First published in ABP's Report magazine – Winter 2020
(Download full issue)
The UK urgently needs a comprehensive policy plan if it is to build a competitive, net zero emissions economy argues Nick Molho, Executive Director of the Aldersgate Group. The Aldersgate Group is a cross-economy alliance driving action for an environmentally sustainable and competitive economy, of which ABP is an active member.
The UK has world-leading commitments on climate change, being one of the first countries in the world to adopt a legally-binding target to achieve net zero emissions of greenhouse gases by 2050. However, despite good progress in cutting emissions from the power sector, emission reductions in most other parts of the economy are lagging and the UK is not on track for meeting its interim climate targets.
In its recent report, ’Building a Net Zero Emissions Economy’, the Aldersgate Group argues that policy decisions in this parliamentary term will determine whether the UK can put itself on a credible pathway towards its net zero emissions target. It calls on the UK Government to put in place a comprehensive policy delivery plan to create the right conditions to drive affordable and timely private sector investment in the infrastructure, business models and supply chains that will needed to deliver on this ambition. Such a plan should be based around six key areas of action.
First, the Government needs to press ahead with regulatory measures and fiscal incentives to accelerate emission cuts in buildings, surface transport, power and waste. These tend to be known as ‘low regret’ sectors, where the required technological solutions and business models to cut emissions are well known but where there is currently an important policy gap. There is an urgent need, for example, to toughen up energy efficiency and carbon emission standards for new and existing homes, bring forward the shift towards zero emissions vehicles and develop an integrated transport strategy that seeks to drive down the carbon intensity of new transport infrastructure and minimise travel requirements.
A different approach is needed for ‘hard to treat sectors’ such as heavy industry, shipping, aviation and agriculture, where cutting emissions is significantly more complex. Here, the first priority is to put together an ambitious and targeted innovation programme to support large scale trials of technologies and business models that will be essential to cut emissions in these sectors. This includes carbon capture use and storage, green hydrogen production, the development of sustainable biofuels and electrification.
The Government recently announced £350 million of funding to support innovation in heavy industry and transport sectors, which builds on previous announcements to support early stage hydrogen production and CCUS trials. However, the challenge at hand is to consolidate and grow these funding pots, so that new technologies can be tried out on a sufficiently large scale to provide valuable lessons that can then inform future policy making to commercialise these technologies. France and Germany, for instance, are committing €7 billion each in the early 2020s as part of their respective hydrogen strategies, with a target of achieving 6.5GW and 5GW respectively of green hydrogen production capacity by 2030.
Third, building on the Prime Minister’s recent announcement to protect 30% of UK land to reverse biodiversity decline, policy makers need to start creating the right policy conditions to grow the potential for negative emissions to help offset any emissions which are likely to remain in complex parts of the economy. The starting point here should be to create a market for ‘nature-based solutions’, such as peatland and wetland restoration, targeted tree planting and improvements to soil quality, all of which provide a cost-effective way of absorbing carbon. Upcoming policy measures that are being considered as part of the Environment Bill and Agriculture Bill provide a unique opportunity to do this.
Fourth, the UK needs to significantly strengthen its Green Finance Strategy if it is to attract sufficient and affordable private finance to get to net zero emissions. This should include setting up a well-capitalised National Investment Bank, with a clear mandate to support investment in complex low carbon projects and drive low carbon investment towards regions in urgent need of economic regeneration. This would be an effective way of crowding in private investment in innovative and complex low carbon projects, whilst also ensuring that the transition to a net zero emissions economy benefits multiple parts of the UK as has been done to an extent with offshore wind.
Fifth, the UK urgently needs to plug the deficit in skills that currently undermines the growth of low carbon supply chains across the UK economy. In a recent policy briefing on ‘Upskilling the workforce for the 21st century’, the Aldersgate Group called for a five-point low carbon skills strategy for the UK, with a particular focus on embedding environmental sustainability across the national curriculum, supporting higher and further education institutions to tailor courses to better meet the needs of local employers (including with respect to STEM skills) and reforming apprenticeship standards and mid-career reskilling qualifications to equip the workforce with the skills needed in a net zero emissions economy.
Finally, a trade policy that is explicitly aligned with the UK’s climate and environmental goals has a key role to play in helping the UK build a competitive net zero emissions economy and support the competitiveness of its businesses in the process. Unfortunately, this issue is receiving insufficient attention in the Trade Bill currently going through Parliament. As argued in Aldersgate’s briefing, focus on low carbon and environment crucial for recovery’, it is essential that the UK’s future trade agreements promote high standards on the environment and climate change, reduce barriers for trade in low carbon goods and services and protect the UK’s future right to regulate on environmental and climate change policy issues. The latter is absolutely critical to the UK’s ability to introduce the measures needed to achieve its long-term goals and ensure these apply equally to all businesses active on the UK market.
The UK is in a strong position to build a globally competitive net zero emissions economy and this should be a central plank of its economic recovery strategy as it emerges from the COVID-19 crisis. Policy decisions in this parliamentary term will be absolutely critical in determining whether the UK can seize this opportunity and put itself on a credible pathway to achieve its net zero target.
