Environmental Audit CommitteeWritten evidence submitted by the Aldersgate Group

Summary

1. The Aldersgate Group strongly believes that the Climate Change Act and greenhouse gas (GHG) emissions reduction targets are essential if the UK is to tackle the challenges of dangerous climate change, energy security and commodity price volatility and to secure growth, jobs and competitive advantage.

2. Levels of carbon in the atmosphere have recently reached record levels of over 400 parts per million for the first time on record. Now is not the time for any country to relax its GHG emission reduction targets.

3. Domestic action legitimises the UK’s role in international negotiations and our domestic policies have been replicated around the world. As international competitors continue to innovate and commit to their own GHG emission targets, it would be regrettable if the UK were to weaken its own emission reduction commitments.

4. There are growth advantages for the UK to be an early mover in the transition to a low carbon economy. The clear direction of travel provided by the Climate Change Act is already bearing fruit. The UK’s environmental goods and services sector out-performed all other sectors in 2010–11 and is on course to halve the UK’s trade deficit by 2014–15. To continue this growth, the Government must ensure that UK businesses have the stable policy framework they need. The Climate Change Act acts as a roadmap for businesses and investors, providing a long-term, stable environment to allow them to make investment decisions with confidence.

5. The UK cannot afford to lose momentum in this low carbon race. While the industrialised world has led the way in the development of a low carbon economy, international competitors are catching up. Businesses argue that the Climate Change Act has set the direction of travel, so hesitation or delay is now counterproductive and will allow international competitors to seize market share.

6. In 2010 the Coalition Government committed itself to being “the greenest government ever”, but there has been no overarching strategy to accelerate the shift to a low carbon economy. The Government has made a series of retrospective or short-notice changes to existing policies that have undermined investor confidence. Contradictory messages from Government are coming at a pivotal time.

7. Business requires a long, loud and legal policy framework, supported by Government messaging, that builds policy coherence. Left to its own devices, the market will fail to respond swiftly enough to the threat posed by global climate change, as it has to previous threats.

8. The systems for operation and management of the carbon budgets are sound. The Aldersgate Group fully supports the Committee on Climate Change (CCC), which is a well-respected body. Management of the carbon budgets cannot, however, be undertaken by the CCC alone; the Government must respond. To ensure the carbon budgets are met, new policies or programmes are required.

9. The Aldersgate Group welcomes a number of developments that have been undertaken since the EAC’s last inquiry into carbon budgets. We support the Committee on Climate Change’s decision to continue to monitor carbon budgets on the basis of production emissions, reflecting the UK’s sphere of direct control, but welcome ongoing measurement of the UK’s consumption-based emissions.

10. The Aldersgate Group supports the CCC’s recommendation that the second and third carbon budgets be tightened to ensure the UK can meet subsequent targets. The Government’s failure to implement the CCC’s recommendations will make it harder than necessary to meet the Fourth Carbon Budget, which in itself is a measure to ensure that the UK is on course to meet the 2050 legislated emissions reductions.

11. The Energy Bill represents a once-in-a-generation opportunity to decarbonise the UK’s power sector. Recent Government statements have seriously challenged the Bill’s clarity of purpose and undermined the investment community’s confidence in the UK as a safe place to build low carbon energy.

12. The Aldersgate Group is calling for the Government to underwrite the carbon budgets by including a carbon intensity target in the Energy Bill for 2030. This would provide a clear, strategic direction with objectives against which policies could deliver. This would build business and investor confidence, which is currently being eroded by mixed messages from Government.

13. The lack of a legislated decarbonisation target risks increasing the costs for renewables to 2020. It would be possible to meet Britain’s legally binding EU 2020 renewables target by largely importing the equipment and materials needed. This would mean spending the money without securing the economic benefit in terms of jobs and growth.

14. The Government should not bet that gas will be cheaper for consumers than renewable sources of power. This is dependent on unknowable future factors. Analysis suggests that although a high gas power system has lower baseline costs under particular assumptions, its sensitivity to these assumptions is far higher than under a high renewables system. Relying too heavily on gas would mean taking the risk that, if CCS is costlier than predicted, or we under deliver on energy efficiency, the Government will be forced either to increase the carbon price sharply, or to abandon its legislative decarbonisation commitments.

15. A target to reduce GHG emissions by 2030 must also be applied at EU level, where businesses are urging for a progressive regulatory framework. The UK will benefit from an EU GHG emissions target, ensuring that its European partners share the same level of ambition as the UK and providing a market for its low carbon goods and services. Conversely, if the EU delays or weakens its action, it will undermine the confidence of its member states to take action themselves. It will also harm the EU’s reputation as a leader in international climate change negotiations.

Background

16. The Aldersgate Group is an alliance of leaders from business, politics and society that drives action for a sustainable economy. Its mission is to trigger the change in policy required to address environmental challenges effectively and secure the maximum economic benefit in terms of sustainable growth, jobs and competitiveness.

17. The views expressed in this document can only be attributed to the Aldersgate Group and not to individual members.

18. The Aldersgate Group is a strong advocate and supporter of the UK’s Climate Change Act and carbon budgets. In May 2011 we wrote to the Prime Minister and Deputy Prime Minister, supporting adoption of the fourth carbon budget in a letter that was signed by nearly 70 businesses, investors and other organisations. We welcomed the Government’s subsequent decision to accept the budget.

19. We responded to the Environmental Audit Committee’s first consultation on carbon budgets, in June 2011 and the fourth carbon budget was the topic of our members’ reception in May 2011, where the Chief Executive of the Committee on Climate Change (CCC), David Kennedy, addressed our membership.

20. In October 2012, we wrote to the Chancellor in a letter that was signed by over 50 business, industry bodies and NGOs,1 calling for a carbon intensity target to be included in the Energy Bill.

21. Our members believe that decisive action on climate change, based on the best available science and the precautionary principle, is essential for long-term economic growth, jobs and competitiveness. Failure to act at sufficient scale and pace will undermine our prosperity, make the costs of tackling climate change in the future much higher and lead the UK to miss out on commercial opportunities associated with the low carbon economy.

22. In consideration of the climate science, the evolving international framework, feasible and cost-effective reductions in the UK through the 2020s, plausible paths to the 2050 target of 80% decarbonisation on 1990 levels and the impact on fiscal revenue and competitiveness, we strongly believe that the UK should follow the Committee on Climate Change’s recommendations for decarbonisation and its advice for the adoption of carbon budgets.

Detailed Evidence

The call for evidence asks respondents to consider:

In light of the current climate change assessments, whether the emissions reduction targets in the Climate Change Act are still valid as an appropriate UK contribution to avoiding dangerous climate change; and if not, whether the Act and/or the carbon budgets should be revised

23. The Climate Change Act provides the framework for the UK’s transition to a low carbon economy. It establishes a legally binding target of an 80% reduction in greenhouse gas emissions, below 1990 levels, by 2050, which is supported by a series of five-year carbon budgets. These act as stepping-stones to the 2050 goal and are set on a 15-year time horizon.

24. The Aldersgate Group strongly believes that the Climate Change Act and greenhouse gas (GHG) emissions reduction targets are essential if the UK is to tackle the challenges of dangerous climate change, energy security and commodity price volatility and to secure growth, jobs and competitive advantage.

25. Now more than ever, it is essential for the UK to stick to the targets that the Act has set. Since the Climate Change Act became law levels of carbon in the atmosphere have continued to rise, recently reaching record levels of over 400 parts per million (ppm) for the first time on record.2 Estimates suggest that the last time atmospheric CO2 reached these levels of concentration—three to five million years ago—global average temperatures were three to four degrees higher and as much as 10 degrees higher at the poles. Sea levels were probably between five and forty meters higher than they are today. Of course, 400ppm is not our end destination: global emissions are set to continue rising.

26. With emissions rising at this rate, now is not the time for any country to be relaxing GHG emission reduction targets. Quite the opposite—a major step-change in most countries’ pre-2020 effort is essential if we are to have any chance of keeping average temperature rise below two degrees.

27. The UK accounts for 2% of global emissions3 (on a production basis), so a reduction in domestic emissions will have a minor direct impact on global climate change. But the UK’s true impact is far broader than this percentage suggests. The Committee on Climate Change has shown that the UK’s indirect carbon emissions (on a consumption basis), give it a carbon footprint that is 80% larger than if it were measured by production emissions alone.4

28. A binding international agreement, scheduled for 2015 to cover the post-2020 period, remains essential to tackle global climate change, but progress towards it is slow. National frameworks are thus increasingly important to bridge the gap and revitalise momentum towards a global deal. As the first country in the world to industrialise, the UK has a responsibility to lead the way in tackling climate change and has played a key role in international climate change negotiations thus far.

29. Domestic action legitimises the UK’s role in international negotiations. This was recognised by the Government, which committed to work towards “a comprehensive, legally binding international climate change agreement”, and noted that, “The right way to do this is through well planned and measurable action right across the UK.”5 The Foreign Secretary, William Hague warned the Prime Minister, “We will not secure a binding climate agreement in 2015 unless the idea of low carbon growth becomes dominant across the major economies before then. We can leverage this. But our diplomacy will only succeed if it is rooted in our own domestic narrative.”6 To have credibility on the world stage, the UK must take robust action domestically to deliver on its emission reduction commitments. Backtracking or ignoring the best available scientific evidence would harm the UK’s reputation and undermine much needed momentum to deliver a global deal.

30. The UK’s domestic policies have been replicated around the world. The UK led the way in 2008 with its cross-party agreement, which produced the world’s first legally binding 2050 target. Mexico has since introduced a Climate Change Act,7 Australia is bringing forward a Clean Energy Act8 which closely resembles the UK’s Act, including an emissions trading scheme, 80% emissions reduction by 2050 and a Climate Change Authority that mirrors the Committee on Climate Change. A White Paper from the Norwegian Parliament9 is investigating the need for a climate change act similar to the UK’s and there is a similar investigation by the Danish Government.

31. But international competitors continue to innovate and commit to their own GHG emissions targets. South Africa will adopt a new carbon tax from 2015 and China’s 12th Five Year Plan has challenging targets on energy efficiency and carbon intensity.10 It would be regrettable if the UK were to weaken its own emission reduction commitments as global competitors commit to their own and would undermine the possibility of a global agreement in 2015.

32. There are growth opportunities for the UK to be an early mover in the transition to a low carbon economy. Early mover advantage can lead to opportunities for growth and job creation in the lucrative global market for environmental goods and services. The clear direction of travel provided by the Climate Change Act is already bearing fruit. The UK’s environmental goods and services sector out-performed all other sectors in 2010–1111 despite the challenging economic times, winning a £122 billion slice of the global market worth £3.3 trillion and it is on course to halve the UK’s trade deficit by 2014–15. The opportunities for further growth are strong. The UK has approximately 3.7% market share of the £3.3 trillion global environmental goods and services sector, having outstripped the global green business growth rate in 2010–11.12 Already the UK is the green financing capital of the world, with one third of all global asset deals between 2007 and 2012 receiving both legal and financial advice from the UK.13 By 2015, the UK market could be worth as much as £150 billion and employ over 1.2 million people.14 This is already making a significant contribution to the UK economy, with the green sector likely to have accounted for one third of the UK’s economic grown in 2011–12.15 There is therefore a core source of expertise for transforming the whole economy.

33. To continue this growth, the Government must provide the stability that UK businesses need, to compete on the global stage. Leading businesses have warned the Chancellor that their continued investment in the UK is “critically dependent on a long-term stable policy framework.”16

34. The Climate Change Act acts as a roadmap for businesses and investors, providing a long-term, stable environment to allow them to make investment decisions with confidence. Even with this in place, the business community has repeatedly cited policy risk as a significant impediment to investment in the UK. John Cridland, Director General of the CBI, noted that, “building confidence in new technologies and markets is essential to get ahead of the game. If we can’t be sure that the policies of today will be the policies of tomorrow, investors will simply spend their money elsewhere.”17 The Climate Change Act underwrites the Government’s commitment to tackling climate change, encouraging investment in innovation for the low carbon economy, reducing policy risk and leading to a reduction in the cost of capital.

35. The UK cannot afford to lose momentum in this low carbon race. While the industrialised world has led the way in the development of a low carbon economy, international competitors are catching up. Many developing countries are winning market share and increasing their carbon productivity. Ernst & Young’s analysis of the relative attractiveness of countries for renewable energy investments demonstrates that “a new world order is emerging in the clean-tech sector with China now the clear leader in the global renewables market”.18 HSBC19 predicts that the share of the three largest industrialised low carbon markets (EU, USA and Japan) will fall from 60% in 2009 to 53% in 2020, while the share of the three leading major emerging markets (China, India and Brazil) will grow from 25% to 34%. In the words of Barack Obama, “nobody in this race is standing still”.20

36. Businesses argue that the Climate Change Act has set the direction of travel, so hesitation or delay is now counterproductive and will allow international competitors to seize market share. The UK must ensure it has the right policy framework in place to deliver confidence, growth, innovation and jobs in the future low carbon economy.

37. In 2010 the Coalition Government committed itself to being “the greenest government ever”. Policies launched since that time, such as the Green Investment Bank, Green Deal and mandatory carbon reporting for companies listed on the London Stock Exchange, have been welcomed as evidence of the Government’s desire to drive the transition to a new economy.

38. However there has been no overarching strategy to accelerate the shift to a low carbon economy and the Government has made a series of retrospective or short-notice changes to existing policies which have undermined investor confidence. It decided to review the Fourth Carbon Budget in 2014, there have been mixed messages from government ministers on a number of vital issues and Budget 2013 offered tax breaks for shale gas, but largely ignored the UK-based green businesses that are already creating a trade surplus of £5 billion.21 The CCC has noted the “high degree of uncertainty about development of the power system beyond 2020 [which] threatens fundamentally to undermine the EMR [Electricity Market Reform]. Unless this is addressed, projects coming on to the system before 2020 are likely to be at high cost and there could well be an investment hiatus for projects coming on after 2020. Therefore, Government action is necessary to resolve these uncertainties in order that the UK can gain maximum economic and employment benefit from the move to a low-carbon economy.”22

39. The Aldersgate Group is deeply concerned by the uncertainty created by the Government’s Gas Generation Strategy23. This contemplates three “pathways” for gas generation and the carbon intensity of the grid by 2030. One of these proposes a grid average of 200g of CO2 per kilowatt hour, which is four times the level recommended by the Committee on Climate Change, to put the UK on the most cost-effective path to decarbonise. By the Government’s own admission, this pathway would be incompatible with current legislated targets and would require the Fourth Carbon budget to be revised upwards. “Only if the world were to abandon attempts to limit the risk of dangerous climate change would there be significant cost savings from a strategy focused on investment in gas-fired generation.”24

40. Contradictory messages from Government are coming at a pivotal time. Projections from the Department of Energy and Climate Change (DECC) show that investment in renewables will hit a cliff in 2020, if access to the Renewables Obligation is closed in 2017, as currently planned.25 SSE warns that “Sufficient certainty that renewables will be a long-term part of the energy system, well beyond the current 2020 cliff edge, is needed in order to allow the industry to mature and put renewables on a path of cost reduction that will steadily reduce and eliminate the need for support.”26 The CBI warned Government prior to publication of its gas strategy, that an “over-reliance on new gas would leave us exposed to global price and supply fluctuations and jeopardise our carbon targets, so we need to build more of everything, including renewables, nuclear and CCS.”27

41. Business requires a long, loud and legal policy framework, supported by Government messaging, that builds policy coherence.

42. It is not feasible to “let the market decide”, to tackle market failure. The Executive Director of UNEP, Achim Steiner argued, “There’s a perception that climate change legislation is about government running the economy, but the fact of the matter is that much of what we talk about in terms of climate change legislation is to set targets, within which the economy then makes choices.”28 Left to its own devices, the market will fail to respond swiftly enough to the threat posed by global climate change, as it has to previous threats: “Markets also malfunction if there are information problems, if firms have monopolistic power or if innovation is not properly rewarded.”29 The Climate Change Act and its carbon budgets provide the framework, which must be supported by Government statements, in response to which businesses make choices.

The operation and management of the carbon budgets, including: the accountability and governance arrangements, and the extent to which the EAC’s previous concerns and recommendations have been addressed; the effectiveness of the overall management system, including for meeting carbon budgets by sector; and the current status, operation and impact of the National Emissions Target Board

43. The systems for operation and management of the carbon budgets are sound. The Committee on Climate Change (CCC) was established under the Climate Change Act 2008, as an independent body to advise Government on the UK’s progress in reducing carbon emissions and preparation for climate change. The Aldersgate Group fully supports the CCC’s recommendations and management of the carbon budgets. It is a well-respected body that provides expertise in climate change targets and is a credit to the UK’s policy landscape.

44. The CCC’s carbon budgets are based on the best possible evidence and assessment, which help Aldersgate Group members to plan for a decarbonised future. Data is made publicly available, which provides a common point of reference for discussions between government, business and civil society. The CCC provides consistency and independence, helping to smooth out the sudden policy shifts from Government, which are destabilising for business and investors.

45. Management of the carbon budgets cannot, however, be undertaken by the CCC alone; the Government must respond. The CCC has called repeatedly for a step change to address the gap between the UK’s long-term environmental ambitions and the policies in place to address them. To ensure the carbon budgets are met and the UK maximises the economic opportunities, new policies or programmes are required. For example we recommend that the Government:

incorporates a major overarching, low carbon element into its industrial strategy;

takes the opportunity to explore how long-term trends (such as resource insecurity and climate change) will affect competitiveness across the priority sectors; and

adopts an overlaying strategy that seeks to maximise economic opportunities. The strategy should be accompanied by a set of economic and environmental indicators against which progress towards a low carbon and resource efficient economy may be measured.

46. The Aldersgate Group welcomes a number of developments that have been undertaken since the EAC’s last inquiry into carbon budgets. In our 2011 response, we recommended that the Government address issues of competitiveness for energy intensive industries, that the CCC should review the Fourth Carbon Budget and make a recommendation to Government, prior to the Government’s own review in 2014, and that consumption-based emissions should be considered for inclusion in the UK’s carbon footprint. All these recommendations were included in the EAC’s report to Government, and have subsequently been actioned.

47. We welcome the CCC’s review of consumption-based emissions, which found that the UK is now one of the world’s largest net importers of emissions, “with a carbon footprint that is around 80% larger than its production emissions.”30 We support the Committee’s decision to continue to monitor carbon budgets on the basis of production emissions, reflecting the UK’s sphere of direct control, but welcome the ongoing measurement of the UK’s consumption-based emissions and recommend that these be regularly reported. If a global deal is not forthcoming, other means of pricing in carbon should be considered.

What the Government’s response should be to the Committee on Climate Change’s June 2013 assessment of emissions reduction performance, and whether the carbon budgets should be tightened or relaxed

48. The carbon budgets represent the minimum ambition if the UK is to meet its legislated target of 80% reduction of emissions on 1990 levels by 2050. As described above, in the context of the climate science, the evolving international framework, the impact of the UK’s domestic policies and the benefits of clear policy to business, the carbon budgets should not be relaxed.

49. The Aldersgate Group supports the CCC’s recommendation that the second and third carbon budgets be tightened to ensure that the UK can meet subsequent targets. “The [Fourth] Domestic Action budget recommended for 2023–27, and the indicative 2030 target, will be difficult to achieve unless the UK enters the 2020s at a level of emissions consistent with the Intended budgets for the non-traded sector, rather than with the less ambitious Interim budgets.”31 The CCC further notes, “from the third Intended budget to the fourth Domestic Action budget would entail a feasible reduction of 13% over a five-year period: from the third Interim budget to the fourth Domestic Action budget would require a much more challenging 23% reduction.”32

50. The Government’s failure to implement the CCC’s recommendations will make it harder than necessary to meet the Fourth Carbon Budget, which in itself is a measure to ensure that the UK is on course to meet the 2050 legislated emissions reductions. In turn, the ambitions of the Climate Change Act amount to the minimum action required of the UK to play its part in a global effort to prevent global average temperature rises in excess of 2ºC.

51. The Energy Bill represents a once-in-a-generation opportunity to decarbonise the UK’s power sector, attracting £110 billion into an economy that badly needs investment; providing a hedge against fossil fuel price volatility (which hits businesses and households), and lowering the cost of capital for the UK to meet is carbon budgets. Recent Government statements have seriously challenged the Bill’s clarity of purpose and undermined the investment community’s confidence in the UK as a safe place to build low carbon energy.

52. The Committee on Climate Change (CCC) made this clear in an open letter to Ed Davey on 13 September 2012: “The apparently ambivalent position of the Government about whether it is trying to build a low-carbon or a gas-based power system weakens the signal provided by carbon budgets to investors. It makes more pronounced the perceived risk that the Electricity Market Reform (EMR) will perpetuate the current stop-start approach to investment in low-carbon technologies. As a result, the cases for low-carbon business development, capital allocation, innovation and supply chain investment are undermined, damaging prospects for required low-carbon investments.”33

53. In response to this uncertainty, the Aldersgate Group is calling for the Government to underwrite the carbon budgets by including a carbon intensity, or decarbonisation target in the Energy Bill for 2030. The decarbonisation target must be set by 2014 in time to be embedded into the architecture of the Electricity Market Reform, and met by 2030. Advice must be sought from the CCC in setting the target and planning for how it would be achieved.

54. A decarbonisation target would provide a clear, strategic direction, with objectives against which policies could deliver. This would build business and investor confidence, which is currently being eroded by mixed messages from Government.

55. The Government has postponed the decision on a decarbonisation target until 2016, while the target that may be decided would not have to be met by 2030. This decision is not required to take account of the CCC’s advice and there is no guidance on how any target that is set, would be met, or would interact with the other electricity market reform proposals. This creates a high degree of uncertainty, which “will adversely impact on supply chain investment decisions and project development, therefore undermining implementation of the Bill and raising costs for consumers.”34

56. Neil Bentley, Deputy-Director General of the CBI, said just before the Bill’s introduction that, “The Energy Bill must deliver the pace of decarbonisation required to achieve [the carbon budgets]. The link to the existing Climate Change Act targets should be enshrined in the Energy Bill”.35 The Government’s own impact assessment of the Energy Bill found that early decarbonisation of the power sector would result in significant net benefits to the economy: £5.5 billion under a 50g/kWh pathway and £4.5–7.8 billion under a 100g/kWh pathway—in contrast to only £2.2 billion under a 200g/kWh pathway.36 A group of leading businesses argued that to secure further investment in low carbon power generation, a decarbonisation target by 2030 should be included in the legislation and “postponing the 2030 decision until 2016 creates entirely avoidable political risk. This will slow growth in the low carbon sector, handicap the UK supply chain, reduce UK R&D and produce fewer new jobs.”37

57. The lack of a legislated decarbonisation target risks increasing the costs for renewables (as well as nuclear and CCS) to 2020 that have already been largely agreed; contracts for difference for renewable power, nuclear power, and CCS will come from the Levy Control Framework, capped at £7.6 billion in 2020. It would be possible to meet Britain’s legally binding EU 2020 renewables target and issue contracts for difference using the Levy Control Framework by largely importing the equipment and materials needed. In other words, we would be spending this money without securing the economic benefit from the investment in terms of jobs and growth. A 2030 decarbonisation target in 2014 would provide greater long-term certainty that would help to ensure that the money spent this decade would build a competitive domestic supply chain. This would both lower the cost of electricity generation and give a much-needed boost to British manufacturing.

58. Government has argued that gas would be cheaper for consumers than renewable sources of power. This is impossible to know with any certainty, because it is dependent upon unknowable future factors, such as the future price of gas, the cost of CCS and learning rates for renewable technologies. Intuitively, as Lord Deben notes, “to invest in low-carbon technologies to 2020, then to focus on investment in gas in the 2020s, and to move back to investment in low-carbon generation in the 2030s simply doesn’t stand up. Such an approach is likely to drive up costs.”38

59. The Government’s policy challenge is to manage these uncertainties by hedging against the risk of being wrong. Analysis39 suggests that although a high gas power system has lower baseline costs under particular assumptions, its sensitivity to these assumptions is far higher than under a high renewables system. Under certain circumstances, the costs of a gas intensive power sector could be up to 98% higher than the forecast central scenario, which, in practice, would almost certainly result in the Government being forced to abandon its low carbon policy initiatives. Relying too heavily on gas would mean taking the risk that, if CCS is costlier than predicted, or we under deliver on energy efficiency, the Government will be forced either to increase the carbon price sharply, or to abandon its legislative decarbonisation commitments. Relying too heavily on gas means backing the UK into a position where we stand a chance of having to choose between affordable or low carbon energy further down the line. This would not be responsible governance.

60. The robust case and overwhelming support for a binding 2030 power sector target has been made absolutely clear. It is now time for the Government to step up to the task. Failure to do so would deliver another severely damaging blow to investor confidence.

61. A target to reduce GHG emissions by 2030 must also be applied at EU level, to provide certainty to pan-European businesses and drive investment. With low carbon goods and services being traded across borders, environmental policies across the Common Market must align to create a level playing field. The European Commission is now consulting on the framework for climate and energy policies to 203040 and businesses are urging for “an ambitious policy on climate and energy targets [that] will drive investment.”41

62. The UK will benefit from the EU’s GHG emissions reductions targets reflecting its own. The EU bloc is the UK’s largest trading partner and “eurozone economies do more business with the UK than any other country, including the US.”42 Aligned environmental policies will ensure a market for the UK’s low carbon businesses that, as discussed above, have already carved out 3.7% share of the global market.43

63. The EU must equal the ambition shown by its member states. The UK Chancellor, George Osborne, announced that, “We’re not going to save the planet by putting our country out of business”, and committed to “cut our carbon emissions no slower but also no faster than our fellow countries in Europe.”44 If the EU delays or weakens its action on GHG emissions reduction commitments, it will undermine the confidence of its member states to take action themselves.

64. If the EU backpedals or stalls in its action on climate change, it will undermine its reputation as a leader in international climate change negotiations. With two out of the next three UN climate change conventions to be held in Europe, it has never been more important for the EU to show leadership and provide an ambitious, transparent, stable and predictable pathway to decarbonisation.

23 May 2013

1 Aldersgate Group (October 2012) Letter to the Chancellor: http://www.aldersgategroup.org.uk/asset/download/832/Letter%20to%20Chancellor.pdf

2 Guardian (29 April 2013) “Global carbon dioxide levels set to pass 400ppm milestone”

3 HM Government (December 2011) The Carbon Plan

4 Committee on Climate Change (April 2013) Reducing the UK’s carbon footprint and managing competitiveness risks

5 HM Government (December 2011) The Carbon Plan

6 Letter from William Hague, Secretary of State for Foreign & Commonwealth Office to Prime Minister David Cameron (19 March 2012). http://www.guardian.co.uk/environment/interactive/2012/may/18/william-hague-green-economy-letter

7 See Globe International’s 3rd Climate Legislation Study: http://www.globeinternational.org/index.php/legislation-policy/studies/climate

8 See Clean Energy Act 2011, the Clean Energy Regulator Act 2011,the Climate Change Authority Act 2011, the Clean Energy (Consequential Amendments) Act 2011 at http://www.cleanenergyregulator.gov.au/Carbon-Pricing-Mechanism/Legislation-and-regulations/Pages/default.aspx

9 See the Norwegian Parliament’s White Paper (http://www.regjeringen.no/pages/37858627/PDFS/STM201120120021000DD) and the cross-party agreement to take forward the development of a new climate change law in Norway (http://www.stortinget.no/Global/pdf/Innstillinger/Stortinget/2011-2012/inns-201112-390.pdf).

10 See ‘China’s Policies and Actions for Addressing Climate Change’, The National Development and Reform Commission, The People’s Republic of China, 2012: http://qhs.ndrc.gov.cn/zcfg/W020121122588539459161.pdf

11 CBI (July 2012) The Colour of Growth

12 CBI (July 2012) The Colour of Growth

13 Green Alliance (August 2012) Green economy: a UK success story.

14 Department of Business Innovation & Skills (BIS) (December 2010) Growth Review Framework for Advanced Manufacturing.

15 CBI (July 2012) The Colour of Growth

16 Letter reported in The Telegraph (8th October 2012) “Businesses threaten to withdraw investment if Government does not go green enough.” http://www.telegraph.co.uk/news/politics/9593184/Businesses-threaten-to-withdraw-investment-if-Government-does-not-go-green-enough.html

17 John Cridland writing in the Foreword of CBI’s publication (July 2012) The Colour of Growth

18 Ernst & Young (November 2010) Renewable Energy Country Attractiveness Indices.

19 HSBC (September 2010) Sizing the Climate Economy.

20 The White House (26 May 2010) Remarks by the President on the Economy.

21 CBI (July 2012) The Colour of Growth

22 Committee on Climate Change (May 2013) Next steps on Electricity Market Reform – securing the benefits of low-carbon investment

23 Department of Energy & Climate Change (DECC) (December 2012) Gas Generation Strategy. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/65654/7165-gas-generation-strategy.pdf

24 Committee on Climate Change (May 2013) Next steps on Electricity Market Reform—securing the benefits of low-carbon investment

25 See analysis presented by SSE here: http://news.sse.com/listing/2013/02/blog-why-the-uk-needs-a-2030-decarbonisation-target/

26 SSE’s Keith Maclean quoted in the Guardian, 25 October 2011, http://www.guardian.co.uk/environment/2011/oct/25/uk-renewables-2030-wwf

27 The Guardian (14 October 2012) “Business bosses attack George Osborne’s policy of ‘dash for gas’”. http://www.guardian.co.uk/business/2012/oct/14/george-osborne-dash-for-gas

28 Achim Steiner interviewed by RTE Radio 1 on 22 April 2013: http://www.rte.ie/radio/utils/radioplayer/rteradioweb.html#!rii=9%3A20192627%3A83%3A22%2D04%2D2013%3A

29 Bowen and Fankhauser (26 August 2012) Blog: “Green Growth” is an attractive concept for analysts and policy makers alike, but to be effective it must be backed up by effective collection action, not spin.

30 Committee on Climate Change (April 2013) Reducing the UK’s carbon footprint and managing competitiveness risks

31 Committee on Climate Change (December 2010) Fourth Carbon Budget report, page 12.

32 Committee on Climate Change (December 2010) Fourth Carbon Budget report, page 31.

33 http://hmccc.s3.amazonaws.com/EMR%20letter%20-%20September%2012.pdf

34 Letter from Lord Deben, Chair of the Committee on Climate Change (25 February 2013) to DECC Secretary of State, Ed Davey: http://www.theccc.org.uk/wp-content/uploads/2013/02/Ed-Davey-February13.pdf

35 Speech by Neil Bentley, CBI Deputy Director General (18 October 2012) “The future of UK energy policy”. http://www.cbi.org.uk/media/1797512/the_future_of_uk_energy_policy_-_neil_bentley_speech_oct_2012.pdf

36 DECC Impact Assessment (8 May 2013) Electricity Market Reform—ensuring electricity security of supply and promoting investmetn in low carbon generation. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/197904/cfd_ia_may_update.pdf

37 Letter to the Chancellor from Alstom, Areva, Doosan, Gamesa, Mitsubishi and Vestas (7 March 2013) “2030 Carbon Intensity Target for the Electricity Sector.” http://www.vestas.com/Files/Filer/EN/FINAL_Industry_letter_-_2030_target_-_7_March_2013.pdf

38 Lord Deben’s Foreword in Committee on Climate Change (May 2013) Next steps on Electricity Market Reform—securing the benefits of low-carbon investment

39 E3G (October 2012) Risk managing power sector decarbonisation in the UK. Avoiding the risks of a new “Dash for Gas”.

40 European Commission (March 2013) Green Paper: A 2030 framework for climate and energy policies. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0169:FIN:EN:PDF

41 Vestas press release (21 May 2013) “Engel encourages EU leaders to adopt 2030 climate and energy targets that will change the balance of incentives to favour green energy investments. http://www.vestas.com/en/media/news/news-display.aspx?action=3&NewsID=3277

42 Stephanie Flanders (21 January 2013), “Trading places: The UK, Germany and France”. http://www.bbc.co.uk/news/business-21127037

43 CBI (July 2012) The Colour of Growth

44 George Osborne’s conference speech, October 2011. Read the full speech here: http://www.telegraph.co.uk/news/politics/georgeosborne/8804027/Conservative-Party-Conference-2011-George-Osborne-speech-in-full.html

Prepared 3rd October 2013