CLIMATE CHANGE | IN FOCUS
around 45 per cent of the EU’s greenhouse gas emissions. The ETS works on the “cap and trade” principle. The EU imposes a limit on the total amount of gases that can be emitted every year, which is reduced on an annual basis. Within this Europe-wide cap, companies receive or buy emission allowances that they can trade, giving them an incentive to become more energy- efficient and invest in low-carbon technology. However an initial over-supply of emissions permits and a drop in demand in the wake of the global recession has led to a fall in the carbon price. Closer to home the government unveiled
plans for far-reaching reform of the electricity market in 2011 as part of the emissions reductions targets set out in 2008. The proposals, which are part of the Energy Act that received Royal Assent in 2013, include a carbon price floor to underpin the ETS, long-term contracts with low-carbon energy providers known as “Contracts for Difference feed-in tariffs” and an emissions performance standard to restrict future use of the most carbon-intensive forms of power generation. Finally the reforms established
Opposite: Businesses and households alike need to address the issue of energy efficiency
a capacity market that offers all capacity providers a steady, predictable revenue stream on which they can base their future investments. In return for this revenue (capacity payments) they must deliver energy when needed to keep the lights on, or face penalties. The strategy is to use market mechanisms
to attract investment into low-carbon generation and help green energy become part of the solution to increasing supply at a time of increased demand and the planned closure of existing, more carbon-intensive electricity plants without imposing the financial burden wholly on consumers. Meanwhile the Green Deal scheme
enables households to make energy-saving improvements to their homes such as insulation, double-glazing and better heating systems and find the best way to pay for them. It creates a market for providers to deliver measures that will increase the energy efficiency of properties at no up-front cost to the consumer.
BUSINESS OPPORTUNITY Businesses have realised that this agenda represents a major opportunity as long as the right policies are in place. Tackling climate change means using energy more efficiently,
future-proofing businesses against climate threats and moving business operations towards carbon neutrality. Businesses that use less power will see the benefit in their own bottom line, especially if energy prices rise. As the CBI’s 2012 report The Colour of Growth
showed, maximising the potential of green businesses could provide up to £20 billion to the economy in the financial year to April 2015 alone. In 2011/12, the UK green business sector had an annual increase of 4.8 per cent and has carved out a £128 billion share of a world market worth £3.4 trillion. This growth translates into investment and jobs on the ground, with government figures showing that around 940,000 people were employed in green business in 2011/12. The UK’s Green Investment Bank, the first of its kind in the world, offers £3.8 billion of funding from the UK government to invest in sustainable projects. The UK’s energy infrastructure needs £200 billion in investment over 20 years, which provides a huge opportunity for businesses that can meet that demand. While the debate over climate change has moved on leaps and bounds over the last 50 years, it is clear that finding a global agreement to achieve the reduction in emissions needed to stem the rise in global temperatures remains a real challenge.
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