Page last updated at 15:24 GMT, Wednesday, 22 April 2009 16:24 UK

Budget: Green tinge or blue rinse?

By Richard Black
Environment correspondent, BBC News website

Climate camp protest at Kingsnorth power station
Issues such as Kingsnorth power station loom over the green ambitions

Alistair Darling's speech marks the first time that a Chancellor of the UK Treasury has set a budget for carbon, as well as for the myriad pots of money that a government commands.

So now, the country has a "legally binding" target: to cut greenhouse gas emissions by 34% with respect to 1990 levels by 2020.

Mr Darling's adoption of the figure proposed in December by the Committee on Climate Change, the government's advisory body, was expected - anything less would have been a major surprise.

And in one sense it has become an easier target for the government to achieve, given that emissions will naturally fall as the economy contracts.

The novelty of a carbon target is perhaps the most startlingly "green" aspect of the Budget; but there are several caveats.

Firstly, like any fiscal goal, it might not be met.

Making its recommendations in December, the committee noted that the UK government had a "mixed track record" on delivering its climate change ambitions; and commenting on the Budget, committee chairman Lord Turner reinforced the point.

"It is now important that this first step is followed by action," he said.

The Budget turns out to be more beige than green
Andrew Simms
New Economics Foundation

"If the targets are to be met, we need to start reducing our emissions now and we need tough policies and strong leadership from government."

Secondly, the fact that words say the target is legally binding do not disguise the fact that no-one knows what that means in practice; no sanctions are proposed, for example, if the country falls short.

And for campaigners, the size of the target - as with just about everything concrete emerging on the European or global stages - is just not drastic enough.

"Cutting emissions by 34% by 2020 will fail to prevent dangerous global warming from devastating the lives of people in developing countries, who are least responsible for this crisis'," said Christian Aid's climate policy expert Alison Doig, in a sentiment echoed by other environment and development groups.

Renewed vigour

Whatever the caveats, though, the appellation "legally binding" may be seen as guaranteeing a stable policy and economic environment in which firms can invest safely.

"These targets will further underpin the increasing levels of... investment being made in sectors which actively support reduction of greenhouse gas emissions," observed Nigel Aitchison of Foresight Group, an asset management company involved in renewables and other environment-connected industries.

Electric car
Low-carbon power is needed to make the electric cars green

Into renewable energy itself, the Budget injects £525m for re-energising offshore wind, a sector that has seen several stumbles recently, including the withdrawal of Shell from the vast London Array project.

The investment comes in the form of increasing rewards through Renewable Obligation Certificates (Rocs) and is designed to create enough offshore wind farms to power 2.8 million homes.

In addition, the government has induced the European Investment Bank (EIB) to put £4bn of new capital into UK renewable projects.

A spokesman for the British Wind Energy Association (BWEA) told BBC News that a number of factors, including the reluctance of banks to lend and the relative cheapness of fossil fuels, had contributed to making a "perfect storm" for the industry.

"In our view, banks are very foolish not to invest, because no wind farm has ever defaulted on its payment," he said.

"But the government has done the second best thing in getting the EIB to lend money - frankly, Darling's pulled a rabbit out of the hat on this one."

The Budget shoves much smaller amounts of money down other potential pipeways to a lower-carbon future, including:

  • £45m to small-scale (house- or housing development-sized) renewables
  • £25m to community heating schemes
  • £65m in loans to public sector organisations for improving energy efficiency
  • £100m for improving insulation in social housing schemes

There is also support for carbon capture and storage (CCS) - the government wants to see between two and four demonstration projects built - and on combined heat and power (CHP), a technology that in some other countries yields major efficiencies.

CHP project are currently exempt from paying the Climate Change Levy, and the Budget extends this exemption until 2013.

"This sends the signal that CHP must be a major part of the nation's green economic recovery," commented Graham Meeks, director of the Combined Heat and Power Association (CHPA).

Alistair Darling on 'the world's first ever carbon budget'

On transport, Mr Darling announced what amounts to a re-start of the fuel duty escalator, which had ground to a halt under the weight of political expediency.

As the Treasury makes explicit, though, the reasoning behind a 2p per litre hike has as much to do with raising the tax take as it does with cutting greenhouse gas emissions.

Green plasters

When the headline numbers on debt and borrowing and contraction are so stark, it was always going to be unlikely that Mr Darling would throw the full weight of the Budget behind a greening of the UK economy.

Smart meter
Smart meters would cut energy use - and, therefore, tax revenues

From his perspective, repairing it was always gong to be a higher priority.

And any finance minister of the present day can only dream of the kind of money that could have been ploughed into green technologies - but was not - during the heady days of the 1980s and 90s, when North Sea oil and gas revenue flooded the Treasury's coffer.

The perceived need to jump-start the wheels of industry has led to moves to re-invigorate the car industry and to obtain more oil and gas from small North Sea fields.

Both decisions could, in fact, raise carbon emissions - as, of course, would a sudden return to heady levels of growth.

So how green, really, was this Budget?

"The commitments on energy efficiency and low-carbon industry are obscured by a cloud of greenhouse gases spewing from the prop-ups given to the car and oil industry," said Andrew Simms, policy director of the New Economics Foundation (nef).

"You could say this is a balanced Budget in the sense that any positive environmental action is likely to be cancelled out by the government locking-in a fossil fuel intensive infrastructure for transport and energy.

"As a result, it turns out to be more beige than green."

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