Falling short on Net Zero?

Watchdog warns UK climate plans “will not deliver net-zero”. The Climate Change Committee (CCC), the UK government’s statutory advisory body set up by the Climate Change Act 2008, released its 2022 Progress Report to Parliament last week. The report comes with a new monitoring framework which outlines the indicators used to track the UK’s progress in transitioning to a zero-carbon economy by 2050.

“The government is failing in much of its implementation”. Whilst the UK’s domestic 2030 climate targets are compatible with the Paris Agreement’s goal of limiting global warming to 1.5C above pre-industrial levels, the CCC has warned that 61% of these commitments are not backed by credible plans to reduce emissions. The CCC praised “warm words” in the Net Zero Strategy but noted “little concrete progress made” as only 8 of 50 key indicators are on track. Carbon Brief’s Simon Evans provided a summary of the progress made so far in a Twitter thread and pulled out this key graph illustrating the gap between the government’s current “credible” policies and the delivery pathway for net-zero.
Risk of relying on technological salvation. NEF’s Chaitanya Kumar blamed the government's “over-reliance on technological solutions with high risk & no plan Bs” in sectors such as aviation, carbon capture and storage and nuclear energy generation. Read this article from a group of respected climate scientists who warned that net zero policy “helps perpetuate a belief in technological salvation and diminishes the urgency surrounding the need to curb emissions now”.

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Decarbonisation of heat and buildings remain a huge gap. The CCC identified the decarbonisation of heat and buildings as one of the most important policy gaps, as buildings are the UK’s second largest source of emissions (20% in 2021), where energy efficiency in non-fuel poor homes was “the most significant policy gap in the buildings sector”. The report states that “current policy is insufficient” to upgrade as many homes as possible to EPC rating C by 2035 and the “Government’s responses to rapidly rising energy bills have so far missed the opportunity” to address this.

Energy efficiency and the cost of living crisis. Many figures from the CCC highlighted that the cost of living crisis increases the importance of improving energy efficiency. CCC outgoing chair Lord Deben explained that bringing forward energy efficiency plans due to be completed by 2030 could reduce household bills by £125 a year and argued that high fossil fuel prices “should have given added impetus to improving energy efficiency, yet the necessary programmes are not in place.” The report criticised the Energy Security Strategy for “failing to offer any solutions” for reducing energy demand, and advocated for “increasing funding and accelerating plans for energy efficiency policies” (Pg.157)
The risk of relying on market-based approaches. The government’s current approach to increasing the supply of low-cabon heating systems relies on a market-based mechanism for rolling out heat pumps and driving delivery in heat networks. The CCC noted “This is an untested approach, and if market participants don't respond to incentives as expected low-carbon heat roll-out will not take off, with significant impact on planned emissions reductions.” As the cost of living crisis continues to erode household incomes, demand for low carbon heat systems may suffer, therefore the CCC recommended intervening with additional measures, such as public funding and more regulation to mitigate risks of low take-up (Pg. 204).
Rationing as a last resort to avoid blackouts. Campaigners have hoped that the government would bring forward energy efficiency measures to insulate enough homes to reduce demand in time for a particularly acute energy crisis this winter. Instead, the Times’ Emily Gosden reports that the National Grid is “working urgently to establish a scheme to pay consumers with smart meters to ration their usage voluntarily…to reduce the risk of blackouts”.

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Action prevented by Chancellor’s fiscal rules. Business Secretary Kwasi Kwarteng suggested in a Select Committee meeting that any new funding for energy efficiency has to be taken from other existing pots of money as no new money has been committed since the Chancellor’s Spending Review (11:52:20).

“Robbing Peter to pay Paul”. When asked about rumours that any funding for a future home insulation scheme would be taken from Boiler Replacement Voucher Scheme and the Public Sector Decarbonisation Scheme (PSDS), Kwarteng said: “I think some of the money has to be reallocated...I've made those decisions...If we’re going to have a high speed ambitious energy efficiency rollout, we can't simply print more money...I can't simply go beyond my CSR envelope... There has to be some degree of reallocation of existing money.” Given the CCC identifies a shortfall in funding for public building decarbonisation as another gap in the government plans, Chris Stark says this is “just the wrong approach”, despite “the value for money case of energy efficiency has never been stronger”.‍
Overcoming ‘Treasury Brain’. Economist Sir Nicholas Stern argued that net zero cannot be achieved with an austerity mindset and has written a paper criticising the use of high ‘discount rates’ in the Treasury's policy making processes, which “grossly undervalue” the lives of future generations and present children. Commenting on the Stern Review of the Economics of Climate Change, James Meadway explains why “shocks that produce permanent losses in growth increase the value of taking action today”. The Social Market Foundation has published a report on the intergenerational issues that arise from paying for the net zero transition. They also argue that the UK should reduce the ‘discount rate’ and spend much more on emission reductions now to avert future costs to the Treasury. ICYMI, read our analysis of the OBR’s report explaining how the costs of net zero are greater without “decisive action” and “early steps” to mitigate climate change‍
Economic case for urgency. The CCC emphasised that high fossil fuel prices following Russia’s invasion of Ukraine “reinforce the case for a rapid transition away from fossil fuels” which could save the economy 0.5% of GDP. Carbon Brief’s analysis noted that previous reports estimated the transition to a net zero carbon would cost less than 1% of GDP (“not including health benefits, the benefits of avoided climate impacts or the potential economic benefits of investment in infrastructure for net-zero”).

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Policies for improving energy efficiency. Given that the CCC’s Director of Analysis, Mike Thompson argued “This is the time for a government to be bold and to help people do what a lot of people want to do anyway. There’s no shortage at all of good ideas out there”, we have collated some proposals for decarbonising heat and buildings below:

Improving energy efficiency in your constituency. NEF’s campaign for a Great Homes Upgrade has produced a campaign toolkit to lobby local MPs to demand action on energy efficiency. CLES have co-produced an Energy Futures Toolkit to help community-led energy planning, an approach which: allows local people to engage in energy transition planning and action, generates valuable neighbourhood-level data to inform the approach to and delivery of the local energy transition, and enables the activation of community-led and owned initiatives which can build community wealth as part of the energy transition.
Low carbon heat installation and skills shortages. A new report from the TUC and Electrify Heat Coalition outlined the role of heat pumps in building a high-wage, high-skill economy. The report is particularly timely as the CCC outlined skilled worker shortages as a ‘major risk’ in the government’s plans to decarbonise heat and buildings.
Ban on gas boilers. Chairman of the National Infrastructure Commission, Sir John Armitt, has called on the government to ban gas boilers, replicating the ban on new petrol and diesel cars by 2030. In the University of Birmingham’s Energy Institute report ‘Pathways for Local Heat Delivery’, Sir John argues that “unless we replace 24 million gas boilers, we will never reach net zero”.
Funding to permanently lower household bills. The Director General of the CBI, Tony Danker, has called for “all-out” action on energy efficiency measures to combat the cost of living crisis. Danker advocated for a “new normal of energy efficiency” instead of a “new normal of billion-pound bailouts every quarter”. He argued that £5.2 billion was needed annually to insulate homes (with £1 billion dedicated to retrofitting) which he compared to the £22 billion worth of cost of living support announced in Spring by the Chancellor and further £15 billion in May.
Labour’s ‘energy efficiency revolution’. Shadow Climate and Net Zero Secretary Ed Miliband outlined 5 recommendations for the upcoming Energy Bill, advocating Labour’s £6bn per year plan to insulate 2 million homes this year and the other 19m that need it this decade. They calculated that this could cut bills by up to £400, gas imports by 15% and reduce fuel poverty.

Weekly Updates

Finance and monetary policy

The ethics of pensions. A new explainer by Common Wealth tracks the investment chain of pensions, outlining their social and environmental implications. The report argues that the current pensions system is “failing” on “democratic participation and accountability to sustainability”. Common Wealth identify three priorities: to democratise pensions, to set up a Public Asset Manager, owned by the people, and a reshaping of companies to work for the public good.

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Climate crisis and ECB policy. The European Central Bank has announced that it will be “taking further steps to incorporate climate change” into its monetary policy operations. The bank has said that it will “better account for climate change” in its corporate bond purchases, collateral framework, disclosure requirements and risk management. New Economics Foundation’s Lukasz Krebel breaks down what these operational changes look like in practice.

Inflation and inequality

Cost of living crisis. Around 7 million families are living through a “frightening year of financial fear”, according to a new survey by the Joseph Rowntree Foundation. The cost of living crisis is also exacerbating debt problems, with arrears on all personal debt having more than doubled from £1.8bn to £3.8bn since October last year.

Dealing with debt. Christopher Harker and Amy Horton have published a new book: ‘Financing Prosperity by Dealing with Debt’ which calls for debt audits, debt cancellation and the expansion of member-owned co-operatives. Horton has written a useful thread, summarising the key arguments from the book.
Council tax arrears. Debt Justice highlights the growing problem of council tax arrears, with £4.4 billion now owed across the UK in council tax back-payments. Its campaign, ‘Ban the Bailiffs’ calls on councils to stop the use of bailiffs in the collection of council tax.
Cost of living and gender. Women are disproportionately affected by the cost of living crisis, particularly when it comes to the “erosion of benefits” over the last decade, argues the Women’s Budget Group (WBG). In a new series of briefings on the gendered dimension of the cost of living crisis, the WBG explains how real terms public sector pay cuts particularly impact women and how there is a ‘gender bonus gap’ of 40% meaning that women do not benefit from record high private sector bonuses.

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Rising poverty for lone parent families. The relative poverty rate for children of lone parents is almost double that for children living with two parents, according to new research by the Institute for Fiscal Studies (IFS). The relative poverty for children of lone parents has risen by 9 percentage points between 2013–14 and 2019–20, from 40% to 49%.

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‍Bailey's inflation predictions. The UK will suffer higher inflation for longer, according to Bank of England governor Andrew Bailey. At a European Central Bank conference, Bailey talked up the option ofhalf-point interest rate rises to curb inflation but also suggested that a rise in the energy price cap could exacerbate UK inflation rates in comparison to other countries.

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Income perceptions. Sixty percent of those earning £80,000-£100,000 in the UK believe they are “about average” on the income scale, according to new research by the New Statesman. Half of all those earning £40,001 and above (the average household income is £31,400) say they feel their income is “normal” while 61 per cent of those with a net income below £20,001 also said they feel “normal”.

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‍McDonnell calls for price controls. Former shadow chancellor, John McDonnell, along with 12 economists, academics and activists (including Naomi Klein, Danny Dorling and Ann Pettifor) have said that the Government must introduce price controls to combat the cost of living crisis. Price controls have previously been introduced by both Conservative and Labour governments.

Tax

Arguments for a property tax. Unherd writer, Peter Franklin, calls for property taxes to combat growing regional divides. He argues that the “investment income surge”, seen mainly in the richest parts of the country, is not due to market forces but due to years of “government intervention — for example ultra-low interest rates and quantitative easing”.

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Windfall tax extension. Firms with ‘excess profits’ should show restraint to tackle inflation, not workers asking for wage increases, argues the IPPR’s Carys Roberts. The windfall tax on oil and gas companies already introduced by the government could be raised and extended to commodities companies to support households and boost supply chains, she says. Analysis by the IPPR and Common Wealth finds that the profits of the largest non-financial companies were up 34 percent at the end of 2021 compared to pre-pandemic levels. However, these profits are highly concentrated, with only 25 firms making up 90 percent of increases in profits.

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Shareholders call for tax transparency. Greater Manchester Pension Fund (GMPF), Ethos Foundation, Etica Funds and the Missionary Oblates have filed a shareholder proposal at Cisco Systems calling for greater tax transparency. It follows similar proposals that have been put to Microsoft and Amazon in recent weeks.

Work

Rise and grind. The rise of ‘microwork’ and ‘hustle culture’ is leading to exacerbated labour market inequalities, according to a new report by Autonomy. 95% of microworkers, who work on digital platforms and are assigned short tasks, are paid below the minimum wage and more than half receive no pension from any of their work.

Good Work Index. Work-life balance, health and wellbeing, job security and the rising cost of living are key concerns for workers across various sectors, according to the CIPD’s latest Good Work Index. The report also finds that fewer workers are reporting that their work is positively impacting on their physical and mental health. In 2018, 33% of workers said that work was impacting their physical health positively compared to 26% in 2022. The percentage of workers who said work impacted their mental health positively fell from 44% to 35% across the same time period.
A rise in ‘work intensity’. A research paper by Tom Hunt and Harry Pickard finds that ‘work intensity’ or ‘work effort’ (defined as “a measure of the physical or mental input an individual puts into their work”) has increased but argue that the concept is very often missing from debates about job quality.

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Platform work: good news and bad news. While most platform workers continue to face unfair working conditions and lack social protections, a growing number of them are receiving better benefits, according to the Fairwork UK Ratings 2022. However, the report also found that only three of the 15 platforms rated could ensure that workers’ pay was at or above the minimum wage and only seven were able to evidence that they take meaningful action to mitigate task-specific risks.

Public services

Childcare ratios. The Government has announced a consultation on measures to cut the cost of childcare provision, most notably to relax the child-staff ratio currently in place at nurseries, preschools and childminders. Organisations such as Pregnant then Screwed, the Women’s Budget Group and the Early Years Alliance argue that not only do parents oppose such a move, but that the measure would not actually bring down childcare costs. For more on the latest childcare ratios debate, see our thread.

Childcare costs keep women out of work. An increasing number of mothers are leaving the workplace due to unaffordable childcare, according to polling conducted by the New Statesman. Childcare costs are particularly high in the UK, at more than double the OECD average and worse than any other OECD country. According to the Women’s Budget Group, 1.7 million women in England are prevented from taking on more paid work due to the cost of childcare.
Platform childcare. The platform economy can impede high quality childcare, according to a new report by the New Economics Foundation. Global corporate companies are allegedly expanding their portfolios into digital services which seek to disrupt the childcare market, however concerns have been raised about the impacts for safeguarding and staff pay and conditions.

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National care service. Labour has announced that in government, it would launch a national care service to be “delivered exactly on the same terms as the NHS” according to Shadow Health Secretary Wes Streeting. The service would be brought in across several parliaments and the Fabian Society are currently drawing up proposals for how it would be funded and structured.

Profiting from care in Scotland. Large private providers of social care in Scotland are associated with lower wages, quality complaints and higher levels of rent extraction than not-for-profit care providers, according to new research by the Scottish TUC. It finds that only 58% of care home revenue is spent on staffing among private providers, compared to 75% of not-for-profit homes. The STUC has produced a helpful thread summarising the report’s findings.

Industrial strategy and business

A bold economic plan? Labour MP and Business, Energy and Industrial Strategy committee chair, Darren Jones, calls for a “bold economic plan” including investment in public services technology, a national workforce strategy and an investment in “digital and transport infrastructure that spreads opportunities outwards from cities to towns”. He argues that “the failure of the past decade to create a strong, successful and sustainable Britain” has left the country more vulnerable to recent external shocks than it needs to be.

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Tony Blair’s new agenda. Last week, Tony Blair hosted the ‘Future of Britain’ conference while the Executive Director of The Tony Blair Institute for Global Change, Ian Mulheirn, has said that the organisation “has begun to develop a policy agenda” including NHS reform and “more pro-growth” fiscal policy. Critics have described the conference as a “centrist love-in” and “a celebration of science, an affirmation that technology and the private sector would solve all our problems”.

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‍Purpose-driven business. Businesses in Scotland can best weather current economic storms and seize future market opportunities by becoming purpose-driven, according to a new report by the Business Purpose Commission for Scotland. WEALL Scotland said that “Scotland's businesses need to show real leadership in moving away from outdated business models and actively enhance the wellbeing of people and planet”. See here for more analysis of the report from WEAll.