Chancellor Philip Hammond covers aviation emissions, housing, biodiversity, energy efficiency and green gas in UK economic update
Pitching his message to the “next generation” of voters who have taken to the streets in recent weeks to demand more ambitious climate action, Hammond announced several fresh climate policies and made the case for a greener form of capitalism.
“We must apply the creativity of the marketplace to deliver solutions to one of the most complex problems of our time, climate change, and build sustainability into the heart of our economic model,” the Chancellor said.
Many of the key green announcements, such as those covering airline offsets, natural capital, and low carbon heating in homes, had been trailed earlier this week. But today brought further details and a few more surprise green announcements to bolster the green economy amid a week of political chaos. BusinessGreen sets out the key takeaways.
1. Biodiversity rules for new buildings
The most conclusive green measure today came in the confirmation the government’s forthcoming Environment Bill will include requirements for developers to deliver ‘biodiversity net gain’ when building new homes or commercial estates in England.
Under the plan, sites earmarked for development will be ranked by environmental importance and developers will have to show how their plans would enhance biodiversity and protect habitats. If a net gain in biodiversity is not achievable on site, developers would have to fund measures, such as tree planting, elsewhere.
This, Hammond said, would ensure “that the delivery of much-needed infrastructure and housing is not at the expense of vital biodiversity”.
It follows a consultation on the requirement launched by Environment Secretary Michael Gove in December, which estimated the new rules would result in more than £52m being invested in environmental impact mitigation measures over the next 10 years.
2. New business energy efficiency scheme
SMEs account for 99 per cent of UK business but have “very low awareness” of the benefits of energy efficiency, according to the government.
The government revealed it is considering three possible proposals to help meet its target to support small and medium sized businesses to improve their energy efficiency by at least 20 per cent by 2030.
The first is to introduce energy efficiency auctions that third parties, such as energy efficiency installers or energy service companies, could bid into to deliver energy efficiency measures in smaller businesses.
The second option is set up a Business Energy Company Obligation (Business ECO) scheme, similar to the domestic ECO currently in operation. This would put a regulatory obligation on third parties, such as network operators or energy suppliers, to deliver a set amount of energy savings for businesses.
The third option is expanding access for green financing for smaller businesses, to encourage more companies to invest in energy efficiency properties, equipment, or energy-saving services.
BEIS has also opened applications for a £6m fund to support innovative cost-cutting energy efficiency solutions for small businesses.
The ‘Boosting Access for SMEs to Energy Efficiency’ fund aims to accelerate the growth of the energy services market for businesses, and is expected to approve up to 10 projects at phase one, with five successful projects envisaged for phase 2 funding of £1m each.
3. A review into pricing up the value of the environment
Without the natural world, the global economy could not function. But too often the value of healthy soil, water courses, and natural habitats is overlooked in economic calculations.
The government wants its Whitehall policymakers to more closely embed the value of the natural world into decision-making on infrastructure investments such as new roads and railways, and in support of that push Hammond today commissioned a new global review to assess the economic value of biodiversity.
The review will identify actions that can both enhance biodiversity as well as the economy, Hammond said, and will be led by Sir Partha Dasgupta, an economics professor at the University of Cambridge. The review will report back to the government in 2020, ahead of the UN convention on biodiversity in Beijing in October that year.
It follows a report Defra just submitted to the UN admitting the UK is failing on 14 out of 19 global targets on biodiversity. The government also recently received a scathing review of its progress on protecting the environment from its own advisory body, the Natural Capital Committee.
Green campaigners will therefore be hoping a renewed focus from the government on biodiversity and natural capital will bring much-needed progress on these fronts, and help achieve its oft-repeated goal of leaving the environment in a better state for the next generation.
However, some environmentalists believe equating biodiversity to financial value misses the point of environmental protection. “Biodiversity is unfathomably complex and inestimably valuable” said David Powell, head of environment and the green transition at the New Economics Foundation. “Couching its protection in economic terms alone is everything that’s wrong with neoliberalism.”
4. Government spending review will determine clout of green departments
In a move could have major ramifications for the green economy and public investment in infrastructure, the Chancellor confirmed that the hotly anticipated departmental Spending Review will get underway before Parliament’s summer recess.
Hammond said the Review would consider how best to prioritise public resources over the next three years, scrutinising every project or programme “from the bottom up”, and would be announced alongside the Autumn Budget towards the end of 2019.
In particular officials at Defra, which has suffered swingeing budget cuts in recent years, will be hoping for a more generous settlement to finance a raft of new post-Brexit policies and governance programmes, including the establishment of the government’s post-Brexit environmental watchdog and the rollout of an entirely new subsidy programme for UK farmers.
Campaigners will be watching closely to ensure the relevant departments and quangos are allocated adequate resource to ensure they can fulfil the government’s repeated promise to deliver a ‘green Brexit’ with no rollback of environmental standards.
Green businesses will also be hoping the Spending Review prioritises a strong funding push on policy frameworks such as the Clean Growth Strategy and 25 Year Environment Plan.
Hammond reiterated the government’s commitment to publishing its updated National Infrastructure Strategy alongside the Spending Review. It follows the National Infrastructure Commission first major assessment last year, which made a raft of recommendations, including calls for a new fleet of nuclear power stations, a larger focus on low cost renewables, and more effort to prepare for the mass rollout of electric vehicles in the UK.
5. Ocean conservation
Hammond also announced plans to launch a call for evidence inviting “creative ideas” on how the government can safeguard the biodiversity found in UK overseas territories.
It came alongside government backing for a 443,000 square kilometre Marine Protected Area in the waters around Ascension Island, where no fishing would be allowed.
6. ‘Future Homes Standard’ to replace zero carbon homes policy
Alongside a package of plans announced elsewhere in the Statement to tackle the UK’s chronic housing shortage, the Chancellor today confirmed new measures would be brought in to make sure new homes do not come with high energy bills – or high carbon emissions.
To be introduced by 2025, the new Future Homes Standard will require all new build homes to feature green heating systems such as ground-sourced heat pumps, and “world-leading” levels of energy efficiency.
Hammond said he had listened to the Committee on Climate Change’s advice on the need to strengthen building efficiency standards, adding the measure would end fossil fuel heating in new homes by 2025 while building on the Prime Minister’s pledge last year to halve the energy use of new buildings by 2030.
It comes just four years after the government controversially scrapped its zero carbon homes policy after years of development, and just a few months before it was due to come into force. It would have required new homes to meet stringent energy efficiency standards and be fitted with green energy generation technology such as solar panels where appropriate. Meanwhile a programme to allow housebuilders to bank carbon savings at off-site projects would also have been introduced. Housebuilding giant Persimmon admitted yesterday it had lobbied against the measures, which had been due to come into force in 2016.
7. The gas grid is about to get greener
Although details were scant, Hammond announced plans to increase the proportion of green gas used in the grid in a bid to drive down the carbon profile of the UK’s gas heating network.
“To meet our climate targets, we need to reduce our dependence on burning natural gas to heat our homes,” the government said.
A consultation on the move later this year is expected to consider continued support for biomethane (and other forms of gasification) after funding for the Renewable Heat Incentive comes to an end in 2021.
Chris Stark, chief executive of the Committee on Climate Change, welcomed the move. “Plans to consult on cleaning up the UK’s gas supply get a thumbs up from the Committee – we have been calling for the government to consider the use of alternative, ‘greener’ gases for some time,” he said.
8. Carbon offset schemes prepare for take off
Government plans to launch a call for evidence on offsetting transport emissions, it said today, in the hope of encouraging more travels to neutralise their climate impact.
Hammond said this would explore how travel providers – including airlines – could potentially be required to “offer genuinely additional carbon offsets so that customers who want zero carbon travel have that option can be confident about additionality”.
Some airlines already offer offset schemes alongside flight bookings, but take-up is very low, at around only one per cent.
Meanwhile, the Aviation Environment Federation warned offsets can never be the solution to aviation’s carbon problem. “In order to meet the tough goals that states signed up to in the Paris Agreement, all countries will in any case need to reduce emissions close to zero in the coming decades, leaving little scope for any country or sector to sell their emissions reductions to airlines or air passengers by way of offset schemes,” it pointed out.