Taking on the net-zero challenge
The UK is committed to achieving net-zero greenhouse gas emissions by 2050, but getting there is not straightforward
In 2019 the UK became the world’s first major economy to introduce a legal obligation to achieve net-zero greenhouse gas emissions by 2050, in line with broader commitments made as part of the Paris Agreement on combating climate change.
The move signified a clear commitment by the UK government to address Britain’s role in mitigating global warming. It also required the government to set out parameters by which the UK creates an equilibrium between the amount of greenhouse gases it emits versus those it removes from the atmosphere, otherwise known as achieving net zero.
While this might sound relatively straightforward, for a country whose emissions rank 36th in the world per capita and 17th overall, reaching this ambitious target will be anything but.
On the face of it, decarbonising the economy is a herculean task that touches almost every single sector and industry. And while early signs of progress are beginning to show, off the back of historical government initiatives, it is clear that without drastic intervention, achieving net zero by 2050 may be impossible.
“You have to do the maths and work backwards from the long-term targets to work out what this means for the next five years or ten years,” says Professor Charlie Donovan, executive director of the Centre for Climate Finance and Investment at Imperial College Business School. “And when you do the maths, you find that a dramatic change has to start today or even yesterday.”
The central problem is that such challenging targets require a consolidated, cross-sectoral approach to a degree never before seen in the UK. By their very nature, these targets necessitate both updates to pre-existing infrastructure and the development of new systems at the same pace as technological innovation.
Put plainly, when it comes to achieving net zero, the ability of every single sector to meet its targets hinges on the available infrastructure being one step ahead of demand; it’s the baseline upon which everything else depends.
According to Donovan, the key challenge in all this is for policymakers. “They must properly price the costs of climate change, manage the risks the private sector cannot manage for itself and provide a strategic direction for all sectors, but especially infrastructure. That’s not just long term, but also speaks to the abundance of short-term actions required.”
The green industrial revolution
Another significant and unique challenge for infrastructure is that it’s a sector that depends predominantly on fixed assets, whether that’s electricity distribution, chargepoints for electric vehicles (EVs) or offshore wind farms. Upgrading pre-existing structures therefore needs to be carefully planned to minimise disruptions to the wider economy.
At the same time, new infrastructure must be developed to enable areas of innovation, such as hydrogen, carbon capture and storage, and this infrastructure needs to be underpinned by a regulatory framework set by the government. In many cases, this is still pending.
As a nod to the scale of the task, the government recently set out a ten-point plan for what it calls the Green Industrial Revolution, detailing the key areas of focus and an outline for what needs to be done. According to Donovan, although it provides a good start, the government’s guidance has not yet gone far enough and needs more detail. “Do I see sufficient alignment across the various levels of government?” he asks. “Not yet.”
The net-zero investment problem
So how much will this cost? According to PwC’s recent Unlocking Capital for Net-Zero Infrastructure report: “£40 billion per year is required, on average, to be invested in new low-carbon and digital infrastructure over the next ten years, with similar levels thereafter, to meet the UK’s net-zero target by 2050.” In terms of the distribution of any investment, the report identifies the key areas of investment as the power system, transport, industrial and residential buildings, and digital infrastructure.
For Dr Peter Bird, managing director of consultancy BRG, there are two key priorities before anything else. “The first challenge is to replace all fossil fuels with clean energy and the second is to ensure there are enough power-generation facilities to meet the increased demand,” he says.
There is perhaps no organisation that plays a greater role in this in the UK than the National Grid, given that clean energy will underpin the success of every other area.
“In the UK, we are in the middle of a transformation, with the energy we use increasingly coming from cleaner greener sources,” says Graeme Cooper, project director at National Grid. “The National Grid is at the heart of that energy transformation, investing around £1.3 billion each year to adapt and develop our transmission network to connect new sources of low-carbon and green energy to our homes and businesses.”
Donovan says the greatest obstacle is not a lack of available capital, but a need for policymakers to derisk investment opportunities and update the structures in place to match investors with projects. “There’s a disconnect between the volume of capital that needs to flow into infrastructure and the way capital markets are set up to do that,” he explains.
“We’re in a situation in which we’re trying to capture what could be the greatest economic opportunity of the century, but the difficulty is infrastructure as a long-term investment prospect poses a lot of challenges for capital markets that are increasingly focused on the short term.”
Donovan believes clear strategic policy guidance from the government is needed to achieve this. Bird agrees: “A full and detailed roadmap to net zero has yet to be established and that has to be a first step.”
Putting consumers at the centre
None of this innovation will deliver progress without the help of consumers. The greatest challenge of all is ensuring they are incentivised by government initiatives and ease of access to switch to greener sources of power in their day-to-day lives.
Ofgem, the energy regulator, agrees that consumers must be at the centre of any net-zero strategies. “We’re working to deliver a greener, fairer energy system for consumers,” says Akshay Kaul, director for networks at Ofgem. Their priority, he says, is “making sure the investment made by the monopoly energy networks will deliver cleaner energy at the lowest cost to consumers.”
And beyond cost, it also needs to be easy for consumers to use, says Patrick Reich, co-founder and chief executive of Bonnet, a new app with funding from Porsche that aims to address the fragmented charging infrastructure for EVs, making it easier for consumers to charge them.
He argues that, as well as being readily available, access to infrastructure must be a transparent and easy process because the more complicated it is, the less likely people are going to use it. In the case of EV charging, Reich believes drivers “should be at the centre of any strategy if it is going to be successful”.
One thing is clear, in a fragmented market, the ability of the UK to deliver on its net-zero targets rests largely on the government’s ability to draw together efforts in a consolidated way, with close input and oversight between policymakers, investors, tech companies and consumers.
In the context of the sustainable innovation happening all over the UK, the challenge for policymakers is finding a way to draw all these different approaches together in a clear and co-ordinated way. Without this, the country’s ability to meet the legal commitments it has made with the net-zero challenge is in peril.