DECC hails increase in low-carbon spending

The Department of Energy and Climate Change (DECC) will see an increase in
its spending over the next four years as a result of this week’s Comprehensive
Spending Review, allowing it to deliver the planned green investment bank, Green
Deal energy efficiency scheme and promised support for wind energy and carbon
capture and storage (CCS) projects.

Energy and climate change secretary Chris Huhne said the only department to
fare better from the spending review was the Department for International
Development, which saw its budget increase 50 per cent.

"If you look at capital and resource spending together, the only department
that has a bigger increase is international development," he said. "The
Department of Energy and Climate Change is the second biggest increase [in
spending] and it actually is an increase. Health has been ringfenced so health
has had an increase, but we have got a more positive settlement even than a
ringfenced department."

Over the four-year spending review period, DECC will reduce resource spending
by 18 per cent and administration costs by 33 per cent, but capital spending
will increase 41 per cent. As a result the department’s total resource and
capital spending will increase from £2.9bn in 2010-11 to £3.7bn by 2014-15.

According to
, Huhne and his ministerial team fought a lengthy battle with the
Treasury to secure a better than expected spending settlement for the
department, heading off mooted cuts to feed-in tariffs, low-carbon
infrastructure funding and the promised Renewable Heat Incentive.

In a wide-ranging interview, Huhne hailed the
as conclusive evidence of the department’s independence and the
coalition’s commitment to the low-carbon agenda.

"My ministerial team met very early on in this whole process and we decided
along with the senior civil servants that we were not going to let the Treasury
run this process for us," he said. "We were going to own it ourselves and we
were going to really go out there and persuade people that we were going to
prioritise what was absolutely necessary and cut out what wasn’t. In general,
that is broadly what has happened – we have ticked all the key boxes in the
decarbonisation agenda."

In particular, Huhne offered assurances that the proposed green investment
bank would operate as a genuine bank and would secure further capitalisation on
top of the £1bn of funding promised yesterday by chancellor George Osborne.

He said DECC itself would aim to contribute additional capital to the bank
through asset sales and was investigating selling the government’s stake in
a joint venture between the UK, Germany and the Netherlands that makes enriched
uranium, to help raise additional funds.

He also dismissed speculation the bank would operate as a
investment fund
, rather than a full-blown bank with the ability to raise
private finance.

"We have found the capital for what the chancellor very clearly called a
bank," he said. "The Treasury has had quite a lot of experience of banks in the
past few years and it ought to be able to know that a bank is something that
borrows money and lends money.

"The exact shape and the remit of the institution still has to be settled and
we are in ongoing discussions on that. But the key thing is that we have found
the capital, we have found a contribution to the capital, we are sufficiently
committed to it that we have found a contribution to the capital from public
spending, and in addition to that we will continue to work hard on finding asset
sales that will fund it."

Similarly, Huhne said £1bn would be made available for a CCS project and
offered the clearest indication yet that the proposed ScottishPower development
in Longannet, Scotland will secure the funding after E.ON this week announced
that it was pulling out of the bidding process.

"[Longannet] is an existing power station, but in many ways it is the
appropriate one to go ahead with as it is able to be fitted up for carbon
storage under the North Sea in oil and gas reservoirs," he said.

Huhne also confirmed the £200m of funding promised by George Osborne for
low-carbon technology projects would include the full £60m investment originally
earmarked to upgrade port facilities to support offshore wind turbine farms, and
promised to investigate how the government could accelerate the rollout of
onshore wind farms.

"The latest figures from the EU show we have a 15 per cent renewable target
by 2020 and we are at three per cent, making us the third worst country in the
European Union after Luxembourg and Malta," he said. "We are playing in the
renewable conference league when we ought to be playing in the Premiership. We
have to deliver a dramatic step change in our renewables capacity."

The DECC spending settlement has been broadly welcomed by the green business
community and Huhne joked that many of the fears that the spending review would
cripple the UK’s low-carbon economy had proven unfounded.

"One of the things that is very exciting about DECC is that we have a lot of
highly enthusiastic people in small businesses like solar PV and heat who really
want to make this agenda work and they are prone to quite big mood swings," he
said. "So I looked at some of the reports over the summer and I kept trying to
say to people ‘we can’t announce anything before the Comprehensive Spending
Review, but believe me we are committed to this agenda’ and I said that until I
was blue in the face. But people often got themselves into a bit of a tizz.

"I think we committed ourselves to being the greenest government ever and
that was always going to be what happened."

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