Budget 2009: £1.4bn package to create low-carbon economy is inadequate, campaigners say

Chancellor, Alistair Darling has allocated £375m for home energy efficiency, £525m support for offshore wind power and £405m to develop low-carbon technologies
John Vidal, Terry Macalister and Juliette Jowit
guardian.co.uk, Wednesday 22 April 2009 20.40 BST

A £1.4bn package to reduce UK carbon emissions and create a low-carbon economy was criticised by environment and business groups as inadequate in delivering the huge greenhouse gas cuts the government embraced in the budget, though they welcomed support for renewable energy.
Funding announced by the chancellor, Alistair Darling, included £375m for home energy efficiency, £525m support for offshore wind power and £405m for the development of low-carbon technologies.
Initial analysis of actual government spending – rather than support – for green measures suggests it totals £510m over the next two years - 9.6% of the chancellor's total spending commitments. This appears to be a higher proportion than in November's pre-budget report, but Wednesday's budget was widely viewed as a missed opportunity to match other countries' multibillion dollar "green new deals" designed to create millions of new jobs and significantly reduce emissions. As part of the budget, the government accepted a recommendation to cut 34 % of UK emissions by 2020.
"This budget fails to include an ambitious green economic stimulus that would have supported job creation, economic development and environmental protection. The extra £1.4bn ... is timid and inadequate – and puts the UK at a competitive disadvantage," said Adrian Wilkes, chief executive of the Environmental Industries Commission, a grouping of 200 environmental technology and services companies.
The economist Lord Nicholas Stern, who has recommended 20% of all new spending be devoted to green measures, said. "The additional expenditure ... must be the initial step along the path towards a major structural shift in policy which we trust will follow over the coming decade."
Friends of the Earth's director Andy Atkins said: "The government has squandered a historic opportunity to kick-start a green industrial revolution and slash UK carbon dioxide emissions."
Wind power
Around £525m is to be pumped into offshore wind generation between 2011 and 2014 through the government temporarily raising subsidies. Offshore wind farms will benefit from increased Renewables Obligation Certificates, which they then sell.
A further £405m is promised "to support the development of a world-leading low-carbon energy and green manufacturing sector in the UK", something that should benefit wind and tidal power.
And £4bn of new loans are to be injected by the European Investment Bank, which is owned by European Union member states but raises its money on the public capital markets. Industry experts said this will help green schemes overcome a critical lack of commercial money due to the credit crunch, which has seen projects cancelled and jobs lost.
"They have given us what we asked for so we must give this a thumbs up," said BWEA spokesman, Charles Anglin. "But we are still faced with a £10bn to £15bn cost of an offshore grid, a cost that needs to be accepted as a social cost and spread across all users including coal and nuclear. There is also the need for changes in the planning system which remain unaddressed."
John Sauven, executive director of Greenpeace said the funds should unlock some of the 8GW of wind power that has secured planning permission but has not yet been built. "E.on and its partners should now give an immediate green light to the proposed London array, which if built will be the largest offshore wind farm in Europe," he added.
Carbon balance
Emissions will be reduced by fuel duty increases, energy efficiency and renewable measures, but will be raised by other policies announced by the chancellor, including the recovery of a further 2 billion barrels of North Sea oil and gas, the use of which would release carbon dioxide approximately equivalent to the entire annual emissions of Britain, about 630m tonnes. Other measures likely to increase emissions are the £750m to be spent on infrastructure building, only one third of which is earmarked for low carbon projects.
That third will "include initiatives on low carbon vehicles, as well as the nuclear and renewable energy industries," the government said in a formal statement. This raised questions from environmental consultant, David Lowry, about whether this was a small but significant breach of its promise not to give any kind of subsidies to the atomic power sector.
Nef's policy director Andrew Simms said: "The commitments on energy efficiency and low-carbon industry are obscured by a cloud of greenhouse gases spewing from the prop-ups given to the car and oil industry. It's as if the chancellor wants to 'have his planet and eat it'."
Energy efficiency
Building firms welcomed the total of £435m of home energy and efficiency measures to be spent in the next two years, but said it was much too little to kickstart an ailing construction industry. Darling praised energy efficiency as "the easiest and quickest" way to reduce carbon emissions and said the benefits would be distributed between homes, offices and public buildings.
"These measures will support employment and save 380,000 tonnes of CO2 and around £60m in energy bills each year," said the full budget report. At least 27% of all UK greenhouse gas emissions come from houses and 4 million people are now classed as "fuel poor" – meaning they spend more than 10% of their incomes on energy.
But Greenpeace dismissed the measures as "woeful". "The emissions saved per year from the energy savings represent about two weeks' emissions from Radcliffe-on-Soar coal-powered station," said a spokesperson.
The Housebuilders' Federation chief executive, David Orr, said: "Ministers should simply have put more money into this scheme as the scale of the challenge is just so great."
Coal burning
The controversial issue of new coal-fired powered stations was addressed with the announcement of at least two, and up to four, demonstration carbon capture and storage (CCS) plants. They will probably be funded by money from the European commission and an unspecified "new mechanism", likely to end up as a levy on consumer bills. The previous policy promised one demonstration. An announcement on CCS is expected tomorrow.
But the government also has a policy of building up to eight new coal plants , and CCS demonstration projects only trap a fraction of emissions.
Another difficulty is that the technology has never been proved on a large scale, so nobody knows how much it will cost. But the first demonstrations, at least, will be hugely expensive – current estimates to build and run the first proposed demonstration are £750m-£1.5bn.
Environmental campaigners want ministers to commit to building no new coal plants without CCS. "Building CCS demonstration projects is pointless unless there are strong regulations that prevent the prospect of the energy companies building regular highly polluting coal plants with the odd small CCS experiment bolted onto the side," said Greenpeace's Sauven.
The Aldersgate Group, a coalition of businesses and environmental groups pushing a green agenda, praised the budget but said it did not go far enough.
"The chancellor should be commended for outlining the world's first carbon budgets but there is a real risk these will not be met without further commitments for environmental technologies," said Peter Young, the chairman of the Aldersgate Group.