Could the Budget have been much worse for the green agenda?

George OsborneGeorge Osborne reiterated today the UK government’s “determination to be the greenest government ever”. But given what we already knew, most of the new information contained in Wednesday’s Budget seems to be set against that agenda.

Let’s take the measures one-by-one:

1) CCS support. We already knew that £1bn was pledged for round one. The new information in the Budget is that round two will be funded largely by the carbon floor price.

But as Mr Osborne himself admitted, this won’t be enough (at least at the level it has been set) on its own. Further money will be required from general taxation, which leaves second round CCS projects fighting alongside everything else for a rapidly diminishing pool of government spending.

2) Carbon floor price. Again, we knew it was coming, the only question was how much it would be. Today we found out: £16 in 2013, rising to £30 by 2020. But both of these are pretty much exactly where traders are expecting the market to be anyway. Richard Gledhill, a partner at PwC says:

The current price of EU Allowances for delivery in 2013 is around €19, which is just above the starting point for the floor, and the £30 price at 2020 is in line with brokers’ forecasts, though clearly that far out, the outlook is much less certain.

This means the Treasury has given investors certainty, but no extra incentive to invest in green power.

To be fair, on this element, the news could have been worse: DECC modelled three scenarios when considering this policy, a price of £20 in 2020, one of £30 and one of £40. Ministers have chosen the middle option.

3) Green Investment Bank. Mr Osborne said: “We’ve already committed £1bn to it. Today I commit £2bn more, funded from asset sales and underwritten by the Treasury.” Those are significant amounts of money. But the only way the “bank” will really be able to punch its weight will be to borrow. As Chris Huhne, the energy secretary, himself has said: “The green investment bank must be a bank. Ducks quack, and banks borrow as well as lend.”

So when will the green bank be able to borrow? 2015/16 – not until the next parliament. And even then, only if the government hits its own debt targets. That is a lot of ifs for anybody wanting to benefit from GIB funding.

4) The big one, as far as Thursday’s headlines go, is of course the cut in fuel duty. This makes sense if the aim is to help out the poor motorist struggling under the weight of £1.30-a-litre petrol. But it certainly is not a green move, and environmentalists have responded with anger. This is from Friends of the Earth:

The government talks about ending our fossil-fuel dependency, but like a 40-year-old smoker pledging to give up in 10 years’ time, the chancellor is taking a reckless gamble.

Of course, all of these moves are justifiable: both the taxpayer and the government are cash-strapped (at least, the government is, given the targets it has set itself). Saving money on these projects (which all of these moves do for one of those two groups) makes sense. But it takes some deft spin to dress them up as part of being “the greenest government ever”.

 

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