House of Commons Environmental Audit Committee A Green Economy Twelfth Report of Session 2010–12 Volume I HC 1025 House of Commons Environmental Audit Committee A Green Economy Twelfth Report of Session 2010–12 Volume I Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/eacom Ordered by the House of Commons to be printed 30 April 2012 HC 1025 Published on 21 May 2012 by authority of the House of Commons London: The Stationery Office Limited £0.00 Environmental Audit Committee The Environmental Audit Committee is appointed by the House of Commons to consider to what extent the policies and programmes of government departments and non-departmental public bodies contribute to environmental protection and sustainable development; to audit their performance against such targets as may be set for them by Her Majesty’s Ministers; and to report thereon to the House. Current membership Joan Walley MP (Labour, Stoke-on-Trent North) (Chair) Peter Aldous MP (Conservative, Waveney) Richard Benyon MP (Conservative, Newbury) [ex-officio] Neil Carmichael MP (Conservative, Stroud) Martin Caton MP (Labour, Gower) Katy Clark MP (Labour, North Ayrshire and Arran) Zac Goldsmith MP (Conservative, Richmond Park) Mark Lazarowicz MP (Labour/Co-operative, Edinburgh North and Leith) Caroline Lucas MP (Green, Brighton Pavilion) Ian Murray MP (Labour, Edinburgh South) Sheryll Murray MP (Conservative, South East Cornwall) Caroline Nokes MP (Conservative, Romsey and Southampton North) Mr Mark Spencer MP (Conservative, Sherwood) Paul Uppal MP (Conservative, Wolverhampton South West) Dr Alan Whitehead MP (Labour, Southampton, Test) Simon Wright MP (Liberal Democrat, Norwich South) Powers The constitution and powers are set out in House of Commons Standing Orders, principally in SO No 152A. These are available on the internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/eacom. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Committee staff The current staff of the Committee are Simon Fiander (Clerk), Nicholas Beech (Second Clerk), Lee Nicholson (Committee Specialist), Andrew Wallace (Senior Committee Assistant), Anna Browning (Committee Assistant), Lucy Graham (Committee Support Assistant) and Nicholas Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Environmental Audit Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6150; the Committee’s email address is [email protected] A Green Economy 1 Contents Report Page Summary 3 1 Introduction 7 Our inquiry 8 2 Defining a green economy 9 Definitions 9 Making a transition to a green economy in the UK 12 The benefits 12 The costs 14 The impact on employment 16 3 The Government’s approach 18 Enabling the Transition to a Green Economy 18 Strengthening policy tools 25 Reflecting environmental limits on growth 25 Delivering the investment needed to transition to a green economy 31 Reflecting the full environmental ‘costs’ in investment decisions 35 Fiscal measures 37 Regulation 39 Innovation and skills 42 Procurement 44 4 Monitoring progress towards a green economy 46 Measuring the green economy 46 Rio+20 48 Conclusions and recommendations 50 Formal Minutes 54 Witnesses 55 List of printed written evidence 56 List of additional written evidence 56 List of Reports from the Committee during the current Parliament 58 A Green Economy 3 Summary Current patterns of growth and development are unsustainable and much focus has been placed on developing a green economy to address this challenge—protecting the planet, creating jobs and securing energy supplies. International efforts to deliver a step-change on this agenda will be taken forward by the Rio+20 Summit, where world leaders will come together to set out a clear vision of the green economy and agree a framework for action. For the Government to be a credible voice at the Summit, it must ensure that it has put in place a strong domestic policy framework to drive the transition to a green economy in the UK. The Government has set out its approach on a green economy in Enabling the Transition to a Green Economy. However, it is a missed opportunity to show global leadership on this area at a crucial time in the run-up to the Rio Summit. It does not set out a new, comprehensive or strategic approach for a green economy with targets to assess progress, but rather lists existing policies. It lacks a long-term vision of a green economy, and it is not the ‘roadmap’ to get us there that was earlier promised. The definition adopted by the Government crucially does not address all three interdependent pillars of sustainable development, including the social pillar, well-being and environmental limits. Placing no new requirements on business, the Government’s market-led approach is too focused on voluntary action. Relying on consumer demand to stimulate the green economy will not work. The recent financial crisis has demonstrated that there are clear risks from such a market-based approach, particularly when markets do not reflect the value of nature. Enabling the Transition suggests things that businesses could, rather than should, do. However at a time when businesses need policy certainty, this is unlikely to provide the platform to deliver the billions of pounds of green investment needed. The Government must set key time-bound milestones towards a green economy for businesses to achieve, such as reduced emissions, waste, and resource use and a halt to activities harmful to the environment. Consumers must also be aware of the impact of their decisions, through better information on their consumption choices and through requiring mandatory greenhouse gas reporting from business. There appears to be little priority in Government attached to moving to a green economy, and it is not clear how all Government departments are taking this agenda forward. The current focus on growth must not be growth at all costs. In particular, we are concerned that the Treasury sees the environment as a cost or block to economic development. Budget 2012, the first after the publication of Enabling the Transition, lacked any indication that the Treasury has embedded the green economy into its economic plans, but rather plans for new roads and increased oil and gas extraction. The Government needs to take the longer-term view. The whole economy needs to be green and traditional sectors of the economy will need to be transformed. To achieve this, the Government’s overall strategy must be improved by: • Revising its definition of a green economy to include all three pillars of sustainable 4 A Green Economy development, including social considerations, well-being, and environmental limits. • Creating a dedicated unit to examine the relationship between growth, prosperity and quality of life. A greater understanding is needed of how best to generate economic activity and jobs, while at the same time promoting sustainability and living within environmental limits. • Setting out a clear trajectory to a green economy with targets, and action required from business in key areas such as resource efficiency, emissions and waste reduction. Transparent reporting arrangements will be integral. • Agreeing a basket of indicators and targets against which regular reporting should be completed and the success of the Government’s approach gauged. The Government should also bolster its current policy levers in three areas, by: Strengthening roles • Delegating to an independent body, perhaps the Committee on Climate Change, a role in setting tariffs and charges aimed at reducing emissions to provide greater policy certainty and reduce political risk to business and investors. • Tasking an independent body, possibly the Office for Budget Responsibility with an extended mandate or the Natural Capital Committee with an obligation to report publicly, to examine the linkages between the state of natural capital and economic policy, and to provide advice on whether growth in the economy is being achieved at the expense of stocks of natural capital. • Strengthening the role of the Green Economy Council by: o broadening its representation to include civil society. This, combined with greater transparency of its actions, would help demonstrate that the green economy is not just a business agenda, provide public confidence that a green economy is being pursued in a fair and inclusive way and help publicise the work of the Council. o Giving it an explicit remit to advise Government on how green infrastructure can be enhanced, building on the recommendations of the Ecosystem Markets Task Force. o Giving it a role in monitoring progress towards a green economy, including reviewing and reporting on progress in developing indicators, and then once developed, regularly reporting against those indicators. Improving strategy • Quantifying those ‘environmental limits’ that are most affected by economic activity in the UK, and building those limits into a green economy strategy. • Setting out a date by which the Government will publish its definition of an environmental tax. Excluding particular taxes would provide no incentive to increase A Green Economy 5 them, and without such a definition it would not be possible to measure whether the Government is meeting its commitment to increase the proportion of environmental taxes. Greater consideration should be given in future Budgets to supporting the green economy. • Setting out how data on natural capital in the National Accounts would be used in policy development and assessing progress towards a green economy; and developing targets for improving the state of the environment.