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How the environment is the cement holding the UK coalition together

Has the political debate in the UK really shifted from whether to how to achieve a sustainable economy, asks Penny Shepherd

“The environment is the cement that holds this coalition together” according to one former minister. Certainly, the UK’s new coalition government is keen to emphasise that it will be “the greenest government yet”. Conservative Prime Minister David Cameron was first with the mantra, followed swiftly by Liberal Democrat Energy Secretary Chris Huhne and Tory Environment Secretary Caroline Spelman. But will it lead to delivery? Yes, I’m told – not least because the Liberal Democrats will be looking for results not rhetoric to keep their followers on side. And because Cameron is genuinely committed to a green agenda but may find it easier to deliver with his new partners than with some parts of his own party.
Indeed, some tell me that the risk now is not so much with the intentions of the politicians but with their skills in using the machinery of government to achieve policyobjectives. In particular, concerns remain about whether pockets of outdated thinking within the civil service will derail effective delivery of a market based framework.
Of course, in the media and more widely, there is scepticism about whether this coalition will survive. Coalitions may be familiar to continental Europeans, the Scots and indeed across the UK at a local level but the last time Westminster saw one was in 1945. But perhaps the coalition is indicative of a wider political modernisation within the UK that should give hope for a low carbon economy and a fresh approach to social problems in spite of the public spending cuts ahead. The election did not only see a change of government – it also saw leadership pass to a new generation of politicians.
Nearly 21 years since its historic two million votes in the
1989 European Parliament election, the Green Party achieved its first UK national member of parliament. Caroline Lucas moves to Westminster after 10 years at the European level. But she is only one of the MPs for whom climate change is as much part of the backdrop to politics as the welfare state was for their post-1945 predecessors. For example, Greg Barker MP steered green investment bank proposals in opposition and retains that responsibility within the government. Greg Clark MP, Barker’s former boss, impressed as shadow Energy Minister before the election. Arguably one of the losers from the coalition deal, his new role as “localism minister” may drive decentralised energy solutions and impact investing in community initiatives. So there are grounds for optimism that the new government recognises the challenge and will drive major progress over the next five years. Indeed Energy Secretary Huhne has said: “The actions of this Government in this Parliament will define our ability to combat climate change in the decades to come.”
Will this deliver benefits for business and investors? Speaking in parliament, Huhne set an aim of “making our economy more environmentally sustainable by ensuring that the economic value of our natural resources is understood by both Government and society”. As fellow economists in the City and business, he and Business Secretary Vince Cable are both well placed to use this to shape markets.
But what about nuclear? The indications are that themarket will decide. The coalition consensus is “no special subsidies”. Low carbon subsidies are likely to be scrutinised for any pro-nuclear bias. Will additional support for renewable technologies become a key point of tension within the coalition as a result? It is too early to tell. Of course, the environment is not the whole story. The new government’s ambitious approach to social issues like welfare dependency and the impact of reducing the deficit will both play a major role in shaping the role of business in society over the next few years. The coalition’s push for deregulation is an area that responsible investors will be examining with particular interest. Cable has announced plans for a new “challenge group” advised by behavioural economists and other experts to come up with innovative approaches to achieving social and environmental goals in a non-regulatory way. It will be interesting to see how closely this mirrors previous Conservative proposals for voluntary “responsibility deals” with business.
And the Labour Party leadership election will give an important final piece of the jigsaw. By the end of the year, we should know if the political debate has truly shifted from whether to how to achieve a sustainable economy in the UK. And whether the cement of environmental issues will indeed deliver a firm coalition bond that will last for five years or more.

Penny Shepherd MBE is Chief Executive of UKSIF – the sustainable investment and finance association