The Green Economy is still viable
emergency Budget began to stabilise the public finances and lay the
foundations for economic recovery.
emerges from recession is a different kind of economy: rebalanced
away from excessive reliance on household debt, property markets
and banking, with prosperity spread more evenly across the country,
supported by modernised and efficient infrastructure - all of which
will support long-term, sustainable growth.
However, one of this Government’s crucial challenges is to
ensure that this growth does not occur at the expense of the
environment, but rather for its benefit. The balance must tip away
from reliance on fossil fuels for power, heat and
We aim to construct a low-carbon economy
that will meet our ambitious climate-change targets, deliver energy
security and contribute to economic recovery.
If we do this right, there is a real chance of a win-win:
investment in the short term that stimulates demand and generates
jobs, and at the same time prepares the ground for the long-term
development of a low-carbon economy. With the global market for
low-carbon goods forecast to grow by around 4 per cent a year up to
2015, this is a major export and employment opportunity.
More than 900,000 people in Britain already work in this sector,
so we are not short of expertise. Indeed, the UK is already a
leader in key sectors such as offshore wind power. With an
estimated £200bn needed by 2020 to replace our ageing power
stations with secure low-carbon energy, as well as the investment
needed to make a reality of high-speed rail and electric cars, the
opportunities are enormous.
We do not underestimate the extent to which, with modest
Government support, the private sector is already pursuing
low-carbon market opportunities. Toyota, for example, has just
launched the Auris Hybrid, the first full hybrid produced in
Europe, in Burnaston, Derby. The Nissan Leaf electric car will be
produced in Sunderland, where staff are being hired to work in the
new battery plant. And RWE Innogy and their partners have announced
a €2bn (£1.65bn) investment in the Gwynt y Mor offshore wind farm
off North Wales, while Dong Energy’s new Gunfleet Sands offshore
wind farm is now helping to power Britain.
Thanks to the huge budget deficit however, we will need a new
approach if significantly greater investment is to take place. We
cannot afford to dole out unlimited subsidies. Even if such an
approach had been shown to work - which, given the UK’s patchy
record in picking winners, is far from the case - we lack the
financial room to stimulate investment directly.
The bulk of investment in sustainable low-carbon growth will
need to come from the private sector. To make this happen, we aim
to establish a long-term framework of incentives, and a policy
framework to mobilise private-sector capital. The emergency Budget
gave an early indication of several of the key steps.
First, we need to make sure that the parameters within which the
market operates send the right price signals. The current framework
clearly isn’t working. The current carbon price, for example,
provides a very limp incentive to green investment.
That’s why the Budget announced plans to consult on reforms to
the Climate Change Levy to provide more certainty and support to
the carbon price; and that’s also why the Government is committed
to arguing for an increase in the EU emissions reduction target
from the current 20 per cent by 2020 to 30 per cent. Further
reforms of the energy market to promote low-carbon generation will
follow in the Energy Bill.
Getting the market framework right
is necessary, but by itself not sufficient. What resources we have
should be used where we can make a real difference - such as in
supporting infant technologies and encouraging
These should bridge the gap in areas that are crucial in the
long term but, because they are relatively new technologies, still
look somewhat risky in the short term. Our announcement today of
£10m in grants to companies working on next-generation offshore
wind technology is a perfect example.
With these exceptions, however, the Government cannot directly
fund the major investments the country needs - which is why our
plans for a Green Investment Bank, also flagged up in the
Budget, are so significant. Of course, there is much to be decided
about how this might work.
Bob Wigley’s comprehensive review of the issue, published last
week, sets out one possible model - a commercially independent bank
given clear overarching goals for green investment in new
technologies and infrastructure. Innovative green financial
products could give an opportunity for individuals, as well as
institutional investors, to take a stake in the infrastructure to
support the new green economy.
We will study this - and other options - carefully, and detailed
proposals will be published following the Spending Review. Close
attention will be paid to the principles of effectiveness,
affordability and transparency. But no one should doubt our
determination to make it work.
Green investment is not only about multi-billion-pound
initiatives. Relatively small energy-efficiency measures can not
only reduce carbon emissions but also help homes and businesses
Our Green Deal programme will ensure householders and businesses
can pay back the up-front costs through lower energy bills, with
extra help provided for low-income groups and hard-to-insulate
buildings. Although individual measures such as these are small,
together they provide another major opportunity for growth and
The coalition’s commitment is clear: to implement a full
programme of measures to fulfil our joint ambitions for a
low-carbon, eco-friendly economy. Over the next few years, we aim
to put in place a framework that will provide the private sector
with the confidence needed to invest billions of pounds here in
Britain in the face of global competition.
Investment in low-carbon technologies and infrastructure,
from electric vehicles to new renewables to home insulation, will
underpin economic growth for long-term prosperity and climate
security. As prosperity is locked in for the long term, carbon must
be permanently locked out.
* Chris Huhne, is the UK Secretary of State for Energy and
Climate Change. Vince Cable is the UK Secretary of State
for Business Innovation and Skills. This article was first
published in The Independent.