Good business environment

OECD Observer

Mixing competition and the environment might raise some eyebrows, but they may help each other. Take the UK’s energy market reform.

According the OECD’s latest environment review of the UK, the resulting “dash for gas” in power generation should enable the UK to meet its 12.5% greenhouse gas (GHG) reduction target under the Kyoto Protocol. The switch from coal to gas fuel in thermal power production, driven largely by the liberalisation of the UK electricity market, led to a 20% reduction in CO2 gas emissions in the UK over the period 1990 to 1999.

This was the easy part; reductions in CO2 and other GHG emissions will be more difficult and costly to achieve in the future, the review says. The lower electricity prices brought about by market liberalisation have acted as a disincentive to conserve energy on the part of consumers. But with further measures in place and still being written, the UK’s climate change programme forecasts that national GHG emissions will be 15% below 1990 levels in 2010.

For instance, the Non-Fossil Fuel Obligation, part of the 1989 Electricity Act, required electricity supply companies to get specified amounts (2.8% in 2000) of new generating capacity from non-fossil sources, including renewables. A new proposal on the table, the Renewables Obligation, expects to increase that amount to 10% by 2010, if consumers agree to shoulder some of the cost.

Another promising regulation is the Climate Change Levy (CCL), a charge levied on businesses and public sector organisations for energy use. It adds about 15% to typical energy bills, but the carrot is that businesses which accept and subsequently meet energy reduction targets get an 80% discount on that levy. As of June 2002, over 40 CCL agreements were in place, covering 5,500 companies in some 13,000 sites. Britain’s efforts to push the environment higher up the policy agenda have also put into motion such “no regret” measures as the road-fuel duty escalator, the landfill tax credit programme and the emissions trading scheme.

But privatisation has not yet worked the same wonders in water services, according to the environmental review. While the report congratulates the government on its decoupling of economic growth from environmental pressures like CO2 increases, the UK’s overall environmental ranking is only average compared to other OECD countries. The survey, a follow-up to the first report in 1994, advises that more attention needs to be given to such areas as waste and waste-water treatment infrastructure; agriculture and urban runoff; nitrogen pollution; and marine habitats and biodiversity conservation measures.

©OECD Observer No 235, December 2002

Economic data


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.
  • Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.
  • OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.
  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2017