Part 18: Environmental Transformation Fund

Year: 2007
Policy Status: In force

The UK's Stern Review of 2006 concluded that three elements of policy are required for an effective global response to the threat of dangerous climate change: the pricing of carbon, support for innovation and deployment of low carbon technologies, and removing the barriers to energy efficiency. The Environmental Transformation Fund (ETF) is part of the second element of the government's response, in the UK and internationally, to create a GBP 1.2 billion fund for the three years of the comprehensive spending review period (from April 2008 to March 2011).

The creation of this cross-government fund was originally announced in June 2006, with further details described in chapter 6 of the 2007 Energy White Paper. The full scale of the fund for the next three years was announced as part of the comprehensive spending review on 9 October 2007.

The international element of the ETF:
The 2007 Budget Report announced the creation of the international element of the fund to be jointly managed by the Department for Environment, Food and Rural Affairs (Defra) and the Department for International Development (DIFID). The international fund will spend £800m over the next three years, focusing on projects that support development and poverty reduction through environmental protection, and will help poor countries to tackle climate change. The comprehensive spending review (CSR) settlement confirmed that the funding will be split 50:50 between Defra and DFID. In the Budget it was also announced that £50 million has been earmarked for tackling deforestation in the Congo Basin.

The domestic element of the ETF:
Defra and the Department for Business, Enterprise and Regulatory Reform (BERR) are jointly responsible for the domestic Environmental Transformation Fund. The Fund has a budget of at least £370m over the CSR period to be spent on the demonstration and deployment of low carbon, non-nuclear, energy and energy efficiency technologies. Of this, Defra?s comprehensive spending review settlement provides the department with resources to invest at least £170 million in England, This consists of £41 million of existing commitments, together with an uplift of £129 million over the three years of the CSR period. This is in addition to the department?s funding of awareness raising, advice and consultancy support services on climate change and resource efficiency. These will continue to be funded by other means such as the Climate Change Levy, the Energy Efficiency Best Practice programme, and the Business Resource Efficiency and Waste programme.

BERR will invest at least £200 million across the UK . This consists of £126 million expected spend on existing commitments together with an uplift of £41 million over the CSR period.

What the domestic ETF will fund:
The domestic fund brings together Defra's and BERR's existing commitments and low carbon technology funding programmes, as follows:

• Hydrogen Fuel Cell and Carbon Abatement Demonstration Programme
• Marine Renewables Deployment Fund
• Low Carbon Buildings Programmes
• Bioenergy Capital Grants Programme
• Offshore Wind Capital Grants programme
• Near Zero Emissions from Coal project
• Carbon Trusts innovation programme, including research accelerators, technology accelerators, and incubators
• Carbon Trust funding for new low carbon enterprises, including Partnership for Renewables
• Carbon Trust investments in low carbon technology businesses
• Carbon Trust energy efficiency loans scheme for small and medium sized enterprises
• Salix Finance public sector revolving loan schemes

The role of the ETF is to help commercialise emerging technologies. It will fund the demonstration and deployment of low carbon, non-nuclear, energy and energy efficiency technologies. It will work closely with organisations funding other stages of the innovation system, including:

• Energy Technologies Institute - a new public private partnership to invest in development of low carbon energy technologies
• Technology Strategy Board - an executive non-departmental public body set up to promote and support industry led applied research
• Research Councils Energy Programme - which provides support for R & D and postgraduate training