Utility Week

UTILITY WEEK | JUNE 2021 | 17 Policy & Regulation Talking Points… "Net zero should be an investment bonanza – but it's at risk of having the opposite eff ect" Comment Tim Lord Senior fellow, net zero, Tony Blair Institute for Global Change N o matter your views on climate change, one thing is pretty much agreed: delivering net zero will require a lot of investment. While we've made strong progress in some areas, we aren't getting enough investment in the low- carbon infrastructure we need for net zero, and we're at risk of slowing major investments elsewhere in the economy because their compatibility with net zero can't be demonstrated. There are four steps we can take to address that. First, putting in place long-term funding, regulation and revenue streams to make the key technologies we need for net zero an attractive investment proposition. To enable private sector capital to • ow, we need investors to be able to make a busi- ness case that their investment will have a return, and to be con• dent that the policy environment will be stable. The government is working to do that on technologies such as car- bon capture and storage – but much more is needed. Second, a relentless focus on reducing the cost of capital. The UK's success in renewables has been driven by the contracts for diƒ erence – which have signi• cantly reduced the cost of capital, enabling much lower cost deployment. That focus on cheap money must be re• ected else- where in the economy – including through direct government support to reduce costs for areas such as invest- ment in our homes. Third, a clear pathway to net zero, which sets out the role that fossil fuels will have in our economy as we transition. The argument in legal challenges to high carbon infrastruc- ture pivots on one central point: the applicants arguing that fossil fuel investments can't be compatible with net zero; and the defendants responding that they can. With- out a clear plan for net zero, these arguments can't be properly tested. The only way of practically assess- ing them is to have a clear, quanti- • ed plan for how net zero will be reached. And fourth, investors need to wake up to what net zero really means. Investment plans that rely on meeting net zero through implausible levels of aƒ orestation or carbon cap- ture but allow emissions to continue to increase in the short term are not credible. While many banks, pension funds, and energy utilities are wak- ing up to this, many are not – and those who are not are creating huge risks both for the climate and their investors, as they focus on assets which will inevitably be stranded by future climate targets. None of these proposals are rocket science – they require clear objectives, transparent analysis, and a stable policy environment. With those in place, we can unleash a transformation in investment which can both deliver net zero and support jobs and growth across the UK. Tim Lord is the former director of clean growth at the Department for Business, Energy & Industrial Strategy. The full version of this article is available to Utility Week subscribers at: https://utilityweek.co.uk/net-zero- should-be-an-investment-bonanza- but-its-at-risk-of-having-the-opposite- e ect/ "The government has a mountain to climb to get to all new cars in the UK emitting zero carbon in the next 14 years: to convince consumers and make the cars appealing, to make the car industry environmentally and socially compliant, to build the necessary infrastructure to support this radical shift and possibly biggest of all, to wean itself off carbon revenues. Yet once again what we've got is a government throwing up a few signs around base camp - and no let-up in demand for oversized, petrol- guzzling vehicles. Meg Hillier, chair of the Public Accounts Committee The news in numbers: Ofwat has approved a swathe of green investments across the water sector. Here are a few key numbers. £2.8bn Total size of the package, made up of: £885m Fast-tracked investment for AMP7 £1.bn for future projects under the Water Industry National Environment Programme (WINEP) Individual projects include: £565m Severn Trent for river quality and nature- based flood reduction. £146m Thames' smart water meter rollout. £63m United Utilities to increase sewer capac- ity, develop nature-based solutions and reduce harm from storm overflows. signs around base camp - and , chair

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