Rishi Sunak’s government risks looking incapable of honouring a commitment | Nils Pratley

One can understand why Rishi Sunak sees political opportunity in watering down a few climate policies. Previous soundbites about “the economic opportunity of the 21st century” may be correct in the round, but voters have also noticed that heat pumps are expensive and that the path to net zero by 2050 involves costs as well as opportunities. A strategy that claims, in effect, that net zero can be delivered more gently is not absurd for a party that is miles behind in the polls.

The problem, though, is the one highlighted by the furious reaction from some carmakers, in particular, to Sunak’s flip-flop. Any realistic route to net zero involves winning, and keeping, the broad confidence of businesses that will be overhauling the infrastructure. At one level, hitting the 2050 target requires an enormous public-private effort to rewire the entire economy. The whole point of setting interim targets is to make it more likely that you hit the main end goal. Presented with a legally binding commitment, the government risks looks incapable of delivering a plan that it can stick to.

The former Siemens UK chief executive Jürgen Maier spoke about “a disaster for business confidence and investment” and one can understand why. The phasing-out of sales of new petrol and diesel cars by 2030 was a policy adopted as recently as November 2020, which is hardly another age. Sunak was chancellor at the time.

Manufacturing investment decisions were made on the assumption that the deadline was solid. Veering to 2035 – never mind what the EU is doing – feels perverse when the government is simultaneously throwing subsidies at Mini and Jaguar Land Rover to crank up their electric vehicle ambitions in the UK.

It was a similar story with the offshore wind auction a fortnight ago. In that case, the – still intact – goal is to have 50 gigawatts of capacity installed by 2030, which requires a tripling of what the UK already has. The auction, however, delivered precisely zero bids because the government’s maximum price for contracts was set at an unrealistically low level.

One can grumble about offshore developers’ greed – some have had a spectacularly good ride in the past – but inflation in construction costs was undeniable on this occasion. The government’s inflexible approach also looked counterproductive in its own terms if the 50GW target is to be hit. Developers next year will have a stronger negotiating hand in an auction in which the government is obliged to land more bids. A “pragmatic, proportionate and realistic” approach, to use one of Sunak’s phrases on Wednesday, would have been to try to smooth the bumps in the interests of steady delivery.

On cars again, if one challenge to electric adoption is the lack of charging points, as Sunak said, a legitimate role for government would be to fill the gaps in the network or create the incentives for companies to invest. If the problem, actually, is that the grid infrastructure is incapable of handling mass adoption of electric vehicles by 2030, it would be better to spell out the facts.

Business won’t hate everything in this reset, of course. If a “fast track” to improve connections to the grid is confirmation that decarbonisation of the power sector will happen by 2035, that is significant. The target is immensely demanding from a technical perspective – and more important than, say, what happens with heat pumps.

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But consistency in policymaking matters. In attempting to signal pragmatism, Sunak may send the message to business that UK targets cannot be relied upon. An awful lot of foreign capital is required to deliver the investments behind transition. Overseas investors may fairly wonder if more U-turns are coming.


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