enabling the transition to a green economy main d

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Enabling the Transitionto a Green Economy:

Government and businessworking together


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2 Enabling the transition to a Green Economy

1. The legacy o the last decade was aneconomy built on unsustainable levels opublic and private debt and too heavy areliance on nancial services. As we emergerom the largest recession since the GreatDepression we need strong, sustainable andbalanced growth that is more evenly sharedacross the country and between industries.This is the basis o the Governments Planor Growth, published alongside the Budget

earlier this year. A key element o this plan iscontinuing the transition to a green economy.There are strong economic arguments ormoving now: to avoid burdening our uturegenerations with the costs o early inaction,to help UK businesses take advantage onew markets or environmental goods andservices, and to demonstrate the strongstance the UK is taking internationally toreduce carbon and tackle climate change

2. The transition to a green economy will bringa range o advantages to our economy.It can help UK businesses to manage risks,such as those rom increasing and fuctuatingossil uel prices; increase resilience, such asto the impacts o climate change and seizethe opportunities rom new and emergingmarkets, both nationally and internationally.Furthermore, businesses across the wholeeconomy can save money through increasedenergy- and resource-eciency.

3. A prosperous and thriving green economywill generate the investment, innovation, skillsand entrepreneurship needed to transormour products and services, developing cleanertechnologies and capturing new internationalmarkets. These opportunities or growth are

Ministerial Foreword


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Enabling the transition to a Green Economy 3

not only rom conventional green sectorssuch as low-carbon energy generation andenvironmental products and services, but inother sectors such as the automotive industry,retail and construction, as these sectorsinnovate to develop greener alternatives.

4. The transition brings challenges along withthe opportunities, or example where sectorsare more exposed to the eects o rising

energy prices. For Governments part we mustensure that UK businesses are well placedto take advantage o the signicant businessopportunities and well equipped to managethe challenges presented by the global shit to agreen, low-carbon, resource-ecient economy.As the likes o China and India respond withincreased investment in low-carbon andenvironmental initiatives, so the UK must playstrongly to its comparative advantages andposition itsel at the oreront o key markets.

5. This document sets out the range o policytools we are using to support the transition toa green economy, the opportunities that arecreated and the implications or the way inwhich businesses operate.

6. This document is a product o collaborativeworking across Government, refecting notonly the broad policy coverage on the greenagenda, but also that a green economy

will only be achieved through workingtogether through concerted action acrossGovernment, but also through Governmentworking together with businesses andwith civil society. The commitments inthis document demonstrate a sharedresponsibility to take action.

7. We have been extremely grateul or theengagement with many business and otherstakeholders. This is a positive example oGovernment and businesses working togetherto make the transition to a greener, low-carbon, resource-ecient economy a reality.

Caroline Spelman

Vince Cable

Chris Huhne


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What is a green economy?

7. A green economy is not a sub-set o theeconomy at large our whole economyneeds to be green. A green economy willmaximise value and growth across the wholeeconomy, while managing natural assetssustainably.

8. Our vision is that our green economy o theuture will:

Grow sustainably and or the long term.Growth in the economy will be achieved

and wealth generated while emissionsand other environmental impacts arereduced. Opportunities or green growthwill be acilitated including in a growinglow-carbon and environmental goodsand services sector and the globalcompetitiveness o UK industry maintained.

Use natural resources efciently. Eectivedemand management and eciencymeasures or energy and other resources

will be used in our homes, oces andbusinesses across the economy. Inputs omaterials to production processes shouldbe optimised and the level o waste tolandll should decrease. New process andproducts will be required creating newmarket opportunities.

Be more resilient. The UK will have areduced reliance on ossil uels whilstmaintaining secure supplies o energy and

other natural resources. The economywill be more resilient and prepared orthe implications o climate change andenvironmental risks such as foods andheat waves.

Exploit Comparative Advantages UK businesses will be well placed to takeadvantage o the expanding markets orgreener goods and services

Why a green economy?

9. There is a strong case or moving the UKeconomy onto a greener ooting: According tothe Stern Review the global costs o climatechange could be between 5% and 20% oGDP per annum i we ail to act, dwarng thecosts o eective international action, estimatedat around 1% o GDP in 2050. In addition thenet costs o mitigation in the short to mediumterm will be higher i global action is delayedor i there is uncertainty about the investmentand changes in behaviour needed to make the

transition.10. The Governments Plan or Growth1

makes clear that decarbonising theeconomy provides major opportunitiesor UK businesses. At the last Budget, theGovernment set out its ambition or increasedinvestment in low-carbon technologies anda commitment to benchmark the UK againstthe top countries in the world. The globallow-carbon market was worth more than

3.2 trillion in 2009/10 and is projected toreach 4 trillion by 2015 as economies aroundthe world invest in low-carbon technologiesacross a broad range o sectors. The UK shareo that market is more than 116 billion in2009/10, but it could be much larger. I we actnow, UK businesses can be at the oreront othe transition.

11. In addition, the UK is becoming increasinglydependent on imported ossil uels by 2020

we could be importing 45-60% o our oil and70% or more o our gas. At the same time,global demand is likely to increase, leadingto supply constraints and volatile prices2.Access to other critical natural resourcessuch as water and minerals could also beconstrained in the uture. Supplies o rareearth elements or example, are dominatedby China, where recent export restrictionshave led to constrained supplies. The UKneeds to become more resilient to these

price variations, develop alternative sources

1 The Plan or Growth, March 2011

2 DECC Annual Energy Statement July 2010


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o supply, and make more ecient use onatural resources.

12. The Government recognises that therewill be increased costs o some resources,and changing patterns o investment andinnovation towards green activity. As wemake the transition, we will need to takeinto account the distributional impacts oncertain households and sectors, including orexample energy intensive industries. We willtake active steps to help these industries overthe transition because the green economy willcontinue to have and need these sectors.

13. There are actions that can deliver botheconomic and environmental gains in theshort-term, such as those which improveenergy and resource eciency. Maximisingthese opportunities and managing thecosts o transition to a green economy willrequire choosing the most ecient mixo interventions where the benets justiythe costs, as well as providing a robust,credible and long-term policy ramework to

increase business certainty o payback rominvestment. To achieve this thriving greeneconomy, both Government and businessesneed to act.

Government Action

14. Government is using a range o policytools to support the transition, including:promotion o international action; regulation;

nancial incentives; voluntary agreements;scal measures; public sector procurement;provision o inormation; and targeted workto unblock non-nancial barriers to thedeployment o clean energy technologies.Using these tools in the right way thatbalances supporting good behaviour anddiscouraging poor environmental outcomes isimportant or ensuring that change happens,that benets rom that change are maximised

and costs are minimised15. To invest in new systems, processes and tools,

businesses require certainty on Governmentaction. Alongside this document, we have

produced a visual timeline or the key policiesrequired or a green economy and anindication o their direction o travel over the

next decade. Our progress on many o theseactions can be tracked through our CarbonPlan which brings together the actions acrossGovernment on climate change.

International action

16. We need a global shit to a green economy,both to ensure eective joint action and toavoid undermining the competitiveness o UKbusinesses.

17. The EU can play an important role in drivingglobal ambition on the green economy andensuring a level playing eld. A developingEU market or green goods and services willopen up bigger markets or UK businesses,helping to promote sustainable growth aswell as allowing the EU to leverage its marketpower internationally working in partnershipwith other economies to promote highenvironmental standards.

18. The transition presents opportunities orthe UK to be a global leader in areas ocompetitive advantage or example in o-shore wind, and to increase exports ogreener goods and services as global marketsexpand. Government can help businesses toidentiy and seize opportunities overseas andbusinesses can highlight opportunities abroad,sharing experience and showcasing successstories.

19. The UK government will promoteinternational action to develop a greeneconomy, including through globalagreements, EU strategies, and otherinitiatives, and working through the G20 andother orums to encourage green growth.The Governments commercial diplomacywill maximise the export opportunities othe countrys green businesses.

Driving Investment in Inrastructure20. Transport and energy are engines or

economic growth, powering our work andconnecting businesses to their markets.


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2011 2012 2013

Policy&incentivisation

Pendingandrecentannouncements

1st Carbon Budget rom 200812 reduce Greenhouse Gas emissions by 22% (against 1990 levels) 2nd Carbon Budget rom 201317 reduce Gre

Green Econom

Review o environmental regulation

Smart metersoundation stage

Carbon price oor

Landfll tax

Aggregates Levy

Plug-in Car Grant

Plugged-in Places

EU Emissions Trading Scheme ETS Phase II

Carbon Reduction Commitment Energy Efciency Scheme (CRC)

ETS Phase III

Ecosystem Markets Task Force

Marine Planning

International Climate Fund

Waste responsibility deals

Climate Change Levy Discount rises to 80%

Renewable Heat Incentive Phase II

Green Investment Bank (GIB) set up

Climate Change Agreements 65% discount on Climate Change Levy

Review o restrictions on landfll

Renewable Heat Incentive Phase I

Green Deal

Phase I Incubation Phase II Establishment

Water White Paper

Electricity Market Reorm White Paper

UK Renewable Energy RoadmapReor

National Ecosystem Assessment

Sustainable ood production

EU Energy Efciency Directive

Growth Review Phase Two

National Inrastructure Plan

Corporate reporting o greenhouse gas emissions

Rio+20 United National Conerence on Sustainable Development

Small scale Feed-in-Taris adjustments

Renewable Obligation banding review

Further adjustments ollowing comprehensive review

Natural Environment White Paper

Biodiversity strategy

Resource Security Action Plan

Susta

Energ

National Adaption Programme

Revised EU Sustainable Consumption Action Plan

Environmental corporate reporting guidance

Payments or Ecosystem Services

First Climate Change Risk Assessment First National Adaption Plan

Waste Review

Carbon Capture and Storage (CCS) Roadmap

New bands announced New bands come into eect

National Planning Policy Framework aim to fnalise by the end o 2011

Consultation on simplifcation Summer 2011

Design and operation model announced

Industry guidance published spring 2012 1st Green Deal appears autumn 2012


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2014 2015 2016 2017 2018 2019 2020 to 2050

use Gas emissions by 28% (against 1990 levels) 3rd Carbon Budget rom 201822 reduce Greenhouse Gas emissions by 34%(against 1990 levels)

Policy Timeline

4th Carbon Budget rom202327 reduce Green-house Gas emissions by50% (against 1990 levels)

mart meters mass rollout

ETS Phase IV

Zero Carbon Buildings (homes rom 2016, non-domestic rom 2019)

Phase III Borrowing powers (subject to conditions)

Phase II

ace

Shutting down or new accreditations

Second Climate Change Risk Assessment Second National Adaption Plan

ste Prevention Programme

5th Carbon Budget

ramework or aviation

ency Standards

UK Targets by 2020 (against 1990 levels):

l reduce greenhouse gas emissions by 34%

l 15% o energy rom renewable sources

l cut CO2

emissions rom new cars by 40%

l source 10% o UK transport energy rom sustainablerenewable sources

l low carbon heat at 12%.

EU/International Targets by 2020l reduce greenhouse gas emissions by 20% (against

1990 levels)

l 20% o energy rom renewable sources (against 1990levels)

l 20% reduction in primary energy use compared withprojected levels (against 1990 levels)

l recycle 50% o household waste and at least 70%o construction and demolition waste (against 1995levels)

l reduce amount o biodegradable municipal wastegoing to landfll by 65% (against 1995 levels)

l halve the loss o natural habitats and increase sizeo protected areas to cover 17% o worlds landmassand 10% o oceans

l halt loss o biodiversity and degradation oecosystem services in EU.


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To sustain and saeguard uture growth, wewill also need to reorm our water, waste andfood management systems, and ensure that

inrastructure is resilient to the impacts oclimate change. This Government is puttingin place the necessary mechanisms to attractinvestment in the inrastructure that willsupport our economy now and enable it togrow sustainably or our uture. This includesdriving investment through:

The largest reorm o the electricity marketsince privatisation, to bring orward the110bn needed in electricity generation

inrastructure.

Supporting low carbon transportinrastructure and acilitating thedevelopment and manuacture o ultralow emission vehicles and recharginginrastructure.

The Green Deal which will create thenancing mechanism to support investmentin energy in our homes and businesses

Our Green Investment Bank which willacillitate increased and accelerated privatesector investment in inrastructure projectsthat support economic growth and ourenvironmental objectives, such as oshorewind, industrial energy eciency andcommercial and industrial waste as wellas growth capital or innovative greentechnologies.

21. Delivering new major inrastructure requiresan enabling planning regime which is rapid,predictable, transparent and democraticallyaccountable. We are making a number oreorms to deliver these objectives throughthe Localism Bill and recently delivered theNational Policy Statements or major energyinrastructure beore Parliament.

22. The Government announced an overhaul oplanning policy which applies to all orms odevelopment under the threshold or majorinrastructure, designed to consolidate existingplanning policy into a single concise NationalPlanning Policy Framework. This includessetting out how the planning system should

support the delivery o renewable energyand minimise vulnerability to the impacts oclimate change. The new Framework has been

designed to be user-riendly and accessible,providing clear policies on making robust localand neighbourhood plans and developmentmanagement decisions. Public consultation ona drat Framework opened on 25 July 20113.Following the consultation, we will aim tonalise the Framework by the end o 2011.

Regulation

23. Regulation has been, and will remain, an

important tool in encouraging businessesto develop greener products and servicesby oering a clear direction o travel and alevel playing eld. Businesses can benet romthe certainty that regulation oers, which canin some instances in energy eciency, orexample lead to a better deal or consumers.

24. The Government will work to ensure thatthe system o environmental regulation iseective, proportionate, coherent, clear

and implemented in a way that minimisesburdens on businesses, in line with theprinciples o better regulation.

Voluntary agreements

25. A wide range o voluntary agreements havebeen used or dierent green economyissues, rom single, tangible issues (e.g.single use carrier bags) to more complexsupply chain issues (e.g. the sustainable

clothing roadmap). This voluntary approachis less burdensome than regulation, and,developed intelligently, can achieve positiveoutcomes reeing businesses and society romunnecessary obligations, unlocking creativesector specic and local responses, improvingcompetitiveness and allowing people to takegreater responsibility or their own lives.

26. The Government believes there is scope orurther voluntary action on the green economy,

with businesses and Government workingtogether as part o the Big Society. Our

3 http://www.communities.gov.uk/news/corporate/1951729
http://www.communities.gov.uk/news/corporate/1951729http://www.communities.gov.uk/news/corporate/1951729http://www.communities.gov.uk/news/corporate/1951729http://www.communities.gov.uk/news/corporate/1951729


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general policy will be to explore voluntaryagreements and other less burdensomealternatives to regulation wherever this would

be practical, especially in resource eciency,waste, sustainable products and ood.

Fiscal measures

27. Fiscal measures, such as environmental taxes,can be eective in driving change. They can,or example, work to discourage damagingenvironmental behaviours (e.g. ClimateChange Levy, Landll tax, carbon foor price);incentivise environmentally-riendly products

(e.g. Vehicle Excise Duty) and energyeciency (e.g. Climate Change Agreements;Enhanced Capital Allowances). To supportde-carbonisation and provide certainty orinvestors on the carbon price, a carbon foorprice was announced in Budget 2011.

28. The Government will increase the proportiono tax revenue accounted or by environmentaltaxes targeting measures to maximiseopportunities or green growth in the UK.

Enabling innovation

29. Many o the main drivers o innovationwill be through generating new marketopportunities. However, unding support willremain necessary and important, especially ortechnological innovations.

30. Going orward, developing environmentaltechnologies with environmental benetswill remain a key priority or GovernmentInnovation support such as rom the ResearchCouncils, Energy Technology Institute and theTechnology Strategy Board among others.

Building the right skills

31. The transition to a green economy requiresa workorce with the right skills. Thisincludes not only skills in the low carbon andenvironmental goods and services sector, butalso those needed to help all businesses use

natural resources eciently and sustainablyand to be resilient to climate change. A newskills or a green economy grouping o SectorSkills Councils will help business understand

changing skills requirements; other actionsinclude improving the quality o inormation,advice and guidance available on careers in a

Green Economy together with inormation onthe skills linked to the Green Economy thatwill be needed in the uture, through the newNational Careers Service to be launched inApril 2012. The Government will also improvethe quality o skills provision in the urthereducation system and raising awareness andunderstanding o the green economy throughthe work o Unionlearn to support lielonglearning among the workorce.

Public procurement

32. Going orward, Government will buy moresustainable and efcient products within thecontext o the overarching priorities o valueor money and streamlining procurementprocesses, and engage with its suppliers tounderstand and reduce the impacts o itssupply chain. This will include urther use oGovernment Buying Standards and improvingand publishing data on Governments supply

chain impacts.

Provision o inormation

33. Access to inormation and advice aboutenvironmental impact can make it easier orbusinesses to produce greener products andservices, and or consumers to buy them.

34. Government has an important role helpingprovide inormation to businesses or

example, on the expected impacts o climatechange, resource eciency and resourcerisks. Government will continue to makeinormation available to businesses in theseareas, to make that inormation easier orbusinesses to use, and to advise businesseson how best to use it.

Support or transitional costs

35. The Government is committed to supporting

particularly those businesses that will behardest hit by the transitional costs ogreening the economy. Government willannounce a package o measures to help


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energy intensive industries adjust to thetransition to a low-carbon economy beorethe end o the year.

Implications or businesses

36. There will be both opportunities andchallenges rom the transition to a greeneconomy and businesses will need to adapt totake advantage o benets and manage risks.Impacts will be elt by sectors o the economyin dierent ways and to varying degrees.

37. For example, some sectors will see increaseddemand or goods and services. Somesectors will need to transorm aspectso their business models to reduce theirenvironmental impact, while others will needto manage potential increased input costs orlower or volatile demand.

38. To get to a green economy, businesseswill need to:

Pursue green growth. There will be asignicant increase in green business sectors

such as low-carbon energy generationand climate change adaptation services,with the UK being a global leader in someareas, bringing increased exports alongsidestrong UK demand. But there will also beopportunities in the wider economy insectors such as business and proessionalservices, retail, automotive, construction,electronics and other manuacturingsectors.

Maximise their energy- and resource-efciency. There are clear businessbenets and market opportunities romimproved energy- and resource-eciency,delivering major cost savings and increasedcompetitiveness.

Innovate. Both new and existingtechnologies, production processes andbusiness models will be used to reduce useo resources, waste, carbon emissions and

other environmental impacts across supplychains. Innovation will also be required tolower the cost o key green technologies andimprove their perormance.

Improve inrastructure. Both businessesand Government will need to invest innew inrastructure that supports the green

economy.

Increase resilience. The uture risks oenergy and other resource security and theimpacts o inevitable climate change willneed to be built into business planning.

Adapt to challenges. For some sectors othe economy, costs rom climate changepolicies and increased energy prices willneed to be addressed, particularly in the

context o international competitiveness.For many businesses climate changeadaptation will need to be built into uturebusiness planning.

Help consumers make inormed choices.Through provision o inormation,businesses can infuence consumerbehaviour and support them in makinggreener choices in their respective markets.

Working together to achieve agreen economy

39. While many businesses in the UK are alreadyat the oreront o a greener economy thereis urther to go. Businesses and Governmentmust work together to ully realise theopportunities and thus drive green growth.

40. Government has already set out in the recentpublication Every Business Commits that it will

help businesses succeed so they can createjobs, wealth and opportunity. Government inreturn has asked businesses to act, includingby reducing carbon and protecting theenvironment.

41. As we transition to a green economythe relationship between business andGovernment needs to be even stronger.Below are a series o Governmentcommitments that will support the move to

a green economy. Also highlighted are actionsthat a number o leading businesses arealready undertaking and that we encourageothers to consider.


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Government will Business could

Develop a green policy ramework which:

Is eective, clear, stable and as streamlined andminimally burdensome as possible;

Encourages investment;

Protects existing investments, where possible,through use o grandathering (protectingpre-existing rights).

Work with Government to:

explore voluntary approaches to greeningproducts and services;

Identiy areas o green policy and regulationwhich can be streamlined whilst remainingeective;

Invest in greener products, services andproduction processes.

Promote the UK as a global leader in greenexports and encourage green inwardinvestment.

Help Government publicise the skills andexpertise o UK-based business.

Provide accessible advice and support to enablebusinesses to increase their resource eciency,resource security and resilience to climate change.

Become increasingly resource ecient and buildrisks o energy/resource security and climatechange into uture business planning.

Ensure that Government green policies takeinto account the competitiveness o UK-basedcompanies, including Energy Intensive Industries

and develop measures to support businessesmost hit by transitional costs.

Continue to explore production processes andbusiness models which reduce use o resourcesand carbon emissions.

Ensure the skills system responds to the demandor skills created by shi t to green economy.

Help articulate skills demand throughinvolvement in LEPs, and Sector Skills Councils

Support the development o greener products,services, and technologies, though continuedsupport or R&D and innovation.

Design, develop and promote greener productsand services, including enabling technologies.

Encourage investment in inrastructure and

ensure that inrastructure supports thegreen economy, including through the GreenInvestment Bank

Invest in inrastructure that will support the

green economy.

Enable UK-based businesses to compete ingreen, low carbon supply chains where the UKhas expertise.

Work together, where possible, to help buildUK-based supply chains.

Procure products that meet cost-eectivesustainability standards.

Adopt sustainability standards or theirprocurement.

Help businesses understand the value o and

their impact on the natural environment.

Consider the value o the natural environment

to their business.

Government commitments to support a green economy


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