Cautious welcome for 'green deal' to slash UK's carbon emissions

The Government yesterday signed up to cutting Britain's greenhouse gas emissions by nearly half – but with no clear agreement on how to achieve the target. The Climate Change Secretary Chris Huhne announced that ministers had accepted proposals by the Committee on Climate Change to enshrine in law reductions in carbon emissions to 50 per cent of 1990 levels by 2027.

Environmental groups welcomed the move but warned that the policies were still not in place to achieve the ambitious target. In recent months the Government has cut the public funds for clean-energy technologies such as carbon capture and solar power.

Meanwhile, the new Green Bank – crucial for getting the investment to replace Britain's ageing power plants - will not be able to borrow money for renewable energy projects until 2015.

The Treasury is fighting a rearguard action to prevent Mr Huhne from producing carbon-reduction proposals that could potentially damage industry and derail economic recovery. But the Department of Energy and Climate Change argues that investment in green technology will improve Britain's long-term economic prospects.

Yesterday's decision to adopt the Committee on Climate Change is a first-round victory for Mr Huhne and makes Britain the first country in the world to set legally binding commitments to reduce carbon into the 2020s. The Treasury won concessions for energy-intensive industries such as steel manufacturing – which are likely to be given tax breaks to compensate them for rising electricity prices.

There is also an option to review the target in 2014. But any attempt to lower it would require consultation with the Committee on Climate Change and a change in EU emissions targets. Sources close to Mr Huhne said in practice it would be almost impossible to renege on the commitment – especially as it would come just one year before a general election.

Announcing the agreement in the House of Commons, Mr Huhne said it sent a clear signal that the Government was serious about the transformation to a low-carbon economy in the UK. "We are demonstrating our desire to drive the changes needed to turn the UK into a dynamic, low-carbon economy that is attractive to investors in the new and growing low-carbon sectors," he said. "We are also sending a clear signal to the international community: that the UK is committed to the low-carbon economy."

He said the Government would continue to press for higher EU targets for 2020 and ambitious action in the following decade.

David Kennedy, chief executive of the CCC, which was set up to advise the Government on meeting its legally binding targets to cut emissions under the Climate Change Act, said he was "delighted" the recommendations had been accepted. "Setting and meeting the carbon budget will place the UK in a strong position, both in terms of meeting the 2050 target, and building an economy very well-placed to prosper in a low-carbon world," he said.

Asked about reports that he had personally had to step in and overrule objections from the Chancellor George Osborne and Business Secretary Vince Cable to the new regime, David Cameron told a Commons Committee: "No 10 is always involved. In this case, my office was involved in trying to encourage a solution.

"The Business Secretary and others had very legitimate concerns about energy-intensive industries and how we should try to put together a package to help them, because they are being affected, not just by the carbon budget but by also changes to the electricity market and other costs.

"It doesn't actually help climate change if you simply drive an energy intensive industry to locate in Poland rather than Britain. That was one sticking point."

The decision was broadly welcomed by environmental campaigners. John Sauven, executive director of Greenpeace, said: "The Prime Minister deserves credit for putting a stop to attempts by the Treasury to derail the UK's opportunity for being a leader in green growth."

Is Britain really getting greener?

The Green Investment Bank

Unveiled in the budget, the Green Bank is the centre-piece of the Coalition's promise to be the "greenest government ever". It will invest exclusively in low-carbon infrastructure, renewable energy and financially support the development of new clean technologies. Current Government proposals stipulate it will not have powers to borrow or raise money (such as issuing ISAS and bonds) until 2015. Until then it has £3 billion of public money to invest. Not allowing it to borrow earlier, green groups say, is disastrous as investment decisions on replacing Britain's power generation plants need to be taken long before 2015.

The Green Deal

The Green Deal will allow 14 million UK households to apply for up to £10,000 to pay for energy efficiency improvements on their homes such as insulation, double glazing and energy-efficient boilers. The money will be provided upfront by the private sector and paid back in energy savings by homes over a 20-year period. The first Green Deals are expected to appear in Autumn 2012 after consultation and review, so for now it isn't working at all.

Investing in renewable energy

Greening our electricity is key to reducing emissions. The need for a shift from fossil fuels to renewable energy has long been accepted by everyone but the harshest climate sceptics, and in response the Coalition Government is pursuing multiple options including on- and off-shore wind farms and nuclear power subsidies. The CCC's report last week recommended developing multiple new technologies. Initially there would likely be a focus on cost-effective nuclear power plants and wind farms across the UK. The Coalition claims this could feasibly result in renewable sources providing up to 40 per cent of all our energy by 2030.

However, while Britain is locked in an ongoing battle between communities and environmentalists trying to protect the countryside, Germany has forged ahead with plans for a huge wind farm in the Baltic, and Denmark and Finland are aggressively pursuing alternative energy.

Green Transportation

The Coalition has put transportation policy at the heart of its pledge for energy and climate change. Fossil fuels would be restricted in the air by opposing a third runway at Heathrow; by the prevention of additional runways at Stansted and Gatwick; and by replacing air-passenger duty with per-plane duty. They would also be restricted on the ground by the Barclays' bike campaign in central London; by more emphasis on public transport; and by encouraging widespread use of electric cars.

Is it working? Aviation policies have had some success. The third runway at Heathrow has been scrapped. However, the per-plane duty promised in the Coalition agreement was not introduced, instead the Chancellor promised a "consultation on the reform of air-passenger duty", which had already risen by 55 per cent in the previous year.

Take-up of electric cars is still small – but the technology is rapidly developing and they are likely to be a familiar sight in the Britain of 2015.

However, rail fares rocketed and there is no sign that gas-guzzlers are on the way out just yet.