CCC urges climate resilience mandate for regulators

Utilities regulators should be given a new duty to ensure resilience to climate change is factored into their sectors’ investment plans, the Climate Change Committee (CCC) has urged.

In a new report the CCC concludes it is “plausible” that the UK will require £10 billion worth of investment per annum to adapt to the consequences of climate change.

Among a series of recommendations on how to facilitate this level of increased investment, the statutory adviser on climate change says industry regulators should be equipped with a new climate resilience mandate.

This would involve including the need for investment in adapting to climate change among the mandates and strategic priorities of regulators, like Ofgem and Ofwat, it says.

The new report says the structure of the UK’s system of regulation allows for investment in resilience by infrastructure operators, which is paid for through customer bills in sectors like energy and water.

However, this will only prove an effective funding route for investment in adaptation to climate change if it is driven by a “clear and explicit climate resilience mandate for regulators”, it says.

The government has a role to put this mandate in place aligned to sectors’  long-term resilience needs, says the CCC, adding that a “well-defined and operable expected resilience standard aligned to national level goals” will also be required.

“If this is put in place, infrastructure owners and operators will be required to invest the appropriate amounts towards improved resilience to climate change.”

The new duty should include identifying, creating and setting out how to help realise project pipelines for adapting to climate change, which would be aligned with national objectives.

The government can help to coordinate approaches where different types of infrastructure have interconnected risks, such as the impact weather-related power failures can have on the water sector.

The report says climate resilience mandates and regulation will need to be “well designed” to ensure revenues are available at the correct scale and are used to support long-term measures to tackle the issue.

Novel approaches to infrastructure regulation are needed because the five-year cycles typical within infrastructure regulation can deter investment in projects with longer-term climate adaptation benefits, the CCC says.

In addition, resilience standards aligned to national-level objectives should be introduced for agencies like the Environment Agency.

Ben Caldecott, a member of the CCC’s adaptation committee, said: “Government funding and public financial institutions have a critical role to play in unlocking private investment but we also need others to play their part. Regulated industries, like the railways and water sector, need to have updated mandates so they can increase investment in climate defences. Financial regulators and government policy must push companies and financial institutions to do much more, including through mandatory adaptation planning and enhanced supervision.

“Integrating climate risk into economic and financial decision-making across society is essential for urgently needed investments in our national climate resilience to materialise.”