Hill+Knowlton Strategies

While the Chancellor’s freeze on fuel duty is likely to grab the headlines, on deeper reflection this afternoon’s Budget announcement is indicative of the Coalition Government’s struggle to fulfil its goal of reducing emissions at the same time as it looks to squeeze spending.

With DECC and the Treasury having fought a running battle over the Green Investment Bank’s ability to raise funds, it looks – as had been anticipated – as though the Treasury has got its way. This will undoubtedly be viewed as a setback for Secretary of State for Energy and Climate Change Chris Huhne, and his Liberal Democrat colleagues.

So much for ducks quacking and banks borrowing eh?

Worries about rising energy prices are also behind the decision to slash the CCS Levy, while the Government has clearly taken note of the need to incentivise the Green Deal at a time when most consumers are more concerned with making ends meet than lowering their carbon footprint (a subject that Huhne spoke about at the launch of the CBI report ‘Making the Consumer Case for Low Carbon’ which was held at H&K 2 weeks ago)

In this context, green campaigners and investors in green technology look set to be disappointed. Many have already begun to argue that the carbon floor price will not drive investment into the more conceptual forms of clean energy or improved efficiency at the proposed level. Nuclear looks like the winner in this regard at the moment, but events in Japan may well put the brakes on the new build programme in the UK as they have elsewhere.

Ultimately for all those involved in the energy sector, whatever their sentiment towards today’s announcements, the 2011 Budget serves as a stark reminder of the difficulties that lie ahead for the Coalition in its quest to become ‘the greenest government ever’ in an age of austerity.

‘We are in the game!!!’ roared Simon Hughes, very excitedly, as he tried (perhaps a little too hard) to convince the Lib Dem conference (and the media, no doubt!) that he is, in fact, a ‘rock solid’ supporter of the coalition. It is this sense of being ‘in the game’ after 65 years in opposition that has gone a long way to appease Hughes and many-a-concerned party activist’s worries about the coalition government over the last six months.

Still, with great power inevitably comes great expectation, and with green issues seen as the heartbeat of the party by many, Chris Huhne, the Secretary of State for Energy and Climate Change, addressing conference for the first time in his new role, was always going to be under great scrutiny by the masses In Liverpool this week.

In his speech to conference yesterday, supported by a carefully co-ordinated series of fringe events, Huhne set about outlining the coalition’s plans to tackle what he described as ‘the greatest challenge across Whitehall in peacetime’.

Addressing climate change, he said, is this Government’s most pressing task in the years ahead, while the UK’s overdependence on big oil means future price fluctuations have the capacity to drain billions from the UK economy. The two interrelated threats would be tackled, he said, by the ‘four pillars’ of the coalition’s energy policy:

1. The ‘Green Deal’ will see companies paying to insulate every home in Britain, allowing them to save both energy and money.
2. A ‘third industrial revolution’ of low-carbon renewable growth will wean the UK off fossil fuels and fulfil the country’s need for more electricity going forward (demand for electricity is expected to double by 2050).
3. Nuclear energy, funded entirely by private industry, will give the UK greater energy security.
4. Clean coal and gas will account for renewable energy’s variability and provide the UK with protection from future oil price shocks.

As I wrote yesterday, Huhne had two major challenges as he made his way to Liverpool this week. On the one hand, he needed to simultaneously reassure activists in his own party over their worries about nuclear while appeasing Conservative cabinet colleague’s concerns about the UK’s future energy security. In addition, he, like the rest of the Lib Dem leadership, needed to convince his party that liberalism has not been nullified by conservatism in the coalition.

It was interesting to see how he approached both.

‘A deal is a deal’, he said of nuclear, with a nod and a wink to the Tories during his speech to conference yesterday. Throughout this week, Huhne has spoke off ‘ending the standoff’ on nuclear energy and has insisted that he is ‘entirely comfortable’ with the coalition’s position on the issue. On first glance, it would seem like he has conceded much ground to the Conservatives on the issue, yet, having witnessed his less publicised conversations within small fringe meetings, I’m not sure that all is necessarily what it seems.

Speaking to worried party members in close confines, Huhne has been at pains to point out that £1.7bn of DECC’s £3.2bn annual budget is spent on clearing up after past generations who were lax on attributing responsibility for nuclear decommissioning. This, he says, is damn-right unacceptable. The great worry over nuclear amongst the Lib Dem faithful is that nasty corporate giants will invest in projects in the short term, before swanning off and leaving little old communities and the humble tax payer to pick up the tap for decommissioning. “No hidden subsidies for nuclear!” declared Huhne in his speech to conference yesterday, a pointed hint that he is on top of the issue.

Huhne addressed his second challenge by attempting to give the Lib Dems ownership over green coalition policy, just as Nick Clegg had done with a range of coalition policies in his speech on Monday. By linking energy and climate change policy with wider social issues – such as poverty, unemployment and consumer rights – he was able to relate coalition energy policy to classic Lib Dem values like internationalism, localism, and, most notably, fairness. Discussion of the Green Deal, for example, was hampered with footnotes over how reducing energy waste could help advance society by lifting people out of poverty.

With next year’s local elections approaching fast, Huhne has bolstered Lib Dem party stalwarts green arsenal as they take to the doorsteps, while he has addressed the nuclear issue with enough subtlety and craft to keep a number of competing voices at bay.

Big smiles all round then? Well, yes, but Chris Huhne will know that much more difficult challenges are yet to come. Giving ownership of green issues to a party full of environmentalists was never likely to be an overly hard sell.

Green plans are all well and good, but convincing investors, businesses and consumers to pick up the tab for the transition to a low-carbon economy will be much trickier, especially when the coalition’s spending cuts start to bite.

Departing Liverpool this week, Huhne will have reason to be positive. Equally, he will know that he has hardly scratched the surface of Whitehall’s ‘greatest ever’ peacetime challenge.