Legal Briefing

Coalition politics: blue + yellow = green?

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Projects, energy and natural resources | 01 July 2010

The result of the 2010 General election has brought about one of the most radical shifts in British politics for over half a century. For the first time since the Second World War, two political parties, the Conservatives and the Liberal Democrats, have united to form a formal coalition government.

Despite their marked political differences on issues such as taxation and the economy, the Conservatives and the Liberal Democrats both claim to be the party of the environment, with the former emphasising that ‘environmental issues must be at the heart of politics’ and the latter claiming that all of their policies ‘have a green thread running through them’. However, a closer examination of both parties’ environmental policies reveals some key differences, the most notable being in the field of nuclear power. But coalition politics cannot operate on the basis of difference. The key to coalition politics, as with all relationships, is compromise. So how have the parties resolved their environmental differences?

This article examines the ‘green’ agenda of the new ‘blue/yellow’ coalition government, and assesses what this marriage of political ideologies might mean for the energy and environment sectors over the coming years.

Green Governance: Who’s who?

Department for Environment, Food and Rural Affairs (Defra)

Defra now has exclusively Conservative ministers. The new Secretary of State at Defra is Rt Hon Caroline Spelman, a Conservative MP who has held several senior positions in opposition since 1997. She assumes a traditional ministerial portfolio, having overall responsibility for Defra’s policy, legislative programme, strategy and budget, as well as being responsible for Defra’s enforcement agencies, the Environment Agency and Natural England.

Three other Conservatives have also been appointed to Defra. James Paice MP becomes Minister of State for Agriculture and Food, and will be responsible for farming and food, as well as agriculture and forestry carbon budgets. Richard Benyon MP becomes Parliamentary Under Secretary for Natural Environment and Fisheries. His ministerial portfolio includes biodiversity, flooding and water, inland waterways, land management, and the marine environment. Lord Henley is appointed as Parliamentary Under Secretary at Defra, and will be responsible for environmental regulation, local and regional government, sustainable development, and waste and recycling.

Department of Energy and Climate Change (DECC)

DECC now has ministers from both of the coalition parties, with a Liberal Democrat MP, Rt Hon Chris Huhne, taking up the position of Secretary of State at DECC. However, in stark contrast to the position at Defra, Huhne’s Ministerial portfolio can hardly be described as ‘traditional’. He will be responsible for energy market reform, energy security and the price of carbon, as well as for setting the DECC strategy and budgets, but his itemised list of responsibility is somewhat shorter than that which Ed Miliband MP recently enjoyed as Secretary of State at DECC.

The new Secretary of State will receive support at DECC from three Conservatives. Gregory Barker MP is appointed as Minister of State for Climate Change and assumes a large portfolio, much of which might traditionally be expected to form part of the Secretary of State’s portfolio. For example, Greg Barker will have responsibility for international climate change, energy efficiency and fuel poverty. The same is true of the portfolio of Charles Hendry MP who is appointed as Minister of State for Energy, and takes on responsibility for renewable energy, gas policy, coal policy and new nuclear. Lord Marland becomes Parliamentary Under Secretary of State, and is responsible for managing departmental performance, efficiency and business in the House of Lords.

The effect of these recent ministerial appointments is that Defra will be led by the Conservatives and DECC will be led by the Liberal Democrats. So should we expect the Defra policy to follow the lines of the Conservatives’ manifesto and DECC policy to follow the lines of the Liberal Democrats’ manifesto? Or does the dilution of Chris Huhne’s responsibility at DECC indicate that Liberal Democrat policy will have only a minor role to play and that the coalition government’s ‘green’ agenda will be predominantly dictated by the Conservatives? This article examines the main policy areas in turn.

Nuclear Power

Nuclear power is without doubt the most interesting area of the coalition government’s environmental agenda, primarily because it represents the single biggest area of ideological conflict between the two parties. The Conservatives’ manifesto pledged to secure the UK’s energy supplies by ‘clearing the way for new nuclear power stations’, whereas the Liberal Democrats’ manifesto promised to say ‘no to nuclear’.

The coalition agreement does acknowledge that the Liberal Democrats have long opposed the construction of any new nuclear installations in the UK, but also that the Conservatives are committed to allowing the replacement of existing nuclear power stations, provided that they are subject to the normal planning process and do not receive any public subsidy. Despite this fundamental difference, it is the Conservatives’ position that will form the basis of the coalition government’s nuclear policy. Liberal Democrat MPs will be allowed to maintain their opposition to new nuclear power, but only by abstaining from voting in the House of Commons, not by voting against Conservative nuclear proposals. The parties have agreed that this will not be regarded as an issue of confidence, but it is difficult to ignore the fact that this constitutional arrangement will produce the strange situation whereby the Secretary of State for Energy and Climate Change will be entitled to denounce his own government’s policy on nuclear power. Perhaps this explains why responsibility at DECC for new nuclear lies with a Conservative minister.

Given that the Conservatives’ policies on nuclear power broadly mirror those of the former Labour government, there should not be any substantial alterations to the indicative timetable for new nuclear advanced by DECC in November 2009. The programme of Regulatory Justification currently being carried out by DECC (under the Justification of Practices Involving Ionising Radiation Regulations 2004) will continue to proceed as it did under the former Labour government. The Secretary of State’s decision as to whether the two leading reactor designs are justified is expected in Autumn 2010. It will be extremely interesting to see whether Huhne’s professional opinion conforms with his personal opinion.

The development of new nuclear power stations therefore remains a key component of UK energy policy. The first step in this process will be for the National Planning Statement, pioneered by the former Labour government, to be finalised and laid before Parliament for ratification.

Climate Change and Carbon Reduction

There is generally very little disagreement between the two parties in this area. Both parties’ manifestos allude to the idea that global climate change is getting worse and that urgent action is required to combat its effects. To this end, the coalition government is united in its approach to tackling climate change, both at international and domestic levels.

At an international level, the government is committed to working towards an ambitious global climate deal that will limit greenhouse gas emissions and explore the creation of new international sources of funding for the purposes of adapting to, and mitigating the effects of, climate change. This policy statement will no doubt be welcomed by the international community, particularly by developing nations, even though the actual sentiment of the policy hardly differs from that of the former Labour government. The acid test for the coalition government on the international stage will be the United Nations’ Conference of the Parties’ 16th meeting in December, the eagerly anticipated successor conference to Copenhagen.

The coalition government will also push for the EU to demonstrate leadership in tackling climate change. The coalition agreement details that this will involve the government supporting an increase in the EU emissions reduction target to 30% by 2020. Efforts will also be made to persuade the EU to move towards the full auctioning of permits in the EU Emissions Trading Scheme. The approach that the government adopts in achieving these objectives will be interesting, not least because of the parties’ differing stances on Europe. Eurosceptic Conservatives may find themselves in a position of discomfort in voting for the UK to adhere to further European targets, although the appointment of pro-Europe Chris Huhne as Secretary of State at DECC may indeed serve as a catalyst to realising these aims.

Measures will be introduced at national level that will seek to ensure Britain does not contribute to global climate change. In a measure to drive down both the UK’s reliance on fossil fuels and its emissions of carbon dioxide, the coalition government will establish an emissions performance standard, which will prevent coal-fired power stations from being built unless they are equipped with sufficient carbon capture and storage (CCS) technology to meet the emissions performance standard. To facilitate this, public sector investment in CCS will continue. The government will also establish a floor price for carbon, although there is no express mention in the coalition agreement of how the government will treat the Carbon Reduction Commitment Energy Efficiency Scheme.

Renewable Energy

As with climate change and carbon reduction, renewable energy is an area of relatively little contention between the parties, as both parties agree that renewable energy has a fundamental role to play in reducing the UK’s net carbon account. The parties do, however, have opposing views on how much reliance should be placed on renewables as opposed to other types of green energy technology. The Conservatives have traditionally favoured the promotion of hi-tech developments, such as nuclear power and CCS-equipped coal-fired plants, with less focus on renewables. In contrast, the Liberal Democrats have generally advocated the exploitation of existing technologies, with a very strong focus on developing the UK’s capacity for onshore and offshore wind energy.

In some respects it is hard to identify from the coalition agreement whether blue policy or yellow policy has won the argument in relation to green energy. Nonetheless, what is clear from the coalition agreement is that renewable energy will continue to play an increasingly vital role in the UK’s energy mix. The coalition government will seek to increase the target for energy generated from renewable sources, although this will be subject to specific advice that is given by the Committee on Climate Change.

Offshore energy appears to feature highly in the coalition government’s plans for renewable energy, with the Coalition agreement indicating that the promotion of marine energy will be a priority. An offshore electricity grid will also be established to support the development of a new generation of wind and tidal energy infrastructure. The proposals will be designed to remove the existing barriers to investment in offshore energy projects and will no doubt be welcomed by industry stakeholders who have recently criticised the suitability of the existing Offshore Transmission Network Owners (OFTO) licence regime. The coalition agreement does not set out much detail in relation to this proposal and further particulars will be expected over the coming months.

On land, measures will be introduced that aim to promote a ‘huge increase’ in energy from waste generated through anaerobic digestion. Although the precise legal mechanism that will be adopted to achieve this is unclear, banded Renewables Obligation Certificates will be maintained to incentivise investment in this technology, an interesting development given that the Conservatives suggested during their election campaign that the Renewables Obligation would be phased out over the next few years. The government will push ahead with establishing a full system of feed-in tariffs, as well as encouraging the establishment of community-owned renewable energy schemes, where local people will benefit from the power produced and from retaining the additional business rates that are generated.

Green Economy

Both the Conservatives and the Liberal Democrats agree that the current financial climate presents an opportunity for reform in Britain, and to emerge from the recession with a new, green economic framework that fully promotes energy efficiency and investment in green technology.

To facilitate this shift towards a green economy, the coalition government will establish a green investment bank (GIB) to support investment in low carbon projects. The GIB will be responsible for creating green financial products so as to provide individuals with opportunities to invest in infrastructure needed to support an economy with a green focus, although the coalition agreement does not make any attempt to identify where the financing for the GIB will come from. Even so, both the Conservatives and the Liberal Democrats support the creation of the GIB, as indeed does the Labour party who first announced the proposal in the March 2010 Budget. Further particulars of the GIB are expected to appear in a new Energy Bill.

The coalition agreement details that further reform of energy markets will be undertaken to ensure security of supply and investment in low-carbon technology. The Office of Gas and Electricity Markets (Ofgem) will be instructed by the government to establish a security guarantee of energy supplies, although the role of Ofgem will also be subject to a governmental review.

The anticipated Energy Bill is also expected to establish measures that will be taken to improve the energy efficiency in business and public sector buildings. A smart grid will be established, energy performance certificates will be retained, and an annual energy statement will be presented to Parliament to identify key areas of strategic energy policy and to guide investment. Minimisation of waste will play a large role in developing a green economy, and the coalition government will adopt a ‘zero waste’ approach by encouraging councils and individuals to achieve recycling targets.

Abolition of the Infrastructure Planning Commission

One of the cornerstone planning policies of the former Labour government was the establishment of the Infrastructure Planning Commission (IPC), the independent body responsible for determining planning applications for infrastructure projects of national significance. The IPC has come in for much political criticism over the course of the past few months and, under the terms of the coalition agreement, the headline has been that the IPC will be abolished. This is something on which the Conservatives and Liberal Democrats are firmly agreed, with both settled on replacing the IPC with a more ‘efficient and democratically accountable’ system that will provide a fast-track planning process for nationally significant infrastructure projects. What this means in practice is perhaps less dramatic than the headline policy appears. The coalition government is expected to introduce legislation, most likely in 2011, that will transfer the responsibilities of the IPC to a new major infrastructure unit (MIU) within the Department of Communities and Local Government. The MIU will make recommendations on planning aspects of nationally significant infrastructure projects, although the final decisions will be made by the relevant Secretary of State. These proposals will no doubt take some time to implement and the IPC has reassured developers who are working towards applications to the IPC that it will continue to progress along existing lines.

From a more general planning point of view, the government has indicated its intention to create a presumption in favour of sustainable development in the planning system. The coalition government has also sided with environmental campaigners and announced its decision to scrap plans for the third runway at Heathrow airport. In addition to this, the government will refuse planning permission for additional runways at both Gatwick and Stansted. The findings of the 2008 Pitt Review will also be advanced through the planning system, with measures being introduced to improve the UK’s flood defence systems and to prevent unnecessary development in areas of high flood risk.

Biodiversity, Nature Conservation and Environmental Protection

This year is the United Nations’ International Year of Biodiversity. It is also the year that the EU failed to meet its target to reduce the rate at which European biodiversity is disappearing. In accordance with the government’s recognition that better measures are needed to protect biodiversity, measures will be introduced to protect UK wildlife, as well as promoting green spaces and wildlife corridors to halt the loss of habitats and restore biodiversity. The government will continue to develop and advance the framework for marine conservation that was established by the Marine and Coastal Access Act 2009, and will maintain the green belt, Sites of Special Scientific Interest (SSSIs) and other environmental protection mechanisms. A new environmental designation will be created, similar to SSSIs, aimed at protecting green areas that are of particular significance to local communities.

One particular issue that may become of interest in the field of environmental protection is the coalition government’s hostile attitude to quangos. The coalition agreement details the government’s intention to reduce the number and cost of quangos, and budgetary announcements have been made by HM Treasury that anticipate £600m being saved by cutting the costs of quangos. It remains to be seen exactly which public bodies will suffer the blow of this financial axe and it may be politically unwise to make significant cuts in the area of environmental regulation, yet nothing is clear in this new age of coalition politics. Regulators, such as the Environment Agency and Natural England, are bracing themselves to experience financial restrictions.

Conclusions

Given the significance that both parties afforded environmental issues throughout their election campaigns, it is no surprise that environmental proposals form a substantial part of the coalition agreement, despite the individuals parties’ differences. The environment was clearly an important factor in Nick Clegg’s decision to unite with David Cameron and the coalition agreement certainly indicates that green issues will feature highly on the government’s agenda.

Yet, however high on the political agenda the environment is, progression towards a green, low-carbon economy will also require that the coalition government pays very close attention to its economic policies. These two areas of policy will often conflict and it will not always be possible to resolve their competing interests in favour of the environment, especially given the nature of the current economic climate, which demands serious attention from the government. HM Treasury announced on 24 May 2010 that, over the course of the next year, central government departments will be required to make significant financial contributions to a programme to save £6.2bn of public money. Environmental departments will suffer. Defra will face cuts of £162m, while DECC will face cuts of £85m.

The reality is that, whatever the government’s environmental aspirations or policies are, its overriding priority will be to reduce the country’s economic deficit. As a result, the exact environmental direction of the government is to a large extent unclear. What is clear, however, is that these are times when politics will play an even larger part than usual in the interpretation of law, regulation and policy.