Additional Memorandum submitted by the Department for Business, Innovation and Skills (BIS), Department of Energy and Climate Change (DECC) and Department of Environment, Food and Rural Affairs (Defra) (GJS38)

1. This note provides an update to the joint Government memorandum submitted to the Environmental Audit Committee in May 2009. It summarises significant further steps taken by Government relevant to the Committee's 'green jobs and skills' inquiry since the submission of our original memorandum to the Committee.

2. The UK Low Carbon Transition Plan[1], the UK Low Carbon Industrial Strategy[2] (LCIS), the UK Renewable Energy Strategy[3] and Low Carbon Transport: a greener future[4] were published on 15 July 2009. Together these set out the policies which will help drive the transition to decarbonising our economy, and reflect how departments across Government are working together to deliver the transition to a low carbon future.

The UK Low Carbon Transition Plan

3. The UK Low Carbon Transition Plan (the Transition Plan) sets out a comprehensive strategy to move the UK onto a permanent low carbon footing. The Transition Plan plots how the UK will deliver emission cuts of 18% on 2008 levels by 2020 (and over a one third reduction on 1990 levels). It sets out how the UK will achieve these reductions while maintaining energy security, maximising economic opportunities and protecting the most vulnerable.

4. As part of this overall framework, the Transition Plan also sets out the policy framework to incentivise businesses to reduce their energy use and seize the opportunities of the move to a low carbon economy. The key measures set out include:

· Capping emissions from larger and energy intensive businesses underpinned by the EU Emissions Trading System, Climate Change Levy/Climate Change Agreements, and the Carbon Reduction Commitment.

· Providing information and advice through the Carbon Trust and Business Links.

· Providing financial support to address capital barriers, particularly for SMEs, through the Enhanced Capital Allowance scheme and through interest free loans.

· Stimulating innovation by investing £405 million of funding announced in Budget 2009 over two years to support the development of low carbon technologies and removing barriers for innovators, for example through the launch of an 'Energy Generation and Supply' Knowledge Transfer Network to enhance collaboration between innovators and support developers navigating the funding landscape.

The UK Low Carbon Industrial Strategy

5. Building on the Government's active industrial strategy for Britain - Building Britain's Future: New Industry, New Jobs[5] - the core objective of the LCIS is to ensure that British businesses and workers are equipped to maximise the economic opportunities and minimise the costs of the transition to a low carbon economy. British firms will benefit from the low carbon transition both by catering to growing British and global markets for low carbon goods and services, and also by using energy and other resources more efficiently to reduce costs.

6. At the heart of the Strategy are three basic principles for a positive environment for low carbon business:

· First, a long term strategic approach from government - like the overall framework we have set through carbon budgets, and the clear commitment we have made to nuclear and renewable energy - which will enable businesses to invest with greater confidence;

· Second, a pragmatic recognition that intervention from government may be required in some areas to accelerate and enable the transition to low carbon - in the case of the LCIS this means support for the research and development that will produce new low carbon technologies;

· Finally, recognition that government has a responsibility to ensure that British-based companies and people are equipped to compete for the new demand created by government climate change policies. This has implications for our skills policy, and the way we support the development of supply chains in this country. Both these issues are addressed in the Strategy.

7. The LCIS identifies a number of low carbon sectors in which the Government believes that the UK has the potential to take a leading global role and where proportionate Government intervention can unlock long-term competitive potential for British based firms. Where market failures or barriers are preventing businesses from unlocking these opportunities and undertaking the transition in the most cost-effective way possible, it sets out the Government's strategy for addressing them. This includes the first investments from the £405 million for low carbon industries and advanced green manufacturing announced at Budget 2009. Key funding announcements in the LCIS include:

· Up to £120 million to support the development of a British based offshore wind industry, including funding for new offshore wind energy manufacturing facilities in the UK; investment in the development of next-generation and near-market offshore wind technologies through large scale demonstration; and improving the UK's capability in integrated offshore wind testing.

· Up to £60 million to capitalise on Britain's wave and tidal sector strengths, including investment in Wave Hub - the development of a significant demonstration and testing facility off the Cornish coast - and other funding to make the South West Britain's first Low Carbon Economic Area.

· Up to £15 million capital investment in order to establish a Nuclear Advanced Manufacturing Research Centre consisting of a consortium of manufacturers from the UK nuclear supply chain and universities.

· Up to £10 million for the accelerated deployment of electric vehicle charging infrastructure.

· Up to £4 million for expanding the Manufacturing Advisory Service, to provide more specialist advice to manufacturers on competing for low carbon opportunities, including support for suppliers for the civil nuclear industry.

· Up to £6 million to construct low carbon affordable homes built with innovative, highly insulating renewable materials.

8. The Strategy recognises that we need to build on local and regional strengths in order to make the most of the future economic benefits for Britain. For this reason, it introduces the concept of Low Carbon Economic Areas (LCEAs), and announces the development of the first of these, located in the South West of England, focusing on the development of marine energy demonstration, servicing and manufacture. A second LCEA in the North East of England focussing on ultra-low carbon vehicles has also been launched, supporting Nissan's investment of more than £200m over the next five years in a new battery plant in Sunderland. The Government is working with local and regional partners to develop further LCEAs in strategically important low carbon sectors over the coming months.

9. The LCIS also recognises that this transition raises significant challenges for our industrial workforce and their families. As with previous structural changes to the economy, the move to a low carbon economy will affect each business, worker and family differently. The Government is committed to doing all it can to ensure this is a just transition. For this reason, a new Forum for a Just Transition, including representatives from Central Government, national, local and regional bodies, Trade Unions, business organisations, and third sector bodies, will be established to consider these issues and advise government.

10. In September, the Government published Jobs of the Future[6], setting out the areas - including the low carbon economy - where, as a result of expected growth and emerging global trends, new jobs will be created in the UK economy of the future. It identifies how the UK's labour market is set to change, the potential employment opportunities that key sectors of our economy could generate and Government action to equip our workforce to win their fair share of these jobs.

11. Looking further ahead, the Government will develop an innovation roadmap to 2050, with industry and others, showing innovation milestones for existing and new technologies. The roadmap will help identify the innovation barriers and decision points for technologies and support Government and industry to prioritise resources and energy technology families which show potential benefit for the UK.

Skills for a Low Carbon Economy

12. In the LCIS we set out a new commitment from Government to work proactively with industry to ensure that skills gaps are filled before they become a barrier to job creation or business growth. Since July, good progress has been made, particularly in the first LCEAs, where Skills Demonstration Projects are already being developed to support the demonstration and commercialisation of new technologies.

13. Under the leadership of SW Regional Development Agency, the LCEA in Marine Energy is creating the conditions for a dialogue between employers and skills providers to ensure that skills solutions are developed as they are needed. Skills funding streams are being aligned to support the delivery of an industry-led skills plan, and 'quick win' solutions for the most pressing higher level skills needs. With support from DWP, the Low Carbon Future Leaders graduate placement scheme is being rolled out in the South West, before being implemented in each LCEA as more are announced. STEM graduates will act as a regional field force to stimulate SME engagement and demand for low carbon skills.

14. In the North East, under the leadership of One North East, skills partners and major manufacturers are supporting the LCEA in Ultra-Low Carbon Vehicles. They are looking at the feasibility of developing an Ultra-Low Carbon Vehicle research centre to be used by colleges, universities and business, and a sustainability centre to disseminate leading edge expertise in Low Carbon Vehicle training. Gateshead College and Sunderland University are working with Nissan and Smith Electric Vehicles to develop a new apprenticeship programme and foundation degree.

15. Energy and Utility Sector Skills Council (SSC) is leading cross sector collaboration to develop a UK wide Renewable Energy Skills Strategy, as part of their wider remit for Low Carbon skills across the SSC network. With support from DECC, BIS and the Devolved Administrations, they are leading a project group with a number of SSCs to coordinate labour market intelligence, and develop a skills action plan for the demand and supply sides.

16. Public procurement is a crucial lever in stimulating new demand for skills. To help drive progress we have committed to using public procurement to promote investment in skills both when letting new contracts, and when working with existing contractors on a voluntary basis. BIS Ministers recently announced that we will aim for 20,000 apprenticeships over the next three years through Government procurement as part of our wider aim to increase apprenticeship numbers.

17. As well as these specific actions, we intend shortly to publish a National Skills Strategy and a Higher Education Framework. Our aim through these documents will be to ensure the skills system fully supports economic recovery and delivery of skills for jobs of the future. This will include looking at how the skills system can align more closely to regional and sub regional economic development priorities through embedding skills within the single integrated regional strategies being developed by RDAs with Local Authority Leader Boards. Our intention is that from 2010 our new Skills Funding Agency will ensure that the skills system has the capacity and funding to support areas of strategic importance to the economy. And we will look to the UK Commission for Employment Skills to improve the intelligence we have about strategic skills needs, with research into the needs of priority sectors. In HE our focus will be on STEM and on boosting employability and specific technical skills at undergraduate level, and also on challenging employers to work with Government on a co-investment basis on course design, careers advice and student placements

23 October 2009

[1] http://www.decc.gov.uk/en/content/cms/publications/lc_trans_plan/lc_trans_plan.aspx

[2] http://www.berr.gov.uk/files/file52002.pdf

[3] http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/res/res.aspx

[4] http://www.dft.gov.uk/pgr/sustainable/carbonreduction/low-carbon.pdf

[5] http://www.berr.gov.uk/files/file51023.pdf

[6] http://www.hmg.gov.uk/media/41730/jobs_of_the_future.pdf