Big manifesto ideas: responsible pensions, help to heat and a resource target

Big Ben in LondonWith the 2015 general election on the horizon, we’ve asked leading thinkers and experts for their one big manifesto idea. The one they think will make a real difference to a greener Britain. Today we’re posting ideas 13,14 and 15. (Read the other twelve.)

These three proposals, including one of our own, would harness the power of pension funds, boost support for the fuel poor and steer industrial strategy to help businesses and reduce the cost of living.

Should they be in the manifestos? Let us know what you think and join in the discussion on twitter or suggest your own via the blog comments.

#manifestoidea
@GreenAllianceUK

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Catherine Howarth 150No. 13

Catherine Howarth
Chief executive of ShareAction

What’s the big idea?
A Responsible Investment Bill

Big pension funds looking after the nation’s retirement savings have influence over most causes the environmental movement holds dear: climate change, biodiversity loss, deforestation, waste management and many more. Yet the power of the pension sector is not deployed with an eye to the long term costs, not least financial, of failing to steward natural resources more intelligently.

A Responsible Investment Bill would address two system failures in the UK’s private pension sector. The first is the dangerous but widespread notion that a pension fund’s core legal obligation is to maximise returns quarter by quarter. The second is the lack of transparency and accountability to the millions of savers who pay in their money every month, taking on significant investment risk.

Who benefits?
Over 30 million people in the UK with private pension savings would be immediate beneficiaries of this legislation. Benefit would also flow to companies investing capital in resource efficient processes and products who would start to be sustained by more long term orientated pension funds operating with an enlightened view of their members’ interests.

What’s the catch?
This would be permissive not prescriptive legislation. It would guide, but not require, pension funds to take environmental considerations into account, much as The Companies Act (on which this Bill is modelled) gives directors a duty to promote the success of their company whilst “having regard” to the environment.

What has to change?
Pension funds would have new obligations to ascertain members’ views on investment policies covering the environmental and social performance of companies in their portfolios. They would have new duties to account for their activities and to act transparently, complying with reasonable requests for information from members.

Why should it be in the manifestos?
In an era of constrained public spending, the £2.9 trillion invested by the UK’s pensions sector (a sum greater than our GDP) is a vital source of capital for the transition to low carbon prosperity. Today’s pension system is failing younger British savers by ignoring environmental factors that will have an impact on their cost of living and quality of life in decades to come. A Responsible Investment Act makes sense for all of us.

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Will Straw pic150No. 14

Will Straw
Associate director for climate change, energy and transport at IPPR

What’s the big idea ?
A new, cost effective ‘Help to heat’ framework for energy efficiency

This would use a local area based approach to target the Energy Company Obligation (ECO) at areas with high fuel poverty and bring down the cost of energy efficiency measures, such as the Green Deal, for all households.

Who benefits ?
Households could save up to £136 from this approach because the economies of scale of the scheme would reduce costs of energy efficiency improvements by as much as 30 per cent. Meanwhile, 197,000 fuel poor households would receive efficiency improvements every year, 117,000 more than under the ECO model.

What’s the catch?
It would require no new public or bill payer support, but a redirection of existing resources.

The problem with delivering the package is that energy companies have a vested interest in the status quo. They have no incentive to see energy demand fall since it reduces their margins. But that’s all the more reason for a new approach that brings new players, including many smaller energy service firms, into the market.

What has to change?
At present, the ECO is poorly targeted with just 20 per cent of resources going to the fuel poor. By using an area based approach better to target the Energy Company Obligation at fuel poor homes, resources can be freed up. These can be used to:

  • provide free Green Deal assessments for households in low income areas to encourage take up;
  • reduce the cost of Green Deal loans by guaranteeing the borrowing of the Green Deal Finance Corporation; and
  • subsidise zero per cent loans for a limited number of early adopters.

Why should it be in the manifestos
Improving the energy efficiency of the UK’s housing stock is a win-win for consumers. First, they can save money by reducing the cost of their energy bills without losing comfort. Second, lower overall demand for energy means that we need to build less expensive kit, like nuclear power stations or wind farms, to keep the lights on. This means that fewer low carbon subsidies would need to be put on consumers’ energy bills.

@wdjstraw

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DustinBenton_150No. 15

Dustin Benton
Head of resources, Green Alliance

What’s the big idea?
A legally binding target for a 40 per cent reduction in the resource intensity of the economy

Targets are hardly fashionable, but this would do one very important thing: set a clear and stretching goal to orient policy making and industrial strategy. The work of the Circular Economy Task Force shows that all but the very biggest companies quickly run up against barriers to better resource use that only government can resolve: a good example is WEEE regulation, which rewards the shredding of old electronics, destroying much of their value, while at the same time subjecting the transport of potentially reusable electronics to onerous and expensive regulation. The result of poorly designed policy is that there has been no decoupling of economic growth from resource use at all. This stands in stark contrast to energy, where both innovation and regulation have driven relative decoupling. As the UK grows more dependent on imported resources for the products it makes, the competitiveness of British industry will depend on increasing resource productivity.

Who benefits?
The most obvious beneficiaries would be manufacturers, who have seen their resource costs rise over the last decade as their labour costs have continued to fall . Lower resource intensity would make them more competitive, just as lower labour intensity has. But the benefits would be broader: consumers have suffered in the great resource price shock with real wages declining due to the surging price of imported commodities. Finally, the natural environment would be a big beneficiary. As resources become more energy intensive to extract and process, the carbon emissions embodied in products increases, as does the habitat loss caused by their exploitation.

What’s the catch?
The EU is proposing a similar target; Euroscepticism may hamper support for this. Although a desire to avoid duplication may undermine a UK target, the UK has shown that it can manage a domestic CO2 target and an EU emissions target.

A resource intensity target is not perfect, either. Absolute reduction in resource use would be better for nature, but an intensity target would help to underpin deliverable, incremental improvements in resource efficiency with a sense that they contribute to the transformative goal of a circular economy.

What has to change?
A legally binding target needs to be set, ideally underpinned by a commission advising on where rapid improvements in resource productivity can be made.

Why should it be in the manifestos?
There’s a big gap between the opportunity that the circular economy presents and the actions that politicians are willing to take, given the small ‘c’ conservative bent of the upcoming general election.There’s now an acknowledgement by politicians on the left and right that government should help to make the circular economy happen, but no one wants to be too disruptive. Pledging a target would show that politicians are committed to a long term programme of change.

@dustin_benton

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