Sam Fankhauser and Simon Dietz write that the current policy mix of different taxes, subsidies, and regulation creates uneven incentives to cut emissions while it also fails to force individuals to change their behaviour. They outline four strategic interventions necessary for the success of the government’s Net Zero Strategy

Dietz, Simon

Fankhauser, Samuel

English

LSE Research Online

Four	key	measures	to	implement	Britain’s	Net	ZeroStrategySam	Fankhauser	and	Simon	Dietz	write	that	the	current	policy	mix	of	differenttaxes,	subsidies,	and	regulation	creates	uneven	incentives	to	cut	emissions	while	italso	fails	to	force	individuals	to	change	their	behaviour.	They	outline	four	strategicinterventions	necessary	for	the	success	of	the	government’s	Net	Zero	Strategy.Ahead	of	the	Glasgow	climate	summit,	the	UK	Government	has	published	itsstrategy	for	reaching	net	zero	greenhouse	gas	emissions.	The	government	hopesthat	demonstrating	Britain’s	commitment	to	net	zero	will	give	a	boost	to	the	difficult	Glasgow	talks.Producing	the	strategy	was	also	a	statutory	requirement	since	the	target	of	net	zero	emissions	by	2050	is	enshrinedin	UK	law.	It	is	to	be	reached	through	a	series	of	five-year	carbon	budgets,	and	each	time	a	new	carbon	budget	ispassed,	the	government	must	publish	a	strategy	for	meeting	it.	The	sixth	carbon	budget	for	the	period	2033-37	waslegislated	earlier	this	year	and	requires	an	emissions	cut	of	78%,	relative	to	1990,	over	those	five	years.The	new	strategy	contains	some	important	steps	towards	meeting	this	target.	There	is	a	commitment	to	fullydecarbonise	electricity	generation	by	2035	and	phase	out	new	petrol	and	diesel	cars	by	2030.	There	is	cash	tokickstart	the	hydrogen	economy,	support	zero	carbon	industrial	clusters	in	the	North-West	and	North-East,	andsubsidise	the	replacement	of	boilers	with	heat	pumps,	although	the	number	of	households	that	will	benefit	is	rathersmall.There	is	nevertheless	a	sense	that	the	strategy	does	not	go	far	enough.	Notably,	the	government	has	shied	awayfrom	anything	that	might	force	people	to	change	their	behaviour,	even	though	we	know	that	almost	two	thirds	of	themeasures	which	net	zero	requires	involve	some	form	of	behaviour	change.	In	a	recent	paper,	published	in	an	e-book,	we	have	outlined	four	strategic	interventions	that	would	help	bring	the	strategy	back	on	track.Making	polluters	payClimate	change	needs	a	multiplicity	of	interventions,	but	most	economists	and	many	policy	experts	put	carbonpricing	at	the	core	of	the	climate	policy	mix.	Pricing	carbon,	through	either	a	tax	or	emissions	trading,	begins	tointernalise	the	climate	change	externality	and	makes	polluters	pay.	While	the	UK	was	part	of	the	European	Union,its	main	way	of	pricing	carbon	was	the	EU	Emissions	Trading	System.	Upon	leaving	the	EU,	the	UK	chose	to	set	upits	own	emissions	trading	scheme,	which	by	and	large	mirrors	the	design	and	scope	of	the	EU	ETS.	While	thisensured	continuity,	it	left	open	the	need	for	a	broader-based	carbon	price	and	a	more	coherent	carbon	pricinglandscape.The	current	policy	mix	entails	a	combination	of	different	taxes,	subsidies,	and	regulatory	incentives,	which	create	anuneven	(and	sometimes	counterproductive)	incentive	to	cut	emissions.	Prominent	examples	include	the	way	the	taxsystem	discriminates	against	building	renovation	(facing	the	full	VAT	rate)	over	new	buildings	(zero-rated),	andclean	electricity	(which	faces	high	charges,	including	the	cost	of	renewable	energy	support)	over	natural	gas	(whichis	untaxed	and	in	the	case	of	residential	use	does	not	face	the	full	VAT	rate).	Carbon	pricing	gaps	also	prevail	inaviation,	agriculture	and	upstream	oil	and	gas	production,	among	other	sectors.Promoting	zero-carbon	investmentNet	zero	requires	sustained	investment	in	the	order	of	£50billion	a	year	by	2030,	about	five	times	current	levels.High	capital	needs	should	not	be	confused	with	high	economic	costs.	Over	the	economic	life	of	the	investments,	thehigh	upfront	costs	are	counterbalanced	by	notably	lower	operating	costs.	Electric	vehicles,	for	example,	are	stillexpensive	to	buy,	but	very	cheap	to	run.British Politics and Policy at LSE: Four key measures to implement Britain’s Net Zero Strategy Page 1 of 3		Date originally posted: 2021-10-29Permalink: https://blogs.lse.ac.uk/politicsandpolicy/net-zero-strategy-implementation/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/The	upfront	capital	nevertheless	needs	to	be	provided	and	promoting	zero-carbon	finance	is	thus	an	important	partof	Britain’s	decarbonisation	strategy.	Lenders	and	investors	are	becoming	increasingly	comfortable	with	zero-carbon	finance.	Indeed,	many	see	it	as	an	opportunity	for	Britain’s	financial	sector,	but	public	policy	is	still	importantto	aid	this	process.	In	particular,	the	financial	sector	is	expecting	the	government	to	provide	more	certainty	aboutthe	policy	environment	within	which	climate	investment	takes	place.	Most	financiers	would	prefer	governmentassurances	to	be	contractual	(as	they	are	in	renewable	energy	contracts),	but	more	certainty	can	also	be	providedlegally	(in	the	way	policies	are	written	and	enacted)	and	institutionally	(the	way	they	are	implemented	andenforced).Building	zero-carbon	skillsThere	is	no	evidence	that	a	zero-carbon	economy	is	detrimental	to	employment.	Indeed,	the	government	is	hopingto	create	two	million	‘green’	jobs	by	2030.	However,	the	distinction	between	zero-carbon	and	conventional	jobs	willprogressively	lose	meaning.	In	a	fully	decarbonised	economy,	all	jobs	are	zero-carbon.	A	more	useful	framing	is	tostudy	the	changing	demand	for	skills.	Even	if	green	employment	options	are	plentiful,	the	shift	into	new	occupationsmay	be	associated	with	structural	adjustment	costs.	Initial	estimates,	based	on	the	extrapolation	of	US	data,suggest	that	about	three	million	UK	jobs,	or	some	10%	of	the	workforce,	will	require	some	re-skilling.	A	further	threemillion	occupations,	for	example	in	electrical	engineering,	are	expected	to	be	in	greater	demand.Green	jobs	tend	to	make	more	use	of	non-routine	cognitive	skills	and	require	higher	levels	of	formal	education,	workexperience,	and	training,	but	overall,	the	skillsets	can	be	acquired	on	the	job.	Addressing	emerging	skill	gapsproactively	is	therefore	important:	it	removes	potential	delivery	bottlenecks,	enhances	productivity,	opens	up	newopportunities	and	ensures	a	smooth	transition	for	workers.	Substantial	zero-carbon	skill	demands	outside	thetraditional	growth	centres	in	the	South-East	of	the	country	suggest	that	green	re-skilling	could	also	support	thegovernment’s	‘levelling	up’	agenda.Leveraging	local	climate	actionClimate	policy	in	the	UK	is	relatively	concentrated.	Little	power	has	been	delegated	to	local	councils,	even	thoughthey	control	important	implementation	levers	in	areas	such	as	planning,	housing,	waste	and	local	transport.In	recent	years,	local	councils	and	community	groups	have	become	increasingly	active	on	climate	change.	A	recentreview	speaks	of	‘strong,	vibrant	and	broad-based	support	for	more	climate	action	at	the	local	level’.	Three	out	offour	local	councils	have	declared	a	climate	emergency	and	two	thirds	of	them	have	followed	this	up	with	astrengthened	climate	action	plan.	Many	have	experimented	with	participatory	structures	like	climate	assemblies,citizens’	juries,	or	climate	commissions.	Some	of	this	momentum	has	been	lost	during	the	pandemic,	but	there	isalso	a	sense	that	national	government	policy	often	hinders,	rather	than	supports	climate	action	at	the	local	level.Council	budgets	have	been	cut	dramatically	and	central	government	support	for	local	climate	programmes	hasbeen	intermittent.Policy	experts	have	called	for	better	coordination	across	governance	levels,	a	clearer	framework	for	delivery	andmore	predictable	long-term	funding	as	ways	to	enhance	the	zero-carbon	capacity	of	local	councils	andcommunities.	Supporting	climate	action	at	the	local	level,	while	maintaining	coordination,	is	our	final	strategicintervention._____________________About	the	AuthorsSam	Fankhauser	is	Research	Director	of	Oxford	Net	Zero	at	the	University	of	Oxford,	and	aVisiting	Professor	at	the	LSE.		British Politics and Policy at LSE: Four key measures to implement Britain’s Net Zero Strategy Page 2 of 3		Date originally posted: 2021-10-29Permalink: https://blogs.lse.ac.uk/politicsandpolicy/net-zero-strategy-implementation/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/Simon	Dietz	is	Professor	of	Environmental	Policy	at	LSE.				Photo	by	Thomas	Millot	on	Unsplash.British Politics and Policy at LSE: Four key measures to implement Britain’s Net Zero Strategy Page 3 of 3		Date originally posted: 2021-10-29Permalink: https://blogs.lse.ac.uk/politicsandpolicy/net-zero-strategy-implementation/Blog homepage: https://blogs.lse.ac.uk/politicsandpolicy/

Four key measures to implement Britain’s Net Zero Strategy

http://eprints.lse.ac.uk/112875/1/politicsandpolicy_net_zero_strategy.pdf

Four key measures to implement Britain’s Net Zero Strategy

Abstract

Similar works

Full text

Available Versions

LSE Research Online