Decoupling and Promise
Economic growth has traditionally been powered by the burning of fossil fuels.This has resulted in immense pollution, depletion, and degradation of the natural environment. The correlation between economic growth and environmental decline is unsustainable. This unsavory relationship has brought about extensive efforts by policy makers to detach emissions from GDP as a matter of paramount importance. Business and industry can no longer continue to breach the environmental contract with society, otherwise known as the ‘tragedy of the commons’. Fortunately, the UK was one of the first countries to demonstrate this detachment.The data shows that since 1985 emissions and GDP growth have separated at an increasing rate. It shows that between 1985 and 2016, real GDP per head grew by 70.7% while carbon dioxide emissions declined by 34.2%.
Opportunity and Haste
A positive perhaps, but the detachment of growth from emissions alone is not enough to respond to the UK climate emergency and now that the Covid-19 pandemic has subsided, net zero has regained its pre-pandemic status as a major political talking point. Driving down emissions at the rate required is perhaps one of the biggest policy goals of the century.
Framing here is important, as views on net zero range from perceptions of immense upheaval to unmissable opportunity. Net zero optimists including ex net zero tsar Chris Skidmore and Alok Sharma, former President for COP26 have stated that net zero is the economic opportunity of the 21st century. And there is widespread acknowledgement that the UK needs to act quickly and decisively to take advantage of the opportunities presented by this transition.
Criticism and Mixed Messages
Yet the need for speed has led to criticisms by the Climate Change Committee that recent progress has been ‘worryingly slow’, with questions being raised over the UK’s ability to deliver on its promises to achieve net zero by 2050. The relaxation of policies to decarbonise buildings and transport including extending deadlines for the sale of new fossil-fuel cars and phasing out of gas boilers may jeopardise the existing 2030 goal of reducing carbon emissions by 68% compared to 1990 levels. In addition, and much to public outcry and dismay from the renewables sector, further North Sea oil and gas licenses have been granted, and funding of CCS storage facilities has been given the thumbs up. This suggests that fossil fuel usage is here to stay, regardless of clear messaging from the International Energy Agency (IEA) that new oil, gas, or coal fields are not compatible with limiting temperature rises.
Policy refinements of this nature have the potential to undermine international pledges and send mixed signal to the business community. Among those to comment is Mike Hawes, chief executive of industry body the Society of Motor Manufacturers and Traders, who has suggested that the policy change to ban petrol and diesel cars will cause ‘concern’ and will be ‘confusing’ for consumers. Moreover, businesses who have committed to costly investment plans will now have to change tack in response to an increasing dynamic policy landscape.
How can businesses achieve net zero?
The Climate Change Committee have advised the UK Government that they must set the frameworks for the transition and lay the foundation for the private sector to invest and transform their business models. Yet having attended a recent Westminster Businesses Forum meeting, reports from business leaders suggested that small and medium enterprises were often confused about when and how to act in response to net zero obligations. The general view was that businesses need consistency and certainty, but are instead muddled, with contrasting policies and frequent revisions to what were previously thought of as determined pathways to net zero. In light of recent announcements, perhaps it can be expected that business confidence will take a hit.
Can the UK remain a global leader in net zero?
Domestic policy changes such as those outlined previously, coupled with the recent deceleration of emissions reductions reported by the Climate Change Committee, has led to criticism that the UK is no longer a world leader in climate change. Added to this, much larger investment in net zero abroad, such as the Biden administration’s Inflation Reduction Act and China’s mass roll out of renewable energy, are expected to deliver a fall in CO2 emissions in 2024. This could indicate internationally that the UK is falling behind in comparison. There is a concern that a failure to keep pace with international progress could see the UK miss out on the opportunities presented by net zero as international competition becomes increasingly formidable. For the UK perhaps now that the ‘low-hanging fruit’ including the elimination of coal and the boom in renewable energy production has been seized, the remaining emissions are inherently difficult to mitigate. The need for investment in technological innovations to address hard to emit sources and sectors to get the UK back on track has never been more pressing.
Looking to the future
The picture in the UK is difficult to grasp despite there being little resistance to net zero. Polls by YouGov show that an overwhelming 86% of MPs support the UK’s target of becoming net zero by 2050 and all major political parties place net zero in their manifestos. Yet the need for consistency over the direction of travel remains. The need for certainty and stable policy conditions will give strong market signals. This will enable businesses to plan and implement for a low-carbon future that is vital in driving down emissions across all sectors. It includes large scale funding to strengthen and support innovation, stimulate research and development, enable collaboration and to de-risk investments in technologies.