Net-Zero Carbon Emissions

Baroness Altmann Excerpts

Wednesday 21st April 2021 Grand Committee

[Baroness Altmann (Con) [V]]

My Lords, I declare my interests as a member of Peers for the Planet and the Conservative Environment Network. I congratulate the noble Lord, Lord Teverson, on securing this debate and on his powerful and persuasive introduction.

I also congratulate the Government on the work that they have already done to help us achieve net zero: their 10-point plan for a green industrial revolution, their determination to be a leader in the global transition to net zero, their pledge to use the Covid recovery to build green infrastructure and jobs and the £12 billion infrastructure bank project to support private sector and local authority schemes. How are plans progressing for publishing the Government’s net-zero strategy implementation proposals? I was delighted to hear the commitment to bring forward our goals to 2035. However, that brings it into what I consider the short term rather than the longer term, and we do not yet have a road map for reaching that goal.

The noble Lord, Lord Teverson, and all other noble Lords who have spoken mentioned the need for a cross-government approach and for integration across all parts of government. I fully support that. I understand that the Government are already working with the devolved authorities on issues such as carbon pricing and industrial decarbonisation strategies. Could my noble friend the Minister comment on further plans to work with regional and local government on these issues?

The Climate Change Committee points out that local authorities can impact more than one-third of all our emissions, and the devolved Administrations of Scotland and Wales account for one-fifth, so a national and local strategy to integrate policies is clearly needed to avoid conflicts between different parts of policy-making. For example, reducing traffic congestion could conflict with expanding cycle lanes, and a desire to build new homes or expand conductivity could undermine emission reductions. As other noble Lords have said, integrated policy-making on transport, electric vehicle charging networks, home heating efficiency and even carbon trading are urgently required. I therefore support the idea of a Cabinet Minister responsible for integrating all these policies and bringing in expertise across government who understands the impact of policies on emissions, and indeed on biodiversity, as the noble Baroness, Lady Bennett, and the noble Lord, Lord Teverson, stressed, to align policy objectives.

Another clear area where there seems to be a disconnect between one arm of government and the aims of net zero relates to cryptocurrency trading, which has been alluded to by others, and the mining and increasing expansion of bitcoin, for example, into regulated firms. I was delighted that the Government listened to the concerns of this House expressed in the Financial Services Bill and overcame their initial reluctance to agree that the FCA, the PRA and the Pensions Regulator should have regard to net-zero aims when making their rules. That is something this House can be proud of. Financial institutions at the Bank of England now have an expanded remit to reflect environmental sustainability and the net-zero transition.

But how does that fit with increasing penetration of cryptocurrency trading and use in transactions by regulated firms? The carbon emissions involved in mining bitcoin, for example, exceed the entire emissions of a country such as the Netherlands and it adds no discernible benefit to society. Indeed, it might encourage fraudulent trading and facilitate money laundering, as well as enticing people into speculative gambling on something that does not exist. This seems rather like the tulip bulb mania, but without any tulips.

The higher the price of bitcoin, the greater the energy emissions involved in the whole market. If our financial regulators want to control the risks and help to meet net-zero targets this would seem to be relatively low-hanging fruit, but the longer it takes to wake up to these risks, the more embedded and financially risky it becomes to remove trading in currencies such as bitcoin from regulated activities, and the greater the danger to the Paris climate change ambitions. If the Government really aim to make the UK the number one centre for green tech and finance, should they now consider a ban on this type of activity?

It feels to me like the debate on climate change is still classified as a long-term problem, but the climate emergency is already with us and requires short-term action, not just intentions. One of the challenges, of course, is to develop clear data and metrics to measure progress on reducing emissions, and to institute regular reporting and correction mechanisms. However, there are still opportunities for the Government to join up and embed a process into policy-making across departments in the shorter term.

On a related subject, what consideration is being given to devising a cross-government, cross-industry taxation strategy which supports net zero and increases the incentives for emission reduction while subsidising investments that will achieve, or help to achieve, climate goals? For example, finance will be essential for decarbonising the UK’s energy sector, as it is for most economic activities. But as a major global financial centre and with one of the biggest oil and gas sectors in Europe, the UK could play a leading role in attracting private finance into renewables projects and other net- zero technologies.

We also need plans to encourage large companies with assets under threat from climate change or climate policies to plan now for the net-zero transition so that they can protect not just their investors but their workers and other businesses in their supply chain. Again, that is where taxation policy could drive positive change.

The production gap already exists, yet our major oil and gas companies and those in other countries have policies that are not compatible with the Paris Agreement objective of limiting global warming to an increase of 1.5 degrees or 2 degrees. Fossil fuel production is still increasing, which means that either we will miss the carbon budgets or the financing of oil and gas infrastructure in the North Sea will become increasingly risky as those assets are more likely to become stranded, risking the financial stability and viability of companies involved and consequent job losses.

As the host of COP 26 and a country with relatively low economic dependency on fossil fuel production, I hope that the UK will address our own production gap, as well as rethinking the new proposed coal mine. As an example of the disjointed policy which this debate is all about, this is clearly incompatible with the Government’s foreign policy priority, expressed in their integrated review, to lead the world on climate change, and their aims of achieving net zero more rapidly.

I congratulate the Chancellor on announcing the UK’s intention to be the first G20 country to mandate climate disclosures by large companies and financial institutions across our economy by 2025, with many coming into force by 2023 and going beyond the recommendations of the Task Force on Climate-related Financial Disclosures. All of the UK’s principal financial regulators have explicit mandates to consider climate risks. These trail-blazing measures may set an example for other countries to follow, and we can be proud of them, but they are just the first steps. For example, mandatory climate risk disclosure improves the information available to investors and shareholders but does not deliver the investment required for net-zero projects on the ground. It will be important to move rapidly from climate risk disclosure to mandatory climate transition plans, explaining clearly how these will align businesses’ activities with the goals of the Paris Agreement.

What plans are there to utilise the hundreds of billions of pounds of pension assets to support the aims of net-zero infrastructure, housing and other investments across government? Long-term investors are most at risk from climate change. There is a huge amount of money waiting but, so far, the Pensions Regulator seems to have focused on asking defined contribution pension funds to aim to use those assets and all pension schemes to disclose their plans. Once again, that does not deliver on the ground.

Defined benefit pensions have more money than defined contribution and do not have the constraints of daily pricing and rapid access, so I hope that there will be increased joined-up thinking that draws together, for example, the funding for local authority pensions and other long-term investments into net-zero investing, rather than just focusing on the new defined contribution schemes. That would be popular; the Make My Money Matter campaign caught people’s attention because the public increasingly care about how their savings are invested and their environmental impact. I declare an interest as an adviser to Cushon, a pension provider that has introduced pension investment funds that are net zero now, with carbon off-sets designed to deliver a net-zero impact straightaway, rather than waiting more years, as other firms have proposed.

I hope that my noble friend will take the sentiments expressed by noble Lords in this debate, which seek to ensure that policy-making is integrated across government, and is consistent and not constantly changing, and reflect on the support from this Committee for the measures introduced so far and on the proposals for a Cabinet Minister responsible for integrating policy in national, regional and local government.