Facilitating technological and business model innovation will be central to achieving net zero, argues Nick Molho of the Aldersgate Group
Whilst Brexit will undoubtedly remain a dominant theme in 2020, the new government will need to press on with delivering progress on the climate change and environmental agenda. It is clear that policy decisions in this parliamentary term will determine whether the UK is on a pathway that will credibly allow it to achieve net zero emissions by 2050 and reverse the decline of the natural environment.
When it comes to the net zero emissions target, the UK is not starting from scratch, having cut its emissions by around 44 per cent between 1990 and 2018, with the economy growing by about two thirds in that period. Whilst this is indeed impressive, the bulk of this progress is due to emissions going down in the power sector thanks to the success of policies to grow the share of renewable electricity and move away from coal power.
However, the UK now has a significant challenge ahead if the country is to be on a demonstrable pathway to reach net zero emissions. There are two key aspects to that challenge. The first is that the UK will need to accelerate action in areas where technology solutions to cut emissions are well known, but policy efforts to support investment to date have been wholly inadequate. This includes improving energy efficiency in buildings, switching to zero emission vehicles and vans, and completing the decarbonisation of the power sector.
The second is that the UK will need to start tackling the decarbonisation of more complex sectors, such as heavy industry, agriculture, heating and long- distance transport (in particular heavy duty vehicles, shipping and aviation). This is where innovation has a key role to play to deliver a significant dent in emissions. For example, carbon capture and storage is essential for cutting emissions from heavy industry; hydrogen could act as a clean fuel for industry and long-distance transport and could possibly also help meet some of the UK’s heating needs; direct air capture could help take out carbon dioxide from the atmosphere and deliver much needed ‘negative emissions’.
However, for policy to be effective in getting to net zero emissions, it is important to be clear what we mean by innovation. Most of the technologies that are needed to get to net zero emissions already exist in some form. Where innovation is needed is not so much in inventing new technologies but rather in helping existing ones to rapidly gain in maturity and be deployed on a commercial scale.
It is also important to appreciate that technological innovation doesn’t hold all the answers to get to net zero; innovation in new business models is going to be just as important. For instance, retailers wanting to be more resource efficient can’t just rely on selling more resource efficient products to improve their environmental footprint. They will also need to think about whether their business strategies need to evolve from a model currently based mainly on selling goods to one based increasingly on leasing products to consumers, who then return products back at the end of their useful lives so they can be reconditioned.
As recently argued in a recent report from Vivid Economics and the UK Energy Research Centre, which studied lessons learnt from past examples of rapid innovation, accelerating technological innovation to deliver net zero requires carefully designed complimentary measures. The first one is that the government must support – and put meaningful funding behind – large scale trials of new technologies. Technology trials won’t always go smoothly but they are an essential part of understanding what does and doesn’t work and how best to design policy.
Second, history shows that government- backed institutions have an essential role to play in rolling out complex technologies, especially those that have multiple infrastructure requirements. The UK’s transition from town gas to natural gas in the late 1960s and early 1970s, which took only 14 years, is a good example. The Gas Council played an essential role in facilitating the development of bulk gas supplies from the North Sea, co-ordinating the roll-out of a national gas grid and overseeing the installation of gas boilers in people’s homes. This included a crucial communications role to help sell the benefits and safety of gas central heating to the public.
Third, government policy should encourage low-carbon innovation to be carefully joined up with digital innovation. The rapid global roll-out of online cash dispensers, which took around 22 years, happened because the development of cash dispensers coincided with that of computerised systems and online algorithms. Looking ahead, digital innovation could help make the take-up of energy efficiency, low-carbon heating and transport technologies a lot more accessible and desirable to the public.
Fourth, as we have seen with renewable energy technologies like offshore wind, a successful innovation policy is one that works hand in hand with market creation measures to grow the demand for new products and technologies. For instance, supporting innovation in carbon capture and storage needs to work hand in hand with policies to grow the market for ultralow carbon industrial products. This can include incentives to store carbon dioxide, changes to public procurement rules, as well as market standards that drive down the permissible level of embedded carbon in products over time.
Technological innovation undoubtedly has a critical role to play to get us to net zero emissions. To be effective, the ambition of the government’s innovation policy must match the scale of the challenge ahead of us. It must also look beyond the research and development stage and must incentivise advances in business models and technologies in equal measure.
Nick Molho is executive director at the Aldersgate Group
This article is from think tank Bright Blue’s Spring 2020 magazine
Source: – Business Green