Carbon Trust funding cut by 40%

The government's leading low-carbon agency has had its funding cut by 40%, causing the cancellation of grants to a major biofuel scheme and other projects, and dozens of redundancies.

The Carbon Trust, whose mission is "to accelerate the move to a low-carbon economy", will receive £50m from the government in 2011-12. It will end free on-site energy surveys for businesses and 35 of its 216 employees will lose their jobs.

"Public funding still remains necessary and important to achieving our mission, especially in catalysing low-carbon innovation to overcome market failures and in supporting smaller businesses to cut carbon," said Tom Delay, the Carbon Trust's chief executive. But with public funding "constrained", he said, the trust would look to the private sector for investment.

In October last year, Chris Huhne, the energy and climate change secretary, said: "The promise of the low-carbon economy is breathtaking."

But Adam Harvey, a chemical engineer at Newcastle University, said: "The cut is very much against the claim of David Cameron and the government that they would regenerate the UK's economy via green technology – it's the exact opposite in fact."

Harvey's research group had received a grant from the Carbon Trust as part of an £8m effort to develop biofuels from algae, but the funding has been axed halfway through the project. "It's a big mistake not to fund this sort of research. We should and could be leading the way. If we had delivered an efficient way of producing algal biofuel we could be selling British technology around the world," said Harvey. The Carbon Trust placed an advertisement in the Financial Times on 20 January seeking partners to fill the funding gap.

A spokesman for the Department of Energy and Climate Change (Decc) said: "The Carbon Trust will continue to play an important role in the drive towards energy efficiency and supporting innovative low-carbon technologies, and is being funded accordingly next financial year. At the same time we are acting across the board to ensure we get value for the taxpayer as part of tackling the deficit."

Greenpeace's Ruth Davis said the cut was a false economy. "The trust is an effective tool for boosting innovation in businesses that increasingly find themselves competing against China and California in burgeoning low-carbon sectors. David Cameron sought to detoxify the Conservative brand by riding a husky sled on a glacier, but a key test of a leader's commitment to fighting climate change is in the nuts and bolts work of ensuring Britain builds a high-tech clean energy economy. He risks failing that test within a year of taking power."

The heavy cut to the Carbon Trust budget follows an even larger funding reduction at the Energy Savings Trust, which has lost half of its grant. The EST, which provides grants and free advice to the public to help them reduce their energy use, bills and greenhouse gas emissions, will make a third of its 300 staff redundant. Another body overseen by the Decc is in doubt, the independent Climate Change Committee, following its inclusion on a list of quangos whose structure could be altered at the discretion of ministers.

The government argues that its promised green investment bank will take up part of the role of the Carbon Trust and that its "green deal", to provide home insulation, will take on some of the EST's work. But Whitehall negotiations over the status of the bank appear deadlocked and the business plan from the Department of Business, Innovation and Skills (BIS) states the bank will not be operational before September 2012. Similarly, the "green deal" will not properly begin before October 2012.

A source with detailed knowledge of the Carbon Trust said: "It does seem odd that on the one hand the coalition is threatening the Carbon Trust's proven ability to focus on things like foundation technologies, just because it is a little lost within a larger and less critical set of Carbon Trust activities, while on the other hand it is putting £200m into technology innovation centres, trying to create what the Carbon Trust already does so well."

The UK is legally bound to make large cuts to its greenhouse gas emissions in coming years in order to tackle climate change. The Committee on Climate Change, whose recommendations are usually accepted by government, has placed low-carbon technology and energy efficiency measures at the heart of its carbon budgets.