Ask the Expert: How can we ensure a just transition to a low carbon economy?

In our latest, Ask the Expert seminar, we heard from Professor Jim Watson, Director of UK Energy Research Centre, on how the UK can continue to reduce carbon emissions whilst paying more attention to the fair distribution of costs and benefits associated with becoming to a low carbon economy.

The SMF’s Ask The Expert seminar series is held in partnership with the ESRC, part of UK Research and Innovation.

The UK has embarked on an ambitious transition to becoming a low carbon economy, with long-term goal to reduce greenhouse gases emissions by 80% by 2050 (compared to the level in 1990).

A sustained fall in emissions by over 40% since 1990 whilst enjoying an overall growth in GDP has shown that economic growth and sensible climate policy focused on reducing greenhouse emissions are not mutually exclusive.

Some sectors have contributed to the decrease in emissions more than others: reduced reliance on coal, the changing industry landscape, and more energy efficient building standards have enabled the power, industry, and building sectors to produce a sufficiently lower amount of greenhouse gases as part of their operation whilst the emission from sectors such as transport has remained flat.

The long-term target is unlikely to be met without centralised guidance, therefore five-year carbon budgets have been implemented and aided by policies outlined in the Industrial Strategy and the Clean Growth Strategy. Whilst the first two five-year carbon budgets have been met and the third is also likely to be met, more action needs to be taken in order for this trend to continue.

Priorities for meeting future targets

Professor Watson outlined the following future policy priorities for meeting the next targets:

  • Realise the benefits of energy efficiency: Household bills are already £490 lower than they would have been without the energy efficiency improvements made since 2004, however they can decrease by further 50% if more socially cost-effective and technical developments are implemented;
  • Keep decarbonising the power sector at the lowest cost: with initiatives such as creating a market for onshore wind, effective incentives for home insulation, abatement measures in agriculture, and more tree planting, as recommended by the Committee on Climate Change;
  • Demonstrate and deploy low carbon heat: using cost-effective initiatives to move UK consumers away from using natural gas;
  • Create a market for Carbon Capture and Storage: as the UK is geographically well-placed to implement such a strategy in order to decarbonise industries;
  • Accelerate low carbon vehicles: as the current policy to phase out fossil fuel vehicles by 2040 alone would be insufficient to meet the Government’s long-term target.

What could a just transition mean for the UK?

The UK is aligned to the main target set by the Committee on Climate Change for emissions per capita to be equal across the globe by 2050; that is, every individual on the planet has the right to emit the same amount of greenhouse gases. However, as the UK was the first to go through the Industrial Revolution and has therefore been an emitter longer than any other country, Professor Watson hinted at the important role the UK could play as an economic and political leader in diminishing the reliance on carbon globally.

The debate surrounding the benefits and costs of moving away from carbon and towards more sustainable sources has mainly been dominated by the associated effect of this move on energy bills. Although energy prices are higher in the UK than in other European countries, one of the underlying cases is higher network costs rather than policy – indeed, taxes and levies make up a smaller proportion of energy prices in the UK than they do in Sweden, Germany, or France. Therefore, further improvements in energy efficiency will have a significant role to play in reducing bills for households throughout the country.

Source: UKERC (2018) , What’s in a Bill?

Research undertaken by Professor Watson and his team has shown that the British public are willing to accept some increase of their bills in the meantime (between 9% and 13%) in order to help fund the future energy transition. However, this willingness is conditional on the parallel commitment of energy companies and the government to help facilitate the increased use of more sustainable energy. Professor Watson noted that, currently, neither is particularly trusted in this regard by the public.

Transition could be derailed if government policies fail to build in justice across income groups. In 2018, around 1.5% of the household income of the lowest earners in the country was spent on energy bills, in comparison to under 0.2% of the household income of the highest earners. Proposals explored in research by the UKERC showed that funding the transition to a low carbon economy through the energy bills of businesses would have some redistributive effect. General taxation, by design, was the most redistributive policy explored. However, Professor Watson highlighted that policy should also evaluate the extent to which households across the income distribution have benefited from energy saving initiatives such as building insulation and solar panels.

Source: UKERC (2018), Funding a low carbon energy system: a fairer approach?

Policymakers should also be cautious of the implications to the wider economy which can arise regionally when transitioning away from carbon. For example, the oil and gas energy sector in Scotland currently contributes more to the Scottish economy and hires twice as many people as its renewables and low carbon counterpart. Additionally, switching the heat supply to a low carbon alternative such as electricity or hydrogen would create many different ‘winners’ and ‘losers’ across the energy supply chain. Regional policy could be more beneficial than centralised decisions as local authorities and community groups are taking an increasing interest in these issues.

Want to hear more on this topic? Subscribe to the SMF Ask The Expert podcast and hear Professor Jim Watson in conversation with James Kirkup

Note: The seminar took place on May 1st 2019, a day before the Committee on Climate Change published their latest advice to the Government.


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