Review of Energy Policy: 2018

As we reach the end of 2018, the scorecard for UK energy policy is mixed. Optimists can point to rapid emissions reductions, cost falls in renewables and the centrality of clean energy within the Industrial Strategy. Ten years after the Climate Change Act was passed, UK greenhouse gas emissions have fallen by 43% from the level in 1990. The UK is on the way to meeting the first three carbon budgets, and a transformation of the power sector is well underway.

However, if we turn our attention from the rear view mirror, the outlook is more pessimistic. As the Committee on Climate Change pointed out in June, there are an increasing number of policy gaps and uncertainties. If not addressed promptly, meeting future carbon budgets will be much more challenging. For some of these gaps, there is a particularly clear and immediate economic case for action.

Key recommendations:

The government needs to take urgent action to ensure that the UK continues to meet statutory emissions reduction targets, and goes further to achieve net zero emissions. This not only requires new policies to fill looming gaps in the portfolio, it also requires much greater emphasis on sharing the benefits and costs of the low carbon transition more equitably. Our main recommendations are:

1. We repeat our call for a heat and energy efficiency White Paper, and recommend that the Industrial Strategy mission to reduce building energy use is extended to existing buildings.
2. A better, more targeted approach to the energy needs of low-income households is required. Energy efficiency investment for these households should be funded via general taxation.
3. Urgent large-scale trials of heat decarbonisation using hydrogen are required to understand whether it could be technically, economically and socially viable.
4. A dashboard of indicators is needed to monitor gas security during the energy transition. The current one dimensional approach is not sufficient.
5. Future electricity policy should build on the Electricity Market Reform policies that have worked well, and adapt them in the light of changes in technologies and costs.
6. Changes in incentives for ‘black start’ and other ancillary services are necessary to ensure that the electricity system remains resilient as it changes.
7. The target for phasing out conventionally fuelled vehicles is inadequate and does not fit with our emissions targets. The 2040 date should be brought forward and linked to accelerated investment in networks and charging.
8. The Industrial Strategy needs to be strongly linked to market creation policies for low carbon technologies. Carbon capture and storage is in particular need of such policies to progress beyond its current holding pattern.
9. To ensure widespread support for the energy transition, there needs to be more focus on equity and justice. The UK government should consider setting up a process similar to Scotland’s Just Transitions Commission to achieve this.
10. Continued vigilance is required to mitigate any negative impacts of Brexit, particularly those that could affect integration with European energy markets.