UK
FABIAN SOCIETY
CHANGING COURSE
Rachel Reeves's first budget will define our ability to tackle the climate crisis, writes Tim Root
BY Tim Root
DATE 19 September 2024
FABIAN SOCIETY
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Rachel Reeves is preparing her budget, which is set to position Labour as “the party of wealth creation”. However, it is vital not just to create wealth, but to preserve the wealth we already have, which is increasingly threatened by climate breakdown. An example is the likely reduction by nearly a fifth of five important UK crops this year, due to unprecedented wet weather in the winter and spring. A survey of 400 climate scientists found that more than three-quarters judge that unless we increase emissions cuts, we face a cataclysmic global temperature rise of over 2.5°C. Numerous experts have emphasised that it is much more economical to invest now to limit climate breakdown, compared to huge potential impact of extreme weather if we fail to take preventive action. Storm Babet caused the death of seven people in Britain in October 2023, but even worse catastrophes await us.
Considerably higher proportions of under-30s than older electors voted Green at the election. Reeves pledged she would be Britain’s first green chancellor, saying: “I want the electorate to judge me by my actions on tackling climate change”. She must live up to this to avoid further voters deserting Labour.
If the world does not reduce emissions enough, every nation will suffer increased severe weather disasters. Food will become scarce, and we will face increasing numbers of climate refugees. Yet there are still upward pressures on worldwide emissions. These include the massive emissions due to wildfires, increased demand for air conditioning, and the increasingly vast amounts of electricity AI is likely to use. Our reduction in emissions must go beyond our own current targets, and be sufficient to help counter these predictable rises.
Leading for international co-operation
Developing nations’ leaders insist that the west caused climate breakdown and therefore should pay both to reduce it, and to help vulnerable nations repair the damage they have suffered. The UK aspires to exercise positive leadership in the COP negotiations. However, we will only have the credibility to pressure other nations to cut emissions if we cut our own sufficiently, and help persuade other wealthy nations to contribute climate finance for developing nations.
The Climate Change Committee stated this July that the government should “act fast to hit the country’s commitments”, and that “only a third of the emissions reductions required to achieve the 2030 target are currently covered by credible plans”. One of the chancellor’s best options is a Frequent Flyer Levy, which would target the 15 per cent of Britons who take 70 per cent of flights. It could raise at least £5bn annually. Ninety per cent of Britons support the levy. Emissions at altitude contribute much more to climate change than the same amount of fuel burned at ground level. The levy could be charged on a second flight within a year, with the rate increasing for third and subsequent flights. However, recent change has been in the opposite direction: the new governenment recently gave authorisation for a large expansion in flights from London City Airport, despite the fact that two-thirds of current journeys could have been made by train.
Expanding aviation will do much less for economic growth than promptly training the additional workers needed to extend the National Grid so we can maximise supplies of cheap renewable energy. Similarly, the Climate Change Committee has emphasised that the “development of a skilled workforce in buildings construction and retrofit is pressing”. It has assessed that this sector will require an additional 120,000 to 230,000 workers by 2030. Failure to train sufficient workers promptly will deter vital investment.
The rise in the energy price cap underlines the urgency of insulating draughty homes. If vulnerable people cannot afford to heat their homes adequately, many will become ill, which will cause additional expense for the NHS. The government should prevent fuel poverty, preferably by widening eligibility for universal and pension credit, and raising benefits to match the rise in fuel prices. It is important to move away from fossil fuel subsidies, which keep prices down artificially. They reduce the important incentive to use energy economically. Research shows that a lot of energy is wasted.
Cut car pollution
The Climate Change Committee recommends a cut of 72 per cent by 2035 in surface transport emissions. It highlights that new sales of electric cars and vans are not increasing fast enough. Emissions have reduced much less than expected, as many more people are driving heavy SUVs. New roads, such as the planned £10bn Lower Thames Crossing, would take investment away from vital schemes such as insulating homes – and insulation which cuts emissions and fuel poverty simultaneously. Congestion would be reduced much more effectively by discouraging car travel, which accounts for 76 per cent of miles driven. Cars constitute 58 per cent of vehicles using the Dartford crossings.
The latest National Travel Survey shows that 45 per cent of all car miles driven are for leisure. Higher income families drive four times further than poorer households. The budget should take steps to reduce this mileage substantially by increasing fuel duty, which, astonishingly, has been frozen since 2010. A substantial majority of Britons support taxing pollution. Cuts in national insurance, including employer’s contributions, and income tax rates for low earners, could offset increases in fuel duty. This would give everyone an incentive to rationalise their journeys and drive less. It would also boost the nation’s health by cutting air pollution. Some of the additional revenue should be invested in public transport, which is currently expensive and relatively inconvenient. Cutting car mileage would reduce emissions immediately, unlike other important policies such as insulation and heat pump installation, which depend on training many additional workers.
The Climate Change Committee has an over-optimistic plan that 11 per cent of emissions reductions could be achieved by techniques to remove greenhouse gases from the atmosphere or at the power station. Much of this is to be achieved by bioenergy with carbon capture and storage, a costly and energy-intensive process. There is little evidence for the successful use of carbon storage, with two well-known projects having shown major flaws. The government plans to invest £1bn in carbon capture and storage. It would probably be much more effective to invest most of this in speeding up National Grid expansion. Far too much land would be required for the crops to produce bioenergy, reducing both food production, and permanent forest carbon sequestration. In the event, carbon removal’s contribution to cutting emissions would probably fall well short of 11 per cent.
Labour’s manifesto states “The climate and nature crisis isthe greatest long-term challengethat we face.” The consequences of failure are unthinkable. Rachel Reeves’ budget must rise to this challenge, or the crisis will soon become even more severe.
BUILDING A CASE
The government's plans for a state-owned energy company will require public buy-in – Labour must start winning over voters now, writes John Morrison
DATE 19 September 2024
FABIAN SOCIETY
Rachel Reeves is preparing her budget, which is set to position Labour as “the party of wealth creation”. However, it is vital not just to create wealth, but to preserve the wealth we already have, which is increasingly threatened by climate breakdown. An example is the likely reduction by nearly a fifth of five important UK crops this year, due to unprecedented wet weather in the winter and spring. A survey of 400 climate scientists found that more than three-quarters judge that unless we increase emissions cuts, we face a cataclysmic global temperature rise of over 2.5°C. Numerous experts have emphasised that it is much more economical to invest now to limit climate breakdown, compared to huge potential impact of extreme weather if we fail to take preventive action. Storm Babet caused the death of seven people in Britain in October 2023, but even worse catastrophes await us.
Considerably higher proportions of under-30s than older electors voted Green at the election. Reeves pledged she would be Britain’s first green chancellor, saying: “I want the electorate to judge me by my actions on tackling climate change”. She must live up to this to avoid further voters deserting Labour.
If the world does not reduce emissions enough, every nation will suffer increased severe weather disasters. Food will become scarce, and we will face increasing numbers of climate refugees. Yet there are still upward pressures on worldwide emissions. These include the massive emissions due to wildfires, increased demand for air conditioning, and the increasingly vast amounts of electricity AI is likely to use. Our reduction in emissions must go beyond our own current targets, and be sufficient to help counter these predictable rises.
Leading for international co-operation
Developing nations’ leaders insist that the west caused climate breakdown and therefore should pay both to reduce it, and to help vulnerable nations repair the damage they have suffered. The UK aspires to exercise positive leadership in the COP negotiations. However, we will only have the credibility to pressure other nations to cut emissions if we cut our own sufficiently, and help persuade other wealthy nations to contribute climate finance for developing nations.
The Climate Change Committee stated this July that the government should “act fast to hit the country’s commitments”, and that “only a third of the emissions reductions required to achieve the 2030 target are currently covered by credible plans”. One of the chancellor’s best options is a Frequent Flyer Levy, which would target the 15 per cent of Britons who take 70 per cent of flights. It could raise at least £5bn annually. Ninety per cent of Britons support the levy. Emissions at altitude contribute much more to climate change than the same amount of fuel burned at ground level. The levy could be charged on a second flight within a year, with the rate increasing for third and subsequent flights. However, recent change has been in the opposite direction: the new governenment recently gave authorisation for a large expansion in flights from London City Airport, despite the fact that two-thirds of current journeys could have been made by train.
Expanding aviation will do much less for economic growth than promptly training the additional workers needed to extend the National Grid so we can maximise supplies of cheap renewable energy. Similarly, the Climate Change Committee has emphasised that the “development of a skilled workforce in buildings construction and retrofit is pressing”. It has assessed that this sector will require an additional 120,000 to 230,000 workers by 2030. Failure to train sufficient workers promptly will deter vital investment.
The rise in the energy price cap underlines the urgency of insulating draughty homes. If vulnerable people cannot afford to heat their homes adequately, many will become ill, which will cause additional expense for the NHS. The government should prevent fuel poverty, preferably by widening eligibility for universal and pension credit, and raising benefits to match the rise in fuel prices. It is important to move away from fossil fuel subsidies, which keep prices down artificially. They reduce the important incentive to use energy economically. Research shows that a lot of energy is wasted.
Cut car pollution
The Climate Change Committee recommends a cut of 72 per cent by 2035 in surface transport emissions. It highlights that new sales of electric cars and vans are not increasing fast enough. Emissions have reduced much less than expected, as many more people are driving heavy SUVs. New roads, such as the planned £10bn Lower Thames Crossing, would take investment away from vital schemes such as insulating homes – and insulation which cuts emissions and fuel poverty simultaneously. Congestion would be reduced much more effectively by discouraging car travel, which accounts for 76 per cent of miles driven. Cars constitute 58 per cent of vehicles using the Dartford crossings.
The latest National Travel Survey shows that 45 per cent of all car miles driven are for leisure. Higher income families drive four times further than poorer households. The budget should take steps to reduce this mileage substantially by increasing fuel duty, which, astonishingly, has been frozen since 2010. A substantial majority of Britons support taxing pollution. Cuts in national insurance, including employer’s contributions, and income tax rates for low earners, could offset increases in fuel duty. This would give everyone an incentive to rationalise their journeys and drive less. It would also boost the nation’s health by cutting air pollution. Some of the additional revenue should be invested in public transport, which is currently expensive and relatively inconvenient. Cutting car mileage would reduce emissions immediately, unlike other important policies such as insulation and heat pump installation, which depend on training many additional workers.
The Climate Change Committee has an over-optimistic plan that 11 per cent of emissions reductions could be achieved by techniques to remove greenhouse gases from the atmosphere or at the power station. Much of this is to be achieved by bioenergy with carbon capture and storage, a costly and energy-intensive process. There is little evidence for the successful use of carbon storage, with two well-known projects having shown major flaws. The government plans to invest £1bn in carbon capture and storage. It would probably be much more effective to invest most of this in speeding up National Grid expansion. Far too much land would be required for the crops to produce bioenergy, reducing both food production, and permanent forest carbon sequestration. In the event, carbon removal’s contribution to cutting emissions would probably fall well short of 11 per cent.
Labour’s manifesto states “The climate and nature crisis isthe greatest long-term challengethat we face.” The consequences of failure are unthinkable. Rachel Reeves’ budget must rise to this challenge, or the crisis will soon become even more severe.
BUILDING A CASE
The government's plans for a state-owned energy company will require public buy-in – Labour must start winning over voters now, writes John Morrison
BY John Morrison
DATE 17 September 2024
DATE 17 September 2024
FABIAN SOCIETY
Great British Energy has a familiar ring to it – almost as if it were, like Great British Railways, an old public asset brought back to life by the new Labour government. But GB Energy has no precedent in the UK, and there is nothing traditional about how it will operate. Whilst it will be a fully publicly owned asset, it will rely on leveraging private capital at ratios of at least three to one to realise the impact it proposes. Part of the Conservative party’s pre-election attack line was that GB Energy will not in itself deliver any new energy to the consumer’s door. Indeed, it will not. As a ‘business to business’ company it will lie ‘upstream’ from the energy utility markets.
But despite not being a consumer-facing company, GB Energy will require a ‘social licence’. It will be judged not primarily by the value it returns to shareholders (which will ultimately be taxpayers) but by how its investments affect the lives of British working people, by reducing household energy bills and creating new jobs while fully decarbonising electricity by 2030. Not easy to do given the sclerotic progress of recent years, and the de facto embargo on onshore windfarms which has only now been lifted.
To make things more difficult still, the challenge of deploying twice as much renewable energy over the next five years, when there is currently up to a 10-year wait to connect renewable assets to the grid, is one that GB Energy cannot tackle on its own. It must be part of a wider ecosystem of change. Whilst GB Energy is focused on the “delivery of clean power by coinvesting in technologies” and to “deploy local energy production”, the new National Wealth Fund will take a whole-of-economy approach to encouraging private investment into “ports, giga-factories, hydrogen, and the steel industry”.
The new government is also promising to shake up planning. Whilst the specifics are yet to be announced, this might include extending the compulsory purchase powers under the 2023 Levelling-up and Regeneration Act to include housing and renewable energy as nationally significant infrastructure projects. Green Belt protections will also need to be more nuanced.
GB Energy, then, is at the centre of proposed systemic change: despite appearances, its implications make it the most radical part of the King’s Speech. At present, the new government with its large majority has political licence to start this process. But the ‘wide but shallow’ majority Labour holds will soon be under attack via the nimbyism that is already knocking at the door of many backbench and opposition MPs. With streamlined planning will come reactions from communities the country over, many who agree with renewable energy in principle, but do not to wish to see it – or the grid infrastructure it requires – near their homes. The social licence must be established now, before the backlash builds.
The government needs to be very clear about why the transition is essential. The case must be made both in terms of our moral responsibility to protect the climate and the economic necessity for the UK to remain at the forefront of the race to net zero. Energy security is clearly central to this, which – over the longer term – will deliver cheaper energy. But to set up expectations that secure energy will mean cheap energy any time soon (compared with pre-Ukraine crisis levels) is misleading, a point Mark McAllister, the chair of Ofgem, has repeated over recent months.
The government also needs to set out the principles through which it will ensure the transition is both ‘fair’ and ‘just’. Tough decisions will need to be made about where to invest and where not to invest, where to build power grids and pylons, where the onshore wind and solar farms should go, and so on. The principles must be set now and so too the oversight and accountability mechanisms that will operate at pace over the next 25 years – both within the new company and externally. The new Net Zero Economy Authority in Australia is one emerging model to look at, integrating social considerations (eg impact on workers) into overall delivery structures. In the UK, we can look to the early thinking of the Climate Change Committee, Scotland’s Just Transition Commission or city-based initiatives such as those in London or Bristol, to frame how we might best deliver a fair and equitable transition. However it is done, streamlined planning and greater coherence from central government must be accompanied by dynamic accountability so that the public can see hard decisions can also be made fairly. GB Energy needs to build, and then maintain, its social licence.
Great British Energy has a familiar ring to it – almost as if it were, like Great British Railways, an old public asset brought back to life by the new Labour government. But GB Energy has no precedent in the UK, and there is nothing traditional about how it will operate. Whilst it will be a fully publicly owned asset, it will rely on leveraging private capital at ratios of at least three to one to realise the impact it proposes. Part of the Conservative party’s pre-election attack line was that GB Energy will not in itself deliver any new energy to the consumer’s door. Indeed, it will not. As a ‘business to business’ company it will lie ‘upstream’ from the energy utility markets.
But despite not being a consumer-facing company, GB Energy will require a ‘social licence’. It will be judged not primarily by the value it returns to shareholders (which will ultimately be taxpayers) but by how its investments affect the lives of British working people, by reducing household energy bills and creating new jobs while fully decarbonising electricity by 2030. Not easy to do given the sclerotic progress of recent years, and the de facto embargo on onshore windfarms which has only now been lifted.
To make things more difficult still, the challenge of deploying twice as much renewable energy over the next five years, when there is currently up to a 10-year wait to connect renewable assets to the grid, is one that GB Energy cannot tackle on its own. It must be part of a wider ecosystem of change. Whilst GB Energy is focused on the “delivery of clean power by coinvesting in technologies” and to “deploy local energy production”, the new National Wealth Fund will take a whole-of-economy approach to encouraging private investment into “ports, giga-factories, hydrogen, and the steel industry”.
The new government is also promising to shake up planning. Whilst the specifics are yet to be announced, this might include extending the compulsory purchase powers under the 2023 Levelling-up and Regeneration Act to include housing and renewable energy as nationally significant infrastructure projects. Green Belt protections will also need to be more nuanced.
GB Energy, then, is at the centre of proposed systemic change: despite appearances, its implications make it the most radical part of the King’s Speech. At present, the new government with its large majority has political licence to start this process. But the ‘wide but shallow’ majority Labour holds will soon be under attack via the nimbyism that is already knocking at the door of many backbench and opposition MPs. With streamlined planning will come reactions from communities the country over, many who agree with renewable energy in principle, but do not to wish to see it – or the grid infrastructure it requires – near their homes. The social licence must be established now, before the backlash builds.
The government needs to be very clear about why the transition is essential. The case must be made both in terms of our moral responsibility to protect the climate and the economic necessity for the UK to remain at the forefront of the race to net zero. Energy security is clearly central to this, which – over the longer term – will deliver cheaper energy. But to set up expectations that secure energy will mean cheap energy any time soon (compared with pre-Ukraine crisis levels) is misleading, a point Mark McAllister, the chair of Ofgem, has repeated over recent months.
The government also needs to set out the principles through which it will ensure the transition is both ‘fair’ and ‘just’. Tough decisions will need to be made about where to invest and where not to invest, where to build power grids and pylons, where the onshore wind and solar farms should go, and so on. The principles must be set now and so too the oversight and accountability mechanisms that will operate at pace over the next 25 years – both within the new company and externally. The new Net Zero Economy Authority in Australia is one emerging model to look at, integrating social considerations (eg impact on workers) into overall delivery structures. In the UK, we can look to the early thinking of the Climate Change Committee, Scotland’s Just Transition Commission or city-based initiatives such as those in London or Bristol, to frame how we might best deliver a fair and equitable transition. However it is done, streamlined planning and greater coherence from central government must be accompanied by dynamic accountability so that the public can see hard decisions can also be made fairly. GB Energy needs to build, and then maintain, its social licence.
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