Thanks to Rishi Sunak’s keynote speech at the Conservative party last week, the national conversation has moved on from cars to trains, and specifically the foreshortening of the planned rail route as part of HS2.
In both cases the prime minister has appealed to pragmatism and cost savings; “the facts have changed”, he said, echoing Keynes’s “when the facts change, I change my mind”. Some might argue Keynes would have been in favour of spending money on HS2, within budget of course, but truth be told we will never know.
One obvious point remains, however: the facts of climate change haven’t changed at all. What do the events of the last few weeks mean in terms of Britain’s climate transition targets and how does that affect the investment prospects of affected industries? The UK was a leader in global terms, helped by being part of the EU bloc, but is now being perceived as a laggard. Its reputation has changed in a matter of weeks.
As the cliché goes, politicians are worried about the next election but voters are worried about their children and grandchildren’s futures as the planet warms up. Record high temperatures for September have reminded us of the urgency of this challenge.
Naturally, there’s a mismatch between the two timescales here. That’s particularly acute as the incumbent party, now 13 years in, faces down an opposition that bookmakers expect to depose it next year (or 2025 at the very latest). The delayed ban of petrol and diesel car sales to 2035 is part of this narrative. It’s an appeal to “common sense”, but also an attempt to win votes from those sceptical or priced out of the electric vehicle revolution. The previous prime minister, Boris Johnson, had brought forward the deadline to 2030, putting the UK five years ahead of Europe – a trading bloc it exited after much acrimony.
In 2006, then-opposition leader David Cameron visited the Arctic. He was pictured driving a pack of huskies on a glacier and promised to lead the “greenest government ever”. It was great optics and generated some good photo opportunities, but these days most modern European governments need to be seen to take climate change seriously. These are backstopped by international legal requirements. You can’t just cycle to work, as he did.
Subsequent Budgets, which lay out what the government plans to spend its money on, have fallen short of environmental groups’ expectations – and even missed out “green” measures entirely. The pandemic didn’t help in this respect, as short-term problems took priority.
In the wake of the initial pandemic lockdown came a “Ten-Point Plan for a Green Industrial Revolution” in November 2020 and the 367-page Net Zero Strategy (NZS) in late 2021.
Reading these documents produces a nice vision of a Britain whose landscape is dotted by wind farms, where homes are energy efficient and have solar panels on the roofs.
Commuters will ditch their dirty diesel cars and instead jump on a carbon-neutral buses or trains. Britons will embrace “flight shame” and holiday from home. On a corporate level, UK PLC will be a global leader in renewable energy, creating millions of jobs, spurring a win-win for economic growth and meeting net zero targets. Like all visions, this one has recently come into contact with the real world.
To show the government was taking climate change seriously, in February 2023 a new department was created: the Department for Energy Security and Net Zero. Previously “green” energy had been “bundled” into the business secretary’s wide portfolio. In terms of the wording, “energy security” is a nod to the Ukraine war and the transition away from dependence on Russian gas. In that context “net-zero” seems an add-on.
The UK is also tied into international climate pacts like the Paris Agreement, which monitor Nationally Determined Contributions (NDCs), effectively an emissions audit. The Climate Change Act of 2008 also established “carbon budgets”, which aren’t annual political events in Parliament but a legal restriction on carbon emissions, running as far out as 2037 (the sixth carbon budget).
Europe’s Green Laws
Britain’s exit of the EU may have been an act of political isolation but in terms of regulation we’re still in the EU’s orbit when it comes to climate.
Greater London’s Ultra Low Emissions Zone (ULEZ), which is thought to have prompted the government’s change of heart on cars, is based on European emissions standards (Euro VI, NOx and PM). For once, the row has not been framed as a battle against Brussels’ rules, but as a pushback against the “war on the motorist”. Parents of children in polluted London boroughs can now wonder why clean air has become a “woke” cause for right-wing activists.
Some European capitals have gone even further than London, imposing bans on diesel cars and charging more for SUVs to park. London is perhaps an outlier here: it’s run by a Labour mayor, it’s one of the most polluted cities in the UK and is a key transport hub. But it also has a well funded public transport system, which is the envy of cities like Manchester and Birmingham.
So while the newspaper headlines focused on the “net zero U-turn”, this wasn’t correct. It feels more like a dabbing on the brakes rather than a reversal of a process that has been ongoing for around 20 years. In the short term, combined with HS2 changes, it weakens the investment case for putting money into the UK and suggests that political will to tackle climate change is fickle.
Certainly the messaging is mixed. Is the UK ready to ditch fossil fuels for good or not? In the same week that net-zero was curtailed in the UK, a new North Sea oil field was commissioned, which will supply up to 10% of the UK’s oil needs up to 2030.
Given Britain’s political cycle, there may be grounds for optimism at least in terms of continuity; we tend to have a party in power for roughly 15 years, so the next government (if it’s Labour) could take us near to 2040. Any new administration will pick up the baton from the last, and certainly can’t be seen to be dismantling the architecture already built up. In my next article, I’ll look at what this political indecision means for investing.
