The state and the market

1. The state and the market Has the Coalition got the balance right on environmental policy? Nicola Smith, Head of Economic & Social Affairs, TUC

2. Responding to the climate crisis • Stern Review (2006) • The scientific evidence is now overwhelming: climate change is a serious global threat, and it demands an urgent global response. • Emissions have been, and continue to be, driven by economic growth; yet stabilisation of greenhouse-gas concentrations in the atmosphere is feasible and consistent with continued growth. • The transition to a low-carbon economy will bring challenges for competitiveness but also opportunities for growth. • Policy to reduce emissions should be based on three essential elements: carbon pricing, technology policy, and removal of barriers to behavioural change. • We need to act to ensure low-carbon growth - and the state has a role to play in enabling success

3. Why a just transition matters • Significant periods of economic restructuring in the past have often happened in a chaotic fashion leaving ordinary workers, their families and communities to bear the brunt of the transition to new ways of producing wealth. • Such injustice cannot become a feature of environmental transition. It would be morally wrong, socially damaging and would undermine the credibility of the transition itself - and could slow or even halt it.

4. Is the balance right?

5. Welcome developments …and their limitations

6. Green Economy …. • COUNCIL: • ‘Will look at how government and industry can work together to help business rise to the low carbon challenge.’ • Welcome engagement • Cross Departmental • Employer and union agreement on the need for state role • Strategic approach to green skills, jobs and growth yet to emerge • ROADMAP: • ‘Will clearly articulate the business and investment environment the government will provide to make possible the shift to a growing green economy.’ • Due this month • Quality and content of proposals remain unknown

7. Green Deal • Intended to ‘revolutionise the energy efficiency of British properties…making energy efficiency affordable for all’ • “Were all 26 million households to take up the Green Deal over the next 20 years, employment in the sector would rise from its current level of 27,000 to something approaching 250,000, working all around the country to make our housing stock fit for a low carbon world.” Chris Huhne, Secretary of State • BUT • Will private finance model work, with falling household incomes? • Who will quality assure jobs and training locally?

8. Green Investment Bank (GIB) • Mandate: 'to accelerate private sector investment in the UK's transition to a green economy' • Operational independence • Can borrow from the market and the Treasury • Likely priorities include offshore wind, non-domestic energy efficiency, waste and the opening phases of the Green Deal • BUT • £3bn funding cap (leveraging up to £15bn) to 2015 at earliest • Most other investment banks are not on balance sheets • A tiny proportion of the £450 bn (to 2025) investment that we need

9. Regional Growth Fund • £1.4bn over three years. • RGF projects are aimed at promoting job creation in areas of England described as “too dependent on public sector employment”. • 27,000 jobs to be either directly created or ‘safeguarded’, with close to a further 100,000 indirect jobs in associated supply chains and local economies. BUT • Total fund represents just a third of that allocated to the soon to be abolished Regional Development Agencies and no compensation for loss of Strategic Investment fund • Concerns about deprived areas of London and the South East missing out • Lack of clarity about the extent to which RGF funding might be used to promote more active engagement of employers in the delivery of apprenticeships, workforce development, tackling inequalities and promoting green jobs.

10. And areas for real concern

11. Funding cuts in key areas • DECC/DEFRA and BIS ‘unprotected’ departments – with significant implications for climate change policy • Cuts in Non-Departmental Public Bodies will mean: • loss of: • Expertise • Independent research functions • Front-line services • as well as wider costs: • Long-term costs • Organisational confusion • Loss of independent oversight • Low carbon industrial strategy • New Industry, New Jobs is no more • Forests • 25 per cent cuts in Forestry go ahead, despite ‘pause’ in sell off • Significant cuts in forestry research (Prospect)

12. Carbon pricing • Agree with Government's objective in setting a CO2 floor price to provide long-term carbon price trajectory through to 2030. • Intention is to help sustain investments in high capital, low carbon technologies (renewables and new nuclear) over the long term. • BUT • EIUG: ‘will add millions to the cost of manufacturing energy intensive products in this country”. • Steel, paper, cement, lime, aluminium, basic inorganic chemicals, glass and ceramics employ 225,000 workers – and have a key role to play in the transition to a low carbon economy • Carbon leakage risks are high

13. Feed In Tariffs • No longer available for large scale renewables – “devastating impact on community energy/large scale schemes” • REA had forecast 17,000 jobs by the end of this year: • “Opting out of the fastest growing energy generation technology in the world, the technology with the fastest dropping prices and which, in capacity terms, was the biggest single renewable installed across Europe last year is a huge mistake in industrial policy terms.”

14. And limitations of all of the above … GIB capacity Green Deal Green jobs and the Green Economy Roadmap Regional development

15. Conclusions • State alone does not have all the answers • But the more the state steps back the greater the risks of market failure become