Green GB Week - recap and reflect

22 October 2018

It’s been a week of many announcements, so it’s hard to work out what to focus on. The first Green GB week, launched at Imperial College London and followed by a flurry of events across the City of London, looked like it had been timed carefully after the launch of the IPCC 1.5C report. Given that context the long term decarbonisation trajectory was a key feature of the week’s theme.

Long term decarbonisation vs. short term actions

The UK is already a world leader when it comes to tackling climate change, as we found in PwC’s 2018 Low Carbon Economy Index. The UK is at the top of the G20 leaderboard for its long term low carbon transition since 2000, decarbonising at an average of 3.7% per year.  It has reduced emissions by 29% since 2000 while growing the economy by 34%. In the electricity sector, emissions per MWh generated have been cut by 29% in the last decade, due to a combination of policies.

So the Government's request for advice from the Committee on Climate Change to help address long term climate targets in response to the deeply worrying findings of the IPCC 1.5 degrees report. This marks the UK to be the first in the G7 to formally explore setting an even more ambitious target aligned with the 1.5oC target.

The CCC will no doubt conduct thorough analysis to explore the options. But it doesn’t take much to conclude that short term actions will be incredibly important to move onto a 1.5 degrees trajectory. Our LCEI analysis estimated that the global economy needs to decarbonise at a rate of 6.4% per year (i.e. reducing carbon intensity per unit of GDP) to get to 2 degrees. No G20 country has hit that in 2017, and emissions have begun to rise again after a lull between 2014 and 2016. The path to 1.5 degrees will be much tougher.

Friday’s criticisms by the Business, Energy and Industrial Strategy Committee on the Government’s electric vehicles strategy therefore dampens the closing of Green GB week. The Government’s target for zero emission cars by 2040 is considered ‘vague and unambitious’. Our comparison of projections on autonomous and electric vehicles suggests that, depending on how radical policies are implemented, the scope of A-EVs to ‘bend the decarbonisation curve’ varies significantly. The potential, however, can be significant. We recently published a report that emphasises the importance of clear signals from government in laying out a roadmap for EV deployment. Policy can influence both end-use cost and ease of adoption.

Managing financial risks and deploying green finance

It is precisely against the backdrop of a tough decarbonisation challenge that the Prudential Regulation Authority’s (PRA) put out a Supervisory Statement. The proposed requirement for Boards to better understand financial risks from climate change, including the requirement to appoint a Senior Manager with responsibility for managing climate risks, will help ensure firms have the right skills and level of oversight needed to respond to this complex problem. Having fully-engaged Board members and the right governance structures in place are essential if firms are to take a long-term and strategic approach.

Through the work initiated by the Bank of England Governor Mark Carney on the Task Force on Climate-related Financial Disclosures (TCFD), the PRA recognises the importance of improving transparency through climate risk disclosures to help make markets more efficient, and economies more stable and resilient. The TCFD framework, a culmination of many months of work by leaders in the field, should provide consistent and comparable decision-useful information across the industry.

But the UK also has an additional role to play, not just in managing financial risks but in deploying climate finance to where it is most needed. The UK is currently viewed as a world-leading green finance hub, so it is little surprise to see the various events looking to cement this view. Our PwC team has also been part of the action. The Climate Finance Accelerator (CFA) initiative, featured in a mid-week event on ‘Accelerating Green Finance in Emerging Markets’, where participants explore how the UK Government and the City can work with developing country governments and markets to turn low carbon investment concepts into bankable projects. As a panellist put it in the event: ‘there is no shortage of good ideas to reduce emissions, and there is no shortage of finance’. By matching projects that accelerate carbon reduction ambitions to sources of financing and improve project developers’ understanding of how to develop bankable projects, the CFA can help channel funding to carbon reduction projects.

On thin ice, but hopeful

As the week coincides with the Prime Minister’s Brexit talks in Brussels, the parallels are striking. We are on thin ice here, both the global climate and Brexit negotiations. Time is running out, action is urgently required. The UK is playing its part, and there have been small victories, but will need to work harder and faster.

 

Lit Ping Low | Assistant Director, Sustainability & Climate Change, PwC UK
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