Clean Growth Strategy ‘flexibilities’ could put Paris goals at risk

While most eyes in the House of Commons were focused on Chancellor Philip Hammond and his Autumn Budget briefcase, the BEIS Committee called an oral evidence session to examine the Government’s Clean Growth Strategy.

The long-delayed strategy outlines how the Government intends to meet the fifth carbon budget, which seeks to limit the UK’s annual emissions to 57% below 1990 levels by the year 2032 – and subsequently covers the fourth carbon budget, spanning 2023-2027.

These carbon budgets set the pathway as legally binding five-year periods to reach an eventual emissions reduction of 80% below 1990 levels by 2050 set out under the UK’s 2008 Climate Change Act. Overall, the strategy covers 50 new measures to drive economic growth across the core pillars of innovation, business and industrial efficiency, domestic improvements, transport, energy and natural resources.

The BEIS Committee called on the Committee on Climate Change’s (CCC) chair of the adaptation sub-committee Baroness Brown to provide her thoughts on the strategy. Although the CCC won’t publish a detailed response to the strategy until January 2018, Baroness Brown noted that the plan suffered from a lack of clarity.

“I welcome the positive tone of the Clean Growth Strategy and it is a step in the right direction,” Baroness Brown said. “It’s good to see climate change addressed in a way of economic growth. It still needs quite a lot of clarification and firming up.

“There a quite a lot of aspirations in some areas that are not yet policy and there are a number of times where it says things will be done where ‘practicable, cost-effective and affordable’. It’s difficult to say how much of this is actually going to happen.”

Banking and borrowing

One of Brown and the CCC’s major concerns regarding the strategy is its so-called “flexibility” mechanisms. Following publication of the strategy, climate change minister Claire Perry admitted that only 30% of the policies listed in the strategy have actually had their emissions savings accounted for.

The Government has shown an apparent willingness to rely on an over delivery of the current carbon budget projections to help plug any emissions gaps that appear in the future. Notably, the strategy claims that international carbon credits can be purchased 18 months in advance of a budget window to cover any shortfalls, a concept that the CCC is also against.

During the committee meeting, Labour Party MP Albert Owen likened these flexibilities to “cooking the books” and while Baroness Brown wouldn’t be drawn into making a similar comparison, she did note that banking and borrowing plans would place UK aspirations to help deliver the goals of the Paris Agreement at risk.

“There are some gaps in the strategy, and we are particularly concerned about the areas of flexibility,” Brown added. “We don’t like the term flexibilities…we prefer to call it borrowing and banking, and we have consistently advised against it.

“We’ve always said there should be no banking of over performance on the second and third carbon budget, we said that before the Paris Agreement was signed. We’ve committed to the Paris goals, which are tighter…If we start banking and borrowing, we absolutely will not be on track to deliver those goals.”

BEIS suggested that it will only use flexibilities “with the consent of the CCC”, but with detailed analysis from Carbon Brief finding that the quantifiable aspects of the strategy will create a 51% reduction in emissions – 6% short of the fifth carbon budget – the Government may be tempted to utilise them.

However, reliance on banking and borrowing could have unforeseen consequences regarding investor confidence in sectors where the UK is desperate to lead, such as electric vehicle (EV) manufacturing.

Investor confidence

The Government has already committed to the phase-out of new car sales for petrol and diesel cars and vans by 2040, and this will be backed by a £1bn support scheme for ultra-low emissions vehicles – including discounts on upfront costs on the purchase of an EV – as part of the Clean Growth Strategy.

Business and Energy Secretary Greg Clark spent much of last winter under scrutiny from the European Commission over a confidential letter sent to Nissan, which resulted in the company agreeing to build two new car models in the Sunderland facility, potentially protecting around 7,000 jobs. The Government views this sector as a key pillar of its Industrial Strategy.

But Aldersgate Group’s executive director Nick Molho told the BEIS Committee that relying on carbon budget flexibilities could reduce short-term investment in areas such as EV manufacturing and offshore wind development – which set a record low-strike price of £57.50 per MWh in the latest Contract for Difference (CfD) auctions.

“Where [the strategy] really helps investors, is the fact this is a cross-departmental strategy, that really differs from previous strategies,” Molho said. “When a lot of your investors are international that really does matter because it provides them with more confidence in the long-term policy direction that the government is embarking.

“If we do introduce those flexibilities, we may reduce short-term investment, but what we’re also doing is dampening a market signal to industry in terms of investment in supply chain and innovation and that will ultimately weaken our competitive advantage in a number of areas, such as EV manufacturing and offshore.”

Molho noted that regulatory drivers would need to be combined with “clear and well-timed fiscal incentives” to drive low-carbon growth in areas like heat, transport and the built environment – all sectors that are struggling with the decarbonisation transition.

CCS necessity

But while evidence providers were highlighting the need to accelerate low-carbon innovations in these areas, the BEIS Committee was already considering what steps would be necessary to meet the more ambitious target of the Paris Agreement – limiting global warming to 1.5C.

The CCC claims that staying below 2C would require carbon emissions to “fall below zero, into the net removals, by the 2050s-70s”. The UK’s Climate Change Act doesn’t quite align with these targets and reaching 1.5C would require emissions to reach net zero by the 2040s.

Baroness Brown claimed that carbon capture and storage (CSS), notably for power generation, would be required to offset the expected emissions increase from aviation and shipping in order to reach negative emissions.

CCS is officially back in the fray as part of the Clean Growth Strategy, two years after the Government faced criticism for closing the £1bn competition fund. At the time, critics were concerned the decision could cost the UK an additional £30bn to meet its 2050 carbon targets.

Some committee members were concerned that the Government would face a “trust” issue over its erratic CCS agenda. The technology is considered a necessity along with biomass feedstock to achieve negative emissions.

Speaking later in the session as part of a reflection on COP23 in Bonn, the Grantham Research Institute on Climate Change and Environment’s policy and communications director Bob Ward noted that conversations around CCS had been “hopeless” in driving progress towards negative emissions.

“Many are against CCS because they think it’s a get out of jail free card for the fossil fuel industry,” Ward said. “Most promoting CCS are working in the oil and gas industry and the conversation we need to have, we a not getting to grips with.

“The CCS community has been hopeless in driving this forward and there is a lack of reality amongst NGOs about the requirement to develop negative emission technology; CCS is going to have to be a part of that.”

The UK will have to publish its own Nationally Determined Contribution to the Paris Agreement once it leaves the European Union, and Ward claimed that the Government would have to lay out how it plans to meet the 2C and 1.5C goals, which would include net-zero emission aspirations.

Matt Mace