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Last Updated: Wednesday, 10 October 2007, 11:16 GMT 12:16 UK
Darling of the greens?
By Roger Harrabin
Environment analyst, BBC News

Alistair Darling and Gordon Brown. Image: PA
Mr Darling's first PBR had a mixed response from environmentalists
Chancellor Alistair Darling made three significant green announcements in his first Pre-Budget Report (PBR): a small but substantial increase in funding for the environment department Defra; a switch in air passenger duty to encourage more fuel-efficient aviation, and cash for an Environmental Transformation Fund to drive green technology at home and abroad.

He identified climate change as one of the greatest challenges facing the world. But in a statement strewn with small green nuggets, critics complained there was little urgency.

The chancellor claimed credit for the UK's CO2 cuts since 1990 - but omitted to mention that since Labour came to power in 1997, CO2 output has been steadily rising.

He offered little to help cut energy use in the home, and did not re-state Labour's promise to end the fuel poverty that leaves families in misery and renders any tax on domestic fuel politically impossible.

What we are seeing at the moment is a soft-shoe shuffle... in the right direction, but far too slow
Andrew Warren, Association for the Conservation of Energy
On motoring, the PBR defined the problem without proposing a solution.

The statement said an independent review had concluded that technology already existed to deliver CO2 savings of 30% within 5-10 years if manufacturers saw a market. It said there was an urgent need to make this happen.

But despite rumours of a salesroom tax on gas-guzzling cars, Mr Darling offered nothing new to persuade people to buy more efficient cars.

He said consumers could help if they chose the greenest cars in their class. He did not mention that when people buy more efficient cars they often tend to drive them further.

Flying high

The chancellor underplayed the contribution of aviation to the UK's CO2 emissions, re-affirmed his faith in the European Union's Emissions Trading Scheme (EU ETS) - which is likely to increase ticket prices by a tiny amount - and announced a surprise move to shift Air Passenger Duty (APD) from the individual to the aeroplane.

Aeroplane. Image: AFP/Getty
Having a tax based on the carbon cost of a particular journey could encourage a change in passenger behaviour
Tony McClenaghan, Deloitte
The policy was first proposed by the Lib Dems, then the Conservatives.

This shift was generally welcomed by green groups, as it will reward airlines for filling aircraft with passengers and will also cover the fast-growing air freight sector.

Tony McClenaghan, tax partner at accountants Deloitte, said: "In its current form, the relatively low 'flat rate' APD simply raises additional tax.

"It also ignores freight and private flights. In contrast, having a tax based on the carbon cost of a particular journey could encourage a change in passenger behaviour."

But some observers fear it might have the perverse effect of encouraging budget fliers on full planes to spend more money abroad, while penalising business travellers whose journeys can benefit the economy.

Friends of the Earth (FoE) proposes overcoming the potential problem by escalating the total tax on flying, so that no-one would pay less than at present - and imposing VAT and fuel tax on airlines, which currently pay much less tax than cars for the environmental damage they create.

This looks unlikely - the chancellor said current APD rates would be frozen until November 2009 when the aeroplane tax comes in.

Transforming the economy

One significant move in the PBR was the cash rise for Defra of 1.4% per year.

Part of this will make up Defra's contribution to a new Environmental Transformation Fund, commanding 123m annually for the next three years, to encourage clean technology in the UK.

A further 266m a year will go into the international arm of the fund to aid adaptation to climate change, clean technology and anti-deforestation policies in poor countries.

Farm gate. Image: PA
Farming woes have taken money earmarked for green initiatives
The UK government has been a leader in promoting adaptation policies in developing nations.

Analysis from the Association for Conservation of Energy (Ace) suggests that the new money for the fund swells the total annual spend on emissions reduction and energy efficiency in the UK to 814m.

This compares with 1.8bn being spent each year by the German government.

Andrew Warren from Ace said: "Ministers admit that climate change needs a step change in the economy. What we are seeing at the moment is a soft-shoe shuffle... in the right direction, but far too slow.

Green and gold

FoE UK argued that the PBR fell short of what was required to tackle climate change.

"Last month, Gordon Brown said that he wanted Britain to lead in developing a low-carbon economy," said the group's director Tony Juniper.

"This was a golden opportunity for the chancellor to produce a range of green incentives to encourage people to go green. But yet again, the government has not delivered."

Other measures in the PBR included:

  • Raising funds for flood protection and coastal erosion from 600m to 800m after widespread criticism of previous policies
  • Exempting microgeneration projects from ad-hoc business rates reviews for five years
  • The government has revised downward by about a third its estimate for emissions savings from biofuels, after research showing that some fuels do not save CO2
  • The chancellor has joined with the French finance minister to press the EU to allow a reduced VAT rate for the most energy-efficient products

Environment Secretary Hilary Benn said: "Today's announcements build on the policies already in place that provide incentives for businesses and individuals to cut emissions and put the UK on the path to a low carbon future."

Stuck in the mud

But one problem the Treasury has not addressed is conflict over Defra funds.

Errors and misfortune in agriculture have drained cash needed to meet the government's commitment to ending fuel poverty.

Flooding  (PA)
The PBR announced new measures on flood protection

The Treasury blames Defra incompetence; but within Defra, the environment side is financially dwarfed by the farming side - and if government wants to be sure its environment policies stick, it will have to find some way of insulating green policies from the vagaries of farming issues.

The government hopes that three bills on climate, energy and strategic planning in the new session of parliament will put flesh on the bones of climate policy.

So far, all of the measures planned on emissions will only just take the government to its minimum ambition for cutting CO2 output by 2020, even if all are fully implemented and effective.

Ministers and civil servants say they are developing comprehensive policies which will pay off in the long term; scientists and environmentalists are impatient for action now.

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