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Sam Hall: Liz Truss's strong free market instincts can drive environmental action

Sam Hall (Director at CEN)

On behalf of the Conservative Environment Network, congratulations to Liz Truss on her election as leader of the Conservative Party. She takes office at a time of multiple challenges which have environmental issues at their heart. Putin’s curtailment of gas exports to Europe and our dependence on gas for power and heat mean British energy bills have rocketed, driving the eye-watering rise in the cost of living and economy-wide inflation. The Russian invasion of Ukraine has also pushed up fertiliser and grain prices, tipping many UK farm businesses into the red and stoking concerns about food security.

We are emerging from a summer of heatwaves and droughts in the UK and across the world, exposing our lack of resilience to the current levels of climate change and the costs of not reducing our emissions. A few brief periods of heavy rainfall in August led to sewage discharges into rivers and beaches, triggering a public outcry and inaccurate social media posts about Conservative MPs’ voting records (the truth is that no Tory has voted in favour of sewage being released into watercourses). And the chronic failure to safeguard protected habitats from nutrient pollution from sewage and agriculture has led to a de facto block on new housing in much of the South East of England, exacerbating the housing crisis.

Given this inauspicious backdrop, Liz Truss’s environmental policies will be key to the success of her government. Looking back at her record as a minister, she can claim a number of environmental achievements. Recently as Foreign Secretary, she published an International Development Strategy, where she committed to delivering climate finance for developing countries. This funding is critical to opening up green trade opportunities for UK businesses, reducing emissions overseas, and mitigating conflict and migration drivers such as water and food insecurity. She has also highlighted her role during the UK’s presidency of COP26, and in launching new tree planting schemes and reintroducing the beaver to England as Environment Secretary.

There have been positive signs too in the leadership contest itself. We were delighted that Liz Truss was quick to sign our Conservative Environment Pledge, committing to net zero by 2050 and halting species decline by 2030. The pledge also reiterates support for renewable energy, nature-friendly farm payments, new clean technologies, and home insulation, among other things. She wrote for the CEN blog about her vision for the UK to lead the green industrial revolution, promising to “double down” on net zero.

At the CEN caucus hustings organised by Chris Skidmore and chaired by Alok Sharma, she talked about her environmentalism rooted in childhood marches in defence of the ozone layer. She made an eye-catching commitment to lead a delegation to the UN biodiversity summit in Montreal later this year. This would build on the significant diplomacy carried out by Zac Goldsmith in his role as International Environment Minister and would send a powerful signal of the UK’s commitment to leading on global nature conversation.

Now she’s won over Conservative party members, Liz Truss’s top priority will be to deal with the energy crisis. She has said that green levies will come off electricity bills, at least temporarily. Provided these legacy renewables subsidies are funded out of general taxes and not scrapped, this policy will not harm renewables investment, which we need more of to displace expensive gas in our energy mix. Indeed, CEN proposed just this back in January as a way to alleviate some of the pressure on energy bills.

Counterintuitively it could be a green move, as it will make lower-carbon electricity a more attractive fuel for home heating and industry, and encourage switching away from gas. Newer renewables schemes, which are supported by Conservative-designed Contracts for Difference, should remain linked to bills, so that energy consumers can enjoy cheaper energy. And the moratorium should be made permanent by accelerating reforms to the electricity market, to decouple cheap renewables from wholesale gas markets and cut bills permanently.

She is also expected to announce a new round of oil and gas licences in the North Sea and an end to the fracking moratorium. Boosting short-term oil and gas supply is good for energy security and tax receipts, and it is sensible to ensure enough domestic oil and gas supply to meet the shrinking demand expected throughout the transition to net zero. But it will take several years for new exploration to result in production. For that reason, she should be wary of creating stranded assets at a time when oil and gas demand will fall sharply, thanks to Putin’s war in Ukraine putting rocket-boosters under European decarbonisation. In addition, the maturity of the North Sea basin means UK production costs are higher than elsewhere.

Given their lower cost, greater popularity with Conservative voters, faster speed of deployment, and lower environmental impact, she should treat onshore renewables in the same way as fracking. They should be allowed to proceed where there is community support and energy firms should be allowed to offer energy bill discounts to reward communities for hosting the new infrastructure. We’re in an energy crisis and we need every quick and cheap solution available.

These measures won't be sufficient, however As well as announcing further energy bill support for households and businesses, she should also focus on another of the root causes - our over-reliance on gas for heating - if she wants to reduce the cost of successive Treasury bailouts. I hope she looks at the three-point plan CEN put forward over the summer to: ramp up insulation for low-income households by increasing public funding for the Energy Company Obligation scheme by £1bn; help more people replace gas boilers with cheaper-to-run heat pumps by increasing the Boiler Upgrade Grant scheme by £650m; and mandate energy companies to advise their customers how to turn down boiler flow temperatures. A further tax-cutting policy idea could be to offer a stamp duty rebate for energy inefficient homes that are retrofitted with insulation within a year of purchase.

The new Prime Minister will also want to immediately get to work supporting the farming community and bolstering food security. The English successor to the Common Agricultural Policy, the Environment Land Management schemes (ELMS), is a critical food security policy and must be delivered. They will reward farmers for improved soil fertility, which also boosts crop yields in the short term, and for restoring depleted natural capital like watercourses and pollinators, upon which food production depends longer term. Further income opportunities for farmers lie in private natural capital markets. The new Environment Secretary should put in place market frameworks to unlock these private funding streams from water companies, industrial emitters, developers, and others for farmers who want to deliver environmental services on less productive areas of farmland.

Liz Truss will want to deliver her pledge to cut red tape for farmers in ways that benefit the environment and strengthen food security. For example, she could boost yields and reduce pesticide and fertiliser use, by liberalising agricultural drones for precision agriculture and legalising gene-edited crops and livestock. There is also scope to simplify regulation for farmers without weakening protections through greater use of earned recognition and remote surveillance, and by creating a single farm regulator, as set out by Dame Glenys Stacey in her review in 2018. Streamlining the process for approving novel foods, such as cultured meat, would also be a food security win.

One pledge that is causing consternation among environmentalists is the proposed reforms to the Habitats Regulations. These EU-derived rules have been blamed for slowing down and, in some regions of the UK, blocking new housing and infrastructure developments. Changes to the Habitats Regulations have been coming for some time. Indeed, the outgoing Environment Secretary took powers to amend them in the Environment Act. A more strategic approach to managing the pressures on protected sites and mitigating harms from new developments could actually be beneficial for nature. The current system seems to be biased towards allowing existing harmful activities to continue, while blocking all potential new harms. But the effectiveness of a strategic approach is highly dependent on whether ministers are willing to take bold action to deal with the multiple existing pressures, including from agriculture, on protected habitats and to keep strong legal safeguards in place.

Some environmentalists will be sceptical of Liz Truss’s strong free market, tax-cutting instincts. Some intervention is necessary to internalise negative environmental externalities and to prevent the massive state intervention that would be required if climate change was not mitigated. But private enterprise and free trade can be powerful engines of environmental progress. Removing tariffs on environmental goods and services, for example, along the lines recommended in the green trade report commissioned by Liz Truss when she was Trade Secretary, would help more people afford the technologies we need for net zero. So too could tax cutting policies like a green ‘super-deduction’, where businesses could get money off their corporation tax bill if they invest in clean technologies.

As she settles into No.10, Liz Truss’s in-tray is undoubtedly daunting. But if she follows through on the commitments she’s made during the leadership contest and enacts practical, market-based environmental policies, she can hit the ground running.


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