What does the creation of a new Department for Business, Energy and Industrial Strategy (BEIS) mean for climate change policy? Samuel Fankhauser argues that it doesn’t have to be the disaster portrayed by some environmentalists: by bringing energy and climate issues together with industrial strategy, and with the right political will, it could be an effective platform to turn the UK into a true global leader in the low-carbon economy.
The move has variously been described as the abolition of the Department for Energy and Climate Change (DECC) or the merger of DECC with the remains of a much-diminished Department for Business, Innovation and Skills (BIS). Either way, most commentators agreed that the new BEIS signalled a softening of Britain’s stance on climate change.
Climate sceptics were jubilant, sensing a second victory after the Brexit vote that most of them supported. Environmentalists were alarmed not just about climate change, but about environmental protection post-Brexit more broadly.
It need not turn out that way. It is true, climate change has disappeared from the departmental name, and it is possible officials will be preoccupied with the issues that the name still contains – business, energy and industrial strategy. However, the new department also creates a much better, stronger basis from which to decarbonise the UK economy. With the right political will, BEIS can become an effective platform to turn the UK into a true global leader in the low-carbon economy.
That would be an attractive prize. The global green economy is thriving and is in fact much bigger than most people think. According to FTSE Russell, a quarter of the companies in its FTSE Global Equity Index have green business lines, which between them generate annual revenues worth US$2.9 trillion.
Remaining a world leader on climate?
DECC was established by Gordon Brown, who understood that energy policy and climate change policy were two sides of the same coin. So he brought the two issues under one roof. Theresa May has now added the third crucial ingredient: industrial strategy. In Greg Clark, a thoughtful former shadow climate change secretary, she has appointed a Secretary of State who understands the links.
The UK has some catching up to do. Other countries have long seen climate policy as a chance to create new economic opportunities in areas like resource efficiency, clean transport, energy storage and renewable energy.
The UK is rightly proud of its world-leading climate change legislation. South Korea has a similar framework law to our Climate Change Act. Theirs is called the ‘Framework Act on Low Carbon Green Growth’ and it puts industrial policy on the same footing as environmental concerns.
When China started to include carbon and energy efficiency targets in its five-year plans, they were complemented by equally ambitious growth objectives for the strategic industries related to this agenda. Japan has positioned itself as a world leader in green innovation, with much of the action in areas of existing industrial strength. These are the sort of countries post-Brexit Britain wishes to engage with, although Europe has not gone away. Germany’s green growth strategy is equally effective and focused on its areas of comparative advantage.
An opportunity for the green economy?
The UK has a sizeable green economy (PDF) and a credible record on green innovation (e.g. on water). So the potential is clearly there. What has so far been lacking is more policy coherence and consistency to turn potential into reality.
The plight of carbon capture and storage (CCS) is a case in point. CCS is an essential part of the UK’s low-carbon plan, as the Committee on Climate Change (PDF) has made clear. But making a success of CCS requires the close coordination of climate, energy and industrial policy.
The technology is best demonstrated through regional clusters, where energy generators and industrial users share the expensive transportation and storage infrastructure to create economies of scale. With the new BIES, the chances of creating these clusters are all of a sudden much higher.
“Never let a serious crisis go to waste”, Barak Obama’s Chief of Staff proclaimed in the midst of the financial turmoil that followed the collapse of Lehman Brothers (quoting, it turned out, Winston Churchill). Britain’s decision to leave the European Union has triggered a political and perhaps economic crisis of similar proportions. Yet, if Theresa May and Greg Clark have the tenacity, leadership and vision, it might also have opened up a game-changing opportunity for low-carbon growth.
This bog first appeared on the Grantham Institute blog.
Professor Sam Fankhauser is Co-Director of the Grantham Research Institute on Climate Change and Deputy Director of the Centre for Climate Change Economics and Policy, both at the London School of Economics.