Today I’m sharing with you an update on some enormous developments in the fight against climate change. The Energy Transition is the great battle of our times, and we are now entering the arms race.
The UK has planted a very firm marker in the sand. Our brilliant Energy Transition investment Director, James Allen, is here to tell you more…
Editor, UK Uncensored
It used to be the case, in English history, that physical proximity to the King or Queen was what mattered most in terms of power at court.
To have “the king’s ear” was more literal back in those days – you had to be close enough to spend time with the monarch personally.
That’s why, when the king or queen moved, the whole court would move with them.
It’s worth noting, then, that these days the Climate Change Committee is based on Buckingham Palace Road, right near the traditional seat of power in the land. It’s a centuries old sign of importance.
Even more interesting, given that its recommendations, science-based, aggressive, and ambitious, are being accepted and are set to be passed into law by our glorious, brilliant, incompetent, cronyist government.
That observation is based on the fact that there is a lot to criticise in our current government. Perhaps you don’t like Brexit, lockdowns, or handing out massive contracts to mates of senior ministers. Or you don’t care for Priti Patel – and I don’t blame you there.
But government is complex. It’s certainly not all good, but it’s not all bad either. The success of the vaccine project is impressive and deserves credit, and so does a very recent development, which is discussed below.
UK to speed up target to cut carbon emissions
The hard facts are these, according to the environmental news and insight platform Edie.
“The CCC advised that the UK will need to deliver a 78% reduction [in carbon emissions] by 2035 if it is to meet its long-term net-zero commitment. In comparison, the UK was originally targeting an 80% reduction by 2050 under the Climate Change Act.
On Tuesday, Prime Minister Boris Johnson confirmed that the target would be introduced based on CCC’s recommendations. It builds on the UK’s new Nationally Determined Contribution (NDC) to the Paris Agreement, which will see the nation reduce emissions by 68% by 2030, compared to 1990 levels.”
So instead of reducing emissions 80% by 2050, we are aiming for 78% by 2035 – essentially bringing the same target forward by fifteen years.
It’s worth pointing out that this will now have to be proposed to parliament and passed into law as soon as possible/reasonable. It cannot, legally, be just empty words.
This matters enormously.
Let’s take the lifecycle of a vehicle as the first and easiest to understand reason why this development is so important.
Say you’re targeting 2050 – that’s roughly two vehicle lives away. Someone who bought a new petrol car yesterday could use it until it wears out in fifteen years’ time, and then buy another one, not going electric until 2049.
Now, however, pretty much all the next vehicle purchases will need to be electric in order to meet this target.
What we do today matters to a 2035 target.
Or take building infrastructure as another example.
How long do you think it will take to get the building stock of the UK fully insulated, double glazed, and carbon optimised?
Given that this is an almost totally new branch of the construction industry, there aren’t exactly hundreds of thousands of workers with the skills and knowledge to do this. In order to meet this target in 2035, action on all fronts needs to be ramped up right now.
This decision brings the climate crisis into the present day, into boardrooms and investment meetings.
How does the system work?
Well, the UK has committed to net zero emissions in 2050, and has also committed to allocating a carbon budget for each five-year period until that point, to act as shorter-term targets or ‘stepping stones’ to net zero emissions in 2050.
In the new report, the CCC recommended that the sixth carbon budget, which will run from 2033 to 2037, should be set at 965m tonnes of CO2 equivalent (MtCO2e – a common metric for countries’ emissions).
This allows for 193MtCO2e each year. In 2019, annual emissions stood at 522MtCO2e, so you can see what a dramatic reduction this is.
In the UK, we have already done brilliantly, having reduced our total emissions as a nation down from 800MtCO2e back in the early 1990s.
This has been achieved primarily through the dash for gas – a massive switchover from coal power to gas fired generators, which has seen us lead the G7 in terms of emissions reductions. But that is… old news now sadly. The low hanging fruit has been picked from the tree of decarbonisation.
Now we need things like a nationwide electric vehicle (EV) charging system, more energy efficient buildings, low carbon steel production, low carbon cement, a fleet level turnover to EVs, and more.
This will require dramatic expenditure.
However, that spending is not as dramatic as people used to think.
Nor is it even as dramatic as the CCC used to think.
So far and fast have the costs of climate solutions come down, that estimates are now that it will cost around half a percent of GDP per year until 2050, rather than the previously assumed 1-2% of GDP.
One thing that isn’t a coincidence is the timing of this.
The UK lays down a marker
Later this year, the UK is hosting the COP26 climate summit – a sequel to the summit in Paris.
Alok Sharma, who is the President-Designate for the COP26 event in Glasgow, said the following.
“Long term targets must be backed up with credible delivery plans and setting this net-zero focused Sixth Carbon Budget builds on the world leading legal framework in our Climate Change Act. If we are to tackle the climate crisis and safeguard lives, livelihoods and nature for future generations, others must follow the UK’s example.”
Sharma clearly believes that leading by example is the way to go. Hosts must show leadership, and this certainly seems to be a big theme for Boris Johnson too.
He is keen on these kinds of things – as Mayor he pushed for and delivered a brilliant Olympics back in 2012.
These flashy showcases of British superiority are exactly what he believes government should provide, and he has become fixated on demonstrating British leadership in this space.
This is slightly cynical, but he did used to be a climate change basher in his previous life as a reporter.
And as a reporter, one thing he did know about was timing.
The release of this news was deliberate, preceding President Joe Biden’s Leader’s Summit on Climate by a single day.
Johnson has laid down a marker.
And… By Wednesday, reports were already emerging that Biden had picked it up.
The Washington Post has reported that Biden is going to say that America will commit to cutting emissions in half by 2030.
It notes that the move would represent a “near-doubling” of the nation’s current Paris Agreement target, which is to cut emissions by 26-28% compared with 2005 levels.
That is a dramatic turnaround from the policies of Biden’s predecessor.
It’s all happening so fast, ever since the pandemic hit really, that it’s starting to feel like we are in a new arms race.
A race to the bottom – the bottom of the emissions table.
Mercedes Benz knows how important it is to win these races.
Over a hundred years ago, it released its first ever production car. Now, with car makers everywhere talking about going all electric by 2050 or 2040, Mercedes Benz went one cheeky step further, and announced that their offering would be electric only by…. 2039.
This just goes to show that global decision makers in the public and private sectors have finally realised that leading the way on the climate crisis will be praised, and rewarded by consumers, whereas previously they only saw it as a cost or a burden.
That former narrative has now been put to bed, and has been replaced by the Energy Transition Arms Race.
It has a nice ring to it, wouldn’t you say?
It is the first arms race that’s doing the world good rather than harm.
I would like though, to finish by quoting the chief executive of the CCC, Chris Stark. I feel his reaction sums up what has happened.
“I am delighted at this news; this is an important and historic decision. In committing to cut emissions by almost 80% in 2035, the UK has taken its place at the forefront of global efforts to reach net-zero – crucial in the fight against climate change.
By implementing our recommendations in full, the Government’s decision rests on the most comprehensive ever assessment of the path to a fully decarbonised economy.”
The immense scale of what is required is starting to dawn on all the right people.
The opportunity for investors today is equally immense. This is important.
The UK’s ambitions to hit -67% from 1990 emissions by 2030 and -78% by 2035 is a steeper-than-linear path to net zero.
This will mean throwing the metaphorical kitchen sink and more at road transport, buildings, industry, agriculture and, of course, clean energy, which should see huge amounts of extra investment.
The signs continue to be good.
Editor, Exponential Energy Fortunes
PS. The UK could be on the cusp of a massive windfall in one particular clean tech sector. Find out more here.