George Osborne’s spending review promised to meet the “aspirations and expectations of today’s population… not those of the 1950s”.
When it comes to meeting the aspirations of current consumers to live greener lives, the government has gone some way to show it is serious about delivering.
Yet it has fallen foul of traditional departmental silos; so while we can see action to help us reduce our high-carbon energy use, less visible is government support to help us green our use of water, reduce our production of waste or improve decision on transport modes.
Up to £1bn was pledged for a Green Investment Bank (GIB). This might sound far away from consumer-scale policies, but the GIB could be the key to funding the improved efficiency of our aging housing stock. A recent Ernst and Young report, joint-commissioned by Green Alliance, showed that we need about £225 billion of investment in energy efficiency. Traditional sources of capital are only likely to provide approximately £50 to 80 billion, which leaves a massive gap. The GIB would take the risk from institutional lenders, allowing financing to flow to energy efficiency schemes, such as the planned Green Deal.
The GIB is however far from a done deal. First the Ernst and Young report showed that it needed £4 to £6 billion of financing over the next four years, and current government plans are for £2 billion at the most (depending on which reports you read). Second, the chancellor needs to confirm that the bank will actually be an independent institution capable of attracting the tens of billions of pounds of private investment needed. A decision on this will be a real test of the government’s seriousness.
Next there was support for two consumer facing policies: a new Renewable Heat Incentive and protection for Feed-in-Tariffs for electricity until a review in 2012. Both of these work by paying consumers for the low carbon energy they produce and use. These schemes had attracted critics in the run-up the spending review who said that they were an expensive way to reduce carbon emissions and that small-scale renewables will never make a sizeable contribution to our electricity needs.
We disagree and think these are fantastic policies, not only for incentivising householders to do the right thing, but for making action on climate change visible, a normal part of life and desirable (see our recent blog post for more on this topic). Alternatives to this kind of direct incentive, such as introducing a minimum carbon price, fail to take into account how real people operate, who rarely do cost-benefit analyses in their heads when deciding what energy source to use at home.
The new Renewable Heat Incentive in particular is great news. It is the first policy in the world to incentivise renewable heat at all scales. Heat sources generate 47 per cent of our CO2 emissions, and action in this area is long overdue. This government deserves praise for being the one that finally delivers on this.
For DECC the main thumbs down would be over the dramatic scaling back of Warm Front which provides energy efficiency upgrades to the poorest households. This will put increased pressure on the Green Deal and new Energy Company Obligation to deliver a solution for all consumer segments, something its design is far from doing yet.
These new instruments are not going to be introduced until late 2012, so the question is what effect the slashing of Warm Front funding to one third of its current level will have on the insulation industry and serving the requirements of the fuel poor over the next couple of years. The 20th October announcement already saw insulator Eaga’s shares fall by 25 per cent while the National Energy Action charity, which administers Warm Front, said about £100 million per year would struggle to fund more than those already on the waiting list for the scheme.
The cuts to DECC’s adminstrative budget, of around 30 per cent, could have a drastic effect. DECC is a relatively young and lean department, and only has only a few people working on some fundamental areas for green living. The reduction in staff numbers could mean that the department struggles to get some areas, like the flagship Green Deal policy, right.
It is not yet clear what effect the Department for Transport’s overall settlement will have on the promotion of low carbon transport choices: there have been some losses and gains. First the good news: there has been significant funding put aside for the Local Sustainable Transport Fund (£560 million) which local authorities could use to encourage walking and cycling, improve integration between travel modes and provide better public transport.
This could help counter the bad news: the abolition, under the quango cull, of Cycling England which has been the main promoter of cycling schemes; revenue cuts to local authority transport budgets of 28 per cent and, in London, a 20 per cent cut in the government’s grant to TfL which may mean cuts for Smarter Travel programmes. On public transport, rail fares are set to rise a staggering 31 per cent over the next four years and there has been a 20 per cent cut in bus service support. Yet, we may find that the spending restrictions actually favour walking and cycling schemes which often come out as the best value for money of any transport programme.
Defra’s overall 33 per cent cut represents the third worst settlement of any department which is likely to be bad news for some key green living areas. How it will affect programme budgets still remains to be seen, but if the Structural Reform plan is anything to go by we could see more money spent on farming and flood relief at the expense of important work on the areas of sustainable consumption and production and water efficiency.
If the government is to live up to its mantle of the “Greenest Government Ever”, it needs to help make this generation’s consumers the “Greenest Consumers Ever”. Based on this performance, the government’s report card would read: “shows promise, but still some way to go.”
