3The Clean Growth Strategy
24.The Government published its ‘Clean Growth Strategy’ in October 2017, setting out how it intended to meet the fourth and fifth carbon budgets.64 This Chapter assesses the strategy as a whole, with specific sectors being discussed in subsequent chapters.
Policy gaps
25.Professor Jim Watson, Director of the UK Energy Research Centre, and Malcolm Brinded, representing the Royal Academy of Engineering and allied institutions, both praised the commitment expressed in the Clean Growth Strategy to meeting the UK’s emissions targets.65 Several stakeholders, such as the Renewable Energy Association, also pointed to what they perceived to be a lack of urgency in the strategy, or a mismatch between the ambition of the strategy and the Government’s current policies.66 When it published the Clean Growth Strategy, the Government estimated that the quantifiable policies proposed within it, if implemented, could lead to the UK achieving 94% and 93% of the emissions reductions needed to meet its fourth and fifth carbon budgets respectively (compared to baseline emissions in 1990).67 The Government’s most recent projections have updated this to 95% and 93% respectively.68 The Minister for Energy and Clean Growth, Claire Perry MP, told us, however, that she considered the projected shortfall to be “small”, and argued that since the projections were calculated she had seen “an acceleration of focus and policy delivery and a further reduction in cost”:
The Committee will have seen things like the spring statement and the announcement that we want all new homes from 2025 to be built without fossil fuel heating, which is an example of a policy for which we have costed no carbon reduction at all […] I am confident that we will meet these budgets within the timeframes we are given.69
Chris Skidmore MP, interim Clean Growth Minister, subsequently wrote to us to list the main policies whose emissions reductions potential had not yet been included in the Government’s projections:
- the Future Homes Standard;
- the Offshore Wind Sector Deal;
- the Industrial Energy Transformation Fund;
- the industrial energy efficiency scheme;
- the deployment of carbon capture, usage and storage at scale during the 2030s;
- the upgrade of all fuel poor homes to Energy Performance Certificate Band C by 2030 where practical, cost-effective and affordable;
- a ban on sales of new conventional petrol and diesel cars and vans by 2040;
- an ambition to remove all diesel-only trains from the network by 2040;
- an ambition to make cycling and walking the natural choices for shorter journeys, or as part of a longer journey by 2040;
- implementation of the smart systems plan; and
- exploration of new and innovative ways to manage emissions from landfill.70
26.The projected shortfall in emissions reductions was highlighted by Chris Stark, Chief Executive of the Committee on Climate Change, who warned us that there were “gaps in the policies that needed to be filled if we wanted to meet the fourth and fifth carbon budgets” and that there was additionally “lots of risk attached to those policies that the Government had already made”.71 Malcolm Brinded, representing the Royal Academy of Engineering, the Energy Institute and other engineering institutions, told us that there was widespread agreement that the UK was “not going to meet the carbon budgets on the trajectory [it is] on”.72 Although the UK has achieved the greatest decarbonisation of the G20 nations since 2000, its rate of decarbonisation has been slowing and it fell to fourth place among G20 nations for annual reductions in 2017.73 Lord Deben, Chairman of the Committee on Climate Change, told us that if he “were to put [his] finger on the thing that [he was] most worried about on climate change, it would be the lack of urgency”.74 The Minister for Energy and Clean Growth, Claire Perry MP, argued, however, that the UK had “the most detailed plan for emissions reduction” internationally and that although she “absolutely agree[d] that we need to raise our ambition”, “you have to have a really detailed plan to do that”.75
Deploying existing technologies
27.Numerous submissions to our inquiry highlighted the importance of supporting the deployment of existing technologies as well as the development of less mature technologies.76 For example, the Royal Academy of Engineering and allied institutions told us that “innovative policy making that works to break down silos and drives large-scale deployment of existing low-carbon solutions is more urgent than policy focused on the development of new technologies”.77 They argued that a “comprehensive review of incentives and regulations is required” to support this. Achieving the Government’s key targets would require an acceleration of deployment of low carbon technologies:
- the Government wants “almost every car and van to be zero emission” by 2050,78 which is equivalent to removing almost 20,000 conventional cars every week on average, from now until 2050,79 whereas around 1,200 new ultra-low emissions vehicles were registered each week in 2018;80
- the Government also wants “as many homes as possible to be EPC Band C by 2035 where practical, cost-effective and affordable”,81 which Tim Lord, Director of Clean Growth at the Department for Business, Energy and Industrial Strategy, clarified to us represented a “very significant majority of homes”.82 This would equate to improving the energy efficiency of around 20,000 English homes (just under 40 per English constituency) per week until 203583—in contrast, the Committee on Climate Change reported that around 2,400 energy loft or wall insulations were installed per week in 2017;84
- the Government has said that “by 2050, we will also likely need to fully decarbonise how we heat our homes”,85 which would require at least 15,000 homes to transfer to a low-carbon heating system every week until 205086—this compares to a projection of 220 low-carbon heat systems being installed each week under the Government’s ‘Renewable Heat Incentive’ from now until 2021; and87
- the Government has set out its “aspiration” to reach woodland cover of 12% in England by 2060,88 which would require the net growth of around 120 hectares of woodland per week—in 2018, net woodland growth was around 20 hectares per week.89
28.Although the rate of deployment may reasonably be expected to grow over the long timescales in question, there are also a number of areas in which Government policy to support the deployment of low-carbon technologies has been delayed or cut back. For example:
- the ‘plug-in grant’ for low-emissions cars was reduced from £4,500 to £3,500 for the lowest-emissions cars in October 2018, and cut completely for other low-emissions cars;90
- the ‘feed-in tariff’ for low-carbon power generation was closed in April 2019 without a successor scheme in place;91
- the Energy Companies Obligation scheme was restricted to vulnerable households only in November 2018,92 despite the Government conceding that this would “result in lower carbon emissions reductions being achieved”93—the Government consulted on “building an ‘able-to-pay’ market for energy efficiency” in October 2017 and said that it would respond in 2018,94 but a response has still not been published;95 and
- following the cancellation of the ‘zero-carbon homes’ policy in 2015,96 the Government pledged in 2018 to consult on changes to Part L of the building regulations (covering energy performance of buildings) in order to support the development of low-carbon heating technologies97—however, this consultation has still not been launched (although the Chancellor has announced that a ‘Future Homes Standard’ would be introduced to deliver homes with “low carbon heating and world-leading levels of energy efficiency”, but only by 2025).98
Developing less mature technologies
29.Although many of the technologies required for decarbonisation are ready for large-scale deployment, the Government and others have identified several important technologies that should be supported through research and development, large-scale demonstration and commercialisation.99 These include low-carbon heating technologies, carbon capture and storage, long-term energy storage technologies, small modular nuclear reactors and hydrogen as a fuel.
30.The Government’s Clean Growth Strategy highlighted £2.5bn of investment being put into low carbon technologies between 2015 and 2021.100 This funding aligns with the UK’s participation in ‘Mission Innovation’, a commitment made at the 2015 Paris conference on climate change to double spending on clean energy research and development from 2015 to 2020.101 The £2.5bn is broken down into:
- up to £505m for the ‘Energy Innovation Programme’,102 which aims to accelerate the commercialisation of innovative clean energy technologies and processes across six themes, into the 2020s and 2030s;
- up to £1.2bn for funding awarded through UK Research and Innovation, including through the Energy Systems Catapult and the Offshore Renewable Energy Catapult;
- up to £246m for the Faraday Challenge,103 which aims to support the research and development of battery technologies for electric vehicles; and
- up to £620m to be awarded through Government departments.104
31.The UK Energy Research Centre argued that “several analyses of public research and development spending on energy in the UK and in other countries have concluded that spending is much too low—particularly when compared to the scale of the challenge posed by climate change”.105 Professor Jim Watson, Director of the UK Energy Research Centre, conceded that it was “very difficult to assess” the ‘correct’ amount to spend on research and innovation for low-carbon technologies, and that the “international evidence […] is quite thin”.106 Nevertheless, he said that analyses tended to conclude that “budgets should be increased by about five times, sometimes ten times”.
32.Of the £2.5bn outlined in the Clean Growth Strategy, £1.14bn (44%) was for “basic and applied research”, £900m (35%) was for “technology development” and £530m (21%) was for “technology demonstration”.107 The Government explained that:
The Government is often more active at earlier stages of innovation, through investment in research, education and skills. Later on, private firms play a bigger role, bringing new technologies to market.108
Nevertheless, the Committee on Climate Change has warned that the Government’s innovation programme was “generally focused at early-stage innovation: research, development and some demonstration”, and that in order “to drive commercialisation and cost reduction successfully, it must be supported by funding and policies to drive deployment and learning-by-doing”.109 Many expressed similar opinions to us.110 The UK Energy Research Centre compared the time that it could take for new technologies to develop from early stage research through to commercialisation (typically three to four decades111) with the time left for meeting the fourth and fifth carbon budgets (five to fifteen years), concluding similarly that “policies to demonstrate, scale-up and commercialise existing technologies are perhaps more important [than fundamental research and development] if the UK is to successfully comply with carbon budgets in the 2020s and 2030s”.112 Damitha Adikaari, Acting Director of Science and Innovation for Climate and Energy at the Department for Business, Energy and Industrial Strategy, told us that “in the next iteration of this effort”, demonstration “is where the focus will be”.113
33.In particular, we heard that it would be important to have co-ordinated, large-scale trials rather than smaller, fragmented projects.114 Johnson Matthey, a multinational chemicals and sustainable technology company, told us that “scale is critical”, arguing that funding for projects greater than £100m in scale would be more effective than the same overall money spent on a larger number of projects of around £10m-scale.115 Malcolm Brinded, representing the Royal Academy of Engineering and allied institutions, explained that “you cannot do a big system design and understand what we mean by that without trying it”:
It is not something that you can do on a desk study and in theory; it is about how consumers respond and how all the integrated system reacts, particularly taking advantage of what big data, smart equipment and grids will enable consumers to do and how consumers will then respond, when it is coupled with clear price signals.116
Guy Newey, Director of Strategy and Performance at the Energy Systems Catapult, acknowledged that there were already “dozens” of demonstration projects in place but said that the “key challenge” was to “bring those together in big demonstrations testing the huge questions” such as low-carbon heating, nuclear power and carbon capture and storage.117 Both Mr Newey and Professor Watson highlighted that the Government would have to accept that some demonstration projects would also be unsuccessful.118
Co-ordinating development and deployment
34.Dr Jonathan Radcliffe, who leads the Energy Systems and Policy Analysis Group at the University of Birmingham and acted as the Specialist Adviser for our inquiry, told us that the deployment of new technologies “is a complex, non-linear process, with feed-backs and feed-forwards” and that it “requires support across the innovation process, with a combination of support for early stage research and development, demonstration activities and market mechanisms”.119 Guy Newey, Director of Strategy and Performance at the Energy Systems Catapult, made the similar point that if the Government “does not get the market structures right, there is a real risk that it will just be supporting isolated innovation projects”, and would not achieve the system-change required:
The lesson from the electricity system in the UK is that you need to get the innovation spend—the earlier-stage research and development stuff—lined up with the market mechanisms, and then you can see extraordinary cost reductions in technologies. If you do not do that, you will end up spending bits and bobs of money, but quite significant sums of public money, that will not lead to the kind of change you need.120
35.The most commonly referenced example in our written evidence of a technology whose development and deployment had been supported effectively was offshore wind power.121 The cost of offshore wind power has fallen from around £160/MWh in 2011 to around £60/MWh today,122 over which time the total generation capacity has increased from 1.8GW to 8.2GW.123 The most important aspects of the support that has enabled this development were frequently identified as:
- clear, long-term targets for cost reduction and deployment;
- stable support mechanisms to create new markets, such as the Renewable Obligation scheme and contracts for difference framework; and
- constructive partnerships between Government and industry, enabled by industry councils and dedicated innovation co-ordinating bodies.
The Committee on Climate Change has similarly said:
Offshore wind deployment exemplifies how clear goals, an ambitious strategy and well-designed mechanisms, can encourage and enable the market to reduce cost and help to build wider economic co-benefits. These lessons should be applied more broadly—to meet the challenges […] in transport, industry, buildings and agriculture.124
36.The Government’s own projections suggest that the UK is not currently on track to meet its existing emission targets, although we note that there are several significant policies and ambitions that have not yet been included in these calculations. Nevertheless, the rate of deployment of several key low-carbon technologies is significantly lower than what is required to meet the Government’s ambitions, and various stakeholders—including the Committee on Climate Change—have expressed concern at the current and projected rate of progress of the UK’s decarbonisation. In order to meet the fourth and fifth carbon budgets, emissions reductions cannot continue only in sectors that have decarbonised successfully so far, and must be significantly accelerated in sectors such as transport, heating and agriculture that have made little progress. The step-change in decarbonisation required will need policies to support the deployment and roll-out of existing technologies alongside, and co-ordinated with, significant research, development and demonstration of less mature technologies.
Technologies for export
37.In addition to the need for decarbonisation, the Clean Growth Strategy noted the “enormous potential economic opportunity” of clean growth with “an estimated $13.5 trillion of public and private investment in the global energy sector alone […] required between 2015 and 2030 if the signatories to the Paris Agreement are to meet their national targets”.125 However, despite highlighting this opportunity, the ambitions and policies in the Clean Growth Strategy focused heavily on deployment in the UK.
38.Professor Jonathan Gibbins, Director of the UK Carbon Capture and Storage Research Centre, argued that it was important to consider “how effective technology developments and investments in deployment in the UK are in influencing global outcomes”, saying that “technologies that convince other countries they can go to net zero are quite valuable”.126 Malcolm Brinded, representing the Royal Academy of Engineering and allied institutions, similarly told us that exporting low-carbon technologies to emerging economies offered “a huge opportunity to have much greater impact [on climate change], probably at lower cost, than just continuing to drive down our own targets”, but highlighted that these opportunities did “not get much focus” in the Clean Growth Strategy.127 Indeed, none of the fifty “key policies and proposals” in the Strategy addressed emissions reductions outside the UK.128 Mr Brinded acknowledged that “at a niche level the UK is quite good at this”, but argued that “we could do much more”:
There are some programmes from the Department for International Development and so forth and some companies in the UK whose whole focus is on, for example, mobile home solar systems in Africa and south Asia, which are now attracting tens or hundreds of millions in support. The UK is very well placed here […] but we could do much more to support an incubator system and infrastructure and the small- to medium-enterprises and innovators delivering these solutions on the ground. That requires more money on a more sustained basis, and an integrated strategy between the Department for Business, Energy and Industrial Strategy, the Department for International Development, the Department for Transport and the Department for International Trade.129
Professor Jim Watson, Director of the UK Energy Research Centre, indicated that he agreed “with a lot of that”,130 while Dr Nina Skorupska, Chief Executive of the Renewable Energy Association, said that, although different Government departments were “beginning to” improve support for export opportunities, “we still have to do a lot more”.131
39.The Government published an ‘International Research and Innovation Strategy’ in May 2019, which included elements addressing sustainability.132 However, this focused on international collaboration on research and innovation, rather than export opportunities for British technologies and companies.
40.The UK can simultaneously achieve economic growth and global emissions reductions through the export of low-carbon technologies to other countries. This potentially offers global emissions reduction at lower cost than the same level of reduction in the UK. However, opportunities for delivering emissions reductions outside of the UK were not included in the 50 key policies and proposals of the Government’s Clean Growth Strategy. When it laid legislation strengthening the UK’s long-term emissions reduction targets, the Government said that it would review the net-zero target within five years, to review the extent to which other countries had followed the UK’s lead in setting and acting upon decarbonisation targets.
41.Ahead of its review of international reaction to the UK’s net-zero target, the Government should actively encourage other countries to take similarly ambitious action. It should develop a strategy by the end of 2020, identifying opportunities for the UK to encourage and support decarbonisation in other countries, and prioritising action that will achieve the greatest global emissions reduction. This should include cross-Government action to support British companies exporting technologies that can deliver emission reductions abroad.
42.Tim Lord, Director of Clean Growth at the Department for Business, Energy and Industrial Strategy, told us that “there is a huge amount of cross-Government collaboration” on clean growth, including across the Treasury, the Ministry for Housing, Communities and Local Government and the Department for Transport.133 The Minister for Energy and Clean Growth, Claire Perry MP, added:
I think the fact that I do attend Cabinet, that we have a clean growth cross-Government strategy, and that for the first time ever we saw a green-focused financial statement, should give the Committee reassurance that it is absolutely percolating across Government.134
Nevertheless, the Minister is situated in one Government Department and is not a Cabinet Minister.135
43.The Government should increase the number of Ministers across Government Departments working on climate change, including a new Ministerial role at the Foreign and Commonwealth Office with explicit responsibility for delivering multi-lateral action internationally on climate change. Reflecting the critical importance of mitigating climate change, and to improve cross-Government co-ordination, the Minister charged with co-ordinating the UK’s action on national and international decarbonisation should be a full Cabinet Minister.
64 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017)
66 For example, see: Renewable Energy Association (CGE0026), para 23; Decarbonised Gas Alliance (CGE0032), para 10; E.ON (CGE0036), para 13; Environmental Defense Fund Europe (CGE0042), para 1; Durham Energy Institute (CGE0065), para 3
67 HM Government, ‘The Clean Growth Strategy’ (2017), p40
68 Department for Business, Energy and Industrial Strategy, ‘Updated Energy and Emissions Projections 2018’ (2019), p20
73 Department for Business, Energy and Industrial Strategy, ‘2018 UK Greenhouse Gas Emissions, Provisional Figures’ (2019), p3 and PwC, ‘Time to get on with it: The Low Carbon Economy Index 2018’ (2018), p8
76 For example, see: ABB (CGE0010), section 1.3; Nuclear Industry Association (CGE0018), para 5; E.ON (CGE0036), para 16; Royal Academy of Engineering and allied institutions (CGE0055), para 2.1; The Royal Society (CGE0056), para 7; Durham Energy Institute (CGE0065), para 19; and Centre for Research into Energy Demand Solutions (CGE0070), para 17
78 Department for Transport, ‘The Road to Zero’ (2018), p2
79 Department for Transport, ‘Vehicle Licensing Statistics: Annual 2018’ (2019), p3; Committee analysis
80 Department for Transport, ‘Vehicle Licensing Statistics: Annual 2018’ (2019), p1; Committee analysis
81 Department for Business, Energy and Industrial Strategy, ‘The Clean Growth Strategy’ (2017), p13
83 Ministry of Housing, Communities and Local Government, ‘English Housing Survey Headline Report 2017–2018’ (2019), Annex Table 2.7; Committee analysis—the National Infrastructure Commission has similarly estimated that the potential for cost-saving energy efficiency improvements equates to “21,000 improvements being installed every week between now and 2035”: National Infrastructure Commission, ‘National Infrastructure Assessment’ (2018), p45
84 Committee on Climate Change, ‘2018 Progress Report to Parliament’ (2018), p85
85 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’, p75
86 There were 24m properties with gas meters in 2016, which will not include some off-grid properties that use fossil fuels to heat their homes—Department for Business, Energy and Industrial Strategy, ‘Sub-National Electricity and Gas Consumption Statistics’ (2018), p22; National Grid similarly told us that “if decarbonisation of heat is to be successful, around 20,000 homes a week between 2025 to 2050 will need to move to a low carbon heat source”—National Grid (CGE0019), para 3.4
87 National Audit Office, ‘Low-carbon heating of homes and businesses and the Renewable Heat Incentive’ (2018), para 1.17
88 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’, p107
89 Forestry Commission England, ‘Corporate Plan Performance Indicators’ (2018), p11
90 ‘Changes to the Plug-in Car Grant’, Department for Business, Energy and Industrial Strategy, accessed 27 May 2019—the plug-in grant is a discount on the price of brand new low-emission vehicles, awarded through a grant the Government gives to vehicle dealerships and manufacturers
91 ‘About the FIT scheme’, Ofgem, accessed 27 May 2019—the feed-in tariff awarded owners of small-scale renewable power generation technologies payments for every unit of power generated and every unit supplied to the grid
92 The Electricity and Gas (Energy Company Obligation) Order 2018 (SI 2018/1183); see also Department for Business, Energy and Industrial Strategy, ‘Energy Company Obligation 2018–2022’ (2019), p10
93 Department for Business, Energy and Industrial Strategy, ‘Energy Company Obligation: ECO3, 2018 to 2022’ (2018), p11
94 Department for Business, Energy and Industrial Strategy, ‘Call for Evidence: Building a Market for Energy Efficiency’ (2017)
95 ‘Building a market for energy efficiency: call for evidence’, Department for Business, Energy and Industrial Strategy, accessed 27 May 2019
96 HM Treasury, ‘Fixing the foundations: Creating a more prosperous nation’(2015), p46
97 Department for Business, Energy and Industrial Strategy, ‘Clean Growth—Transforming Heating: Overview of Current Evidence’ (2018), p9
98 Chancellor of the Exchequer, ‘Spring Statement 2019: Written Ministerial Statement’ (2019), p4
99 For example, see: Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), p53 and Energy Systems Catapult (CGE0029), para 10
100 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), p17
102 ‘Energy Innovation’, Department for Business, Energy and Industrial Strategy, accessed 26 May 2019
103 ‘Faraday battery challenge: Industrial Strategy Challenge Fund’, UK Research and Innovation, accessed 26 May 2019
104 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’, p50
105 UK Energy Research Centre (CGE0057), para 6—the Centre cited J. Pless et al., ‘Inducing and accelerating clean energy innovation with ‘Mission Innovation’ and evidence-based policy design’, Working Paper (2018) and Research Councils UK, ‘Investing in a brighter energy future: Energy Research and Training Prospectus’ (2013)
107 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), p52
108 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), p49
109 Committee on Climate Change, ‘An independent assessment of the UK’s Clean Growth Strategy’ (2018), p10
110 For example, see: Carbon Capture and Storage Association (CGE0023), para 10; Energy Systems Catapult (CGE0029), paras 12 and 26; Decarbonised Gas Alliance (CGE0032), para 38; UK Energy Research Centre (CGE0057), paras 7 and 16; Energy Technologies Institute (CGE0061); and Johnson Matthey (CGE0066), para 4
111 R. Gross et al., ‘How long does innovation and commercialisation in the energy sectors take? Historical case studies of the timescale from invention to widespread commercialisation in energy supply and end use technology’, Energy Policy vol 123 (2018)
114 For example, see: ABB (CGE0010), section 2.0; Greenpeace UK (CGE0022), para 7; Energy Systems Catapult (CGE0029), paras 10, 12 and 20; UK Hydrogen and Fuel Cell Association (CGE0034), para 10; Royal Academy of Engineering and allied institutes (CGE0055), para 2.2; Energy Technologies Institute (CGE0061); and Qq47–52
121 For example, see: Menter Mon (CGE0002); Scottish Carbon Capture and Storage (CGE0021), section 6; Carbon Capture and Storage Association (CGE0023), para 29; Energy UK (CGE0024), para 8; Drax Group plc (CGE0025), para 39; Energy Systems Catapult (CGE0029), para 23; Decarbonised Gas Alliance (CGE0032), para 42; E.ON (CGE0036), para 34; UK Energy Research Centre (CGE0057), paras 21–22; UK Research and Innovation (CGE0058), para 17; Johnson Matthey (CGE0066), para 7; RenewableUK (CGE0067), section 1; Dolphin N2 (CGE0069), para 3.5.1.1;
122 Committee on Climate Change, ‘Costs of low-carbon generation technologies’ (2011), p3–4 and Department for Business, Energy and Industrial Strategy, ‘Contracts for Difference Second Allocation Round Results’ (2017)
123 Department for Business, Energy and Industrial Strategy, ‘Energy Trends: renewables’ (2019), Table 6.1
124 Committee on Climate Change, ‘2018 Progress Report to Parliament’ (2018), p11
125 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), p8
128 Department for Business, Energy and Industrial Strategy, ‘Clean Growth Strategy’ (2017), pp12–16
132 HM Government, ‘International Research and Innovation Strategy’ (2019)
135 ‘Ministers’, HM Government, accessed 9 July 2019
Published: 22 August 2019