Investment Framework AA1-3 Increasing Sustainable Production and Consumption

Investment Framework AA1-3 “Increasing sustainable production and consumption”

Investment Framework for Action Area 1-3 – Increasing Sustainable Production and Consumption

1. Specific Purpose of this Investment Framework

1.1This Investment Framework is designed to guide the use of the resources under the NWOP that have been indicatively allocated to this Action Area as part of Priority 1 “Stimulating Enterprise and Supporting Growth in Target Sectors and Markets”. It specifically supports interventions that will help reduce the carbon and environmental impact of all SMEs, prepare SMEs for the business opportunities/threats arising from climate change, prepare for future environmental legislation and policies and improve resource efficiency, waste treatment, new forms of energy production and other aspects of environmental improvement.

1.2The indicative resources for this Investment Framework amount to some £34.0m over the life of the Programme comprising £10.2m in the Merseyside phasing-in area and £23.8m in the rest of North West.[1]

1.3This Investment Framework is a critical area of the NWOP aimed at reducing the environmental impact of the Programme as a whole. The rationale for public investment is based upon market failures on many levels:

fundamentally, the external environmental costs of production and consumption not being fully reflected in market prices.

consequent disincentives to change patterns of production and consumption, including investment in and use of low impact products, services and processes.

information failures concerning environmental effects and the scope for their mitigation.

investment risk aversion due to the novelty of environmental technologies and uncertainty of returns.

As at April 2011 Investment Framework 1-3 is not currently active. Any future calls will emphasise Lisbon compliant activity and addressing gaps in Programme targets.

2.Linkages to Other Strategies

2.1As at April 2011 the principal policy context is as follows.

The 2006 Stern Review concluded that the benefits of strong, early co-ordinated action against climate change far outweigh the economic costs of doing nothing. It is estimated that the cost of not taking action could be equivalent to losing between 5% and 20% of annual global GDP whereas the costs of taking action can be limited to around 1% of annual global GDP, if the World pursues the optimum policies.

The Plan for Growth 2010 acknowledges Stern and commits the Coalition Government to being "the greenest ever". It highlights the opportunities in the growing low carbon and environmental goods and services sector. It additionally provides £3bn in funding for a Green Investment Bank being developed by DBIS and DECC to facilitate investment in green infrastructure.

The UK Energy Bill 2010-11 presently passing through Parliament includes proposals for a Green Deal designed to stimulate the market for low carbon technology by enabling households and businesses to benefit from energy efficiencies now and to pay through their energy bills.

The Defra Business Plan 2010 aspires to create the conditions in which businesses can innovate, invest, grow; encourage businesses, people and communities to manage and use natural resources sustainably and to reduce waste.

Creating Growth, Cutting Carbon - Making Sustainable Local Transport Happen White Paper (2011), sets out Government strategy "for a transport system that is an engine for economic growth, but one that is also greener and safer and improves quality of life in our communities". It sets out a framework for planning and delivering sustainable transport through greater local determination and perceives local solutions as having a particularly important role in providing the early reduction in carbon emissions.

3.Scope of Investment Framework

3.1This Investment Framework supports 5 strands of activity:

Strand 1 – Support for innovative approaches to changing culture and embedding sustainable behaviours and managementpractices

Strand 2 – Support for improving Sustainable Consumption and Production (SCP) within key and enabling sectors

Strand 3 – Support for Sustainable procurement

Strand 4 – Expanding the development, demonstration and market development for low carbon technologies and processes in the NW

Strand 5– Supporting the installation and use of current low carbon/low-resource technology and processes.

3.2There is scope for the development of regionally strategic territorial (inter-regional) co-operation projects linked to this Investment Framework provided the project has been developed from the region’s participation in an EU Fast Track network or inter-regional or trans-national networks of regional significance.

Strand 1: Support for innovative approaches to changing culture and embedding sustainable behaviours and management practices

3.3This Strand will support action directed at raising awareness and encouraging businesses, SMEs in particular, to adopt sustainable behaviours and management practices. This may include a small number of high-impact projects that demonstrate innovative use of media and demonstrate a measurable impact on behaviour/awareness.

Strand 2: Support for improving sustainable consumption and production within key and enabling sectors

3.4This Strand will provide assistance to businesses to identify opportunities to reduce waste and to apply solutions to improve resource efficiency. This assistance will be targeted on businesses, SMEs in particular, in key sectors (advanced engineering and materials; biomedical; digital and creative; food and drink; tourism; business and professional services and; environmental technology sector) and enabling sectors (construction; transport; and appliances) plus regional businesses that are significant users of energy and/or resources.

3.5The activity supported will include, for example:

Support for businesses to assess the economic risks and opportunities associated with climate change and to identify actions to minimise/capitalise on these.

Support for businesses in reducing the use and waste of energy and resources, especially Defra’s seven priority waste materials: textiles, plastics, paper/card, glass, wood, aluminium and food waste.

Support for businesses in embedding resource management, including levering change through supply chain influence; carbon management; renewable energy; Corporate Social Responsibility and; travel planning.

Strand 3: Support for Sustainable Procurement

3.6This Strand will ERDF will provide support to businesses, SMEs in particular, in the form of:

• Guidance on the principles and practice of sustainable procurement.

Specialist support for organisations to develop and implement sustainable procurement policies;toincrease the levels of competencies within organisations to undertake sustainable procurement activities (including supply chain development).

Strand 4: Expanding the development, demonstration and market development for low carbon technologies and processes in the NW

3.7This Strand will support, for example[2]:

development of innovative products and services that significantly demonstrate progress towards the goal of achieving a more efficient and responsible use of natural resources, including energy.

the development of markets for such goods and services.

projects demonstrating near-to-market commercial technologies in: energy efficiency, demand reduction, climate change adaptation, energy from waste, energy generation techniques (i.e. renewable energy) and resource/water efficiency.

3.8The total maximum ERDF and other public sector match funding for individual demonstration projects will generally be fixed at €200,000 over 3 years[3]. Demonstrable carbon savings or environmental protection benefit will be required to secure investment. Applications are encouraged from collaborations, particularly between industry and universities. Pure R&D projects which cannot demonstrate a clear route to market are not eligible for support.

Strand 5: Supporting the installation and use of current low-carbon/ low-resource technology and processes.

3.9This Strand will support action to stimulate markets for low-carbon, renewable, energy efficiency, recycling and, waste minimisation products and services. The activity supported will include, for example[4]:

schemes to provide small grants to SME businesses for the implementation of low-carbon, energy-efficient, renewable, waste and water minimisation technologies, processes and services – no minimum grant requirement.

schemes to provide grants to support larger individual projects to install low carbon technologies, resource efficient infrastructure, recycling services and, renewable energy at locations that provide for or are used by SMEs e.g. business parks, incubation units etc. or, which will provide exemplars in the integration of low carbon technology or processes. Activity under this strand will focus on existing sites and premises or new developments where these activities are not being supported under AA3-2 or AA4-3.

3.10Eligible activities must use current and proven technologies, processes or services and must have a demonstrable benefit for SMEs. Infrastructure bids for funding must be for additional low carbon investment (i.e. above current sustainable construction commitments). Infrastructure projects should also be phased to include an initial review of the technical viability and the low-carbon, low-resource impact. A maximum grant threshold of ERDF and other public sector match funding for individual demonstration projects generally fixed at €200,000 over 3 years[5] will normally apply. Exceptions to this maximum grant threshold may be made in the case of an outstanding, innovative project demonstrating high impact. Eligible activities include transport technologies but exclude the provision of transport services

4.Performance Indicators and Targets

4.1The indicators that will be used to measure progress are as follows:

Indicator / Merseyside / Rest of NW / Total
Outputs
No of businesses assisted to improve their performance / 1374 / 3536 / 4910
No of businesses assisted to reduce industrial & commercial waste / 1063 / 1973 / 3036
Private sector investment levered (£m) / 1.5 / 11.6 / 13.1
No of demonstration projects / 8 / 15 / 23
Results
No of businesses assisted with improved performance / 72 / 393 / 465
No of businesses with reduced industrial or commercial waste / 1913 / 3552 / 5465
No of jobs created - total / 678 / 1604 / 2282
No of jobs created - male / 388 / 965 / 1353
No of jobs created -female / 290 / 639 / 929
No of jobs safeguarded - total / 1026 / 2500 / 3526
No of jobs safeguarded - male / 575 / 1429 / 2004
No of jobs safeguarded - female / 451 / 1071 / 1522
No. of applications of low carbon technologies / 15 / 50 / 65
CO2 emissions from Programme interventions (tonnes) / 10358 / 19244 / 29602
Impacts
Net increase in employment / 1288 / 3102 / 4390
Net annual increase in GVA as a result of the Programme (£m) / 64.4 / 155.1 / 219.5
Net change in overall CO2 emissions (tonnes pa) / 9144 / 22027 / 31171

The following indicators[6] for which no targets have been set will also be monitored:

Results: No. of businesses with improved environmental performance; Number of businesses with sustainable procurement policies*; Number of applications of low carbon technologies*;

Impacts: Net additional GVA overall in region (£m); Net additional employment overall in region; Less waste produced per unit of GVA*; More waste diverted from landfill (tonnes)*; Raw materials saved (tonnes)*; Higher % energy generated from renewables*; Water saved (cubic metres)*; Fewer CO2 emissions per unit of GVA.

5.Project Prioritisation and Selection Criteria

Focus and Target Beneficiaries

5.1To be considered for support, projects must be consistent with the focus and targeting for the relevant investment Strand(s) identified in Section 3.

General exclusions include:

Bids related to the natural environment habitat and habitat management.

Projects which should more naturally be funded by the Rural Development Programme for England (RDPE).

Demonstrable Need

5.2To be considered for support, a robust investment case should be presented:

evidencing market and / or other failure.

evidencing prospective demand.

outlining proposed approach to screening prospective beneficiaries for consistency with targeting.

Value for Money

5.3Priority will be given to projects which represent good value for money in delivering against the ERDF Programme’s target outcomes, including environmental outcomes

Lisbon Compliance

5.4Projects under this Investment Framework must consist of 100% Lisbon compliant expenditure.

Deliverability

5.5Priority will be given to projects that are ready for delivery with all preliminaries completed and where the required expenditure can be defrayed in line with the Programme financial profile, including the Profile for Merseyside.

ERDF / ESF Integration

5.6Priority will be given to projects coordinated with ESF supported activity linked to enterprise delivered through the regional ESF Plan.

Environmental Sustainability

5.7ERDF NW’s mandatory Environmental Sustainability Cross Cutting Theme aims to ensure that negative environmental effects are minimized, or mitigated, and positive environmental impact enhanced. The Environmental Sustainability theme aims to improve:

Energy Efficiency and related carbon mitigation measures

Air and water quality

Develop and deliver high quality Green Infrastructure

Resource efficiency to minimise waste encourage re cycling

Sustainable transport

Sustainable construction

Accordingly, priority will be given to projects that:

support a thriving low carbon and environmental goods and services sector

support improved environmental performance and transition to a low carbon economy in beneficiary businesses

re-use brownfield land.

5.8ERDF NW’s Sustainability Policy for the Build Environment will apply to all capital projects including new build and refurbishments over £500,000.

New buildings will need to achieve BREEAM Excellent rating and BREEAM Very Good for Refurbishments in addition to the targets set out in the policy.

5.9All projects need to demonstrate a meaningful contribution to the environmental sustainability Cross-cutting Theme and should:

develop sustainable procurement and green travel plans to address the positive and negative impacts a project may generate in relation to environmental sustainability

provide an initial estimate and report the actual carbon impacts using the Online Carbon Calculator.

Equality and Diversity

5.10Priority will be given to projects containing tangible proposals for targeting and supporting:

female entrepreneurs.

entrepreneurs from an ethnic minority background.

disabled entrepreneurs.

other under-represented and / or disadvantaged groups.

5.11There is a potential overlap between some of the activity to be support under this Investment Framework and other Investment Frameworks for the NWOP. This is inevitable given the overlapping and complex nature of the issues. The main potential links are summarised as follows:

Action Area 1.2 has a sector focus and will support a programme of activity aimed at strengthening the energy/environmental technologies sector in the region. There is a potential overlap with Strand 4 of the Investment Framework. The expectation is that Action Area 1.2 will not be supporting development of environmental technology demonstration or prototypes, rather this Action Area will do that. However, given that both Action Areas are in the same priority, if necessary there may be projects developed across both Investment Frameworks if they contribute to the overall aims of the NWOP.

Action Area 2.1 supports the development and transfer of R&D and University expertise in technology, sustainable practice, design etc. Again there is a potential overlap with this Investment Framework. However, the intention is that this Investment Framework will focus on direct work with SMEs and better environmental practices within SMEs, rather than working with HEIs. However, it is possible that HEIs may be involved in the development and delivery of some of the projects.

Any activity that covers innovation in products or processes related to sustainable production must not overlap with projects supported under Action Area 2.2 (Action Area 2.2 supports the development of innovation within SMEs).

Any activity to ensure more sustainable property and business areas must not overlap with projects supported under Action Areas 3.2 and 4.3.

6.Procurement Method for the Investment Framework

6.1The remaining resources under this Investment Framework will be procured through open bidding with collaborative bids encouraged.

7.Spatial Level of Delivery

Merseyside

7.1Where appropriate, projects will need to ensure that the relevant outputs, activity and spend linked to the ring-fenced Merseyside allocation is delivered. This means that there will need to be separate targets for Merseyside.

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[1]The figures are based on an assumed exchange rate of €1.257 to £1.00

[2]Strand 4 will potentially support development, demonstration and market development in relation to energy efficiency in housing subject to the maximum 4% of Programme activity devoted to this field of activity.

[3] As of 1 January 2007 this is the de minimis aid level granted by the Commission. In addition projects which fall within any other Block exemption may be eligible for a higher level of funding.

[4]Strand 5 will potentially support development, demonstration and market development in relation to energy efficiency in housing subject to the maximum 4% of Programme activity devoted to this field of activity.

[5] As of 1 January 2007 this is the de minimis aid level granted by the Commission. In addition projects which fall within any other Block exemption may be eligible for a higher level of funding.

[6]Note: Indicators with an asterix are not included in the CLG list of indicators