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The “DECC coup", Nigel Lawson and green taxes: George Osborne and climate change

  • 21 Mar 2012, 11:15
  • Ros Donald

It's budget day again, and George Osborne is limbering up his red suitcase to deliver the government's economic plan for the year. Over the past six months, Osborne has generated controversy with statements apparently aimed at rolling back the government's plans to decarbonise the UK economy - but is he really bad news for the UK's climate change mitigation policies?  To mark his third Budget speech, here's a look at Osborne's evolving stance on climate change.

2009

It's November 2009, and in opposition the shadow chancellor sounds very keen indeed on cutting the UK's carbon and implementing other environmental measures.

In fact, Osborne criticised the Labour chancellor Alistair Darling for "not giving a single major speech on the environment [over the previous] two years …". According to Friends of the Earth, (FoE) he attacked Darling and other ministers for failing to work together to tackle climate change, and promised a Conservative treasury would "be in the lead of developing the low carbon economy and financing a green recovery." The treasury had often been thought of as the "cuckoo in the nest" when it comes to environmental policy in the UK, he said, pushing other departments' attempts to cut carbon aside and fostering growth in heavy industry.

But no longer?

2010

When the Lib Dem/Conservative coalition came to power, such rhetoric seems to have been quietly parked. Osborne takes the helm of the treasury as part of what Prime Minister David Cameron promised would be the " greenest government ever". Since then he has not made any speeches on the environment, according to FoE.

The Guardian reported of the 2010 budget:

"Hopes that the emergency budget would shed light on plans for a green investment bank, renewable energy and financial incentives for individuals to make their homes more energy efficient were dashed in the chancellor's speech."

2011

Osborne's 2011 budget had its climate moments, containing an increased climate change levy discount - a tax break for energy intensive businesses that signed up to promise to meet energy efficiency or carbon-saving targets.

But it was another measure announced in the budget that captured the environmental headlines, as the Green Investment Bank got more flesh on its bones. But was it to be a strapping Olympian or a shambling corpse? According to the Independent, Osborne:

"limited the powers of the much-heralded Green Investment Bank, a centrepiece of the Tories' general election manifesto, by ensuring that it cannot borrow funds until the government has completed its deficit-reduction plan in 2015."

October saw the chancellor's strongest suggestion that economic recovery fuelled by heavy industry should take priority over decarbonisation, as we reported here. At the Conservative party conference, he effectively promised the UK would not take the lead in Europe in reducing carbon emissions, echoing the Daily Mail's enthusiastic campaign on so-called "green stealth taxes" on energy bills to claim that "a decade of environmental laws and regulations are piling costs on the energy bills of households and companies."

But where did he get the inspiration from? News drifting out of DECC suggested Osborne "privately defended his green antagonism by saying he was more worried about the £200-a-year of "green taxes" borne by energy customers." This figure, the centrepiece of the Mail's "green stealth tax" campaign, originated with the climate sceptic thinktank the Global Warming Policy Foundation and was notably wrong - the Mail group subsequently published three corrections.  

The ensuing outcry from green groups forced then secretary of state for energy and climate change, Chris Huhne, to defend Osborne in December, saying he is " not a climate skeptic".

2012 - Who has his ear?

The BBC and other outlets have remarked that Osborne may today follow the lead of former chancellor Nigel Lawson, who in the 1980s cut the top rate of tax for the UK's high earners. Indeed, there's a suggestion that advice from Lawson is directly behind the expected move.

There's no hiding the Osborne's admiration for Lawson at any rate - he invoked Lawson as an inspiration for tax policy in his budget speech of a year ago, and the BBC reports Osborne hosted the peer's 80th birthday party, with the chancellor's residence resounding to his predecessor's singing.

So we're intrigued as to whether the pair are equally in tune when it comes to climate change policymaking. Lawson is a well known climate skeptic and chairman of the Global Warming Policy Foundation who supplied the £200-a-year figure which may have worried Osborne. (Needlessly, as it turned out.) The GWPF argues for the abandonment of renewable power initiatives and developing more conventional and unconventional gas sources for the UK electricity industry.

On the other hand, Huhne attempted specifically to distance Osborne from Lawson on climate in December last year after the chancellor got flak over his conference speech, saying: "He is not in the position of somebody like Nigel Lawson who is clearly skeptical about the science". It'd be interesting to know why Huhne felt compelled to say this - we would ask him, but he's probably got other things on his mind at the moment.

A treasury coup at DECC?

As we reported, Osborne's comments in 2011 gave an insight into the kind of arguments that were going on inside the Cabinet between the treasury and the Department of Energy and Climate Change (DECC) over whether boosting UK industry should take precedence over decarbonisation targets.

When fellow Lib Dem Ed Davey took over from the notoriously strong-willed Huhne in February, there was speculation that the treasury would take advantage of a less experienced minister to, as the blog Conservative Home said, "kick some green policies into the longer grass". This fear may have been realised following news over the weekend that DECC is mooting plans that would allow gas plants to operate without carbon capture and storage for an extra decade.

WWF called the move a "treasury coup at DECC", saying it will spur a dash for gas that will ruin the possibility of decarbonising the economy. Osborne hasn't helped endear himself to the greens, saying gas is a "reliable, affordable source of energy" - when, as Damian Carrington points out, supplier nations in the Middle East are in a state of flux at present and rising gas prices count for 80 per cent of the energy bill increases experienced of late.

But as we explain, DECC denies a dash for gas is the  end game. They argue gas is in the frame to back up renewables supplies and smooth out the shift to decarbonisation. But the timing of the DECC gas announcement and the prominent quote from Osborne it contained suggests that it may have been crafted with one eye on the budget statement this week. This indicates Osborne may not offer any breaks to the gas industry himself.

This budget

Bang up to date, Osborne has not made much mention of further plans regarding the UK's energy and climate policy in the new budget, apart from provisions for a green bank to help people save energy. But, if cynics are right and Osborne is pushing for a dash for gas through new influence over DECC, he may not have to do much in the budget on energy or climate. We shall wait and see.

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