Former Energy Secretary Ed Davey on the abolition of his old departmentby Ed Davey / July 22, 2016 / Leave a comment
Signals matter in politics. And for investors. That’s why Theresa May’s decision to abolish the Department of Energy and Climate Change (DECC) has put her government on the back foot when it comes to the environment and green investment.
For most environmentalists and climate campaigners, the strong impression is that this was a signal to the many Tory Brexiteers for whom climate scepticism was ranked a close second to their Euroscepticism in their priorities.
For investors, there is genuine alarm that the business climate for low carbon energy in the UK—regarded during the Lib Dem-Conservative Coalition as amongst the most stable and attractive in the world—has just become even worse than it was in the first disastrous 14 months of Conservative majority rule. Brexit and DECC abolition looks radioactively toxic to international green capital. In the real world, those perceptions matter. Long term capital-intensive investments can suddenly become even more expensive when the risk premium rises. The cost of decarbonising Britain may just have gone up.
Yet as we are increasingly finding with our new Prime Minister, the truth may be a little more complex—and the signals even fuzzier. For her decision to appoint Greg Clarke as the new Secretary of State for Business, Energy and Industrial Strategy has helped to reduce the adverse reaction to the abolition. Clarke is remembered positively from his days shadowing the DECC in David Cameron’s Opposition days. And coupled with the appointment of Nick Hurd as Minister of State for the new department, who likewise has a strong record on climate change, many feel the situation can be rescued.
Apologists for DECC abolition do have two potentially good arguments. First, energy and climate change have been kept together. Before the DECC was created these policy areas were in separate Whitehall silos. This meant that the capacity and incentive to square the circle of decarbonising the UK’s power supply, which is an essential first step to achieving climate objectives, was severely restricted. Keeping these…