Opinion


(4) building a low carbon UK; and (5) supporting individuals, communities and businesses to play their part.


Te Renewable Energy Strategy is geared towards meeting the European Union target of having 15 per cent of all energy produced by renewables by 2020. Tis means that the 2 per cent contribution that renewables currently provide to our energy production has to increase seven-fold in just over a decade. However, the UK Government has been candid about the implications these combined measures will have on household bills.


When announcing the publication of the White


Papers, the the Environment Secretary, Ed Miliband, said bills are likely to rise. Tere has also been a frank admission by the Government that its involvement alone will not be enough to ensure carbon budgets are met.


Private sector investment


Private sector investment will be crucial. Te precise breakdown of the 2020 renewable energy target between technologies will depend on how investors respond to Government incentives. Similarly, the UK has sought to make the private sector a key player in reducing carbon emissions. Te White Papers demonstrate the UK’s broad strategy. Legislation will be introduced to tighten environmental standards; for example, by limiting the permitted average tailpipe emissions for new cars. More importantly, however, in tandem with issuing levies against polluters, the Government is creating economic incentives and opportunities to those embracing the green agenda. For example, the Carbon Reduction Commitment


(CRC) announced in the Climate Change Act has been incorporated into the Transition Plan. Designed to target organisations not covered by the similar EU Emissions Trading Scheme (eg, supermarkets, hotel chains and government departments), the CRC imposes a mandatory cap and trade scheme whereby organisations consuming a certain amount of electricity (equivalent to a yearly energy bill of around £500k) are allocated a prescribed level of permitted energy usage. Exceeding that level will lead to large fines.


Tere are two ways to avoid the fines; reducing energy consumption and selling your unused allowance, or increasing your own allowance by buying it from another organisation. Te trading of carbon allowances is therefore set to become big business. Tis is perhaps the most interesting element of the UK’s approach; reducing emissions while encouraging industries to facilitate the green agenda.


Te economic opportunities created by such an approach are compelling. If the Government’s current


strategy succeeds then the UK could find itself as a world leader in a low carbon and environmental goods industry already worth approximately £3 trillion worldwide.


Te UK could also insulate itself from fluctuating commodity prices, seen most notably in last year’s spike in the price of oil. Green industries are set to grow significantly in the


future as countries strive to reduce their emissions and carbon trading becomes a more prevalent and lucrative marketplace. If public money and private investment combine


effectively to stimulate innovation and new technology, the Government estimates that there could be more than 1.2 million ‘green collar’ jobs in the UK by 2015. Notwithstanding the positives, there are some potentially significant negatives which can be associated with the carbon reduction commitment – not least of which is, where will the required funding come from? Te Government does well in setting out the business case for adopting a whole new thought process to the climate change issue, most notably the economic benefits on offer, but it comes up woefully short in detailing what incentives will be offered to companies and investors (ie, in the form of tax breaks, etc.) that help us achieve our carbon reduction targets. Coupled with the lack of any clearly designated funding sources for clean energy alternatives is the argument that penalising current forms of energy production is unhelpful. Why tax the affordable forms of energy we have today to subsidise forms of energy that may not be able to compete in the marketplace? Economies riddled with subsidies are sometimes


viewed as less efficient, less competitive and slower growing.


Te argument, and a convincing one at that, is that


we should instead focus on making our existing energy sources cleaner. Unfortunately, the White Papers do not touch on this potential dichotomy.


Challenges into opportunities


Te challenges in meeting the UK’s ambitious climate change goals are numerous and significant. However, the recurring theme in the White Papers is that the potential benefits make it possible to turn these challenges into opportunities. Strong and immediate remedial action can still head off the worst effects of climate change while improving the security of the UK’s energy supplies and bringing wider economical benefits. Only time will tell where the UK ends up in its quest to be the leading country in the fight against climate change, although by the Government’s very own admission, time is not something we have. ●


Simon W Holden is an associate in the London, UK, office of international law firm Faegre & Benson LLP. www.faegre.com


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