By Steven Heath; Director of Public Affairs and Strategy (Knauf Insulation Northern Europe)
‘It will cost the earth!’ is a well-used phrase that you will have heard both sides of the climate change debate voicing. One camp, of course, uses the phrase literally while the other, seemingly predominated by economists rather than climate scientists, often clouds their core concern with costs by questioning the science.
A new report from Cambridge Econometrics in association with Pr Paul Ekins at University College London, shows how action on emissions needn’t be a huge burden on strained budgets. Rather, it makes the case to Government, and perhaps more importantly to Treasury, that acting on carbon emissions would make us wealthier, healthier, and more resilient as a nation to energy price shocks and improve our energy security.
In detail, the report suggests that meeting the fourth carbon budget would add 1.1% to GDP by 2030, creating 190,000 jobs and increase real disposable income by £565 per household. Add in an increased tax take for Treasury and you have a business case that stacks up well against other capital investment options. And that’s before you even consider the positive impacts on climate change mitigation.
Arguments to Treasury on this debate are vital given our impression of current Government attitudes to energy efficiency in buildings. The approach across Government appears to be that emissions reduction is a departmental issue. It is for the Department of Energy and Climate Change (DECC) to deliver against carbon budgets while the rest of Government gets on with the business of governing. Indeed, the tools DECC has been offered to drive energy efficiency in our homes are not smart interventions around tax nudges or full on regulation but rather blunt instruments such as cash subsidies and energy supplier obligations. Or in the case of Green Deal a sports car without an engine. You can read more about my thoughts on how energy efficiency can be achieved in a previous blog post ‘A manifesto writer’s guide to delivering Home Energy Efficiency’.
So, why is policy important to us, an insulation manufacturer? In the United Kingdom, the insulation market demand is heavily driven by Government. By that I mean most demand, whether through regulation or incentive schemes, is generated by Government policies. Homeowners, at least those that can afford to act on energy bills, put a high discount rate on future benefits – rather a holiday today than a small saving on energy bills year on year.
Government is our key customer and Government policy is a key planning tool through which we forecast future sales and assess capital investment in factories, products and people. Indeed, as a global company it is those sales forecasts, in conjunction with a number of other factors, that help decide which countries are allocated capital investment as the various Knauf Insulation regions compete for a finite investment pot.
We are not alone as a business where political risk plays such a key role. On the opposite side of the coin, the debate is raging on the finance pages around fossil fuels. The scientific consensus says the large fossil fuel companies now hold enough oil, gas and coal reserves to take us beyond the two degree warming level should they be burnt. If the political will to curb emissions can be found, and a quick route to carbon capture and storage isn’t, these assets will be stranded.
Yet the Cambridge Econometrics report released today offers policy makers the business case for standing firm on driving down emissions across all sectors – buildings, transport, agriculture and industry. Combine the strong arguments in the report with the on-going campaign to get energy efficiency improvements in our old and leaky housing stock rebadged as a National Infrastructure project, and we may yet see emissions reduction as a cross departmental issue. Suddenly, all in Government have a stake in seeing policy succeed.
If we, as a business, were to see this level of ambition across Government and a clear and strategic direction of travel toward achieving the fourth carbon budget, we would be at the front of the global queue for the next round of capital investment decisions. Indeed, we could then roll out solutions developed here across the globe.