Green Foundations 2009 Reception

The Aldersgate Group Chairman, Peter Young, briefly outlined the Green Foundations 2009 report and introduced the speakers.

Far from presenting the need to sacrifice environmental goals, the recent economic turmoil reinforces the importance of better regulation and is an opportunity to reassess the sustainability of current economic practices.

The report argues that our long-term economic success depends on the sustainable use of natural resources; at the company level, good environmental performance translates to tangible economic benefits and is a major source of competitive advantage; environmental regulation creates new business and employment opportunities in a fiercely competitive global marketplace; policy appraisals must accurately assess environmental costs and benefits; and the better regulation agenda must not lose sight of the need to maximise outcomes in the drive to reduce unnecessary costs.

The scheduled keynote speaker, the Secretary of State Ed Miliband, is unable to attend due to a Council of Ministers of meeting in Brussels. This punctuates the significance of the key messages in the report, with EU leaders finalising the details of the EU 2020 for reducing carbon emissions in the context of weakened resolve by a number of EU member states.

Mike O’Brien MP, Minister of State, Department of Energy and Climate Change, outlined the role of the new Department and some of the current challenges.

The Department will be dealing with some of the most crucial issues which are facing not just Britain but our planet. It will ensure that real intellectual tensions in terms of ensuring the lights are kept on, making energy affordable, and also making sure that climate change targets are achieved are resolved in acoherent and unified way.

The components of the economic downturn are clear; a breakdown in credit markets and a large uncertainty about the nature of their recovery; a slowdown and possible deep global recession in the real economy; and high domestic fuel and energy prices. At the same time, there is a duty to deliver on the climate change agenda, which is a long-term international problem that requires long lasting policy solutions agreed between all the major polluting and non-polluting
countries.

The credit crunch, however severe, must not affect the rationale for action. Lord Turner showed in the Climate Change Committee’s report that the cost of doing nothing is higher than the cost of doing something: even in the current economic turmoil. It is essential that the UK continues to take action to reduce its contribution to global carbon dioxide emissions, and it is essential that it gets off to a strong start in the coming years.

While traditionally business says it doesn’t like regulation, in the context of climate change it will enable companies to gain advantages, make profits and create whole new sectors. The government is committed to ensuring that policies to reduce emissions will be achievable, cost effective and consistent with economic growth in the long term. Businesses must be supported to become more energy efficient – often the most cost effective way to tackle climate change and ensure the lights are kept on – through regulation (such as the Carbon Reduction Commitment and Climate Change Agreements), promoting smart metering, providing better information, supporting innovation and new technologies through increased funding and providing long-term certainty to the market through legislation.

Despite the credit crunch, the UK continues to be regarded by many foreign investors as one of the most attractive places to invest in green energy. For example, October‘s announcement that Masdar from the Middle East will be investing in the London Array wind farm project was a major achievement. In terms of the renewable energy market, the credit crunch will affect the availability and the cost of capital for small firms, but virtually integrated companies are well placed to manage their own capital requirements. The government is ensuring that it provides support to medium and smaller companies, such as with interest free loans for energy efficient investors.

Part of the government’s fiscal stimulus programme will provide additional resources to support low carbon growth and jobs by investing £535 million to accelerate capital spending. This will help to save an estimated 350,000 jobs already believed to exist in the low carbon economy, with the prospect of further jobs in the future.

If Britain can get the right level of commitment from the public sector, the private sector, and individuals, it can be at the forefront of the transition to a low carbon economy and will benefit substantially in the long run economically. It’s a big agenda, not only for the UK but for the wider world as well.

Lord Chris Smith, Chairman, Environment Agency, made the case for safeguarding the environmental agenda during the economic downturn.

The creation of DECC is enormously welcome for two principal reasons. Firstly, it means that climate change issues will be at the absolute heart of the energy debate, particularly in light of Lord Turner’s report which shows that the UK’s ambition has to be the complete decarbonisation of electricity generation over the course of the next 30 to 40 years. Secondly, there will now be two cabinet members whose first thought will be climate change and sustainability in any cabinet discussion.

The message from the Aldersgate Group in this time of huge global financial difficulty is that safeguarding the environment and surviving the global financial downturn must go absolutely hand-in-hand. There are four main reasons why we mustn’t lose our nerve environmentally simply because things are difficult economically:

(1) Green business is good business. The evidence is very clear - companies which invest in environmental management systems consistently outperform their less environmentally aware counterparts. Research commissioned recently by the Environment Agency shows that shares of the top environmental performers outstripped the laggards by 12% in the oil and gas sectors and 43% in the forest and paper products sectors.

(2) Regulation actually delivers real benefits for business as well as for the environment and wider society. Smart regulation – not unnecessary red tape – has led to the energy, chemicals, metals and minerals sectors reporting a reduction in greenhouse gases by 4%, releases of sulphur oxides by 69%, releases of fine particles by 53% and releases of nitrogen oxides by 12%, leading to a better environment to all.

(3) It is extremely important, especially in the current downturn, for business to continue to look to the long term rather than just to the short term. The recycling industry is a classic example. Currently, the demand for recycling materials, particularly in India and China, has diminished, and there is a danger that we stop the emphasis on recycling from domestic household waste here in the UK. The market will recover – and local authorities must hold their nerve in the meantime. Around 30% of all household waste is recycled across the UK, a substantial improvement over the last decade, and we mustn’t lose sight of the habit of recycling simply because there is a temporary downturn in the market.

(4) Green technology and renewable energy offer a golden opportunity for the kind of stimulus into the economy that the government is seeking and could build on a number of very welcome initiatives. Not only would this represent a substantial benefit now but it would be a real wealth and energy generator for years to come. Also, there is a prospect of gaining first-mover advantage in industries such as tidal power, wave power and carbon capture and storage which provide the opportunity to develop the expertise, skills and companies here in Britain, which can then sell the technology around the world in years to come.

The message to businesses, to governments, to all of us is clear: we must in these times of economic difficulties hold our environmental nerve and carry on making the case for long-term sustainability, climate change and environmental issues which are going to be here for decades to come. While there will be ebbs and flows in financial markets and national economies over the course of the next 4-5 decades, environmental imperatives will remain constant. The report by the Aldersgate Group is particularly welcome - it’s detailed, comprehensive and offers sound advice, and hopefully all of us will take this report away and give it a really good boost in our companies, in government and in our agencies.

Mark Clare, Chief Executive, Barratt Developments, outlined the business case for leading on environmental issues and some of the challenges facing the housing sector.

The reason Barratt Homes is focussing on environmental issues is principally because it makes sense for the business. There are three key reasons for leading on environmental issues in the house building sector:

(1) In order to gain competitive advantage against competitors;

(2) There is a compelling case for action now and it will cost an awful lot more to tackle environmental issues later; and

(3) Half of all gas and electricity in the UK is consumed in homes, so it is something that Barratt Homes are very focussed on.

One of the key challenges for the housing industry will be how to implement the changes needed in the way homes are powered. This will require companies like Barratt to work closely with the energy industry and government to find the right solutions. For example, I led the Green Building Council’s work on the definition of zero carbon and this helps bring the different constituents together.

Given the current economic backdrop, there is a very strong debate about how far we should go, and more importantly how fast we should go. It is essential not to compromise the direction of travel. At Barratt Developments, we are intending to continue to invest because this will deliver the competitive advantage that will be really important in this particular industry. There is a great advantage for being at the vanguard of this revolution - besides the environmental advantages. For example, Barratt Developments was the first major house builder to test microsolutions and build a level 6 house, and we are planning to build the first zero carbon community (in Bristol).

One of the most significant issues that has to be solved is finding a way of making zero carbon affordable and so reducing the cost very substantially. It is not feasible for £20-30k – which is what people are saying it would cost today – to be absorbed by either the home buyer or the house builder or the land owner, especially in the market we’re in today. Also, customers must really want to live in these homes of the future. Therefore, they must be easy to use and comfortable to live in, especially as temperatures are set to increase.