to submit our proposals for 2011 Budget to the Chancellor of the
We have followed the government's progress on being
the "greenest government ever" we would like to congratulate
on some good initiatives. We will be watching out for more.
The EIC believe that the UK needs a new approach
and new thinking to create sustainable jobs and low carbon resource
efficiency which will save the economy money and protect our environment.
Today we have an opportunity to shape a new economy
that is driven by industrial processes which are low carbon and
resource efficient, and protect our environment. The fundamental
logic of this "new economy" must be for ecological sustainability
- an argument endorsed only this month by the UN report "Towards
a Green Economy".
To do this the government must rectify the major
market failure of unpriced environmental costs and benefits -
thereby reconciling the free market economy with the environment.
We need above all a strong and robust economic-environmental policy
framework that rectifies this market failure by putting a cost
on pollution, thereby encouraging finance and investment in low
carbon resource efficient industrial operations and supply chains.
Our Pre-Budget report highlights a few areas where
we think the Chancellor must focus if we are to build a "green
economy and create jobs". We and our members look forward
to working with the government and to support them in their efforts.
The Government must put green jobs creation at the
heart of the 2011 budget if it is to establish an international
leadership role for UK business in the global economy of the future.
The Budget is the first opportunity for the Coalition
Government to lay the foundation for a fundamental shift in our
economic model so that future economic wellbeing and competitiveness
is based on protecting the environment, not destroying it. This
is not only the defining challenge of the coming decade, but the
defining business opportunity.
The global environmental market place is currently
worth £3.2 trillion and is growing at over 5% a year. The
UK's environmental industry is currently valued at £112 billion
and employs just fewer than one million people. Its continued
success will be engine of growth on which the future of the UK
The Environmental Industries Commission's 2011 Budget
proposals set out a series of recommendations for how the 2011
Budget can exploit this huge business opportunity and help establish
a world-leading environmental technology and services industry
in the UK - with thousands of new businesses, hundreds of thousands
of new jobs and huge export potential - at a low cost to the Treasury.
In 2009, George Osborne highlighted the need to "bring
to an end the stale argument that we have to choose between economic
growth and the environment." Indeed, he went on to argue
that "the Treasury should put a fair and predictable price
on environmental externalities
An externality is an impact
that is not fully reflected in the economic costs or benefits
of a transaction or process. A classic example of a negative externality
is a polluting factory that does not have to bear the full cost
of the damage it's causing to the environment
The role for
the Treasury is to ensure that these externalities, whether good
or bad, are properly priced into the cost of doing things."
This was a welcome commitment. These words were said
in opposition, but we would very much hope that we now see evidence
of this thinking in Government. Rhetoric must be replaced by
action both in the forthcoming budget and wider HM Treasury policy.
A vital first step will be taking action to correct
the huge market failure that continues to allow the exploitation
of our environment. When we emit greenhouse gases, or our vehicles
emit harmful air pollutants, or our factories discharge harmful
pollutants to our rivers and seas, the market does not bear the
true cost of the damage caused. The only way to correct a market
failure is to adopt policies that ensure environmental damage
is translated into immediate price signals. Putting a fair and
predictable price on environmental damage means developing market
mechanisms that price in the true environmental costs of doing
THE UK NEEDS
In the past the UK has missed countless opportunities
to put an effective price on pollution through the tax regime
and, therefore, done little to encourage investment in environmentally
sustainable behaviour. By reforming fiscal measures to put a price
on pollution and better reward environmentally sustainable behaviour,
at the same as facilitating innovate funding mechanisms such as
Tax Increment Financing, the Government could provide much needed
support to the UK's high growth environmental industries. This
will help drive investment in new green businesses, help create
new jobs and put the UK at the forefront of a £3 trillion
global market place for environmental goods and services.
David Cameron recently highlighted that "if
government put a realistic cost on pollution and waste, it
force whole industries to change in order to survive
why a future Conservative Government will put a real price on
pollution and waste in our economy - and one that is here to stay."
The 2011 Budget is the Government's first opportunity
to embrace low carbon and sustainable growth and put an appropriate
price on pollution. By doing this the Government can harness the
power of markets to find effective, efficient and equitable responses
to the environmental challenges we face.
EIC believe that the 2011 Budget must support the
UK's environmental industry through targeted fiscal incentives
for green technologies; innovate funding mechanisms such as Tax
Increment Financing; and mobilising private sector investment
through a Green Investment Bank.
These fiscal support measures should be supported
with the launch of an Environmental Industrial Strategy setting
out how Government Departments can help establish a world leading
environmental industry in the UK.
Of over-riding importance, if the Government is to
provide the confidence it acknowledges businesses need to invest
in environmentally friendly goods and services, is the urgent
need to put in place a long-term, ambitious environmental policy
framework right across the economy. Without this, business will
not have the confidence to invest in the technological solutions
to the range of environmental problems we face, leaving our international
competitors to seize huge new environmental markets.
David Cameron has acknowledged that environmentally
friendly goods and services "take time and money to research,
develop and invest in. And businesses will only put in that time
and money if they are confident that there will always be a place
for these products in the market."
The 2011 Budget is the Government's first opportunity
to show that it is serious about leading a "green technology
revolution, creating jobs and new businesses across the country."
Unless urgent action is taken to secure these environmental
and sustainability investment opportunities for British business,
countries such as Germany, the USA, Japan and Korea - whose governments
are continuing to put in place ambitious support measures for
their environmental industries - will steal the march on the UK.
This would be disastrous for our international competitiveness.
1. A Green Investment Bank
EIC welcomes the Government's commitment to create
a Green Investment Bank. It is crucial that the Bank is given
a broad remit to invest in the whole of the UK's environmental
If the Bank's mandate is limited to the low carbon
sector the UK will risk forfeiting the huge investment opportunities
that exist across the whole of the environmental sector - notably
in the traditional environmental technology and services industry.
The GIB is about building confidence for the markets
so they unlock finance and invest in environmental technologies.
The GIB must be the finance mechanism that supports industry exploiting
the positive synergies between environmental protection and economic
We therefore believe that the GIB should not be a
fund but a fully operational commercial bank that can raise money
(eg through "Green ISAs".
EIC has established a Green Investors Strategic Policy
Group of leading private sector investors to look at how the Government
can boost private sector investment in environmental solutions.
It will explore ideas such as an Environmental Investment Tax
Credit (similar to the Community Investment Tax Credit available
to individuals and corporate bodies investing in accredited community
development finance institutions which then in turn provide finance
to qualifying profit-distributing enterprises, social enterprises
or community projects).
2. Environmental Tax Incentive Financing
EIC believe that the 2011 Budget should launch a
new Environmental Tax Increment Financing model to finance local
environmental infrastructure, including:
(i) Low and zero carbon public buildings:
(a) Energy efficiency retrofitting of low-income
(b) The construction of low carbon social and
affordable homes (on brownfield land).
(c) Energy efficiency retrofitting of public
buildings, such as schools and hospitals.
(ii) The redevelopment of Brownfield land.
(iii) The construction of new waste infrastructure.
(iv) The implementation of Sustainable Urban
3. Targeted Incentives for Energy Efficiency,
Land Remediation, Waste Management, Transport Pollution Control
and Water Management
EIC believe that the 2010 Budget is valuable opportunity
for the UK to show leadership in stimulating the economy through
support for the high-growth environmental technologies and services
Below we have set out a series of targeted fiscal
and monetary incentives that EIC believe would facilitate investment
in green technologies. EIC believe that these measures should
be primarily financed by applying the "polluter pays
A. Incentivising Energy Efficiency
Ambitious carbon and energy management policy that
drives vast improvements in energy efficiency -and therefore makes
a full contribution to meeting the UK's climate change targets
- will help position the UK as a global leader in provision of
energy efficiency technologies and services. Establishing this
technology and skills base in the UK will help create new business
and, potentially, thousands of new jobs.
If the UK is successful in establishing a domestic
market for energy efficient solutions, we will start to see other
Governments around the world adopt similar measures. And as they
do, UK business will be ready to respond to the increasing demand
for their skills and technologies - creating new business opportunities
for the UK across the world.
Whilst EIC welcomes the Government's commitment to
energy efficiency we still need far greater ambition from Government
if we are to fulfil the full potential for energy efficiency improvements
right across the economy.
EIC believe that the 2011 Budget should incentivise
energy efficiency improvements across the economy by:
(i) Increasing the ambition of the Carbon Reduction
(a) Reducing the coverage threshold from 6,000
MwH to 3,000 MwH.
(b) Ensuring a higher price for allowances.
(ii) Improving the Enhanced Capital Allowances
(a) Introducing an "open competition"
for new technologies to be added to the energy technology list.
(b) Increasing the values of ECAs to 150% for
the most innovative technologies.
B. Supporting Land Remediation and Brownfield Development
In 2007 there were an estimated 62,130 hectares of
previously developed land in England alone. Local planning authorities
have estimated that 26,510 hectares (43%) of this is potentially
suitable for housing and could provide around 1,051,000 dwellings.
Given the UK's ambitious house building targets, EIC believe that
it is vital that development of these sites continues to be viable
and that we retain the skills to deal with the challenges they
The UK's contaminated land sector is worth £1
billion a year and employs almost 8,000 people. The sector is
expected to grow by almost 3.5% per year between now and 2015,
with the number of jobs expected to increase to 10,000 over the
EIC calls on the 2010 Budget to support the redevelopment
of brownfield sites by:
(i) Urgently improving the Land Remediation Relief
(a) Allowing developers to claim in year of spend.
(b) Extending the Land Remediation Relief.
(c) Change the definition of long term derelict.
(d) Allow the Landfill Tax Exemption for asbestos;
(e) Allow the transfer of the Landfill Tax Exemption.
(ii) Using Tax Increment Financing to help local
authorities to develop brownfield land.
C. Using Waste as a Resource
As a society, we current consume natural resources
at an unsustainable rate. Reducing waste can make an important
contribution to achieving sustainability. Waste can be reduced
by using fewer natural resources, and by re-using products and
recycling the materials in them.
The waste hierarchy sets out an order of preference
for waste management policy - reduction, reuse, recovery, and
disposal. Where waste minimisation has reduced the waste stream
to the extent practical, and recovered materials are reused or
recycled, EIC believe that it is preferable to recover energy
from residual waste rather than dispose of it.
Disposal to landfill should only be necessary for
small amounts of residual material. EIC therefore welcomes the
decision to extend the landfill tax escalator to 2014 (and to
introduce a "floor" price of £80 per tonne).
EIC believe that the Government should ensure that
Defra's new review of waste policies adopt a policy and regulatory
framework across the waste hierarchy that facilitates a rapid
move away from a linear process of resource extraction, manufacture,
consumption and disposal towards a "closed loop" economy
where resources remain in use.
EIC believe that sustainable waste management should
be supported in the 2011 Budget by:
(i) Maintaining a landfill tax escalator in excess
of £80 per tonne beyond 2014 (at a minimum through inflation-linking
of the landfill tax "floor" price);
(ii) The use of Tax Increment Financing to allow
local authorities to invest in new waste infrastructure;
(iii) Minimising virgin material use through
the introduction of new fiscal incentives such as reduced VAT
for the use of reused materials and a Virgin Materials Levy.
D. Improving Public Health by Incentivising Transport
Poor air quality is estimated to reduce the life
expectancy of every person in the UK by an average of seven to
eight months - impacting particularly on children, the elderly
and those in poor health. According to recent estimates, poor
quality results in more than 32,000 premature deaths in the UK
each year. Road transport is one of the most significant contributors
to poor air quality. This problem is significantly worse in hotspot
problem areas, such as cities.
EIC believe that one of the most effective ways to
meet the UK's air quality obligations is through targeted programmes
focused on cleaning up the most polluting vehicles. These areas
will continue to suffer from poor air quality unless measures
are implemented at a local level.
EIC calls on the 2011 Budget to incentivise the uptake
of transport pollution control measures by:
(i) Announcing a National Framework for Low Emission
Zones supported by funding for retrofit of PM and/or NOx abatement
(ii) Introducing an equivalent "Enhanced
Capital Allowance" for retrofit technologies
(iii) Incentivise the early uptake of Euro VI
vehicles through the continued use of the Reduced Pollution Certification
E. Making Water Regulation Work Better for Consumers
EIC's Members have consistently argued that Ofwat's
current regime for the Periodic Review creates a "boom and
bust" financial climate for the supply chain serving the
water industry in the UK as capital expenditure tends to be concentrated
towards the end of the five year period. This situation leads
to financial and managerial inefficiencies and instabilities in
the supply chain (leading to sizeable job losses) and ultimately
leads to higher costs for consumers.
EIC welcomes the current reviews into Ofwat (by both
Defra and Ofwat) but is concerned that insufficient attention
is being paid to the problems suffered by that EIC Members and
the water technology and services sub-sector.
EIC calls on the 2011 Budget to announce:
(i) An immediate study into job losses suffered
by the water technology and services sub-sector in the last two
years of the last five-yearly AMP cycle;
(ii) Changes to Ofwat's Periodic Review process
to avoid damaging the competitiveness of the UK's water technology
and services sub-sector caused by the existing "boom and
(iii) The use of Tax Increment Financing to allow
local authorities to invest in Sustainable Urban Drainage Systems.
4. An Environmental Industrial Strategy
EIC believes that there is a need for strategic thinking
by ALL government departments with the aim of promoting and assisting
the whole of the environmental industry (covering the traditional
environmental technology and services sector as well as renewables
An overall strategic approach to green jobs and skills
must address issues related to water, air quality, land contamination
and soil quality, and the efficient use of resources.
EIC calls on the 2011 Budget Report to: announce
an Environmental Industrial Strategy supported by:
(i) A fully resourced Sponsoring Unit for the
UK's environmental industry.
(ii) An "Environmental Industry Forum"
(across government departments) to coordinate the range of policies
20 April 2011