UK Net Zero - Lessons for Australia?

With COP27 now only a few months away, the road to net zero is back on the political agenda, and countries are now updating, amending and lodging new Nationally Determined Contributions (NDC’s). 

In June 2022, Australia submitted an updated its NDC to the United Nations, which:

• commits Australia to a more ambitious 2030 target, pledging to reduce greenhouse gas emissions by 43% below 2005 levels by 2030, which is a 15 percentage point increase on Australia’s previous 2030 target;

• reaffirms Australia’s commitment to net zero emissions by 2050;

• commits the government to providing an annual statement to parliament on progress towards these targets; and

• restores Australia’s Climate Change Authority as a source of independent policy advice.

These targets are a first step toward increased action to reduce emissions, and the Australian Government will now need to shift quickly to an implementation footing in order to achieve these targets.  In this regard, the United Kingdom (UK) provides valuable lessons on the contrast and challenge between the ambition of commitment, and the detail of implementation.

The United Kingdom – Targets and Outcomes to Date

To paint a picture, the UK went early on its commitments.  In 2020, the UK was the first major economy in the world to pass laws to end its contribution to global warming by 2050. The target, which was passed into legislation, requires the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels.

In October 2021, the UK Government released the Net-Zero Strategy: Build Back Greener policy which sets out policies and proposals for decarbonising all sectors of the UK economy to meet its net-zero target by 2050. 

The scene was set.  So what has worked, and what has not?

Between then and now, UK emissions have fallen by almost half since 1990. The UK Climate Change Committee (CCC) reports each year, before the end of June, to Parliament on its assessment of the Government’s performance in combatting climate change. The Reports measure its actions, both overall and by each Department, against the national and international legal obligations to which Britain is committed.

The Report notes those areas which have had the strongest progress, backed by policy which has been implementable. 

Areas of success include:

• Deployment of renewable electricity – with technological cost curves allowing low-cost abatement, renewable energy has boomed, with emissions from electricity generation falling by nearly 70% in the last decade in the UK. With offshore wind, the CCC found that given the right market conditions and support, industry can cut costs dramatically and deploy low-carbon solutions rapidly;

• Electrification of transport – similarly, the CCC found that electric cars are being adopted in greater numbers each year. With increases in numbers already exceeding earlier CCC projections when commitments were made, the UK Government is now able to count on the passenger and medium transportation sectors to hit their long-term targets with minimal disruption. 

Success has been more difficult to find however, in areas which are more disruptive for industry and households, and the CCC found that policy has not fully been put into motion in the UK in these areas.

Areas which the CCC found are at risk include:

• Policies relating to owner-occupied homes – while energy demand in UK buildings has been flat over the past 7 years, energy efficiency is low as installations on insultation have not risen over the past few years, and supply of low-carbon heat remains challenging due to the costs of substitution between heat pumps and gas boilers.  To illustrate the extent of the change required, heat pump installations in the UK needs to shift from 54,000 last year to over 600,000 a year to meet targets;

• Reductions in manufacturing and construction emissions – the size and number of these industries mean that understanding, measuring and improving emissions reduction is proving difficult, and hindering impactful policy design and implementation.  Energy efficiency also remains a challenge in some sectors;

• Agriculture and land use emissions – he CCC found a lack of progress in in low carbon farming and productivity measures needed to decarbonise the agriculture sector, and delays in land use changes necessary to ultimately meet net-zero timelines.  The CCC noted that meat consumption is reducing at an encouraging rate, but that there are no policies in place to capitalise on this momentum. 

What does this mean for Australia?

Firstly, let’s compare contexts.  Australia’s emissions profile is slightly different from that of the UK.  Energy accounts for 33% of Australian emissions (UK is 21%), transport accounts for 17% in Australia (UK is 24%), 20% is from business in Australia (UK is 18%), and 14.6% is from agriculture (UK is 11%). 

Like the UK, Australia has also made great progress naturally on the most successful area identified by the CCC – electricity, though its current and proposed deployment of renewables caused by the phasing out of coal.  Further, while uptake has been slower to date, current forecasts are that EV numbers will rise to 11.4m across Australia by 2040, with around $30bn required in charging station infrastructure to enable this growth.  Transport and energy will play their parts in de-carbonisation at a sectoral level, leaving business and agriculture with the remaining heavy lifting. 

For Governments, the challenges will mirror the UK experience, and policy makers would do well to take note.  Reducing stationary emissions is a micro, not a macro experience for business, and require three active steps to be taken at a local level.  Firstly, to understand emissions, secondly to make all possible reductions over a manageable timeframe, and thirdly, to take the steps to both acquire carbon reductions elsewhere (e.g., through credits or certificates) without imperiling the underlying economics of business operation, noting that there is greater attention being paid to the authenticity of offsets.  What the UK Government has found is that financiers and insurers can help in making the big end of town begin to take these steps, but that real change lies beyond this.   A critical role for Government will be developing and implementing policies aimed at defining the benefits of climate change action and supporting harder to abate sectors, particularly for the household and small-to-medium sized business sectors; this will not be an easy transition. 

For business, the prospect of non-linear and sudden policy changes is real, meaning that transition risk is emerging as a key challenge to medium term profit.  For now, measuring and developing strategies to reduce Scope 1 and 2 emissions is critical, while being aware that there will also be increasing pressure from stakeholders to reduce scope 3 emissions over the coming 12-24 months.  Preparation is key. 

Wondering how to become net zero?  Rennie provides an end-to-end emissions measurement, strategic planning and transition execution service for clients all over Australia.

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