Net Zero Isn’t Impossible, It’s The Key To UK Prosperity — Ep202: Emma Pinchbeck

Bryony Worthington  

What do you tell yourself and what does the community tell itself when  asked the question, 'listen, we're only 1% of global emissions. We were two and a half. We've done such a good job, we're now 1% and only 5% of historic emissions. So why does it matter?' Why are we doing this?

Emma Pinchbeck 

Regardless of whether or not you care about climate change, if you understand energy economics, you should probably electrify your economy as fast as possible, because otherwise your incumbent industries are about to get eaten alive by something cheaper and more efficient. Households are better off, in our model, in this system. So by 2050, a household with an electric vehicle and a heat pump, the average household saves £700 on their fuel bill. They save £700 on their driving costs. This is better for the economy. So I don't particularly care whether you want to pass a moral test and whether or not you care about climate change, but if you're a politician that worries about the economy or the costs of people's bills, that's the thing.

BW  

Hello, I'm Bryony Worthington, and this is Cleaning Up. I was recently in Houston, Texas, as CERA week took place, the largest annual gathering of oil and gas executives. There, the new Secretary of State for Energy in the US took time in his speech to berate the UK, claiming that our once great industries have been shuttered by climate policies. Of course, the real reason for industrial production shifting outside the UK is global trade, not climate policies, and the clean electrification of industries like steel production is today bringing investment and future proof-jobs back to Britain. Why Chris Wright felt the need to focus his attention on the UK in his short speech, is testimony to the fact that despite our size, what we do matters. Clearly, the symbolism of the UK as the home of the Industrial Revolution, successfully showing how modern economies can move beyond fossil fuels, is uncomfortable for those who believe it can't or shouldn't be done. And now Kemi Badenoch, leader of the Conservative Party in the UK has joined the naysayers, breaking the political consensus that led to the setting of the country's target to achieve net-zero by 2050 under the leadership of her own party.

Kemi Badenoch  News Clip

Net-zero by 2050 is impossible. I don't say that with pleasure. I want a better future and a better environment for our children, but we have to get real.

BW  

The truth is that the UK is an extraordinary case study in how to cut greenhouse gas pollution successfully. Since 1990, the country has more than halved our greenhouse gas emissions, while the economy has grown by over 80%. And the Climate Change Act and the carbon budgets it introduced are specifically designed to be ambitious but flexible, with lots of options available to the government to meet the targets. So talking down the UK's capabilities is both ill-informed and unpatriotic. Anyone who cared to properly understand all of this would be well advised to speak to my guest this week, Emma Pinchbeck, the new CEO of the Climate Change Committee, or CCC, the organization which advises the government on the route it should take to net zero. Emma has spent close to a decade leading energy sector trade associations, and is now responsible for producing advice on the UK's final three carbon budgets, starting with the seventh, which covers the period centered around the year 2040. I wanted to discuss why she wanted to take on the role, the challenges ahead, and why it's so important the UK holds the course, even if others have chosen to abandon climate ambition. Please join me in welcoming Emma Pinchbeck to Cleaning Up. 

BW  

Emma, thank you for joining me. And I'm really looking forward to this conversation. We're going to kick things off, as we always do, by asking you to introduce yourself in your own words, please.

EP  

I'm Emma Pinchbeck, and I'm the new-ish chief executive of the Climate Change Committee, which is the statutory advisory body to the UK Government on our climate ambition, and also the auditor for the delivery against that climate ambition. 

BW  

But you obviously just took up that role quite recently. So tell us a little bit about your background. What led to that appointment?

EP  

So the last time I was on Cleaning Up, I was the Chief Executive of Energy UK, the energy trade body, and my background is really working with private energy companies of all shapes and sizes, often innovators, but also some of the incumbents, and helping them face the energy transition that's coming. Although for the last five years at the energy trade body, that job was as much about energy security and energy bills and keeping the lights on in the face of the gas crisis after Russia's invasion of Ukraine. So it's been an amazing time to be doing this kind of work, and very relevant for my current job. But I suppose one of the delights of the current job is that I get to work on energy across the economy now, and also things like land use and agriculture and things I haven't done for a long time. 

BW  

It was quite an extraordinary period to be running that trade association energy. Can you tell us a little bit about the highs and lows of that time? 

EP  

Oh well, the lows are very easy, and we like to talk about her and remember what an amazing human being she was. But the lows were — both from the external environment, but also for EnergyUK itself — and in that we lost my deputy chief executive, Audrey Gallagher OBE, to cancer, at the same time as I had found out I was pregnant with my second child. And just in terms of running an organization, the person who I thought would do my maternity cover was no longer there. The staff faced losing two of its leaders in one go, and the grief of that, and managing that as the chief exec, and how everyone felt, particularly people who've worked with Audrey for much longer, losing our consumer champion at the time of an energy bill crisis as well, that person that just held all of that. And then all of that happening literally the same time as the autumn price spike in the UK, just after Russia invaded Ukraine, and we had 22 energy suppliers going out of business, some of whom were in my membership, most of whom weren't. But then this snowballed down the mountain, through the whole of the UK market and for people on their energy bills, and going on the radio every single day to explain to people what was happening, and then the government bringing in emergency support that we were involved in designing as the trade body. And it was just completely mad, professionally, personally, most importantly, I think, for everyone in the UK, trying to work out what it meant for their ability to keep the lights on in their own homes and in businesses. But, yeah, it was really challenging. There is a happy end to this story, which is that Dhara Vyas, who came in, who'd known Audrey in a previous life and previous work, and had a similar kind of consumer heavyweight background came in to support through that period, and ended up growing into the role of Deputy Chief Exec herself, and is now the Chief Exec of Energy UK. And there's a really wonderful story there as well, of just brilliant staff all looking after each other, and it's nice for me watching all their careers grow now I've moved on to

BW  

And how was working within this trade association of energy experts? You know, it tends to be quite a male-dominated environment from my experience.

EP  

I hadn't noticed that, had you Bryony?

BW  

You know, I didn't actually experience any problems, but it's just noticeable. 

EP  

Yeah, I think, I think that's fair. I mean, there were a couple of instances in the sort of wider environment during my time as chief exec for junior staff, where you have to step in. And one of the things that I hope that I did in terms of how we led the trade body, was a sort of zero-tolerance policy to anything that we thought was bad behavior from the industry. And I mean, from how they treated their customers to how they treated the trade body to how they treated their own staff. We were very unfun people for them if we felt that they crossed a line. And I actually love that my board granted us that space to demand excellence. I don't think we ever apologized for anything that the industry had done in the entire time I was in the job, if we didn't think that it was right. And largely, actually I had a lovely time. I had two babies in that job, and my board supported me to the hilt, including through that really challenging time I've talked about, and I'm pathetically grateful for it, and grateful for the temporary support of Siobhan Kenny, who they brought in, and Dara and all these people that helped me. I think that the industry also recognized the value of being led by people who spoke humanely and tried to speak authentically, and tried to mix deep technical knowledge, which we all have with sounding like normal human beings on the radio on their behalf, at a time when people really needed to hear that from the industry. I think that did help through a crisis, because normally what would happen is the industry would be on the receiving end of the kind of political fire on behalf of customers. And actually, at this particular time, with the small exceptions where there was genuine bad practice in industry, my members were as much part of solving the problem and trying to be honest about problems as they were held accountable for them by government. And I think that's partly due to the work that we do at the trade body, and I'm really proud of it. I think it's a good model for how a trade body should be. 

BW  

I mean, it must have also had quite a sobering effect on people's concepts of energy security. I imagine that there was just this assumption that there was this global gas market and that it would always keep flowing. Did it give people insight about vulnerabilities into the global market?

EP  

Yeah, almost overnight, the conversations I was in and the nature of the conversations about energy changed. So just as a working level example, as Chief Exec of the energy trade body, I was expected to deal with the Energy Secretary in the UK fairly often. You know, that's the department I deal with. It's much rarer for us to deal with what we call Number 10, so the Prime Minister's team or the Chancellor in number 11. And at that time, we were seeing those people in government more, also things like the cabinet committee and having conversations that were about security, and in particular, the thing that changed is people started to think about renewables and clean generation and reducing gas demand as an energy security issue, almost rather than a net zero issue. I don't think I said net zero or climate change at all that year, but we were still advocating for renewables, for heat decarbonization, for electrification of the economy, because it became about getting off gas, and there's very little the UK can do, even as a producer, because of the nature of the gas markets, to produce more gas and affect the gas price that way. Basically, our only option is to reduce our demand for gas, and that largely means electrifying heat and using more renewables. And that conversation was an extraordinary thing to be part of, because it brought in ministers who would never normally have thought of it at all. And it was very scary at times when you're sitting in rooms making these big decisions that affect the economy. But it was a real privilege, and it did change how I thought about energy and the energy transition. And I think for the government, they realized, and I mean the last government, but you've seen it in this government, in their manifesto, I think politicians realize energy is a key input to the economy. And if you don't have control over your energy production, if you haven't got an efficient energy system, you are very dependent on volatile international forces, and we're saying that. Nice thing, in full circularity, the Climate Change Committee, in the seventh carbon budget that we put out two weeks ago, said that a household with a dual fuel bill, dependent on fossil technology — so things like a gas boiler in 2050 will be 15 times more exposed to another gas price spike than a house that has electrified. And so I think that you know that has become a real train of thought for people since the gas crisis. 

BW  

So let's bring us up to date with your move from Energy UK to the CCC. What was it about this role that attracted you to it at this particular time? 

EP  

I mean, the attraction of it was to work across the whole economy. As I said, the experience of Energy UK was thinking about the energy transition inside the traditional energy sector. We did some work on electric vehicles and on heat decarbonization, and on electrifying the wider economy. But your job in the energy trade body is to serve the energy suppliers, the energy producers, the generators and the folks building the infrastructure. The Climate Change Committee works across the economy. And so much of our decarbonization needs are really an energy problem. It's how you get fossil fuels out of the economy as fast as possible, and then some other stuff, but it's still a big energy transition. I just thought it would be fascinating to think about it from a different point of view, and then the other way around. What I know from that last five years, that sensitivity about cost of living, the fact that we've got to make this easy for people, because it's a really challenging time, the needs of businesses in how they think about their energy use and how we frame what we're asking them to do, in terms of infrastructure investment, all of that stuff, I thought I could hopefully bring to the CCC, and how we think about the problem of decarbonizing economy. So when I was phoned about the job, I said, 'No, thank you. I've just moved to the other side of the country, and I quite like my current job, and I've just got on top of it, and I feel like we're really motoring on.' But it is sort of the job that I always thought would be amazing to do. So go on then. So yeah, what an incredible thing that I got it.

BW  

Let's just pause and explain what the CCC is and what it isn't, because probably quite a fair amount of people know what it is, possibly, but let's just do a quick explainer of what you are actually legally required to do. 

EP  

Well, this is interesting. One of the privileges of the job is that everyone has an opinion about this particular institution in the UK. I started the job by going to COP. I hadn't been to a COP for a few years, but I started as a new Chief Exec and went straight out to COP to help the government launch their NDC. And not only does everyone in the UK have an opinion about the Climate Change Committee, it's sort of internationally known as a body, so everyone has an opinion about this thing. And I'm really keen, for lots of different reasons, to spell out what we actually do in the Climate Change Act and where our mandate stops and where the government's job begins. And our mandate in the Climate Change Act is to advise the government on these five yearly caps in emissions across the economy. And it's a carbon dioxide equivalent cap that we specify, or a percentage reduction in emissions. And we set those, they're called budgets, and we set them about 13 years ahead of need. So we have just published, two weeks ago, the next carbon budget for the UK, and that covers the years 2038 to 2042. Now the number is the thing we're mandated to produce, but in order to demonstrate to the government that the number is feasible, we have to consider social and economic factors and demonstrate that there's a route through to delivering it. So alongside the number, we also publish a very long — it's 400 pages this time — piece of analysis, which basically tracks a pathway from emissions today to where we think we can squeeze emissions out of the economy to meet the number that we're recommending. And I think people have tended to assume the pathway is the legislative thing, like every single thing we say is what the government has to do. But in reality, the pathway is advisory. And then the government accepts or rejects the number, and they've always accepted it. Parliament votes on it. It becomes the target, and then the government takes our rounder advice, looks at it, and develops their own delivery plan and their own set of policies. And I think theoretically, they could come up with something entirely different to what we're suggesting, so long as they meet the number, that's the thing that we get to audit. And then our second job is, every year, we audit their progress against delivery. So we say, do we think their plans add up? Do we think that what they're saying about the GHG emissions for the economy makes sense? And we give that report to parliament so that parliament can scrutinize the government. So we neither dictate the pathway nor actually do the audit. The auditor is parliament, but we provide the information for the government to set the target, and we provide politically neutral information for parliament to hit them with a stick — whatever the color of government. And the thing that's remarkable about carbon budgets is that they have allowed a huge amount of innovation because they're not technology specific, and they're not single decadal targets. So there is wiggle room in them, being five yearly, and the first three carbon budgets, which were met actually ahead of need, for example, were delivered through decarbonizing power with offshore wind. And I can tell you for free that in the early 2000s and then in the 2010s when we were setting those carbon budgets, no one in the renewables sector would have said it would be offshore wind. And here we all are. We sort of designed that threshold back then — we designed those carbon budgets with nuclear, maybe large scale biomass or onshore wind, in mind, and this whole other technology came through. And that's what I think is great about them and working in the market. I like that they set long term certainty, but with a huge amount of room for innovation. So that's the job. We also have a second committee that does adaptation, and it's really important, and it never gets a look in, and I've just given you a really long answer and mentioned it at the end, but they're publishing their advice to government next year. And their job is similar in that they offer a big look at the resilience of the UK economy in a world where we might miss our climate targets. So preparing for the worst, as it were, for the economy, and what our security and resilience is in that kind of environment, what we need to do to prepare for the impacts of climate change. And then, similarly, they audit progress against that every couple of years, and so it's a big job, and I'm just about getting to grips with it.

BW  

It's really great to hear you describe this back to me. Because I can remember the conversations that I had when the act was being drafted about the creation of the CCC. And it was, it was really Tony Grayling, who was at that time, David Miliband's special advisor, who quite brilliantly realized that the setting of these interim targets towards our goal could get highly politicized, and so the creation of a body that was one removed from from government itself was his brainwave. And yeah, it's absolutely been the case, as you say, that the advice you've given has never been rejected, even in the most turbulent of political times, and there has been some turbulence over the last few years. And, you know, it's testament to the skill of that team, right? That you come up with scenarios that governments don't have to adopt wholesale, but they can see where the numbers come from, right? That's the most important thing.

EP  

I would like that relationship between our advice and then the wider zeitgeist to be more discursive. It's not meant to be a single point of truth. I will say, I think the analysis is pretty good, and particularly this time it's been relentlessly quality assured by our chief analyst, James Richardson. He's ex-National Infrastructure Commission, ex-Treasury, absolutely forensic, brilliant economist. And so getting anything past him is quite difficult. And then the committee themselves are brilliant. We've got two economists on the committee, plus world-class climate scientists and technologists and I think I'm just really impressed. I'm new, so I came in quite late to the process with all these great ideas about how I'd make sure the evidence is really good this time, and they've laid out a really good bit of work. And there will be mistakes in it, obviously, because we're doing the whole economy, it's a small team. There will also be surprises and this is the discursive bit. We are not responsible for things like industrial strategy. We're not responsible for wider social pressures beyond energy bills. There are lots of different reasons why government might choose a slightly different tack for reasons that are very understandable for the economy, for society, but that sit outside our mandate. And so I feel intensely relaxed about people saying, 'Well, actually, I don't think this many trees is particularly practical in this area of the country.' Or about 'how does it fit with the land-use framework?' That gets you into delivery. I think our job is to offer the best evidence we can in the most politically neutral way possible, and then for people to actually debate it. And I don't think that affects whether or not you legislate the target at all, because if you're identifying multiple routes to get there, great. So long as you think the target number is feasible.

BW  

Yeah, definitely. Anyway, I was particularly pleased when the seventh budget report came out, because when the act was originally published, I got quite a lot of flack, as did Ed Miliband, for being the most expensive couple in British history, because we'd passed this climate change act with these budgets, and then your report came out and said, 'Oh, by the way, the cost of meeting net zero has pretty much halved since our initial estimates.' And so I was just very pleased to be quietly deflating in value and not being the most expensive woman in Britain anymore, which was never the case, but this is...

EP  

You're getting cheaper. Is that an insult?

BW  

Yeah, exactly, getting cheaper, which is good. But underlying that is a really serious point, which is predicting the future is really hard. And you can always take the worst case scenario, but actually, as we go forward through this transition, there are going to be positive surprises, as you pointed out. And in general, it's ended up being cheaper, which is great news. 

EP  

The thing I often say to people about the carbon budget is a bit like democracy, in that I'm sure there are other ways of doing it, and you kind of weigh them. Like, I don't know, universal carbon pricing or if you want less targeted things, or more market-y things, and you could have, I don't know, specific technology targets, as indeed we have previously had in the UK a more defined approach, as with the Europeans. I think the carbon budgets sit somewhere in the middle, and probably more towards the market end. So there's lots of different ways you could do this, but much like democracy, I always come back to 'it's not perfect, but it's probably the best thing that we've got.' And also, importantly, it's nearly 20 years in now nearly, and they're delivering. So the UK was the first G7 economy to halve its emissions. We've turned off coal. We've brought on renewables. Technologies have come forward that we didn't know existed when we were starting this process. We've done that at a time of growing the economy. We've survived, as you say, lots of political turmoil and change. The point was to have something that was long-term enough to keep momentum going, to identify difficult challenges ahead of need, to give industry a sense of direction, but also to allow innovation and change. It's doing a pretty good job, and I'm happy to debate where there are things about it that I think are interesting or need tweaking for the real world, and especially when you're getting into stuff like international aviation, that's quite a hard thing to model territorially. All that stuff is fine, but I suppose I joined cognizant, as someone who'd been in the private market, of the value of this system versus almost any governance system I could think of for climate mitigation. And I'm really proud of it. So I feel very privileged to be in charge of the institution. I just don't want to break it, because you're so aware of all the people, including you, that have carried it from conception, into the world, and hopefully well beyond me.

BW  

It's really interesting to reflect on it, you know, this many years later, almost 20 years later, and see that, you know, we're kind of approaching the end now, right? You just advised on the seventh carbon budget, the eighth will follow, and then the ninth we'lll be at net zero. That was always the plan, and so the fact that we've over delivered so far... I think the sixth carbon budget is probably the first one where it starts to really get challenging, right? And that's mainly because the electricity sector savings are pretty much done by then, and you're really looking to get savings out of the other parts of the economy: out of transport and out of heat for buildings. Is that the tricky stage that we've got to transition into?

EP  

Yeah, it's tricky. Also, the sixth carbon budget was the first set in line with a with a net-zero target. When the Climate Change Act was written in 2008 it was written with an 80% emissions reduction target. We're saying that the pathway for the seventh, because of technology innovation, since we did the sixth, is actually a bit more straightforward in many areas. So you know, modeling technology S curves like roll out rates for things like heat pumps, electric vehicles. Essentially, they go slightly slower in this decade than we thought they might, and then speed up a bit. And all of that will help in how you deliver the six, I think. But in terms of the story for the economy, this period ahead, we need to do power still. We need a lot of clean electricity, about twice the size of the electricity sector today in order to do the rest of the decarbonisation. And it is an electricity story. So 60% of the emissions reduction for the whole economy in the UK to 2040 will come from electrifying other bits of the economy and more clean power, and in particular, surface transport. So in our modeling, we think three quarters of of vehicles could possibly be electric vehicles by 2040.  Two-thirds of vans can be electric by 2040 we're talking about heat pumps and electric technologies taking over from gas boilers in homes. And this is only modeling sensible technology replacement rates, so when you come to the end of lifespan of your heating system in the UK. No scrappage, no people ripping stuff out. We can see the potential of these technologies. And for electric vehicles, it just happens because of market forces, almost regardless of sort of climate policy now. So there's this huge electrification story, and also electrifying industry, and that is all challenging, not because of the economics. Actually, overall, you can also start to see savings coming through the economy. For the first time in this carbon budget, is when the investment flips over to savings, at about 2040. It's challenging because you've got to get the technologies into businesses and households. And businesses and households do not have the same finance ability, generally, as power companies building new power assets. So could I find a way of helping a householder afford the upfront investment for a heat pump, even if that household is making operational savings? And that sort of financing arrangement doesn't exist in the same way as a pension fund investing in a wind-farm over 25 years. And so that's a big challenge for the government. It's who they support to get these things and how they make finance available for those that probably would finance it with the right support and so on. And all of this means people.

BW  

It's people, but it's also challenging to the utilities model, right? The people you used to represent, they were really slow to realize that electrification is a growth boom for their market. And I would have endless meetings with representative distribution network operators who would just see added electricity growth as a problem, rather than seeing it as a return to growth in the sector, which means you can do a lot more, you can raise a lot more finance, you can grow. It should be a really exciting time. And it was really quite curious how slow they were to realize that moving into electricity, yes, it would involve more investment, but that's a good growth opportunity, right? And yet you've got this kind of 'engineers say no,' or 'it's going to be very hard.' And I always felt that at the heart of it was this feeling that we just don't want to lose the gas business, right? That yes, we can see the electricity growth is positive, but this desire to hold on to the gas infrastructure, I think, has held back quite a lot of progress, potentially, because it's an existing asset, sunk costs, and people couldn't see beyond it. And I think now we're finally realizing things move on, that it's going to transition, you need to get involved.

EP  

It's really hard to let go of infrastructure, particularly big infrastructure. And the last time we did an upgrade of this kind in the UK was probably the switch to town gas and onto methane and what we currently use in our boilers, and everyone having an individual boiler, which happened within the living memories of some people in the UK, but fewer of them. And since then, we haven't done much in the way of big infrastructure upgrades at all. It's not like we've built the rail network, or done a road building program or even a house building program or any kind of infrastructure at scale in a long time. And so change feels quite disruptive for people, I think. And so it's sometimes really hard for incumbent industries, particularly when you've got big, physical assets, to imagine that this thing that feels so literally solid could be beaten by this thing coming from somewhere else. And I suppose one of the jobs of the Climate Change Committee is we are the medium to long term people, so we are supposed to take a view that's 10 years out, and that allows us to say things like, 'No, we think change will come.' We can not skip over, but we are less caught up in the ‘this looks really hard for the next five years problem’, and more about, 'well, this is the way the world is going in 15 years problem.' So, yeah I think it has taken people by surprise, a bit, the speed of things. But that's the story of every economic shift ever, isn't it, that incumbent industries think this can never happen to us, and then it does so. But you're right, for the energy sector that I work for, everyone was very excited about the energy transition, the investment going in the technologies, the potential for new energy services, I think they're in that sticky bit where they haven't quite got the markets, the consumer offering where the revenues are right through the industry yet. So the potential of the technology is not fully being realized, either by investors or by consumers on the other end. And if they can get that right, that will help, because the thing about it being a boom is literally true in terms of the amount of infrastructure we're building, in terms of the opportunities there. Working out how to get the finances flowing through the system for the good of people, so that you can build products and services that people want... we're not there yet.

Michael Liebreich  

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BW  

It's also really interesting what you said about the budgets allowing for innovation to emerge, right? Nothing in the Climate Change Act says, 'Thou shalt build renewables, that shalt install heat pumps.' It was always described as the outcome that was legislated, not the means. But now what's happening is, the option choices are narrowing just by identity of the best solutions coming to market, right? So you're able to say in your seventh carbon budget, 'we don't see any role for hydrogen in home heating,' because over the last four to five years, we've had a big debate about it. Everyone's weighed in, and the sort of blinding, obvious conclusion has come forward, which is, 'Heat pumps are just going to be easier and cheaper.' 

EP  

Yeah, we've got a recommendation in the seventh carbon budget, which says very high-level when we present it, which would provide certainty. I've had a few people saying, 'Isn't this like market intervention, you know, markets like risk.' And it's like no, what we're saying here is the market has picked a winner. And in this case electric heating, we are going to say you should do heat pumps, or you should do electric vehicles, because the market has chosen that winner. Where there are still options, we force the models to still produce options. And a good example of that is removals technologies or natural solutions like woods and peatland and that whole bit of the economy where we might be trying to remove emissions to allow some sectors to keep producing emissions. That science, those technologies are a bit further off, more uncertain. Probably where the surprises will come, are things like will planes electrify, that kind of thing. And so we're not certain. We're not being prescriptive about the technologies there, because the market hasn't determined them yet. And I'm looking forward to getting the exact technology mix wrong, although we are confident enough that we can see technologies out there today that could do it, even if they end up getting beaten by something even more efficient.

BW  

Yeah, and efficiency is actually the key to it, right? You said that, to get to net zero, we might have to double the size of the power grid. It would have to probably triple or quadruple if everything was running on hydrogen and you wanted green electrons to be the source of that. Or you'd be talking about continued reliance on imported gas and cracking that entire... I think there was a plausible hydrogen scenario that I'm sure the gas industry and existing operators of the distribution gas networks would love to have been correct, which is, 'well, we'll just do a drop-in solution fuel.' But that just hasn't emerged as anything that's really feasible or practical. 

EP  

Yeah, again, it's the role of the Climate Change Committee, actually, to be fair, it was the role of Energy UK, where we were thinking across the whole system, where the other thing that happens in industries is little bits of the economy thinking inside their own bubble. So actually, a good example from the seventh carbon budget, because we're starting to think about things like agriculture is we modeled agricultural land use together for the first time,thinking about diets and land use and farming all in the same bubble and so on. Someone gave me an example of something today where I think bits of the food sector had decided that it would be fine for us to still produce emissions because they had a technology to suck the emissions out of the atmosphere. So I imagine something like a DAC technology, store it, and use it in food. And it sounds interesting, but it also sounds like a very small bit of a much bigger market talking to itself. And the constraints on that kind of solution tend to come from outside of the bubble. And so for hydrogen, for the 10 years I've been doing this, it was never the heating bit of it where I couldn't see the potential. It'd be great if you could just drop a fuel into the existing asset, that's obviously economically efficient if you can do that. But it was how you could generate enough fuel and move it around at the other end of the system, when we also had this need for electrifying things like transport, which was going to electrify. And it was the constraint on fuel production that was, for me, the issue, because of what I knew was coming for other areas of the economy outside of heat. And that's the job of cross-economy bodies. And I think we are confident enough to say 'no hydrogen for heat,' for the first time as a committee. I will add we were like the 16th body in a row to get in line and say that. So, you know, it's nice to join the party. The other thing, though, the thing that's important about this, is that we're still saying there is a role for fuels in the economy. But it's just that you electrify everything we can electrify, and the fuels do the things that we can't yet electrify. And so then there is an interesting question about, which bits of the gas network do you still need for those areas of economy, and do you what's the cost of that? And how does the government manage that? You often end up in a binary state, where, with things like these assets, you're like, 'No, none of it.' But actually it might be the case that the industry is doing something different in terms of gas network provision, or fuel provision. 

BW  

That's partly why it'd be good to have a spatial plan for energy coupled with a land-use plan, because there might be areas where we're doing fertilizer production, we need the hydrogen. There's a lot of excess wind capacity, and it makes sense to locally produce the hydrogen. That spatial plan might actually really help, and I think it's a good thing if government embarked on it. It's been missing. It seems a bit central planning, but actually doing everything from the bottom up, as in developer land, can lead to some really suboptimal outcomes.

EP  

And I suppose that's why energy, which is an essential service to the economy, has always been a regulated sector, right? Government wants particular outcomes from it, some of which are industrial, in terms of job creation, some of which are about energy security. Now we're going to go further than is efficient, because we don't want to rely on imports of electricity or fuels, some of which is about fuel poverty and social need, and some of it is about running an energy system. And so having a tool, whether it's a market based price signal or an auction system or whatever it is that produces those outcomes, or having a kind of plan where you need it for how you get industries to work together? Yeah, it's why it's always been, we used to describe it in Energy UK as a bit of a partnership between the government and the best of the market. And I think when we get that right, you get a good outcome. And I have been a long term fan of the Contracts For Difference (CFD) or the auction based system in the UK. Again, that is a Conservative party innovation. It was our center-right government's innovation. Instead of a direct subsidy for particular technologies, they set up an auction scheme where people had to bid in, and so there's a bit of the state saying we need clean energy technologies to meet our climate targets, but then it's the market delivering price reductions. And I found that brilliant. I remember the state's expectation of offshore wind prices were like £100 pounds per megawatt hour by 2030 or something. And they were like £57 off the back of the first auction round, because people had to compete. The sector, the market, took some risk, they innovated. They did the things that good private markets do, but they had the stability of the CFD from the government in order to get cheap capital in. And I think that's a really good example of things going well. So we're going to need lots more of that sort of thinking for the challenges we've got coming. Fortunately, it's not the job of the climate change committee. That's the job of government.

BW  

No, but if you had to do an audit of what the UK has going for it? The Low Carbon Contract Company (LCCC), which administers the CFDs, is a little unsung hero in this whole issue. And it came out of industry, really. CFDs were already used bilaterally between companies to offset risks. And I think it was actually Electricity De France (EDF), who thought, 'hang on, we need more certainty than a variable certificate, green certificate, to get a new, new nuclear plant away. Let's use a CFD model.' And it really was the desire to build new nuclear that led to the CFDs being brought in, which then ended up being so brilliant for offshore wind. It's doing both jobs. The LCCC is the thing that makes that possible. Perhaps we should get the head of the LCCC on to Cleaning Up to explain.

EP  

We're really quite good at governance in the UK. There are bits of our governance in this which I think do work. And again, I don't want to be smug, there are imperfections in all of these things, in an imperfect world. But I think the CCC and the LCCC and the CFD are all good examples of things where there has been genuine policy innovation, as well as technical innovation coming from the UK. And I'm proud of those things, and in all of my jobs, I've variously been talking about them. 

BW  

So yeah, you've touched on it. But the next challenge is to take all those learnings and apply them to the land use sector and the food and commodities sector. That's the next frontier after we've done power decarbonization and we've done electric heating and batteries, we're going to have to do land use. And at the moment, my interactions with that department have not been very numerous, but I sort of feel that they're back to where DEFRA was pre the Climate Change Act, which is: which little interventions can we unlock to try and get to our projected savings that we need, rather than taking a systems wide approach? And how do we incentivize least-cost carbon abatement? Make sure that we're not picking winners, but we're equally trying to provide certainty for investors. And it's been done in those other sectors, right? So there's a lot to learn. 

EP  

I think that's exactly right. I'm actually back hot off the train today where I've been talking to an agriculture and land use conference, and researchers and farmers and land managers about our advice in the seventh carbon budget, and what we're saying about agriculture. And for us, just from a boring economics perspective, the thing that's different about how we've approached this in the seventh carbon budget is we've considered agriculture and land use together. And what that does is we are imagining consumer trends in terms of diets and what people might do in terms of their own food, following existing dietary trends, and thinking about things like alternative proteins coming forward, or whether the farming industry in the UK would produce more vegetables, and all that kind of stuff about people's choices and how that manifests for farmers in terms of whether we're putting livestock on land, or growing crops or some other thing. And then, in turn, what solutions that they could have on their land that help to remove carbon, and thus offset any continued farming practices that release emissions — things like trees or peatland — we've tried to consider it all together. The reason I'm telling you this is essentially what that gets to is like a revenue model for land management, which is revenues for farmers and the existing industry. And what we can see is a clear net benefit overall for public services, things like improved air quality, improved water quality, reduced overflow into sewers and that kind of thing from farming runoff.Providing a service in terms of trees and biodiversity, but also removing carbon from the atmosphere. So you can see a social benefit, and you can see a literal financial benefit to farmers, because they electrify a lot of their machinery, and production becomes more efficient, higher yields for less land, and together, that's like 500 to 1500 pounds for most of the farms that we looked at. We modeled different farm types, as well as across the economy. This is a long way of saying what's missing is the monetization of the social good bit, which is the department's job. And historically, in the UK, that's been done. We've supported farming through the Common Agriculture Policy, and then the replacement, after the UK left the European Union, and the government is consulting about what it does instead. I would agree with you, Bryony, that they need a plan for that. They need a plan for land use overall, and they've got this land use framework coming out, and our land use numbers are quite similar to theirs. That's good, but then they also need to identify the revenue mechanisms. And it's not as easy with stuff like trees. You want them to be credible and good, but what we are saying is there definitely is a benefit there. There's definitely a benefit there that you could pay for. So how do you do that in a way that allows farmers still to farm and land managers to steward the land, and to do this whilst maintaining food security and all that stuff. And yes, it's not beyond the wit of man, because you can see the benefit there. So I could see the product, it just needs the market. And luckily, that's not my job, but it is the department's job. And I think DEFRA needs that vision. They've got 99 problems at the moment DEFRA, because they're also looking after water and...

BW  

And actually, I think when it comes to solving this part of the segment of emissions, we should look beyond the farm gate. We should be looking at the incentives coming from the buyers of the commodities they produce, and also the input providers to the farming sector. And actually start there, because farmers react to these two forces. They have to buy a load of inputs and they have to sell to someone. And if those two flanking industries have the right incentives, and those incentives are aligned with low carbon, farmers will naturally shift. And then you've got 'what we do with all the subsidies' we've been paying them and obviously stopping paying them for doing things that make climate worse, and water management worse, and all those other things that we're currently doing. But beyond that, I don't think it really sits on the shoulders of farmers to solve and I think you can go a long way with agreements in those other two segments, which have got climate change agreements, actually, with government. So it's not hard to do.

EP  

I've been enjoying this bit of the work because, as you say, it's also interesting, speaking as someone who used to run a trade body. So obviously, the trade bodies that look after food, and, indeed, the NFU, the farming but not quite trade body, but the farming body, and others I used to sit with fairly regularly when we were talking about things like skills, for example, or inflation or energy inputs into the economy. I was quite frequently talking to one of them about that. One of the interesting things is often sectors outside the energy industry, when they're thinking about their own carbon, corporates will often go vertically down the supply chain rather than across the system. And so if you're a food producer, if you are a supermarket, you're probably not thinking about stuff like getting a heat pump. You're thinking about your suppliers and your supply chain. If you're a farmer, you're probably not being rewarded for the system change that you could be bringing, the pressure from the retailer is on your emissions kind of straight, vertically down. And we've done lots and lots of work talking to the farming community, and farmers absolutely know climate change is happening. These are the people that most know it's happening. They're really worried about it for their businesses. They're also really struggling to make a return, many of them, in the current environment. They are not the people that are opposed to the analysis that we've put forward, generally speaking. They just want their markets, the people they sell to, and the government to help them explain to consumers what's changing, and they will meet that changing need. And I'm talking to you from a rural community, and I've got farming in the family through my grandmother, so I'm really pleased that I haven't been banned from the school gates after the announcement of the seventh carbon budget. But stand in a rural community like this one, and we also want a future, this is a community that really does understand a changing landscape, that does care about it, that does want to do something about it. We kind of culturally value farming and land stewardship. We understand that change happens. This neighborhood has changed every 100 years as more technology has come through. We used to produce wool for manufacturing soldiers coats in the 18th and 19th centuries, and there were mills down the bottom of the valley that service that industry, and all of the farms here farmed sheep to service that industry. And that's not what the farming industry does here anymore. Farming will change to meet the needs of the economy of the day. Where we have done that in this community for generations, we would do it again. But we do need to understand what we're being asked to do and people need to be rewarded for it. We can't ask people to farm for free. 

BW  

But I think this is a good case of where government gets in its own way because of lack of joined up government, right? Because, just as you said that, you know, sheep haven't disappeared from the hillside, because at some point governments decided, 'actually, they need to be subsidized to compete in global markets that have disappeared, really,' but we want to make an investment into keeping everything as it was, and believing that would be politically popular. But it's sort of short term thinking that you're always going to be pushing a rock uphill, rather than letting adaptation come through. You know the point about adapting — to your point about the retailers perhaps thinking too narrowly. The way the climate change agreements work is that, if you're a retailer of supermarket, you are thinking about heat pumps and refrigeration, because that's what your climate change agreement requires of you. It's an inefficiency and a CO2 target. They're not allowed to put in CH4 or N2O, or wider things that they're responsible for from their purchasing. So anyway, this is one of my hobby horses, I think you need to change the nature of the climate change agreements to make them broader. And actually some retailers want this, then they would be able to look upstream into what they're causing to happen in farms, and take that into account. So far, the government said they're not interested, but they should be, they're going to have to be. 

EP  

I find this debate really fascinating because this is slightly beyond the scope of the CCC, as in how will this actually get delivered, and what should the department do, and what should supermarkets do? But it's good to understand it, because it feeds into what we're saying about what's feasible. But also, because I would instinctively know what this looked like in the energy world. I know what the business models look like, I understand the financial flows, that's been my world for 16 years. And one of the joys of the new job is learning to try and apply some of that thinking to very new sectors of the economy. And you're right, it does seem we're 13 years out from the carbon budget we've just recommended. There's time, but one of the big shifts we're going to see between now and 2050 will be quite a lot of other sectors of the economy electrifying, and then some other fuels coming in, and then these remaining sectors in the UK, which are agriculture and aviation, and the need for removals, either manufactured removals, in terms of removing aviation emissions or land use change to enable those emissions to still be there in the economy and to meet our climate ambitions. And that thinking has not been done the same way. It must have been what the energy stuff felt like before I started doing this, you know, 30 years ago. And there'll be someone somewhere, just as someone in a university somewhere, built a wind turbine and thought it was a good idea 40 years ago, who's got an answer to this. We just need to scale it up and through into the real world. And like I said, I've just come back from a conference today where loads of people have brilliant ideas, and they're just crying out to get them heard and financed and out there. So hopefully we'll be surprised with what comes forward and your hobby horse, Bryony,you know, keep going. It's not as if we don't need to come up with the how. But fortunately, we've done our bit as the CCC, and now it is about working with people on the how. But really, that's not our job. That's for the people that are doing it in the market and doing it in government, to come together and come up with some stuff.

BW  

I know we're nearly out of time, but I did have a couple more questions I wanted to ask you. One is internationally. At the moment, we've had a very nice conversation because we're both similarly minded, we believe that this is necessary, we believe it will be good for the UK. But there's a lot of criticism at the moment that the UK is receiving, because there's a sense that we're going too far, too fast. That somehow we're punishing our citizens. You know I'm in Houston this week, and the Energy Secretary of the United States took time out of his speech to berate the UK for net zero. So we're coming under quite a lot of pressure, and I'm just interested in: what do you tell yourself, and what does the community tell itself when asked the question: listen, we're only 1% of global emissions now. We were two and a half. We've done such a good job, we're now 1%, and only 5% of historic emissions. So why does it matter? Why are we doing this?

EP  

I have three answers to this question, because I get asked it a lot. One is the technical one, which is something like a third — and someone will look up the stat now — but a significant proportion of the effort globally to decarbonize comes from countries that individually are only worth 1% of emissions. And so there's a sort of we're all in it together. If every country that was only 1% of global emissions decided not to do its share, we wouldn't get there. And we all experience the impacts of climate change because it is a global problem. The atmosphere doesn't stop at the border. So that's the technical answer. And there is the political answer, or the economic answer, which is regardless of whether or not you care about climate change, if you understand energy economics, you should probably electrify your economy as fast as possible, because otherwise your incumbent industries are about to get eaten alive by something cheaper and more efficient. We halve energy losses in our model from electrifying heat and transport, and we reduce our imports, and thus exposure to volatile gas markets. Households are better off in our model, in this system. So by 2050 a household with an electric vehicle and a heat pump, across most of the house types we modeled, the average household saves £700 on their fuel bill. They save £700 on their driving costs. This is better for the economy. So I don't particularly care whether you want to pass a moral test or whether or not you care about climate change, but if you're a politician that worries about the economy or the cost of people's bills, that's the thing. And you know just to go further than that. In the UK at the moment, there's a lot of debate about industrial energy prices and the prices faced by businesses, that is almost wholly caused by our dependence on gas and the amount of gas that we use in our energy system and our exposure to gas markets. So again, if you're worried about your industrial strategy or your competitiveness in the UK, electricity has to be the answer. So that's the political and economic question. The personal answer to this, which I never quite express properly, is that I'm a parent of a five year old and a two year old, so I spend a lot of time at the moment thinking about teaching them about right and wrong. And I would never, ever say to my children the amount I expect of you is the minimum someone else is doing. I expect you to be polite to people and to be kind to people and to not hit each other because that's wrong. If the metric was you can hit your mate just as much as they hit you... I think we should do this because it's the right thing to do. And for me, I very rarely say that, because I think there are very good economic reasons for doing it. But I also think we've become frightened somehow in saying that this is a good thing to do. People in this country, and I think people around the world, know that climate change is happening. They want to preserve things for their children. They want to hand on a stable environment to their children. They want to pass on nature to their children. They want these intangible, beautiful, invaluable things, as well as the economically tangible things they matter too. And on the doorstep, people tell politicians that. So it is always a mystery to me that politicians forget it. 

BW  

That's a lovely way of rounding it up. And I think this moral element is actually really important, and even more so perhaps at this time. We used it when we were trying to get the Climate Change Act through as drafted, because we always said, 'in a crisis like this, the only way forward is through leadership and then hoping others follow.' And you can't have a race to the bottom, because that is a suicide note for humanity. So someone's got to lead. And given that we did it once before with industrial revolution, we are probably the country in the world that's responsible for doing it now, and it's going to be a 100 year transition, probably, but if we embark on it, then that's putting good a mistake we made, perhaps unknowingly. Fossil fuels have been an amazing gift to the world to get us to this stage of development. But nobody believes that fossil fuels can carry us forward for the next 100 years. There just isn't enough of them, or even if there was, there are too many associated damages. So this transition is inevitable, but we should be at the forefront of leading it, as we were in that industrial revolution. So I'm glad that... I think you could be even stronger in your saying that we do it because it's right. 

EP  

You know, in case people think this is just the opinion of, I don't know, two tired optimists at the end of, in my case, at the end of a working day, and in your case, in the middle of one. That opinion about what the public think and feel is actually evidenced, in my case, by A) every poll I've ever seen in the UK. But B) the work that we did this time with a citizens panel. And one of my favorite things in the seventh carbon budget this time is not the quantitative analysis that we've done or the economics modeling. It's the evidence of this particular group, and it was done independently of us. It was done by a professional polling company. So the people were demographically representative. They were across politics, all of our political parties, even climate skeptic political parties, and it was a deliberative process. So they were presented with some of the analysis, they brought in experts, and then they gave their opinions on a range of policies. And the three things that came out of that of note for this conversation. One, the public absolutely wants action on climate change. They were worried about it. They were worried about nature. Actually, they'd seen fires like in California, or floods here in the UK, they knew about it. We shouldn't patronize the public by assuming they don't understand that this is happening. Secondly, they were annoyed at political messaging that flip flopped around on climate change. What they were crying out for was a bit more certainty and clarity on messaging. Tell us what's happening, tell us what you want us to do. And thirdly, they were more up for it than any of us anticipated, even in the Climate Change Committee, but certainly more than politicians realize. And they were going further on their policy recommendations than we've ended up going as the expert body. And I think I'm not sure why we frame climate politics badly, but we do, I think, compared with how people think about it. And some of that is on us to have better conversations, but I think some of it is on politicians not to assume that the public doesn't support this. We need to make it easy. We need to make it attractive. We need to recognize there's a cost of living crisis. It needs to be fair, but people do want to do it, and I've got the evidence for that. 

BW  

Emma, thank you so much for spending your evening with me, talking through these issues, and for clarifying what it is you do, what you don't do, the importance of the work and some of the challenges ahead. I just wanted to flag that the committee doesn't just do this mitigation budget setting. You mentioned the adaptation committee, but there's also this really important five-yearly risk assessment report that the committee produces. And I've always felt that if people really fully understood the risks, then all of this mitigation stuff would be even more obvious that we have to do it. So how are you approaching that five-yearly process of that risk assessment? 

EP  

Well, one, it's really important. So I think just telling people that we have the second job and that we do it is the first thing as Chief Exec. Sometimes the work of the adaptation committee can get overshadowed by this carbon budget process. So I'm out and about talking about it. Helpfully, the UK government's office for science is also having a year of adaptation next year, which our report will land in the middle of. So there should be this big moment to talk about the risks of climate change to the economy, definitely that's good in terms of the structure of it. Actually something that we would quite like the department or government to do is set their framework for how they want to measure adaptation. Like what does good look like? Because, unlike the carbon budgets, where they've basically said, this is the framework, advise us within it, we don't have that for adaptation. So we're sort of building the plane whilst flying the plane a bit on the adaptation side. And I think the work is still good, but having that shared monitoring framework would help us all, I think, because then we could track progress and try and set some goals and try and use that to then advise government about delivery. 

BW  

As you were talking, you were just reminding me that another one of my previous hobby horses is that risk assessment, and the way we do risk assessment on climate, really requires us to identify risks and then have the monitoring processes in place to see if they're getting better or worse. And then identifying sensible, no regret actions that we can take to try and address those risks. And it's not often framed like that. The IPCC doesn't work like that, the NDCs don't work like that. But if the UK could come up with a model, as you would with a business, of what are the biggest risks, the level of impact, level of likelihood, and what are we doing to manage and mitigate? That would be a step forward, and also at this time, where we're seeing a rollback of climate science, we've relied on the US for a lot of our basic understanding of what's going on with the global atmosphere. And to do a good risk assessment, you've got to have really good data as to what those risks are and how they're changing over time. And I think investing in that, as the UK has, is a really important part of the equation. 

EP  

All of that is fair, and so we do that as the committee, they have the experts around that table, and then the secretariat has endeavored to identify risks and monitor them and track progress and report to the government regularly. But I think the point is that, like we have done that, but a similar framework in the other direction needs to be there too. Because as a country, we should know how to tackle this. We should be thinking about it across the economy. I will say that the government signaled in its last response to us on our progress report of last year that they were setting up a new Cabinet Office — this is effectively a cross government office — they were setting up a new committee of some kind to look at climate risk and resilience across the economy. And they are having a year of adaptation next year. So I think that is something this government wants to do, and we're really ready to help them with it. In terms of our report, yeah, there's some interesting, scary, thoughtful analysis on what climate change could mean for the UK, for things like our infrastructure vulnerability for coastal power stations or railway lines for extreme heat, where we've had instances in the 40 degree summers we've now experienced in the UK of railway lines buckling, or roads melting, or key infrastructure being affected, increased hospital admissions, healthcare impacts. And so we model for a three degree world. They sort of prepare for the worst. That's the sort of thinking. And it's not a hysterical bit of work. It really shows where there are risks and where we can mitigate them. And some sectors are actually really thinking about it. But I would like to see far more attention brought to this agenda in government. And then lastly, if you get the framework right, what I'd really like to be able to do is the two sides of the ledger problem, which we can't currently do. We don't currently think about, 'this is the cost of mitigation.' And our reports on the mitigation side say, regardless of the impacts of climate change, this looks better for GDP and it certainly looks good for managing the economic risks of gas dependency. It looks better for bills. But what we can't cost is the avoided impacts bit, because we just don't have the equivalent methodology. And I'd really love to try and get to a point where we can bring the work of those two committees together and compare them side by side, and say, 'okay, you've got to do this and this,' and this is the cost of adaptation, and this is the cost of mitigation. And the less you do of this one globally, the more you've got to do of this one. And that is another thing that I'm quite interested in, combining the work of both committees, and being able to see this problem for the UK economy in the round. And that is quite an exciting thing that I hope I get to do in the job too. 

BW  

Congratulations on the new role, Emma. I'm sure you're going to excel at it, and it will be a brilliant learning curve for you, I'm sure, as you go through this process. Thank you for joining us, and good luck. 

EP  

Thank you. 

BW  

So that was Emma Pinchbeck, CEO of the Climate Change Committee. There's no doubt that extreme right wing voices that seek to deny or belittle the consequences of climate change will continue to attack the UK's progress, and we may be in for some turbulent times. It's reassuring, therefore, that the CCC is in Emma's extremely capable hands, the UK is already demonstrating that economic growth and greenhouse gas emissions can be decoupled and our energy security improved, and in the coming years, as we continue to wean ourselves off dirty and expensive oil and gas and replace it with more efficient homegrown electricity, citizens are about to see very real benefits in their pockets. This will make it even more politically popular to take action on climate change for future generations. My thanks as ever, to Oscar Boyd, our producer, and Jamie Oliver, our editor, and to the rest of the Cleaning Up team and the members of our Leadership Circle. And thank you for listening, we hope you enjoyed it, and please join us at the same time next week for another episode of Cleaning Up.

ML  

Cleaning Up is brought to you by members of our new Leadership Circle: Actis, Alcazar Energy, Davidson Kempner, EcoPragma Capital, EDP Portugal, Eurelectic, the Gilardini Foundation, KKR, National Grid, Octopus Energy, Quadrature Climate Foundation, SDCL and Wärtsilä. For more information on the Leadership Circle, please visit cleaningup.live, that’s cleaningup.live. If you’re enjoying Cleaning Up, please make sure you subscribe on Youtube or your favourite podcast platform, and leave us a review, that really helps other people to find us. Please recommend Cleaning Up to your friends and colleagues and sign up for our free newsletter at cleaninguppod.substack.com. That’s cleaninguppod.substack.com.