Not if low-carbon transformation is at the heart of the government’s industrial strategyby Michael Liebreich / November 15, 2016 / Leave a comment
One of Theresa May’s first acts as Prime Minister was to merge the Department of Energy and Climate Change (DECC) into a new Department for Business, Energy and Industrial Strategy (BEIS). The move was met by howls of outrage from the UK’s self-appointed climate champions: Ed Davey, former Lib Dem DECC Secretary, called it “a major setback to British efforts to combat global warming”; Green MP Caroline Lucas said the move was “deeply worrying”; Ed Miliband, the first ever Secretary at DECC branded it “plain stupid.”
What bothered them was the fact that there would no longer be a government department with the words “climate change” in its name, which they took to mean that the May government would relax its commitment to climate action.
Within a week, however, the government had approved the fifth carbon budget of the 2009 Climate Change Act, which binds the UK to eliminating 80 per cent of its emissions by 2050. Then, at the UN General Assembly in September, May announced that the UK would ratify the Paris Agreement, committing the UK—along with the rest of the world—to weaning itself entirely from fossil fuels by the second half of this century.
The UK has already made impressive progress towards these goals: emissions have dropped 35 per cent over the past 25 years, while energy productivity—the amount of GDP generated per unit of energy consumed—increased by 83 per cent, and electricity derived from renewable sources soared from 5 per cent in 2005 to over 25 per cent now.
However, to meet the UK’s emissions goals, we can’t just keep doing more of the same. Electricity accounts for only 18 per cent of our energy use and generates just 25 per cent of the UK’s emissions. Emission reductions on the scale required by the Climate Change Act and the Paris Agreement cannot be achieved if all we do is change the source of our electricity.
For instance, we need to fix our woefully inefficient building stock, which is all about building codes, regulation, and re-skilling our building trades—never within DECC’s remit. Electric vehicles will prove a vital tool in the fight against climate change and air pollution, but we also need to see massive shifts towards public transport, walking, cycling, shared vehicles and super-efficient internal combustion engines. Again, DECC was never responsible for transport.
The construction industry will have to wean itself off wasteful use of high-carbon materials and practices. Manufacturing will have to move away from traditional, energy-intensive techniques towards advanced materials, 3D-printing and other zero-loss approaches. The farming sector needs to change practices to fix carbon in the soil and address livestock methane, and we need to accelerate the trend towards reforestation.
Any meaningful UK industrial strategy—the first since the 1970s—must support these monumental shifts. That means co-ordinated measures, spanning R&D, infrastructure, taxation, trade and government procurement, which encourage rapid formation of capital and development of intellectual property in sectors of the low-carbon economy where the UK can have competitive advantage. It is not about subsidies; it is about joined-up government. What we definitely don’t need is a 1970s-style attempt to pick technology winners, protecting old-economy polluters threatened by climate action.
Luckily, the UK is already among the global leaders in many of the key technologies: material sciences, electrochemistry, IT and the internet of things, advanced automotive technology, biosciences, aerospace, design, architecture, even nuclear power. Graphene was discovered in Manchester; the world’s most powerful electric motors are made by Dyson. The UK is home to some of the world’s most innovative energy companies, and Transport for London is a world leader in open data and contactless payments.
Also, the City of London is the leading centre for climate finance, to which more than one third of the world’s clean energy project developers turn for legal, financial and consulting services. Whatever form Brexit takes, London will remain one of the world’s A-list financial centres, capable of financing the emergence of UK-based low-carbon leaders and the export of their products and services. The Environmental Goods Agreement, currently in the final stages of negotiation at the WTO, will guarantee zero tariffs on a wide range of goods at the heart of sustainable energy and transport.
There is, therefore, every reason to put a low-carbon transformation at the heart of the UK’s industrial strategy. And this is where some criticism of the May government’s early decisions is valid.
The approval of Hinkley Point C threw a lifeline to a struggling French technology from the 1970s, while the rest of the world is betting on small modular reactors, based on new, modular, failsafe technology. While it will cost £18bn to build, UK plc will pay a staggering £82bn for 35 years of Hinkley’s output.
The Heathrow runway decision is similarly inexplicable. Leaving aside the threat to air quality and the lack of plans for transport links from the capital, around 20 per cent of Heathrow flights are to destinations which can already be conveniently reached by rail. Why make it easier to fly to Northern Europe when low-carbon Eurotunnel is still operating at less than 60 percent of its design capacity?
The approval of fracking in Lancashire is not per se inconsistent with decarbonisation—the UK will remain a big user and growing importer of gas for many decades—but the sight of a government riding roughshod over local opposition, while deliberately tilting the playing field against onshore wind and solar, is deeply troubling.
There is no doubt that BEIS Secretary Greg Clark understands all this, based on his years shadowing Ed Miliband at DECC. The only question is whether he can carry with him his Prime Minister and her influential advisors, as well as the wider Conservative party. The sooner we see the first draft of his industrial strategy for the UK, the sooner we will know whether abolishing DECC was, as Ed Miliband said, plain stupid, or very, very clever.