Tom Delay has landed himself arguably one of the most difficult jobs going. The Carbon Trust, which he heads, is trying to wean the UK off its dependence on fossil fuel-derived sources of energy.
The government-backed non-profit-making company has to stimulate the development and take-up of low-carbon technology and innovation, and promote energy-saving measures.
Some of its remit will be achieved through education and training. But the main driving force will be R&D and technology development, with the aim of stimulating a thriving low-carbon technology sector. The trust hopes to act as broker and co-ordinator to help businesses find their way through the maze of funding that is there for the taking. The idea is to reduce emissions of carbon dioxide and other greenhouse gases by 60% by 2050 to combat global warming.
This week Baroness Young, chief executive of The Environment Agency, called on the government to develop a programme explicitly directed at achieving this goal.Delay sums up the challenge: ‘Energy efficiency and climate change are very difficult concepts to sell. You’re looking at something 50 years out where the outcome, if you do a fantastic job and everything goes right, is that nothing happens – we stabilise the climate. That’s not a good marketing proposition. Especially as the alternative view is Armageddon.’
Dramatic, almost ‘activist’ rhetoric. But the good news is that when the trust commissioned a study from the Imperial College Centre for Energy Policy and Technology earlier this year, it concluded that the 60% target is feasible without harming prosperity. The catch is that a start needs to be made now. And the study identifies a range of barriers, from conflicting government policies and gaps in funding to public attitudes.
‘No one agent can make the low-carbon economy come about,’ admits Delay. ‘You need concerted action and support from the government through regulations, from business through the development and deployment of technology, and ultimately acceptance from the public. Success will probably lie in getting a broad range of stakeholders to pull together.’
One of the immediate problems is the confusing array of bodies offering support for developing technology. The trust started to research the scale of support, including European sources. ‘We concluded there was over £1bn a year available, and then stopped counting,’ says Delay. ‘The money is available but it’s not getting through.’ So one of the trust’s first tasks is to act as a broker with the other bodies.
Some question whether the trust’s own annual budget of around £50m is adequate. Of this it plans to spend about one third on the accelerated deployment of existing energy-efficiency measures, and about half on the development and commercialisation of new and emerging technologies. ‘It’s not a lot compared to the amount invested in other countries,’ says Delay. ‘We see ourselves as levering other funds, public and private. We want the money invested well, on the basis that if we do a good job other funding will appear.
‘The Advisory Committee on Business and the Environment pushed for a much higher budget, but I want to see demand outstripping supply before I worry too much about the supply.’
The energy review currently being undertaken by the Cabinet Office’s Performance and Innovation Unit will set the context for UK energy policy for the next 50 years. This matters for two reasons. First, it is an opportunity for the Carbon Trust to demonstrate if it has the required clout. Second, the review will have to decide if building new nuclear power stations is justified.
Initial expectations were that the review would come out in favour. The Carbon Trust’s analysis concludes that carbon-reduction targets can be met without nuclear power. If new nuclear stations are built they could contribute a saving of five million tonnes in emissions (from 120). Delay says new-build nuclear could make the RCEP target easier. On the other hand, other technology could achieve the same result.’The point we want to make is the government has a choice,’ says Delay. ‘There are those who take the view that it’s either a good or a bad thing to the degree that there’s no choice.’
Nuclear currently provides around 25% of power generation. ‘Our scenario assumed a lower level on the basis that new build would only be possible on existing sites at a limited level.
‘One of the biggest dangers in supporting nuclear is the risk that it might crowd out resources, human and financial, from other sectors. The thing I find inappropriate is the weird notion that nuclear is proven but the rest isn’t. I can see that the requirements for offshore wind are not rocket science. If, as an engineer, you gave me the choice between building offshore wind facilities or solving the nuclear waste management problem, I know which I’d pick.’
The trust believes the development of low-carbon technologies will enable a ‘low-carbon technology sector’ to capitalise on opportunities in a growing global market. But does the UK have strengths in this area to build on?
‘As long as firms recognise where the potential lies, and have the skills and capacity to take advantage, I think there’s a real opportunity. The Low Carbon Innovation Programme (see panel above) has received over 100 expressions of interest – from no-scale start-ups to big plcs – and across the board, not focused in one area.’
Now is a propitious moment to start, he says: ‘There’s a degree of momentum, supported by political and public opinion. Global awareness has increased; a number of events have pushed it up the agenda.’ Ironically, President Bush’s views on Kyoto have boosted awareness.
Delay is also confident that regulation can be sorted out – including the dreaded New Electricity Trading Arrangements system. This, the second attempt since privatisation to create an equitable market, has backfired spectacularly in its effect on small generators and has almost killed off investment in combined heat and power, which had been seen as a central plank of the government’s climate change strategy.
‘I think the government knows what needs to be done. It holds firm to its targets for CHP and renewables. It also has to meet the Kyoto targets and, at some point, will have to align policy to meet those targets.
The danger is it will do it too slowly. It will be interesting to see whether the energy review says ‘we’re talking about 10, 20 or 30 years out but we’re not going to meet the targets in 2010 unless those issues are resolved’.’
Sidebar: the company entrusted to ecologically go where no quango has gone before
The Carbon Trust was set up in March following a proposal from the Advisory Committee on Business and the Environment in 1999. Its remit, direct from the prime minister, is to ‘take the lead on low-carbon technology and innovation in this country and put Britain in the lead internationally’.
In the words of chief executive Tom Delay, ‘It exists because of a consensus between the British government and British business about the way forward’, and ‘the need for an intermediary to overcome what has been, historically, a lack of closeness between government and business’.
While pursuing public policy objectives, the trust, he says, is rooted in the private business sector. The drive to tackle climate change and move to energy sources less dependent on burning fossil fuels contains a twofold opportunity for businesses: firstly, by investing in energy efficiency they can be made more competitive; secondly, there are opportunities to develop and adopt products based on new low-carbon technologies. One of the trust’s key aims is to stimulate the low-carbon technology sector, building on existing UK strengths. In addition it will develop programmes to spread best practice, and act as a co-ordinator and broker between developing technologies and funding partners.
The trust will take over responsibility for the Energy Efficiency Best Practice Programme, which is to be heavily revamped. It is setting up a Low Carbon Innovation Programme (LCIP) to support new and emerging technologies, aiming to draw in other partners to create a ‘funding continuum’ across the process from research to market. It will also be the custodian of the Enhanced Capital Allowance scheme, introduced to recycle some of the revenues from the Climate Change Levy to give companies an incentive to invest in energy efficiency.
Its strategic starting point is the Royal Commission on Environmental Pollution (RCEP) recommendation that carbon dioxide emissions should be reduced by 60% by 2050. Its plans are based on a recent study that concluded that a low-carbon economy is not only technologically feasible, it could even be far more prosperous than today’s.
Energy efficiency would account for half the saving, along with renewables, the use of hydrogen as a source of energy, and a small contribution from carbon sequestration (trapping greenhouse gases to prevent them entering the atmosphere).
Specific technologies include wind power, energy crops (biomass), municipal refuse, landfill gas, wave and tidal power, and solar photovoltaics. There would be an increased use of combined heat and power and a move to higher-efficiency power sources such as fuel cells. Changes to car and building design would also have a role to play.
But projections show that the RCEP’s target of a reduction in carbon emissions of 60million tonnes can be achieved only if numerous barriers are removed. These include misaligned government policies and regulations. There are difficulties accessing capital for developing new technologies at all stages of the innovation chain from R&D to market. A confusing array of bodies offer funding but gaining access to these funds ‘is difficult, bureaucratic and time-consuming and therefore frequently not pursued, especially by small companies’, says the trust. Policy initiatives tend to focus on R&D and miss out the demonstration phase.
So far the trust has spent its time consulting interested stakeholders and potential partners and developing its strategy. Delay’s aim for the first year is to establish itself as a credible partner.
The single most important thing, he adds, is to form the right team. The trust has attracted a finance director who headed the mergers and acquisitions section of SG Warburg; a strategy director from another leading consultant; and Professor Michael Grub, a leading authority on climate change.
How is its progress seen by industry?
Helen Woolston, head of environmental affairs at the Engineering Employers’ Federation, says: ‘We’re still nervous about its funding. But the research it has done is encouraging. Now we’d like to see the trust develop similar kudos to an independent think-tank. At the moment it’s seen as a blip on the side of the Department of Environment, Food and Rural Affairs.’
Merlin Hyman, director of the Environmental Industries Commission, the trade association for companies making products to combat pollution, says: ‘We welcome the trust. It’s clearly important to co-ordinate the energy efficiency for business message. We do have a concern that government messages on this have not got across. There are too many bodies and the trust has the potential to bring those together.’
As far as creating a successful UK low-carbon sector, he says: ‘If the trust can create a climate for a lot of investment then the industry will succeed. There is a lot of R&D out there: what they need is secure markets.’