On 19 July, Tata Group announced it would be locating its new electric car battery factory in Somerset, with the UK government having seen off a rival proposal in Spain by offering undisclosed incentives to bring the £4bn facility to the UK. The timing of the announcement, the day before voters in Somerset went to the polls in a parliamentary by-election, indicated that the Conservative party thought the announcement would be a vote winner.
Two days later, having lost heavily in Somerset and won a different by-election in outer London, the mood had shifted. The local Conservatives had won by campaigning against plans to extend the ultra-low emissions zone into London’s outer suburbs, introducing a daily charge on older and more polluting vehicles.
Figures in the winning and losing parties (and the press) agreed that the apparent unpopularity of a potentially costly clean air policy foreshadowed a wider reassessment of the UK’s net-zero policies. Some suggested the 2050 net-zero target might need to be reviewed.
Three anchors of UK climate policy
The febrile mood is being steadily brought back to earth – as it has been in the past – by the three strong anchors that act on the UK’s climate policy. The first of these is the UK’s international commitments on climate, most recently through the Paris Agreement. With trade and defence agreements being so central to UK foreign policy it is not at all clear that the UK wants to be seen to be an unreliable partner.
The second is the UK’s Climate Change Act, which puts the net-zero target in law and places restraint on the government’s ability to backpedal. The political consensus is still behind the Climate Change Act. The leaders of every major political party have reconfirmed their commitment to the UK’s net-zero target in recent days.
The third – and arguably weightiest – anchor is climate change itself. As debate took place, one newspaper accused the government of “fiddling with green policies … while Rhodes burns”. A reference to the wildfires sweeping Greece and southern Europe.
Action plan
Politicians are right to draw lessons from elections, but they would do well to remember these anchors. It should not be controversial to say that individual policies need to carry public support. The UK’s independent Climate Change Committee has consistently encouraged the government to produce guidance for policymakers to improve targeting of polices that rely on changing behaviours to deliver net zero. That work is underway.
We must fully explore how partnership between government and industry can take responsibility for the bulk of the transition to net zero. The Investment Association recently published its latest Climate Change Action Plan. The action plan is an annual commitment to enhancing the capacity of policymakers, financial institutions, and the wider economy to mitigate against and build resilience to climate change. Investment managers responsible for managing more than three quarters of all assets under management in the UK have made the Net Zero Asset Managers commitment. The appetite exists to invest in the green transition.
The action plan sets out areas in which we have worked in partnership with government and will continue to do so. We have supported the development of the UK green gilt, which to date has raised more than £30bn for investment in projects including improving energy efficiency in homes, railway renewal, and managing flood risk. According to the Debt Management Office, another £10bn in green gilt issuance is planned in this financial year.
This initiative is an example of the alternative means by which we can finance the transition, and yet it has also been swept into a political debate, which risks framing the net-zero transition as all-or-nothing.
Strategic financing plan
The government should champion its achievements – which have contributed to the UK cutting carbon emissions faster than any G20 country – and think more carefully about how it can catalyse the private finance needed to deliver green growth in the UK economy.
The creation of a UK net-zero investment plan would foster dialogue between private finance and all government departments to ensure investment goes where it is needed, with a comprehensive and strategic financing plan to close the gaps between required and actual financial flows.
Such an approach will require consistent messaging to provide investors with the confidence to back the transition. Sometimes that will involve setting out detail on how policies will affect consumers. Alongside the financial incentives, Tata might have been attracted by the UK’s clear approach to phasing out the sale of petrol and diesel vehicles. There is a balance to be struck, but failure to get the supply-side transition right only increases the risk that a poorly planned transition will hit voters in their pockets.