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Green projects survive the worst of spending review cuts

Michelle Ward
20th October 2010
The Renewable Heat Incentive, offshore wind, clean coal and the Green Investment Bank received funding today, even as Chancellor George Osborne announced £81 billion in public spending cuts.
Chancellor George Osborne announced during the final part of the Comprehensive Spending Review (CSR) today, that the Government would maintain its commitment to being one of the "greenest governments ever" and fund green initiatives such the Green Investment Bank (GIB), offshore wind manufacturing, carbon capture and storage (CCS) and the Renewable Heat Incentive (RHI).

Science and the environment have still taken a hit, but it is less than some feared. The £4.6 billion budget is the same in cash terms, and will amount to a cut of less than 10 per cent over four years. From this budget, efficiency savings of £324 million will have to be found.

Osborne said the UK is a leader in scientific research and that is the key to future economic success, and therefore should lose as little funding as possible.

"Research and technological innovation will help us with one of the greatest scientific challenges of our times - climate change - and it will support new jobs in low  carbon industries," the Chancellor said.

Renewable Heat Incentive
Osborne announced funding for the RHI, which will incentivise homeowners and businesses to generate their own renewable heat, but this also means a phasing out of the Warm Front programme. The Department of Energy and Climate Change (DECC) has confirmed that the RHI will receive £860 million in funding and begin in June 2011.

The Renewable Energy Association (REA), which has been lobbying for the incentive, said details on the subsidy are still needed, but cited this as a big step for the UK.

"Today's announcement is a huge relief and a very big breakthrough," said Gaynor Hartnell, chief executive of REA. "Finally renewable heat moves to the heart of UK energy policy, exactly where it belongs.

"While the announcements today are tough in many areas there is a good news story here to celebrate – the Coalition Government is putting its money where its mouth is."

Green Investment Bank

The Government promised £1 billion to fund the Green Investment Bank, which falls £1 billion short of the amount Greenpeace says is necessary. The organisation climbed the Treasury yesterday, urging ministers to go ahead with the bank.

Greenpeace expressed disappointment after the announcement today, however, saying that the £1 billion fell short of the amount needed.

"A poorly financed fund is not a green bank," said John Sauven, Greenpeace executive director. "It doesn't have the financial clout, or the independence to do the job, and will end up as nothing more than an ill-equipped quango.

"So if this Government wants to live up to its own billing as the greenest ever, this bank must be independent and properly financed. Anything less will dash hopes of a new green economy for Britain, and our chances of tackling climate change and energy security."

By using other sources to build on the £1 billion of direct funding, the bank's capitalisation could reach the £4 to £6 billion that is recommended by business leaders and independent analysis, said the Aldersgate Group, a business coalition.

Deputy director for the organisation, Andrew Raingold, said the creation of the GIB could boost economic growth. "We welcome the Chancellor's announcement to put the Green Investment Bank at the centre of the Government's plans to invest in the country's future," said Raingold. "If the institution has a remit to issue bonds and leverage capital at scale from the private sector, it can significantly reduce the massive financing gaps for green technologies over the next decade, stimulating growth and jobs."

Carbon Capture and Storage

Secretary for Energy and Climate Change, Chris Huhne, succeeded in securing £1 billion for carbon capture technology, although this was half the amount he had bid for.

"DECC is playing its part in tackling the deficit," said Huhne. "Like the rest of the public sector we have taken some tough decisions, but we remain on course to deliver on our promise to be the greenest government ever. We will help create green jobs and green growth – and secure the low carbon investment we need to keep the lights on."

The DECC suffered an annual cut in budget of five per cent. DECC promises to reduce resource spending by 18 per cent in real terms and increase capital spending by 41 per cent in real terms.

Offshore wind
Trade association RenewableUK has backed the announcement today for £200 million to be invested in low carbon technologies including offshore wind, saying it appears that the £60 million fund to upgrade ports for offshore wind turbine manufacturing it has been lobbying for has been retained within it.

"Retaining the Ports Fund will give the industry a huge boost and establish the UK as a major force in renewable energy manufacturing," said Maria McCaffery, RenewableUK chief executive.

Impact for Defra

The Department of the Environment, Food and Rural Affairs (Defra) will have to make savings of an average eight per cent per year. Over the course of the Spending Review period, Defra will reduce resource spending by 29 per cent and capital spending by 34 per cent. The Department’s administration budget will also be reduced by 33 per cent.

"Our strategic aim is to deliver on the Prime Minister’s pledge that the Coalition will be the greenest Government ever, whilst playing our part in tackling the economic deficit that we have inherited," said Caroline Spelman, Environment Secretary.

"This settlement reflects the need to make significant savings alongside meeting the priorities we have set and maintaining important frontline services in respect of flood defences, environmental protection and animal health monitoring."

FiTs
Despite fears over the future of green subsidy schemes in the spending review, the Feed-in Tariff, which pays people and businesses for small scale green electricity generation, is set to remain as it is until an already planned review in two years.

Renewable energy supplier Good Energy said it was pleased that the immediate threat to Feed-in Tariffs (FiTs) has been avoided.

"These tariffs are essential in driving renewable energy generation amongst consumers and businesses," said Juliet Davenport, chief executive of Good Energy. "FiT has a vital role to play in reaching the Government's commitment to achieving at least a third of energy generation from renewable energy by 2020."


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Green projects survive the worst of spending review cuts
Chancellor George Osborne announced spending across a number of green projects today
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