Kiran Stacey Budget constraints knock UK green policies off track

David Cameron may regret saying he wanted the coalition to be the “greenest government ever”. Not because he didn’t mean it, but because as ministers strive to keep to the tough spending allowances granted by the Treasury, it is an aim that seems to be slipping further and further away.

The last week has seen a slew of announcements that appear to signal a retreat by the government from its green ideals. Firstly, we had the cut to solar subsidies in the form of the feed-in tariff.

Officials at the energy department claim the changes to the feed-in tariff are primarily aimed at redistributing the money away from large-scale solar farms and towards households and small businesses, rather than cutting it. But if this was the case, the amount of money that had been cut from large producers would surely have been recycled in the form of higher subsidies for smaller ones.

Instead, what happened is that an overall £30m was cut from the solar subsidy budget. And it is no coincidence that the Treasury has asked for savings of £40m from this budget by 2014-15.

Then on Tuesday, we had advance warning of two other moves in Wednesday’s Budget which will be viewed by environmentalists as regressive steps.

The first is the news that the green investment bank will not be able to borrow until 2015. Once again, this was a direct shoot-out between green and financial concerns, and once again, the financial won out. For while energy secretary Chris Huhne wanted the bank to start raising its own funds as soon as possible to put into green projects, the Treasury didn’t want the extra liabilities on its balance sheet.

The second is that ministers have decided against raising a new levy on consumers to pay for carbon capture and storage. Instead, they hope to be able to fund the £3bn needed for three future projects from the additional revenue taken from the carbon floor price.

What is certain is that CCS needs government money to progress: Powerfuel’s entry into administration last year proved as much. What is much less certain is whether the carbon floor price will be enough to pay for it, especially since the actual level at which the price is to be set has not yet been decided.

Given these three policy decisions, it is little surprise that a new survey from Ernst & Young has found that only 13 per cent of UK-based corporates, financiers and cleantech companies believe the coalition will create an environment for cleantech success in 2011. This is down from 38 per cent towards the end of last year.

Green campaigners are worried. Jim Footner, head of the climate campaign at Greenpeace UK, argued that Cameron should intervene in this apparent battle between energy secretary Chris Huhne and the chancellor, George Osborne:

Only a last ditch intervention from David Cameron will be able to breathe new life into the government’s green agenda, which is currently being strangled by Treasury officials.

With clean energy programmes being axed rather than strengthened, you have to ask what it will take before ministers finally reign in their mandarins and seize the potential for clean energy and the bounty of jobs and investment that would come with it.

It’s short-sighted, but unsurprising, that green initiatives should fall by the wayside as the government rushes to balance its books. But every time it happens, the public will ask, “I thought this was meant to be the greenest government ever?”