CORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1025-iv

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Environmental Audit Committee

green economy

Wednesday 14 December 2011

Janice Munday, Steven Fries, Mallika Ishwaran, Andrew Lawrence and Peter Schofield

Evidence heard in Public Questions 116 - 186

USE OF THE TRANSCRIPT

1.

This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

2.

The transcript is an approved formal record of these proceedings. It will be printed in due course.

Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 14 December 2011

Members present:

Joan Walley (Chair)

Peter Aldous

Neil Carmichael

Mark Lazarowicz

Caroline Lucas

Sheryll Murray

Caroline Nokes

Mr Mark Spencer

Paul Uppal

Simon Wright

________________

Examination of Witnesses

Witnesses: Janice Munday, Director, Advanced Manufacturing and Services, Department for Business, Innovation and Skills, Steven Fries, Chief Economist, Department of Energy and Climate Change, Mallika Ishwaran, Chief Economist, Department for Environment, Food and Rural Affairs, Andrew Lawrence, Director, Strategy and Sustainability, Department for Environment, Food and Rural Affairs, and Peter Schofield, Director, Enterprise and Growth, HM Treasury, gave evidence.

Q116 Chair: Thank you to all of you for coming along. There are rather a lot of you, so I hope we will be able to get through our proceedings in time for the members of the Committee to leave for Prime Minister’s Question Time. If I can start off, we want to try and get an idea of how the whole issue of the green economy is being looked at across different Government Departments. I think we wanted to start off by really trying to understand what Enabling the Transition to a Green Economy seeks to achieve and just to set out how you think businesses would use it and what relevance it has to businesses. I do not know who wants to take the lead on this?

Andrew Lawrence: Thank you. Perhaps I should take that one as I was the senior responsible owner of the overall transition plan, so perhaps I will start with that.

In terms of what it was designed to achieve, I think it is probably best explained through some of the feedback we are getting from business stakeholders but other stakeholders as well. I think they were asking Government five questions. One is, "What do you mean by green economy? What is your vision? What do you think it will be?" The second, "Can you put all the information in a single place because clearly there are lots of departments involved and it would be helpful to have the information in a single document". The third question they are asking us, I would say, was, "Can you give us as much clarity as possible about what lies ahead, what the forward plan is?" The fourth was, "What might it mean for us? What does the transition to a green economy mean? What might the implications be for us?" Then, finally, I think there was a question about partnership, "How do we work together? What will Government do? What will business do?" I would say those five questions were the ones for us to address and I think the document aims to tackle them. We hope, given that these were responding to business, that the document does that.

Q117 Chair: I think some people would say that all it has done is just set out existing Government policies and I think our question back to the other Departments is how it has brought added value to the work that has been done within the business plans of the other Departments, having had what is almost a communications document setting out what is meant by it.

Janice Munday: Well, going back to what Andrew said, business has made the point to us that finding all of these policies and seeing them together was quite difficult when looking through the business plans. The timeline that we set out in the document, which sets out how all of these things fit together, when businesses can expect to see things, has been hailed by business as one of the most significant things that Government has produced to give business that clarity. It is something that is very much aimed as a tool so that business can interact with us more easily on the whole green economy agenda.

Chair: Caroline, you wanted to come in.

Q118 Caroline Lucas: There is lots of language about the green economy, growing sustainably and so forth, and I think the purpose of this inquiry is to try and get to the heart of what some of those words really mean. For example, some of the people who have given evidence would say that on a planet of finite resources the idea that you can go on growing infinitely, using ever more finite resources, with more and more production and consumption, is not actually sustainable. I want to know where your position is on that. In your evidence from the three Departments, you write, "Our vision is that our green economy of the future will grow sustainably". Even if you are using resources more efficiently, how do you propose to go on growing indefinitely on a planet of finite resources?

Andrew Lawrence: Yes, in terms of vision I think you are right-four aspects in the opening sections of the document set out what we think the vision is. Growing sustainably for the long term is one of them, as well as using natural resources efficiently, which is vital to the description you just made, and being more resilient and exploiting comparative advantages. Those are the overall objectives. Overall, in the document we try to understand better the value and the availability of natural resources. I do not know whether Mallika will want to say something about this from the economist group, but you need to take decisions as Government and work with businesses in the light of the best available information. Understanding resources, their value and their impact when implementing Government decision making is the key answer to meeting the vision.

Q119 Caroline Lucas: With respect, that does not actually get down to the issue of whether or not you see the economy as a subset of the wider ecology or whether you think that, with a bit more resource efficiency, we can go on growing. That is the nub of what I want to get at. Some of the people who have given evidence from, if you like, a more dark room perspective would say that Enabling the Transition to a Green Economy is about business as usual with a few green bits of window dressing. What I want to get to is the heart of the philosophy that underlies that.

Andrew Lawrence: Well, I do not think it is business as usual. I think there are lots of things in there that are quite radical and quite ambitious in changing the way in which Government works, the economy operates, businesses behave and consumers as well. I think it is not a "business as usual" type document. I think it is challenging on the basis of new evidence and new insight. Mallika, do you want to talk about the interconnection between growth and the availability of resource and so forth because I know you have worked on that?

Q120 Chair: Just before I bring in Ms Ishwaran, was there any discussion about this at the time when you were formulating these proposals? Were there specific papers relating to this and the issues that Caroline Lucas has just raised?

Andrew Lawrence: Principally through the work of the economists, I suppose.

Mallika Ishwaran: Yes, Defra has published papers on the links between the economy and environment, and the specific nature and evidence of those links. This informed the Enabling the Transition to a Green Economy (or ETGE) document that was produced.

We looked in detail at what green growth means from an economist’s perspective. Valuing natural resources correctly was a key element of that. Resource efficiency is a winwin in the near term which the ETGE document picked up on, but we also looked more broadly at valuing resources that do not have a market price, for instance, and at how to get businesses and others to consume natural resources in a way that reflected the scarcity of that resource. We also considered whether some natural assets which are highly valued have limits or thresholds, which mean that even though individual consumption decisions may be right, there could still be unpredictable cumulative impacts somewhere down the road. We looked at both concepts in the context of the ETGE and asked what direction we wanted to give business based on the economic evidence.

The idea of setting out the Government’s vision and a policy framework for the transition to a green economy was also to encourage private investment, particularly in green R&D, where there might be underinvestment as a result of the lack of accurate pricing, i.e., because such investments are valued socially but not in the market. Private investment and innovation is key to improving resource efficiency and overall productivity of the economy.

This was some of the argumentation that we went through to judge and decide how best to deliver in a resource constrained and prosperous economy.

Caroline Lucas: I do not want to take too much time, so just to say that I still think that there is an intellectual flaw there, if you like, that even if you are using resources more efficiently, even if you are valuing them-and I take the point exactly that many natural resources do not have a financial value-even if you are doing that, if overall the economy is based on more and more growth, then ultimately there is going to come a point where we are exceeding massively what the planet can provide. That kind of broader framework does not seem to be reflected in the document, but I will not take up further time, Chair.

Q121 Chair: I am just conscious of time. As I understand it, it was not published with a huge amount of publicity. It was tucked away on a Business Link website somewhere. How do you expect this joinedup document and policy to be brought to the attention of every business all the way around the country?

Andrew Lawrence: Shall I start? I do not think it was tucked away. We launched it in what I would say is a pretty normal way, and it was on the website of the three Departments-it was in the Defra business plan but it was published as a joint Defra/BIS/DECC document. It was launched on the departments’ websites. The Secretaries of State wrote a joint letter to people who had been involved saying, "Here is where it is. Thank you for your help. Do please go and have a look". It was put on Business Link, which was, according to the feedback we were getting, the place that businesses and others were most likely to look to try and find it. Then we had a larger event a couple of months ago-well, maybe it was early last month, actually-with the Aldersgate Group and NGOs and other business stakeholders to give it a bit of prominence and a bit of profile, which was well attended. I think the overall view was quite positive. I think it was-

Q122 Chair: How are you monitoring the kind of feedback that you have had?

Andrew Lawrence: We get it almost constantly. We also look at what is happening. We have had quite good feedback throughout the process because we have consulted a lot of business and other stakeholders who generally said, "This is a good idea and a useful idea and we support it" so we were encouraged by that. On the announcement itself, it was welcomed by a number of people. One or two, admittedly, said, "Could it go a bit further? Could it have said a bit more?" which is fair enough. Since then, we see that it has been picked up. For example-it is in my mind because it took place on Monday-there was a joint CBI/Green Alliance event where they referred to this document as one of the positioning statements for their overall conference, which is a circular economy. We also have the Green Economy Council, of course, which helped us.

Q123 Chair: Could I just ask as well what difference it has made to the Treasury?

Peter Schofield: I think one of the key points about this document is it brings together in one place all the different measures that every part of Government is taking forward, and the Treasury has its role within that as well. You only need to look at the way that The Plan for Growth, for example-which was published jointly with BIS alongside the Budget-referred to the need to take action now to put the whole economy on a low carbon, resource efficient path that maintains UK competitiveness, which lays the foundations for strong and sustainable growth in the future, and referred to the opportunities of green growth to see that this is at the heart of the overall growth agenda.

Q124 Chair: I am just interested in how that is being done. For example, one of our separate inquiries, which involves DECC and the Treasury, is looking at the feedin tariffs. How, for example, would a joint statement and policy by you result in greater dialogue, understanding and twoway communications between, say, Treasury and DECC in relation to, for example-I think it is a good example to use-the way in which the appraisal was done of the review of the feedin tariffs?

Peter Schofield: I know that the Committee took quite a lot of evidence on this last week.

Q125 Chair: Sure, but I am asking you how this joinedup approach across Government impacted on the way in which you jointly, through DECC and the Treasury, set out the review of FITs.

Peter Schofield: Well, the context of all of this is that the appraisals are done through the Green Book rules-the Treasury has these on its website and leads on that, but the various different annexes are jointly agreed with other Government Departments. That is all on the Treasury website. In terms of what difference it makes, the Budget measures alongside The Plan for Growth included things like the introduction of a carbon price floor. It included £3 billion of capitalisation for the Green Investment Bank. This does turn into some pretty significant policy measures.

Q126 Chair: Do you want to add to that, Mr Fries?

Steven Fries: Yes. I think the value of the document is that it sets the energy and climate change challenges that we face in a broader context of sustainable development and resource scarcity and identifies the relationships between them. I think the document also is important in emphasising the importance of cost efficiency in your approach to meeting your energy and climate objectives and, more broadly, your sustainability objectives. That issue very much informed our approach to the review of FITs.

Q127 Simon Wright: Some of our witnesses have suggested that in Enabling the Transition to a Green Economy the Government is adopting a rather passive approach rather than requiring businesses to do anything differently. Is this an approach that will really ensure that the green economy does happen and does develop as we know it needs to?

Andrew Lawrence: I would not say it is necessarily passive, but I think the document tries to be very clear on different roles. Part of that is saying that the green economy is not entirely for Government to achieve and deliver. In the introductory section, the Secretaries of State described it as, "The commitments in this document demonstrate a shared responsibility to take action" and that indicates that what they had in mind for this document was to show what Government will do and then to encourage businesses and consumers and other stakeholders to respond, if you like. I do not think it is passive, I think it is a call to action. Even on the 11th page of the overall document it says, "Here is what Government will do", about 10 or 12 actions that Government will take, and then on the other side it says, "Business could". Now, we did not want to say, "Business will" because clearly that is their decision, but we set out what we thought businesses could do in response as well. I think it is quite a call to action rather than a passive document.

Q128 Simon Wright: What will happen, however, if that call to action is not responded to? What is next in the strategy?

Janice Munday: Perhaps I could pick this up because I think there is an important element in this picture that is being taken forward now, which is the work we are doing intensively within sectors of the economy about what the particular issues are for them in making this transition. Within the Department for Business, Innovation and Skills we have a number of councils or bodies where we interact with senior business leaders on a range of issues. We have the Green Economy Council, which perhaps we will come back to, which is something that is shared responsibility across these Departments. We also have bodies like the Automotive Council, which is looking at decarbonising the transport system, where a huge amount of work is going on by industry with Government about the implications and the actual way we design, build and operate road transport in the system. We have the Aerospace Leadership Group, which is looking again at the whole question of noise, not just emissions, from aircraft engines and what the next generation of aircraft will be like. We have the Green Construction Board, which has the ambition to adopt completely the transition to the green economy in the construction industry-a difficult industry to deal with. The board is giving a guiding vision on that and taking forward the implementation of the Government’s low-carbon construction strategy. We take the strategy forward with particular industries, responding to the needs of those industries.

Q129 Simon Wright: To many it would seem that the transition to a green economy is actually in the interest of businesses. Using resources more efficiently should, you would imagine, cut costs overall. So why aren’t more businesses engaging in this approach already?

Janice Munday: From our experience, a large majority of businesses are engaging in this. We know some businesses are actively looking at how they provide environmental reporting. We know the chemicals industry is the most environmentally efficient industry in the UK compared with that anywhere else in the world. As I say, innovative work is going on with the automotive industry to try different things, for example, there was the recent announcement of some work on hydrogen fuel cells. There is a huge amount of innovation and a desire to engage with this agenda from business.

Andrew Lawrence: If I could just add that there are a lot of examples and we tried to include as many case studies and examples in here as we can, particularly of, as you say, companies who are saving money and saving resources, which is the winwin that we are trying to push for. Clearly, it is not a universal action from businesses, though, so we try also to encourage them. I think the two main issues I would point to are, first, publishing research on the benefits of resource efficiency. We hope that the headline figure of £23 billion available to British industry if they were to adopt quite simple, within one year payback measures to increase their resource efficiency will be a flashing light for business to think, "This is something we should take seriously. There is a lot of money to be made here". The second thing I would highlight is the Ecosystem Markets Task Force that was set up, which essentially tries to encourage businesses to think quite innovatively and creatively about how you can do things, how you can make the most of the opportunities. That has now been established under Ian Cheshire. It is reporting to the Green Economy Council just to show people the sense of the possible and to encourage action. I think there are things we are doing, if you like, to push as well rather than to accept-

Q130 Mark Lazarowicz: I was struck by Ms Munday’s comments about a large majority of businesses being involved in the transition to a green economy. What do you mean by a large majority, 70%, 80%?

Janice Munday: The answer, as always, is difficult when you take the whole economy as opposed to particular sectors. From my perspective, we deal with the issues and the problems for sectors. I would say from our interaction with the top prime companies in all sectors that it is nigh on impossible to have a conversation without discussing the transition to a green economy. It is one of the No.1 things that those companies raise with me and my colleagues and with Ministers in this Department, and we talk about the issues. This is not something that has passed business by.

When we come to look at what is obviously vast numerical numbers and talk about engaging the SME community, that is always a more difficult task. Inevitably, when their concentration is on cash flow it is quite difficult to engage them, which is why Andrew Lawrence referred to making a pitch to those businesses about how their cash flow could be helped by adopting relatively easy resource efficiency measures.

Q131 Mark Lazarowicz: This is more kind of an impression you have of business rather than any kind of systematic measuring of how far they are involved in taking organised steps to transit to a green economy? Maybe that is all you can do. I am not necessarily criticising you, I am just trying to be clear that this is more an impression rather than an actual analysis.

Janice Munday: Perhaps Steven Fries could pick up on the Carbon Plan.

Steven Fries: Well, the Carbon Plan sets out clear roadmaps for improved energy efficiency in a range of sectors in particular-transport and buildings and structures-as well as the power sector. But the transport and commercial sectors and structures are a clear area where progress can be made, particularly in terms of improving the efficiency of buildings. We have a number of programmes in train and in effect to improve efficiency in this sector. In our recently issued Carbon Plan this was one of the key pathways to achieving our energy and climate objectives over the next four carbon budgets.

Q132 Neil Carmichael: I was listening carefully to Janice about what BIS was doing. I was just wondering what role incentivising consumers will play in encouraging manufacturers to develop more green products. I am thinking of the example of the £5,000 for electric cars for next year. We do need to explore that area and perhaps enhance it if you think it is an appropriate direction of policy.

Janice Munday: The Government has a number of instruments within which it deals. The £5,000 for electric vehicles is a large sum but it is not the only sum, and perhaps Mr Fries can talk about the Green Deal in a moment. Again, I would say in our interactions, for example, with the retail sector and with the construction sector, which is most interfacing with consumers, that we talk all the time about ways in which they can market green economy goods and services to consumers using their considerable knowledge of consumer behaviour. We are working very closely on that.

Q133 Chair: Further to that, then, can we expect an announcement very soon that the Government is going to be looking towards mandatory reporting of greenhouse gas emissions in order to get that labelling and understanding in terms of purchasing requirements?

Andrew Lawrence: There will be an announcement of a decision soon. I do not know what the decision will be at this stage because the Government is still considering the responses to the consultation that it held earlier this year.

Q134 Chair: But have your discussions been crossparty in how to arrive at a decision on that?

Andrew Lawrence: Yes, the discussions about the decision, the evidence and the extra evidence from the consultations are being collected across pretty much all the Departments here.

Q135 Caroline Nokes: I just want to take Ms Munday back to her comments about interaction with companies and the vast majority of them engaging on the transition to the green economy. I think you specifically said that with the majority of top companies it was impossible to have a conversation with them without this engagement occurring. Would that be in a positive or a negative way?

Janice Munday: It depends, as ever, on the sectors. We may get on to the package of measures to support the energyintensive industry sector. They have been very concerned about the rising cost of electricity, but despite that, they want to engage with us. They raise questions about what we could do with waste gases, could we capture this, could we do that, what is happening on carbon capture and storage? It is a positive discussion about mechanisms.

Q136 Paul Uppal: Briefly, I just want to get the panel’s view on a more broader based thing. I was India recently, where there is a great appetite to capitalise on green technologies. In terms of the Enabling the Transition to a Green Economy report generally and the balance between our domestic consumption and the international perspective on this, I picked up from the trip abroad that a lot of businesses have an appetite to capture green technology and to learn from best practice as well. Do you think that avenue could have been better explored in perhaps encouraging businesses to adopt a more green mantle?

Chair: Who wants to answer?

Janice Munday: Well, if we are talking about internationally, obviously UK Trade & Investment has a strong team dealing with low carbon and green economy themes and it looks for opportunities for British business to sell their goods, service, products, technologies and knowledge in other overseas markets. We put a lot of effort across the UKTI to promote and sell those products overseas.

Steven Fries: Yes, and also we share best practice not only on successes within the private sector but also in policy. We have a dialogue with our Indian counterparts on policy approaches that also helps to facilitate a private sector response to these challenges.

Q137 Mr Spencer: You made reference to energyintensive industries and obviously we are trying to move to a position where the whole economy is green. I just wonder what the Government is doing to try and assist those energyintensive industries to make the move.

Janice Munday: The Government is absolutely committed to the fact that energyintensive industries have a strong role to play in the transition to a green economy. We need steel in order to build the wind turbines that we are going to need for our renewables target. We need niche chemicals that are going to decarbonise, and an awful lot of manufacturing projects are already doing so. We have had what I would call a short-term or transitional problem about the cumulative impact of a number of things-rising energy prices and Government policies-which has led to particular industries facing higher than expected costs. In the Autumn Strategy the Treasury announced that there would be a package of support to help energyintensive industries make that transition. That help and package will also include advice on how we can help to make them more resource efficient and more energy efficient, although some of them are already at the limit of what can be done with current technologies. Again, we are taking that package forward in a cross-departmental way.

Q138 Mr Spencer: Where will that leave industries? I am thinking of cement manufacture, for example, where it is pretty much impossible to make that a green process in that one of the by-products of cement manufacture is carbon dioxide. How do you green an industry that, by its very nature, produces greenhouse gases?

Janice Munday: All credit to the cement companies, they have done a huge amount in reutilising their waste gases and using those to retain and control heat. I was talking to Lafarge the other day about their significant research and technology work in the south of France to look at how we make cement manufacture a more environmentally efficient process. At the moment we are probably at the limit of what is technologically possible, but there are new technological developments coming through that may enable us to do more.

Steven Fries: If I might just add that in the long run, carbon dioxide capture and storage for these difficult sectors is the one technology that, if proved successful, would allow very substantial reductions in emissions.

Q139 Mr Spencer: Do you feel, then, that the Government is putting enough emphasis on CCS? I know we have some trials coming forward, but it seems to me the only way to green these industries is to go down that carbon capture and storage route. Are we doing enough to invest in that technology and make sure it does work?

Steven Fries: Yes, that is a clear priority for the Government and for DECC, and we are working to advance the CCS demonstration initiatives of the Government. Work in this area will be coming forward in the new year.

Q140 Chair: What has happened to the carbon capture and storage project for this year?

Peter Schofield: Sorry, I was just going to pick up on Mr Spencer’s point, which is probably the same as yours, Chair, which is that the Government remains committed to £1 billion of investment. Obviously, the Longannet project fell away, but that commitment remains.

Q141 Chair: Does it have to go through a new process to get confirmed or is it automatically available to go to another project?

Peter Schofield: The commitment is there and the Government has made that point even after the Longannet project fell away. The next stage, as Mr Fries says, is for further work to progress other ways of developing this technology. As I say, the £1 billion commitment remains. The precise profiling of that is something that we will have to talk about when the projects have been taken forward.

Q142 Mr Spencer: If I were being over-critical, it feels like it is an aspiration and a dream rather than a reality and a solid project. Is that a fair criticism? How can you identify the specific, if you like, timescale and projects that are going to deliver this technology for us?

Steven Fries: I think it is more than a dream. If you look across the world, there is a wide portfolio of CCS demonstration projects. The UK Government, as Mr Schofield was emphasising, is committed to the development of CCS demonstration projects within the UK and this is an important technology to demonstrate.

Q143 Caroline Lucas: I wanted to come back to the £250 million that was announced in the Autumn Statement to help energyintensive industries. How will that be used? It does not help them if it is just simply there as a cushion, if it does not actually get to be used to help them make more of that transition. It has certainly raised quite a few eyebrows given that many of those companies are already enjoying quite significant benefits from being given free allocation under the emissions trading system, so they have free permits and arguably have some windfall profits under that. How is that money going to be used to enable this transition in practical terms?

Janice Munday: One of the elements of the package, which is outside the £250 million, was the announcement that the Green Investment Bank intends as one of its first priorities through UK Green Investments to invest up to £100 million into a fund to cofund with industry, and others, energy efficiency projects, which will be targeted particularly at those sectors that are energy intensive to try and get more efficiency. As I say, quite a few of them are at the end of what is technologically feasible but there are others who still have some way to go. That is a very important part of the package.

We will be consulting on how best to use the money because inevitably there are a lot of companies who would like to benefit and not all of them can do so. It is important that we improve our evidence base on what the current costs are that fall on particular sectors and plants and we will be looking to do that in the new year.

Q144 Caroline Lucas: But there is no condition specifically linked to the £250 million that was in the Autumn Statement?

Janice Munday: That will be for the Government to decide once we have improved the evidence base.

Peter Schofield: But is it worth adding-

Q145 Chair: You are advising Government, all of you together collectively?

Peter Schofield: Yes, sorry, it covers all of them. Just to pick up on Ms Lucas’ point one of the elements of the £250 million was the additional discount from the climate change levy for those companies that sign up to climate change agreements. Those agreements are part of a commitment to increase energy efficiency. That is one element of it.

It might also be worth mentioning the announcement in the Budget last year that talked about relief from the carbon price floor for fossil fuels used to generate electricity in CHP plants, which is another element of this. I think there are a series of elements within this, added to the work of the Green Investment Bank whereby the Government-

Chair: I think we hope to come in a little bit more detail on to the Autumn Statement and the Budget in a short while, if that is okay, so I will bring Sheryll Murray in.

Q146 Sheryll Murray: Some of our witnesses were members of the Green Economy Council and they have been involved in drafting Enabling the Transition to a Green Economy. They told us that the version that was published bears little resemblance to the version at the Green Economy Council’s meetings. Can you just explain the process and also how the working group input into this, please?

Andrew Lawrence: Well, it is certainly true that the document changed a lot and continuously throughout the process. I think in terms of the Green Economy Council, they had what we described as a scoping document at their February meeting. They responded to questions about broadly what areas it would be useful and helpful for the document to consider. Then they had a fuller draft at their June meeting to which they gave a more substantial response. We also had the sounding board.

I think the main reason why some of your earlier witnesses may have felt that it changed substantially was probably more to do with the look, feel and presentation. We had two key pieces of feedback consistently from stakeholders. The first was that the document had to be short; it was not going to be used, it was not going to get on to boardroom tables or be easy to get into unless it was short. We had an exercise in, if you like, paring it back to what we needed.

The second point they made was it would be better if it was an online document rather than a bulky carryaround because then you have people in a wide range of audiences, those who know what they are talking about through to the, "I just want to find out a bit" types. You need to have an online document that you can easily penetrate and get into. We ended up sectioning it off quite a lot. I think those are probably the main changes. Make it short and make it online, navigable, if you like, and that may be why it looks a bit different.

Q147 Sheryll Murray: Was there a redrafting exercise after the Minister’s comments?

Andrew Lawrence: Well, there would have been changes after the Minister’s comments, I suspect, but not very many towards the end. I think it was from June when we had that substantial set of comments from the Green Economy Council and others that we then worked through the governance procedures and we had to finalise a final version, which went round for collective clearance.

Q148 Sheryll Murray: Finally, it does not seem to include any new policies. Were you directed from the outset that the document would not include any new policies? If so, where did that come from?

Andrew Lawrence: The intention was that it would not be a new policy document. It would be a sort of gathering together of everything that the Government was doing. In that sense, it was a conscious decision and the decision was in large part driven by, as I say, the feedback we had from business and others, which said, "Can you put it together for us, please, so we can easily find it". That was its intention. It was not meant to be an announcement vehicle for a series of new policies.

Q149 Mark Lazarowicz: How are responsibilities for the green economy shared across Government?

Steven Fries: Well, there is not one Department in the lead. All departments share responsibility and are working quite closely together. All the departments have their own objectives in this area but work quite closely together in order to strike the right balance. We have heard already this morning about a number of ways in which this balance is struck through the Green Economy Council operating at ministerial level. There are also working groups at the Director General level and also at the policy and economics level. There are a number of structures and ways of working across Departments that allow us to bring together our various policy agendas and to strike the appropriate tradeoffs among them.

Q150 Mark Lazarowicz: You said that there was not one Department in the lead on the green economy, I thought it was Defra?

Steven Fries: The responsibility for the agenda is shared across the departments. On specific items, such as Enabling the Transition to a Green Economy, clearly Defra was in the lead on that specific exercise.

Q151 Mark Lazarowicz: But there is no one Department actually responsible for the overall lead on the green economy for coordination? Which Department coordinates the Green Economy Council? One Department must presumably be in some way in charge of it.

Janice Munday: My Department provides the secretariat for the Green Economy Council, so it is our job to convene the meetings and make sure they all happen. Briefing is provided by all Departments getting together. The Green Economy Council is chaired on a rotating basis by three Secretaries of State.

Q152 Mark Lazarowicz: That is DECC, Defra and BIS?

Janice Munday: Yes. The agenda is developed with a small working group of members of the Green Economy Council working with all the Departments.

Q153 Mark Lazarowicz: There is a secretariat, but there is no drive from-it is a secretariat role provided within BIS rather than a policy leadership role? I know that they can sometimes overlap, shall we say-

Janice Munday: Our offer to the Green Economy Council members was that they would work with us in driving the green economy, which is why we have this working group who work with us on the future agenda.

Q154 Mark Lazarowicz: Is this kind of rotation paralleled at the political level as well? There is no one Secretary of State who takes a lead on the Green Economy Council, is that correct?

Janice Munday: I think technically Vince Cable as Secretary of State for Business, Innovation and Skills announced the membership, but it is very much something that is owned by all three Secretaries of State.

Q155 Mark Lazarowicz: It was certainly suggested that Defra had the lead on the green economy. That is not correct by the sound of it?

Andrew Lawrence: As I said, it is quite common for a single responsible person to be identified so people know who to go to, if you like, and that was me in this case. Defra were leading the work on this document. The green economy policy is shared as described.

Q156 Mark Lazarowicz: It does seem a little bit unclear. You might have expected one Department to have been specifically the lead on the green economy, but you are telling us how it is. Can I just ask, now that Enabling the Transition to a Green Economy has been published, the document, what is the next step to follow it up? What is happening now?

Andrew Lawrence: The main focus is through the Green Economy Council. We have asked them what the future work programme is, what they would like to focus on, using this as a starting point, if you like. Clearly, all the announcements of policies within it are being progressed as well. We have committed to keeping this document up to date. Clearly, it is only as good as the information in it and after a period of time it will need an update. We have committed to do that-every few months I suspect it will be due-and update some time early next year.

Q157 Mark Lazarowicz: My final question if I can, BIS, Defra and DECC are involved in the Green Economy Council but the Treasury is not. You are going to pull all the strings from behind, of course, as you know. How do you relate to the Green Economy Council and green economy policy more generally across Government?

Peter Schofield: We are closely involved with all aspects of this. To give one example, in terms of the preparation of the Enabling the Transition to a Green Economy document, we were actively involved in the working groups. I participated in the senior leadership group and then obviously Treasury Ministers were part of signing off the overall document. That is one example, but we are actively involved in all of this.

Q158 Mark Lazarowicz: Is there a Cabinet Committee that has specific responsibility for the green economy? Is there a Cabinet Committee responsibility overall?

Andrew Lawrence: The Cabinet Committee that took and cleared this document was the Economic Affairs Committee.

Q159 Caroline Lucas: Coming back to the Autumn Statement, many of the green groups looked at that Autumn Statement and said that it marked the death knell of any aspiration to be the greenest Government ever. Can you explain a little bit about how your green economy teams were involved in drawing up that statement, the process?

Peter Schofield: Shall I talk a little bit about that because the Autumn Statement was the culmination of the second phase of the growth review? The growth review was kicked off in November last year and it is a process that involves every Department here and, indeed, many others. The work itself is led jointly by the Treasury and BIS. It is coordinated at an official level at a group that is chaired by a senior BIS official. I sit on that as well. Then it reports to a Cabinet Committee chaired jointly by the Chancellor and Vince Cable, but the Secretaries of State of the Departments represented here are all in attendance at those meetings.

Now, the growth review then had a whole series of different work streams, which took the work forward, which led to a first set of announcements at the time of the Budget and then a second set of announcements at the Autumn Statement. For each of those work streams, the responsible Department for the policy area was responsible for leading that and driving that forward. In terms of the culmination both in terms of The Plan for Growth in March and the Autumn Statement and the National Infrastructure Plan, all of the relevant Departments were involved. It was very much a cross-Whitehall process.

Q160 Caroline Lucas: That sounds wonderfully consensual. I am sure it probably might not have been. In terms of the opportunities offered by the green economy, what discussions are going on when it comes to new policies or spending plans being drawn up, particularly by the Treasury?

Peter Schofield: Well, I think a whole series of different announcements have already been made, which involve tax or policy measures. I talked earlier about the Budget announcements, which were quite significant in terms of the carbon price floor, the capitalisation of the Green Investment Bank and some regulatory measures.

Q161 Caroline Lucas: It depends on your perspective, doesn’t it, because the Green Investment Bank is not capitalised nearly as much as this Committee, for example, wanted in the Environmental Audit Select Committee report that we produced. You can say, "Yes, there is some investment in rail" but actually that was massively outweighed by the investment in roads and new airports and so forth. I suppose it feels as if the environment is being treated as if it is always a burden and the impression is that we are going to try and reduce the requirements to do anything on it. What are your teams doing to be able to really underline the opportunities, particularly the job opportunities that exist?

Peter Schofield: Yes, you are absolutely right that this is an opportunity. The earlier quote I gave from The Plan for Growth has very much emphasised the opportunities. You talked about the infrastructure announcements. The National Infrastructure Plan-and I have a copy here-is very much a significant document in terms of looking ahead at the constraints and the issues facing UK infrastructure as we move towards a green economy. For each of the major sectors of infrastructure-transport, energy, water, waste-there is a section in the document. This is very much framed in terms of what are the issues as these sectors and as the economy moves towards a green economy. The response in terms of the policy measures is very much designed to take us on that journey, to take us towards the vision that is outlined.

Q162 Caroline Lucas: Can I give you a practical example? For example, on the Green Investment Bank, the Autumn Statement announced that nondomestic energy efficiency would be a priority with £100 million made available next year. But in the 2011 Budget the Treasury originally said that £775 million would be available to get investments going. What happened between the original Budget and the Autumn Statement to mean that that was slashed to such a degree and were your Departments fighting to try and stop it?

Janice Munday: If I may pick up on that, the Budget has not been slashed in any way. I am the senior responsible officer for delivering the Green Investment Bank. I am assembling a highpowered team at the moment in the form of UK Green Investments. The Secretary of State for BIS, Vince Cable, made the announcement on Monday about what the priority sectors would be. We are working actively with markets and with players to make sure that we spend that money to maximum effect to deliver on our financial and green targets.

The particular issue about the £100 million for industrial energy efficiency was reflecting the way we are choosing to manage part of that money in order to make it more easily accessible to quite a large number of companies. We similarly have made an announcement in the infrastructure plan about a £100 million fund for energy from waste. We are actively engaged in discussions with financiers about a number of other projects. Our plan and our commitment is all go to spend that £775 million wisely.

Q163 Caroline Lucas: When will we see the figures of how-we have £100 million that has been identified in the Autumn Statement for the nondomestic energy efficiency. If it is already in the public domain, where is it? Where do we find out how the other £675 million has actually been spent?

Janice Munday: The Secretary of State for Business, Innovation and Skills made a statement to Parliament on Monday about the sector priorities for the Green Investment Bank so that is-

Q164 Caroline Lucas: But figures did not go with that, did it?

Janice Munday: That is simply because we are dependent on more projects coming through and that is why I have project financiers involved in those discussions. We set out that the aim is to spend 80% of the funding on those priority sectors, a minimum of 80%, leaving up to 20% for other sectors. Those discussions are going on. We are talking, for example, in other sectors about whether there is something we might do to help enable carbon capture and storage. We are fully engaged with the market in looking for these opportunities.

Q165 Caroline Lucas: That £775 million is completely safe, ring fenced, and will be used for what it was said it would be used for back in the Budget?

Janice Munday: We are seeking to spend the money wisely within the targets on financial returns and green investment.

Q166 Caroline Lucas: That is not exactly what I asked. Can you just say yes or no? Will the £775 million be there-

Janice Munday: The £775 million is in my budget for next year.

Q167 Caroline Lucas: For Green Investment Bank investments?

Janice Munday: Yes.

Q168 Chair: You were talking just now about this growth review and BIS and the Treasury looking at how that growth review was going to come forward with the proposals. Where did Defra sit in this?

Andrew Lawrence: In the latest round we led our own growth reviews. There were six altogether, of which one was on the rural economy, which was-

Q169 Chair: What does your own growth review consist of? Was that just projects that were pertinent to Defra?

Andrew Lawrence: No, because Defra was in the lead and there were plenty of other departments involved. Of the six growth reviews, one was on the rural economy, one was on midsized businesses. There was one on skills, one on infrastructure. We led one and my Secretary of State was on the ministerial group that Peter has referred to and we were on the project board.

Q170 Chair: What were Defra’s views on the proposals to take forward, for example, the part of the Autumn Statement that involved the road building programmes?

Andrew Lawrence: My Secretary of State was on the ministerial group and was in agreement with the package.

Q171 Chair: You see the road growth building as part of green growth?

Andrew Lawrence: Yes, as part of the overall-the overall growth review looking across the piece-

Q172 Chair: But we are talking about green growth.

Andrew Lawrence: Yes. We supported the proposals as my Secretary of State was on the committee.

Q173 Chair: Did you do any appraisal to be able to give support for what would be green growth?

Peter Schofield: Well, in terms of the appraisals, each of the projects that is supported goes through the normal rigorous appraisal process as set out in the Green Book. Each of those appraisals needs to take account of all relevant aspects.

Q174 Chair: But isn’t that in the process of being reviewed, the Green Book and the appraisal?

Peter Schofield: Well, the Green Book is a living document. It is constantly under review because we need to make sure that it remains relevant and that aspects of an appraisal that need to be taken into account are valued effectively and considered properly. If you look online at the Green Book, there are a whole series of annexes that we are working on together with other Departments in order to make sure that we keep it relevant. For example, in terms of how do you value greenhouse gas emissions as part of the process, we work very closely with colleagues in DECC on developing that.

Q175 Chair: No, it is just my concern is to what extent Defra’s views were fed into the outcome of the infrastructure plan, to what extent that would be locking in longterm, 20 to 25 years, carbon investment, if you see what I mean. I just want to be reassured that that discussion took place.

Andrew Lawrence: As Peter has described, the individual measures have their impact assessment and Defra is involved in all the clearance and discussion procedures that lead to the agreement and the announcement. So, yes, we are-

Q176 Chair: Individual measures?

Andrew Lawrence: Yes, we get to see the whole package.

Q177 Chair: On a case by case basis?

Andrew Lawrence: We get to see the whole package as it is developed and for its final approval.

Q178 Chair: Not looking at the whole wisdom of roads versus something else?

Andrew Lawrence: We get to look at the whole package to approve it and sign it off, including all the measures within it. That is through officials and up to the ministerial committee.

Steven Fries: If I could just add on this point, obviously within the carbon plan and the broader Government strategy there are quite ambitious targets to decarbonise road transport, particularly for light duty vehicles. One of the aspects of greening of the economy is actually the decarbonisation of mobility and, of course, we will need road transport as one of the elements of the transport mix going forward.

Q179 Caroline Lucas: Wasn’t there that case about the aviation expansion that was also implicit in the Autumn Statement where it was said that there would not be any further expansion at Heathrow, but that was read very much as meaning there probably will be expansion, or at least it is certainly not being ruled out on other airports in the south-east, which was a reversal from the Government’s original position on aviation? You might be able to make a case that because you are going to decarbonise road transport that it is fine to build more roads, but I think you would have a harder case to make in terms of the expansion of aviation. My question is the same as the Chair just asked: what is Defra’s position on that.

Steven Fries: It is clear that aviation is one of the most difficult sectors to decarbonise.

Q180 Caroline Lucas: So why are we expanding it?

Peter Schofield: Can I pick up on that? The National Infrastructure Plan sets out the capacity constraints facing the UK’s aviation sector. The Government has set out that it wants to look at all the relevant options for addressing that.

Caroline Lucas: Except reducing aviation, I suspect.

Peter Schofield: Well, aviation is an important industry.

Caroline Lucas: The environment is an important commodity. It is an important thing and it comes back-I am sorry, Chair, but it comes back to the very first point that I was making this morning about what the philosophy is behind this. If we are constantly trading off the fact that, yes, aviation is important in terms of its employment potential, in terms of growth and so forth, against the fact that aviation is the fastest growing source of greenhouse gas emissions and will stuff us in terms of getting to our carbon reduction targets, there is a contradiction there. All your nice language is all about trying to smooth over what are glaring contradictions, and it is really frustrating.

Steven Fries: Aviation is about 3% of global emissions, albeit growing quite quickly, and-

Q181 Caroline Lucas: Well, we can argue about that as well because of the impact of when they are being emitted high up or when they are being emitted on the ground and if you look at the nitrogen impacts and so forth. I know what the figures are but the point is it is not sustainable to have ongoing aviation growth. My question is what discussions does Defra have about the part of the Autumn Statement that was about increasing aviation, or at least increasing the potential for more aviation?

Steven Fries: I cannot speak for them.

Andrew Lawrence: We were involved in discussions around the entire package that was pulled together and we contributed to the impact assessments when we were required to. I think we have been involved and it is a question of balancing all the different elements.

Q182 Chair: I think what the Committee is really interested in is how that was done and what the detail of that was. I do not know whether or not there are any documents that would set out what Defra’s position was at the time when these discussions took place?

Peter Schofield: These discussions go through a Cabinet clearance process. They go through, first of all, the Economic Affairs Committee, which the Defra Secretary of State sits on. Defra officials are involved in the clearance of papers before they go there. This is a Government document and all parts of Government were signed up to it.

Chair: I am conscious of time. We have one last sector that we want to cover, which is skills, so Peter Aldous.

Q183 Peter Aldous: This is really in regard to providing people with the skills they need to take advantage of the opportunities that will arise in the green economy. Now, our predecessor committee found that the current demandled system was not working, mainly because employers were not able to actually articulate their skills needs. The system does not appear to have changed much since they reported, so I would just ask in the first instance what is the Government doing to ensure that we have those skills that are needed for the green economy?

Janice Munday: I can pick this question up because I come from the Department for Business, Innovation and Skills. You are right to refer to the fact that the Government skills policy is based around a policy of employer demand. That is the way we must do it to make sure that the skills are relevant to the needs of employers. Our question over the last year has been about whether the instruments we use so that employer demand can be translated into skills work has been as efficient and as effective as it might be on green skills. Through the Growth and Investment Fund we have put £50 million a year into a number of projects, one of which is the renewables training network, which is run by Renewables UK, to tackle the shortage of skilled workers in green energy industries. It will create 2,000 places on training courses specifically tailored to those wanting to make the transition into the renewable energy sector. That is a particularly significant initiative because it focuses particularly on mature skilled workers wishing to retrain.

Last month, we launched the National Skills Academy for Environmental Technologies, which will develop standards, deliver training and up-skilling for plumbers, electricians and technicians to install and maintain solar thermal hot water systems, smallscale photovoltaic heat pump and water harvesting and recycling systems, so that is very much around and in parallel with the work that we are doing on the Green Deal.

More widely, what we know from employers is that STEM skills is the thing that is most valuable for the majority of green economy jobs. We work closely with the Department for Education so that Government policies track students taking science, engineering and mathematics subjects. We have the STEMNET system to take the STEM ambassadors into school. We have our See Inside Manufacturing programme, which is designed to change students’ views of manufacturing. There is a lot of work to make people willing to come in and engage with the provision.

Peter Aldous: I think she has answered my question in one fell swoop.

Q184 Chair: I am just wanting to double check. Neil Carmichael, did you want to just come in a short while ago?

Neil Carmichael: Well, I was going to start defending the aviation sector, but we seem to have moved on.

Chair: No, I do not think we will go there.

Q185 Neil Carmichael: Except to say that in my constituency we have a huge number of firms actually supplying Airbus in technologies that are actually very modern, very innovative. They are also cutting emissions and helping the sector to thrive in a measured and appropriate way consistent with protecting the environment and promoting economic growth.

Chair: Okay, I think we have heard that.

Q186 Neil Carmichael: I was going to talk about skills because it is a really important point. A motor organisation told me not so long ago that one of the areas in which they really need more expertise in is electronic automotive sectors in terms of skills. Apparently, there are a large number of jobs obviously in terms of the development of the car, because in a few years’ time 30% or 40% of the car will be electronics rather than internal combustion engines, and yet we really do not have anybody trained in that sector. It is a good example of a skills deficit that we still need to address. My key question, to reinforce the point that Peter has made, is: are we really making sufficient effort to understand what is needed in the business world in terms of the skills so that we can upgrade our education and training sectors to actually provide those skills?

Chair: I really want a very brief response because we have to carry on.

Janice Munday: I was just going to say we have a network of sector skills councils whose job it is to do that. We have one on electronics. We have ones on manufacturing. They are deeply engaged in these discussions through the UK Commission for Employers and Skills.

Chair: Thank you. I think the message is that skills always get left until the last and actually we see it as being really critical in moving the agenda forward. Our time is up. Thank you to all of you. We look forward to a rearranged session with the Defra Secretary of State and the Chief Secretary to the Treasury. Thank you all very much.

Prepared 11th January 2012