Labour’s green policies are warming up, but its economics lag behind

If action on climate change is urgent, why is it hard for politicians to spend a bit of money on it?

If action on climate change is urgent, why is it hard for politicians to spend a bit of money on it?

This year’s Labour conference gave people who care about the environment some new grounds for hope. But the party’s top brass still haven’t fully grasped the economic mindset needed for the UK to succeed in a low carbon world.

Most positively – after years of the likes of us banging on about the awfulness of existing government policy – the shadow energy secretary, Caroline Flint, announced a “war on cold homes”.

She set out plans to introduce zero interest loans for insulation and promised to sort out five million leaky properties over the next ten years (not fast enough for our taste, but certainly a lot better than nothing). She also committed to make it easier for schools to install solar panels, saving money in the process.

Meanwhile, shadow environment secretary Maria Eagle made an impassioned social justice case for environmental action, and backed urgently saving our declining bee populations. And Ed Miliband didn’t forget the green stuff this time:

“I said the only way to transform our economy is to make sure we create good jobs. The jobs of the future. So our third national goal is for Britain to be truly a world leader in Green technology by 2025, creating one million new jobs as we do…

The environment may not be fashionable as a political issue any more. But I believe it is incredibly important to our economy today. And it is the most important thing I can do in politics for the future of my kids and their generation.”

This is exactly where the narrative on green stuff needs to be: not tacked onto the end of speeches to keep the tree-huggers happy, but woven into a joined-up story about what economic and social policy actually needs to do.

So far, so good.

So why do I also feel a bit flat? It’s not just the sleep deprivation and the borderline scurvy brought on by a week of conference food.

I think what it is, is this. At the same time as Mr Miliband was speaking, world leaders were gathering in New York to talk about climate change. Everyone seemed to be agreed that it’s all very urgent (which it is) and everyone needs to do something about it.

But, if action on climate change is indeed so urgent, why is it so hard for our politicians to even hint that it’s a good thing to spend a bit of public money doing so?

I should rightly have use the word ‘invest’ there, not ‘spend’. Focus for a minute on insulating homes, as Caroline Flint did on Tuesday. The economic, social and environmental case is overwhelming. Badly insulated homes kill people. They cost the NHS a bucketload. They waste energy and haemorrhage both money to profitable energy companies, and carbon dioxide into the atmosphere.

They mean we have to build more energy infrastructure and make it harder than it needs to be to get off fossil fuels quickly. And insulating them en masse, big time, would generate tens of thousands of jobs right across the country, and give millions of people either more cash in their pocket to spend elsewhere in the economy, or homes they can be comfortable in, or both.

I really can’t think of a better case for public spending – sorry, public investment – than insulating homes. Our estimate is that about £4 billion pounds a year would do the job – money we think should be found by using carbon tax cash, and re-allocating just 2 percent of infrastructure spending.

Even as Caroline Flint was announcing her plans, there was the elephant in the conference hall, sat just offstage, saying: whatever you do, don’t say you’re going to spend any more money. In an otherwise pretty ambitious speech, she concluded by stressing happily that her plans don’t necessarily mean spending more money.

We were pleased that she said insulating homes would be a “national infrastructure priority”; but to deliver, just like with most infrastructure, this is almost certainly going to mean actually spending some more cash.

Our domestic UK debate has been reframed by neoliberal tittle-tattle so that ‘economic credibility’ now means a race over who would cut public spending the fastest. Even if you believe the deficit is the greatest economic problem we face (I don’t), there is a world of difference between genuine investment, about which all parties should be positive and evangelical, and borrowing for day-to-day spending.

There is another problem. To tackle climate change we need to not just invest in the solutions but disinvest from the problems.

Ed Balls’s commitment to airport expansion makes me less certain how he’ll live up to his promise to consider the environmental impacts of such infrastructure – as does the Labour leadership’s willingness to go along with Tory plans to frack Britain’s countryside, setting up an entirely new (and unpopular) fossil fuel industry. Coal remains Britain’s dirtiest technology, responsible for 1,400 premature deaths each year.

So, warm words from Caroline Flint that the only future for coal is with carbon capture and storage are very welcome, but this has to mean ending coal subsides and phasing out coal emissions by the early 2020s.

Perhaps the bigger challenge here is that despite initiatives like the New Climate Economy report from a fortnight ago – which made the compelling case for climate action on economic grounds – there’s still an ingrained resistance of the most powerful economics ministries in the world, including our very own Treasury, to releasing the grip of traditionally powerful fossil fuel industries.

With the slow pace of change, investors (even the Rockefeller Foundation!) are jumping ahead of politicians with their own disinvestment plans.

We – the planetary ‘we’ – only win when we to change the definition of good economic policy to mean investing as if future generations mattered.

Until then, all the warm words in the world are unlikely to be enough, and the debates will continue to focus on the wrong things. And our economies, which critically depend on a planet that we can all peacefully live on, will head for ever rockier-ground in the long-term.

David Powell is senior economics campaigner at Friends of the Earth

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18 Responses to “Labour’s green policies are warming up, but its economics lag behind”

  1. Leon Wolfeson

    “economic mindset needed for the UK to succeed in a low carbon world.”

    Yea, it’s so terrible when the poor have power. Gee, look at…oh…France. Right, nuclear energy. Actually clean, etc. – rather than your plan of ending base-load power which can only be enforced by “smart” meters cutting off most households during low-production periods with your unreliable power.

    “Badly insulated homes kill people.”

    Correct, and there is for instance nothing in what you’ve said about the worst-off stock, which is rented property, Landlords have no real incentive to allow works of that nature, control if people can get grants and in many cases people are not eligible for them anyway (i.e. living above shops).

    Oh, and Ms. Eagle has not done anything for bees, she has gone for blanket bans of pesticides, boosting the usage of older and even more toxic pesticides and blocking necessary studies. (Certainly one or arguably two of the family should be banned, but the wider family…the evidence is not there! Science based policy!)

  2. itdoesntaddup

    Insulating homes can make sense. Or not, when taken to excess – the marginal cost exceeding the marginal benefit. Costs can include the consequences of lack of ventilation, as well as loss of space, paying for ineffective amounts of insulation at the margin, and the cost of financing the investment – subsidy that must be paid by tax or bill payers.

    However, trying to attack coal use in the UK is not really going to help the planet. China’s per capita CO2 emissions now exceed the EU’s, and it is by some margin the world’s largest emitter. If you really believe that action is urgent, then you must engage the Chinese, who were notable for refusing to come to the table in New York. UK emissions are now less than 1.4% of the global total. Germany’s are increasing, because they made a mess of trying to implement renewables and because they are anti-nuclear – so now its Braunkohle – far more polluting than the imported coal we burn to try to balance the windmills that haven’t been providing us with much power this month or over the summer.

    If you want to take over responsibility for power cuts and shutdown of industry – which will emigrate to China and use coal fired power – then by all means avoid realism. I’d encourage Ed Miliband to keep quiet, and blame it on Davey if he can get away with it.

  3. Leon Wolfeson

    So…you don’t know about insulation (which is in the loft, and cavity walls).

    And then you whine that the UK shouldn’t do anything, and just offload the costs to the poor. Germany’s path is not the one to go down. Feel free to emigrate to China.

  4. itdoesntaddup

    I think it’s you who doesn’t understand the economics of insulation. According to the Energy Trust, topping up insulation from 100mm to 270mm would take over 10 years to pay back the cost in a typical detached house or bungalow, and 15 years in a semi or mid terrace. That is assuming no cost of borrowing to fund the installation. Borrowing at 4% via long dated gilts increases the payback period to 17 years and almost 40 years respectively. Add in some administration cost, and the payback is never.

  5. Leon Wolfeson

    270mm is well below the recommended, and 100mm is well below what a lot of rental accommodation has.

    Moreover, their figures “exist” for a reason, and are not precisely undisupted

  6. Stephen

    Meanwhile as Labour declares war on cold homes, Cameron plans to build more of them by waiving the energy standards on his cheap brownfield homes idea. Surely another throwback to the awful ‘Thatcher homes’ of the 80s.

  7. El_Sid

    promised to sort out five million leaky properties over the next ten years

    That’s the soundbite, even if it’s not technically true. They want to set a decency standard for 3 million properties of private landlords to meet by 2027, make a million interest-free loans for energy efficiency in private houses in the next Parliament, and tweak ECO to target it at insulating 200,000 low-income homes per year. There’s some talk of localising the Green Deal, but the government is heading that way in any case, given that the LibDems’ highly centralised approach hasn’t worked but localised pilot projects like Somerset have worked much better. And Labour only get to do anything over 10 years if they win the 2020 election…

    The yawning gap in Labour’s platform is how they square decarbonisation by 2030 with all their rhetoric against the energy companies and freezing electricity prices. Decarbonisation will require £100bn’s to be spent, and the energy companies will be the ones to do it – but I’m not sure why they would in the current climate.

    At current prices, decarbonisation implies a doubling of wholesale prices from the current £50-55/MWh. We will pay
    £92.50/MWh for 35 years for nuclear electricity from Hinkley Point C.
    For projects starting in the next 5 years we will pay at least a
    guaranteed £90 for onshore wind, £100 for hydro and large-scale solar,
    £125 for dedicated biomass, £140 for anaerobic digestion, geothermal and
    offshore wind, £305 for wave and tidal.

    So it looks like Labour will have to accept much higher electricity prices or fail in the decarbonisation target – and they need to be a bit more honest with the electorate about where they plan to strike the balance. It’s also clear that they intend to decarbonise with a significant proportion of nuclear power – Flint mentioned it in passing in her speech but it’s not something that they’re exactly shouting about.

  8. El_Sid

    Insulating homes can make sense. Or not, when taken to excess – the
    marginal cost exceeding the marginal benefit. Costs can include the
    consequences of lack of ventilation, as well as loss of space, paying
    for ineffective amounts of insulation at the margin,

    On the other hand, there appears to be some low-hanging fruit. There’s 7.4 million houses with lofts but less than 125 mm of insulation. There’s 700,000 houses with easy-to-treat standard cavity walls, but no cavity insulation. Payback periods on those houses should be pretty reasonable, and if access to capital is a problem for the owners then it’s probably in the national interest to help them meet basic standards.

  9. Godfrey Paul

    No where near as bad as the dreadful 1960’s concrete tower blocks thrown up by corrupt Labour local authorities under the Wilson government.

  10. swat

    Labour is putting all its money on a green economy, generating energy and jobs, and they may be right. Because there is no alternative. We have to be self sufficient in energy, dependent on no one else, and then we can have an ethical Foreign Policy.

  11. Leon Wolfeson

    The problem is that the owners of most of the worst properties don’t live there, and with the “market” for housing as it is, they have no real incentive to allow works, or to go through the process of allowing the tenants to borrow to insulate – moreover, if you’re renting, then you probably won’t be there long enough to personally benefit.

    There needs to be something done to make it fiscally important for landlords to insulate, at least to a minimal standard.

  12. Leon Wolfeson

    Only because the fixed pricings from the Coalition are so high that even their own watchdogs have called them a scam.

    Oh, and nuclear power need not be that expensive, the Coalition did so so much to jack the prices up it was unreal.

  13. Guest

    Smart meters will let you shut down power to the poor regions, so you can “ethically” close the borders for good, sure. The food situation…well, that’ll sort itself out in a few weeks won’t it, the recovery will take a bit longer, but hey who cares eh?

  14. Guest

    Far worse, for a lot of reasons. One, you’re talking the usual anti-democratic spiel.Two, they will use large amounts of land. Three, they won’t even be affordable to normal people, but to rich kids (who will then have to pay our for insulation).

    No surprise you can’t stand the thought of mass housing, however “bad”.

  15. El_Sid

    You are ignoring all externalities, you are cherry-picking your cost figures from the cheapest, dirtiest power (with no pollution controls), ignoring supply trends and ignoring current subsidies, etc.

    I’m just looking at the reality of the electricity market. The average price of the LEBA front-month contract was £50.26/MWh in 2013. You can dismiss it all you like as dirty, without externalities and all the rest – but that’s the kind of price that current bills are based on. Someone needs to have an honest discussion with the electorate about what it would mean to include some of the factors you mention – but most politicians are running scared of that kind of honesty.

    In fact, Ed Miliband’s price freeze is probably the reason that retail prices haven’t followed wholesale prices down (below £40/MWh in the last few months since the warm winter left lots of gas available) – they’re scared of being frozen at current atypically low prices.

  16. Leon Wolfeson

    You are looking at one component of energy pricing, and comparing it to studies which are looking at total costs. There are plenty of studies showing the total costings, the problem lies when you try and muddy it up, no more.

    And is that your latest excuse for why costs haven’t dropped. It’s been excuse after excuse for several years now! Meanwhile, record profits, of course.

  17. El_Sid

    I’m not comparing anything to any studies or LCoE – just the real-world costs that companies will be paying to buy electricity over the next few years. You can coulda-woulda-shoulda all you like, but those prices are what will be paid for renewables under the CfD system.

    That’s my point – Miliband is making promises about real-world bills so has to think about what costs are in the real world. And they don’t match up. He might care to think how much capital is required to implement his wish for decarbonisation by 2030 – and be honest where that money is going to come from.

  18. Leon Wolfeson

    You’re still trying to compare pure fuel costs with total energy costings, there.

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