'Greenest government ever' keeps us addicted to oil and other dirty energies

Posted by jamie — 24 March 2011 at 4:32pm - Comments

So yesterday's budget was from the self-proclaimed 'greenest government ever', but was it the greenest budget ever? How could it be, when it has done nothing to break our addiction with oil, hobbled the Green Investment Bank before it's even started, and provided a windfall for nuclear power. In our top 10 ideas for a clean energy budget, Tracy explained the need for major investment in low carbon technologies and energy efficiency, along with the tools (such as a powerful Green Investment Bank) and the incentives (using the tax system to discourage carbon-heavy industry and transport, for instance). In her blog, Tracy posed the question:

"Will the chancellor simply try to manage the fluctuations of energy prices passed on to consumers or invest in the real solutions?"

We know the answer now - and it's definitely the former. Instead of encouraging the development of clean technologies, and reducing the risks presented by the volatility of oil prices, George Osborne has done his best to maintain business as usual.

Transport taxes have been cut in favour of the continued use of oil and the bank will be a shadow of the strident investment mechanism it should be. Even the one green tax that has been introduced – the carbon levy – comes with the unpleasant bonus of directing the money raised into the hands of the nuclear industry.

Going over the top 10, it's depressing to see how little affirmative action we've seen. I was going to grade them with 'pass' or 'fail', but to save on typing I'll just say it here; it's a big fail on all ten counts:

1. Allow the Green Investment Bank to borrow and issue bonds and loans

While the bank will come into effect next year, it won't be able to borrow until the 2015/2016 financial year, and only then if targets to reduce the national debt are reached. With no guarantee the bank will be able to access additional capital, investors in renewable and low carbon technologies can have little confidence that serious additional help is on the way. And it will only have initial capitalisation from the government of £3bn.

Analysis by Ernst and Young has shown that state investment of £4-6bn is required to boost our low carbon infrastructure, along with the ability to borrow and issue bonds and loans straight away. So that's four wasted years on the green investment front.

2. £160m investment in wave and tidal development

No mention of this in the budget. Allocation of the Low Carbon Innovation Fund is now expected some time in the summer, firmly behind closed doors. We’ll keep you posted...

3. £240m investment over five years to increase electricity from offshore wind

This was money hoped for from the new Regional Growth Fund, the much smaller replacement of the scrapped Regional Development Agency pot. The budget document says final decisions on the allocation of money will be 'shortly announced.' So again, no up-front priority commitment from George but watch this space.

4. Support carbon levy

The price of carbon has been set at £16 per tonne, rising to £30 in 2020 but where will this money go? Straight to the nuclear industry A big chunk ends up with the nuclear industry as a windfall for existing nuclear power stations. What it won't be doing is encourage investment in clean energy and greater energy efficiency.

5. Keeping energy bills reasonable and invest in household energy efficiency

The budget made a feeble commitment to "encourage and incentivise" domestic and business efficiency measures through the upcoming Green Deal. At least the government has finally acknowledged with this that its flagship Green Deal energy efficiency policy will only stack up with extra financial incentives, but this is so vague with no indication as to how this will happen.

6. Tougher efficiency standards for vehicles
7. Raise money from most polluting vehicles
8. Extend electric vehicle rebate and invest in charging infrastructure
9. Continue to support local bus services

I'm lumping these points together as there was scant hope for low carbon, efficient transport in the budget. Instead of weaning us off oil, the chancellor seems keen to keep us addicted.

The 1p per litre cut in fuel duty (guaranteed to make the tabloid front pages) might ease money worries for motorists immediately, but it completely fails to grapple the root of the problem – that our transport system is over-dependent on oil. As a result we will always be exposed to volatile oil prices, and absorbing the associated costs.

Instead of cutting 1p off of a litre of petrol (bear in mind the budget small print reveals that 6p will be added back on by August next year), we need to ramp up investment in electric vehicles and public transport, along with tougher efficiency standards for vehicles.

Of course, the oil companies are happy with this state of affairs as they enjoy bumper profits, and car companies drag their heels over making their cars more fuel efficient even though it would save their customers some serious cash.

10. Raising air passenger duty every year at a rate above inflation

No sign of this in the budget. In fact, George has chosen to freeze passenger duty which is another example of the air industry getting special treatment despite being the most polluting mode of transport.

On top of that, there was nothing about the coalition's pledge to introduce a per plane levy, which would have discouraged airlines from sending them into the air half-empty. Any sign of rail fare reductions? Not a chance.

You now know what we think about George's budget - but what do you reckon? Is it a wasted opportunity or has he been restricted by the national debt and deficit?

@Chris: on reflection, my comments about the carbon levy were overstated - not all of the carbon levy will go to the nuclear industry, but a large proportion of it will - so I've updated the text above. Thanks for pointing that out.

And on top of the levy, there's also the increases to wholesale electricity prices which will happen as a result. That's across all electricity producers not just those using carbon-heavy sources like coal so nuclear operators will benefit there as well without actually having done anything to help reduce overall emissions.

@Barry D: I'd be wary of what industry analyists say about risks to exploration in this instance. Oil companies have been squealing about the tax increase but given the profits they make ($77 billion last year for the top five oil producers, and that's including the loss BP suffered over the Deepwater Horizon disaster) and the general downward trend in UK oil production taxes since 1983, it's a small drop in the ocean.

About Jamie

I'm a forests campaigner working mainly on Indonesia. My personal mumblings can be found @shrinkydinky.

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