The Budget energy announcements: good for manufacturing?

Posted on 21 Mar 2014 by The Manufacturer

Richard Warren, senior climate & environment policy adviser, analyses the Budget's energy announcements and whether they will positively impact UK manufacturing.

Some commentators viewed the energy related announcements in the Budget as a regression of climate change action and capitulation to polluters and big business. But, it is disingenuous to portray it as such.

Richard Warren - EEF
Richard Warren, senior climate & environment policy adviser at EEF.

EEF supports the need for action to cut global emissions. But, this must be done in a way that does not leave the UK with the highest carbon price, the most burdensome climate change legislation and the highest targets for which we pay a price in lost investment and jobs. This is not to call for a reduction in UK climate change ambition, far from it as the move to a low carbon economy is a significant business opportunity for manufacturing.

It is merely recognition that we remain a long way from reaching a global binding agreement for all countries to reduce emissions, and that until we reach this point climate change policy must reflect this.

To do otherwise will do nothing to reduce global emissions but has the potential to do a great deal of damage UK industry and encourage carbon leakage in the future. This is in no-one’s interest and why the Budget announcements are a positive step forward in terms establishing a climate change policy framework that will facilitate the transition to a low carbon economy, whilst allowing UK manufacturing to benefit and contribute effectively to this transition.

The freezing of the Carbon Price support rate and, the measures to shield our vital energy intensive foundation industries from the most damaging excesses of high energy costs are a common sense approach. Furthermore they are no more or less compared to what other countries across the EU, Germany in particular, are doing to support their industries.

However, even with these policy changes, despite what some commentators claim the energy measures in the Budget have done nothing to reduce the UK’s ability to meet its climate change responsibilities. We still have the highest targets in the world, we still have the highest carbon price in the world, we still have binding targets for renewables out to 2020 and will soon have binding emissions reductions targets out to 2030.

The 2030 target, will almost definitely be accompanied by an EU wide renewables target and through the new governance structure the UK will need to demonstrate how it will contribute towards this; this may mean increased investment in renewables in the 2020’s or it may mean a greater reliance on other forms of low carbon technology, we should seeks to box ourselves into an overly specific path right now. The UK climate policy framework still provides a remarkably secure investment platform for low carbon generation and will continue to do so through the 2020s.

Tackling global emissions remains the ultimate prisoner’s dilemma, but we must design our climate policy in a manner that accurately reflects the realities we face and how that world is not how we would like it to be. If this means accepting that limiting a global temperature rise to 2°C is no longer a realistic global target so be it, this may sound pessimistic but I believe it is far better to be honest about what we can globally achieve and work towards this then to continue to kid ourselves, not least this will help us take more appropriate and adaptable options in the years to come.

Far from an about turn on climate change I believe this year’s budget represents a realistic view of the challenge we are facing, strengthens the UK’s ability to reduce emissions and, the manufacturing sector’s ability to contribute to this and provide the solution we all desperately want.