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Posts Tagged ‘economy’

The UK economy stands to lose hundreds of millions of pounds of investment in gas-powered plants and offshore wind farms unless the government can provide guarantees about its future carbon policy plans, a leading article in The Times warned on Monday[1]. Seven ’global electricity and nuclear technology’ firms have written collectively to the Energy Secretary Ed Davey and to the Chancellor George Osborne, voicing their concerns over a lack of commitment to the delivery of climate change targets and a watering down of energy policy targets’.  The letter was one of two letters from ‘UK plc’ yesterday asking George Osborne to commit to these targets, the other coming from the Aldersgate Group – a coalition of companies committed to moving towards a green economy[2].

Their concerns come as yet further disagreements within the coalition emerge, this time over whether to pursue the policy recommendations of the Committee on Climate Change (CCC). The CCC recommends that 50g of CO2 should be generated per kilowatt of electricity compared to the current 400GCO2/kW (a 87.5% reduction), something that the Chancellor views as undesirable because of the higher energy cost burdens it imposes on UK businesses. The Chancellor’s argument runs that the higher costs of low carbon technologies would be passed on by energy firms to ‘UK plc’ thereby stifling economic growth as the potential for expansion in employment and productivity in these firms would be reduced.

The reason the CCC was set up was to try and avoid the 5 year political cycle, yet if the government ignores its advice then surely they become a toothless body subject to the whim of politics and their function becomes less of a comfort to those who worry about these sorts of things.

Unfortunately, as a result of George Osborne’s’ lack of commitment to a low carbon economy, energy firms remain reluctant to commit capital investment in such technologies, being unsure of the comparative advantage that it will deliver in the future. In a future where we are committed to lower carbon energy generation, it is likely that there would be higher taxes on carbon intensive energy generation, so investment in low carbon technologies now is a good idea. However without this commitment to lower CO2 targets, energy firms have no incentive to invest in such technologies and will continue to invest in cheaper higher carbon technologies, lest they risk losing out to their competitors.

So in order for a low carbon renewable technology economy to really take off, the government must commit in the long term to stringent targets for CO2 set out by the CCC. Only then will we see the required investment in low carbon technologies and significant advances in employment levels and productivity in the emerging low carbon or ‘green’ economy. And only then will we begin to have any chance of meeting our climate change targets and avoid the large costs associated with a failure to act (see next post).

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Amid the election headlines we spotted this article from the BBC on Monday highlighting the conclusions from the UN’s third Global Biodiversity Outlook (GBO-3), and it doesn’t look good.

In 2002 the world set the target of significantly curbing the global rate of biodiversity loss by this year, 2010. The report finds that none of the 21 subsidiary targets which were set at that time have been met on a global basis. This has led to an increasing number of species being listed by the International Union for the Conservation of Nature (IUCN) as ‘threatened’… i.e. they are very close to extinction.

Bill Jackson, the deputy director general of IUCN is quoted as saying “If the world made equivalent losses in share prices, there would be a rapid response and widespread panic”. This is a very valid point, and the article goes on to talk about a project called TEEB (The Economics of Ecosystems and Biodiversity)* which is attempting to value the various services provided to humans by nature – not because it wants to put a dollar sign on the environment, but because it wants to show how even a partial estimate of this value compares to financial figures. It also aims to show that not only do ecosystem services generate economic value but also that once these (at the moment free) services start disappearing, society will have to start spending money to replace them (for those that are possible to replace that is).  Significantly, the BBC article states “TEEB has already calculated the annual loss of forests at $2-5 trillion, dwarfing costs of the banking crisis”.

The message is clear: While, to some people, biodiversity loss might seem less of a threat to society than other seemingly more imminent problems, biodiversity loss is a real and significant threat that needs to be tackled now before the damages become even more significant than they currently are.

* Disclosure: Some of the cows in the pasture are involved in the TEEB project.

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