Demise of DECC may spark investor ‘concern’

The department was abolished last week, and a new department for Business, Energy and Industrial Strategy was established with Greg Clark, the recently appointed Secretary of State, at the helm.

Clark said the new department was charged with “delivering a comprehensive industrial strategy, leading government’s relationship with business, furthering our world-class science base, delivering affordable, clean energy and tackling climate change”.

Over the coming weeks I will speak to colleagues to explore how we can ensure that effective Parliamentary scrutiny on the crucial issues of energy and climate change continues

Angus Brendan MacNeil MP

Reacting to the announcement last week, Angus Brendan MacNeil MP, chair of the Energy and Climate Change (ECC) Committee, said he had serious concerns about investor confidence in the UK energy sector being compounded by the move.

“While Members of my Committee differed in their views on the European Union, the immediate impact of the vote to leave has been to amplify uncertainty at a time when major investment is needed to deliver affordable, clean and secure energy,” he said.

“In this context, I am astonished at the Prime Minister’s decision to abolish DECC.”

He said the “disappearance” of DECC raised urgent questions about the central statutory obligation, contained in the Climate Change Act 2008, to reduce the UK’s carbon emissions by 80% from their 1990 baseline.

“Over the coming weeks I will speak to colleagues to explore how we can ensure that effective Parliamentary scrutiny on the crucial issues of energy and climate change continues.”

Investor confidence in government-funded energy and environment projects was dealt a heavy blow last November when the Treasury chose to axe a £1bn carbon capture and storage (CCS) competition in a bid to cut costs.

However, a report released this week by the National Audit Office (NAO) has found that the decision could actually increase the cost of meeting the UK’s carbon targets by 2050 by £30 billion. 

“The Treasury’s axing of the UK’s CCS competition brought a great deal of criticism,” said Stuart Haszeldine, director of Scottish Carbon Capture & Storage (SCCS).

“It was a premature decision, made before the two preferred project bidders, White Rose and Peterhead, had even submitted their design studies. It also reflected a lack of understanding of the strategic value of CCS to the UK’s climate ambitions as well as our perceived leadership on climate action globally."

He said the cancellation of the projects had also led to a collapse of industry interest in building projects in the UK. “This will mean that, when projects are eventually built, the government will need to pay more to convince industry investors that the UK can be trusted to deliver on its contractual promises.”

This will mean that, when projects are eventually built, the government will need to pay more to convince industry investors that the UK can be trusted to deliver on its contractual promises

Stuart Haszeldine, director of SCCS

Treasury decisions had a “history of being made impatiently, where short-termism is unable to support fundamental change that requires many years of design evaluation, demonstration, confidence building and construction,” added Haszeldine.

“Now, with the UK’s decision to investigate leaving the European Union, developing and maintaining global expertise in science and technology design, consultancy and construction is more pertinent than ever.”

Luke Warren, chief executive of the Carbon Capture and Storage Association said: “This report unequivocally shows that the full costs and impact of delaying CCS were not adequately considered in the run up to the cancellation of the CCS competition.”

He said the government must now urgently develop a new and improved approach to CCS that delivers this essential low-carbon infrastructure for the UK economy, recognising the wider benefits of CCS to decarbonise energy intensive industries, power, heat and hydrogen.

"The new Department for Business, Energy and Industrial Strategy will be well-placed to deliver a more holistic and strategic approach to CCS and we look forward to building a constructive relationship," he said.

EEF, the manufacturers’ organisation, has welcomed the inclusion of industrial strategy within Greg Clarke’s remit, saying it demonstrated “a new, serious purpose to this government reflective of the times”.

Merging energy and business policies could result in an industrial strategy better able to support manufacturing "as it seeks to overcome the challenges and seize opportunities from the decision to leave the EU," said Terry Scuoler, chief executive of EEF.

In a separate move, the House of Lords EU Sub-Committee on Energy and Environment this week took evidence from senior environmental academics to determine the likely impact of Brexit on environmental policy.

The committee asked about short and long-term impacts of Brexit on environmental policy, both in the UK and in the EU.

It also examined the role the UK should play in shaping EU environmental measures over the next two years, while still a member of the EU. In addition, it investigated to what extent the UK would need to align its environmental policy with EU policy in order to maintain access to the single market.