Could BEIS be the vehicle the low carbon economy has been waiting for?

Climate change was at the centre of a bitter row over Theresa May’s government reshuffle this July. One day into her premiership, it was announced that the Department for Energy and Climate Change (DECC) would be merged with the Department for Business, Innovation and Skills (BIS), to form a new Department for Business, Energy & Industrial Strategy (BEIS). Politicians and campaigners were quick to point out that, in the acronym acrobatics of the new Prime Minister’s departmental restructure, two important letters had been lost: CC.

May’s decision to abolish the department with a named responsibility for tackling climate change provoked a huge backlash. Ed Miliband, DECC’s first ever secretary of state (2008-2010), labelled the move ‘plain stupid’. This negative sentiment was echoed by his two Liberal Democrat successors at the department, Chris Huhne and Ed Davey – the latter describing it as a ‘major setback for the UK’s climate change efforts’. Outside the arena of party politics, critics ranged from Friends of the Earth and Greenpeace to environmental law organisation ClientEarth and The Elders, an international NGO chaired by former UN Secretary-General Kofi Annan.

The main objections to the merger of DECC and BIS, and the omission of ‘Climate Change’ from the new BEIS department’s name, were that it:

  1. was a capitulation to the climate-sceptic wing of the Conservative Party;
  2. would side-line climate change at the cabinet table and within the department;
  3. sent a negative signal about UK climate leadership, hitting low carbon investor confidence.

Although these were legitimate concerns, the evidence suggests that the restructure was neither an attempt to kick climate change into the long grass nor aimed at inhibiting the process of de-carbonising the UK economy. Despite lingering uncertainties, signals from BEIS have mostly been positive and, if this continues, the new department has the potential to be a powerhouse for the low carbon economy.

Appeasing the climate-sceptics?

The Global Warming Policy Foundation, the UK’s foremost climate-sceptic think tank, has previously called for DECC to be abolished. In 2014 and 2015, Conservative backbenchers presented ultimately doomed private members bills to that effect, requesting DECC’s functions be absorbed by BIS. So when Theresa May appeared to do exactly that on her second day as Prime Minister, it was considered to be a hasty implementation of plans laid by the most climate-sceptic of her colleagues. Her decision was seen in the context of the recent vote to leave the EU. May, a Remainer, was thought to be making a ‘concession to the Tory Brexiteers’, in the words of Catherine Bearder MEP; all nine of the MPs who supported the DECC Abolition Bills still in Parliament had campaigned to leave the EU at the time of the referendum.

However, there are important differences between what the climate-sceptics had proposed and what actually happened in the restructure. Rather than DECC being diminished and subsumed by BIS, it has been merged with a reduced BIS. All the previous climate change functions of the old department have been fully transferred to BEIS, which is now run by the permanent secretary from DECC. Although the secretary of state is responsible for a much wider policy portfolio and the minister for climate change also has industry to grapple with, the division of roles and responsibilities within BEIS suggest an attempt to connect energy and climate policy with business and industrial strategy, rather than to side-line the former.

May’s appointments to key BEIS positions appear to confirm this. Greg Clark, the Secretary of State, previously served as shadow DECC secretary (2008-2010) and is widely considered to be an ally of the green movement. In 2010, the man who was expected to succeed Ed Miliband at DECC – pipped to the government post by his Lib Dem coalition partners – argued that sticking to a high carbon path was ‘the biggest threat to our prosperity, social fairness and economy’. Six years later, in his first statement as BEIS secretary, he highlighted ‘delivering affordable, clean energy and tackling climate change’ as priorities for the new department. The minister responsible for delivering the last of these ambitions, Nick Hurd, is also an outspoken advocate for climate change action and was earlier in 2016 named ‘MP of the Year’ at a green awards ceremony.

Side-lining decarbonisation?

Perhaps the strongest argument against the DECC/BIS merger is that it will weaken the status of climate change within government. Ed Miliband, DECC’s first ever secretary of state, argued that losing a dedicated ‘climate change’ department would be a setback for the agenda because ‘dep[artmen]ts shape priorities, shape outcomes’. It is unlikely, however, that the restructure ‘risks dropping climate change from the policy agenda altogether’, as the New Economics Foundation has argued.

The government is legally bound by the UK’s Climate Change Act to meet incrementally increasing emissions reduction targets. Unless this Act is repealed – unlikely given the support it enjoys from Theresa May and Greg Clark – the responsible department, now BEIS, is obligated to produce carbon plans that spell out how these targets will be met. According to Stephen Heidari-Robinson, former advisor to David Cameron on energy and environment policy at No. 10, much of the next carbon plan has already been drawn up by Amber Rudd, the last secretary of state at DECC. If there are to be major changes to this plan following the leadership changes, the question is: which department would be best placed to draw up a credible and ambitious decarbonisation plan?

Sam Fankhauser, a climate change specialist at the London School of Economics, argues that BEIS provides a ‘much better, stronger basis from which to decarbonise the UK economy’ than DECC, as to do so ‘requires the close coordination of climate, energy and industrial policy’. This coordination is vital for decarbonising the heat sector in particular, and for mainstreaming innovative technologies like storage and Demand Side Response – all of which should be at the heart of the carbon plan. Having responsibility for industry and climate change within the same department should lead to new policies for low carbon growth that, as Greg Clark has pointed out in to reference renewable energy infrastructure, will ‘build new industries and create new jobs’.

Moving climate policy to BEIS could also give the low carbon economy a stronger voice within government. According to the Policy Exchange think tank, climate and energy policy has the potential to be ‘elevated to a much higher level politically’ by relocating responsibility for it away from the now defunct DECC, which it described as ‘something of a minnow in departmental terms’.

Sending the wrong signals?

Angus MacNeil MP, chair of the Energy and Climate Change Committee, pointed out that investor confidence in the UK energy sector has been low following the EU referendum and years of uncertainty on climate policy. Environmental lawyers ClientEarth argued that abolishing DECC shortly after the unexpected and destabilising vote to leave the EU sent ‘a terrible signal at the worst possible time’. Of the 50 large business energy users surveyed by Inenco in early August, a majority were worried about a downgrading of the climate change agenda following the merger.

However, this ‘bad’ signal has been followed by series of good ones. The ratings agency S&P Global claimed that, despite uncertainty, the ministerial appointments at BEIS and the government’s decision the pass the 5th Carbon Budget, a requirement of the Climate Change Act which sets the government’s emissions reduction targets (now 57% below 1990 levels), had boosted optimism within the renewable energy sector. Although Amber Rudd had set the carbon budget’s wheels in motion before Theresa May’s ascension to the premiership, one of the first acts of the May government was to see this carbon budget through Parliament. In his short time as BEIS secretary, Greg Clark has already given the green light to the creation of the world’s largest offshore windfarm.

These are important first steps, but the government still needs to do more to reassure investors of its future plans for the low carbon economy. The UK should follow in the footsteps of China and the United States by taking the symbolic, albeit easy, step of ratifying the Paris Agreement. The best thing the government could do, however, is produce an ambitious carbon plan before the end of the year that brings business and industry into its efforts to decarbonise the UK economy – something it is better placed to do now than ever before.

Liam Taggart is president of the Energy & Environment Policy Centre at the King’s Think Tank.
A shorter version of this piece can also be found on the WWF UK blog.

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