LSE: “Conservative government climate policy is more dangerous than one of open denial”

2nd May 2019 / United Kingdom
This suggests that the UK in 2015 subsidised fossil fuels at between three to four times what it spent on renewables: a policy that is lose-lose.

Via LSE – Politics and Policy: Conservative governments have systematically adopted policies that are damaging to the environment, writes Abby Innes. She traces their relevant record and explains how it contravenes scientific evidence and diverts investment from low carbon and renewable technologies.

 

In the light of the recent climate protests the Conservative government insists that the UK is a world leader in climate change policy, but this is no longer true. Conservative governments since 2015 have systematically dismantled the policies put in place under the Climate Change Act of 2008 and increased public spending on fossil fuels. Nevertheless, conscious of ongoing public concern, governments since 2016 have played a remarkable game: one in which they make unprecedented promises of action while they actively reverse the essential policies of mitigation in practice.

This may seem like shrewd politics – it lulls voters into a false state of security while appeasing the radical free-market, neoconservative and climate-change denying faction of the parliamentary Conservative Party – but it is lethally irresponsible. It also sets a dangerous precedent: even democratic governments apparently now think little of actively misdirecting their electorate in regard to the most critical policy challenge of our time.

Cameron’s second, now standalone Conservative government of 2015 began the process of comprehensive policy reversal but this was accelerated under Theresa May.

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On her second day in office May abolished the Department for Energy and Climate Change and moved climate change responsibilities into the Department for Business, Energy & Industrial Strategy: a marked downgrading.

 

The Fifth Carbon Budget was set at 57% reduction on 1990 levels through 2028-2032 in line with the independent advice of the Climate Change Committee (CCC). However, in its 2017 Progress Report the CCC warned that neither the Fourth nor Fifth Budgets would be met as both existing strategy and policy were insufficient.

Climate change did not feature in the ‘Five Giant Challenges’ set out in the 2017 Conservative Manifesto, Forward Together. On the contrary, the number one challenge as conceived by the Conservative Party was to create a strong, high growth economy, though maximising growth (as distinct from inclusive prosperity), is a recipe for accelerated ecological disaster. The Manifesto also committed to ensure “that the [oil and gas] sector continues to play a critical role in our economy and domestic energy supply.” It supported fracking and committed to exempt exploratory wells from planning permission requirements, a policy on which they are currently following through. This government also promotes the significant expansion of UK aviation.

In October 2017 the now minority government announced its much delayed Clean Growth Strategy which declared the government’s intent to combine adaptation to a low-carbon economy with increased economic growth. In its independent assessment of the Strategy the CCC concluded that “whilst some new policies are announced in the Strategy, the detailed policies and measures to meet the targets are not, in general, set out. Furthermore, even taking account of the Strategy’s aspirations, a gap in meeting the Fourth and Fifth Carbon Budgets remains.” This growing tendency towards empty promises reached its apogee in January 2018 when the government launched A Green Future: Our 25 Year Plan to Improve the Environment. It spoke of “green growth” and “environmental net gains – while ensuring economic growth and reducing costs, complexity and delays for developers”: a Panglossian offer. It promised to consider multiple policy proposals…

The accusation of mendacity is serious and requires verification, and so here is the policy record:

Following the election of the Conservative government in June 2015 the Business Secretary, Sajid Javid, announced the privatization of the Green Investment Bank (launched in 2012). Javid claimed that privatization would give the GIB better access to capital and more freedom to operate. However, its more obvious spur was to ensure that debt held by the Bank would not contribute to the public sector net debt: the abiding preoccupation of Chancellor George Osborne under his policy of austerity. A primary function of a state-owned investment bank is that it signals long term policy commitment to private investors to create certainty and hence lower the risk premium on private capital. The sale of GIB signalled the opposite. The National Audit Office report concluded that the price of sale was too low and that while officials had secured some commitments from the buyer to continue its green goals these were not legally binding.

In the 2015 summer Budget, Osborne removed Climate Change Levy Exemptions from renewable electricity with less than a month’s notice. This decision ended the de facto tax exemption for organisations that turned to renewables and left few tax incentives for industry to make a forward-looking choice of supplier. The shift was straightforwardly damaging to the renewables sector. In the 2016 Budget, Climate Change Levy rates were raised but this now meant a higher carbon tax on renewable energy while the discount rates available to carbon-intensive industries were increased, protecting them from the higher rates. Osborne had ‘levelled the playing field’ in narrow competitiveness terms that contradicted the whole point of the original policy, which was to increase the deployment of renewable energy.

 

The Carbon Price Floor, supposed to set a minimum price for carbon, was meant to rise every year until 2020 (from 2015). This commitment lasted one year. 

 

In his last, 2016 Budget, Chancellor Osborne froze fuel duty for the seventh year in a row despite a steep decrease in oil prices, so the average motorist spent £450 less on fuel in 2016 than they did in 2011. This freeze was extended under the autumn 2017 Budget of Philip Hammond. In spring 2017 Hammond announced a five-year freeze on the Duty and Road Use Levy for heavy vehicles while promising for a ‘call for evidence’ on updating the latter.

Recent Conservative Chancellors have increased financial support for North Sea Oil and Gas. The 2016 Budget halved the Supplementary Charge (a top-up tax) on the industry from 20% to 10% and announced £20m in funding for a second round of seismic surveys in 2016-17, to encourage exploration for new sources of oil. This budget also abolished the 35% tax collected from the profits of oil and gas production by reducing the rate to 0% and backdating this to 1 January 2016. As for the 2017 Autumn Budget, Hammond announced an effective moratorium on new support for low-carbon electricity. The Carbon Price Floor was not extended beyond 2025 and no commitments were made to adjust it if the EU emissions trading system price changed. The Budget made no mention of carbon pricing after the phase-out of coal. The low price threatened a return to coal by the 2020s and endangered the UK’s emissions targets. Greenpeace declared autumn 2017 “one of the least green Budgets ever”.

By 2016 UK general government (i.e. central and local) spent £14.4 billion on Environmental Protection Expenditure compared to £15.4 billion in 2010, with over 70% of this spending taken up by waste management. Spending on the protection of ambient air and climate stood at £119 million in 2016: that’s just over a fifth of the expenditure in 2010, despite the UK’s chronic breach of EU air quality standards. In the meantime, the audited figure for total BEIS departmental spending on Decarbonisation saw this more than halved between 2015-2016 and 2017. In the same vein, Departmental capital expenditure in 2015-2016 also declined.

One reason this expenditure is low is because the majority of UK energy policies in recent decades have been organised through quota-setting and consumer- rather than taxpayer-funded policies. But recent Conservative governments have also rowed back on these more decentralised policies. In practice, the climate sceptic Conservative right and the affiliated press objected that consumer levies unfairly raised consumer bills. DECC and HM Treasury duly decided in the 2010 Spending Review to introduce a Levy Control Framework to control the cost of levy-funded schemes from 2011-12 onwards. The Framework set an annual budget for projected costs of all BEIS’ low carbon electricity levy-funded schemes until 2020/21: effectively a cap beyond which consumer-funded subsidy couldn’t go.

As Greenpeace pointed out to a 2017 Public Accounts Committee Inquiry, the cap on renewable funding was purely political given that low carbon schemes were not the only levies to affect consumer energy bills. The Committee agreed and wondered why the Levy Control Framework didn’t cap the costs of the Capacity Market, which was set to cost consumers around £1 to £3 billion a year from 2017–18. The Capacity Market was largely a subsidy to existing (fossil fuel) generation technology with high waste costs, and nuclear funding appeared to have its own, far from transparent funding pot, despite its massive costs.

By 2017 onshore wind was on track to become the cheapest energy source of all, followed by solar, which further undermined the cost-efficiency claims for the Framework. CCC research demonstrates that green policies have actually helped to reduce annual household dual fuel bills from 2008-2016.

 

The IMF reported that the UK spent £26 billion on fossil fuel subsidies in 2015, with coal the main beneficiary, gaining some £18 billion, with much of that subsidy going overseas, since the UK satisfied 85% of its coal demand through imports. This suggests that the UK in 2015 subsidised fossil fuels at between three to four times what it spent on renewables: a policy that is lose-lose. This subsidy diverts investment from low carbon and renewable technologies while directing high volumes towards the largest, most carbon-intensive and polluting companies in the world and towards assets that cannot be exploited without catastrophic climate effects.

The right of the Conservative Party has tended to designate climate change a socialist-conspiracy-by-stealth. As Carter and Clements put it: “The right is climate sceptic or ‘climate go-slow’ because it is anti-regulation, pro-market, anti-state, anti-EU, anti-taxes, so it is very hard to construct a ‘conversation’ or ‘narrative’ where positive action [by the state] fits comfortably.” But the preferment of dogma in the face of overwhelming scientific evidence is shocking, as is the refusal to offer certainty to the business sector around investment and to galvanise the wider institutional transition to a zero-carbon economy.

 

The Extinction Rebellion and School strikers have attended to the science and are striving to act responsibly at a time when we are realistically the last generation that can act to prevent runaway climate change.

 

The burning question for all of us is this: at what point will government join them?

 

 

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