26 January 2010: UK policy on clean business

Yesterday, I attended a talk by Pat McFadden, a minister in the UK’s Business Department, about how the UK should move to a low-carbon economy. His main point was that the UK is still a manufacturing economy, despite the common view that everything manufactured is now imported. He also talked about the enormous opportunity for people in the UK to make wind turbines. This certainly is an enormous opportunity, particularly for the enormous proposed expansion of offshore wind. Turbines could and should be made in the UK. This would increase public support by giving a clear economic benefit to the UK and would also reduce developers’ costs, as importing from Germany or Denmark means that they have to be paid for in Euros, so the decline in the value of sterling meant a cost increase of around 30%. The UK is not about to join the Euro. Therefore, instead it must manufacture wind turbines. It should also make the ships needed to install offshore wind turbines, since there is a serious global bottleneck on this. Offshore wind should mean onshore jobs.

McFadden made some predictable attacks on the policies of the opposition Conservative Party, primarily criticising their refusal to run an active industrial policy because this would be ‘picking winners’. However, the Conservative policy is not against intervention and not against supporting the low-carbon transition, but he did make one important point. The Conservatives have said that, in government, they would abolish the £50,000 annual investment allowance, which would save £855 million (see conservativehome: A 21st Century Employment Strategy). Public expenditure certainly does need to be reduced, in the UK as elsewhere. However, investment allowances are important in encouraging businesses, particularly small and medium enterprises, to invest and the low-carbon transition is essential in economic as well as climate terms. The Conservatives should rethink this policy – possibly by retaining allowances for low-carbon investments.

McFadden was weaker when asked about fuel poverty. The UK is supporting renewables through an obligation on all energy suppliers, which increases fuel tariffs. The government is proposing to raise money for carbon capture and storage by introducing a levy on fuel bills. The UK has an appallingly high level of fuel poverty, and, without concerted action, this will get even worse. McFadden basically fell back on the line from the Stern Review – it is cheaper to control climate change than not to control it. This is true, but does not mean that it will be cheap. The issue of reducing fuel poverty will almost certainly be the top political issue around the climate agenda in the years to come in the UK.

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