Tuesday, November 29, 2011

Do We Really Need Environmental NGOs?

So farewell then Environmental Protection UK (EPUK). The UK’s oldest environmental NGO (Non Governmental Organisation), known for most of its life as the National Society for Clean Air, last week announced that it was shutting up shop as a funded and staffed organisation. If it continues it will do so on a purely voluntary basis.

EPUK is not the first NGO that's run into problems in the current harsh financial climate, and it won't be the last. Running an NGO has always been something of a wing and a prayer activity, and establishing cash reserves when your focus is delivering on your charitable objectives is extremely difficult. People donating money want it to be spent on delivery, not stashed away in a bank account. Consequently many NGOs run with reserves that cover only a few months of operation and when individual giving and Government grants dry up (as they have done) they can quickly get into trouble. Larger NGOs have been cutting back, and many smaller ones are going to the wall.

But is this a problem: what do NGOs do and do we really need them? In essence most of them perform two functions. Firstly they provide an advocacy role – the public don’t know if something’s a problem unless somebody tells them, and nobody knows if Government policy is failing unless someone makes the effort to analyse it. Secondly they provide services, for example information and advice to the public on a particular issue.

If we look at Environmental Protection UK they have provided both these functions. Their policy function analysed (and frequently criticised) Government policy, whilst campaigns such as their Healthy Air Campaign helped to get air quality on the public and political agenda. On the services side they provided advice and information to the public, as well as technical advice to pollution professionals through products such as the Pollution Control Handbook and training events.

Services can be provided by the private sector, albeit normally at a greater cost and only if there is potential for a profit to be made. But the advocacy function is one that cannot be easily replaced. In an idea world the science around environmental protection would speak for itself, and policy would flow directly from academic research. In the real world scientists are often unable or unwilling to become advocates, and many areas of research are simply starved of funding as they aren’t seen as a priority. External advocates are needed to review the science, push for any new research needed and drive the findings into policy.

The Government seemed to doubt the need for advocates when they scrapped the Sustainable Development Commission back in 2010, stating that bodies such as the Environmental Audit Committee (a Select Committee of MPs) could perform the job instead. But this glosses over the fact that Select Committees and officials in the Civil Service set out to be to be decision makers rather than experts. The job of civil servants in the main Government departments is to listen to the arguments and produce appropriate policy, not to be experts in fields such as environmental protection. Political leaders do not want the civil service to get too attached to issues and pursue their own policy agendas.

Bodies such as the Environmental Audit Committee are therefore heavily influenced by the organisations they take evidence and advice from. For an example see their latest report ‘Air Quality: a Follow up Report’ where the conclusions are heavily influenced by the bodies (including EPUK) who gave evidence during the enquiry. But with NGOs scaling back so drastically now there is a real possibility that the voice of advocacy for environmental protection will be lost.

The one ray of sunshine on the horizon is that, though individual organisations may die, their cause lives on. In EPUK’s case their history has been one of retrenchment followed by rebirth since establishing as the Coal Smoke Abatement Society back in 1898. The organisation was battered during the wars and the Great Depression of the 1930s, but lived on under a new name. EPUK is now trying to find an alternative home for its successful Healthy Air Campaign, and it may be through this route that the flame of advocacy on air pollution is passed on.

Monday, November 14, 2011

MPs Blast Government Over Air Pollution Failures

Parliamentary Select Committees are rarely kind to Governments. With a remit to scrutinise the Government's record they normally pick policy areas where heals are being dragged rather than shining examples of success. But even against this background accusing the Government of 'putting the health of the nation at risk' is quite strong stuff.

This statement is contained in a new report from the Environmental Audit Committee (EAC), 'Air Quality: A Follow Up Report'. The document is a successor to the EAC's 2010 'Air Quality' report, a wide ranging examination of the previous Government's record on air quality. The new report is shorter and more focused, examining what's changed since the previous report was published and making suggestions for key policy changes.

As with any select committee report the Committee invited submissions of evidence from organisations and individuals, in his case attracting 26 written submissions. They also heard in person from a number of expert witnesses, including yours truly (I appeared before the Committee back in May).

The new report tells us that the health evidence that underpins work to improve air quality has developed significantly in the last 18 months. It quotes 2010 work from the Committee on the Medical Effects of Air Pollutants stating that ‘air pollution may have made at least some contribution to the earlier deaths of up to 200,000 people (the number dying of cardiovascular causes) with an average loss of life of about two years’. It also quotes new evidence linking air pollution with the onset of childhood asthma and respirator disorders later in life.

Despite the mounting evidence of air pollution's health impacts the EAC finds the Government's response to be poor, noting that 'we have received no meaningful evidence to suggest that progress towards meeting air quality targets has improved’. They are particularly critical of the low priority air pollution has been given by the Government, and question why the lead department (DEFRA) doesn't even see fit to include air quality in their business plan, concluding that this is ‘symptomatic of its [air quality’s] low priority’.

The Committee have recommended 5 key actions to take. The first of these is the creation of a true cross-departmental air quality strategy led by the Cabinet Office (the body responsible for cross Government policy delivery). The current air quality strategy was released in 2007. It is considered by many to be an impressive exercise in technical analysis, but simply not fit for purpose as it sets out very little in the way of new action. Delivery of the strategy is also felt to be siloed in DEFRA who simply lack access to the policy levers around energy and transport that are controlled by other departments.

I'll explore the other recommendations in future posts, but before leaving the subject it's well worth pointing out one point squirrelled away on page 10 of the report. This essentially asks the Government to give a clear indication of their lobbying intentions as the European Union reviews their air quality legislation. These are the Directives that set those air quality targets that the UK is struggling to meet. This review concludes in 2013 and there are strong suspicions that the UK Government will push for the targets to be weakened during the review process, i.e. rather than take action to meet the targets the UK Government will simply lobby to have the targets changed.

The EAC report states that ‘It [the Government] must say, in its response to this report, whether or not it intends to push for less stringent targets when air quality legislation is reviewed in 2013. Its apparent tactic of avoiding EU fines by applying for extensions to limit value targets, with an expectation that target values will be diluted in the near future, is putting the health of UK residents at risk’.

They key point here is that the Government is required to formally respond to the EAC's report and its recommendations. Whilst they'll no doubt answer in political doublespeak this recommendation puts them in a difficult position. If they indicate that they are not lobbying to have the targets relaxed it then implies that the Government will pull out all of the stops to meet the targets as they stand. But if they say they do want the targets weakened they'll be eviscerated by campaigners who'll accuse them of not caring about those 200,000 people who have their lives shortened every year by polluted air.

The Government response will be due in the first half of 2012. Time then for them to put their cards on the table and say exactly what they're willing to do to clean up our air.

Wednesday, November 9, 2011

The Curious Case of the Vanishing Car Taxes

The recent Road Ahead Group report on reform of vehicle taxation publicised one of the unintended consequences of UK and European 'green' vehicle legislation – cleaner vehicles could hugely reduce the Government’s income from vehicle taxes.

European legislation has now set a road map for the average CO2 emissions (and hence fuel economy) from new cars. The Government is also strongly encouraging alternative fuels such as battery electric vehicles. As a result cars are becoming far more fuel efficient, and fuel sales are now starting to fall. This process is set to continue for the foreseeable future.

Making a few assumptions, the Treasury’s own figures suggest that fuel tax receipts will fall from 1.8% of GDP in 2010 to 1.0% by 2030, and vehicle excise duty receipts will fall from 0.4% to 0.1% of GDP over the same period. And that's assuming modest increases in the mileage driven.

Of course falling tax receipts may not be the only consequence of more efficient cars. There's a well known phenomenon known as the 'rebound effect' where making something cheaper means that people tend to use more of it. With cars this effect be especially strong, as falling motoring costs compare rather favourably to the rising costs of using trains and buses.

Vehicle and fuel taxes are currently a major cash cow for the UK Government, and the Treasury is unlikely to let them dwindle away. The campaign for road tax reform might then see an unlikely alliance between green campaigners and Treasury economists before too long.

A Road Ahead to Greener Driving?

A new report from the Road Ahead Group (published by the RAC Foundation) makes some intriguing suggestions for reform of motoring taxation via an alternative model for road pricing.

The gold standard for a reform of motoring taxation would be a full national road pricing scheme. This would replace some or all of the current motoring taxes with a variable charge per mile driven. Using busy roads during peak times would incur a hefty charge, whilst driving on quiet roads away from peak times would cost very little.

Whilst this system is technically feasible it has significant downsides. It would be costly, bureaucratic and mean tracking of vehicles and their drivers on a scale that would make many fear 'Big Brother' style state intrusion intotheir lives. But above all full road pricing is considered by many to be politically unacceptable, and liable to see any party who implemented it rejected at the ballot box.

The Road Ahead Group have proposed a half-way house to road pricing that could possibly provide many of the benefits of full road pricing but with much less in the way of bureaucracy, invasion of privacy and political risk.

Under the proposals Vehicle Excise Duty (your tax disc) would be reformed as a flat rate tax, however drivers would receive a number of 'discount points' along with their tax disk. The points could be used to get a discount on the following year's tax disc, however driving within a 'peak zone' on any given day would mean the loss of a discount point and the associated saving the following year.

This system would see drivers who avoided peak zones receive a chunky discount on their tax disc, whilst drivers who regularly entered the zones would pay the full amount. Crucially the maximum amount anyone could pay would be the full cost of the tax disc, allowing the scheme to be presented as a way of saving money rather than an additional cost for drivers. The report's authors think this would make the scheme much easier to sell to the UK's drivers.

The report proposes to establish the peak zones as the areas of managed motorway now appearing across the road network. Managed motorways were pioneered on the M42 around Birmingham, and involve variable speed limits and hard shoulder running during times of road congestion. Managed motorways already feature numberplate recognition cameras to measure average speed, and it should be technically possible to use these to manage the discount points system.

The driver for this report, and other ideas for road tax reform, is the increasing congestion and delay we experience across the UK's roads network. Our roads are one of the only forms of transport where there is no peak time cost penalty. If you want to catch a train you'll find it's expensive (some may say extortionately expensive) to travel during the morning and evening peaks, whilst tickets during the day and the evening are often heavily discounted. This pricing differential, in theory, helps to manage demand – people only travel during the peaks if they really need to, whilst cheap tickets during the day help to fill trains that would otherwise by largely empty.

Our roads on the other hand have no price signal at all, if fact the only real signal they have for drivers is the amount of congestion they experience. If you want to drive round the M25 during the morning rush hour it'll cost you no more and no less than driving round in the middle of the night, but the congestions and lengthy delays just might put you off.

A road pricing system – even a halfway house as the Road Ahead Group propose – would help move us from road capacity managed by queuing to one managed by price. They key perhaps is explaining this to the everyday driver, and trying to make sure that the off peak users who will benefit make as much noise as the howls of protests that will be sure to come from rush hour drivers.

Tuesday, November 8, 2011

Putting a Spark in the Electric Vehicles Market

Take up for electric car grants fell sharply in the third quarter of 2011, with only 106 applications for the scheme. The plug-in car grant was launched with great fanfare at the start of 2011 and 465 grants were awarded in its first three months of operation. In the second quarter this dropped to 215, before falling again in the latest quarter.

£43 million has been allocated by the Department for Transport for the first round of the scheme, which runs until the end of March 2012. The maximum grant is £5,000, or 25% of the vehicle’s cost, but at the current rate of uptake there will be a very large underspend come March.

The finger of blame for the lack of interest in the scheme has been pointed at the poor choice of qualifying vehicles currently available. The figures suggest that a number of early adopters were waiting for a grant to get to get their hands on a new vehicle, however with the needs of this group met electric cars are struggling to find buyers.

The market may yet be turned round by the arrival of the innovative Vauxhall Ampera early next year. The Ampera is an electric vehicle with a 40 mile range, but crucially if the battery runs flat it has a small petrol motor to keep it running. This eliminates the problem of ‘range anxiety’ and makes the Ampera a practical choice for nearly all drivers.

However, the Ampera is likely to set buyers back a cool £29,000 (including the grant) when it arrives next year. This is a £10,000 premium over the most fuel efficient conventional vehicles of the same size, and at current diesel and electricity prices it would take over 180,000 miles of all electric motoring to repay the additional outlay.

10 years ago similar economics faced the first UK adopters of hybrid (petrol-electric) cars. The first generation of the now ubiquitous Toyota Prius was a far from great proposition, and even with the Government purchase grant available at the time it made little economic sense. However, hybrids were thrown a lifeline in 2003 when they were given exemption from the London Congestion Charge. A £5 per day saving, combined with new, better vehicles, allowed hybrids to gain a toe hold in the UK market.

The prospect of exemptions being used again to help pure electric vehicles were quashed last year though when the Mayor’s introduced a new ‘Greener Vehicle Discount’. This allows free entry to the Congestion Charge zone for all vehicles with emissions of less than 100 g/CO2 per kilometre. Cheap, conventional diesel vehicles that slip in under this limit are now ten a penny, making a pure electric cars a poor value purchase.

Rumours are abound though that the Mayor is considering reviewing the exemptions once again, and may set a CO2 limit that only the best hybrid and pure electric vehicles can meet. Combined with the availability of vehicles such as the Ampera this may provide the spark that the grant take up figure suggest the UK electric vehicle market desperately needs.

Tuesday, November 1, 2011

Sunset for Solar Panel Subsidies

Subsidies for solar photovoltaic panels are set to be slashed after the Department for Energy and Climate Change (DECC) launched a consultation on halving the main ‘generation tariff’ available through the popular Feed in Tariffs (FiTs) scheme. The proposed cut will apply to new installations only: individuals and businesses who are already receiving the subsidy will continue to get the full rate.

The Government’s reasoning for the proposed cut is a fall in the cost of the solar panels themselves. Whilst this is true, it is largely the result of a glut in the supply of solar panels which would be expected to reverse as the manufactures scale back production in response - the actual costs of producing them is little changed. Behind the scenes though the cuts reflect increasing nervousness by the Government around the impact of ‘green’ commitments on our fuel bills.

The cuts may bring to an end a boom in solar installations where solar photovoltaic panels became the best investment in town. The FiTs scheme aimed to give people installing solar panels a 10% annual return on their investment for a period of 25 years, and that's before the actual value of the electricity generated by the panels was taken into account. In an era of ultra low interest rates this made purchasing solar panels one of the most lucrative investments available. The subsidies also made possible a business model where panels were offered to homeowners for no upfront cost, in return for signing over the subsidy rights to the installer.

The resulting boom in solar installations has not been without its critics. Environmentalist George Monbiot denounced the subsidy scheme as a ‘Great Green Ripoff’. Social commentators have criticised the scheme on the grounds that it transfers money from the poor to the better off: the subsidy is funded through levies on fuel bills, therefore everyone pays for a scheme which only directly assists people able to raise the upfront finance (or credit) for an installation.

But perhaps the most damning indictment of the scheme is hidden in the Government’s own assessment of its effectiveness. Policies that aim to cut carbon emissions (as this one does) are assessed on their cost effectiveness – the cost per tonne of carbon saved. At £430 per tonne the costs of the FiTs scheme are vastly higher than alternative options such as energy efficiency, large scale renewables and nuclear power.

Solar installers will rightly say that the Government is stoking a boom / bust cycle for the solar industry. The ‘free panels’ business model is also unlikely to survive the cut, as the reduced subsidy on offer will make this system unviable. However, there are still chinks of light available for the renewables industry. The Renewable Heat Incentive (RHI) has recently come into operation, and will be extended to domestic installations from October 2012. This supports technologies that generate heat, as opposed to FiTs which supports technologies that generate electricity.

Technologies supported by the RHI include solar thermal (hot water) panels, ground source heat pumps and biomass (wood) boilers. Crucially these technologies can all offer lower cost carbon savings than solar photovoltaic panels, particularly if they’re installed in locations where natural gas is unavailable was here they substitute for high carbon fuels such as coal, oil and electricity. For the immediate future the RHI will be paid for through general taxation rather than levies on our fuel bills, which should help to reduce opposition to the scheme.

In the longer though there is considerable disagreement in the Government regarding the scale of support for renewable energy. Fuel bills have risen significantly over recent years plunging millions into fuel poverty, whilst energy intensive industries have complained that rising fuel costs will make them uncompetitive. Ultimately this argument will be settled by the direction of the UK economy. If fuel costs fall and the economy recovers strongly low carbon policies may continue on track. However, if the economy continues to struggle solar panels grants may not be the last subsidy to be scaled back.