Government is now lagging behind energy companies in the green transition

Against expectations, the corporate sector has overtaken government in the seriousness of its commitment to the energy transition. In the UK the government’s grand commitments to deliver zero net emissions by 2050 still have no grounding in detailed policy. Perhaps Dominic Cummings, in his battle against the old culture of Whitehall, will spare a moment to shake up the structures which are failing to produce a viable energy policy.

Across Europe, the major energy companies by contrast are embracing the reality of the energy transition. Shell, Equinor, Total and Repsol have all committed to becoming net-zero emissions businesses by 2050 or sooner. Next month BP will publish the details of a radical shift in its business model over the next decade. The routes to the target vary—some are concentrating on the development of hydrogen and wind power, others on solar and energy storage technology. The moves are matched by shifts in capital expenditure and reductions in the carbon impact of both their own operations and the products they sell.

Such moves will no doubt be regarded with deep scepticism by some climate campaigners and there will be accusations of “greenwash,” since the companies are not abandoning their interests in oil and gas. But the shift in the balance of investment is clear. This is a commercial decision. Oil and gas are both oversupplied—a fact evident well before the arrival of Covid-19—and with prices low and unlikely to rise on a sustained basis, few projects open to investment by international companies look commercially viable. Low-cost supplies—from the Middle East and other producers, including the US shale industry—will pick up any growth in demand as we emerge from the current recession. The industry is therefore being entirely logical in embracing rather than resisting the transition to a lower-carbon world.

Climate campaigners should be celebrating the shift and focusing their concern instead on governments which have become the laggards in the climate story. Their contribution so far has been to offer commitments in most cases without any supporting plans to deliver on the promise.

The UK is a case in point, though by no means the only offender. The UK’s achievements on climate to date have been built on the decline of manufacturing industry and the removal of coal from the energy mix. The headline number—a reduction of CO2 emissions of over 40 per cent since 1990—hides the reality, which is that if emissions are calculated on the basis of what we consume (including imports) rather than what is produced, the total over those 30 years has fallen by little more than 10 per cent.

The UK was one of the first to embrace a 2050 target of zero emissions but policies have not been aligned with the objective. A white paper setting out future plans has been promised for several years but remains unpublished. The three steps most likely to help the transition are all being neglected.

The energy transition is about changing the pattern of energy use by individuals and businesses. The objective of energy policy should therefore be to make sure that low-cost, low-carbon alternatives are available to consumers and to use both regulatory and fiscal measures to encourage those consumers to make the shift.

In the short term, the introduction of a carbon tax in areas where substitutes for hydrocarbons are immediately available through electrification, such as domestic heating, is the place to start. The case has been well made in the recent report from the Zero Carbon commission but has been ignored.

The next level of the shift requires new infrastructure, of which the simplest example is the installation of sufficient, readily-accessible and standardised charging points, which would enable those who would like to use electric vehicles to do so. Current capacity is unevenly distributed and left to the discretion of local authorities which face massive competing claims on their scarce resources. For those of us living in the London Borough of Lambeth there are 140 charging points, but this is not nearly sufficient for 325,000 residents. In many rural areas the situation is even worse. In Herefordshire, a county covering 840 square miles, there are just 12 public charging points.

Some low-cost, low-carbon alternatives are available now. Others, particularly in sectors such as freight transport and industry, are not. One part of a serious strategy must focus on the research and development work necessary to make a shift possible in the future, with a National Laboratory modelled on the highly successful institutions which exist in Germany and America. The need is obvious but nothing happens, and even the useful initiatives which do exist—such the Faraday Institution, which is working on energy storage and battery technology—have still not been given the funding required to continue beyond the end of the current year. The work on the advances necessary to make hydrogen a major part of the energy system is similarly underfunded.

The process of transition—including the construction of new infrastructure and the development of new technologies—has the potential to deliver jobs and in some cases to create businesses which could operate internationally. Clarity of policy would encourage investment including by the major energy companies, many of which in the absence of a clear UK energy strategy are focusing their plans elsewhere.

Cummings’s attempts to shake up Whitehall are driven by a sense that the complexities and bureaucracy of the system are holding up necessary change. “Delivery” has been a major problem for many governments. Cummings doesn’t go out of his way to be popular but there is a core of truth behind his impatience. Energy is a prime example of a government policy which is not working and not responding either to the changes in market conditions or to the emerging technological possibilities which the companies are seeing. Energy policy is by its very nature hybrid. Progress requires the aligned combination of private capital and public policy. The energy industry is ready to move. Real change is now possible and public policy needs to be aligned to make it happen.