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Home , Chris Huhne, David Laws, Ed Davey, Liberal Democrats (UK), Nick Clegg

Liberal Democrats in coalition: climate and energy

The coalition’s climate and energy policy: from consensus to conflict Neil Carter

Chris Huhne at the UN ‘A flagrant reversal of a totemic commitment Cameron’s embrace of the green agenda in oppo- climate conference, … When raise it with Osborne he just says: sition and the Liberal Democrats’ longstanding Cancun, 2010 “I don’t believe in this agenda. Of course we environmentalism. Keen to make a mark in this had to say all this stuff in Opposition.”’1 (Nick policy area, the Liberal Democrats demanded Clegg) the Department for Energy and (DECC) with one of their leading lights, Chris ‘For me, the green agenda is important. For Huhne, as Secretary of State (replaced by Ed Nick it’s existential.’2 () Davey in February 2012). If promises made in Opposition could be believed, even the Treas- t had all started so well. Conservative ury appeared onside, for had and Liberal Democrat negotiators encoun- declared: ‘If I become Chancellor, the Treasury tered few difficulties agreeing an ambitious will become a green ally, not a foe’.5 Yet the appar- I 3 agenda for climate change and energy policy. ent harmony was short-lived. By late 2013, Nick The coalition agreement promised to ‘imple- Clegg, the Liberal Democrat leader, reflected ment a full programme of measures to fulfil that: ‘Energy and environmental policy has in our joint ambitions for a low-carbon and eco- many ways now become the biggest source of dis- friendly economy’.4 It outlined a litany of climate agreement in the coalition. I have spent more time change mitigation measures that reflected David arguing about the details of this with Cameron

46 Journal of Liberal History 92 Autumn 2016 Liberal Democrats in coalition: climate and energy and Osborne than any other issue’.6 Thus, despite ‘burdening the UK economy’ and ‘undermining Cameron promising to lead ‘the greenest govern- the UK’s competitiveness’.10 Several other cabi- ment ever’, it is his despairing plea to his aides to net ministers also wanted weaker targets. Cam- ‘get rid of all the green crap’ that is equally well eron eventually intervened to secure approval of remembered. This article assesses the coalition’s the budget, although Osborne insisted on a 2014 record on climate policy, focusing primarily on review to assess whether it was negatively affect- the energy sector. ing the UK’s industrial competitiveness. In the The path-breaking event, the 2014 review left the carbon budget (CCA) set challenging greenhouse gas (GHG) untouched, although in the interim its looming emissions reduction targets of 34 per cent by 2020 presence cast a negative light on the coalition’s cli- and 80 per cent by 2050 compared to 1990 levels, mate commitment. backed by five-yearly carbon budgets. Progress The proposal for a Green Investment Bank towards these targets during the coalition govern- (GIB) to support investment in low-carbon infra- ment was mixed. On the positive side, UK emis- structure encountered similar inter-departmen- sion levels in 2015 were below the annual average tal tensions: when Cable and Osborne initially permitted in the second and third carbon budg- queried the availability of funds for it, Clegg, ets; emissions must fall by 2–3 per cent annually, Huhne and formed a common and since 2012 they have fallen at 4.5 per cent per front against Treasury foot-dragging. Neverthe- annum.7 However, the reductions were almost less the Chancellor promised an initial investment entirely in the power sector where renewables of £3 billion from the Treasury to leverage pri- have steadily replaced coal; elsewhere emission vate-sector capital to fund projects, although the levels have flat-lined. Without reductions in the GIB wouldn’t be allowed to raise its own capital industry, buildings, agriculture and transport sec- until at least 2015. The GIB’s priority areas were tors in particular, the UK will not meet its targets offshore wind, waste and bioenergy, and non- beyond 2020. However, rather than evaluate the domestic energy efficiency, and by mid-2015 the coalition on an outcome that is not unequivocally bank had invested in fifty-two green infrastruc- Yet the appar- linked directly to its actions, it is more helpful to ture projects and seven funds in over 240 locations examine the policy measures it implemented (or around the UK, directly committing £2.1 billion ent harmony was did not). in transactions worth £8.1 billion – and it had Climate policy had been fundamentally trans- made a small profit.11 short-lived. By formed under the Labour government since 2006, The Labour government had launched a huge notably through the CCA and the ambitious tar- £30 billion programme of financial support for late 2013, Nick get, set by the EU Directive, renewable electricity and heat to 2020 and to source 15 per cent of all energy from renewa- introduced a feed-in tariff (FiT) in April 2010 to Clegg, the Liberal bles by 2020.8 Labour instigated a hugely inter- incentivise small-scale renewable energy produc- ventionist programme with a raft of policies and tion. The coalition continued this policy, which Democrat leader, major investment in renewables and low-carbon leveraged massive private-sector investment, reflected that: infrastructure; the coalition agreement repre- leading to the share of electricity generated from sented a continuation of this strategy. renewable sources increasing from 7 per cent in ‘Energy and envi- However, implementing the coalition pro- 2009 to 26 per cent in 2015, of which 53 per cent gramme proved more contentious than its archi- was from wind, 33 per cent from biomass and the ronmental policy tects had anticipated. Climate policies provoked rest from solar photovoltaic and hydroelectric- conflicts between DECC and the economic min- ity.12 Meanwhile, the coalition designed a major has in many ways istries – the Treasury and the Department for reform of the financial support system for renew- Business, Skills and Innovation (BIS) – which able energy development. The Energy Act 2013 now become the were prioritising austerity budgeting and anxious outlined the phasing out of the expensive renewa- about anything that might damage UK economic bles obligation (RO) by 2017, replacing it with biggest source competitiveness.9 There were disagreements the Contract for Difference (CfD) mechanism, a of disagreement between the coalition partners, as a significant long-term contract enabling low-carbon electric- tranche of Conservative MPs became increasingly ity generators to recoup their investment costs in the coalition. I resistant to progressive climate policy measures. in renewables (and nuclear) via fixed prices for Tensions also arose, inevitably, between the three electricity generation. CfD is intended to pro- have spent more core energy policy objectives: affordable con- vide certainty and revenue stability to genera- sumer prices, security of supply, and GHG emis- tors while protecting consumers from paying time arguing sions reductions. higher support costs when electricity prices are One early conflict concerned the government’s high. The first twenty-seven CfDs were awarded about the details decision whether to accept Cli- in February 2015, worth £315 million to deliver mate Change Committee’s (CCC) recommenda- 2.1GW of renewable energy leading up to 2020, of this with Cam- tion for a fourth carbon budget (for 2023–2027). with significantly lower prices paid for renewable eron and Osborne Cabinet splits were revealed in a leaked letter schemes than DECC had expected.13 The carbon from (Liberal Democrat BIS Secre- price floor was introduced to provide additional than any other tary) to Clegg and Osborne expressing concern certainty for investors in low-carbon technolo- that the proposed carbon reduction targets risked gies by establishing a minimum price for carbon, issue’.

Journal of Liberal History 92 Autumn 2016 47 Liberal Democrats in coalition: climate and energy although it was widely criticised as costly and at a potentially huge cost to the taxpayer.17 Yet ineffective.14 the coalition still left office without finalising the Indeed, there was considerable uncertainty deal. in the renewables sector by the end of the coali- An alternative solution to the electricity gap tion. The threat posed by the Chancellor’s levy was shale, which had revolutionised the US control mechanism, which capped the overall energy sector by reducing prices and slashing subsidy payable to renewables, had been deferred emissions. is a fossil fuel with lower in November 2012 when persuaded emissions than coal so it would provide a short- the Treasury to lift the cap to £7.6 billion by term reduction in GHG emissions, although a 2020, thereby encouraging both short-term and successful shale industry would certainly draw medium-term investment. But when the whole- investment funds away from renewable energy. A sale price of energy fell during 2014 the poten- temporary moratorium on drilling was imposed tial threat posed by the levy resurfaced. There after exploratory drilling near Blackpool caused were also some chaotic policy shifts, particularly minor earth tremors. Huhne was unconvinced affecting the solar industry, which did little for by its potential, arguing that shale gas would not the industry’s long-term security. Large-scale take off any time soon and dismissed claims that it solar installations grew so fast – quicker than any- would reduce energy prices in Europe.18 Despite one had anticipated – that they outstripped the provoking significant popular opposition, Cam- allocated budget, prompting the government eron and Osborne were both strong advocates and to remove their eligibility for RO support from after Huhne resigned they worked with Davey to 2015; while microgeneration on domestic and make it happen. Yet, despite passing supportive business rooftops benefited from a very gener- legislation, including offering payments to local ous FiT, which was then cut to one half and then communities where drilling would take place, no one third of its 2010 level. Loss of confidence in further drilling occurred before the coalition left renewables also reflected the growing opposi- office. tion to onshore wind power on the Conservative The coalition reaffirmed Labour’s commit- The Green Deal backbenches, whipped up by a hostile right-wing ment to fund four carbon capture and storage press. As resigned, 101 MPs wrote (CCS) projects, a potentially critical technol- was a policy dis- to Cameron urging the removal or a dramatic ogy for decarbonising the economy, but the pro- cut in the subsidies paid to develop- gramme fell far behind schedule. By 2015 three aster. The scheme ers.15 Cameron later appointed John Hayes, who projects were receiving funding, although none opposed wind farms, as a junior energy minis- would be operational before 2020. Numerous was too complex, ter, although after Hayes directly contradicted unanticipated technical problems hampered pro- Davey, the latter insisted Hayes be removed from gress, but, again, so did consistent Treasury reluc- hardly tested on DECC. Clegg later had to block a proposal from tance to fund CCS.19 Cameron and Osborne to cap the construction Energy efficiency is an essential element of consumers, the of onshore farms. When rising domestic energy the UK’s low-carbon strategy because its hous- Treasury-imposed prices became politically contentious in 2013, the ing stock is among the least energy-efficient in criticism of wind power expanded to a broader Europe. The coalition’s flagship initiative, the interest rates of assault on the ‘onerous’ green levies that contrib- Green Deal, was enthusiastically supported by uted to increased consumer prices. With political both coalition partners, including Osborne.20 The 7–10 per cent for pressure ramped up by Labour leader Ed Mili- Green Deal was a finance mechanism enabling band’s promised energy price freeze, Cameron householders to borrow money to insulate their the loans were reportedly made his ‘get rid of all the green crap’ homes, with repayments channelled through their comment as a panicky government transferred energy bills, partly offset by lower costs resulting unattractive, some environmental levies from customers to from the energy efficiency measures. The innova- the taxpayer amounting to a £50 price reduc- tive idea was to tie the loan to the property rather and the market- tion whilst also trying to shift the blame onto the than the current occupiers. Great claims were ing emphasised energy utilities.16 made about the Green Deal. Greg Barker, Con- The coalition echoed Labour in embracing servative Climate Change Minister, declared that financial benefits as a large-scale low-carbon energy it had the potential to improve the entire hous- source to replace ageing coal and nuclear power ing stock of 26 million houses, yet by 2015 just to consumers stations. The coalition agreement circumvented 14,000 households had taken out a loan. DECC longstanding Liberal Democrat opposition to predicted that Green Deal loans would be worth rather than the nuclear power by promising that new reactors around £1.1 billion by 2015; in practice it was just would receive no public subsidy and allowing £50 million. The scheme cost £17,000 for every comfort and envi- their MPs to abstain in any parliamentary vote loan arranged, with minimal reductions in CO 2 ronmental ben- on the issue. But delivering even one new nuclear emissions.21 In short, the Green Deal was a policy power station proved challenging. The EDF- disaster. The scheme was too complex, hardly efits that might led Hinkley Point C consortium was offered tested on consumers, the Treasury-imposed inter- a CfD for thirty-five years at a very generous est rates of 7–10 per cent for the loans were unat- have proved more index-linked £92.50 per MWh, plus a £2 bil- tractive, and the marketing emphasised financial lion Treasury guarantee for construction finance benefits to consumers rather than the comfort and appealing.

48 Journal of Liberal History 92 Autumn 2016 Liberal Democrats in coalition: climate and energy

It quickly became environmental benefits that might have proved of their own party (although Cameron himself more appealing. The less-hyped complementary often wobbled under pressure). Clegg’s increasing obvious that Energy Company Obligation (ECO), which cop- despair at continually having to fight the Con- many Conserva- ied previous schemes by requiring energy suppli- servatives on the green agenda reflected battles ers to install measures that reduce CO2 emissions of varying intensity with Cameron and, espe- tive MPs didn’t or bills, did improve energy efficiency in 1.4 mil- cially, Osborne, over the fourth carbon budget, lion homes, although DECC was unable to deter- the GIB, wind power and over their willingness support much mine its impact on fuel poverty.22 to blame high domestic energy bills on green poli- The roll out of smart meters gathered pace cies.26 Indeed, the positive impact of the Liberal of what their slowly, held back by delays in setting up the data Democrats has become clearer in retrospect, as infrastructure underpinning the programme, the Conservative government has moved rapidly own manifesto although DECC remained confident that the to dismantle many elements of the climate policy, roll-out to 30 million homes and small businesses including DECC itself.27 said about cli- planned for 2016–2020 was still on target.23 The potential for direct energy savings appears lim- Neil Carter is Professor of Politics at the University of mate change. The ited, but smart meters will provide flexibility . He has published widely on environmental policy involvement of over the timing and demand for electricity that and politics, and UK political parties. will enhance the integration of renewables and the Liberal Dem- deliver greater energy security. 1 Matthew D’Ancona, In It Together: The Inside Story of the , (Penguin, 2014), p. 282. ocrats enabled 2 Ibid, pp. 364–5. Conclusion 3 , Coalition: The Inside Story of the Conservative– those Conserva- The coalition continued Labour’s interventionist Liberal Democrat Coalition Government (Biteback, 2016), p. climate policy, leaving an energy sector charac- 374. tives who did terised, perhaps inevitably, by a fiendishly com- 4 HM Government, The Coalition: Our Programme for Gov- believe in Cam- plex set of practices and extensive government ernment (, May 2010). micromanagement of energy markets.24 The suc- 5 The Independent, (24 Nov. 2009). eron’s modernisa- cess stories were the rapid growth of renewable 6 Laws, Coalition, p. 379. energy and the creation of the Green Investment 7 Committee on Climate Change, Meeting Carbon Budg- tion project, such Bank. By contrast, little progress was made deliv- ets – 2016 Progress Report to Parliament, https://documents. ering greater energy efficiency, advancing CCS or theccc.org.uk/wp-content/uploads/2016/06/2016-CCC- as Letwin, Barker, improving business efficiency. Progress-Report.pdf, pp. 11–12. The coalition’s experience underlines the 8 Neil Carter and Michael Jacobs, ‘Explaining Radical , important general point that delivering climate Policy Change: the Case of Climate Change and Energy progressive climate policy requires action across Policy under the British Labour Government 2006– government. However, apart from the Foreign 2010’, Public Administration, 92 (1, 2014). and some oth- Office, Environment, and International Develop- 9 Politics.co.uk, ‘Cabinet showdown looms over carbon ment, few departments were sympathetic to the emissions’, http://www.politics.co.uk/news/2011/05/15/ ers, to hold the climate agenda and some, notably the Treasury, cabinet-showdown-looms-over-carbon-emissions. BIS (sometimes) and the Department for Commu- 10 Politics.co.uk, ‘Cabinet splits over carbon budg- line against the nities and Local Government (DCLG), were often ets’, http://www.politics.co.uk/news/2011/05/10/ actively hostile. The continued Treasury subsi- cabinet-splits-over-carbon-budgets. bulk of their own dies for North Sea oil and gas exploration, the 11 Elena Ares, The Green Investment Bank (House of Com- unwillingness of DCLG to promote higher build- mons Briefing Paper No. 05977, 13 Apr. 2015). party (although ing insulation standards or push through approv- 12 Committee on Climate Change, Meeting Carbon Budgets, als for onshore wind farms, and the failure to stop p .51. Cameron himself rising emissions from transport all illustrate the 13 ‘UK renewables auction pushes down costs’, Car- often wobbled failure to mainstream climate change policy. bon Brief (27 Feb. 2015), https://www.carbonbrief.org/ If this is a challenge common to all govern- uk-renewables-auction-pushes-down-costs. under pressure). ments, a more specific lesson concerns the Liberal 14 ‘Unpopular but tenacious: A Guide to the UK Carbon Democrats’ critical role in keeping the climate Price Floor’, Carbon Brief, 19 Nov. 2013 agenda on track in the face of growing Conserva- 15 ‘101 Tories revolt over wind farms’, The Telegraph, (4 Feb. tive hostility.25 Despite the ease with which the 2012). climate section of the coalition agreement was 16 , ‘The Coalition and Energy Policy’, in negotiated, given the closeness of the two parties’ and Mike Finn (eds.), The Coalition Effect manifestos, it quickly became obvious that many 2010–2015 (CUP, 2015), p. 198. Conservative MPs didn’t support much of what 17 National Audit Office,Nuclear Power in the UK, overview their own manifesto said about climate change. (HC 511, session 2016–17, 13 Jul. 2016), p. 9. The involvement of the Liberal Democrats 18 Daily Telegraph, (9 Nov. 2011); see also ‘The truth about enabled those Conservatives who did believe in David Cameron’s fracking fairytale’, (26 Cameron’s modernisation project, such as Letwin, Jan. 2014). Barker, William Hague, Caroline Spelman and 19 ‘Coalition “united on carbon cuts”, says Clegg’, The some others, to hold the line against the bulk Independent (6 Aug. 2012) http://www.independent.

Journal of Liberal History 92 Autumn 2016 49 Liberal Democrats in coalition: climate and energy

co.uk/news/uk/politics/coalition-united-on-carbon- p. 69. cuts-says-nick-clegg-8009546.html 24 Helm, ‘The Coalition and Energy Policy’. 20 Laws, Coalition, p. 375. 25 Neil Carter and Ben Clements, ‘From “greenest govern- 21 Public Accounts Committee, Household Energy Efficiency ment ever” to “get rid of all the green crap”: David Cam- Measures (House of , Session 2016–17, Eleventh eron, the Conservatives and the environment’, British Report, HC 125, 20 Jul. 2016). Politics, 10 (2, 2015). 22 Public Accounts Committee, Household Energy Efficiency 26 Laws, Coalition, pp. 376–9. Measures, pp. 5–6. 27 ‘UK has “lost world climate leadership role” by axing 23 Committee on Climate Change, Meeting Carbon Budgets, domestic green policies’, The Guardian (10 Dec. 2015).

Commentary: former minister Chris Huhne

eil Carter provides a fair assessment been backed up by a competing option, which of coalition energy and climate policy. was never clarified. NIt is worth, though, laying out some On renewables, the UK played its part in one The low-carbon big forces. The concern of the Treasury and the of the most successful experiments in indus- Business department about energy costs did not trial policy of any time. The EU renewables transition became just flow from scepticism about green objectives, target – to ensure that 20 per cent of primary though that helped. Nor was it just cynicism energy consumption is from renewables by more difficult from the Conservatives. The low-carbon transi- 2020 (reduced to 15 per cent for the UK to take because of the tion became more difficult because of the unique account of our slow start) – was a significant British circumstances surrounding the Lehman- driver of lower global prices for solar and wind unique British crisis-driven downturn in the economy. This power. This deployment of key technologies for entailed an unprecedentedly prolonged period a low-carbon future was key to learning and cut- circumstances of falling real incomes – a squeeze which high- ting costs. It is simply not to do this on a lighted any high-profile costs. There are few lab bench, as some academics have suggested. As surrounding the more substantial bills than energy. Energy policy Citi has shown using Bloomberg New Energy became tough politics. Finance data, the cost of solar power has fallen Lehman-crisis- Contracts for difference (CFDs) were ham- by 19 per cent for each doubling of installations. pered, because of the wide range of potential The cost of wind is down 7 per cent. Deploy- driven downturn future costs depending on projected energy ment matters. Both solar and wind can now in the economy. prices. The logic, though, was right: by guar- compete without subsidy in favourable world anteeing energy prices for low-carbon projects, conditions, and will do so soon even in the UK This entailed an the government could reduce the interest rate (where a solar panel yields just half the power it charged by banks on the capital investment. Since would yield in Arizona). unprecedent- almost all low-carbon sources of electricity are The Green Investment Bank (GIB) was another capital intensive – nuclear, offshore and onshore initiative that made modest progress, but had edly prolonged wind, solar – getting the cost of capital down less impact than it should have done, and is now was and is crucial to the best deal for consumers. slated for privatisation and virtual death. The period of falling However, a big mistake on the part of the Depart- first problem was persuading the Treasury that ment of Energy and Climate Change (DECC) the GIB should be able to borrow: the UK is the real incomes – a was allocating too many CFDs administratively only major industrialised country not to have a squeeze which based on guesstimates of costs and returns. As we state-owned bank that can leverage the govern- subsequently saw, the process of Dutch auctions – ment’s credit standing to provide cheap long-term highlighted any where the lowest bidders win – has proved better finance to important projects. The Treasury has at getting costs down. always seen off rival borrowers, usually on spuri- high-profile costs. The biggest such allocation was the CFD for ous that protect its monopoly. The compromise Hinkley Point, which Carter rightly describes as preserved the GIB’s right to borrow, but at the There are few expensive. Given that EDF had initially offered cost of requiring commercial returns. The man- to build Hinkley at a much lower price, it is hard agement team had to be as profitable as its private- more substantial to avoid the view that the company played the sector competitors, so that it only invested when coalition cleverly. George Osborne’s keenness on a private player was already prepared to do so. As bills than energy. big projects – and his and his party’s enthusiasm a result, its envisaged role as a pioneer was sabo- Energy policy for nuclear power – meant that DECC’s nego- taged from the start. tiators had a hand tied behind their back. Unless Carter is not right to imply that I was a sceptic became tough you can credibly walk away from the table, you about gas: I insisted that the projects for carbon will never get the best offer in a commercial capture and storage (CSS) should add a gas elec- politics. negotiation. That credible threat should have tricity generating plant, and not just be applied

50 Journal of Liberal History 92 Autumn 2016 Liberal Democrats in coalition: climate and energy to coal as Labour had ordained. The reason was for itself – without a strong government lead Without the EU’s precisely because it seemed to me that we did not and sweeteners. DECC wanted stamp duty relief yet know what the cheapest form of low-carbon for homeowners if they installed a Green Deal incessant pres- electricity would be – whether gas or coal with within a year – timed to attract people when they carbon capture and storage, nuclear or renewa- were anyway going to renovate their homes – but sure – and with- bles – and that we needed to have a portfolio this was repeatedly blocked by the Treasury. As out the UK’s role approach, rather as you would spread your risks a result, we will pay a far higher price for more among different shares when investing a expensive energy and power stations. among the cli- fund. Carter perhaps underestimates the contribu- Shale gas was, though, ludicrously oversold by tion in the international sphere. The UN con- mate progres- Conservatives on the basis of the low US price, ference of the parties at Copenhagen was all the which is entirely artificial since there are so few greater a debacle because expectations had been sives alongside US export terminals serving the world market. high, and it was quite possible that the whole pro- As a result, shale gas has been trapped in the US, cess of the Framework Conven- Germany and driving down the price. By contrast, the UK gas tion on Climate Change (UNFCCC) might have price varied little from the continental gas price collapsed. The rescue – which ultimately led to France – I doubt even when we produced from the North Sea a the agreements at the Paris conference of the par- that the UNFCCC vast surplus to our own needs, because we have ties – began under the Mexican presidency at so many export pipelines. It is also going to be a Cancun and continued under the South African would have been lot more difficult exploiting shale gas in built-up presidency at Durban. Without the EU’s inces- than in desert-density North Dakota. sant pressure – and without the UK’s role among saved. That was Nevertheless, gas (whether conventional or shale) the climate progressives alongside Germany and has been dealt a blow by the recent government France – I doubt that the UNFCCC would have an important decision to cancel the CCS programme. This does been saved. That was an important achievement not add up. in which Britain’s outstanding climate negotiators achievement in The biggest disappointment in coalition cli- (such as the estimable Pete Betts) played – perhaps, mate policy was the failure of the Green Deal post-, for the last time – a key part in the which Britain’s energy-saving policy. The Green Deal was and EU strike force. outstanding cli- still is an outstanding vision. We waste masses The best that can be said for coalition cli- of energy in heat loss, and rectifying this is far mate policy is that we kept the show on the road mate negotiators cheaper than building new power stations or for four years longer than would have happened pipelines. The concept was to provide consumers with a majority Tory government, as Carter … played – per- with a cheap way of paying for a complete home points out. That bought time for the UNFCCC, insulation makeover out of the savings from for renewables, and ultimately therefore for the haps, post-Brexit, their energy bills. But the programme became chances of a solution to global warming. It is an far too complex as DECC attempted to forestall honourable achievement, but fell short of our for the last time Whitehall critics, and it became too expensive hopes and ambitions. as the Treasury insisted on market finance (not – a key part in the something that it required when it came to the Chris Huhne was Secretary of State for Energy and Cli- EU strike force. guarantees for Hinkley Point). The real killer, mate Change from 2010 to 2012, and shadow Environ- though, was the failure to provide strong incen- ment Secretary in opposition, responsible for the party’s tives to undertake the programme. This flew in ‘Zero-Carbon Britain’ plan. He is now co-chair of ET the face of all the economic evidence that people Index, which measures carbon emissions of quoted com- would not adopt energy saving – even if it paid panies, as well as advising renewables businesses.

Commentary: former minister Ed Davey

eil Carter’s review is spot on about the slightly offset by the biggest failure – namely the coalition’s climate and energy headline Green Deal. (A policy Osborne told me was his Npolitics: the Liberal Democrats fight- idea!) ing an increasingly bitter war, with (most) Tories But it is the big omissions I must begin with. objecting to everything green as soon as the coali- The most significant is our excellent record on tion agreement ink was dry. international climate change negotiations at the Within this political war, he gets some of the EU and UN. This is crucial, given that the UK’s achievements and failures of the Liberal Demo- share of global emissions is less than 2 per cent. crats right too: our expansion of renewable power Chris Huhne laid the foundation for this success, was truly remarkable and the creation of the particularly at the Durban UN Climate Change Green Investment Bank a lasting legacy, albeit Summit, where, within the EU team, he played

Journal of Liberal History 92 Autumn 2016 51 Liberal Democrats in coalition: climate and energy a role in securing an agreement to final- most renewable power plants built in this parlia- ise the first ever climate change deal applicable to ment will also be thanks to the Lib Dems, not the every country in 2015 – what became the Paris Conservatives. climate summit. I then worked at three succes- The second is our creation of Britain’s world- sive UN summits to prepare for a deal at Paris. leading offshore wind industry. While the seeds My most significant contribution towards this had been sown under Labour, the big decisions was leading work for the EU agreement to reduce had not been taken – from the massive Levy Con- greenhouse gas emissions by at least 40 per cent by trol Framework I prised out of the Treasury to 2030 – mainly through the Green Growth Group wooing to invest in their Hull factory. I established with other likeminded ministers on The shockingly poor energy policies since May the Environment Council. 2015 coupled with Brexit have put our offshore This EU agreement – largely unreported in wind industry at risk, but May/Clarke could still the UK – helped persuade the USA and rescue this huge British energy success story. to be bolder and was more ambitious than either The longer omissions list includes, for exam- my Conservative colleagues or the EU’s Climate ple, a dramatic boost to in the market Change Commissioner, Connie Hedegaard, for domestic supply of gas and electricity, a huge thought possible. It took more than two years of boost to interconnector policy (including the hard behind-the-scenes climate diplomacy and signing of the NSN link enabling green hydro- may prove to be the Liberal Democrats’ most power from to be imported into the long-lasting and significant contribution to tack- UK), Britain’s first-ever community energy strat- ling climate change – even with Brexit. egy, ensuring the potential of tidal lagoon power On renewables, whilst acknowledging Lib was taken seriously for the first time, a radical Dem achievements, Carter misses two key details new approach to fuel poverty, new energy effi- which mean that the success will turn out to be ciency regulations on the private rented housing even greater (assuming the Conservatives do sector, pump-priming of over 100 district heat- not totally screw things up). First, Chris Huh- ing schemes, and our work on UK and EU energy ne’s design of the contracts for difference (CfDs) security (including unreported measures to stop ensured they are private contracts, not statute- UNITE using fuel tanker drivers to hold the based agreements. This means future govern- country to ransom). ments must honour them. This is crucial, both in Turning to what is actually in Carter’s review, helping to reduce risk and lower costs, but also to there are details with which I disagree. protect the Lib Dems’ renewables legacy: George On our strong record on emissions reductions, Osborne apparently wanted to renege on the Carter regrets these were primarily in the power Ed Davey as Secretary twenty-seven CfDs for renewable power plants sector – but fails to add, that was the intention. To of State for Energy I signed in March 2015, but was told he couldn’t decarbonise, developed countries must start with and Climate Change because they were private contracts. This means the power sector, because the technologies are (photo: RWE)

52 Journal of Liberal History 92 Autumn 2016 Liberal Democrats in coalition: climate and energy

Conservative more mature and because decarbonised electric- built, the British consumer and taxpayer pays ity first makes decarbonising transport and heat nothing.) So I do not know whether the price is actions since May easier. generous or not (no one can!) but I do know that On shale gas, he makes the classic mistake of – unlike the past record of the nuclear industry 2015 should con- thinking shale is all about electricity, when actu- – the UK is protected against cost over-runs, vince everyone ally it is about heating. Over 70 per cent of the gas delays or failure to build and future unknown the UK consumes is for heating, and we increas- liabilities, thanks to Lib Dems’ scepticism over how hard Lib- ingly import that gas as North Sea production nuclear’s economics. falls. So shale decisions were led by energy secu- To add one self-criticism to Carter’s, we should eral Democrats rity considerations for future heating supplies. perhaps have realised that the collapsing price Moreover, scientific evidence I commissioned for solar energy coupled with the real potential had to fight on revealed UK-produced shale gas would emit for energy storage means that even the UK can fewer emissions than the liquefied look to generate significant amounts of our future energy and cli- we would otherwise import from . It is not power from . popular to make the energy and climate change There is one point I totally agree with Carter mate change case for shale, but it is a strong one. on – Conservative actions since May 2015 should – and thus the On nuclear, Carter follows the pack in convince everyone how hard Liberal Democrats describing the price for Hinkley Point C as ‘very had to fight on energy and climate change – and full extent of our generous’. Yet to make sensible comment on that thus the full extent of our achievements. price, you must take a view about the wholesale achievements. price of electricity and the carbon price between Ed Davey was Liberal Democrat MP for Kingston & 2025 and 2060, i.e., not prices now but prices dur- 1997–2015 and Secretary of State for Energy ing the contract period. Not easy! You must also and Climate Change 2012–15. He now runs his own accept this was the first ever nuclear pricing to management consultancy, Energy Destinations, and is (a) include decommissioning and nuclear waste Chairman of Mongoose Energy, a leading community management costs; and (b) pass all construction energy cooperative company, and the ‘Fit for the Future’ risks to the developer, EdF (so if Hinkley is not network of charities and not-for-profits.

Commentary: critic Fiona Hall

eil Carter’s analysis of coalition station, Hinkley C. First, EDF hesitated, fearful energy and climate policy is fair but that the company would be bankrupted, then the Nwhat he does not say is also worthy of post-Brexit May government, worried about dis- attention. proportionate Chinese involvement, called for a First, Carter highlights two energy sources further stocktake. So the failure of the coalition – nuclear power and shale gas – where the coali- government to finalise a deal on Hinkley C looks tion government agreed to go forward with new more and more like sensible caution rather than investments yet left office without seeing any failure to deliver. construction on the ground. Carter appears to On shale gas, the change of policy under regard this as a negative, saying of nuclear: ‘Yet Davey was surprising, not only because the the coalition still left office without finalising a exploitation of a new fossil fuel source seemed at deal.’ But with hindsight, this failure to follow odds with his ambitious approach to greenhouse through looks very wise. The Liberal Democrats gas (GHG) reduction (see below), but also because had long been opposed to nuclear power and the fracking to extract shale gas was deeply opposed party conference was only persuaded to support by environmentally concerned Lib Dem local the proposed new nuclear programme on condi- activists. In September 2015, the Liberal Demo- tion that it went forward without public subsidy. crat conference adopted a policy of opposition In 2010 the then Secretary of State Chris Huhne to fracking. The failure of the coalition govern- had made it known privately that he did not think ment to deliver on shale gas extraction might be the proposed nuclear programme would ever go regarded as rather fortunate. ahead, simply on grounds of cost. Subsequently, On energy efficiency, much more could be under Ed Davey, the coalition government claim said on why the Green Deal became, in Carter’s that a thirty-five-year £92.50 per MWh CFD words, ‘a policy disaster’. Certainly, the Treas- support was not a public subsidy raised some eye- ury’s insistence on an interest rate of 7–10 per brows. However, even this government under- cent at a time when the base rate was half that was writing has proved insufficient to secure the final extremely efficient at killing consumer interest. investment decision on the first proposed nuclear As Green Deal assessments far outstripped Green

Journal of Liberal History 92 Autumn 2016 53 Liberal Democrats in coalition: climate and energy

Had the UK set Deal loans, it does seem, however, that some Member States. But the sub-text of the admira- energy efficiency improvement work may have ble UK efforts on the GHG target was thatonly itself on a less been carried out, unrecorded, by householders the GHG target really mattered. The coalition using alternative, cheaper forms of financing. approach, inherited from the previous Labour confrontational But over and above the interest rate diffi- government, was that, given a sufficiently ambi- EU path, perhaps culty, the Green Deal failed because it was simply tious GHG target and a high enough carbon price, not given enough time to bed in. Too much was the market would deliver carbon reduction in the the discipline of expected of the scheme too quickly. The real- most cost-effective way possible. ity of house renovation is that it is disruptive and The UK obsession with a single GHG target national targets therefore tends to take place sporadically, usually was met with some bemusement and frustration linked to the buying and selling of a property. by other Member States. Generally speaking, for renewables Even then, energy efficiency improvements have those Member States who wanted an ambi- to get themselves onto the standard list of works tious 2030 approach to climate and energy, such and energy effi- that people routinely think about when moving as Denmark, Germany, Belgium and Portugal, house, alongside cosmetic improvements to kitch- wanted to set three separate 2030 targets: for ciency, requir- ens and bathrooms. Upgrading to a good level of GHG reduction, renewable energy and energy ing long-term energy performance needs to become as much a efficiency. They did not believe that the market must-do improvement as installing central heat- alone could deliver GHG reductions fast enough, strategic plan- ing was last century. But this is a long-term shift and saw merit in giving policy certainty to the – and arguably the coalition government’s biggest growing renewables industry, and to support- ning in those contribution to this fundamental mind-set change ing energy efficiency because of the many addi- was in taking forward the previous govern- tional benefits it brought in terms of security of areas, would have ment’s proposals on minimum energy efficiency energy supply, the elimination of fuel poverty, standards for rental properties. These proposals, improved health, increased competitiveness and helped the coali- designed to outlaw the renting out of the poorest job creation. Apart from the UK, the other ‘one F and G rate properties, will turn a poor Energy target’ Member States were those who wished tion government Performance Certificate into a badge of shame, to do as little on climate change as possible and to achieve more much as an outside toilet was once regarded. favoured a low GHG reduction target for 2030, Without progress on this attitudinal change first, not an ambitious one. consistent out- the Green Deal was never going to enjoy the mas- Many frustrating months of negotiation came sive take-up that was predicted for it. to a head in the October 2014 Council, when comes in its cli- Carter identifies the unhelpful failure of the Prime Minister Cameron vetoed any national Department for Communities and Local Gov- renewables target for 2030 – it was set at an EU- mate and energy ernment to promote higher building-insulation level only, at the modest level of 27 per cent – and standards. As well as being an example of the refused a binding energy efficiency target, which policy. coalition government’s failure to mainstream cli- was set at an indicative level of 27 per cent, ‘hav- mate change policy, this also indicates a lack of ing in mind an EU level of 30 per cent’. Had the understanding in the coalition government of the UK set itself on a less confrontational EU path, virtues of energy efficiency per se. The tensions perhaps the discipline of national targets for Carter mentions, between affordable consumer renewables and energy efficiency, requiring long- prices, security of supply and GHG emissions term strategic planning in those areas, would have reductions, need not have arisen if a strategic helped the coalition government to achieve more energy efficiency policy had been in place. consistent outcomes in its climate and energy Nowhere was the fundamental failure to policy. understand the wide-reaching importance of energy efficiency more apparent than in the nego- Fiona Hall was a Member of the tiations at an EU level on the climate and energy for North East (2004–14) and leader of the UK targets for 2030. Determined to secure a 2030 Liberal Democrat MEPs (2009–14). She now works as EU GHG reduction target of at least 40 per cent, an advisor on EU energy efficiency policy, principally for Ed Davey convened a Green Growth Group of Rockwool International.

Journal of Liberal History 91 (summer 2016): corrections A number of errors crept into our last issue – our apologies to all concerned. • In the report of the meeting on ‘Europe: The liberal commitment’, the Scottish historian Sir quoted was James Lorimer (rather than Larner – p. 34) and the name of the Secretary General of in 1946 was John H. McCallum Scott (rather than McMillan Scott – p. 35). • In the same report, William Wallace is quoted as saying that Megan Lloyd George left the Liberal Party in the late 1940s (p. 36). In fact she was Liberal MP for Anglesey until 1951 and until 1952; she defected to the Labour Party in 1955. • In his review of Alan Mumford’s David Lloyd George: A Biography in cartoons Kenneth O. Morgan wrote that Mumford is a notable political car- toonist and historian (p. 37). In fact he is not a political cartoonist.

54 Journal of Liberal History 92 Autumn 2016