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Businesses positive about a UK net zero emissions target but it must come with bold innovation support

4th April 2019

Based on extensive business engagement and new research from Vivid Economics and the UK Energy Research Centre, the Aldersgate Group launches two new reports today [1]. They argue that a net zero emissions target could provide a significant industrial opportunity for UK businesses as long as it is accompanied by a much bolder innovation policy and ambitious market creation measures that are informed by a clear understanding of lifecycle emissions. These policies should seek to accelerate the innovation at scale of critical technologies such as carbon capture and storage and hydrogen, and rapidly grow the demand for ultra-low carbon infrastructure, products and services.

Both reports, which come ahead of the publication of the Committee on Climate Change’s advice to government, will be presented at an Aldersgate Group event hosted by RICS from 9.30am - 11:00am on Thursday 4th April [2]. See business reactions below.

1. The first report, Accelerating innovation towards net zero, from Vivid Economics and the UK Energy Research Centre (UKERC) commissioned by the Aldersgate Group, sets out key recommendations to accelerate innovation. These recommendations come from a review of past case studies of rapid innovations relevant to decarbonisation from the banking, manufacturing and energy sectors [3]. 

2. The second report, Zeroing in: capturing the opportunities from a UK net zero emission target, from the Aldersgate Group, establishes key policy measures that should accompany a UK net zero emissions target to maximise industrial opportunities for UK businesses and avoid unintended consequences. It features innovative case studies from the energy, steel, aviation, manufacturing, ICT and cement sectors showing how businesses are already taking action towards net zero emissions.

Key messages to government include:

1. Urgently accelerate efforts to meet current carbon budgets to provide a credible foundation from which to achieve net zero emissions. The UK is currently not on track to meet the fourth and fifth carbon budgets [4]. To rectify this and put the UK on a credible and cost-effective pathway to achieve net zero emissions, government must urgently pursue low-regret policy options. These include significantly improving energy efficiency in buildings through the introduction of binding regulatory standards and fiscal incentives and accelerating the roll-out of zero emission vehicles through tightening emission standards in the 2020s and guaranteed plug-in vehicle grants.

2. Provide long-term visibility to businesses by setting a net zero target as soon as possible after the CCC publishes its advice [5]. Long-term clarity is essential to inform cost-effective business investment decisions in the new business models and high capital cost infrastructure required to achieve net zero emissions. Government should work with industry to set sector-based decarbonisation roadmaps underpinning this target, following the example of the Swedish fossil free industry roadmaps.

3. The Government’s innovation policy should overcome the fear of failure and be focused on demonstrating the viability of critical technologies and systems at scale, including through public-private funding arrangements. This should include supporting at scale demonstration of Carbon Capture and Storage (CCS), the use of hydrogen in heating, Direct Air Capture technology and continued innovation in offshore wind. Government – and its stakeholders – should recognise that successful and unsuccessful trials provide equally valuable lessons to inform good policymaking. 

4. Market creation policies based on an understanding of lifecycle emissions are essential to accelerate innovation and deploy new low carbon infrastructure, goods and services at scale. Market standards informed by lifecycle emissions can help grow the market for critical infrastructure and products such as ultra-low carbon building materials, guarantee a level playing field for business and avoid offshoring emissions. Stable revenue policies such as through incentives for fossil fuel using industries to store their carbon emissions can provide a market for CCS.

5. Mandate new or existing institutions to accelerate innovation and co-ordinate the early stage deployment of complex technologies such as low carbon heat and CCS. Past innovations show that third party institutions can accelerate knowledge sharing between businesses and sectors and co-ordinate the efficient deployment of complex infrastructure. For example, government-backed organisations in the UK and Denmark ensured that successful wind energy designs proliferated more quickly, whilst the Gas Council in the UK played an essential role in the late 1960s in developing bulk gas supplies, rolling out a gas network and supporting the rapid customer take-up of gas boilers and central heating in homes.

6. Support the UK’s workforce so it can benefit from the economic opportunities that a net zero target could provide. This requires developing a cross-departmental education and training strategy to ensure the workforce is equipped with the skills required by the net zero transition, working with industry to understand future needs. Government should also work with businesses and Local Enterprise Partnerships to encourage low carbon supply chain investment decisions to be made in parts of the country facing high unemployment risks and where similar skill sets can be found.

7. Use the UK’s diplomatic reach and new trade policy to promote the adoption of net zero targets globally. Through its extensive diplomatic network of climate attachés, the UK can play an influential role in encouraging the adoption of net zero targets globally in the run-up to the COP26 climate summit in December 2020. The UK’s future trade policy after Brexit should support the delivery of its net zero target and promote growing trade in low carbon goods and services.

Nick Molho, Executive Director, Aldersgate Group, said: “UK businesses are ready to take up the challenge of delivering a net zero emissions target but bold innovation and market creation policies will be essential to give them the support they need. Businesses want to see the government’s innovation policy move beyond the ‘fear of failure’ and trial critical technologies such as CCS and hydrogen at scale in order to inform key policy decisions in areas such as heat and industrial decarbonisation. Support for innovation must be combined with measures informed by lifecycle emissions, such as markets standards, to grow the demand for ultra-low carbon infrastructure, products and services and set a market level playing field in the process.”  

Alex Kazaglis, Principal, Vivid Economics, said: "Achieving a net zero emissions goal requires a vast economic transition in just a few decades. History tells us that such transitions are possible, but a broad program of government action is vital. Government can accelerate the adoption of innovative technologies through demonstrating key technologies at-scale, making use of important skills and knowledge spillovers between sectors, strengthening market signals and harnessing the disruptive power of digital technologies." 

Professor Jim Watson, Director, UK Energy Research Centre, said: “Accelerating innovation will be essential if a net zero target is to be met by the middle of this century. Our report shows this is likely to require governments to implement comprehensive, mission-oriented policy programmes that include support for R&D, demonstrations and market creation. Institutional innovations could also be needed - including, for example, a new public delivery body to develop pipeline and storage infrastructure for carbon capture and storage (CCS).”

Steve Waygood, Chief Responsible Investment Officer, Aviva Investors, said: “Aviva Investors is currently directly investing over £500 million a year in innovative infrastructure projects that deliver significant emissions reductions. A net zero emissions target would give us the confidence we need to scale up these investments and help to deliver a zero carbon economy in the UK. To make further progress, we need government to pursue market creation policies based on an understanding of lifecycle emissions and innovation policies that overcome the fear of failure and focus on demonstrating the viability of critical technologies and systems at scale.”

Andy Wales, Chief Digital Impact and Sustainability Officer, BT Group, said: “We need policymakers to continue to set more ambitious targets, encouraging businesses to make their own bold commitments and generating greater positive momentum to a net zero future. We have set an ambitious net zero by 2045 target, but we need collaboration and policy support to realise it.” 

Martin Casey, Director, Public Affairs & Communications UK & Public Affairs EU, CEMEX, said: “CEMEX supports efforts to understand better how the UK can achieve net zero, and therefore welcomes these new reports. CEMEX’s use of fuels derived from unrecyclable wastes in cement manufacture helps us contribute to the circular economy whilst also reducing our carbon emissions. We are eager to understand further how the journey to net zero could be achieved, including utilising carbon capture use and storage technologies without negatively impacting competitiveness. It is essential that the government gets on with the job of trialling critical technologies at scale to support business in this process and considers how lifecycle emissions can better inform future policy measures.”

Sam French, Business Development Manager, Johnson Matthey, said: “The latest IPCC assessments are showing that global emissions need to move to net zero by 2050, which presents a great opportunity for UK industry to implement existing low carbon technologies and develop new ones to be one of the leaders in this transition to a net zero carbon world. 

At Johnson Matthey we are driving innovation in low carbon hydrogen generation, batteries and fuel cells, as well as constantly looking for new areas of sustainable chemistry to help meet these future needs. To put UK businesses at the forefront of global efforts to move to net zero, further policy support is needed to drive large scale, low carbon projects using known technologies and help businesses to “learn by doing” and to incentivise future-focused innovation by providing a clear market demand for these technologies.”

Benet Northcote, Partner & Director of Corporate Responsibility, the John Lewis Partnership, said: "Urgent action is needed to keep global warming below 1.5C to avoid the most dangerous impacts of climate breakdown. Now, more than ever, businesses and government must respond with ambitious and credible zero emissions targets. At the John Lewis Partnership we are committed to making significant emissions cuts in the vital period of the next ten years through investment in new refrigeration technology, biomethane-powered trucks and renewable electricity, and we have set out a clear path to becoming a net zero operation by 2050 at the latest."

Alexander Law, Public Affairs Manager, Michelin Tyre, said: "At Michelin, we fully support the aim of reaching net zero carbon dioxide emissions in keeping with the 2015 Paris Agreement. This will require clarity from government on the pathway going forward as these global issues require long-term planning and structural changes and not just quick fixes. In particular we support effective and robust carbon pricing mechanisms which should help change investment decision-making processes without penalising consumers unduly." 

Dr Jonathan Scurlock, Chief Adviser, Renewable Energy and Climate Change, National Farmers' Union, said: “Climate change is one of the greatest challenges of our time, and British farmers are ready to take action. The NFU’s ambition is to strive for net zero greenhouse gas emissions across the whole of agricultural production by 2040. A combination of policies and practises are needed to achieve this aim, and the NFU is looking to build upon our work on industry-led initiatives such as the Greenhouse Gas Action Plan to help deliver this. We look forward to a smart and well-targeted partnership with Government and other agricultural stakeholders.”

Chris Fry, Infrastructure & Regeneration Director, Ramboll, said: “The Zeroing in report highlights the need to accelerate cost effective short term action, whilst establishing a clear, long term framework for more significant changes and technological breakthroughs. Accelerating decarbonisation may be best served by policies and industry initiatives designed to galvanise the uptake of existing solutions. For example, leveraging investment in major regeneration and infrastructure renewal programmes to embed energy efficiency, resource efficient digitalised design and harnessing waste heat sources for district heating.”

Sean Tompkins, CEO, Royal Institution of Chartered Surveyors, said: “These reports show that people shouldn’t fear the transition to a low-carbon economy. Buildings account for 60% of global electricity use and produce more than one-third of all greenhouse emissions, so our profession should see it as a huge opportunity to innovate and modernise. That’s why we’re supporting them with resources, skills and standards to ensure this happens.”

Sarah Handley, Carbon Neutral Programme Manager, Siemens plc, said: “Siemens is committed to be carbon neutral by 2030, working with our customers to deliver intelligent and sustainable solutions. We call on government to provide leadership so we can all play our part in addressing the risks of climate change.” 

Stuart Hayward-Higham, Technical Development Director, SUEZ recycling and recovery UK, said: “SUEZ is taking part in a number of industrial collaborations across our operations as we align our business and sustainability goals both laterally across the value chain and vertically with other value chains, with those of our customers and industrial partners. However, to make further progress, we need government to openly prioritise the green growth sectors it wants to support so we can explore the industrial opportunities for using residual wastes as potential feedstocks for this future green growth agenda (from aviation fuels, to sugars, polymers and heat offtake). We will invest in new transformational infrastructure needed if the policy direction is clear.”

Bevis Watts, Managing Director, Triodos Bank UK, said: “We believe that a fundamental transition is needed away from a carbon based economy to a renewable one. To stimulate this transition, we are lending and supporting investment in this sector, focusing on financing solar, wind and hydro energy as well as energy efficiency and new technologies. In order to accelerate investment in projects that will help to cut emissions in the UK, we need government to provide long-term clarity and visibility on a net zero target to give us greater confidence in investing in the innovative low carbon technologies that will be crucial to achieving a net zero emissions goal in the UK.” 

Julia Barrett, Director, Willmott Dixon Re-Thinking, said: “Sustainability makes good business sense and at Willmott Dixon, setting challenging carbon reduction targets makes us more efficient and effective. We have exceeded our current goal to reduce our carbon intensity by 50% by the end of 2020 compared to 2010 levels. However, extending beyond the 59% reduction we have achieved towards the imperative of net zero emissions will get progressively harder without accelerated government support for this agenda. We would welcome regulatory standards to improve energy efficiency in buildings, and standards, informed by lifecycle analysis, to grow the market for low carbon building materials.”

Dr Maria Brogren, Director of Sustainability and Innovation, WSP Sweden, said: "The Swedish government aims for Sweden to become the world’s first climate neutral welfare society. The target is net zero emissions by 2045. To help meet this goal, WSP Sweden has pledged to ensure its operations are climate neutral by 2040 and to possess the competence to help our clients to cut their CO2 emissions in half by 2030.

Support from government is essential to meet the national target, and policy initiatives such as facilitating the development of climate neutrality roadmaps for different business sectors and allotting funding for flagship projects, such as climate neutral steel production, is crucial. These actions provide a clear direction for the Swedish business sector, which facilitates the investments needed to reach net zero.”

—ENDS—

[1] These two new reports will be available on the Aldersgate Group’s website at the following link from 00.01 Thursday 4 April 2019 http://www.aldersgategroup.org.uk/our-reports

[2] This event will be held from 9.00am - 11.00am on Thursday 4th April at RICS, 12 Great George Street, Parliament Square, London SW1P 3AD. Chaired by Nick Molho, Executive Director at the Aldersgate Group, the event will feature a review of each report from Nick Molho and Alex Kazaglis, Principal at Vivid Economics. The event will then proceed to a panel debate with Dr Maria Brogren, Director of Sustainability and Innovation at WSP Sweden, Sam French, Syngas New Market Manager at Johnson Matthey, Sarah Handley, Carbon Neutral Programme Manager at Siemens plc, Chris McDonald, Advisor at the GREENSTEEL Council, Graham Meeks, Head of Policy at the Green Investment Group and Dr Jonathan Scurlock, Chief Adviser, Renewable Energy and Climate Change at the National Farmers' Union. 

[3] Case studies reviewed in this report include (i) the deployment of the ATM network and cash cards across the UK; (ii) the roll out of a gas network and central heating in the UK; (iii) the development of wind turbines in Denmark and the UK; (iv) moving from late-stage adoption of steel technology in South Korea to being the world-leading exporter; and (v) the failure to develop commercial-scale CCS to date across the world. A table summarising the report’s recommendations can be found on page 4 of the report.

[4] CCC (June 2018) Progress Report to Parliament 

[5] The UK has an existing target of at least an 80% emission reduction between now and 2050 against 1990 levels under the Climate Change Act. The CCC has been asked by Minister of State Claire Perry MP, along with the Scottish and Welsh governments and support from senior Northern Ireland officials, to review the UK’s long-term climate targets, and their advice is expected on 2 May 2019.