The ozone layer: how to solve a global environmental challenge

Last month, researchers published a study showing that the hole in the ozone layer had started to close. It found that the size of the ozone layer hole is now 4 million square kilometres smaller than in 2000. Moreover, their analysis showed that this can be directly attributed to the reduction in chlorofluorocarbons (CFCs) in the atmosphere.

With this news, the danger from one of the greatest environmental challenges of the 1980s and 1990s seems to be receding. This blog will briefly examine the environmental problem, the political solution that was devised to address it, and the policy lessons for tackling other global environmental challenges.

The problem  

The ozone layer protects the Earth’s surface from harmful ultraviolet rays from the sun. In 1985, scientists discovered conclusive evidence of a hole in the ozone layer above Antarctica. It was also found that this phenomenon was being caused by manmade ozone-destroying chemicals, such as CFCs, which were found in aerosols and refrigerators.   

Depletion of the ozone layer has been shown to lead to adverse health and environmental outcomes. It increases incidence of skin cancer and cataracts, as well as a harming plant growth and the production of phytoplankton, which is vital to marine ecosystems.

The solution

The international response to this scientific consensus was rapid and decisive. In 1985, the Vienna Convention was agreed, which established a framework for international cooperation on research and monitoring. This led to the signing of the 1987 Montreal Protocol, which was championed by green conservatives Margaret Thatcher and Ronald Reagan. Now hailed as the most successful international environmental agreement ever signed, it imposed legally binding controls on the production and consumption of ozone-depleting materials. It has now been ratified by every country in the world, making it the only international environmental treaty to enjoy such a status. 

The seminal agreement has already had a major impact on human health. Research by Cambridge University in 2012 found that the Montreal Protocol had prevented 2 million cases of skin cancer per year around the world, which represents 14% fewer skin cancer cases per year.

The environmental benefits are already being felt. Chipperfield et al. published a study in 2013 showing that, without the Montreal Protocol, the ozone hole over the Antarctic would have been 40% bigger and a new ozone hole over the Arctic would have formed. 

CFCs have a long lifetime in the atmosphere, and so scientists do not expect the hole to close up completely until 2050 at the earliest. Moreover, some of the chemicals, such as fluorinated gases (F-gases), devised to replace ozone depleting substances, are potent greenhouse gases. However, last month’s research shows positive signs that not only has the depletion been halted, but the environmental damage is starting to be reversed.

Policy lessons

Caution is required before seeking to apply the policy lessons of the Montreal Protocol to other global environmental issues like climate change. The reliance of the global economy on carbon-intensive fossil fuels is much greater than it was on ozone depleting substances. The scale of the clean energy transition, and the disruption it will cause, is therefore of a different order of magnitude to the phasing out of CFCs.

However, one important lesson that can be applied is that international agreements on the environment require broad political consensus, forged by strong leadership. Margaret Thatcher and Ronald Reagan were both free-market conservatives. Yet they led the international community in imposing these environmental regulations on businesses. Unlike with ozone depleting substances, there has been a consistent failure to align the negotiating interests and priorities of the major carbon polluting nations, which has limited the effectiveness of international climate agreements to date.

As Bright Blue has argued previously, concern for the environment should not be confined to either the political left or right. Widespread political cooperation on tackling these challenges is vital if international agreements are to have a real impact. The success of the Montreal Protocol is testament to the power of evidence-led, political consensus on environmental threats.

Ruling the waves: Britain’s marine reserves

Our seas and oceans support a great diversity of species and habitats. With ever greater levels of human development of land, the oceans are now home to around 80% of the world’s biodiversity.

Sadly, however, Unesco reports that 60% of the world’s major marine ecosystems that underpin livelihoods have been degraded or are being used unsustainably. Protecting this rich natural inheritance for future generations is an essential task for policy makers.

Marine protection areas (MPAs) are an important policy tool for safeguarding the underwater natural environment. National governments have the powers to establish them to prohibit any damaging or extractive practices, such as fishing or mineral excavation, within the marine areas for which they are responsible.

Usually, an MPA is designated with a list of protected natural features and enforced by a management authority. Small-scale, local fishing is allowed in some MPAs. However, one of the major challenges for governments when implementing MPAs is ensuring that there are sustainable livelihoods for local populations, particularly those dependent on the fisheries industry, while depleted fishing stocks recover. This can require government investment in coastal communities to enable diversification of incomes.

Previously, enforcement of MPAs by patrol boats was difficult and expensive. But modern satellite monitoring has made them a more attractive, cost-effective policy for governments. In 2015, the Pew Charitable Trusts and Satellite Applications Catapult launched ‘Project Eyes on the Sea’. This new system, which the UK government uses to monitor MPAs in overseas territories, analyses multiple data streams in near real time to identify suspicious vessels. It then sends an alert to system users, so that rapid action can be taken to investigate potentially illegal activity.

Scientific research has found that MPAs effectively safeguard the population and diversity of species. They make marine ecosystems, such as coral reefs, more resilient to environmental problems like ocean acidification and climate change. They allow overexploited species to replenish their stocks. They are also beneficial to surrounding unprotected waters, as species spread out from the MPA to neighbouring seas.

Marine Conservation Zones are a kind of MPA that have been introduced by the UK. The legal framework for these MCZs was instituted by the UK’s Marine and Coastal Access Act 2009, which passed with cross-party support. There are currently 50 MCZs around the UK. The first tranche of 27 zones was established in November 2013, and the second of 23 zones in January 2016. These now cover 7,886 square miles, or around 17% of UK waters. A third and final tranche will be designated in 2018, completing a ‘blue belt’ around the whole of the UK.

Because of the UK’s significant overseas territories, it is able to have a greater impact on the marine environment than simply the seas around the British Isles. The Chancellor announced in his 2015 Budget that an MPA would be established around the Pitcairn Islands, a UK overseas territory in the South Pacific. Once established, this MPA will be around 830,000 square kilometres (roughly equal to three and a half times the size of the UK’s land mass), making it the largest of its kind anywhere in the world.

The Conservative Party’s manifesto for the 2015 general election promised similar MPAs around the Ascension Island and other UK overseas territories. The UK could have a significant impact on the global marine environment, as it controls the fifth largest marine area of all countries in the world. More than 94% of the UK’s biodiversity is found in the overseas territories.

Similar to much of our nature laws, EU regulation has played an important role in the protection of our marine areas. There is still considerable uncertainty about the future relationship the UK will have with the EU, and which environmental rules will be retained. Much of the UK’s policy on MPAs was driven by the introduction of the EU Habitats and Birds Directive, which has been implemented through the Natura 2000 network of nature sites. There is now domestic legislation that covers MPAs, but the initial political pressure came in part from the EU.

The UK has shown that it can take strong national and international action on this issue outside of EU institutions. Through establishing such a large network of MPAs around the British Isles and in the overseas territories, the UK is demonstrating global environmental leadership. The UK already protects approximately 30% of its oceans around the world, a higher percentage than any other country. Given Britain’s historic influence over such large areas of sea, it is a fitting environmental achievement and one that must be strengthened in the future. 

Britain’s forests: not seeing the wood for the trees

Forests are an essential component of our natural environment. They provide eco-systems for wildlife to flourish, beautify landscapes, and provide green spaces for recreation and leisure. Matt Browne, an associate at Bright Blue, has already written for this site about how the National Forest in the Midlands, planted under John Major’s government, is an exemplar of green conservatism in action.

Yet further action is required to improve the state of the UK’s forestry. England has one of the lowest levels of forest coverage in the Europe. Just 11% of its land surface is covered with trees, compared to an EU average of over 44%. Across the whole UK, the figure is not much higher – just 13%.

The pendulum has now started to swing the other way, as forestry’s share of UK land has started to tick up. The nadir came after the First World War, when forest coverage fell to just 5%. The Government now boasts that woodland cover is back to the levels of the fourteenth century.

Policy framework

The twin challenges for government in improving forest coverage are maintaining existing forests and planting new trees.

Ancient woodlands are defined as forests planted over 400 years ago and make up approximately a third of England’s total woodland. They are particularly important habitats for wildlife. They enjoy special protection from development, although organisations like the Woodland Trust claim that many are under threat from a loophole in the planning guidelines. In 2014, the Communities and Local Government select committee recommended strengthening the wording of the National Planning Policy Framework, adapting the clause that allows ancient trees to be cut down if the benefits of development outweigh the loss.

Forests are a sensitive and potent political issue. One of the biggest policy reversals in the last Parliament came when plans were announced to privatise the state-owned Forestry Commission, which administers the 18% of the UK’s forests that are in public ownership.

Following the u-turn, the Government set up the Independent Panel on Forestry to advise on the future of public woodlands in the UK. In response to the Panel’s report, the Government in 2013 announced its target to increase tree coverage in England from 10% to 12% by 2060.

The Government has maintained this commitment, by pledging to plant more trees in the UK in this Parliament. In the Spending Review last year, £350 million was ring-fenced for spending on public forests, with the aim of planting an additional 11 million trees over the course of the Parliament.

Yet analysis last week by the Woodland Trust found that the rate of new tree planting had slowed, and was insufficient to meet the planting rates required to meet the 2060 target. The goal requires the planting of 5000 hectares of trees annually on average, but last year just 700 hectares were added.

Benefits of woodland

The maintenance of forests falls within the Government’s natural capital policy agenda, which provides a framework for ascribing value to and enhancing natural assets. In their latest report, the Natural Capital Committee, set up by the Coalition government, called for more trees to be planted on the periphery of major cities and towns. They argued that this would bring greater recreational benefits and carbon savings than continuing to plant new forests in peatlands. They quantified the net economic benefits of this approach as being worth £550 million per year.

Planting more forests will have a number of important benefits for the UK’s natural environment. First, trees lock up carbon, allowing warming emissions to be removed from the atmosphere and helping to mitigate climate change. The Committee on Climate Change has recommended that an additional 10,000 hectares of trees are planted annually in order to cost-effectively meet the emission reductions in the Climate Change Act 2008. It’s worth noting that the Committee on Climate Change’s recommendation for additional tree planting is twice the level implied by the Government’s 2060 target.

Second, trees can make catchment areas more resilient to flooding. They slow the flow of flood water, by evaporating more water, increasing water absorption by the soil, roughening up land surfaces, and decreasing soil erosion. This helps the environment adapt to the effects of climate change. In her statement to Parliament following the flooding in December 2015, the Environment Secretary Liz Truss MP identified tree planting as part of a long-term approach to flood risk management.

It is also claimed that there are economic benefits of woodland. By quantifying the monetary value of a hectare of woodland in terms of health, climate, business, recreational, and water management benefits, the Woodland Trust has estimated the total value of £270 billion of Britain’s forests.

The Government’s 25-year environmental plan is due before the end of the year. Ministers have indicated already that forests are going to be one of its focuses. It’s clear that greater afforestation offers many public benefits. The challenge is now to increase the rate of planting to match the ambition. The forests planted under this Government could rival the Major government’s National Forest as a demonstration of green conservatism in action.

Releasing the potential of energy storage

Energy storage will play a central role in our future power system. It enables electricity that is generated at times when supply exceeds demand to be stored, and consumed later at peak demand. It’s one of a suite of ‘smart’ technologies that help to balance the grid, which include interconnection and demand-side response.

The benefits of energy storage

Demand for electricity varies significantly throughout the day. At some times, total UK electricity demand can be below 30GW. At other times, it can be just below 60GW. A lot of this variation can be managed through turning up or down power stations, but this can be difficult, particularly with an increasing number of renewables on the grid. Energy storage can help to even out that profile. It obviates the need to build new generating assets in order to meet peak demand. This can save consumers money, because they do not have to pay for expensive new energy infrastructure through their bills.

Energy storage also tackles the intermittent supply of power from renewables, making our energy supply more secure. Because the wind doesn’t always blow and the sun doesn’t always shine, the supply of electricity from renewables is inconsistent. This makes it hard to ensure that electricity supply and demand are always in balance. There are costs associated with balancing the grid, which can prevent renewables from competing with other forms of ‘baseload’ power generation such as nuclear or gas. Storage, therefore, is an important part of successfully integrating renewables into the electricity grid.

Carbon Trust recently produced a report on energy storage in which they quantified the benefit to consumers of further uptake of storage technologies. They found potential for £2.4 billion per year of savings by 2030, which could translate into a £50 annual reduction in household bills. This fall in energy costs comes from optimising existing generation capacity, and from avoiding building new infrastructure.

Different technologies

There are many different technologies that can provide energy storage. On the one hand, there are mature technologies, such as pumped hydroelectricity, which was first developed in the 1920s. The UK already has 2.8GW of pumped hydroelectricity capacity. It works by pumping water from a lower reservoir to a higher one at times of low demand, and releasing the water through the turbines when demand is high.

On the other hand, there are new technologies, such as lithium-ion batteries, like those found in smart phones. The potential growth of these new storage technologies is significant. Analysis from Citi has found that the price of lithium-ion batteries (per kWh) has fallen from $3,185 in 1995 to $320 in 2011, with further decreases projected.

A number of innovative new schemes have recently been announced that show how companies developing this technology in the UK. Nissan this year launched a new vehicle-to-grid scheme for their pure-electric vehicle, the Nissan Leaf. It will enable owners of a Leaf to sell the electricity that is stored in their car’s battery back to the grid at times of peak demand. Statoil has confirmed that they will build a major storage plant, called ‘Batwind’, next to their planned floating offshore wind farm in Aberdeenshire. It will help to optimise the electricity produced at the site and overcome the problems of intermittency.

Growth in energy storage

The market for storage is growing. Last year, when the National Grid invited expressions of interest for 200MW of grid balancing capacity. Bids from electricity storage alone would have surpassed the quota more than four times over. Bloomberg New Energy Finance predicts that by 2040 there will be a 75% fall in the cost of commercial and residential storage systems and the size of the global market will grow to around $250 billion.

But further measures are needed to unleash the true potential of energy storage. The National Infrastructure Committee recently called for a removal of regulatory barriers to storage to ensure it can compete on a level playing field with electricity generation assets. They identify storage as an area in which the UK can become a global leader. Not only can this be done without subsidies, they claim, but it can have a net positive benefit on consumer bills.

The Energy and Climate Change Committee in the House of Commons today published a report echoing calls for regulatory reform. For instance, energy storage is currently ‘double charged’, once for consuming the energy it stores, and again for supplying that energy back to the grid.

Finally, last year, Bright Blue called for the Government to invest in research and development of new electricity storage technologies. And in our latest report, we call for between 5GW and 6GW of storage capacity to be brought online by 2030 to ensure security of supply during the coal phase-out.

The potential for energy storage is great: government and industry now need to release it.

Why conservatives should welcome the circular economy

Not many people have heard about the ‘circular economy’, and even fewer know what it means. But, among environmentalists, it’s increasingly talked of as a major new economic trend.

It’s a term that means different things to different people. But the core of the idea is resource efficiency, the idea of reusing and recycling materials, and maximising the economic value of the things that we produce. It is a move away from the linear economic model of ‘make-use-dispose’, and a way to promote sustainable growth in a future of resource scarcity and a growing global population.

Making the circular economy a tangible concept can be hard. In the Green Alliance’s 2015 report on the circular economy, they outlined some of the different examples of circular economy activities. These include:

·      Reusing. Using the finished product for the same purpose as it was originally manufactured (e.g. using a second-hand iPhone)

·      Servitisation. Using assets more efficiently, such as through leasing or short-term service provision (e.g. renting a room via AirBnB)

·      Recycling. Using recovered materials to create new products

·      Biorefining. Extracting useful, valuable material from biowaste

Domestically, ministers at Defra are supportive of the circular economy. In December 2015, the EU Commission published a new action plan on the circular economy, which includes new common targets for EU Member States on waste and landfill use. It’s something that will increase in importance, therefore, in the coming years. This blog will look at some of the evidence around the economic and environmental impact of the circular economy.

Economic

There are significant economic benefits for businesses of cutting waste and being more efficient in their consumption of resources. A circular economy approach can help firms reduce their costs and make them more competitive globally.

Last year, the Green Alliance analysed the impact of the circular economy on employment. They studied the performance of the waste and recycling industry between 2000 and 2010, a period in which landfill declined and recycling rates rose. During that time, employment in the sector increased from 75,000 to 130,000 people, and sales turnover nearly tripled, up from £6.5 billion to £19 billion. They also examined the potential for the whole circular economy up to 2030. They found that there’s the potential for between 54,000 and 102,000 net jobs to be created in that time.

As more resources are consumed and they become scarcer, businesses that rely on natural resources will become more susceptible to price volatility. The circular economy reduces businesses’ exposure to these price risks. The Ellen MacArthur Foundation, an organisation set up to promote the circular economy, has worked with McKinsey to quantify the benefits to businesses of being more resource efficient. They have found that, by reducing the amount of raw materials businesses need, the net material savings across the whole EU could be between $340-630 billion per year.

Environmental

As well as offering economic benefits to businesses, there are advantages to the environment of a circular economy approach. The circular economy recognises that some natural resources are limited. To achieve sustainable economic growth, countries cannot rely on infinite consumption of finite resources.

Many activities associated with the circular economy reduce greenhouse gas emissions, and therefore support efforts to mitigate climate change. For instance, recycling food waste rather than sending it to landfill reduces harmful methane emissions. Through the process of anaerobic digestion, food waste creates biogas, a low-carbon energy source that displaces fossil fuels.

Circular economy approaches can also reduce pollution that is harmful to the natural environment. For example, the Ellen MacArthur Foundation has produced a report on plastics and the circular economy. Eight million tonnes of plastic leaks into the ocean every year, adding to the total of 150 million tonnes of plastic that is in the ocean today. Plastics also represent about 6% of global oil consumption, and is thus a major driver of fossil fuels use. In a circular economy, these environmental impacts could be mitigated through greater recycling, greater use of reusable packaging, and the use of compostable packaging.  

Conclusion

The more the circular economy approach is adopted, the greater the scale of economic transformation is required. For instance, the Chatham House has argued that a circular economy implies the decoupling of rising prosperity with growth in resource consumption. This talk of economic revolution can make conservatives anxious.

The idea of a circular economy, however, shouldn’t be seen in such stark terms. Organisations like WRAP and the Ellen MacArthur Foundation partner with businesses to develop circular economy approaches that increase their profits. It can be a very practical way of reducing inefficient economic activity and improving the natural environment. Conservatives should ignore the hyperbole, and embrace the opportunity that it offers.

Winning the green global race

Conservatives care for much more than a strong economy, important though that is. Beautiful landscapes and diverse wildlife all have intrinsic value. They improve our quality of life, and conservatives should protect and enhance them.

However, the dichotomy between economic progress and safeguarding the environment is a false one. We are now seeing that the transition from polluting fossil fuels to sustainable energy sources offers a major economic opportunity. Policies to tackle climate change sometimes get framed as harmful for economic competitiveness. But countries that take a strong lead on environmental action can gain a competitive advantage in the new global low-carbon economy. Global investment in new green energy infrastructure is boosting economic growth and creating jobs.

A number of reports have come out in the past month, which have quantified the size of this green economic dividend. These include a major study by the Renewable Energy Policy Network for the 21st Century (REN21), a report by the International Renewable Energy Agency (IRENA), and a survey by the Office for National Statistics (ONS). This blog will highlight some of the principal findings.

Investment

Investment in global renewable energy in 2015 was $286 billion, according to REN21. This is an increase on the previous year’s total of $273 billion. It is also double the amount of investment that new coal and gas-fired power attracted over the same 12 months. In the rankings of countries for renewable power investments, the UK came fourth, after China, the US, and Japan.

A major milestone was achieved in 2015, as renewable investment in developing countries outstripped that of developed nations. Moreover, this crossover has occurred before the effects of the Paris Agreement in December 2015 have been felt, where additional finance assistance was pledged to developing countries to help them mitigate and adapt to climate change.

Employment

There were just over eight million jobs in the green economy globally last year, according to the IRENA data. Europe’s share of this green employment was 1.17 million in 2014. Following a 20% increase in solar installations around the world last year, solar energy is now the biggest green employer overall.

The latest ONS figures show that the UK’s green economy employed 238,500 people in 2014 and turned over £46.2 billion. Energy efficiency is the biggest employer within this sector, supporting 155,000 jobs. That statistic underlines the imperative for a successor policy to the Green Deal to ensure this market continues to thrive, which we will be exploring in the second report from our Green conservatism project.

Low-carbon transport makes up over half of the UK’s green export market, generating nearly £3 billion for the UK economy. This reflects the current strength of the UK’s automotive industry, which now manufactures and exports pure electric vehicles around the world. For example, the Nissan Leaf is produced for the whole European market in Sunderland. With news this week that there are now globally over one million electric vehicles on the road, the potential for growth in this sector is significant.

But do these green jobs outweigh jobs lost in other sectors, such as fossil fuels? The UK Energy Research Council produced a report last year examining this very question. It's clear that net employment is what matters in this debate, as government spending in a particular sector will always boost short-term employment. Their study found reasonable evidence the renewables sector is more labour-intensive than fossil fuels, both in the construction phase and the average lifetime of the plant.

The UK in the green global race

The low-carbon transition is happening across the world, and momentum is gathering. The issue is not whether the UK participates in this, but whether it leads and wins big shares of these important new markets. At the moment, the UK is in a good position. It was the first country in the world to put into statute a framework for cutting emissions and it is now the first developed country to phase out coal-fired electricity. The UK is also the world leader in offshore wind with the most installed capacity of any country.

In the last Parliament, the Prime Minister would often refer to the ‘global race’. In few sectors is the opportunity as great or the competition as fierce as the green economy. Conservatives should champion environmental policy, as it will help Britain succeed in winning the green global race.

Sam Hall is a Researcher at Bright Blue

The path to decarbonisation and the fifth carbon budget

By the end of June 2016, the Government must announce the level of the fifth carbon budget. This will set a legal cap on UK carbon emissions for the period from 2028 to 2032.

Five yearly carbon budgets are a key component of the Climate Change Act, and together they plot a route to the 2050 target of an 80% reduction in emissions against 1990 levels. The Committee on Climate Change (CCC) has a statutory duty to advise ministers on the most cost-effective path to decarbonisation. In November 2015, they recommended a 57% reduction in emissions for 2028-2032.

The period of the fifth carbon budget coincides with when the EU’s 2030 emissions target must be met. At the Paris climate summit in December 2015, the EU committed to reducing carbon emissions by 40% by 2030 from 1990 levels. If the UK wants to fulfil this international obligation, therefore, it must ensure that the fifth carbon budget is compatible with what was agreed at Paris.

There has been considerable discussion among Conservative backbenchers about the fifth carbon budget. Two groups of Conservative MPs have written to ministers with contrasting views on the fifth carbon budget. One group has called for the Government to accept the CCC’s decision as soon as possible to send a clear signal to investors. Another has called for the Government to delay the decision to ensure other member states contribute fairly to the EU’s Paris commitment.

The Chair of the CCC, Lord Deben, wrote to the Energy Secretary, the Rt Hon Amber Rudd MP, in January 2016 advising that their recommendation for the fifth carbon budget would be sufficient to meet the EU’s agreed contribution. However, he has also warned that, in the long term, the targets in the Climate Change Act will have to be revised to fulfil the ambition in the Paris Agreement of reaching net zero global emissions by the end of the century. These conclusions were also reaffirmed in April 2016 by the cross-party Energy and Climate Change Select Committee.

Although the overall 2030 EU target has been agreed by national leaders, the country-by-country division is yet to be determined. This has prompted some to caution against the UK setting an overly ambitious domestic target in the fifth carbon budget. If the UK does more than its fair share, they argue, then others in the EU will do less. They add that this would deliver no additional benefit to the climate, and would damage the UK’s competitiveness.

Both of these arguments have been examined. The impact of carbon budgets on the UK’s competitiveness has recently been studied by LSE’s Grantham Institute. They find, firstly, that existing policies to reduce carbon emissions have not had a negative impact on businesses. Nor do they find evidence of ‘carbon leakage’, whereby carbon intensive industries just relocate to countries with less stringent climate change legislation. Secondly, they show that there are economic benefits for countries that take strong climate action, arguing that the UK in particular is well-placed to take advantage of the global low-carbon transition. This week, the Energy and Climate Intelligence Unit (ECIU) released a report showing that across a range of climate policies the UK is not significantly ahead of its EU competitors. They find in fact that the UK is sixth among the 28 member states, far behind the clear leader Sweden.

The CCC has examined what the likely implications of the EU 2030 target are for the UK. They find that the UK can be expected to be given a target of around 54%, within a range of 51% and 57%. This is compatible with their recommendations for the level of the fifth carbon budget. Internationally, the UK Government has long argued for larger, more developed economies to decarbonise at a faster rate. This is the reason why the UK’s share would in any case be larger than the overall EU target of 40% reduction by 2030 from 1990 levels. Moreover, given the EU and UK share the same 2050 target of reducing their emissions by 80% by 1990 levels, the CCC’s advice on the fifth carbon budget provides the most cost-efficient route to 2050, independent of the interim 2030 target.

The Government championed an ambitious deal in Paris last year, and has repeatedly affirmed its commitment to the Climate Change Act. In the same vein, ministers should agree the fifth carbon budget as soon as possible. Amber Rudd announced in her energy policy reset speech in November 2015 that the Government would set out new policies by the end of 2016 to ensure the UK meets its fourth and fifth carbon budgets. The focus should be quickly turned to establishing these new policies and giving investors a clear direction for future energy policy.

Sam Hall is a Researcher at Bright Blue

Can the anaerobic digestion industry survive with the reduced feed-in tariff?

Anaerobic digestion (AD) can play a role in meeting some of the UK’s environmental policy objectives. AD produces biogas, a renewable, low-carbon energy source, which displaces fossil fuels. It also has some important co-benefits. Harmful methane emissions are reduced by diverting waste from landfill. Moreover, the digestate that remains after biogas has been produced can be applied to agricultural land in place of an artificial fertiliser.

The Committee on Climate Change has identified anaerobic digestion as a technology that can reduce emissions in the agricultural and waste sectors. However, in cases where biogas is made using purpose-grown crops, carbon emissions can actually increase through changes to land use. For this reason, it is important that there are appropriate safeguards on the sustainability of the feedstock, if genuine carbon savings are to be achieved. This is a concern that the Government has recognised, by making public support for AD contingent upon developers meeting sustainability criteria.

The last few years have seen a significant increase in anaerobic digestion capacity in the UK. The most recent figures from the Anaerobic Digestion and Bioresources Association (ADBA) show that in August 2015 there were 411 anaerobic digestion plants operating in the UK, generating over 500MW of power, with 89 new plants built in 2014 alone. The UK now has the second largest biogas industry in the EU, second only to Germany, which has over 8,000 AD plants.

The Government recently capped the amount of subsidy available through the feed-in tariff scheme and introduced a degression rate to encourage the industry to keep cutting its costs. For now, however, demand for new AD projects is strong. Within 15 minutes of this quarter’s scheme being opened, the cap for new AD generating capacity had been exceeded. DECC is forecasting an additional 17 new plants this year under the reduced subsidy regime. As the degression rate cuts the level of subsidy, projects supported through the feed-in tariff will likely become less economical and  harder to finance.

The Renewable Heat Incentive (RHI) also provides a subsidised revenue stream both for biogas and biomethane, an enhanced biogas that is injected into the gas grid. Following confirmation of funding for the RHI in last year’s Spending Review, DECC is now consulting on reforms to the structure of the scheme. Their consultation document sets out an ambition for an annual deployment of 20 biomethane plants by 2021 through the RHI. The Renewable Energy Association (REA) has found that, by the end of 2016, there will be enough UK biomethane capacity to replace four 60,000-tonne LNG tankers, with potential for this to rise to 45 tankers’ worth by 2035. This would reduce our LNG imports by a quarter and offer significant carbon savings.

One of the keys to the industry’s long-term future will be further cost reductions. In our Green and responsible conservatism report last year, we called on the Government to set out clear trajectories for phasing out subsidies for renewable energy technologies. The Government does not want to subsidise green industries in perpetuity through consumers’ energy bills. Subsidies are to be a temporary measure while supply chains and technologies develop, and costs fall.

There are signs that the industry is willing and able to meet this challenge. ADBA has recently launched a cost-competitive taskforce, which aims to bring down the levelised cost of energy to the same level as Hinkley Point C by 2020. The REA believes that the industry could also be helped by greater levels of food waste collection from households. Policy Exchange also called for mandatory food waste collection in their 2009 report on this subject. A report from the Green Investment Bank last year argued that greater consolidation of the number of operators in the AD market could also improve the economic feasibility of new projects.

Anaerobic digestion is still a developing industry, with some important challenges to be resolved. However, the changes to the Government’s subsidy regime will allow a small but successful UK industry to grow.

Sam Hall is a Researcher at Bright Blue

This article originally appeared in the May/June edition of Bioenergy Insight and can be viewed by subscribers here.

How smart is the smart meter rollout?

The main installation phase of the Government’s programme to offer smart meters to every household by 2020 is set to begin this year. The meters are provided by energy suppliers, who pass on the costs of implementation to consumers in energy bills.

Smart meters send information to suppliers about consumers’ energy consumption, ending the practice of estimated bills. They also enable consumers to better track and thus manage their energy usage so they can save money on their bills.

The smart meter rollout, however, has already received some trenchant criticism. Both the House of Commons Public Accounts Committee and the Energy and Climate Change Committee in the last Parliament raised significant concerns about the policy. Influential groups such as the Institute of Directors and Which? have both called for the rollout to be halted or scrapped altogether. This blog will examine some of the most frequent objections.                                         

Timeline

The scheme is already behind schedule. The main installation phase should have started in 2015, but was subsequently delayed to 2016. Even in the foundation stage, there have been problems keeping suppliers on the timetable. For instance, in November 2015, E.On was fined £7 million for missing their 2014 target to supply smart meters to all their business customers. By the appointed deadline, just 65% of their eligible businesses had been provided with a smart meter.

Last year, the Energy and Climate Change Committee concluded that the full rollout would not be complete by 2020. In support of this prediction, they cite: a lack of trained installation engineers; the delay in the launch of the Data Communications Company (DCC) to control consumers’ energy information; and persistent, unresolved problems with interoperability. According to DECC’s latest progress report last summer, around 1.2 million smart meters had already been installed in the foundation stage. This figure represents just 2.5% of all domestic meters, demonstrating the scale of the remaining task.

Cost

The Government’s official impact assessment has forecast that the scheme will cost £10.9 billion. In return, it will yield a total of £17.1 billion of benefits for both consumers and suppliers. Consumers will save money through reduced energy consumption, while suppliers will avoid costs of site visits and reduced customers’ enquiries.

Yet some important voices in the debate have been sceptical of these figures. The Chair of the British Energy Efficiency Federation expresses some doubt in a recent article, pointing out that the German government’s impact assessment found no net benefit for consumers of smart meters. The National Audit Office report in 2014 cautioned that the estimated benefit of the scheme was contingent on near universal take-up of smart meters. Energy suppliers may need to spend money engaging with reluctant customers to convince them of the merits of the devices. Similarly, the Institute of Directors argues that DECC’s calculations are not at all transparent, with earlier impact assessments showing a net negative benefit to consumers and key pages missing from current documents.

The Government’s primary method for controlling the cost of the rollout is competition between different suppliers. In theory, customers will be able to switch suppliers away from companies that increase their bills by more than their competitors. However, in its 2014 report, the Public Accounts Committee said that this would be insufficient to protect consumers. The very fact that Ofgem referred the energy market to the CMA shows there is currently a deficit of competition. While the dominance of the Big Six has fallen from 99% of market share at its peak to 85% now, the Government still acknowledges that further competition is required. This concern was also expressed in the Centre for Sustainable Energy’s report in 2011. They recommended the Government adopt a more interventionist approach to regulating the cost of the smart meter rollout.

Data-sharing

The data-sharing aspect of smart meter technology has also proved a concern. A recent academic study found that, because of data-sharing, smart meters, and demand-side management technologies in general, are likely to be supported only by people concerned about climate change, and not by those worried about high energy costs. This research suggests that many will be uncomfortable about large energy suppliers having access to their personal data. Some security issues have been identified already, demonstrating the validity of this anxiety about data sharing. For example, the FT reported in March 2016 about how GCHQ intervening in the programme to add extra encryption on smart meter data to protect households from hackers.

Conclusion

Smart meters offer exciting opportunities for the future energy system. As part of the smart meter installation process, consumers will be given advice about how to improve the energy efficiency of their homes. Moreover, by seeing near-real time data of their energy usage, consumers will be able to observe inefficiencies in their homes’ energy consumption. This feature of the scheme may enable some much-needed progress on improvements to domestic energy efficiency.

The smart meter rollout undoubtedly has some serious challenges, however, particularly around staying on time and on budget. To an extent, that may be inevitable given the scale of the programme, whose aim is to install 53 million appliances in people’s homes. Close monitoring and constant reviewing from DECC will be essential as the main stage of the rollout commences.

Sam Hall is a Researcher at Bright Blue

Electric vehicles: driving future growth

Greater uptake of electric vehicles (EVs) will be important for decarbonising Britain’s transport sector, since it will mean a reduction in the use of petrol and diesel cars. Air quality will also be improved as harmful emissions such as particulate matter and nitrogen dioxide are reduced.

In addition to these environmental and health factors, there has been a number of recent studies about the economic impact of EVs on the UK. One of the aims of Bright Blue’s Green conservatism project is to advocate green policies that enhance Britain’s prosperity. This blog will examine the potential for EVs to contribute to jobs and growth in the UK economy.

Current performance

The electric car industry is currently enjoying phenomenal growth in the UK. There are two main types of EV: a plug-in hybrid, which has both an electric motor and an internal combustion engine, and a pure EV, which just has an electric motor. According to the Society of Motor Manufacturers and Traders (SMMT), 2015 saw a 50% increase in sales for pure EVs compared to the previous year. Tesla’s new model of electric vehicle received 276,000 pre-orders in three days of launching. Last week, Nissan Europe reported record sales of EVs in 2015, an increase of 45% in the previous year. They ascribe much of this increase to businesses looking to decarbonise their vehicle fleets.

There is still a long way to go before EVs properly penetrate the automotive market, however. Large percentage gains mask the fact that EV sales are starting from a very low base. Even among new car sales, EVs make up just over 1%. They are also still very dependent upon government subsidy to compensate buyers for the greater upfront cost. In December 2015, the Government committed to spending £600 million on the plug-in car grant system over the next five years. Under the revised scheme, buyers of pure EVs receive a subsidy of £4,500, while new owners of plug-in hybrid vehicles get £2,500. The Department for Transport’s target is for 100,000 drivers to benefit from this support.

Future success

In its report on the fifth carbon budget, the Committee on Climate Change has said that EVs need to constitute 9% of new vehicle sales in the UK by 2020 and around 60% by 2030, if the most cost-effective path to carbonisation is to be achieved. This is very ambitious growth, and will require significant reductions in the upfront cost. There is evidence that this will be achievable. The CCC’s finding that EVs will become cost-effective in the mid-2020s is supported by Bloomberg New Energy Finance's recent analysis of this market. They studied particularly the costs of batteries, which are one of the main factors driving the price of EVs. Lithium-ion batteries have fallen in cost by 65% since 2010, with costs expected to fall further to around a third of their current level by 2030. Their report found that 2025 was the year the cost of EV ownership fell below that of conventional vehicles.

Green jobs

This boom in EV sales with have a major impact in the UK, both in the automotive industry and the wider economy. A study published this month by Loughborough University found that the electric vehicle industry in the UK could support 320,000 jobs and generate £51 billion of economic activity by 2030. This is contingent on further government investment in electric vehicle infrastructure and training of skilled mechanics. Cambridge Econometrics has also tried to quantify the direct economic benefits of EVs. In a report from 2013, they forecast that there would be 7,000 to 19,000 net additional jobs by 2030 under a low-carbon transport transition. This is because the UK petroleum industry is not very job-intensive. Moreover, as the UK is now a net importer of oil, the switch to powering vehicles with British-produced electricity will accrue more revenue for UK energy companies.

Because of the importance of the price of oil to the wider economy, the increased uptake of EVs in the UK will have an impact beyond the automotive sector. Last week's report by Cambridge Econometrics found that policies to tackle climate change, including the transition away from combustion engine vehicles, will reduce demand for oil across the EU and therefore lower the price compared to what it otherwise would have been. They find that this lower price will increase real incomes and enable more consumer spending on UK-produced goods and services. This model of course is predicated upon a number of assumptions, but it provides confidence that the transition will be broadly economically positive.

The UK automotive industry has enjoyed a renaissance in recent years. If this important sector, and the jobs that depend on it, is to thrive in the low-carbon economy, the UK must ensure it become a world leader in electric vehicles.

Sam Hall is a Researcher at Bright Blue