The BBC ran a story this week with the headline ‘The UK can’t go climate neutral before 2050’, citing an important report from the independent research body, the Energy Systems Catapult (ESC). That report details a set of pathways to getting the UK to net zero by 2050 and is careful to highlight that it is not prescriptive. While we cannot expect nuance in a news headline, suggesting that it is impossible to hit net zero carbon before 2050 belies the very nature of innovation.
The Committee on Climate Change concluded last year that “many elements of the transition are becoming more feasible than was envisaged only a few years ago.” This understanding has informed the committee’s analysis and gave it the confidence to recommend the net zero target. Nowhere is this more evident than the power sector which offers a remarkable lesson in how innovation-led cost reduction is disrupting the traditional way of doing things.
The role of assumptions
Modelling is a function of the assumptions that are fed in and the ESC’s model isn’t any different. No single model can offer a comprehensive picture and uncertainty is a key aspect of all climate and energy models. This is apparent when you consider a 2018 report from Vivid Economics and WWF that lays out the trajectory for reaching net zero by 2045. The technology options are broadly the same as for the ESC model, but the assumptions underpinning their deployment and the role of so-called ‘speculative emissions’ varies significantly.
Everything in these models is essentially dynamic. For instance, in 2013, deploying over 2GW of offshore wind every year was considered to be “stretching credibility” but today we are planning to install 3GW annually over the next decade. Similarly, the modelling story around the growth of renewable energy and battery storage is a litany of wildly incorrect projections.
A couple of assumptions within the ESC’s model are particularly frustrating. For a start, it makes an uncritical assumption on the sustained growth of private car use with an addition of around nine million more cars on UK roads by 2050, even though the evidence seems to point towards a potential decline in car use. It also assumes low levels of carbon savings from building retrofits and perhaps exaggerates the rebound effect of energy efficiency, despite its significant contribution to emissions reduction since 2005.
The mother of all assumptions is of course human behaviour. It is wildly bold of anybody to project the nature of human attitudes towards climate change over the next three decades, let alone the next three years. Economic models find it notoriously difficult to factor in a variety of intertwined elements like changing personal and institutional values, path dependency, distributional impacts of policy and the highly fluid nature of society’s capacity for change.
What is least cost anyway?
ESC’s model is built to optimise for least cost (of technology and energy sources) pathways while taking certain constraints into consideration, like resource availability, technology deployment rates and overall emission targets. Vivid Economics’ report, on the other hand, is built to show the “fastest feasible pathway to net zero, rather than a cost optimal pathway”.
A fundamental criticism of energy and climate models is their inability to appreciate the endogenous nature of innovation. In other words, it is very difficult to estimate precisely how actions today affect outcomes tomorrow. As the cost advisory report to the CCC noted, “the correct answer to the question ‘what will it cost?’ is what economists call endogenous; it depends on what is done now”. While the ESC model takes this into consideration, it is still incredibly challenging to identify what the least cost path might be to net zero. It depends entirely on what we invest in today and how new technologies interact with society.
The notion of least cost is, therefore, problematic given its inherent uncertainty. For instance, the government can decide to invest heavily in nuclear and create a large supply chain, with commitments from industry on achieving meaningful cost reduction but, if local community engagement proves to be an obstacle, a model built today cannot realistically factor that in, except with a semblance of risk premiums. Germany’s decision to retire its nuclear fleet, despite all the evidence of its negative impact on the climate and economy, is just one example where politics and public opinion trumps any logic of a least cost economic model.
The question that begs to be asked, however, is what is the purpose of a least cost approach when we are facing a climate emergency. I’d be very wary of a least cost approach to Covid-19, for instance. The right approach would surely be, in the face of a global epidemic or worsening impacts of climate change, to prevent and protect at any and all costs. Espousing such a view is not a call to put on hairshirts but a genuine plea not to be limited by long held notions of how we understand change to happen.
The pathway ahead is a political choice, not a modelled output
The power of public opinion has strongly shaped UK politics over the past few years. Be it Brexit or the climate strikes, political institutions are forced to respond to public outcry both domestically and internationally. The Australian summer of bush fire horror is just one example where climate disasters could end up shaping electoral fortunes. The UK is equally prone to severe climate impacts and one can expect public opinion to get louder and louder on climate change and manifest in ways that we cannot predict today.
There is an undeniable element of political choice embedded in the way we plan and design our infrastructure for transport, buildings, health, materials and several others sectors. If we want to reduce our dependence on cars, we can build our cities around better public transport. If we want longer lasting products, we can regulate against planned obsolescence. There is always a choice.
Local authorities are already considering these political choices, and setting ambitious net zero targets. Very few of them will have all the evidence to back those targets but, in responding to rising concern, they are opening up dramatic new possibilities. Bristol’s net zero by 2030 plan, for example, requires vehicle miles to be slashed by roughly 40 per cent and that will inevitably require a dramatic shift away from private cars.
The ESC report hopes to build a consensus for credible action now and that is a worthy cause. But, while it might be easier to dismiss the feasibility of hitting net zero by 2025, suggesting that 2050 is the earliest we can hope to achieve net zero is fraught with danger. Such resignation risks undermining the important political choices that more ambitious leaders are willing to make.