The revised UK net zero strategy: Moving ambition into action
The “Powering up Britain” strategy was released alongside a package of policy statements, responses, consultations, and competitions across a range of energy transition technologies such as hydrogen, electric vehicles, heat pumps, carbon capture and storage (CCUS) and Small Modular Reactor projects around the country – a whopping nearly 3000 pages over 40 documents.
Crucially, the policy package contains the much anticipated “carbon budget delivery plan”. The plan spells out how the Government plans to achieve its legally binding Carbon Budgets 4, 5 and 6. However, despite the ramped-up efforts, the UK remains off track to meet its pledge to the Paris Agreement, and it will fail to deliver the necessary emissions cut for Carbon Budget 6. With rapidly evolving net-zero technologies, the error margins in forecasting the impact of new proposals may also be significant. Much uncertainty is associated with these types of estimates, and the document acknowledges that it is extremely difficult to forecast emissions reductions and the impact of policy interventions over a decade away.
Whilst forecasting remains a challenge, the UK net zero strategy does provide significantly more detail and increased clarity on its energy transition plan for the next fourteen years. The UK net zero strategy offers a clear ambition for a net zero future with increased certainty on the direction of travel, which in turn will provide confidence to private investors. Whilst the strategy provides greater clarity on what will be done, the government must now focus on how to corral and mobilise the diverse sectors, stakeholders and geographies that make up the net zero ecosystems. To realise the strategy, the government must do three things: adopt a whole system mindset; ensure regulation enables innovation; and deliver real, tangible benefits to the whole population.
Focus on the system as a whole rather than getting lost in the weeds of siloes
The newly formed Department for Energy Security & Net Zero (DESNZ) is responsible for successfully implementing the revised UK net zero strategy. However, it alone cannot guarantee success. The energy transition requires societal, not just sectoral, transformation.
DESNZ should take the lead on mapping the net zero ecosystems in their entirety to know who is responsible for and who will be impacted by the delivery of the strategy. DESNZ will then be able to target better and deliver its specific interventions to address the world’s most ‘wicked problem’ and minimise the risk of perverse incentives and policy conflicts which would hinder progress. By owning a single view of the ecosystem, DESNZ will be able to manage progress more effectively, minimise uncertainty in decision-making, and provide focused guidance and support to impacted stakeholder groups, including the industry.
Ensure regulation enables rather than hinders innovation in the revised UK net zero strategy
Technological innovation is a cornerstone of the plans to achieve net zero. However, many of these net zero technologies are still in their infancy. For policymakers, this poses a very practical dilemma: how does one regulate or invest in something which doesn’t yet exist and whose characteristics are not yet known? Energy transition technologies such as intermittent renewables have far outperformed the wildest expectations of economists. As these technologies rapidly develop, the approach to regulating them must be flexible and work closely with the industry to learn and adapt while protecting the interests of consumers.
It is vital to create an enabling environment for nascent solutions to mature and scale at pace whilst putting in place suitable frameworks and guide rails to ensure they work for the betterment of all.
Aim for the game-changers, but don’t lose sight of the quick wins
The policy package and the recent Spring Budget contain plenty of support for hydrogen and CCUS projects. They have the potential to be disruptive, system-level interventions, but it will be decades before they reach their true emissions reduction potential. Rather than waiting for the technologies to mature, there is an opportunity to get on the front foot and look for wins in the short term and medium term that can both support the realisation of the UK net zero strategy and bring benefit to households currently enduring soaring energy prices fuelled in part by Russia’s illegal invasion of Ukraine. A focus on energy efficiency solutions, such as home insulations, heat pump installations and retrofitting, will help towards achieving targets in the medium term without negatively impacting longer-term ambitions and plans. However, whilst the benefit of these solutions may not be realised until the medium, they require immediate action as there can be a lag between policy decisions and impact.
The past few weeks have seen a flurry of highly ambitious international climate policy deals, such as the EU’s Net Zero Industrial Plan and the US’s Inflation Reduction Plan. The announcement of the Powering Up Britain strategy highlights the UK’s commitment to achieving this most important of targets. However, simply having a strategy is no longer enough; we need a clear plan and a focus on action to deliver. The strategy is agreed upon, but all of society stands to win on its successful implementation.