Landmark report on energy
- Landmark report on energy. Last week, the International Energy Agency (IEA) called for an immediate end to new fossil fuel developments in its report Net Zero by 2050: A Roadmap for the Global Energy Sector. The report marks the first time the world’s most influential voice on energy has modelled a pathway consistent with the Paris Agreement goal of 1.5C of warming, and underlines the benefits of clean energy in terms of jobs, energy costs and energy access for poorer households. (Climate Home News coverage)
- Why is this a big deal? For years, governments and companies have justified expanding fossil fuel production on the basis of IEA scenarios asserting this would be consistent with net zero commitments. Now, they can no longer do so. As Politico’s Karl Mathiesen puts it: “The consequences… are profound. The most august energy organisation has said any new $ spent on gas, oil or coal supply is incompatible with 1.5C. That could underpin court cases, state aid challenges and makes the stranded asset argument very simple.” (See summary thread from energy economist Greg Muttitt.)
- ~~Gas is not a transition fuel. Notably, the idea of expanding gas production – which has lower emissions than coal – as part of the transition to net zero was killed off by the IEA’s report, with major industrial and geopolitical consequences (Energy Monitor).
- Critique. While the report has been widely welcomed by environment experts, a number have criticised the assumptions underlying the IEA’s modelling. Oil Change International’s excellent analysis of the report welcomes the step-change in the IEA’s messaging but highlights flaws in the modelling – underestimating wind and solar power, a dangerous gamble on bioenergy and carbon capture, and relying on oil from existing sites far more than e.g. the United Nations Environment Programme 1.5C-consistent pathways.
- ~~Degrowth. Its assumption of continued GDP growth in rich countries also implies an unprecedented rate of GDP/energy ‘decoupling’ – where GDP growth is achieved without corresponding growth in energy consumption. (Thread by Jason Hickel) Last week we covered new research on ‘degrowth’ pathways to emissions reductions (Beyond Covid). See also UCL Professor of Geophysical and Climate Hazards Bill McGuire’s article covering the research this week (Prospect).
- Early impact. Said to have been “heavily influenced” by the IEA’s report, G7 environment ministers have agreed to deliver climate targets in line with a 1.5C of warming target, and have pledged to stop direct funding of coal power stations – though not gas (see above) - in poorer countries by the end of this year. (BBC)
- ~~Fossil fuel companies. Oil giants will also find it harder to justify fossil fuel expansion. Shell, for instance, asked shareholders to approve its ‘net zero’ strategy – which included expansion of oil production - on the day the report was published.
- Next steps. The IEA will publish its massively influential World Energy Outlook (WEO) later this year. The question remains as to whether its new 1.5C pathway will be presented as the central scenario of the report. This matters, as the central scenario is used by governments and investors as their default in energy decision making (Kelly Trout, Oil Change International).
- ~~Government responses. The question remains as to whether governments will act on the findings – Reuters has a good summary of the mixed reception the report received from fossil producer governments.
- ~~City of London. While G7 governments’ commitments to stop funding coal are welcomed, steps must be taken to tackle private finance of fossil fuel expansion too. UK banks provided $56bn financing for firms involved in the coal industry between 2018 and 2020 (CityAM).
- ~~International green financing. Rich countries must go beyond tackling domestic emissions and financially support poorer countries in their transition to clean energy. See our previous Digest on climate targets for more analysis on industrialised countries’ “fair share” of emissions reductions and international climate justice.
Environment and climate change
- Net zero targets should be split in two. An important survey of 300 carbon removal experts found that an “overwhelming majority favour separating emission reduction and carbon removal targets to improve transparency” around net zero goals.
- ~~Why? Carbon removal is subject of controversy in net zero targets because of the anticipation that future technological advances will enable large-scale removals of carbon from the atmosphere which will then reduce the pressure on near-term emission reduction and enable more gradual decarbonisation. We covered the problem with this ‘techno-optimism’ in our previous Digest.
- ~~Impact. Separation of carbon removal from net zero targets would “render the assumed carbon removal reliance explicit, allowing for public scrutiny on the feasibility and fairness of mitigation strategies”. The intervention hopes to add pressure to the proliferation of net zero targets by governments and companies.
- Apple won’t save the world. Paris Marx shone a light on Apple’s greenwashing for Tribune, arguing its offsetting programme and other initiatives do not compensate for unsustainable practices ranging from extractive mining in the Global South to its ‘anti-repair’ approach to product design and branding.
- The BoE and net zero. The Bank of England’s Sarah Breeden outlined the role of the bank in contributing to the net zero transition, exploring the role of the financial sector in divesting from companies with high emissions to steward polluting companies through the transition.
- ~~Avoiding a ‘Minsky moment’. Breeden feared a ‘disorderly transition’ “a so-called Minsky moment - as a significant number of otherwise productive assets have to be abandoned”, and urged financial institutions to take action “today, well before the consequences of inaction become clear”.
- ~~CBPS consultation. The Bank has recently asked for consultation on its discussion paper ‘Options for greening the Bank of England’s Corporate Bond Purchase Scheme’. One option given by the bank is to consider excluding bond issuers with “certain activities judged incompatible with transition to net zero”.
Work and inequalities
- NAO investigates Windrush. The National Audit Office released a report investigating the Windrush Compensation Scheme. Two years after the scheme’s launch, only 633 individuals have received compensation, compared to original Government estimates of 15,000 potential applicants. (Guardian)
- Money for Nothing? ‘Radical centrist’ think tank Radix has published proposals for an alternative approach to unconditional universal social security payments. Claiming that UBI and job guarantee schemes are financially and politically unviable, author Kevin Langford argues: “unconditional universal payments – which don’t need to be ‘claimed’ and don’t come with any stigma – are a good idea in a world where there is long term uncertainty about the availability of ‘good’ jobs – but such schemes need a narrative which is credible and commensurate with the scale of the payment promised.”
- ~~Recommendations. Langford proposed a payment of £150 twice a year to individual bank accounts whenever inflation falls below the Bank of England’s target; a payment of £1,000 to working age adults linked to the country’s progress on environmental goals; and a 'Carbon Dividend' distributed to all young adults to compensate for the impact of environmental breakdown.
- UK billionaire wealth grows by a fifth in 2020. The Times released its Rich List 2021 showing “how the Covid pandemic spawned more billionaires than ever”, with an increase of 24 UK billionaires (the biggest increase in 33 years) in 2020. (Twitter analysis by IPPR’s George Dibb)
- ~~Asset ownership is driving inequality. Economist and former city trader Gary Stevenson appeared on LBC to explain why asset ownership helped the wealthiest 250 people in the country make an extra £600billion last year, and why targeted wealth taxation on the super rich could reduce inequality without ordinary people having to pay more in taxes.
- ~~Explaining the difference between the rich and the super rich. A new data visualisation tool - equal parts funny, insightful and shocking - demonstrates the scale of wealth inequality and imperative to tackle such extreme disparities.
- Great British Railways. The government released the ‘Williams-Shapps Plan for Rail’, a review of the railway franchising model that will “bring back together track and train under a new arms-length public sector body, Great British Railways”.
- ~~Union resistance. RMT union responded, calling upon the government to “cut out the middleman, strip out the deadweight of private companies” as “the taxpayer carries all the risk while the train companies carry out bags of cash”.
- ~~Accountability issues remain. We Own It’s Cat Hobbs criticised the plan as “the same old privatisation, tweaked and rebranded… yet again the private sector has guaranteed profits while the public sector takes the risk and bears the responsibility if things go wrong” for openDemocracy. (Video summary here)
- Reforming property taxes. A cross-party, cross-sector Tax Commission convened by Bright Blue proposed an Annual Proportional Property Tax to replace Council Tax and Stamp Duty to help achieve government aims of levelling up and delivering net zero.
- Home ownership and racial inequality. An article for Bloomberg illustrated the “ugly truth about the road to prosperity in the UK”, citing ONS data showing that the median black household has accumulated zero wealth through home ownership over the last decade, compared to £115,000 for the average white household.
- Government resists Biden’s tax plans. Tax Justice UK’s Robert Palmer has called on the government to stop “dragging its feet” and back Biden’s proposals for a global minimum corporation tax. British ministers have indicated they’ll resist without a separate deal on taxing tech multinationals to replace the Digital Services Tax (DST), but Palmer argues Biden’s plans go much further than the DST and represent a “once-in-a-lifetime” opportunity for major global cooperation on tax. (CityAM)
- ~~Opposition response. Labour is tabling an amendment to the Finance Bill aimed at forcing the government to back the proposal.
- Raising finance for vaccines. Church Action for Tax Justice released a Global Tax Plan for a Global Pandemic, showing how “Biden’s tax plan combined with the reform of global tax rules would provide sufficient finance to vaccine all those at risk of severe Covid disease”.
- Benefits of public debt. A new paper from Christian Odendahl and Adam Tooze on “learning to live with debt” argues states need a new fiscal consensus that recognises the benefits of public debt and is less obsessive over its costs.
- ~~Managing a sustainable and equitable recovery. A new Policy Contribution from Bruegel warned against “premature fiscal tightening and recommended instead additional short-term support from national budgets”.
- ~~Yellen on need to reframe fiscal policy. In her speech “A Better Deal for Americans”. US Treasury Secretary Janet Yellen stressed the need to “reorient [the] framing of U.S. fiscal policy” to address “long-standing challenges our country faces, & the innovation needed from the public & private sectors to tackle unaddressed problems & improve our economy in ways that will benefit our children & grandchildren.” (Twitter thread summary)
- Public perception shapes fiscal space. Will Davies argued “the secret of Johnson’s success lies in his break with Treasury dominance” in an article for the Guardian, looking at the Brown-era rules which (used to) govern public spending and lessons for Labour: "In the end, it turned out that public perceptions of financial credibility were largely shaped by political messaging and media narratives, not by adherence to self-imposed fiscal rules."
Health and Covid-19
- NAO report on UK government’s pandemic response. The National Audit Office released a report on Initial learning from the government’s response to the COVID-19 pandemic, reflecting on lessons learned across six themes: risk management; transparency and public trust; data and evidence; coordination and delivery models; supporting and protecting people; and financial and workforce pressures.
- Defining ‘levelling up’. A new article on the “Politics of Levelling Up” argues the Government’s agenda is: “not primarily concerned with redistribution between social classes, or even between regions, but rather targets communities that feel they have lost their centrality and standing”. The authors highlight a range of policy contradictions in the Government’s agenda, but argue these may be smoothed over by savvy political strategy.
- ~~Inherent contradictions? Another paper looks at the Ambiguous Ideology of Levelling Up, as a vision for bringing together a wide range of disparate political ideologies without addressing the underlying tensions between them: “If levelling up develops from a political slogan into a fully-fledged policy programme, it will become increasingly difficult for the government to manage the ideological tensions inherent in the levelling-up agenda.”