Delivering on a low carbon economy: Joan Ruddock, Minister for Energy and Climate Change

Q. The CRC Energy Efficiency scheme comes into effect in a week's time. How prepared does the Government think businesses are and how severely will it come down on companies that have not signed up to it or are not properly prepared for it?

A. We, together with the Environment Agency (EA), have continued to make significant in-roads in raising awareness of CRC and ensuring potential participants have detailed understanding of what CRC is, how it affects them, and what they need to do to assess qualification and comply.

We are confident that through the media activity and the EA’s targeted approach to the billing addresses, most participants are aware of the CRC and their obligations, at least in broad terms. Many are highly informed. The EA have also commissioned work to measure the level of awareness.

To ensure compliance there needs to be penalties. The penalty regime is designed to be proportionate and fair, ensuring that the cost of the penalties is higher than the cost of non-compliance. The EA will be responsible for administering the penalties. However we are hoping they won’t be necessary as we believe the reputational impact of non-compliance will be a significant driver for businesses to comply.

Q. How confident are you it’s going to be effective given the trouble the EU ETS has had to date in securing a high enough price for carbon?

A. The current lower carbon allowance price is due to a variety of factors including reduced manufacturing output and lower electricity demand. Allowing carbon allowance prices to reflect these changing market fundamentals is necessary for achieving fixed emissions reductions at least cost, as it incentivises participants to change their behaviour accordingly.

We are confident that the CRC scheme will deliver emission reductions savings of at least four megatonnes of CO2 per year by 2020.

The carbon savings from the CRC will be determined by the emissions cap which will apply from 2013.

We also believe CRC will stimulate changes in behaviour and infrastructure through introducing new financial and reputational drivers.

Q. The Government is legally obliged to make carbon reporting mandatory for all businesses by 2012, unless it can come up with a good enough reason to Parliament before that. Ed Miliband has hinted that it could come into force before that. Can you give me the Government's current thinking on this matter and do you think it is something that smaller businesses can realistically afford/have the resources to address?

A. We have taken note of the views of a number of leading stakeholders, such as the Aldersgate Group, who support the introduction of mandatory carbon reporting, particularly for larger companies. We also recognise the importance of giving certainty to business on this matter so that they can plan accordingly. However, the Government is currently undertaking a review evaluating the contribution of greenhouse gas reporting, as required under the Climate Change Act. The review is due to report by December 1 this year. The results of that review will help to inform decisions on whether to make reporting mandatory or not. We have also said that we would undertake a further public consultation before a decision is taken on whether or not emissions reporting should become mandatory.

In relation to the possible impact on small businesses, one of the issues which the review will consider is whether a threshold should be set, below which the regulations will not apply. But more generally in relation to minimising the administrative burden, it’s an important principle that any new laws on climate change should meet the seven specific tests for better climate change regulation published by the Better Regulation Commission and subsequently adopted by the Government. That includes, for example, making sure that new policies in this area should be consistent with a healthy UK economy and keep administrative costs to a minimum.

Q. Do you accept that 'climategate' and 'glaciergate' have undermined the validity of the scientific claims about man-made climate change and what is the Government doing to reassure businesses that investment in carbon reduction is not only the right thing to do but commercially sensible?

A. We have seen nothing that undermines the main body of climate research, which goes back many decades and has involved some of the best scientists in the world. Although it is clear that there have been some errors and possible misjudgements, we know that CO2 emissions in the atmosphere are growing at an unprecedented rate. We have every reason to accept that that is the result of human activities.

The UK supports the Intergovernmental Panel on Climate Change (IPCC) in planning to learn from mistakes and strengthen its procedures to ensure that its processes are properly followed. We remain committed to the IPCC as the primary source of information on climate change science. Recent errors have not changed the fundamental message that human induced climate change is happening and that we must act now to prevent the worst consequences.

Q. Climate change aside, energy security should be a major concern to any business. But is the Government really doing enough to incentivise business to invest in energy efficiency measures, especially given the current economic situation?

A. This shows we can meet the national interest of tackling climate change and reducing our dependence on foreign energy at the same time as we help people save money.

The UK is leading the way in tackling climate change and in the move to a low carbon economy. Businesses and the public sector must play a central role including all Government departments, regardless of size. The CRC Energy Efficiency Scheme has huge potential to drive cost-effective energy efficiency savings amongst UK organisations and as a result increase the demand for green technology. There are clear benefits for business from positive, immediate action to tackle climate change.

The CRC Energy Efficiency Scheme will incentivise organisations to become more energy efficient, to save significant sums of money on fuel bills, and to show customers, clients and competitors that their organisation is a leader in tackling climate change.

The Carbon Trust is an invaluable resource and offers businesses access to practical advice on lowering their emissions and even loans to secure low carbon commercial property. They will refurbish up to 50 properties over the next five years to best practice low carbon standards. Occupiers will then be offered space at market rates benefiting from significant savings on energy bills. Initiatives like these aim to prove that green business opportunities can deliver the secure long term returns investors demand.

Q. The feed-in tariffs come into effect on April 1 and as well as householders, businesses are also set to benefit, but there are questions being raised about the return on investment from the tariffs being sufficient to encourage businesses to invest - what do you say to that?

A. We're hearing from lots of businesses that the rates of return that we've aimed to deliver, of between five to eight per cent for well sited technologies, are sufficient to make them consider investing in these technologies.

Q. Early adopters of onsite renewables will not be eligible for the same tariffs as those installing new ones from April 1 under current Government rules. Do you think that is a sensible policy?

A. We are introducing FITs to incentivise new deployment of small-scale, low carbon technologies. Existing generators took investment decisions based on the support that was available at the time. Providing them with additional financial support in excess of what they were expecting when they invested will not affect the amount of generation that their installation delivers.

Increasing rewards to existing users will increase the cost of FITs, which will feed through into higher electricity bills for all consumers, without the benefit of a corresponding increase in uptake or electricity generation. We therefore do not believe that this is a cost-effective measure.

Q. The Government has made much of the new green industrial revolution, the tens of thousands of green jobs and the many new and exciting business opportunities that are going to be created by moving to low carbon economy. But, whichever party wins the next election, is any of this realistic, given the huge state deficit Britain faces?

A.The current transition to a low carbon economy is undoubtedly a challenge but one that will reap huge rewards for the UK bringing massive job and growth opportunity. A progressive industrial strategy is about coming out of recession, building jobs in the low carbon growth industries of tomorrow.

We have made a series of active Government interventions to make the UK a leader in low carbon goods and services with an estimated 1.2 million people in green jobs by 2015.

We have announced our Carbon Capture and Storage (CCS) Industrial Strategy highlighting an industry worth up to £6.5 billion and sustaining up to 100,000 jobs by 2030. And we have published our home energy management strategy which will provide up to 65,000 jobs in the green homes industry with home owners could see energy bills cut by £380 a year.

Recently, we unveiled an £80 million loan to a UK firm to build a major facility to supply components for the civil nuclear industry, an essential development in the nuclear supply chain to meet the demand of the next generation of nuclear power stations.

Another example of the low carbon economy in action is the recent announcement that Nissan will locate its new electric car plants in the North East creating new green jobs and bringing investment to the area.

Moving to a low carbon economy is crucial to tackling climate change and ensuring our energy security, but it is also a transition that provides opportunities to boost jobs, skills and investment in Britain.

Q. Do you think Mexico will deliver where Copenhagen failed to?

A. The Copenhagen Accord represents serious progress and shouldn’t be underestimated. We did after all agree there that we wanted to keep global temperatures to under two degrees. Even though it's not everything we wanted, if countries deliver at the high end of their offers, this would represent real progress towards a two degree trajectory. We also saw a commitment from the developed world to provide up to $30 billion in short term climate finance for those most in need and to raise $100 billion per annum by 2020.

The COP16 in Mexico will be an opportunity to build on these achievements and work towards agreeing a comprehensive legal instrument which incorporates all of these actions.

Related news:
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Related links:
www.greenwisebusiness.co.uk/resources/incentives-for-generating-renewable-energy
www.greenwisebusiness.co.uk/resources/emissions-measuring-and-reporting
www.decc.gov.uk