Sorting Whitehall

Our commitment to net zero is a world beating ambition and has galvanised businesses, NGOs and government departments to start seriously developing short, medium and long term plans – more of the latter than the former.  However, this cannot be seen without recognising that the world has changed due to Covid-19.

Our realisation of our vulnerability has significantly increased – we know that we are not invincible.  Safety first will be demanded by the public and they will expect governments to anticipate, mitigate and protect them from unexpected, unpredictable and destructive risk. Climate change is neither unexpected nor unpredictable but is most certainly destructive. We cannot hide from the fact that climate breakdown will impact our whole economy and will have a devastating effect on all of our communities.

So, government taking on its new responsibilities to be “risk manager in chief” needs to re-designate climate change, not as economic transition, but as a health and safety risk that needs to be addressed throughout all policy and with urgency. All policies and measures must start to meet clear thresholds of being “Climate Safe”, or “Climate Hazardous”.

However, becoming “Climate Safe” is not a pain but should be regarded as an economic, health and societal gain – it should sit at the heart of shaping a new modern “future fit” economy.  While tragically we can expect to see economic wreckage all around us in the next few months,  we have a clear choice of what sort of economy we want going forward.  I would urge government to embrace the low carbon transformation as a modernisation project for the economy, moving from an old fashioned 19th Century economic model into a 21st Century economy.  While we will need to support some of our older-fashioned businesses, we must use our limited resources to focus primarily on creating a modern, highly productive, efficient, healthy and clean economy.  Net zero requires us to become hyper-efficient, always striving to get more from less, focusing on productivity and full utilisation of all resources. This should be music to Conservatives’ ears.

There are four key areas of policy and government practise that need to change – shinning a light on both the opportunities of the new economic model while never underestimating the seismic impacts of climate change.  We need to make climate a health and safety issue, mitigate for those that might be left behind, embrace net zero as an exciting modernisation agenda, and abandon GDP as an old fashioned and inappropriate metric of economic success.

Unblocking the Treasury

Prior to Covid-19, one of the best developments was the establishment of the net-zero unit in the Treasury.  Without the Treasury understanding that decarbonisation is a market opportunity here and abroad, all the excitement and hullabaloo will hit the Treasury brick wall.  Now they have to understand it at speed and need to reshape the underlying “plumbing” of the economic system to modernise how we value investment.

Decarbonisation at the heart of the Covid-19 recovery will in turn release the growing appetite for the private sector to invest, innovate and build strong low carbon businesses.  The Treasury have to see decarbonisation as an investment not an expense – and a short term investment at that – as the potential for climate safe innovation, low-carbon products and services will rise both here and abroad – an economy that is future fit and world leading.

But our approach must be fair too as the public do have a veto on net-zero policies. We need to understand that there will be winners and losers through this transformation, and we need to avoid repeating the mistakes of the past and leaving communities behind. Decarbonisation can, and should, be seen as a strong regeneration tool that can breathe new life into communities that have been sidelined, but this has to be done carefully with risk assessments – not to slow down the transformation but to incorporate appropriate mitigation for those impacted.

There is a particular example that will hit us very quickly after the lockdown is lifted.  The oil and gas sector are facing a double whammy of low oil prices today and demand into the future expected to be weak.  There are many excellent jobs in the sector, concentrated in particular regions. With the combination of Covid-19 and decarbonisation, we need to establish a clear plan to migrate these jobs and repurpose the supply chain to support the transition.

At the heart of this transformation we need to measure economic activity totally differently.  Net zero is a concept that runs counter to current growth metrics, and needs to focus on turbo charging productivity, driving our economy to deliver more from less.  We need to abandon the very 19th Century metric of GDP which has always delivered perverse outcomes. Take, for example, the 10 years that Japan had virtually no growth – except for one year, which was in the aftermath of the Kobe earthquake due to the investment just to restore the area to its original state. Not exactly growth in any other person’s terms.

Counting the benefits

This new “balance sheet” needs to account for the value that decarbonisation will deliver; wider economic and societal benefits which need to be measured and costed properly. These could include: energy efficiency; water efficiency; more productive use of resources which reduce imports; new business opportunities capturing new growing markets in higher margins; and low carbon products and services. Let’s also add into the positive bucket the improvement of the public health due to better air quality, healthier food, and less fuel poverty. If all these were properly costed, there would be strong monetary reasons to transform.

In the negative bucket are the costs of climate change across the economy and society – a large number if we get this wrong. This includes: the economic vulnerability of being invested in products and services that will be seen as old fashioned; facing carbon border tariffs on carbon intensive exports; natural disasters at home and abroad, the significant increase in global migration and the ongoing NHS costs of not addressing the health outcomes of our current trajectory.

We can also do some plumbing that the public and even the public purse would not feel or even notice.  We must decarbonise the wide range of standards embedded deep in our systems. The FIRES project from Cambridge is doing some extraordinary work identifying the multiple standards that are totally unnecessary and consume significantly more carbon than needed, such as the steel intensity of our construction (which we import from China), the carbon intensity of our gas supply set to support North Sea Gas quality, and many more.  Government should task the British Standards Institution to strip the carbon gold plated standards from the top 10 largest carbon emitters. This is how government can do some of the heavy lifting without asking consumers to fight their way to the least carbon intensive choice.

These plumbing reforms should fit right into Dominic Cummings’ philosophy around systems design and there is no better test than how we can address climate change, deliver net zero and at the same time deliver a vibrant modern economy. What is exciting is if we get these right, businesses and consumers will be able to take on the baton, accelerate, amplify and identify the new opportunities that lie ahead. But government must do the initial re-engineering.

The impacts of climate change are not pretty, and while I would never downplay the dramatic impacts of climate change, we also have to see that there is an optimistic vision for how we decarbonise. This is a modernising transformation, towards an efficient, productive, dynamic and future fit economy – with significant benefits for the public – not just their purse.

Laura Sandys CBE is chair of the Energy Data Taskforce, chair of the Food Foundation and former MP for South Thanet. She is also a member of Utility Week’s editorial board.

This article was featured in the Delivering Net Zero collection of essays, compiled by Bright Blue and WSP.