Climate Change: COP 26

Viscount Hanworth Excerpts

Thursday 18th November 2021 Lords Chamber

[Viscount Hanworth (Lab)]

I do not intend to make a detailed assessment of the outcomes of the COP 26 conference; I wish to say only that I share the disappointments and anxieties that others have expressed. Instead, I propose to examine the achievements of the first country in the world to declare net-zero targets for carbon emissions, which, of course, is the United Kingdom.

In agreement with the recent pronouncements of the UK Climate Change Committee, I wish to say that we are liable to miss these targets by a substantial amount. The Government’s overall strategy and detailed policies are not adequate to achieve the targets. The lack of meaningful plans for achieving a green industrial revolution threatens to consign this country to poverty and social dislocation.

The essential requirement is for a plentiful supply of electrical power, which should be available to replace the fossil fuels that power our transport and energise our industrial processes. Without this electricity, we would not be able to replace fossil fuels, and if we were to forgo these fuels without replacing them, we should suffer an economic collapse.

Other European nations that have hesitated to declare targets for staunching carbon emissions have been far more active than we have in pursuing industrial strategies that are appropriate to a decarbonised economy. It is undeniable that Britain has greatly reduced its carbon emissions in the course of the last 20 years. From 1990 to 2020, the UK’s emissions of carbon dioxide fell from 800 million to 420 million tonnes per annum, which is two-thirds of its former amount.

These reductions have come largely from one source in a way that cannot be expected to continue. It is in the generation of electrical power that the main reductions in emissions have occurred. The remainder of the reductions are illusory. They have arisen from the deindustrialisation of our economy and from the transfer of manufacturing to other countries where there have been little or no reductions in emissions.

The reduction in the UK of the emissions from generating electricity has arisen from the closure of coal-fired power stations and from their replacement by gas-fired power stations and wind farms. Power utilities in the private sector have managed the transition without any intervention from the Government. This has created an illusion that the private sector can be relied on to achieve the necessary investments in industrial infrastructure. However, it has become clear that, on its own, the private sector is incapable of accomplishing the next phase of the transition, which should see the elimination of natural gas as a source of power.

The successive failures of projects to build new nuclear power stations have shown that other means of financing large projects are called for. In the process of providing the necessary assistance, the Government will have to relinquish the free-market philosophy which proposes that capital markets should provide the necessary funds for investment.

The Government should be able to raise the necessary funds without paying the surcharges that normally accompany financial borrowing. They will be able to borrow the funds without paying a risk premium under the supposition that they do not default on their debts. If the funds are not readily forthcoming from the financial markets, the Government may resort to creating money to enable them to pre-empt the resources that will be demanded by the project, thereby avoiding the payment of a scarcity premium. Underlying the commercial rate of interest payable on borrowed funds is a discount factor, whereby future returns are valued at less than present returns.

A Government that propose to be custodians of our futures should not think of applying a discount to the future benefits of projects that are designed to avert or mitigate the damage caused by emissions of greenhouse gasses. By creating the money, the Government can avoid paying any surcharge that might be embodied in the commercial rate of interest on borrowed funds.

A more hopeful recent development has been the announcement by Rolls-Royce that it is prepared to go ahead with its project to build small modular nuclear reactors despite the paucity of government support. This is a technology in which we have a comparative advantage. Through the export of these devices, we should have a chance of contributing greatly to the reduction of carbon emissions throughout the world. It is agonizing to contemplate the loss of this opportunity.