Legal Briefing

The 2015 election and its environmental and energy implications: change or continuity?

The In-House Lawyer Logo

Projects, energy and natural resources | 01 June 2015

With environmental considerations playing an increasingly important role in our everyday lives, it is perhaps surprising that, aside from the Green Party agenda, the sphere of environmental and energy policy took a relative back seat in the lead up to the 7 May 2015 general election. As the dust from the election settles, however, it seems certain that environmental and energy issues will return to the fore. With the eagerly awaited preliminary findings of the Competition and Markets Authority’s investigation into the UK energy market expected to be published in the coming months and with the fast approaching UN Climate Change Conference in Paris at the end of the year – to name but two significant upcoming events in the sector – the new government will have no shortage of difficult energy and environmental policy decisions on its hands.


Against this backdrop, one of the most important questions in the environment and energy sector – as in many others – is whether the expulsion of the Liberal Democrats from the coalition government, which they had shared with the Conservatives since the 2010 general election, will lead to significant policy changes or, effectively, ‘business as usual’, a question which has excited no shortage of punditry in recent weeks.

On balance, and as we shall see below from an analysis of a selection of key aspects of environment and energy policy, it seems that the argument for continuity – at least in most material aspects – is a strong one. Many felt that the Department of Energy & Climate Change (DECC) – presided over as it was by the Liberal Democrat MPs Chris Huhne and Ed Davey – did bear something of a Liberal Democrat stamp under the coalition government. However, DECC never operated in a vacuum free from Conservative influence and many of the policy initiatives were constrained by the Chancellor’s budgets. Both in their manifesto and by other actions prior to the election, particularly David Cameron’s symbolic signing of the so-called Climate Coalition Leaders’ Pledge on Valentine’s 
Day this year, the Conservatives have already in many ways committed themselves to a course that is not overall radically different from that pursued over the last five years.

Shale Gas

There is perhaps at present no aspect of energy policy which divides opinion quite as sharply as the question of shale gas extraction. The policy of the coalition government in this area can be best described as cautiously encouraging and there seems to be much to suggest that this will remain the position under the new Conservative government.

The coalition government took a number of measures to encourage shale gas exploration in the UK, not least of which was the announcement in January 2014 that local authorities could expect to receive 100% of business rates from future shale gas projects, and a number of tax incentives. With their manifesto commitments to promoting energy security and to a ‘significant expansion in… gas’ it seems certain that the Conservative government will continue to be ‘pro-shale’. Amber Rudd, the new Secretary of State for Energy and Climate Change has already said as much post election.

At the same time, however, it must be recognised that constraints remain in place to limit any too precipitous rush for shale. For one, the Conservative’s manifesto pledge to create a sovereign wealth fund for the North of England ‘so that the shale gas resources of the North are used to invest in the future of the North’ recognises a lingering public concern about the merits of shale gas. In addition, the precise mechanics of such a fund remain uncertain, and seem unlikely to be easily or quickly resolved. Secondly, the widespread use of shale gas is not calculated to assist in relation to the climate change targets to which the Conservative government remains committed.

Waste

Though not apparently a key area of 
focus either of the new Conservative government or of its coalition predecessor, enforcement-related waste policy does receive some mention in the Conservative manifesto, albeit on a fairly minor scale. The manifesto pledges higher fixed penalty notices for littering, and also promises to develop legislation allowing councils to tackle more efficiently small-scale fly-tipping through fixed penalties, rather than by means of prosecutions. These policies seem likely to be welcomed by an industry which in recent years has made repeated calls for government action to combat waste crime.

Given the decreasing likelihood of the UK meeting the EU target of recycling 50% of household waste by 2020 – as flagged last year after a six-month inquiry by the House of Commons Environment, Food and Rural Affairs Committee – and criticism of the Department for Environment, Food and Rural Affairs’ (Defra) handling of its waste remit, it seems probable that over the duration of the coming Parliament, waste will end up attracting more government attention than the Conservative manifesto suggests.

Energy Efficiency

As we have already seen above, by signing the Climate Coalition Leaders’ Pledge on Valentine’s Day 2015, David Cameron acknowledged that action to tackle climate change was in the national interest and committed the Conservative Party to: seeking a legally binding climate deal limiting temperature rises to below 2oC; working to agree carbon budgets in accordance with the Climate Change Act 2008; and accelerating the transition to an energy-efficient low carbon economy. Although form must always be distinguished from content – especially in relation to policy – such a symbolic step remains a clear indication that a considerable measure of continuity can be expected from the present government.

In the task of meeting the UK’s international climate change and carbon reduction commitments, greater energy efficiency clearly forms an important part of the toolkit, a fact recognised by the Conservative Party’s 2015 election manifesto. Aside from once again spelling out that the party would continue to support the Climate Change Act 2008, in their manifesto, the Conservatives also commit themselves to cutting emissions ‘as cost effectively as possible’, supporting ‘low-cost measures on energy efficiency, with the goal of insulating a million more homes over the next five years.’

The record of the coalition government in relation to energy efficiency was somewhat mixed. Although it presided over the launch of the ‘Green Deal’ – aimed at allowing householders to offset the initial cost of implementing energy-saving improvements against the savings to be made from them over time – and the accompanying Energy Company Obligation (ECO), the coalition government was criticised for failing to fully embrace the underlying objectives of the schemes. In particular, in a report prepared by the House of Commons Energy and Climate Change Committee in the autumn of 2014, criticism was levelled at a lack of communication and an overly complicated nature of the scheme, which were felt to be significant factors in meaning that by September 2014, only some 2,581 household Green Deal loan plans had gone live. In short, the committee’s report called for decisive government strategy to turn the situation around and provide renewed impetus to the schemes.

It may be somewhat optimistic to suggest that the Conservative manifesto promises such a decisive re-formulation of government policy in relation to the Green Deal and ECO. However, reference to the objective of insulating a further million homes over the course of the next Parliament does at least suggest that energy efficiency schemes at the household level are very much in the Conservative Party’s consciousness and certainly gives some cause to hope that the next five years may indeed see a reinvigorated commitment to two schemes which hold 
so much theoretical promise.

Biodiversity

Measures to protect and improve biodiversity are at the core of the Conservative Party’s manifesto pledges in relation to the environment. Aside from general statements that the Conservative Party will provide continued support to environmental designations such as Sites of Special Scientific Interest, Areas of Outstanding Natural Beauty and Sites of Specific Interest, there are also some more specific pledges and initiatives. No doubt eager to distance themselves from the furore surrounding proposals to ‘privatise’ woodlands back in 2011, the Conservatives pledge in their manifesto to ensure that Britain’s public forests are kept in trust for the nation and pledge the planting of a further 11 million trees. Similarly, £300m has been pledged to mitigate the environmental impact of new infrastructure, including tunnelling, construction of noise barriers and restoration of lost habitats and that any biodiversity lost as a result of the HS2 project will be restored. Sceptics will say that this is probably motivated by considerations of political expediency, however, such measures do indicate recognition on the part of the Conservative Party of the need to protect biodiversity.

Indeed, many of these pledges are clear continuations of aspects of policy developed under the coalition government. For one, the proposed local replacement of biodiversity lost as a result of HS2 appears to follow closely from the biodiversity offsetting pilots which were an attempt to create a standardised method for the calculation of and compensation for habitat loss – carried out by Defra under the last government. Though not without its criticisms, for example, that offsetting does not properly take into account the social utility of the land lost to development, many observers have acknowledged that developing a system to ensure ‘no net loss’ in the light of development is fundamentally sound. It is certainly an improvement over the status quo. All those involved in infrastructure projects will recognise the increasing focus on biodiversity and habitat replacement and it is likely to become a serious area of cost and debate over the next decade.

Renewables

Given the growth in renewable energy generation over the last few years and the vital part that the industry plays in the UK’s attempts to meet its decarbonisation targets, it is perhaps inevitable that the Conservative Party’s views on renewable energy have been subject to particular comment and scrutiny.

Opinion on the coalition government’s record on renewables has been somewhat mixed. Undoubtedly, its tenure in power witnessed a continued surge in the use of green energy generation, and an increasing trend towards the ability of some forms of renewable generation to compete on an almost even footing with conventional energy generation. These recent developments have occurred against the background of the coalition government’s sweeping reform of the energy market through Electricity Market Reform (EMR), the main pillars of which have been Contracts for Difference (aimed at providing long-term price stability for low carbon generation) and the Capacity Market (aimed at ensuring available capacity at peak times through regular retainer payments).

Although many have welcomed these developments as sensible ways of rationalising the electricity market, they have not gone without criticism. Some have expressed concern over the tendency of existing, conventional generation, to prevail over new generation in the first round of the Capacity Market auction in December 2014. Similarly, a recent report by the House of Commons Energy and Climate Change Committee has questioned whether the coalition government’s dual aims of, on the one hand, pursuing ambitious decarbonisation targets, while at the same time trying to replace some 14 GW of retiring generation, may be pulling in opposite directions.

Despite the fears of some, Conservative policy post 7 May 2015 is unlikely to look radically different from that pursued by the coalition government in the previous five years. In one of the core areas of energy policy – EMR – the process has been sufficiently driven by the Conservatives for any radical shift to be both surprising for observers and embarrassing for the government. Although tinkering to both Contracts for Difference and the Capacity Market does seem likely in the lead up to the next Contracts for Difference allocation round in October and Capacity Market auction in December, the big issue will be how much budget is made available for the second and subsequent rounds of these schemes.

Even in one of the most talked about areas of Conservative policy – the Party’s proposals for onshore wind – time will tell but the prognosis may not be as drastic as some have feared. Under the seemingly unequivocal heading ‘we will halt the 
spread of onshore windfarms’, the manifesto simply states that:

‘… we will end any new public subsidy 
for them and change the law so that local people have the final say on wind farm applications’.

Amber Rudd has already reiterated this following her appointment. The above statement is not a moratorium, but it will certainly make life more difficult for onshore wind. The Conservative government will be faced with the reality that onshore wind is one of the most cost-effective sources of renewable energy at present and therefore this may yet have a bearing on the party’s goal of meeting the UK’s 2020 renewable generation targets as cheaply as possible, especially given its own manifesto pledge 
to ‘back… good-value green energy’. 
The influence of the SNP in Westminster also seems likely to encourage more 
pro-renewable tendencies.

The Conservatives have also been strong supporters of developing the marine (wave and tidal) energy sector which is starting to make headway. The Swansea Bay Tidal Lagoon is also entering negotiations with government over support via a Contract 
for Difference.

Nuclear

The UK’s resurgent nuclear industry represents, as with the EMR more 
generally, another area of energy policy in which the Conservatives’ commitment during the previous Parliament makes it unlikely that any sudden shift is to be expected over the next five years. Indeed, the Conservative Party manifesto embraces the concept of new nuclear in no uncertain terms, pledging ‘a significant expansion in new nuclear’ in order to ‘secure clean but affordable energy supplies for generations to come.’

Conclusions: Business as Usual?

Despite the fears of some, it seems reasonable to expect a considerable 
degree of continuity from the present government over the next five years. Though a Conservative – Amber Rudd – 
has now replaced Liberal Democrat Ed Davey as energy and climate change secretary, many of the energy and environmental policies of the last year 
bore a clear Conservative stamp, even under the coalition government. Amber Rudd herself is no new arrival at DECC, having previously served as under-secretary of state at DECC since July 2014. Fundamentally, with the Conservative commitment to continued support of the provisions of the Climate Change Act and with the fast-approaching 2020 targets across a wide range of environment and energy-related metrics, policy will remain subject to Realpolitik considerations of how most efficiently to achieve these.