Written evidence submitted by the Zero Carbon Campaign (NZG0031)
Net Zero Governance Inquiry - Submission by the Zero Carbon Campaign
Information on organisation:
The Zero Carbon Campaign was launched by entrepreneur and founder of OVO Energy Stephen Fitzpatrick in July 2019, following the introduction of the UK’s 2050 net zero commitment. It calls for the government to introduce stronger and more consistent carbon pricing across more of the UK economy, to help drive a fair and just transition towards net zero, whilst catalysing a ‘green recovery’ from COVID-19. The Zero Carbon Campaign has set up a Commission of leading scientists, business leaders, environmental and academic experts to work through the practical challenges of how such a policy might be structured and implemented. The Commissioners include:
● Lord Adair Turner, Former Chairman, Committee on Climate Change
● Nick Butler, Visiting professor, King’s College London and Energy Commentator
● Professor Paul Ekins, Director, UCL Institute for Sustainable Resources
● Professor Sam Fankhauser, Director, Grantham Research Institute on Climate Change and the Environment (LSE)
● John Sauven, Executive Director, Greenpeace
● Dr. Rhian Mari Thomas, CEO, Green Finance Institute
● Georgia Berry, Director, Sustainable Business and Communications, OVO Energy and former Downing Street adviser on energy policy
Rachel Wolf of Public First was the Commission Secretariat. She authored the Commission’s interim report, which was published in June 2020. The final White Paper was published on September 21st and can be found here.
Since the release of the White Paper, the Zero Carbon Campaign has been publicly campaigning for the Government to put stronger, fairer and more consistent carbon pricing at the heart of it’s plan for reaching net zero - including launching a petition calling for the introduction of charges on carbon emissions. The petition received over 100K signatures and is currently being considered for a debate in Parliament.
Contact:
Should you have any questions in regards to this response, please contact the Head of the Zero Carbon Campaign, Hannah Dillon.
Questions and responses:
- What are the key requirements for a governance structure that can deliver cross-Government climate action at the pace, scale and over the duration required to meet the carbon budgets and the 2050 net zero target?
Driving cross-departmental consensus and collaboration on climate. Action to deliver on the net zero agenda is unevenly spread across Government departments, many of whom consider climate mitigation to be somebody else’s remit.[1] Consequently, policymaking processes often fail to account for climate risks, or to consider the Government's long-term climate objectives. This has resulted in decisions that undermine the Government's climate commitments, including recent proposals to allow new North Sea Oil and Gas exploration,[2] scrap funding for the Green Homes Grant,[3] cut Air Passenger Duty on domestic flights[4] and omit green conditions from "the UK's biggest ever tax break to business" - the Super Deduction.[5]
Ensuring that all decisions are made with “net zero” in mind. To prevent further inconsistencies, we must ensure that all departments implement climate-conscious policy-making at a local, regional and national level. We need to promote greater cross-departmental coordination, and support stronger consideration of unintended risks and benefits of different policy-related decisions on the climate and environment.
One relatively simple way in which this could be achieved in central government is through the introduction by Her Majesty’s Treasury of a robust Net Zero ‘stress test’ across all fiscal decision-making, ensuring fiscal decisions cannot be taken at the expense of environmental outcomes.[6]
Proactive communications. A strong, proactive focus from all departments on engaging the general public on climate policy would help to strengthen the societal consensus on climate action and - by extension - the Government’s ability to deliver on the 2050 net zero target. The Government has committed to engaging with the public on net zero policy, but it yet hasn’t done enough to deliver on this commitment or leverage the public education opportunity that COP26 provides. The BEIS Committee have highlighted how as part of its work to promote Great Britain hosting COP26, there has only been a single Government-led public engagement campaign aimed at adults outside the business community, and - as far as we are aware - there are no specific plans to engage with those who are no longer in formal education and those who haven’t already engaged with these issues.[7]
62% of emissions reductions required to achieve net zero will involve some form of behaviour change from the British public.[8] Ultimately, climate action at pace and scale over the long term will only be possible if we combine policy with measures to ensure that the public are being taken along for the journey and given a voice in decision making. This is supported by our own polling, which found that 77% of the public agree that “HMG needs to be clear and transparent about how it will achieve it's net zero commitment” (Opinium Feb 2021 for the Zero Carbon Campaign).
- Are the Government’s existing net zero governance structures effective in this role, both in terms of coordination across Whitehall, and coordination with the devolved administrations and local and regional authorities?
The Government’s existing net zero governance structures are not effective in this role.
Case Study: The Environment Bill. The environmental safeguards included in the Environment Bill are not sufficient to ensure enforcement and coordination across and between departments. The Bill will enshrine environmental principles into law, but the Government has failed to use the accompanying policy statement - which provides guidance to Ministers and those working on their behalf - to establish a robust statutory framework for the application of these principles.
Significantly, the policy statement forces no obligation upon Ministers and policy makers to apply or collaborate to ensure the application of environmental principles; and consequently undermines the premise for their application. Guidance for application is also undermined by constant reminders that environmental principles only apply “where relevant,” “where appropriate” and after weighing up the “costs and benefits to society of the policy’s primary objectives, as well as the financial and economic costs and benefits.”[9] This leaves the door open for Ministers to prioritise (and justify prioritisation of) other factors over the application of environmental principles, even where their application could help mitigate serious harm.[10]
Addressing weaknesses in existing structures:
Even if the Environment Bill policy statement did provide a strong political direction and culture of collaborative ambition, it would not be enough on its own to ensure effective climate policy coordination across Government departments. Other weaknesses in existing structures also need to be addressed, not least:
Environmental regulation. Existing regulation is an inadequate means of preventing decisions that are inconsistent with the UK’s climate goals. The Cambo heavy crude oilfield off the coast of the Shetland Islands is a good example of this. Under proposals submitted to the government, developers expect to extract 150-170 million barrels of oil from the site — equivalent to operating 16 coal-fired power stations for a year.[11] The project is expected to be approved despite the clear incompatibility of new oil and gas exploration with Britain’s emissions reduction goal, and the International Energy Agency’s calls on Governments to desist from “investment in new fossil fuel supply projects” in order to give the world a fighting chance of reaching net zero by 2050.[12]
While the Government has highlighted it’s recently announced “climate compatibility checkpoint” as evidence that it is taking steps to regulate future oil licences in line with wider climate objectives,[13] we would challenge the validity of this argument. The whole concept of a ‘climate-compatible’ oil and gas licence is misnomer in the context of the UK’s target of reducing carbon emissions by 78% by 2035. If we are to stand any chance of meeting this ambitious goal, we cannot continue to enable the expansion of the most polluting forms of energy. Poorly designed regulations like the climate compatibility test could serve as a thinly veiled excuse for providing ongoing support to the fossil fuel industry. If we are serious about meeting our climate targets, we need to be unequivocal in preventing processes and practices that we know will impair our progress in driving down emissions.
Planning and administration - to deliver on the 2050 net zero goal Government departments will have to work together - and hand in hand with the private sector - to plan, manage and administer interventions that support climate-conscious decision-making amongst the British public. So far, the Government’s track record in this area has been patchy - with the failed Green Homes Grant scheme offering a good case study of the capacity building that will be required within Government to ensure the success of centrally-managed climate initiatives.
Case study: Green Homes Grant. The £2bn green homes grant, which allowed people to apply for vouchers to cover the cost of installing energy efficient improvements to their homes, was promoted as a key pillar of the Prime Minister’s plan to align the UK’s short-term actions with its carbon neutrality goal.[14] Yet only a few months into the scheme, Ministers decided to withdraw over £1bn of its funding, citing low uptake as a result of householders' "understandable reluctance" to have tradespeople enter their homes during the pandemic.[15] The statistics, however, tell a very different story: official Government figures from February show that over 100,000 Green Home voucher applications had been received from homeowners, with just over 20,000 issued, and only 2,700 installations completed.[16] This suggests the failure of the scheme has much less to do with public appetite and much more to do with the Government’s failure to coordinate with installers and support the growth of the home retrofit supply chain such that consumer demand could be sufficiently met.[17] These setbacks are particularly frustrating given the potential for decarbonising the heating supply of the UK housing stock to create jobs and fuel the UK’s economic recovery from COVID. They represent a “shovel-ready” infrastructure investment, a genuinely national, labour-intensive task that will take place over decades, and which could ultimately support 200,000 jobs by 2030.[18] But the potential of this industry will not be realised until we can ensure effective Government planning and administration, and this can only be achieved through strengthened net zero governance structures.
Accountability - since the Climate Change Act was passed in 2008, the mechanisms available for holding the Government to account on their climate commitments have been tested and left wanting. The Act does not formally impose any sanctions should the Government fail to deliver on its ‘legally binding’ emissions reduction targets, which are outlined in the UK’s Carbon Budgets. The result is what we see today: a chasm between the Government’s rhetoric on climate, and action to meet its stated ambition.
Case study: Treasury spending. A Recent Environmental Audit Committee report revealed a £10.6bn gap between the funds that have been promised for heat decarbonisation and those that have actually been announced.[19] This is a particular concern with regards to the Treasury, who have not only been exempted from having to consider environmental protection principles within their policy and decision making,[20] but are also being led by a Chancellor who is reportedly reluctant to prioritise spending to help reach net zero due to concerns regarding the potential cost of policies.[21] This speculation was evidenced by WWF’s recent analysis of the Spring Budget - which found that only £145m was devoted to environmental spending, while measures that would increase emissions were worth about £40bn.[22] The former seems particularly perverse in the context of the impending Net Zero review and strategy, and in light of the Government’s professed commitment towards a Green Recovery from COVID-19. While the latter is a concern because there are not sufficient safeguards to ensure that the Treasury are held to account for their paucity of green spending, or any future political backsliding for that matter.
- What alternative governance structures could be established to coordinate and deliver cross-Government action on climate change more effectively?
Strengthen the draft statement on environmental principles. We recommend that the draft statement on environmental principles that accompanies the Environment Bill is revised to i) remove exemptions to adhere to the principles (for example, those issued for the Treasury) and ii) obligate policy-makers to conduct an assessment of environmental impacts of proposed policies before they are implemented.
While Ministers are currently compelled to “consider environmental principles in the early stages of policy-making,”[23] it is difficult to see how they can do this effectively without establishing a detailed evidence base.The need for such assessments has been highlighted in the recent Public Accounts Committee report on Environmental tax measures, which highlighted how HM Treasury’s current tax impact assessments do not sufficiently recognise the potential for every tax measure to affect progress towards environmental objectives. The report recommended that HMT publish the expected environmental impact for each tax measure in the budget, including the extent of behavioural change and forecasts for tax receipts.[24] This approach should be replicated across all Government decision-making.
Stronger governance and accountability structures.
We recommend giving new or existing bodies (like the Climate Change Committee) more powers of oversight with regards to the Government’s progress in meeting its climate commitments, especially when it comes to long-term policies that could be changed subject to political whims. This could include a statutory response time by which the Government must have published details of it’s plans to deliver on the emissions reductions targets that are mandated in each Carbon Budget.[25] We should also consider updating the Climate Act to include legal consequences for Government non-compliance when it comes to delivering on said emissions reduction targets. The Government has repeatedly said it wants to create a world leading system,[26] but in the absence of effective governance and compliance frameworks, such statements could amount to little more than rhetoric. True ambition would be something much closer to the Denmark[27] or New Zealand[28] model of climate governance, both of which include legal safeguards to ensure that all major decisions are made through a climate-conscious lens, and that positive climate efforts in one part of its government are not undermined by those in another.
Empower local authorities to pursue climate action. Local authorities are best placed to help deliver many of the solutions required to tackle climate change, as illustrated by the devolved administrations superior progress on energy efficiency that is presented in Fig 1 below.
Fig 1: Annual installations of energy efficiency measures by nation compared to
number of measures require to meet net zero targets:[29]
However, local authorities often lack the resources and powers they need to roll out projects designed to reduce emissions in line with net-zero. This is a serious missed opportunity given the Climate Change Committee’s recent estimation that - if empowered with the right support - UK councils will be able to influence one-third of the emissions generated in their local areas through partnerships and place-shaping.[30] Moreover, there is evidence to suggest that members of the general public typically trust their local council more than the central Government,[31] meaning that new powers could boost public support for the net-zero transition. By decentralizing power and responsibility - as recommended in the “Net Zero Local Powers Bill” - the Government will be supported in a number of its key priorities, including the expansion of affordable electric vehicle (EV) charging networks, scaling up energy innovation zones and retrofitting existing buildings with energy efficiency and low-carbon technologies. This will also help deliver on overarching objectives, such as achieving unified emissions reporting and ensuring better departmental alignment across Whitehall.[32]
2. What governance structures would enable HM Treasury to give greater priority to the net zero target and the carbon budgets in its financial and economic decisions?
Introduce a net zero test. As referenced earlier, we support WWF’s recommendation for the Government to put in place a “net zero test” so that all policies would have to be proven to contribute to the net zero emissions target, or at least be compatible with it, in order to be adopted. In the first instance, this should include a review of all existing fiscal measures, including provision of tax relief and tax freezes, and their associated environmental and emissions-saving impacts. Subsequently, this process should be applied to future decision-making, to ensure that fiscal measures - including those which do not have explicit environmental objectives - drive rather than hamper progress against our legally-binding net zero target. The Government's ambition in this space is not where it should be - as demonstrated by a recent statement from the Exchequer Secretary: "We do not have a way of saying 'this investment is good for net zero or not good for net zero…we're not going to do is to strangle our economic recovery with regulation that's not necessary.”[33]
- How could HMT better ensure that spending decisions contribute to achieving net zero in the long term?
In addition to the net zero stress test cited above, the following two interventions can help ensure that spending decisions contribute to achieving net zero in the long term:
● Adopt a methodology that awards departmental spending according to the estimated (and real-life) emissions reductions that the investment helps to generate.
● Continue to encourage departments to include a green focus in their spending bids.
3. What signals and support does business need from the Government in order to deliver cross-economy decarbonisation in line with the carbon budgets and the net zero target? What delivery function should Government provide itself and are relevant regulatory bodies mandated and resourced effectively to deliver on Government priorities?
- How do policy and regulatory signals and support vary between Government Departments (and how have they varied over time)? How is this affecting business activity on climate change?
Policy and regulatory signals are sporadic between departments - with some sectors facing strong incentives to invest in lowering their emissions, and others being offered limited encouragement to change the way they operate. This frustrates progress towards net zero because businesses need robust investment signals that indicate the value of low-carbon investments - both in the short and long term.
Existing inconsistencies could be addressed through the implementation of economy-wide policies which span departments. For example, clarity and consistency on the UK’s plan for strengthening and extending it’s approach to carbon pricing could help drive business activity and investment in a much more climate-friendly direction.
The Government must also introduce governance mechanisms that reassure businesses of the certainty of it’s emissions reductions commitments, including on carbon pricing. The Climate Change Committee is not currently effectively mandated to do this - which is true with regards to all net zero policies, not just carbon taxation. We propose that the Government takes the following steps to address this issue:
- Legislate for a clear price trajectory through 2030, accompanied by clear rules relating to how that price trajectory might be changed in response to its impact (for example, it could be raised in certain sectors if it was not having the desired effect on the UK meeting its Carbon Budgets);
- Also commit to long-term investment mechanisms for UK industry transition (such as Contracts for Difference for CCUS and hydrogen);
- Give new responsibilities to an existing body (such as a sub-committee of the Committee on Climate Change) or set up a new one to report on:
○ How the carbon price is affecting UK projected emissions;
○ Its impact against the UK carbon budgets;
○ Any offshoring (‘carbon leakage’) of emissions and their cause. As part of this, the body should pay particular attention to the amounts of emissions consumed in the UK, including from products made abroad and imported into the UK;
○ Impacts on consumers; and
○ The amount of private investment being brought in.
Such a framework could be established for all climate-based policy making. You can read more about our proposals for reforming the UK’s approach to carbon pricing across the economy in our Commission’s White Paper.[34]
August 2021