The UK has long been heralded as a leader on climate action but as the United Nations General Assembly takes place in New York alongside Climate Week, with a focus on increasing climate ambition, the UK Prime Minister has publicly pushed back on net zero targets. While some argue that this an attempt to appeal to the people in the run-up to the election, there’s a real question as to whether the UK government understands what they’re doing.
Despite its much-heralded Climate Change Act and the fact that the UK has beaten decarbonisation targets for its first few carbon budgets, the Climate Change Committee (CCC) – the body charged with ensuring that the UK fulfils its obligations under the CCC – has expressed serious concern about the UK’s net zero future. In March 2023 it said the government was ‘asleep at the wheel’ and warned in its June 2023 report that “confidence in the UK meeting its medium-term targets has decreased in the past year.”
The key messages the CCC delivered were simple. Amongst other things the government was told it needs to up the pace on climate action, reclaim its place as an international leader on climate action, accept there is no room for new fossil fuels and, most of all, it needed to stay firm on its commitments. Yet Sunak has pushed back the ban on fossil-fuelled cars making it more difficult for EVs to penetrate the market, weakened the commitment to phasing out gas-fuelled boilers, dropped planned fines for poorly insulated buildings, and scrapped programmes to encourage positive behavioural change.
What this u-turn seems to represent is an inability to take a long-term view. Sunak argued that heat pumps are too expensive. But the Office for Budget Responsibility warned in July 2023 that the cost of relying on gas fuelled boilers could be double the cost of transitioning to net zero. Johan du Plessis, CEO and founder of zero emission boiler developer tepeo, also pointed out: “If the Boiler Upgrade Scheme were extended to cover existing British innovations manufactured in Britain such as tepeo’s Zero Emission Boiler, ordinary people would be PAID £800 to replace their boiler with a ZEB rather than pay £2500 for their next gas boiler.” And that would be supporting British innovation.
Sunak has said that he is concerned about the ‘people’ but the reality is that a fossil fuel based economy makes significant sums for the fossil fuel industry, while ordinary people are subject to the volatility of access to supply, the impact of war and the coming impact of climate change. Paul Szyszczak, Country Manager, Danfoss Climate Solutions, UK and Ireland pointed out the importance of implementing energy efficiency measures to cut costs. He said: “If the UK is going to meet its climate goals, boosting energy efficiency and electrifying transport will play vital roles. The technology already exists to make this all possible. But to ensure these changes are achievable and affordable, we need the right regulatory framework – one which incentivises long-term investment, encourages efficiency and creates an accessible market for electrified transport. Ambition and leadership in these areas will be essential if we are to achieve Net-Zero by 2050.
The issue is that by undermining supportive policies, the government is undermining the necessary decision-making framework that encourages both corporates and the financial sector to invest in transition. The quicker the investment flows, the more rapid the transition and the faster that overall costs come down. Tara Clee, an ESG Analyst with Hargreaves Lansdown pointed out that the government risks being out of step with many investors – because risk management is risk management, whether ESG or not. She said: “The amount invested in responsible funds has grown 74% since 2020 according to the IA’s data, and our own data shows strong demand from investors of all ages – not just younger investors.”
Jobs are an issue too. There is no doubt that recovering from COVID, the energy crisis and rampant inflation have caused problems for the ordinary citizen. At the same time there is no doubt that the potential in a green future is strong. The CCC reported that the net zero transition has already created 250,000 (with hundreds of thousands more expected) but that getting those jobs in place will only happen if policies are put in place to create a stable investment environment. The UK’s Trade Unions Congress (TUC) warned in a statement that 800,000 jobs are being put at risk through what they call “the Conservatives’ “incoherent” climate politicking.”
The UK is certainly moving in a different direction from the rest of the world. The EU is using policy to drive a net zero transition while the US is using the Inflation Reduction Act to incentivise millions in investment in a greener future. There are more than 35 jurisdictions that are taking action on climate risk and that means doing things the old way means greater risk, for companies and investors.
That movement is accelerating too. California recently passed a bill demanding climate risk disclosure from top polluters, and has filed a suit against the fossil fuel industry for a decades long misinformation campaign resulting in climate damages. While the SEC still hasn’t issued its own climate risk reporting guidelines, the US Treasury has released its own principles for net zero investment.
There is a growing awareness of the reputational and legal risks associated with failing to act on climate There are also billions in investment opportunities in every sector that is going to affected by climate change and transition. That means all of them – and the UK is walking away from a chance to be a leader in this fundamental change in the operational and investment environment.
Sunak makes the point that the consumer should make the choice, not the government. So shouldn’t the government be ensuring that consumers are able to make the best choices for their long-term future? Consumers only have the options between the choices that are made available to them. What the world needs are politicians who understand and recognise the implications of the science, that accept that tough decisions have to made, provide a policy framework that supports the vulnerable through transition and take a long term view that ensures stability in the future. Is that too much to ask?
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