On 20 October 2010, the Chancellor of the Exchequer, George Osborne, set out the government's four-year public spending plans in its Spending Review 2010 (SR 2010).

This update summarises the main environmental announcements in the SR 2010. For a summary of other announcements in the SR 2010, see Legal update, Spending Review 2010: PLC coverage. For links to the relevant primary sources, see Sources below.

The June 2010 Budget set out the overall level of public spending for the four years from 2011/12 to 2014/15. The SR 2010 now sets out the allocation of these resources across all government departments, according to the government's current priorities. The budgets announced for each department are fixed but departments have the power to decide how best to manage and distribute this money within their areas of responsibility.

The June 2010 Budget announced that public spending, and not taxation, was where the most dramatic reforms to reduce the national deficit lay. For more information on the June 2010 Budget (including environmental announcements), see Budget 2010: PLC coverage.

The Department of Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs (Defra) will have to cut their overall budgets by 30% and 29% (respectively), by 2014-15. Each government department will be publishing an individual business plan in November 2010, detailing how it plans to achieve these overall reductions.

Announcements about changes to public bodies (such as the Environment Agency and the Committee on Climate Change) had already been made on 14 October 2010 (see Legal update, Public bodies reform: environmental implications).

Defra has reduced the number of arm's length bodies it funds from 92 to 39, and DECC has said that it is still reviewing the work done by other arm's length bodies such as the Carbon Trust and the Energy Saving Trust (see DECC press release, HMT Spending Review, 20 October 2010).

The government announced in the SR 2010 that it will be publishing a government-wide Carbon Plan in 2011, setting out in detail how each department's policies will contribute to meeting the UK's targets for reducing greenhouse gas (GHG) emissions.

For more information on the:

The government has confirmed that it plans to go ahead with the creation of a Green Investment Bank (GIB) and has announced in the SR 2010 that it will invest an initial £1 billion of public money, with additional public funding to come from the proceeds of the sale of government-owned assets. The aim is for the remainder of the GIB's funding to come from private sector investment. The government is aiming to complete the design of the GIB by spring 2011.

For more information on the GIB, see Legal update, A blueprint for the Green Investment Bank.

HM Treasury and HMRC are expected to consult, in autumn (probably November) 2010, on proposals to reform the climate change levy (CCL) in order to provide more certainty and support for the carbon price (see HM Treasury: Upcoming consultations).

For more information on the CCL in general, see Practice note, Climate change levy and climate change agreements.

The CRC Energy Efficiency Scheme (CRC) will be simplified to reduce the burden on businesses. The first sale of allowances will be in 2012, rather than 2011. The revenue from the sale of allowances (expected to be £1 billion a year by 2014-15) will be used to support public finances, rather than recycled back to participants.

There is no indication in the SR 2010 as to whether the government is planning to make any other changes to the CRC (and if so, when) or what it intends to do with the various recommendations made by the Climate Change Committee on 28 September 2010. It merely says in the SR 2010 that "further decisions on allowances sales are a matter for the Budget process".

For more information on the CRC, see:

The efficiency of the feed-in tariffs (FITs) will be improved in the next formal review (in 2012, with any changes coming into effect in April 2013) to rebalance FITs in favour of more cost-effective carbon abatement technologies. However, the review could be brought forward if there is higher than expected deployment of the relevant technologies.

The Renewable Heat Incentive (RHI) will be introduced in 2011-12. The government has announced that it will not be taking forward the previous government's plans to fund the RHI through "an overly complex" renewable heat levy. Instead, the RHI will be funded (£860 million) from Annually Managed Expenditure (AME) (that is, general, non-cyclical government expenditure). The government wants to shift renewable heat "from a fringe industry firmly into the mainstream" (see DECC press release, HMT Spending Review, 20 October 2010).

For more information on:

The government has confirmed its plans for a Green Deal, which will enable householders to improve the energy efficiency of their homes through savings made on their energy bills.

Additional support to combat fuel poverty by improving heating and insulation for the most vulnerable households will be provided by energy companies through the Green Deal and the Social Price Support. This will enable the Warm Front Scheme to be phased out by 2013-14. The government plans to carry out a review of the target and definition of fuel poverty before the end of 2010.

For more information on the:

Government spending on the clean up of the UK's nuclear legacy (described in the SR 2010 as "energy liabilities") will increase over the spending review period (2011-2015) as the Nuclear Decommissioning Authority's (NDA) commercial income is expected to reduce. However, the NDA will be carrying out a "significant programme of reform" to become more efficient.

For more information, see:

The government has said it remains committed to providing public funding for four carbon capture and storage (CCS) demonstration plants, and that it will provide up to £1 billion for a commercial-scale CCS demonstration project at a power station.

The £1 billion funding will come from general public spending, rather than from the introduction of a levy on electricity suppliers. However, the government will decide on whether it should introduce such a levy to fund future demonstration projects once it has finished its review of the CCL in November 2010 (see Climate change levy and carbon pricing above).

For more information on CCS, see:

The government will invest £200 million in the development of low carbon technologies, including offshore wind manufacturing facilities at port sites and wind turbine research and development.

For more information on wind power, see Practice note, Offshore wind farms: summary of Round 3.

The government has announced that Defra will stop the funding for seven waste private finance initiatives (PFIs) because these are no longer needed for the UK to meet its targets for the diversion of waste away from landfills.

For more information on:

The government will continue investment in the management of flooding and coastal erosion, with £2 billion to be spent in the spending review period (2011-15).

For more information on flooding, see Practice note, Managing flood risk.

The government has said it will publish a National Infrastructure Plan next week.

For more information on announcements in the SR 2010 relating to infrastructure investment, see:

Generally, there's a feeling that green projects have got off relatively lightly, and the recent threats of judicial review if, for example, FITs were abolished have not been warranted. It might be the age of austerity, but it's still light green, even if we don't yet have the "greenest government ever".

CRC: The announcement that the revenue from the sale of CRC allowances will no longer be recycled back to participants in the scheme (based on their rankings in the CRC league tables) has come as a surprise and arguably could be described as a "stealth carbon tax" (see Spending review blog, Guardian, 20 October 2010). Interestingly, the Guardian blog suggests that the funds raised from the sale of CRC allowances will be used to support CCS, for which up to £1 billion has been promised for the first project (see section entitled "CCS" below). Nevertheless, press commentary states that the changes to the CRC are likely to be welcomed by environmental groups and some green businesses that have long maintained that the CRC would not be enough to drive significant improvements in energy efficiency (see Coalition hits big business with stealth carbon tax, BusinessGreen.com, 20 October 2010). It is also consistent with the new government's support of green taxes in general.

CCS: On CCS, £1 billion has been earmarked for one demonstration plant, but what of the other three that had been planned? Also, on 20 October 2010, E.ON announced that it will not proceed to the next stage of the government's CCS competition, as its Kingsnorth power station won't be ready in time for the government's timescale for the demonstration project (see E.ON UK press release, E.ON not to proceed to next stage of Government's carbon capture and storage competition as Kingsnorth cannot meet competition timescales, 20 October 2010). Dr Paul Golby, Chief Executive of E.ON UK, said, "Having postponed Kingsnorth last year, it has become clear that the economic conditions are still not right for us to progress the project and so, simply put, we have no power station on which to build a CCS demonstration." E.ON will now be concentrating its efforts on its Maasvlakte project in the Netherlands. ScottishPower's proposed CCS project at the Longannet power station in Scotland now looks set to secure the £1 billion funding, as it is the only project still in the running.

RHI: The confirmation that the RHI will go ahead was welcomed by the Renewable Energy Association (REA). The REA's chief executive, Gaynor Hartnell, said, "Today's announcement is a huge relief and a very big breakthrough. Finally renewable heat moves to the heart of UK energy policy, exactly where it belongs" (see REA press release, Heat Goes Renewable, 20 October 2010).

GIB: The government has also confirmed that the GIB will go ahead. According to the press, this announcement will disappoint those that had hoped for the bank to be capitalised with between £4 billion and £6 billion of government funding, but arguably represents a victory for DECC if rumours are to be believed. There were suggestions in the lead up to the SR 2010 that the Treasury wanted to prevent the GIB from raising additional private funds through green bonds and other financial instruments, which now seems to be the case (see Osborne unveils package of green cuts and growth, BusinessGreen.com, 20 October 2010). Friends of the Earth is reported as saying, "The chancellor's pledge for £200m to support low-carbon technologies and a new bank to help green industries get off the ground is good news – as is his clear commitment that it will be a bank not a mere fund – but it will need significantly more than the £1bn allocated to be effective" (see Friends of the Earth press release, Green response to spending review, 20 October 2010).