Sweeping changes in UK raise questions on energy and climate change
The new U.K. Prime Minister, Theresa May, last week caused consternation among environmentalists and confusion among investors as to the future direction of energy and environment policy by abolishing the Department of Energy and Climate Change (DECC). It has served to represent the U.K. at international climate talks, as well as being responsible for carbon targets and the promotion of green energy policies.
British media has been full of reports of environmentalists shocked at this seeming downgrading of action on climate change. But in truth, no one knows – yet – what it will mean in practice.
Greg Clark, formerly U.K. Secretary of State for Communities and Local Government, has been put in charge of the Business, Energy and Industrial Strategy (BEIS) department. The department, formerly named the Department of Business, Innovation and Skills (BIS) has absorbed the DECC. Mr. Clark said he was looking forward to “delivering affordable, clean energy and tackling climate change,” along with a comprehensive industrial strategy.
The U.K. think-tank Policy Exchange argued, “Rather than bemoaning the demise of DECC, we should embrace the creation of BEIS. DECC has always been regarded as something of a minnow in departmental terms. By merging with BIS, energy and climate change issues can be elevated to a much higher level politically.”
“The combination of business, energy and industrial strategy also offers some significant opportunities to mainstream climate change into business and industry,” said Policy Exchange. It suggested, “the new structure creates the opportunity to develop a proper industrial strategy for energy and low carbon industries.”
But the U.N.’s special envoy for climate change, Mary Robinson, has since put the issue of U.K. commitment in the spotlight by accusing both the U.K. and Germany of backtracking on the spirit of the Paris climate deal by financing the fossil fuel industry through subsidies.
Meanwhile, former U.K. Energy Minister, Andrea Leadsom, a prominent Brexit campaigner who initially challenged Mrs. May for the Conservative leadership, and is pro-fracking, has been appointed as the new Environment Secretary.
Women suddenly feature high in the ranks of power in Britain. Speaking to an audience at the Business and Climate summit in London late last month, Amber Rudd, then U.K. Energy and Climate Change Secretary, warned that the next Conservative Party leader would have to have a strong stance on tackling climate change in order to win her support.
Ms. Rudd is now in the high-powered Cabinet post of Home Secretary, the last position held by the current Prime Minister, Theresa May.
What does it all mean for investors in energy and the environment, looking at the U.K. and its stated commitment to climate targets to date – and amid the economic uncertainty caused by the referendum result?
The axing of DECC has raised urgent questions on which U.K. government department will even take responsibility for energy and climate issues in the negotiations to leave the EU, let alone the future direction for investment. Lawrence Slade, chief executive of Energy UK, the trade group for electricity generating companies, said, “Companies are ready to deliver the billions of pounds of investment needed (to decarbonize the electricity system) but we need a clear policy framework to deliver it.”
For now, many feel it is a case of waiting and watching. Or maybe not.
Last week the Financial Times reported: “Ineos, the $50 billion petrochemicals giant controlled by British billionaire Jim Ratcliffe, aims to accelerate shale gas development in the U.K. by lodging as many as 30 planning applications to drill test wells in the next six months.”
Tom Crotty, a director at Ineos, said the company hoped to start drilling in the north of England early next year and could begin extracting gas in about 18 months through the “controversial technique known as fracking”, reported the Financial Times.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com