Utility companies and regulators need to fully incorporate climate change issues into their investment planning and pricing decisions. That is one of the conclusions of last week’s report to Parliament from the independent Committee on Climate Change (CCC).
The CCC is Parliament’s official adviser on climate change issues. It is responsible for assessing whether the UK is on track to meeting its legal targets to reduce greenhouse gas emissions and whether it is taking sufficient action to ensure the UK is resilient to climate change risks. The latest report to Parliament tackles both of these critical issues.
On emissions reduction, the report emphasises that it is not as simple as a “game of two halves”. Yes, emissions have fallen 42 per cent since 1990 (as GDP rose by about 65 per cent during the same period) which is about half way towards the 2050 target to reduce UK emissions by at least 80 per cent. But the second half will require new and different actions to maintain emissions reduction while growing GDP. In recent years nearly all of that progress has come from the spectacular fall in emissions from electricity generation. However, emissions from transport and buildings have started rising in recent years.
The primary risks to the UK from climate change include: rising temperatures leading to risks to health and wellbeing; flooding from heavy rainfall or rising sea levels causing risks to homes and business; risks of shortages in the public water supply, and for agriculture, electricity generation and industry; and risks to the natural environment and a wide range of terrestrial and marine ecosystems. Each of these risks is also affected by a number of additional factors, including a growing and ageing population.
Many utility companies and regulators are central players in whether the UK continues to successfully reduce its emissions and improve its resilience. Smarter electricity networks, rapid electric vehicle charging, and making our ports, airports, and energy and telecommunications networks better prepared for storms, all help to increase productivity and ensure we’re prepared for climate risks. Modernising our infrastructure is also vital to reducing emissions.
Government and Parliament have agreed cost-effective reductions in greenhouse gas emissions from 2017 until 2032. The most urgent risks facing the UK from climate change have also been agreed. The UK helped to negotiate and has ratified the international Paris Agreement on climate change. That agreement implies emissions reductions that are more ambitious than current UK targets. The UK has also re-iterated its support for the Agreement, alongside China, India and the EU, despite the announcement by the Federal Government of the United States of its intention to withdraw. Faced with broad domestic and international agreement – on emissions reduction and on tackling climate risks – strong policies are now urgently required to drive UK climate action forward.
Decisions taken by infrastructure providers, utility companies and regulators need to support that action. For example, recent floods have demonstrated that telecommunications, water, power and transport infrastructure remains vulnerable to climate change impacts. An awareness that electric vehicles, intermittent generation and electric heating all contribute to tackling greenhouse gas emissions must inform power sector investment decisions and price control reviews; risks of water scarcity should feed into water reviews, and the need to transition away from gas for heating needs consideration during gas distribution price control reviews.
Through successive Parliaments, and most recently in the Queen’s Speech, we have seen broad cross-party support for climate action. Utilities and their regulators have been a key part of delivering that action to date. The upcoming investment planning and price control reviews will cover much of the 2020s. That is the decade in which the UK needs to take a decisive step to ensure its future prosperity by shifting to a truly low-carbon and climate resilient economy.