Chris Stark is the Chief Executive of the UK’s Climate Change Committee. The committee is an independent statutory body which advises the UK and the devolved governments on emissions targets and preparing for and adapting to the impacts of climate change. I think he is one of the most important and thoughtful thinkers on climate change policy today. This is his second time on the podcast. We covered many topics in 2022 which you can check out here.
This time I ask on:
How does it matter that we will pass 1.5c ?
What did we learn after COP27 (climate conference in Egypt in 2022)
How do you think we should think about NetZero at the corporate level
How should we be thinking of adaptation and the CCCs latest report
the CCC work on UK domestic energy rating
Heating and building strategy
Some of the recent politics decisions and discussions such as the UK government decision on a Cumbria coal mine.
What the US IRA (inflation reduction act) might mean for climate policy:
“Now you asked me, has anything changed since last we spoke? And yes, it has. Something quite substantial has changed in the United States of America. So we have this inflation reduction act which is an unfortunate act in only one sense, really. It's the IRA. So in the UK of course it's very difficult to talk about the IRA being good. But it's just a kind of game changing piece of legislation. At the core of it I think is a fairly simple thing really which speaks to our last discussion about the difficulty of implementing carbon taxes. The economic logic of making dirty stuff more expensive than clean stuff is still there.
But it turns out that the effort of putting carbon tax on something that you actually need in the present society is enormous politically and maybe it's best at just to make the green stuff cheap. Broadly, that's what the Inflation Reduction Act has done. It has done so in quite a controversial way. We're having a discussion now about the protectionist elements of the Inflation Reduction Act. It is a very protectionist piece of legislation but it has lit a fire under some of these green technologies. It's because of that simple thing that people I think are more willing to move towards things that have been made cheaper and move away from things that are more expensive. But I feel I want to add a note of caution on that. That we can't walk away entirely from the need for carbon taxes. They're still very, very, very important. It's very, very important to send a signal about the need to use less of the dirty stuff.
I’ll give you one example of that back in the UK. We are on the way to having fully decarbonized power system and that's very exciting. We will shortly produce a report I think that will really help explain what that fully decarbonized power system looks like. Super pleased about the modeling that we're going to put into that report and use. But the challenge shifts a bit I think now on power to actually consuming it being the main challenge. So you've got to push people towards having devices and technologies that use that electricity more. Then when it comes to something like heat or when it comes to an industrial process, you're right up against the problem that gas is cheaper than electricity for the consumer.
So you've got this kind of incentive issue and that's really what carbon taxes are about. We do need to maintain the incentive to move towards electricity as a fuel. We will probably be able to do that if we can have a policy framework that is aimed at making electricity cheaper than gas for the consumer. “
Chris outlines some of the challenges of a carbon tax and why a carbon tax and dividend may also not work.
Chris ends on advice on to think about climate impact and future projects.
Listen below (or wherever you listen to pods) or on video (above or on YouTube) and the transcript is below.
Transcript (only lightly edited)
Hey everyone. I'm super excited to be speaking to Chris Stark again on the podcast. Chris is the Chief executive of the UK's Climate Change Committee. The committee is an independent statutory body which advises the UK and the devolved governments like Scotland and Wales on emissions targets and preparing for and adapting to the impacts of climate change. I think he's one of the most important and thoughtful thinkers on climate change policy today. Welcome, Chris.
Chris (00:32):
Hi, Ben. And hello to the listeners again.
Ben (00:36):
How does it matter that we will pass 1.5 degrees? Some climate scientists’ model that we are likely 90% chance the world will move past this 1.5 C as a point estimate, but also many scientists are communicating and pointing out that doesn't mean we should stop our efforts. Social scientists has also weighed in and have said this 1.5 degree has a lot of communication and political roots to it rather than also just some of the science roots. How do you think about these temperature alignment numbers and how this interacts and how we should be thinking about policy?
Chris (01:12):
This is so complicated, Ben. The kind of core of what we do really is defined in the Paris agreement. So for those of you who don't think about this stuff as regularly as I do, there is a global treaty on climate change which was finally reached in Paris just a few years ago; 2015, I think. It talks about temperature goal of keeping global warming above where it was pre industry when we started burning fossil fuels to well below two degrees centigrade is what it talks about. So that was the kind of goal that many policy makers had in their mind prior to that Paris Summit when it was agreed. But quite later on in the process, this extra temperature target of 1.5 degrees was thrust into the discussion. And rightly so, I think, but it was a sort of stretch goal. So can you keep temperatures even lower than the two degrees that most people had been thinking about as a sort of global goal for this?
That led then to this other really amazing piece of work brought together by the UN's scientific cleaning house; the IPCC. Looking at just what it would take to hit or to keep temperatures to that 1.5 degrees centigrade target, it led some of the key stuff that we now take for granted like net zero being an important goal to reach globally, that for net zero CO2 you need to get there by about 2050. They've become really embedded in the discussion now. This 1.5 degree centigrade target has become, I think, a catchall for all of that. It's the target we should be aiming for.
When the UK hosted the Climate summit in Glasgow, it was the 1.5 degree summit. It was the kind of catchall thing that the US and the UK together were really pushing for. The trouble with it is it's really bloody difficult to get to that kind of ambition and it is very likely that we will go beyond 1.5 degrees centigrade. In fact, I will say confidently that we will hit 1.5 degrees centigrade. In fact, the only uncertainty is whether that's as far as we go. The chance of reaching something lower than that is probably now gone. 1.5 degrees itself gets further and further the more that we don't have rapid emissions reductions. Broadly, you need to have emissions by the end of this decade if you'd really think you want to be on track for that 1.5 degrees. And that's a global goal. Of course, global goals are harder than national goals or goals at the level of any single corporate or individual. So it's very difficult.
The two degrees centigrade goal by the way, is very much on the table. My own view--and it's a personal view, is that I think we will keep our temperatures to that because there's all sorts of good things happening in the energy market. But this question of what you do if it looks like 1.5 degrees is sailing out of view is a really critical one because each COP comes around each year, it becomes more obvious that 1.5 degrees is harder. I don't think I have an easy answer to that question of what you do as it slips out of view really. My view is that we stick to it really. That 1.5 is still a useful thing, a useful framing device because it's a temperature goal but it's also this catchall way of describing the need to throw everything at it. That is still useful to talk about that.
And if it's not 1.5, then we go for 1.6, and if it's not 1.6, then we go for 1.7 because every fraction of a degree matters. Every fraction of degree causes misery and cost to the economy becomes more difficult to manage. We get into quite difficult points as you reach the very much higher temperatures where it's quite difficult to describe the impact because they're so catastrophic. But one more thing on this, Ben, there isn't some special significance to 1.5 in the literature of the impacts. It's a temperature. It will come with costs. There are awful things that will happen to the natural world at that kind of level of temperature increase but it's not special. It's not particularly a special target.
One of the things that often is pulled out of the lecture is that coral reefs are quite likely to bleach more extensively above 1.5 degrees centigrade. Why do we obsess about the coral? Well, partly it's the visual metaphor of it, but also it's because it's one of the very few natural systems that we think is then genuinely impacted above 1.5 degrees centigrade. The point is that it's a slightly artificial threshold. Basically the goal here is to keep the temperature as low as we possibly can. And actually the trouble with all of this is that the communication of that is really difficult as probably I'm showing you today. It's not an easy thing to talk about keeping something that hasn't happened yet as low as possible. That's how we've got to work and frame it and work hard at. So that's the challenge. I think we're probably going to have to come up with a different framing technique than 1.5 degrees centigrade. But 1.5 has been very helpful in pushing the progress that we've seen in the recent years.
Ben (06:36):
Yeah, a very useful simple message. Thinking about the coral reefs, climate warming is happening now. Coral reefs are being bleached at this moment so that's why it's a very apt metaphor. But what you said also echoes what you said last year and my conversation with climate scientist, Zeke Hausfather, who makes the same point. It's not a point estimate. There's nothing particularly special. It's a sort of spectrum. Different parts of the world have different things on averages and all of that and you kind of want to aim for as low as possible. I guess the silver lining out of some of that is if you look at maybe where the estimates on climate policy were 10 or 20 years ago. Maybe even 10 years ago, it looked like a four degree world or above was a significant probability.
Whereas if you look at it now-- Again, you have to execute on the policy. And we can talk about the differences between implementation and ambition. But if you look at the ambition, most of the models are pointing towards between two and three. 2.7 is a median that I'm looking at. Two, like you say, is actually very much still on the tables and there's error within that which is the silver lining. And again, it's a really nuanced thing to say you need to be able to on the one hand celebrate that you've gone from four degree at your mean estimate, median estimate to 2.7 because that's progress. That's good. You don't want to discount the fact that we've done something. But it's not below two and it's not as low as possible. So you've kind of got those. I think people sometimes lose hope or whatever that is if they feel there's no progress being made. But you also can't be complacent. So the messaging has got trickier.
Chris (08:15):
It has. You put that very well, I think. As we went into the Paris COP before this global accord was finally agreed, we were facing best estimate then. The con-central estimate was 3.6 degrees centigrade of warming by the end of the century. And now today, as you see, a relatively conservative estimate of where we stand is if you add up all the pledges that we've seen in the cut process, it's something that's about one degree centigrade less than that. Now, that progress has been achieved in less than a decade. I think that is progress. People should be angry about the fact that we're in this position, and I understand that. So we've got to keep that process going. I think the 1.5 degree framing does help with that but it is very lightly to slip from view. I think we've got to be realistic about that.
Ben (09:08):
That's fair. Your climate change committee have produced some really excellent reports over the years in my opinion and a lot of people I know. So you've had quick hits post COP conferences to work on voluntary carbon markets, this really big piece on adaptation, and of course assessing the UK government's strategy. I'd love to touch on many of these, but it might be worth highlighting on the COP things. We last spoke about the Glasgow COP26 being a corporate and finance COP to some degree and that businesses and corporates as enablers definitely seemed to come to the fore as an idea. My outsider's impression of the COP27 in Egypt, it was perhaps a little bit more niche and targeted and was looking at maybe more of the developing world. What did you take away from the COP in Egypt and how have things changed over the year?
Chris (10:06):
I find Egypt COP really interesting. I didn't go to it. I have slightly regret not going to it; not because it was a really interesting place to actually go. I mean, a lot of horror stories about some of the things that happened at COP this year; accommodation wars and lack of sanitation and food and those sorts of things. But the reason I regret going to it is because I think it was right at the crossroads of a whole host of stories, some of which you've just talked about, Ben, and it's not quite clear to me what the theme really was in retrospect to that COP. So you had this ongoing interest from the UK and the US particularly to push what we call the mitigation agenda. That is the need to cut emissions which is a big part of the story. It's what we often look at in my work in the CCC and what we're best known for as work on net zero.
But actually for many countries in the world, what happens on emissions within their own country is not that important to the story of climate change. What they are grappling with is the impacts of climate change itself which are largely outside of the control of some of the smaller countries. So this question of what you do about that really came to the fore. There has been several attempts at getting something called loss and damage onto the agenda at COP. COP happens every year. It's always hosted by a different country. There is always a push to discuss the kind of reparations as it's sometimes called that are due to some of the countries that are experiencing the worst impacts of climate change but had the least to do with the problem.
Each year it's raised and then sort of taken off the agenda at some point. So scrubbed before the final agenda is agreed, usually. This year that didn't happen. It remained on the agenda all the way through. And then remarkably there was an agreed text which included the words loss and damage and this idea that there should be some sort of facility in there which is really a kind of UN code for transfer of resources from the richer economies that have been largely to blame for the problem of climate change, and those poorer economies often in the global south that are now experiencing the worst impact. What's interesting is that these meetings each year are really hard going. So you get this moment where loss and damage gets put into the text and agreed, but there's no money behind it. So the next COP then has to work out what the money behind that looks like.
Those of you who follow this will know that there has been for a long time a discussion of what's called climate finance which is a really bad term; very difficult term because it doesn't really describe the finance challenge in my mind. But this idea that there should already be a hundred billion dollars of climate finance largely coming from those rich economies to help with the issues of climate change and decarbonizing and all the other things that need to go on. And that a hundred billion dollars was a figure that was being discussed back in the Paris COP and still has not been met. So we're in a world where it's quite easy to get these things agreed or the effort is there to get the text agreed, but the money behind it is a much more difficult thing. And each COP, it becomes more and more difficult I think to get the financial facilities agreed.
So that's how I'll think of Egypt as this sort of struggle where you got this kind of push still from the western economies to talk about a mitigation and 1.5 degrees centigrade in the UK sort of outgoing COP presidency prior to the Egypt COP saying 1.5 got to stay on the agenda. And then this kind of really interesting and pretty successful movement from the African presidency to get loss and damage on the agenda and successfully landing the idea that it needs to remain there. So it sort of sets up the next COP and the ones after it to now have to tackle these things together for the first time. I think in the end it was about as good as it could be actually. The next COP is particularly interesting because it's in the United Arab Emirates and it'll be another COP talking about energy issues. So really interesting to see what happens next.
Ben (14:25):
I think we spoke last time about this sense of fairness being one of the major political economy issues to deal with which has no simple resolution. I have to say post pandemic, I got a little bit more negative on it in the sense that if you had a benign rational dictator of the world, it would probably be obvious to that entity that some sort of fund which would've funded Covid vaccines or treatments for the whole world would've been a great net benefit. And that was kind of quite clear over a pandemic. Climate's actually more complicated. But the root of that problem about where you have the resources and how to allocate it seemed to me to be similar and you couldn't get richer nations easily agreeing on that, although they all agreed kind of in the messaging and in principle.
Having said that, it's a longer going process and it's still being worked upon and it does seem to have a little bit of progress. So there is a little bit of silver lining. But I do wonder about that particularly with where everything's going on in the world. That just at this moment in time nations have got a little bit more inward looking as opposed to global looking. But it does change with the times and can change quite quickly. And in history particularly if you're looking at five year or 10 year periods, it has changed quite quickly.
Chris (15:42):
Yeah, I very much agree with that. Markets need to come into this discussion. I think the framing that I've often put around this is that we are going to have to tackle climate change in an increasingly divided world, at least for the immediate term. This multilateral approach that the UN is just about holding together on climate it doesn't do much to hide the divisions now that you see across the world on some core issues; not only the energy issues. I think what points in the favor of good things happening, I suppose is the fact that the market dynamic has been harnessed on energy at least. That you've got this one way directional thing now happening on energy that points away from the use of fossil fuels towards a cheaper cleaner energy system which is irresistible in the end, I think. So that the markets in the end pull you along that way. But that's the mitigation story I talked about, that's about cutting emissions. It's much more difficult to consider and work out how you can harness markets on the adaptation side because it's fundamentally more difficult to monetize adaptation benefits if your adapting to climate is often not such an obvious return to investors for the big upfront capital investments that are required. So it's tricky.
Ben (16:59):
Yeah. So the adaptation piece where you've done a really big report recently I'm definitely going to touch on that. But perhaps as a segue into that would be maybe thinking at that corporate business level, particularly on thinking around net zero or net zero commitments. So I'm hearing debate about the value of corporate net zero commitments or not, and particularly so-called scope three commitments. So for listeners, scope three is often considered outside the control of companies. That's maybe one of the easiest ways of thinking about it; whether that's downstream or upstream. On the one hand, some people argue there is signaling power and corporates can direct strategy and cash flows to be part of the solution.
On the other hand, corporates do not have direct influence over the power grid where they take their energy from. So you want to be on a green grid, great, but you've got no influence on that. Perhaps they can influence transport or fleet and maybe heating to a degree, maybe land use if they got supply on that. And some also critics worry about greenwashing. On the other hand, at a sector level and on country level, net zero and that kind of thinking seems to make quite a lot of sense. I guess there’s some climate economists who also question about this carbon budgeting on a corporate level. The econometrics don't hold up as well versus a sector or a country level. So how do you think we should be thinking about net zero at the corporate level and maybe some of your worries or pros and cons about the situation?
Chris (18:27):
I've got lots of worries but also some positive things to say about the recent move towards all of this in the corporate community. It is worth just stepping back from this. The discussion that we are having about corporate commitments to net zero is completely remarkable. We would not be having this discussion five years ago. So something has shifted in the corporate community that has meant that there is now a need, I think, whether it's for reasons of social license or whether it's-- I think probably a lot to do with the fact that if you want to hire good staff, particularly young staff, you've got to have solid climate commitments in place and customers are looking for that too. So what we have now is in one sense really, really good.
We've got a lot of very strong and I think legitimate commitments to achieving net zero at corporate level. My concerns come from mainly the fact that it's actually very difficult to define how most corporates get to net zero unless you are an enormous multinational. I'm going to make a notable reference for a corporate like Microsoft which is way ahead of this as a really good plan for not just reaching net zero, but also getting negative and actually undoing some of the harm that has been done over the time that they've been using their energy particularly. That's great. But for most corporates, they're not in that kind of position.
So you see this kind of rush to adopting a net zero target often with a date and often that date is ahead of the global goal. That's kind of what you want really. You want corporates to be aiming for something that is more ambitious. Some of those dates are pretty punchy to put it mouthy. 2030 is a common one. Often you see 2040, some of them are even 2025 astonishingly. But actually if you look at how those will be achieved, you need to look through as you call them the scopes-- and I won't go through all this. But as you move from scope one to three, you have greater agency at the lower scopes to actually tackle the emissions that you are responsible for. Scope three is mostly what's happening in the wider supply chain that you are interacting with. It's difficult at that level to know where to draw the line and about what a good target should be.
And interestingly as we've looked at this, we start from the principle that net zero for a country like the UK will require lots and lots of corporate investment, lots of corporate support. In fact, most of the work that we will do as a country to get to net zero will involve investing at the private level. It's not going to be driven entirely from public investments. So you kind of want those corporates to be on side with it. So why am I concerned about net zero targets? Well, I'm concerned that at the moment you've got this rush to achieving net zero, but a rush to do so in the wrong way. So you've got corporates thinking, "Bloody hell, we've made this commitment. How can we do it?" They work out what those scope one to three emissions are and they find actually that they've not got a lot of scope to do much on many of those things and they'll do cheap stuff first. So they might put solar panels on the roof of buildings. They might have better travel policies for their staff.
But then they'll find that's not reducing emissions very much and then they'll turn to offsets. And this is the key things. You've got lots of very cheap offsets out there right now-- very, very cheap offsets, mostly forestry offsets and they're legitimate things. People are buying them I think mostly in the knowledge that they are useful things and want to be able to legitimately say that they're part of the answer. But they're so cheap and they're cheaper than the harder things. What you really want to be able to say to those corporates if I could sit them all down is, “Thanks for setting out your ambitions for net zero, but let's just talk about your place in the system.”
So mostly-- your emissions if you're a service sector dominated economy like the UK, mostly your emissions are connected with the energy that you will consume in buildings. Most of those are about the electricity that you might consume. And in that world you might think it's a good idea to put some solar panels on your roof. But I'm going to tell you, “No it's not.” It's quite interesting, it's not. Because in this country, in the UK, we'll probably have fully decarbonized para system over the next 10 years or so. In which case plan for that and make the harder steps now to decarbonize the fleet of vehicles that you use or to heat those buildings with a heat pump rather than a gas boiler. That tends to be more expensive and-- this is the crucial point-- it tends also not to get you to net zero today or indeed any time over the next decade But it's much, much more useful for the country and for the global effort if you do those things.
So it’s really interesting for every corporate out there that's got a net zero target. What I would like to see is some kind of kite mark, if you want to call it, for having a good transition plan. Something that marks you out as a company that is doing the best possible things now as part of the wider system change that a country like the UK or the US or the whole of Europe or anywhere in the global economy; as part of that system accepting some of the conditions in that system and recognizing that certain things along the way will shift outside of your control. If you get to that kind of world where actually you're getting more credit with investors, credit with customers, credit with your staff for being net zero aligned than for being net zero itself, then I think we'll be in a much better place because you're going to get a much better alignment from the corporate community behind the national goals that we have here in the UK for getting to net zero.
Ben (24:05):
That's really fascinating. I guess in investment world there are two pseudo kite marks but that don't really capture what you just articulated. So they would be what people use with CDP and also what people use for this science-based targets initiative; SBT, which look probably more primarily at carbon footprinting and glide paths. I really simplify something but they don't really capture what you were talking about. So I think that's quite interesting. I don't know whether you think those have some kite mark value or we really need something else which takes into account of that. And that also puts into question partly this value of carbon footprinting itself at a corporate level, but particularly at an individual level there's some interesting critiques about how that came about. Sector and national, yes, because the macro pitcher gives you good information. But I think people can't comprehend that even the largest company in the world is just a microcosm of what normally a rich nation would be. But how should we think about carbon footprinting and do you think any of the kite marks that you might know about do encompass maybe a bit of this more so there's room for another organization to really look at that?
Chris (25:24):
There are lots of really good organizations out there doing good work. SBTI that you talked about, the Science-Based Targets Initiative is one of the best ones. I think one thing, in the end they all need to come together and align behind some sort of accounting standard. That's the real goal here. So getting to a point where this is just a normalized thing is really the goal here and that kind of idea that corporates need to be net zero aligned rather than net zero themselves is very much at the heart of things. I think if you get that accounting standard in the right place then it'll just be done as a matter of course. So I think it's very important. Carbon footprinting and the assessment of it is hugely important so I don't want to undermine any of that trade. I think it's very, very important the tools that you will need to understand the impact that you're having on carbon are really important. I think what we lack is the next stage of this which is a sort of intelligent, informed discussion about what that's telling you.
So I had a discussion this week with somebody who works in the health system about the extent to which-- even in the NHS they really are thinking about this. But you've got pockets of the NHS… NHS is quite an interesting one because you've got lots of people worried about climate in the NHS. Very often find that actually in my trade that it's often doctors and nurses that are most concerned and come to me with questions about what to do about climate change.
So you've got pockets of the NHS just as an example, where they've got to the point in their carbon footprinting, where they've got this incredible understanding of the carbon impact of a particular operation in a particular building and you sort of wonder what is that actually teaching us? We've gone almost too far down the route of thinking about that whereas some of the fundamentals are being missed. Most hospitals, most NHS buildings are being heated with fossil fuels. That's a much bigger impact. But I think this speaks to the idea that we're all grappling around, we're all looking for something that we can really get our teeth into. So I think the more that we standardize this, the better, but there's still a bit to go on that.
I should declare an interest in this because I've been chairing one of the work streams for this piece of work that is commissioned initially by the treasury in the UK to look at coming up with a transition plan standard that could sit alongside some of the work that's been done particularly in the financial sector. So GFANZ which is a thing that may be known to you, this Global Financial Alliance for Net Zero is coming up with all sorts of very interesting ideas about how you align the right finance behind the green stuff. This is a sort of equivalent to that really that takes it into the real economy and asks questions about how corporates themselves-- particularly in the real economy, but also finance firms can themselves be better aligned so that investors know what they're investing in and banks know what they've got in their balance sheet. We're almost there actually with this. I'm quite pleased with how things are going. It's not easy at this, but we're not far off having some common standards. I think that means something.
Ben (28:25):
So I completely agree. I say a lot about this in overall extra financial data, whether that's environmental, natural, or even to do with the human and/ or the social. That the data is coming, the standards are evolving. You've got a lot of work streams, international standards accounting boards, GFANZ and all of that. But even today with the data that we do have, I can see the missing pieces to your point. The kind of analysis of it or what does it mean or what can you do or have you missed the whole-- there's a lot of this in your reports, the whole enablement piece. I always talk about, "Well, if the world is electrified, you're going to need a lot of semiconductors."
So you want to make your semiconductors well, but regardless of how intense they are, you're going to need vast more quantities of that. You might argue the same for copper and lithium and the like. Those are very obvious ones and there's a lot of unobvious ones. So I think we need to invest the time alongside of being able to interpret the data and tell us what that really means as well as having it. It's coming faster than it has ever been because financial standardization or financial data took quite a long time and it's actually happening much quicker within this area than I've ever seen. Even though it does seem sort of slow because it has taken years and years, it's still happening. It's happening faster.
Chris (29:49):
Yeah. But don't forget the bigger challenge beneath this is not disclosure, it's actual action. Perhaps I've been swept up in this over the last few years as well. Is this idea that if you just get the disclosure regime right, everything will click into place. Slightly ignores the fact that there's a lot of big stuff needs to be invested in and the disclosure regime is there to make sure that when that happens you should get good credit for it. But I think sometimes we forget that last bit and are being overly focused on the standards themselves. My worry with that is that you can really get in-- And again, I think I've fallen into the trap of doing this over the years. The minutiae of this is just there's never an end to it. You can fall endlessly down the rabbit hole. I worry that for those of us who are turned on, it makes sense. But if you are brand new to this thing wondering why you have to disclose all this stuff or follow some sort of counting standard is it is byzantine in its complexity and it will not be obvious why we are asking for that kind of level of details. So we've got to stick to the really important principles I think at this stage particularly.
Ben (30:57):
Completely agree. And I think it gets in the way of sometimes particularly smaller corporates which know what they need to do and actually don't need data to a single decimal point to enable that. That's where the data becomes a red herring and gets in the way of that real world action piece. I do think that can be problematic. And then actually the fact that you probably don't need to one decimal place anyway. So once you've got it and then you know what it's saying, this orders of magnitude and the action is the more important piece.
Chris (31:28):
Yeah. And just very briefly. This is why we over the years have advocated these really clear milestones for the decarbonization of some of the big systems in the UK. It's a model that most corporate, most western economies now are following. But it's really important to know that by 2035 we will have a fully decarbonized power system because it's such a clear offer to the whole country. So it means that whatever electrical device you're using from 2035 onwards is fully decarbonized. That means if you can decarbonize the heat to that building, then the heat and the light and all the stuff that you plug your IT gear in, that's fully decarbonized to that point.
That's not the end of the challenge, but for small-- and most corporates are small, most small corporates in the service sector-- and that's mostly what we have here in the UK. That's the majority of the job that is done. So right now we should be advising people to prepare for that moment. Back to my story of solar panels on the roof. If you want to put solar panels on the roof, do so for other reasons. Do so because it might make your energy cheaper, but you're not actually making a great contribution to the net zero goal in that world. That's a tiny, tiny additional amount of capacity that we're adding to a system that's already on the way to being fully decarbonized.
Ben (32:42):
That's a really good insight. Maybe we'll talk about some of the UK sectors and industries on that. I wanted to touch back on the report that you have which focuses on adaptation and maybe some of the enablement and that because there's a lot of talk about mitigation and actually, I guess there's a lot of talk about energy. But actually you make the point-- and I think a lot of people in the field make the point that the adaptation is a really big piece and is underdeveloped across all of the domains. Maybe partly because of where the messaging has and climate warming and everything is happening now. So we are actually having to adapt now as you say. There's also these milestones coming up. Private sector needs to be mobilized. Maybe that's where policy can help create markets for private sector to help develop. Do you maybe want to highlight why we are where we are on adaptation and some of the things in the report that you think are perhaps most misunderstood?
Chris (33:48):
Yeah, good. This is going to be something that I'm going to make a big push to talk more about actually. Adaptation is a word that I'm not a big fan of. It's a very complicated word but there isn't a better one, sadly. I'm happy with resilience. I think we should maybe talk more about climate resilience, but it's not quite the same as adaptation. And when I talk, I often talk about preparing the UK for climate change which is also not quite what is implied there. But broadly, the key thing is we face big risks from the changing climate. Actually in the UK we know more than most places in the world about those risks because we have some of the best climate forecasting in the world from the Met office. We have some of the best scientists working on climate and climate impacts in the world. And we have a climate change act and an institutional and legal framework for tackling climate change that has pushed the various institutions that matter to think about the risks that we face in quite a lot of detail.
So we have over the years led that. Every five years we do an assessment of climate risks and we've identified 61 risks that the UK faces. I'll tell you now, most of them are flashing red. So there's a sort of question in my mind about why haven't we done more about that? Partly I think it's because there are 61 risks. There's far too many to really cope with. But also I'm afraid it's partly to do with the fact that most people and most corporates and most people in any authority are not really attuned to the reality of the situation that this thing is now upon us.
My belief is that every year when we have one of these moments as we did last year with the heat wave and the 40 degree day in the UK. Every year there's one of these now. I'm afraid that that kind of summer is going to very shortly be a normal summer. I think a lot of the work will be done by the weather that we've experienced and the extreme events that we experienced to raise awareness on that. So we've been talking more about what we need to do in response to the risks which is the adaptation story of how do you adapt the economy to the risks that we face from known climate change. There's a big challenge in this. So adaptation is a whole host of things; it's behavioral, it's the way in which you plan for those kind of moments like a heat wave.
But there is another big challenge of investment here. We know a lot about the net zero investment challenge. Net zero is mainly a capital investment challenge. There is another investment challenge for adaptation and we know less about that because we haven't been thinking about it. We, in a report that we published just recently looked at just a handful of the investments that we've needed and some really key systems as we call them. So flood protection, public water system, how we retrofit houses to be ready for the warming climate and restoring nature. And then infrastructure generally how you make that more resilient. When you look across those systems as we call them, you can see very obviously that there is a massive investment need in each of them to prepare for the kind of shift in climate that we'll have in the future. So just think about something like housing retrofit. We are already thinking about how we need to retrofit houses to be decarbonized, making them more insulated so that they're more energy efficient.
Well, we also need to prepare them for the fact that each year there will probably be extreme heat particularly in the south of the country. There may well be a need to reserve water and to conserve water in a better way in those houses. So very obviously, lots of investment there. But thee big problem with it is that the value of that adaptation is difficult to monetize. So investors may well see the needs to invest but are not going to get a return for it very easily. So what we're trying to do in the report that we publish is just shine a light on that. Say that, "Yes, there is of course a need for public investment and many of these things, but there's also a need for households to invest in this stuff.” There's a big need for regulated infrastructure investment. So that's particularly helpful because you can actually encourage regulated industries through their regulation to invest in it. Think about flooding for example.
Then there is also a need for private enterprise to make some of these investments too if they can be led to that and to see the value of reducing the risk that they face from climate change. It's really interesting. Just to give you a sense of it, a very conservative estimate of the investment needs for the country is 10 billion a year of extra investment just in adaptation. So that's a lot. Not all of that can be met from the public purse. So we're talking about really interesting area where it's flashing red as I mentioned. But there are massive needs now for some creative policies to in particular overcome some of those barriers and give a return to investors for making these investments.
Ben (38:44):
Yeah, completely agree. So I live in a lower ground flat and we refurbished it over 10 years ago. The flat mostly stays quite cool in the summer and doesn't need as much heating. It’s underfloor heating in the winter because actually at that point in time it was worth doing it when you're going to do a refurbishment. That was kind of adapting for the future even being at that and you kind of need that on an unbelievable scale on that. I was interested on the adaptation piece because there's some talk about these creating markets and things. What do you think of our institutional robustness here in the state of our institutions and governance? In some ways I think it's really great. So climate change committee your reports are some of the best in the world. Like you say, we have some of the best information. You get to work on the really important things. We have some frameworks. We had [Chris Skidmore review recently which looks at that so government does look at it. With respect to adaptation I don't feel we have a particular organization or market around that and maybe that's one of your points of having that. So I'd been interested in that.
Chris (39:57):
Yeah, I agree with that. We've got this pretty good institutional framework on the other side of my job; on the net zero side thinking about how we decarbonize. We didn't used to have that, but the Climate Change Act has been one of the things that's helped with establishing that. You've now got a set of very important institutions around things like the regulated industries. They're all broadly except they have a need to act on net zero and are doing most of the right things now. I regularly complain that things are not happening as quickly as they need to but at least it's there. There's almost none of that apparatus on adaptation. I kind wonder why that is really. I think it is partly the thing I mentioned earlier about people not really accepting the reality of the situation which I think will change.
But even those institutions that really have an interest in it-- you look at the water companies for example. Some of the best planning for adaptation is in the water companies but it's still not at the kind of level that you would expect planning for the potential. Remember we are at the mercy of the world's approach to climate change more generally here. So it's not off the table that we might get to four degrees centigrade of warming. And in that world, water becomes incredibly scarce in some parts of the country. So you would expect water companies to be planning for that broad set of scenarios and scenario outcomes, yet they don't really. You find that also in other parts of the energy sector. So even in regulated parts of the economy, they're not planning for realistic and sadly pessimistic climate outcomes and they do need to.
The other bit of it I think is that we haven't got the same corporate disclosure regimes in place yet that we have urging on net zero. That will help create the kind of market that we need to see around some of these adaptation outcomes eventually, I think. But we're still quite far back from demonstrating why it's important for corporate disclosure regimes to reveal some of this stuff properly. I think we and other institutions that think about this more actually need to be better at helping those financial regulators and the people that put these rules together to understand some of that.
Ben (42:07):
I think we need something catchy a little bit like net zero. Like you say, adaptation doesn't quite do it; resilience preparedness. I guess there's a sense that-- and this comes through in the report-- that the government or someone is going to step in and solve it for you. Like, "Oh, London's at risk of flooding. We have a temp barrier. Sure, we'll create another 30 billion and someone will build a bigger barrier. Surely that will happen." Without kind of thinking, "Well, 30 billion's quite a lot of money, takes quite a long time." And so it's theoretically doable, but who is going to do it? "Oh well, someone will step in." I mean, that's a kind of more extreme slightly silly example, but I think that's part of it.
And even when you’ve spoken to the water regulator, it's obviously on their radar and it's part of the strategy and plan, yet when you think about that adaptation isn't quite rolled in. I guess there's also the politics of it. One thing which is perhaps worth commenting on, in the UK we had a recent decision in government and planning on a coal mine decision. On the one hand some would argue on the specifics of the planning and on the locale and putting one coal mine in the context of world energy. And there's all sorts of arguments that you could make there. On the other hand you have this kind of clear, political signaling and the climate change committee already had advice around that. How should we think about the power of signaling and leadership which kind of ties into institutional governance and that? Do we underestimate the power of those type of signals that are peril? Or is it-- I don't know about the complexity of that. I'm really interested if you have a view.
Chris (44:04):
Yeah. I've been in this job for five years and I definitely feel the signal value is understated. Again, back to my story about net zero. One of the reasons why naming a date for stopping the installation of gas boilers, one of the reasons why that matters so much is because everyone understands what they need to do in that world. We were amongst the strongest advocates for a switch over date-- I'm going to call it a switch over date rather than a phase out date-- a switch over date for electric vehicles. So naming a date when you stop selling petrol and diesel cars in this country. At the time that was very controversial. Turns out once you name it, people know what to do. Still lots of concern about that. But we're having a different discussion about that now.
We're having discussion about whether the charging infrastructure will be ready for that moment, not whether the moment is going to come. So signals matter. You mentioned the coal mine in Cumbria. That is a massive mistake. It's that simple. If you are in a world where you are trying to give signals to the world about what the UK is trying to do on climate change, that matters, it's titanic. But never mind that, that's debatable. If you are a steel company in the UK and you see that we are opening a new coal mine in Cumbria to produce cooking coal for the production of steel, then that is a signal that your government wants to see you use that substance. It completely undermines the effort that then of course two months later is what we're talking about, about how we decarbonize the steel industry with hydrogen in this country.
It's just silly. So we've got a government that cannot speak with one voice on an issue as important as this. I don't think there will ever be a coal mine in Cambria because the investing community is not interested in that kind of uncertainty. So I think probably on that coal mine, the biggest and most problematic signal is to the people of Cambria themselves. I don't think there's kids in school in Carlisle right now thinking, "Oh thank God I've got a coal mine to go to when I graduate from-- when I finish my school education." It's just ludicrous to talk about that. So these signals really, really matter and I think the more that we can align them, the more that we can step away from the expensive policies that you've got to put in place if you want to change to one of those signals that you've wrongly put in place in the first place.
So yeah, I think signals do matter. And I have to say back to my top story about what signal we've sent to the rest of the world. We have completely undermined what we did at COP26 when we projected to the rest of the world what needed to be done to take ourselves off fossil fuels. So I very much regret what Michael Gove did. I don't know what will happen. I'm sure it'll go through the courts after this. But the chances of there actually being a coal mine is vanishingly small. I've never spoken to Michael Gove about it but I think he was playing politics with that. I think he probably saw that there was a corner of the country that wanted to see him accept that and that there was some minor political advantage in green lighting that coal mine without thinking about these broader signals. Or if he did think about them, he had a very cynical outlook on it.
Ben (47:13):
Yeah. So for people in the finance world, financing coal mines is probably the hardest piece of debt you'll ever try and get or debt inequity. I think one of the last funders of that which was the Chinese state or the Chinese government has pretty much said they're not funding any coal mines outside of China. And even that is on the way down. So very hard to get the money and you need a lot of money.
Chris (47:39):
They do. I think it's an Australian that's behind this one. They've got no interest in actually developing the coal mine because that's not the way these things work. So you get a consent, you package it up and you pass it on at that point. So anyway, all very silly and I hope it's all eventually erased from history, but we shall see.
Ben (48:00):
That's an interesting segue around the points that we have in the future when gas boilers won't be used, when all vehicles will go electric. Last time we were chatting we were probably both a little bit cautious on carbon tax or carbon; that sort of thing. Essentially we discussed that while the economic models might work-- and there's sort of a lot of sense and certainly there's a sense for having a carbon price. The political economy is very tricky and broad-based carbon taxes-- the practicalities of them are a bit contested and a bit hard to know. Whereas sector led policy could be quite effective which doesn't necessarily need the kind of carbon tax to get going. So for transport we need to electrify trucks, buses, and cars. We can put that in place and then you need everything which goes along that. We need to green the grid. I think you're going to have a report out this year on that power.
So although carbon tax could help that, you could actually do something directly with transport policy and when we have heating industry land use and the like. Has anything changed your mind more positively or negatively on carbon tax or that sort of view? Or as you were sort of suggesting actually the way that when you have put in what seemed controversial, say 2035 x is going to happen, that actually the way that people have got around it now that they have done... I've actually been positively surprised by that. I thought there would be more pushback and that there would be more of that. But actually it's like, "Oh, alright. Let's see how we can achieve that." That kind of up an atom attitude actually has probably put me in a more positive space. So as I was a bit negative on the kind of global cooperation side, I've been more positive about, "Okay, give people something to gun for." And suddenly they're gunning for it which was not maybe my initial expectations.
Chris (49:57):
Yeah, and I'm glad to hear you say that, Ben. It's always good when you can admit you're wrong. So I think the idea of laying out these dates is just that isn't it? It gives you something to gun for. That's a really good way of describing it. Now you asked me, has anything changed since last we spoke? And yes, it has. Something quite substantial has changed in the United States of America. So we have this inflation reduction act which is an unfortunate act in only one sense, really. It's the IRA. So in the UK of course it's very difficult to talk about the IRA being good. But it's just a kind of game changing piece of legislation. At the core of it I think is a fairly simple thing really which speaks to our last discussion about the difficulty of implementing carbon taxes. The economic logic of making dirty stuff more expensive than clean stuff is still there.
But it turns out that the effort of putting carbon tax on something that you actually need in the present society is enormous politically and maybe it's best at just to make the green stuff cheap. Broadly, that's what the Inflation Reduction Act has done. It has done so in quite a controversial way. We're having a discussion now about the protectionist elements of the Inflation Reduction Act. It is a very protectionist piece of legislation but it has lit a fire under some of these green technologies. It's because of that simple thing that people I think are more willing to move towards things that have been made cheaper and move away from things that are more expensive. But I feel I want to add a note of caution on that. That we can't walk away entirely from the need for carbon taxes. They're still very, very, very important. It's very, very important to send a signal about the need to use less of the dirty stuff.
I’ll give you one example of that back in the UK. We are on the way to having fully decarbonized power system and that's very exciting. We will shortly produce a report I think that will really help explain what that fully decarbonized power system looks like. Super pleased about the modeling that we're going to put into that report and use. But the challenge shifts a bit I think now on power to actually consuming it being the main challenge. So you've got to push people towards having devices and technologies that use that electricity more. Then when it comes to something like heat or when it comes to an industrial process, you're right up against the problem that gas is cheaper than electricity for the consumer.
So you've got this kind of incentive issue and that's really what carbon taxes are about. We do need to maintain the incentive to move towards electricity as a fuel. We will probably be able to do that if we can have a policy framework that is aimed at making electricity cheaper than gas for the consumer. So if we move in a-- I hope we are in this world by the way. If we're in a world where the gas price is high today as a result of what's happening in Ukraine, as the gas price comes down-- and hopefully it is coming down, that's the moment to start putting some tax on it so that you start to create that incentive to move to electricity instead of gas. So as the price comes down, let it come down slightly more shallowly than it would otherwise by putting a tax in place at that point. That would work. So then you would push people towards electricity to heat their home or to fuel their car. I think we got to think about that. So we can't abandon entirely the idea that these price incentives have got to be there. It's really interesting to see what the US has done which is largely about incentivizing these green things, but let's not abandon entirely the carbon tax thing.
Ben (53:41):
But it's more specific and better thought out. It's using more as opposed to just broad brush. I've always been quite partial to this idea of some sort of tax like that and then giving that back to-- Well if you want to be just broad, people like universal benefits. So I've always thought a sort of carbon dividend or some sort of universal benefit which is actually progressive. So whereas the tax is kind of regressive, actually in the net you can make it progressive. But people tell me the political economy of that doesn't work and that there's all sorts of other issues. Tell me why it doesn't work.
Chris (54:21):
Well, I mean it's lovely to think about putting a tax in place and then dividend to hand it back again. But if we are successful in this endeavor of decarbonizing the economy, what happens to the dividend? Well, it shrinks to nothing. So you create a new political problem, aren't you? Right now today you can put a tax on those people who use fossil fuels and then hand that back to people who are doing the right thing or who can't afford to use those fossil fuels in the future. But if you've got a position in the future where as a result of our success on the transition we no longer hand out those handouts to those people who need them now, then I think you've got an even bigger challenge actually politically. So I'm not a fan I'm afraid of the tax and dividend policies that are often proposed for that reason. It's a political economy reason. I'm aware that other views are available, but that's my take on it.
Ben (55:08):
Okay. That's interesting. So again, that's because of the political economy piece rather than the so-called rational model bit. In some ways it's a distant relative to the issue we are having now about the fact that we probably need something like a road pricing tax type thing because you give all of these subsidies to EV. But then if something is a hundred percent EV, what happened to all your so-called car tax revenue or whatever the tax was? And so again, the economy said, "You could use some road price and something." But whatever it is, you probably need some substitute. Now, this is a slow enough change that I'm hoping that you can figure out something to do with it. But actually it does create this type of problem which it would be similar. So you create it, but your success will be your downfall. It's the same if you overnight change the EVs; then all of that tax money is gone. It's the fact that it's actually transitioning.
Chris (56:01):
That's right. And I think it depends on your outlook really. Are you implementing this particular tax because you want to see behavior change or is it revenue raising? So that has always been-- The historic problem is that the environmental taxes have mostly really been about revenue raising and when they start to work, that's when you get problem.
Ben (56:18):
Yeah. And that's our point. In fact, that's our last one about behavior change. That we didn't really like the term behavior change because it's really due to cultural technology habits as opposed to people doing the wrong thing from the wrong place. But that's exactly right. It's the price signal to change how people think and act as opposed to whether you are using that money for something.
Chris (56:40):
Yeah. And just before we leave tax, it's really important to think this through. The other thing with tax is that you can't escape the electoral cycles when amongst the UKs. Taxes are hard to implement whenever you try to do them and usually you'd implement them at the start of a political term because that's when you've got the greatest political capital to do it. We're actually at a newly interesting point with net zero where some of these new taxes which will almost certainly be needed-- you've raised one of them and probably the most obvious one which is some form of new transport tax that can cope with the fact that electric vehicles are on the road. Looks probably like road pricing. That's one of the most obvious ways to do it. If you want that tax to be implemented, it's probably going to have to be at the start of the next term really for our UK government. It's never going to be popular.
If you don't do it at the start and then you start to wonder whether you will ever do over the course of that parliament-- And the interesting thing with net zero is that it's this parliament that matters. So it's quite interesting. The tax stuff probably needs to have more oxygen as they say in think tank land because we're going to have to create more of a discourse about the need for some of these big tax changes so that come the election, there is government discussion in politics about what to do about it.
Ben (57:54):
Yeah. I guess people always think it's always maybe this decade or this next five years. But I think it kind of really is for all sorts of policies.
Chris (58:03):
It really is for transport. You can see the movement towards electric vehicles. We're in a world now-- I'm very pleased to be in this world. But mostly it's about what barriers there are now to a faster transition rather than pushing it harder. It's more about the fact that you have to use the public charging network. I have an electric car and I use the public charging network. It's awful. So that's a bigger issue now than the underlying problem of encouraging it in the first place. So in that world it's likely to be a tidal wave. Most people are thinking about electric cars we know as their future vehicle. In that world tax revenue starts to dwindle quite quickly and it's a fiscal risk for the chancellor.
So we've got to have a government that's willing to tackle that. If you want to tackle that particular tax challenge, it's probably better that you do it in a strategic way looking across all the taxes so that you reach this kind of fairer outcome and distribution of costs and benefits that we want to see. And if you want to do that, you need some political capital in the bag to do it. That points to the start of a term. Next election is probably 18 months away so it's pretty important to think this through.
Ben (59:13):
Yeah. And I think they will need to look at tax in the round because there will be some taxes which you want to do which in isolation will look regressive. But if you pair them with other things, will either look progressive or at least also achieve; be maybe neutral and achieve the outcomes that you need to achieve.
Chris (59:29):
That's right. And a final point for me on this because mostly people talk about spreading costs and a fair way which is of course a challenge. But actually I think in this discussion one of the biggest challenges is spending benefits. So if you are rich enough now to have an electric car, to have a heat pump with a time of day tariff that allows you to store electricity when it's cheap, to produce all that stuff, basically you can remove yourself from some of the big costs that those who are not rich enough and have to deal with what they're given currently incur. And I think that issue of spreading benefits fairly is actually a harder one when it comes to some of this because we need to think that through properly.
Ben (01:00:09):
Yeah, I've always thought that. It has happened in all sorts of things. People who only need to borrow small amounts of money but desperately need it at the end of the month are always paying through the nose on it. People who are having to use for their heating or their electricity paying either by the hour, by the day, by a meter or something like that are not seeing any of these benefits and have the highest costs which never seems-- Well I don't think anyone really thinks it's fair, but it's really a difficult problem to solve.
Maybe just finishing on a few couple of items and then advice. We talked about some of the other sectors a little bit, but I didn't know whether you have any comments on work that you've done or thinking about buildings, heating and cooling. And I know power grid and also fairness to the worker where it might be coming up. I think it's probably too big to talk about all of that.
Chris (01:01:04):
That's for the next podcast. I'm very happy to do that if you'll have me on. Why don't we talk buildings? I'll try and make this as succinct as possible because there has been a lot of interest in policy towards buildings in this country which is very welcome. So we now have a heat and building strategy from the UK government. There is a similar strategy in Scotland. Wales are working on one as well. So it's very good to see the focus that's been given to buildings. Buildings are-- depends how you look at it. But they account for roughly a fifth of the emissions that we have each year in this country and it's worth thinking through why that is. It's basically because we have to heat that building up and then there's only a question of how quickly it cools back down again.
So it's a big challenge because we have a climate here in the UK that requires you quite often to heat a building up quite quickly. Those buildings are often very old as well. So gas boilers which is what roughly 80% of us use to heat buildings are very useful in that world because you can flick them on and off quite easily. The fuel can be stored in this very extensive gas network we have at the moment. And turning that over, which I think is probably the biggest challenge in climate policy for the UK is not easy. And still there are lots of choices ahead of us with what you want to do about it. Sorts of real interest, for example, in using hydrogen as we use natural gas in the future potentially. Or the question of heat pumps, of course, whether electrical heat might be able to do the job.
I suppose that's where I start with this. Is that even though there has been lots of policy focus on this, no one's really grasped the central issue of heat and what you actually want to do about it. We are desperately lacking a clear decision from government on what to do about domestic heat especially, but also commercial heat and even how we use heat in industry. Some decisions have to be taken on that. We talked about tax and that being a big decision for a new administration. This is another one. What do you do about hydrogen for heating, for example? Are we going to go down the route of just electrical heat or is there going to be some room for hydrogen in there? Where is that hydrogen going to come from if that's a discussion you want to have? Is it safe? Is it manageable? It's a greenhouse gas so it will leak. That's another problem there too.
So at the core of this is the heat question. How are we going to decarbonize heat? By what point and through what means? How is the democratic process going to arrive at that decision? Is it going to be distributed to the regions of UK or are we going to have a central decision on it? So that's where I would start and I'm afraid I don't have good news there. We haven't got a full decision from this government but hopefully that will come with whatever flavor of government we have after the next general election. The area where we've seen most interest is in energy efficiency and in home insulation where there's been I think more efforts to kind of start the engines on an industry that was shut down by a change in policy back in 2012 removing the subsidies for energy efficiency that were in place then.
It's a big challenge. You're going to scale up this supply chain to install all this home insulation that we could really be doing with worth knowing in error modeling. What we have really in the challenge of decarbonizing buildings across the UK is broadly a strategy before 2030 across the economy of doing as much insulation as you can in buildings. So sort of reducing the size of the problem of decarbonizing it really by reducing energy needs. And then after 2030, the whole strategy kind of flips towards replacing the heating source in those buildings. That's very simplified but that's roughly how we viewed it in our models. So do as much as you can this decade to make buildings more energy efficient. And then after 2030, the big challenge is what you do about the gas grid and what you do about decarbonizing properties with different heating sources.
And I still stick to that. I think that's broadly what we need. Again, the home insulation challenge is a big one because we still don't have a policy. Most homes are unoccupied and we don't really have much by way of an incentive for those homes. So lots to do there. The thing I really wanted to just flag is that at the core of this whole challenge is this question of what we actually know about the building stock and how energy efficient it is and how prepared it is for this transition. It turns out we have this system of EPCs as an Energy Performance Certificates which anyone who's bought and sold a house, any of your listeners will have been through the process of getting an EPC and you get this kind of rating in it. You actually get a couple of ratings which people don't know that. It turns out its spectacularly unuseful in describing the challenge of what you do to improve the energy efficiency of that building or indeed to prepare it for low carbon heat.
So we've given some advice which if you're at all interested in this, it kind of sets out, I think a simpler way of looking at this challenge that helps with the kind of metrics that sit behind that EPC and which would allow EPCs to play a more useful role in the question of decarbonizing buildings. I would encourage anyone who has an interest in it to look at it. It's a really interesting thing actually because in terms of the financing of this, the bog-standard mortgage products, we really do need EPCs to mean something so that the mortgage products can help with decarbonizing buildings. At the moment, broadly the problem is that EPCs are about energy cost rather than carbon value or energy efficiency of the fabric of the building. So we've got to tackle that and we give some advice in a letter to the department called D-Lock which is my favorite of all the acronyms known in White Hall.
Ben (01:06:49):
So I would definitely go and check out that letter which is available on the Climate Change Committee website. I found it really fascinating. We briefly discussed this before because this is a key piece on the homeowner which could potentially try and catalyze this issue that you have on there and on the retrofit. Two quick ones on that. Is it too crazy to think that we could have some sort of district heating network in the same way that we put the gas grid in? Is that too crazy or is that possible?
Chris (01:07:18):
No. I would say that is probably my favorite route through. Let me add further craziness to your suggestion. So you could have a world where every building in the UK-- Let's assume every building in the UK has a gas boiler. It doesn't, and many of your listeners will probably be in one of the buildings that doesn't have a gas boiler. Let's assume for the purposes of this discussion that every building has its own gas boiler. It's quite interesting. What you have is a gas network bringing you gas but they're actually a very atomized heating system for the UK. So every single property has its own heat system. That's a bit weird when you think about it because there's lots of inefficiency. Even the boiler itself is very efficient. It's slightly weird that we all have our own one. So if you look at other countries in the world, it's not like that.
I think there is a world where every one of those properties has a big heat pump sticker at the back. I have an image in my mind of a sort of New York tenement with all the air conditioning units at the back next to the fire exits. It's not a very appealing world. Particularly in high density cities there is a better option here which is that you run hot water around and every one of those properties instead of having a boiler has a heat exchanger which is a much smaller thing. There are plenty of places in the world that have just that so I would love to see that happen. I mentioned the bit of craziness if I can add it in, is that we could heat those insulated pipes in the ground by taking the heat out of rivers.
So you can have one very big heat pump rather than a million heat pumps sitting in big rivers taking low heat from a water source, very efficient source of heat. It doesn't need to be warm by the way, it just needs to be not zero. You can take the heat from that and then turn that into the heat that heats the whole town or the village or the city. You need a few for a city of course. But that's quite appealing actually because it's not an atomized system at that point then. It's a very efficient system to do that and 80% of us live next to water body that would allow that. I'm in Glasgow today and I'm very proud that I had some hand in this amazing project in one of the towns that's near Glasgow called Clay Bank where they used to make very famous ships.
The ship building community there was shattered in the 1980s when the John Brown shipyard closed. This dock that they left behind is where we put one of these river source heat pumps which is now heating this brand new housing development on the site of the John Brown shipyard. And each of the lovely properties that have been constructed there on the Clay-- genuinely nice, is being heated with this wonderful heat power. I find it quite a romantic thing. You've put the river back into the community and it's now supporting the community in a different way. I think it's lovely and there's loads and loads of scope to do that. So I think we could have district heating, we just need to kind of imagine it and do it. That's a Bjork quote; imagine the world, no be in it.
Ben (01:10:32):
That sounds great. That sounds a perfect kind of government private partnership. Could be GovTech, could be something. It seems doable, but yeah, imagination. Okay, so last two questions. Although actually one quick comment on the efficiency part. There is this paradox that when you make homes more efficient, people use more energy. It's kind of the same from the candles to the light bulb. You thought, "Oh, we've got candles and the light bulb would just use more light." So it's a little bit like the gas thing. You do need some pricing thing that as you come more efficient you just don't overuse things because you are there which is-- I think it's the Jevons paradox, but it's a paradox which policymakers haven't quite got their hands around and all that.
Chris (01:11:11):
Yeah. We call it comfort taking. It's sometimes called the rebound effect. But yeah, it's a real thing and indeed that is what happens. It's hard to say that people shouldn't do. It’s because they can afford their energy bills and they make their homes warmer and that's fine. It's an interesting thing. I think a very brief point on this is that-- The dark secret of my trade is that it's difficult to decarbonize the buildings that we have in the UK through fabric efficiency alone. So I know there are a bunch of really prominent people in the field who would like to see what they call a fabric first approach to decarbonizing. But actually in our view, it doesn't take you that far.
That's kind of the point that some of the economic evidence supports actually that you should certainly make buildings more energy-efficient. But it's not really about the carbon challenge, it's more about the fuel poverty challenge or the fact that people living in those houses just should get a better deal. They shouldn't be living in drafty crackled houses. We should be helping them to live and have a better quality of life. The carbon bit of it, I'm afraid that that needs to be tackled. That's swapping over the boiler. That's the big challenge. That's where the big returns come from. Part of the worry I have with all this is that when it comes to the heat pump discussion which has become quite a live thing, the government's approach to all this if it has one binding approach, is heat pumps. We attached a slightly higher standard to the use of heat pumps. We don't do it with gas boilers.
Before we rolled out gas boilers particularly over the seventies and eighties we didn't say, "Ooh, you could have a gas boiler but you've got to make your home much more energy efficient before we'll give you one." And that's this sort of weird discussion we're having with heat pump. You could have a really big heat pump. It's probably not the best idea for the whole energy system to do that. But we might need to get to the point where we're more tolerant of drafty leaky houses because we've just got to get on and decarbonize them. Some of the people living in those houses are going to have higher energy bills and it's for them to worry about that. I don't want people who can't afford their energy bill today to be in that position. So we should be thinking most about those who can at least afford their energy bill when we think about this transition and the energy efficiency, I think.
Ben (01:13:21):
Yeah, I think that makes a lot of sense. We put in the gas networks when most people don't have gas, right? So there's a lot of things like that. Okay, last few questions. So one is an ask for what you would have for people and then what people ask us. So people ask me a lot about what they can do on climate change and my answers tend to be specific and quite long and complex depending on who is asking and what their background is. But often policy influences an important component of my answer whether that's a political or a corporate level or some thinking on this. Maybe there can be tech. So I don't know what do you say to that question and what can people do or maybe what can people do to influence policy or influence corporate or how should they be thinking of this? Because actually there's some household things that we can do, but we know at the household level it's great to have a signal if you can afford a heat pump or go vegetarian and the like. But that isn't this kind of system policy change with the big levers as well. So I kind of don't want to do it down, but obviously we need to do these other things. What's your advice or thoughts there?
Chris (01:14:29):
Well, I'm aware of your audience, Ben. I don't make claims to know who listens to your podcast but I imagine some of them do have a lot of influence in this area. So I think the really important thing to say at the top of this is think through what influence you have particularly on the policy front because conversations you might have are really important there. I think the one thing that really matters when it comes to that is if you are in a circle with influence. Just talking positively about this is a thing that is actually going to happen is the most important thing. There's a general-- I still get it. There's a sort of disbelief that it can't be done. It can be done. All these steps that we've talked about and the reports that we've produced illustrate them even further.
They will be done. So any talking in a sort of constructive progressive discussion about those things as an inevitability I think it's probably the most important thing actually. If you want to be vegan, go for it, but it's not going to make that much difference. I think the really important thing that I often say at the top of this discussion is that we can't make this about individuals. The big systems that need to be shifted are not going to be tackled just by making personal consumption choices. But those personal consumption choices probably make you feel better about it and therefore they will matter too. The one that probably matters most is the move towards or rather the move away from kind of red meat consumption and processed meat.
So if we can find alternative proteins, for example, George Monbiot is very good on this, then that would make a real big shift. So actually being willing to consume some of those things might be more interesting. I'm going to give you two things to try and cut this as short as possible. If you make an investment to have an electric car or a heat pump, tell people about it. Turns out that that matters a lot. We've done very well with electric cars because they've become quite desirable. I think we probably need to have the same thing happen with domestic heat. So if you make that kind of investment to make your home warmer, put a heat pump in it, tell people about it, feel proud about it. That will matter because particularly in the community around you they'll all want it too. So that's the first thing.
Then the second thing, think through what wider impacts you can have. Probably the two biggest impacts you can have are how you vote. And I'm not telling you how to vote-- make that very clear. But take an informed view on that. If you care about climate, those parties that you may or may not vote for will have a position on it and it matters. Where you invest is the other. Even if you think you don't invest, you've probably got a pension and you probably can have a say on that. So directing that is probably very, very important. That if we can get some of the big institutional investors behind this transition-- most of them are, but really actively behind it, that will make it sing. So this ratified audience of yours, Ben, I bet they've got more influence than most. So do think those things through. We need to be proud about decarbonizing, I think, and proud to make the investments that will make it work. We need to build the idea that these are desirable things in life and alongside that, these wider choices about the political system we have and the financial system and how you invest really matters.
Ben (01:17:53):
That seems like excellent advice. And then last one, current or future projects. Anything you want to highlight or you're particularly excited about?
Chris (01:18:02):
Very excited about all the things that we do but this is a particularly interesting era for us so we've got lots of exciting stuff coming up. Briefly on the CCC, my institution, we've changed quite a lot in the last six months. So we've built for the first time a set of integrated teams that are looking across the net zero challenge and the adaptation challenge. So got a team on the built environment which is not just thinking about how you decarbonize buildings but it's also thinking about how you prepare them for the likelihood of flooding or overheating. It's really good to have that and the transport systems that we'll need into those buildings. We've got a team now on the energy supply that's not just thinking about decarbonizing; it's also thinking about making it resilient. We've got team on infrastructure doing similar things. We've got a really exciting team doing something on nature, on land, on agriculture, on the seas, bringing together biodiversity with adaptation and mitigation.
So we've got this kind of new facility to look at things which we've never had before. So we're kind of using that now in anger to produce some new analysis. Stuff I'm really excited about. We're going to do something on work and skills coming up, looking at the nature of the transition that's coming up and the nature of the workforce change that goes with it and the skills challenge. That's going to be really interesting. Some very interesting and actually maybe controversial stuff in there about which sectors of the economy expect to shrink and which ones will grow and the slightly uncertain nature of all of that. So that's really interesting. Big thing coming up which I'm so excited about is that we've done some amazing modeling work over the last 12 months on the power system looking at how we decarbonize the electricity system in the UK in particular to give a better sense of how we cope with a world where we are using renewable electricity as a sort of backbone of the whole electricity system and increasingly the whole energy system.
And in that world how we cope with long periods without wind which will come. This wonderful German phrase, dunkelflaute, which explains these kind of long periods of dark and often cold periods without wind. We will be exposed to that in the UK. What do we do in that world? Without spoiling the surprise, what we've done with this modeling is illustrate what kind of system you need alongside that very extensive offshore wind system and onshore wind system, solar system that we have. It's really good. So big story there on hydrogen use and storing hydrogen using it in the para system. The really cool stuff is that we've used actual weather data from an actual year where we had low wind that year and then stress tested it with very long periods without wind and looked at what we can actually do.
So it should answer the often stated point from people on Twitter that we haven't thought about; point when the wind stops blowing. Turns out we have but we've kind of illustrated it. So that's coming up. Got a big report to do and then progress report should do every June. Then the very final thing I say is that at the halfway point we will then begin these really big strategic pieces of work that we do every five years. So the seventh carbon budget which is the emissions target for the UK which will take us into the 2040s, we have for advice on that every five years and we'll start the process of thinking about that properly in the last six months of this year. Really interesting because the 2040s we should have reached full decarbonization in some sectors and we may not have actually done so. So how do we cope with that uncertainty? It is going to be a big thing.
The question of what the right data is for net zero is not really in the discussion at the moment, but kind of interesting questions that do come up about how would you go faster on this? Maybe an interest from future governments and things like capital scrappage. So we might look at some of those issues moving more rapidly off fossil fuels. We're going to explore some of that. And then the very final thing-- we've already begun work on this actually. But the other thing that we do every five years is an assessment of the climate change risks that we face as a country. This will be CCRA4; Climate Change Risk Assessment Four and we've just got the commission for that agreed. It's really exciting.
So yes, we are going to look at the climate risks, but we're going to do something that I've always wanted to do which is to look at defining what a well-adapted UK looks like. So that's the kind of really interesting piece of work to actually define what we mean by a well-adapted UK across some really important issues like overheating and the natural world and how we do deal with big supply chain interruptions globally. All sorts of interesting stuff there. And then actually giving advice on adaptation itself; not just on the nature of the risks that we face, but how we put policy around it. That's the other thing that we're going to do. So it may seem a long way away. It's probably 2026 maybe we'll bring that together, but actually three years not that long in bringing together that kind of program of work. So we'll get that going properly this year. There's a host of other things too, but look out for it. We're always busy in the CCC but we've got a load of stuff this year that's been in gestation for a while.
Ben (01:22:51):
I highly recommend all of the reports. If you don't have super time, the executive summaries are extremely good and give you the heart of the matter. But all of the technical and the backup evidence, I think they're some of the best reports on climate that I ever read. So on that note, Chris, thank you so much for joining me.
Chris (01:23:10):
Thanks Ben.