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Net Zero: mission impossible?

7 min read

No one said achieving net zero would be easy, but it’s clear the financial, technological, and industrial challenges are immense. Dr Joshua Wells, Environmental Policy Consultant at Dods Political Intelligence, explains.

The role of the government

Achieving net zero is a huge undertaking, requiring substantial financial investment, large-scale technological and structural innovation and development, and widespread behavioral change. But none of that is likely to happen unless the government is willing and able to lead and drive the change required. To that extent, the first key challenge to reaching net zero is for the government to decide what role it should play and organize itself accordingly by setting the agenda and targets.

The Conservative government of Prime Minister Boris Johnson has clearly got the ball rolling. It has accepted the science behind global warming and sought to take a leading role in tackling climate change. It was one of the first major economies to legislate for reaching net zero by 2050, with interim targets in 2030, and it tried to convince other countries to follow suit as host of the COP26 United Nations climate change conference in Glasgow. In October 2021 it set out a net zero strategy with plans to mobilise billions of pounds of investment and calls to action for almost every government department.

The Department for Business, Energy, and Industrial Strategy (BEIS) is spearheading the effort, with a dedicated Minister for Energy, Clean Growth, and Climate Change—Greg Hands. It has published the energy white paper in late 2020, followed by its March 2021 industrial decarbonisation strategy. The challenge is to keep up the impetus in the face of significant economic headwinds. How it fares will also be a key test of its claim to be a global climate change leader.

Who pays?

The first challenge leads inevitably to the second: limiting global warming will involve new costs for government, businesses, and individuals – deciding who foots the bill is vital for ensuring that net zero is achieved and the goal is met in a fair way.

The costs of achieving net zero promise to be enormous, although it is dwarfed by the cost of not acting on climate change or not acting fast enough. The Climate Change Committee (CCC) – the independent advisor on tackling climate change – puts the cumulative investment cost for the whole economy between now and 2050 at £1.4tn at 2019 prices. Pending clarity from the government, the Office for Budget Responsibility (OBR) has said it has assumed public spending will cover about a quarter of that. When combined with savings from greening buildings and transport, it has predicted a net cost to the state of £344bn in real terms, which spread across three decades gives an average of 0.4 per cent of GDP a year.

The government’s net zero strategy calls for £50-60bn capital investment per year, but adds “most of this investment will come from the private sector.” That represents a significant challenge for BEIS and other government departments. The government UK Infrastructure Bank has been tasked with providing leadership to the market with an initial £12bn investment. However, the House of Commons Public Accounts Committee (PAC) has said the government has a poor history of providing investor confidence due to its history of “stop-start policies”. The Commons BEIS committee has launched an inquiry on net zero governance which will examine the department’s ability to coordinate the delivery of net zero.

To raise funds, the government has started to sell green bonds and used green levies to generate climate finance and fund subsidies to support innovation such as wind power. However, the government faces considerable headwinds from a 40-year high inflation rate and subsequent cost-of-living crunch, and severe constraints on public spending in the wake of the Covid crisis.

The lack of clarity on the government spending plans on net zero also makes it hard to judge whether the state is paying its fair share, a factor which could prove key to ensuring there is buy-in across society. Tackling climate change promises significant reform to certain industries – for example North Sea oil and gas – a process which will need to be managed or it risks repeating the economic and social scaring that followed the closure of UK coal mines in the 1970s.

Supporting innovation: batteries and NETs

Tackling climate change is expected to involve widespread technological innovation and development, much of which will require regulatory support. One of the most common objections to renewable technologies such as solar and wind power is that they do not provide enough energy when the sun does not shine and the wind does not blow. The holy grail for renewable technology is having the capability to store this energy to better manage the peaks and troughs in supply.

The challenge for BEIS is to create a regulatory environment in which battery technology can grow and flourish in the UK. To do this BEIS must find ways to overcome the high initial costs involved in supporting innovation, but also regulate a young technology that is complicated by a lack of standardization in the industry. BEIS does have experience of fostering a now healthy wind power sector. However, the department will need to create an environment in which batteries can develop at a much faster rate than wind farms which have existed since the 1950s.  

Negative emission technologies (NETs), which aim to remove greenhouse gases from the atmosphere, are seen as another key part of the toolbox to achieve net zero. The government has included NETs in its net zero strategy, and their contribution is also acknowledged in recent reports by the UN’s Intergovernmental Panel on Climate Change, even though some of the technologies are theoretical or untested at scale. As with batteries, BEIS faces the challenge of creating an appropriate regulatory environment to nurture the growth of these young and necessary technologies.

BIES also faces a challenge to ensure certain industries do not use the promise of NETs to avoid cutting back on their emissions. Experts and the Commons’ Environment Audit committee (EAC) have voiced concerns that the government’s reliance on untested and unproved NETs could prove counterproductive.  

Decarbonizing industry

Greening industry--one of the heaviest emitting sectors – in a way that does not damage the wider economy promises to be another major challenge for BEIS. The department’s March 2021 Industrial decarbonisation strategy provides a blueprint, which it followed in October 2021 with plans to decarbonize the UK power system by 2035.

One of the challenges is getting industries to adopt low carbon fuels in the coming decade. The success of this seems to be dependent on BEIS gaining industry trust in those fuels and incentivizing a timely transition to them, something which has been complicated by the recent energy crisis. There is also no one-size-fits-all approach to industrial decarbonization, with different approaches for different producers, such as the steel and cement industry.  BEIS must also ensure its decarbonisation and environmental policies are aligned, which requires the department to work closely with other parts of government. There are instances where priorities can clash, for example, the adoption of biomass technology can undermine air quality.

The UK’s Climate Change Risk Assessment 2022, released in mid-January, said BEIS recognized the that risks from climate-related hazards will become more common as the UK’s dependence on electricity grows, from increased us of electric vehicles and home heating. The report concludes that, “the risks can be managed, but that ensuring the UK has a power system that is resilient to future climate impacts is now an urgent issue.”

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