Does yellow and blue make green?

10th May 2012


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After two years in office, Tim Yeo and Peter Young consider the progress of the coalition's pledge to be the greenest government ever

The second year of the coalition government has seen some progress on the environmental front in several areas, including the publication of the natural environment white paper, the pioneering national ecosystem assessment, the resource security action plan and approval of the fourth carbon budget (from 2023 to 2027).

The government has also made funding available to kick-start the green deal energy-efficiency scheme, provided money to support the manufacture of equipment in the UK for the wind energy sector and introduced a package of measures to encourage industrial energy-efficiency.

Year two was also notable, however, for the continued fiasco over the feed-in tariffs (FITs) for photovoltaic solar panels, the delay in deciding whether to introduce mandatory greenhouse-gas (GHG) reporting, further confusion over the future of the Carbon Reduction Commitment Energy Efficiency scheme and controversy over the national planning policy framework.

Not forgetting the less-than-enthusiastic support shown for the green agenda by some senior government ministers, which came to the surface in 2011 when the chancellor promised the Conservative party conference in the autumn that the UK was not going to cut its carbon emissions faster than its European competitors.

So, following the mixed messages of the past 12 months, is the government on course to meet its pledge to be the greenest ever? Last year, the environmentalist gave the coalition a C– for its first year’s performance, describing it as “very disappointing” and demanding it improved, particularly its policies supporting investment in low-carbon technologies. This year we invited Tim Yeo MP, chair of the energy and climate change committee, and Peter Young, chair of the Aldersgate Group, to discuss progress.

Pluses …

“There are pluses and minuses in the government’s performance,” says Yeo. “But these are still very early days. We are only two years in, and little of what the government has done will have started to have much of an effect. By 2015, we will know what the government has achieved, but now is too soon to judge.”

The Conservative MP for South Suffolk lists his “pluses” as the green deal and the approval of the fourth carbon budget as set out by the committee on climate change (CCC). “The green deal is a great concept and if implemented successfully it will be a massive step forward in terms of making our residential built environment more energy efficient,” he says.

“And one of the most significant things the government did last year was to accept the fourth carbon budget. The CCC set very challenging targets and these were accepted. For me that was the litmus test of 2011 and I was really pleased with the outcome.”

Peter Young agrees that support for the fourth budget was a good test of the government’s environmental credentials, but fears the review planned for 2014 has created uncertainty. “I agree with Tim that accepting the fourth budget was key. The trajectories that have been set are quite impressive,” he comments. “As long as they remain constant, then investors are more likely to invest in low-carbon technologies.”

Yeo, however, is not too concerned by the planned review, which was reportedly agreed at the insistence of the chancellor, George Osborne, and the business secretary, Vince Cable.

“There would be an opportunity, whether there is a formal review or not, for the government to get out,” he acknowledges. “I think that because the whole environmental movement considers this one of the key tests for the government it would be an extraordinary, retrograde step if it decided to back off following the review.”

Young, a member of the government’s green economy council, identifies other positives from the past 12 months. “For me, the publication of the natural environment white paper and the creation of a natural capital committee are particularly good moves,” he states.

“If we can use what we’ve learned to get the natural capital committee [NCC] to operate in a similar way to the CCC, and try to embed its aims in the Treasury, that would be fantastic. The structure that has been created for the NCC is a very positive one and could be a really good legacy of the coalition government.”

Young is also pleased that climate change adaptation is finally appearing on the government’s radar with the publication by Defra of the first assessment of the risks posed to the UK economy by a changing climate, and the Environment Agency receiving additional funding to provide advice to businesses and local authorities on preparing for change.

“This is really, really helpful, particularly as we’re probably going to have to adapt more than we initially thought we would have to,” he declares.

He also sees merit in the government’s examination of environmental regulation as part of its red tape challenge.

“I don’t have a problem with the principle of reviewing environmental regulation. You wouldn’t design the whole environmental regulatory framework to mirror what we have now if you were starting again from scratch,” he concedes. “But the government needs to signal that it’s about genuine efficiency and improvement rather than eroding environmental standards.”

Yeo agrees. “It is right to have an overhaul, but I think that we also have to make the case for good regulation,” he says. “Businesses can benefit. One example is the automotive industry, where engine emissions have been cut significantly due to regulation, but car companies aren’t selling fewer cars as a result. So the industry has not been disadvantaged by the regulatory drive.”

… and minuses

Despite some positive movement, both Yeo and Young are worried about the lack of progress in other areas.

Young is particularly concerned that the government has delayed its decision on mandatory GHG reporting, which he believes is due to a desire to not introduce new regulation.

“There is strong support for reporting among the business community. Lots of companies are already doing it, so they are keen to make it mandatory so it is more efficient and provides greater transparency to promote good practice and goad laggards to take action,” Young says. “But the government is sitting on its hands and refuses to make a decision.

“I don’t think it’s necessarily because the government is against it in principle, but they just don’t want to be announcing a new regulation. I think that mind-set is getting in the way of some of the good stuff it wants to do and that’s irritating. It’s like we’ve got right to the door but can’t quite get through.”

He also cites the troubling changes to FITs – which saw the government lose its legal case against implementing cuts of 55% to tariffs before consultation on the changes had ended. “It was a complete fiasco and undoubtedly damaged an emerging industry,” he states. “I hope lessons have been learned by DECC.”

Yeo puts the problems down to a management failure. “DECC had set the incentives for small-scale photovoltaics at a very generous level and then failed to monitor take-up by consumers,” he explains. “If the department had been looking at the figures carefully, as a business looks at its weekly sales figures, through May, June, July 2011 it would have seen demand was going through the roof and would have realised then that the payments were unsustainable.

“And, if DECC had announced the consultation at the end of July instead of the end of October the problems would largely have been avoided. So I think there was a serious management failure in DECC for which I blame both department officials and ministers.”

“I agree with that,” Young says, adding: “I hope the energy and climate change committee [which Yeo chairs] can continue to monitor FITs because I don’t have the confidence that DECC can do so effectively.”

The lack of effective oversight of the FITs leads Young to criticise the decision to scrap the Sustainable Development Commission (SDC), which he believes has left a void in overseeing government policy. “While I concede that the SDC had largely outlived its usefulness, the absence of a similar organisation makes me nervous,” he says.

“I think an SDC-type body is the kind of thing we need to provide the momentum for change beyond what the core departments can achieve by themselves. It would provide a degree of scrutiny of policy.

“I know the energy and climate change committee and the environmental audit committee try to play this role, but wonder if it would be better if we had an independent body, to bring the government to account on some of the key issues.”

Yeo believes DECC will need to up its game if the green deal is to achieve its promise. “It’s a hugely important task and quite complex to deliver,” he warns. “DECC has started some big stuff with the green deal and electricity market reform,” acknowledges Young. “It has bitten off quite a lot, and there is a question mark at the moment as to whether it can actually ‘chew’ all of that and deliver!”

Young considers the failure to make progress on areas such as GHG reporting to be the result of the lack of influence wielded in government by the core environment departments, Defra and DECC.

“I have most contact with Defra and the issue has always been that the environment department lacks influence,” he claims. “That’s not down to lack of commitment from Defra ministers, just where the environment department sits in the government hierarchy.

“Like DECC, Defra has a lot on its plate, but it’s hard to see these departments influencing the overall government agenda. And, while they are failing to sufficiently influence government, there is a feeling that other departments’ attention is drifting away from the green agenda.”

Young sees the recent misleading media reports that rising energy prices are wholly due to environmental levies as a sign that DECC and Defra are losing the battle to put the environment at the heart of government.

“There is now a fairly widespread view that the main reason energy prices are rising is because the UK is investing in ‘expensive’ renewable energy, when, in reality, the increases are due to climbing fossil fuel prices,” he says.

“There is a similar issue with some of the government procurement processes, where short-termism is taking precedence and, as a result, poor decisions are being made. That’s where the environment loses out. There just isn’t a strong enough voice. I think the agenda has suffered quite a lot from the lack of attention by DECC and Defra.”

“I agree with Peter; you’ve only got DECC and Defra really championing the environment in government, and it isn’t enough,” Yeo says. He acknowledges that DECC, for instance, is less influential than it should be, which, following the change of secretary of state – Ed Davey replaced Chris Huhne in February – is a situation that is likely to get worse.

“DECC is a small, new and relatively weak department,” declares Yeo, “and was very unfortunate recently to have to change its secretary of state.”

“Ed Davey has come in and, as the newest member of the cabinet, is going to find it very difficult. There are a lot of big decisions pending and there is a sense that DECC is now behind on the agenda: the Energy Bill has yet to be published and we’re still awaiting clarity on electricity market reform.”

Yeo also concedes that the environment is not a top priority for the transport, communities and local government or business departments, for example. But he notes that some senior government ministers and other departments are focused on green issues.

“Oliver Letwin, who has a sort of cross-government role [he is Cabinet Office minister responsible for coordinating government policy], is quite focused on the green agenda; he understands it and is influential in government, so is helpful,” says Yeo.

“Perhaps surprisingly, the Foreign Office is also doing stuff. John Ashton, the foreign secretary’s special representative for climate change, is very clear that, under [secretary of state] William Hague, the Foreign Office’s commitment to green issues has actually strengthened. That is really encouraging.”

Power struggle

Yeo believes that the lack of delivery so far on the environment is partly down to the government’s determination to reduce the budget deficit, which is preventing it from taking some decisions that would encourage the transition to a low-carbon economy.

He would like to see the chancellor and the Treasury adopt a more long-term approach, rather than just engage in firefighting.

“The economies that will be really well placed in the 2020s will be the ones that decarbonise their infrastructure. The investments to achieve a low-carbon electricity and transport system and built environment need to be made now, not in the next decade. Countries that invest now in low-carbon technologies will be at an enormous advantage,” he explains.

“If the Treasury is looking ahead,” Yeo goes on, “it would accept that argument. You can see why the Treasury’s focus is on the deficit, and that’s only right; but it shouldn’t ignore long-term success.”

Young agrees, and fears recent comments by George Osborne will undermine investment. “The deficit is not an excuse for the chancellor’s argument that we should go no faster on reducing emissions than our competitors,” he comments. “The irony is that, while the Treasury sees everything in terms of deficit reduction and cutting back, the private sector has money to invest.

“What investors need is the right kind of noises coming out of the Treasury so they can have confidence that they can put money into long-term investments that do not provide an immediate return. They’re not looking for a quick buck. But they want the surety that there will be returns in five or 10 years’ time.

"There isn’t the understanding of the impact a few misconceived remarks can have. It’s not that the chancellor is actively campaigning against the green agenda, but that a few ill-chosen words can have a massive adverse affect. The cost of capital, according to green investors, went up several base points after the chancellor’s speech to the Conservative party conference last year.”

The benchmark

Given the mixed performance in 2012, do Yeo and Young believe the coalition will meet its pledge to be the greenest government ever?

“I do think the benchmark of being the greenest government ever is not very hard, as we’ve never had a very green government in the UK,” remarks Yeo. “Tony Blair talked a great game but didn’t deliver very much. So, in a sense, this government can claim to be the greenest one even if it doesn’t do a great deal. And, to be fair, after only two years my verdict would be ‘not proven’. But there’s a chance it might be.”

The former environment minister fears, however, that powerful forces in the government may scupper progress. “There are some worrying signs. If you’ve got the most powerful department in Whitehall, the Treasury, not entirely convinced green issues should be top of the agenda, that’s not helpful.

“The government needs to exercise more discipline over its rhetoric, because anything negative can have a deterrent effect on investors. On electricity alone we’re going to be investing £200 billion over this decade, so a 1% increase in the cost of capital is £2 billion a year. That’s an extra £160 a year on the electricity bill of a family of four. So a few careless speeches could cost every family in the country £3 a week.”

Young agrees that the government will not have to work too hard to be considered the greenest, but he’d like to see the pace of progress increase. “The key point is that while the government will be greener than many past governments, it will not be as green as it needs to be,” he comments. “The issue for me is around the pace of change. The prognosis for the long-term infrastructure is good – it’s the short-term delivery that’s the problem.”

He also believes that any more poorly judged speeches could hinder investment in low-carbon technology. “Discipline of rhetoric is really, really important. Both capital and businesses are very mobile. One of Europe’s, and the UK’s, main strengths is that it has always been very stable. But with the current euro crisis, it is now looking less stable, so we’ll have to try even harder to make sure some of our policies and regulations actually make us attractive.”

Young would also like to see more support for the green agenda across the entire government, with environmental concerns not championed only by the environment departments. “One other thing about the greenest government issue is that it is a whole-government issue: you can’t measure it by just looking at what Defra and DECC are doing,” he warns.

“For me it is about what every single department does. Until that is addressed, the coalition will not achieve its goal, even though technically I think it will be the greenest government ever.”

Tim Yeo has been Conservative MP for South Suffolk since 1983 and was minister for the countryside and environment in the last Conservative government. He is also chair of the energy and climate change committee.

Peter Young is strategy director at consultants SKM Enviros and chair of the environmental business body the Aldersgate Group. He is also a member of the green economy council, established in February 2011 to ensure the government and industry work together to support the transition to a green, low-carbon economy.


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