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CCA at 10 - 'The oil and gas chief' - Views from James Smith CBE HonFEI
To coincide with the tenth anniversary of the Climate Change Act receiving Royal Assent in the UK in November 2008, the Energy Institute convened a ‘virtual panel’ of ten figures who were in leading positions at the time - six of them now Fellows of the EI - to reflect on how it came to pass, what it has meant for the UK and the prospects for the future. The result, part of the EI Views series, is a social history from diverse perspectives of one of the most ground-breaking pieces of environmental legislation of its day.
The following is the individual perspective of James Smith CBE HonFEI, who in 2008 was Chair of Shell UK and later Chair of the Carbon Trust.
Reflections on 2008
1. How significant was the passing of the Climate Change Act in your view, and why?
The Climate Change Act led the world on national commitments to tackling climate change.
The Act is crucial to passing the energy and climate change exam. The exam question is in four parts. How do we get the energy we need; while avoiding dangerous climate change; at least cost; and with a high likelihood of success?
All four parts of the exam question must be answered. We have to pass each part. There are no resits. There is no muddle through option. The climate has no reset button. And it’s urgent. We’re running late.
The good news is that a set of technologies exists to get the job done at reasonable cost. But poor technology choices could end up doubling the cost. The extra money would be better spent elsewhere such as in health and education. We must take cost minimisation seriously.
Climate change is a dangerous threat, running on a short fuse. We can't let ourselves get past the point of no return. We have already left it late. That's why we need a strategy we are pretty sure will work rather than one we hope will work. Innovation is crucial. But that must be married to a commitment to deploy a set of technologies that we believe will work overall. This also means wise management of options and having contingency plans ready to implement when needed.
We need market forces for both scale and efficiency. But to harness markets we need workable business models based on systems thinking covering our huge and complex energy system. Systems thinking includes recognition that there are major, long lead time infrastructure decisions that have to be taken soon. Governments, understandably, don’t relish big infrastructure decisions. But they will need to be made.
We will need all the low carbon technologies available to us. Progress on renewables has been amazing. But we won’t succeed with renewables alone. We need to recognise the importance of nuclear and carbon capture and storage as well.
Let’s be a bit daunted by the risks but let’s more be invigorated by the tremendous opportunities that come from tackling climate change.
The Committee on Climate Change is doing a great job in helping us pass our climate change exam. The CCC are systems thinkers with great depth of knowledge.
2. What were the factors that led to its overwhelming adoption by Parliament? Did parliamentarians fully understand its implications?
Climate change transcends politics. National economies need to be decarbonised by a factor of 10 in the first half of this century. That means more than trebling energy efficiency and reducing CO2 per unit of energy by more than two thirds. These are massive changes to enormous physical systems. Perhaps not everyone in Parliament knew or could know the implications of the CCA. Let's applaud their unity and determination.
3. Did you have any misgivings at the time? Either about the level of the 2050 target or the framework or process designed to achieve it?
The Act was a great start but everyone knew much more would be needed. There are three big themes for further work: targets, infrastructure and investible business models.
The real targets are for the atmospheric stock of CO2. Emission reductions are the means to the end of keeping atmospheric concentrations within sustainable levels. An 80% reduction in emissions that arrives late won't be good enough. That's why a pathway that conforms to Paris is crucial.
The infrastructures that need considered are both tangible and intangible. Tangible infrastructure is the hardware that can deliver energy to consumers without subsequent CO2 emissions. Our electricity, transport and heat infrastructures are going to have to change significantly. Energy storage needs to be linked across electricity, transport and heat. The infrastructure needs thought through in an integrated way.
Intangible infrastructure refers to the institutions for creating and implementing a successful low carbon energy systems strategy. There are things that must be done inside Government and things that are better done outside Government. Our existing institutional frameworks don't support integration well enough.
On investible business models, CFDs and capacity payments alone might not be sufficient long-term answers. It isn’t easy to design investible models that can combine intermittent electricity sources with firm ones. We should be thinking about RAB style instruments (Regulatory Asset Base). The UK is very good in this area. RAB instruments have the potential for accessing enormous private sector capital flows.
The view from 2018
4. Marks out of 10 please! 10 years on has the CCA lived up to its ambition? Has decarbonisation to date progressed as you expected? Where have we been successful and where is progress disappointing?
We have made very good progress in decarbonising electricity. But there is work to be done to ensure the next phases on electricity are achieved at lowest cost. Logical systems thinking is vital. On the other hand we are now having to confront the more significant and challenging areas of heat and transport. It's not as easy as with the electricity grid. Solutions exist. But there are major infrastructure implications. And we have to ensure that consumers are offered solutions they find affordable and that work well.
5. How strongly has the Climate Change Act influence changes in behaviour and decision-making by government, industry and consumers?
Tackling climate change means mustering the common will to change fundamentally parts of our economy and lives. Such change requires exceptional collaborative effort. The Act created a national focus for action. A lot has been achieved on electricity but the challenges in transport and heat are now looming large. At political and individual levels we have plenty other things on our minds. But we have to continue to tackle climate change with vigour.
6. To what extent has the UK maintained its position as a global climate leader since the Act was set?
Paris was a major achievement in international cooperation. Agreement between the US and China, together with a number of other high emitting countries was crucial. The UK was then and remains a key player, respected for its environmental commitments; its policies; its technological base; and its willingness to promote action internationally.
But many countries now seem less focused on tackling climate change and some arguments that had appeared settled in Paris seem to be reemerging. These are especially around the Kyoto notion of “common but differentiated responsibilities” on who caused climate change and who should pay for mitigation. I really hope the UK can continue to play a pivotal role in creating common ground among the international community.
Lessons for 2028 and beyond
7. As the carbon budgets tighten and the "lower hanging fruit" of easier emissions reduction measures run out, how can popular by-in to the Climate Change Act’s goals be maintained?
In the UK we need to decarbonise about 30 million cars and 20 million gas boilers. Thank goodness for Elon Musk in his efforts to enable affordable electric mobility. Affordable and effective consumer products for transport and heat are among the biggest challenges on climate change. It's going to require a combination of finding the right technologies and finding the right ways to support consumers making the transition.
About half our response to climate change has to come from energy efficiency and half from decarbonising energy. There are encouraging signs on energy efficiency but the links between GDP and energy growth might not yet be broken.
We need contingency plans in case energy efficiency and the technologies for low carbon transport and heat don’t get deployed quickly enough. This means negative carbon technologies.
8. Is the Climate Change Act consistent with the Paris Agreement? In the context of 1.5° should we be increasing ambition to net zero emissions by 2050? And what about accounting for emissions from sources with less clear jurisdiction (aviation, imports, etc)?
It is becoming clearer that meeting the Paris goals will require faster and deeper emissions reductions than envisaged in the Climate Change Act. We’re going to need to get to zero emissions and, given that progress has not been as fast as it should have been, we will probably need negative emissions. International agreements are going to be needed in areas such as aviation and shipping. The industries themselves have a big part to play.
9. How could Brexit affect the U.K.'s continued progress towards CCA targets?
The UK needs to stay very close to Europe on climate, energy policy and infrastructure.
10. What would be your advice to other countries now thinking about legislation to meet similar climate change goals?
Should we be daunted or invigorated by climate change? It's easy to be daunted. But we will do best if we are invigorated by the opportunity to solve a serious problem; to create a new wave of innovation; and to foster stronger international partnerships.