UK: UK launches Low Carbon Strategy

Last Updated: 17 March 2009
Article by Munir Hassan and Nicholas Molho

On 6 March 2008, the UK government (BERR and DECC) launched the 'Low Carbon Industrial Strategy: a Vision'. A public consultation on the draft paper began on Friday and aims to gather responses from stakeholders to inform the final strategy paper, which the government intends to publish this summer. The government intends the above to be used to help define government policy going forward and impact a wide variety of industries.

A large number of separate initiatives are already in train for most of the areas that the strategy paper covers. How the outcome of the consultation will be reflected in those separate initiatives and processes is not made clear. Given the paper's breadth of scope, it could be used to integrate the strategy for achieving a low carbon economy and draw together the strands for the various initiatives in Carbon Capture and Storage (CCS), renewables, nuclear, energy infrastructure and energy efficiency, and to highlight inconsistencies of approach. The scope of the Vision means that it is likely to be of interest to a wide variety of industrial and commercial entities, in particular those operating or investing in the renewables, nuclear, energy networks, clean tech and transport sectors.

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On 6 March 2008, the UK government (BERR and DECC) launched the 'Low Carbon Industrial Strategy: a Vision'. A public consultation on the draft paper began on Friday and aims to gather responses from stakeholders to inform the final strategy paper, which the government intends to publish this summer. The government intends the above to be used to help define government policy going forward and impact a wide variety of industries.

A large number of separate initiatives are already in train for most of the areas that the strategy paper covers. How the outcome of the consultation will be reflected in those separate initiatives and processes is not made clear. Given the paper's breadth of scope, it could be used to integrate the strategy for achieving a low carbon economy and draw together the strands for the various initiatives in Carbon Capture and Storage (CCS), renewables, nuclear, energy infrastructure and energy efficiency, and to highlight inconsistencies of approach. The scope of the Vision means that it is likely to be of interest to a wide variety of industrial and commercial entities, in particular those operating or investing in the renewables, nuclear, energy networks, clean tech and transport sectors.

The Government's Vision

The UK's transition to meet its commitments in reducing carbon emissions is expected to have a transformative impact on the whole of the UK economy. The government stresses that the transition will "change our industrial landscape, our supply chain and the way we all work and consume". It highlights that the challenge for business and government is to ensure the UK benefits economically and industrially from the move to low carbon.

The framework already established to encourage industry to invest in bringing low carbon products and services to the market includes the Climate Change Act 2008; the EU Emissions Trading Scheme; the Renewable Energy Obligation; the UK's targets of 15% of all energy generated from renewables by 2020; the new Carbon Reduction Commitment; building regulations; vehicle emissions standards; dynamic product standards for consumer goods; public spending; and planning processes. The strategy paper seeks to explore, among other things, how the existing arrangements may need to be supplemented particularly having regard to four key areas:

  • energy efficiency for businesses, consumers and the public services;
  • establishing the energy infrastructure for the UK's low carbon future - in renewables, nuclear, Carbon Capture and Storage and a 'smart' grid;
  • making the UK a global leader in the development and production of low carbon vehicles; and
  • ensuring our skills, infrastructure, procurement, research and development, demonstration and deployment policies make the UK the best place to locate and develop a low carbon business and ensure international business recognises that.

Industry analysis

A government-commissioned analysis report from Innovas, which was released in parallel with the announcement, provides new market data on the environmental economy in the UK, its regions, and internationally. The report, entitled "Low Carbon and Environmental Good and Services: an industry analysis", considers activities undertaken by companies across the whole environmental supply chain, from R&D, through manufacturing into distribution, retain, installation and maintenance services. The report's key findings and conclusions emphasise:

(a) Size of sector

  • The value of the UK low-carbon and environmental goods and services (LCEGS) sector was £106.5 billion in 2007/8 and the sector could grow by approximately 5% per year despite the current economic slowdown.
  • The UK is the world's sixth largest low carbon and environmental economy, with 3.5% of global market share.
  • Within the LCEGS sector in the UK, 54,835 companies are active and there are over 881,000 jobs.

(b) Growth of sector

  • In 2007/8 the global market value of the LCEGS was £3,046 billion and the sector grew by approximately 4% in 2007/8.
  • The overall growth forecast for the UK LCEGS sector is 4.7% for 2009/10, increasing to 6.10% by 2014. Positive growth is forecast across all LCEGS industries in the UK.
  • If forecasts within the report are correct, the environmental economy will grow by about 45% over the next eight years, which would create new domestic and international opportunities for both new and existing UK companies.

(c) Opportunities for UK plc

  • Given the size of the LCEGS sector and its growth rate in both domestic and global markets, environmental activities offer an attractive opportunity for the UK's manufacturing base to exploit current and emerging technologies.
  • There is significant export potential for companies across most industries based on the current forecasts for global growth rates (with exports currently only 10% of sales, the UK has an opportunity to increase its global market share from 3.5%).
  • The UK market is well positioned to develop and gain comparative advantage in key areas of the environmental supply chain (e.g. water and wastewater treatment) through exporting nations looking to upgrade their infrastructure.
  • The high level of manufacturing content in the environmental economy (31%), particularly in the Renewable Energy sector, creates opportunities for manufacturing companies to diversify into new and potentially profitable activities.

Next Steps

The government has set up an interactive website to provide a forum for stakeholders to engage in the consultation on the strategy paper. Officials from BERR and DECC intend to use views expressed on the site to inform policy development towards a Low Carbon Industrial Strategy. The site will run throughout March and the government will review it in April. To visit the site, please click here.

Further information:

To access the report entitled "Low Carbon Industrial Strategy: a Vision" and the report entitled "Low Carbon and Environmental Good and Services: an industry analysis", and supporting material please click here.

To view our previous Law-Now article entitled 'Offshore Energy Development Environmental Report Published' (30.01.09), please click here.

To view our previous Law-Now article entitled 'EU climate change package - impact on carbon capture and storage' (23.12.09), please click here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 13/03/2009.

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