We will need disruption to tackle the climate challenge

07 Jan 2021

The last few weeks have seen the strengthening of efforts to ensure that the UK is on a path to meeting its net-zero greenhouse gas target by 2050, while also encouraging other countries to increase their level of climate ambition.

First, we had the Government announce that it will aim to reduce emissions by 68% by 2030, as part of a domestic action plan to deliver the UK’s contribution towards the Paris Agreement. Then, the Climate Change Committee’s 6th Carbon Budget advice to government recommended a 78% reduction in UK emissions between 1990 and 2035. Some of the detailed actions the government is planning to meet these targets were set out in the Ten Point Plan for a Green Industrial Revolution and a much-delayed energy White Paper. The UK also helped to organise a Climate Ambition Summit, which featured countries that were making new commitments to tackle climate change and deliver on Paris.

Meeting these ambitious targets will require substantial changes to energy systems over the next 10 to 15 years. In a recent Special Issue of Energy Policy, UKERC researchers explored the nature of the change that would be required in different sectors of the UK and the extent to which it will require the disruption of established technologies, markets, and business models.

Disruption on the rise

We found that significant disruption is already affecting parts of the energy sector, but stakeholders have differing views of the future and the extent to which energy system change will be characterised by disruption or continuity. However, further disruption is inevitable if the UK and other countries are to deliver on the Paris Agreement.  In the UK at least, there is also a significant gap between what stakeholders expect to happen, and what they think is necessary to meet such targets. This reflects a persistent gap between ambitious government targets and plans, and detailed policies to deliver them.

Significant pandemic implications

While a lot of our analysis focused on technological change, this is not the only source of disruption. For example, shifts in political priorities have already led to ambitious climate change targets that have driven some of the disruptions so far, with the changes in the power sector being a notable example. However, other sectors – such as construction – have not yet been affected; but this will need to change if emissions from homes are to be reduced significantly.

Of course, currently, another major source of disruption is dominating our lives. Whilst it is still unclear exactly what the long-term implications of the global coronavirus pandemic will be for patterns of energy use, the implications may well be significant in some areas.

The future for heat decarbonisation

A second important finding is that disruption to energy systems will affect some actors more than others. In the power sector, many of the Big Six companies have changed their strategies in response to a combination of climate policy, new market entrants and a loss of trust. In contrast, there is considerable uncertainty about how heat decarbonisation will be achieved and what role incumbent heating firms will play in decarbonisation.

Some incumbents face starkly divergent futures – including those where their core assets will need to be phased out. In the case of road transport, a wholesale shift to electric and other low carbon vehicles may mean continuity for many of those who own and drive cars. But this could be very disruptive for some firms in the supply chain, for electricity network companies and for government too.

The prospect of further disruptive change represents a particular challenge for government policy because the extent and impacts of some potential disruptions are inherently uncertain. As illustrated by the example of heat decarbonisation, this uncertainty may be compounded by an understandable reluctance to take courses of action that might be disruptive to citizens. Nevertheless, it is clear that some sectors will need to be deliberately disrupted by government policies if they are to be compatible with a net zero economy.

Two recommendations for decision-makers

We have two recommendations for decision-makers to help them deal with this uncertainty.

First, a wider range of models and tools should be used to inform energy and climate change policies. Current models often provide limited insights about the potential social, economic, and political impacts of disruptive change. Furthermore, the current global pandemic highlights the importance of scenarios that explore the potential impacts of systemic disruptions from outside the energy sector.

Second, a review of international policy experience carried out for the project points to the advantages of a flexible and adaptive approach to policy development and implementation. This approach can help governments to respond quickly to unexpected consequences, and reduce the impacts of unforeseen events.