Will the government’s carbon budget help or hinder UK industry?

Stung by criticism that it’s failing to deliver on its pledge to become the “greenest government ever” the coalition has announced ambitious emissions reduction targets that could put the UK at the forefront of the global low carbon industry.

After weeks of argument, and in the face of mounting speculation over his political future, energy and climate secretary Chris Huhne yesterday announced that the government is to put in place legally binding targets that will lead to a 50 percent cut in greenhouse gas emissions (on 1990 levels) by 2025.

The package of measures - which put the UK on course for an 80 per cent emissions reduction by the year 2050 - will require huge changes in the way the UK generates and uses its energy and will have major implications for every area of the industrial sector.

While environmental groups have welcomed the announcement, some in industry have reacted angrily to the proposals. And although the package includes as yet undefined exemptions for energy intensive industries, there are profound worries about the potential impact of the cuts on the stuttering recovering of the UK’s manufacturing industry. EEF chief executive Terry Scuoler described the move as a “bad decision for manufacturing” and called on the government to reassure industry that it will safeguard its competitiveness.

For other areas of the UK technology industry however, the proposed cuts are more welcome.

Earlier last year, in response to fears that the coalition was about to pull the plug on plans to turn UK ports into renewable energy manufacturing hubs, Siemens threatened to pull out of a proposed wind turbine manufacturing plant in the UK. Thankfully, these plans are still going ahead. But the episode was a telling reminder of how signals from government can drive foreign investment. The latest carbon budget should send a very strong message that the UK is serious about building a renewable energy industry.

And it’s not just about attracting foreign investment. The drive to meet the proposed targets should play into the hands of the UK’s growing expertise in a range of low carbon sectors: from its world-leading offshore renewables research base, to the growing low carbon vehicle sector. The package also offers hope for some of the UK’s more traditional skills. The positive stories coming out of some of the UK’s long-neglected dockyards, where shipbuilding skills are being repurposed for the offshore energy industry, are a case in point.

The carbon budget is either exceptionally bold or incredibly risky, or possibly both. And many would correctly argue that much of the technology needed to achieve these ambitious targets is - though well understood - unproven on the kinds of scales that will be required.  But if the UK can seriously set itself up as an example to the world of how to decarbonise a society, and drive the development of the technology that makes this possible, it might be in with a chance of becoming the low-carbon industrial powerhouse of the future.