I love a good graph. And I love a good statistic. You’ll be pleased to hear this week’s Weekend Essay has plenty of both.
When, in 2019, the UK led the world’s major economies in setting a target of net-zero emissions by 2050, we couldn’t have imagined that the rate at which things would change would pick up in the way it has.
Renewable energy costs are dropping sharply. UK offshore wind prices have fallen by 70% since 2014. In fact, offshore, onshore, and solar have dipped below the cost of fossil fuels.
This means we could have a society in the very near future for which the sun and wind meet most of our energy needs.
Society is responding too. According to the Office for National Statistics, when asked about a range of issues, climate change was the second biggest concern facing adults in Great Britain (74%), with the rising cost of living being the main concern (79%).
Today 91% of the global economy is committed to net-zero.
And now, former energy minister Chris Skidmore has insisted more needs to be done to reap the economic benefits that net-zero presents.
He recently published his independent Net Zero Review, which makes 129 recommendations for how to do this.
Concerns had been expressed by some in the industry that, amid all of the upheaval in government over the past few months, the net-zero agenda would be quietly watered down or side-lined.
But quite the opposite. The review suggests the government is still just as committed to net-zero. But the UK will need to work hard to keep pace with commitments made by the rest of the world.
Skidmore said the pace of recent change has created a global rush of economic opportunity that maybe have never seen before.
From the $370bn support for clean energy agreed by the US senate, to the European Green Deal’s €600bn green investment – the world is responding to this opportunity.
A central question for this review is how the UK can best position itself in this global marketplace.
The opportunity on offer is huge. The global market opportunity for UK businesses from net-zero could be worth more than £1trn in the period 2021 to 2030.
“If we seize it, we can usher in a new generation of UK businesses, providing high-skilled jobs for our generation and our children,” says Skidmore.
But, he warns: “Failure to compete globally risks missing this opportunity, seeing UK industries move away and other countries capturing the economic gains.”
One essential thing Skidmore points out is that investing now is cheaper than delaying.
Office for Budget Responsibility (OBR) analysis suggests in its ‘delayed action’ scenario that public sector debt could be 23% higher than in its ‘early action’ scenario by 2050 – thus doubling the fiscal impact of achieving net-zero.
Oxford University research has shown that a ‘fast transition’ to net-zero based on scaling up key green technologies will continue to drive their costs down.
It also suggested transitioning to a decarbonised energy system based on green technologies by 2050 can save the world at least $12trn, compared with continuing our current levels of fossil fuel use.
Recent evidence shows how technology costs can decrease as a result of significant investment. These trends have been observed most sharply for solar, biopower, wind, and batteries – which is good news for the net-zero transition.
Businesses are doing a lot. Globally, we are seeing a huge uptick in major corporations pledging to reach net-zero.
The UN’s Net Zero Asset Managers initiative recently announced that nearly a third of the $66trn of assets managed by their members globally are committed to net-zero with tangible decarbonisation goals.
But businesses will need government support to help them make the net-zero transition.
Skidmore suggests a tax policy to incentivise growth and decarbonisation is needed.
The government should use a balanced approach of tax incentives and disincentives to encourage economic activity that meets the dual objective of growth and decarbonisation.
In the UK, some tax measures are already in place to support the decarbonisation journey to net-zero by influencing business and consumer decisions.
These currently target the power sector via Carbon Price Support, broader business energy efficiency via the Climate Change Levy and Climate Change Agreement Joint Incentives and the waste sector via the Plastic Packaging Tax, Landfill Tax and Aggregates Levy.
A net-zero tax audit would help to ensure that the taxes not defined as ‘environmental’ also support the transition.
“Climate commitments and net-zero targets remain just words on a page without a clear, consistent, and stable transition plan,” Skidmore writes.
“I hope that this Independent Review can provide additional clarity and certainty on how the UK can not only meet its net-zero commitments but can once again demonstrate international leadership in setting out a comprehensive roadmap towards a net-zero future.
“While 42 months may have passed since the UK signed net-zero into law, there remain just 324 months until 2050.
“Planning effectively for that net-zero future must be our priority.”
It will be interesting to see how (if) the government responds to the review in its next Budget, due to take place on Wednesday 15 March.
