London to be ‘the most important green financial centre’ – Westminster Energy Forum

Friday, 19 December 2008

by Paul Garrett, Energy Editor.

The final WEF meeting of 2007 was launched with a keynote from Greg Barker MP, Shadow Minister for Climate Change, who talked about delivering a low carbon Britain – ‘from aspiration to action’.

He appropriately struck an initial sombre note on the constraints of the credit crunch and deepening recession and observing the challenges of meeting the now well documented ‘2020 targets’, particularly on renewables. 

But Barker saw positives in the economic gloom. He foresaw London as the most important ‘potential ‘green financial centre’, with Britain at the forefront of many sustainable carbon abatement technologies, especially carbon capture and storage (CCS).

He said he believed that the UK should use its talent in the CCS field to rapidly develop three large CCS plants, and that this was now Conservative energy policy. There had been ‘foot dragging’ on CCS but it would have a key part to play in delivering carbon objectives efficiently and would also give the UK a solid basis for export of CCS technology to emerging markets such as China. 

Barker acknowledged a ‘revolution’ in decentralised energy and said that feed-in tariffs would enable this to grow; and he concluded that a low carbon Britain needed, in a joined up way,  to look at all emissions, including aviation. He said that a third runway at Heathrow was in this respect unhelpful. Implementing the Climate Change Bill was examined by James Hughes, Deputy Director, Climate Strategy and Delivery at DECC.

He contended that the UK had been very fortunate that all parties seemed to share the same goals with regard\to climate change. The Climate Change Act then created a framework on how to deliver these aspirations and targets. The new Act required that carbon budgets were needed and the Budget of 2009 would be a key landmark here. He also said that 2009 would bring a Government consultation on heat and energy saving which would push forward on carbon objective achievement. 

Hughes also talked about the continuing role of the Committee on Climate Change. He said it will instigate an annual review on how well the UK Government is doing on hitting carbon targets and facilitate Greg Barkers’s comments about greater collaboration between Government departments. 

Chris Lambert then questioned the ability of the energy sector to deploy new infrastructure and technology required to address the carbon agenda in the current economic climate. Could the private sector deliver budgets for low carbon investment in a recession?

Hughes said that policy signals on investment were important in this context.  A 30 per cent renewables target from Government might delay new nuclear investment, for example. A 25 per cent renewables signal would be more helpful for new nuclear It was important to avoid blocking industry initiatives to invest in low carbon energy. 

The effectiveness of emissions trading and the value of carbon targets was addressed by Dr Andy Kerr, from the University of Edinburgh and Director of E3 International. Kerr began by quoting Professor K Anderson on the ‘fool’s gold’ of carbon trading:

‘Carbon trading may have been the answer once, but not any more’. So was carbon trading doomed to failure as a carbon reduction mechanism? 

He said that theory suggests that price is the flip side of quantity, and that a tax or market system could achieve the same outcome. Perhaps an effective economic solution to carbon abatement might be a hybrid ‘market and tax’ scheme. 

He described ‘Recipe One’, Cap and Trade where coverage had to be agreed, emissions caps set up, allowances distributed, and an enforceable monitoring and reporting regime established – all the basis of Kyoto, EUETS and the CRC. He said the environmental effectiveness of cap and trade was determined by the volume of allowances. 

One anecdote on the ‘reduction’ of emissions was the recent break-in at Kingsnorth power station, where environmental activists shut the plant down and claimed to have temporarily reduced CO2 emissions. Not so, said Dr Kerr. ‘This had no effect on total carbon emissions. Under the trading regime the emissions just went elsewhere. 

‘Recipe Two’ was Baseline and Credit , which did not represent a guaranteed cap on emissions – and was not the same as a carbon allowance. 

Commenting on the European Emissions Trading Scheme (EUETS), Dr Kerr said that almost all EU member states had allocated more allowances than they needed – politicians were not prepared to create a scarcity. But the scheme had done well in delivering some change of behaviour on the grounds in terms of carbon reduction. 

He said that the UK’s Carbon Reduction Commitment (CRC) was an example of a downstream-of-the- EUETS application. Again, the key was to deliver behavioural change. Different instruments needed to be applied to different parts of the economy. As to their effectiveness, the tolls were now in place – it was now down to political will to apply them. 

So back to the accusation that carbon trading would just take to long to work.

Dr Kerr said that there was a need to introduce scarcity of allowances quickly – but that current mechanisms, supplemented by additional instruments, would start to become effective. 

A specific view of climate change strategy as applied to a major world capital was given by Alex Nickson, London Climate Change Strategy manager at the Greater London Authority.

Tasked with the job of preparing London for ‘inevitable’ climate change, he said that the Mayor’s strategy was to adapt to climate change as well as mitigate it. 

The scenario for London was one of warmer, wetter winters and hotter, drier, summers – annual rainfall would stay the same, but patterns would change, with more frequent and intense extreme weather. London would experience more heatwaves and more floods. Adaptation to climate change would mean prevention, including structural measures, preparation, response and recovery.

The impacts expected would be firstly flooding. This would come from several sources – tidal (from the sea, though the Thames Barrier would be helpful), fluvial (from the upstream Thames and its tributaries) surface, sewers and finally groundwater. Flood risk would affect  75 underground stations, 411 schools, 10 major hospitals, 46 police stations and 20 fire stations Tidal flooding presented the highest consequence – but at the moment, thanks to the Barrier, the lowest probability. 

New development in a city expecting a population increase of 8000 people in the next decade alone, must be built with climate change in mind. Flood risk management must be improved particularly with regard to the Thames tributaries such as the Lea, Brent, Wandle and Colne. Critical infrastructure such as electricity, gas and water installations, must be protected.

Drainage, still reliant on Bazelgette’s Victorian engineering must be upgraded. Drought and heat also had to be addressed. The South East of England was already ‘water stressed’ with less rain than cities like Istanbul. London had higher than average water use with 23 per cent of water lost through leakage and only 19 per cent of households metered.

The Urban Heat Island effect overheated London in hot weather and this must be managed in the design of new buildings, development of low carbon cooling and also cultural adaptation.

Publicly accessible cool buildings needed to be open to the public during heatwaves, as already happens in the United States. 

Delegates needed to go away thinking about addressing not just fuel poverty but ‘cool poverty’ – people who could not afford to keep cool during ever more frequent and intense heatwaves.