• Real Assets
  • ESG
  • Responsible Investing

Navigating the path to net zero: An interview with Jill Rutter

There is a large gulf between the concept of ‘net zero’ and the practical policies that will deliver it. Jill Rutter, senior fellow at the Institute for Government, takes a hard look at the UK’s progress towards the 2050 target.

Jill Rutter
Jill Rutter, Senior Fellow at the Institute for Government

The number of countries and companies committing to net zero targets has surged in the last year, but there is a vast amount of work to be done to craft the policies that will ensure it is delivered on the ground.

One of the challenges is that achieving net zero (where greenhouse gas emissions are limited to cap global warming to 1.5 degrees above pre-industrial levels, and human activity is no longer adding to atmospheric carbon stock) will impact many facets of how we live. Changing established energy networks and consumer habits will take years; failure could leave millions exposed to extreme climate events and the social impacts of migration. But there is no agreed pathway to achieve the target.

The UK in 2019 became the first major economy to legislate for net zero by 2050. We caught up with Jill Rutter, former civil servant and now senior fellow at the Institute for Government, the independent think tank concentrating on efficient policy making, for an up-to-date report.

How would you assess the UK government's progress towards achieving net zero?

We have been researching this and wrote our report on net zero1 because it is a massive but under-reviewed issue. Under Prime Minister Theresa May, the government decided as part of its legacy to move the target from 80 per cent emissions reduction by 2050 and accept the Climate Change Committee (CCC)'s recommendation for net zero. I was appalled that the biggest decision the government had taken to restructure the economy – much bigger than Brexit – was approved by parliament after only an hour and a half's debate!

The biggest decision the government had taken to restructure the economy – bigger than Brexit – was approved by parliament after only an hour and a half's debate

It is quite easy to legislate for ambitious targets, and you can get a lot of kudos from green groups and those supporting you, but there is no compulsion to set out a decent plan. If you are going to set those targets, they should be accompanied by a much clearer-eyed view of what meeting the target might require.

We also noted that within a month of the government accepting the CCC's recommendation to target net zero, it highlighted the government was not on track to meet the 4th and 5th carbon budgets introduced under the 2008 Climate Change Act. Progress had stalled in the critical areas of housing and transport.

On the plus side, the UK has made deep emissions reductions since the act came in. The framework we have has been replicated in other countries, so it is quite a successful export. It is regarded as a world-beating model, but the progress has really been confined to the power sector. Broadly, that has been achieved by a dramatic reduction in emissions from electricity generation. It was initially fuelled by the dash for gas, but has now been taken over by an increasing proportion of energy coming from renewables, and the successful electricity market reform in the early 2010s that led to the large-scale development of offshore wind. Of course, onshore wind development was stymied by planning restrictions that David Cameron introduced.

If you are looking at a 2050 target, you need to be making critical decisions in the next zero to five or ten years

We now have the arrival of an even more ambitious target, while government was not well placed to deliver on the last, less ambitious one. If you are looking at a 2050 target, you need to be making critical decisions in the next zero to five or ten years. This is the vital period that will decide whether net zero is delivered or not.

Boris Johnson abandoned quite a lot of the previous administration's legacy but embraced the net zero target. He set up a cabinet committee to look at it, and bid to host COP 26, which has been pushed back to November 2021 due to COVID-19. COP 26 is very important, as it will review the progress that has been achieved since the Paris climate change agreement in 2015.

What was the context behind your own net zero report? 

The question we wanted to answer was 'If we take that target at face value, is what the government is doing equal to the task?' Do its actions reflect its ambition? Is it setting up the right sort of machinery and processes within government to deliver?

In the process, we identified some key features, including an incoherent policy stance. It undermines certainty and the ability to invest, which is particularly important as the UK's infrastructure model incorporates a privatised energy sector, and in other key sectors we will be looking to private sector actors as well. 

Government can talk a big game around things like climate, but baulk at the measures needed if they are unpopular

We asked whether we have the mechanisms in place to give people the certainty they need. Is there the capability inside government to do that? Is there enough science, engineering and delivery capability to join the dots? Government can talk a big game around things like climate, but baulk at the measures needed if they are unpopular. The Treasury is currently carrying out a net zero review, looking at the costs of reaching net zero and how you distribute them - how to manage the cumulative burdens. Should it be achieved through general taxation, or through consumers? These are all critical decisions.

Unfortunately, we have also seen a lot of chopping and changing. For example, the government committed funding for carbon capture and storage, and then cancelled on the commitment, then revived it again. One of the things we know is that if you chop and change, the costs of delivery go up, because you increase the policy risk premia. People need certainty. Uncertainty means they are less willing to invest and will demand a better return. That’s because they are not just covering the cost of change, they are covering the cost of change and the risk that the policy environment changes again too. It is not a good way to govern.

For net zero, the question is how you deliver in a way that commands public consent, so you are not forced to carry out about turns, at least cost to the economy. There are lots of benefits that will come from the transition, and there is no need to make it a more expensive process than it needs to be. Being properly sequenced and managed can play a role in reducing the cost.

What are the most critical elements the government needs to focus on?

The net zero target has certainly energised people in government in a way the 80 per cent target did not. One official said to us: “At last we have a proper target.” Of course, there has been a target since 2008, but officials on the ground say the environment feels different. Net zero has had a galvanising effect, notwithstanding the fact people are having to focus on Brexit and COVID-19 as well. And we have a large stage planned for next year to showcase this at COP 26, the biggest outing for global Britain since Brexit.

You need to be able to sequence and work through the interdependencies

The biggest challenge now is that we have lots of sectoral plans, and some of these are wholly independent of each other. But in order to deliver, there are key elements to get in place, and you need to be able to sequence and work through the interdependencies. That's one reason a central plan is needed.

One factor that is difficult in the UK system of government is how you maintain a sustained focus across parliamentary terms. The other big challenge is how you take the public with you. In the past year or so, the public seems to have come onboard more; they recognise the scale of the problem and that we need to do something about it. Politicians are always nervous when they think they have not got the public with them, because they are proposing changes that will affect people's lives.

That's why the experiment with the Climate Assembly2 was very interesting. Government needs to think about how it maintains that dialogue with the public. People say they know there has to be change, but the costs need to be distributed fairly, and there may need to be help from those experiencing the downsides of transition.

The Climate Assembly was not a government initiative, it was established by parliamentary select committees, but its findings were presented to government and the government welcomed it. It is quite different to the assembly Macron set up in France. He said every proposition agreed on would either be turned into law or presented to the French National Assembly. Now he seems to be rowing back on that. 

In the UK, the Climate Assembly was not a government enterprise, but it was useful because it highlighted government may have more space to act than it thought.

Has COVID-19 made a difference to the appetite for change?

We have not seen radical action on climate prior to now, because climate has always been trumped by more acute crises. When I was the director of strategy and sustainable development at the Department for the Environment, Food and Rural Affairs, there was a study that suggested climate change was a larger problem than terrorism. But every action by government seemed to signal the reverse. Climate change only got a look in when every other avenue had been pursued. 

Climate change has always suffered from the perception this is something we can deal with later, tomorrow

Climate change has always suffered from the perception this is something we can deal with later, tomorrow. The problem for government is that it will mean making changes to lifestyles. What COVID-19 has shown is that when there is an acute crisis, we can suspend life as usual and change a lot of things dramatically. 

The easiest adaptations for people to make are the ones where people basically perceive no loss of utility. No one consumes energy for the sake of it; you consume energy for the benefits. If you can provide consumers with energy in a lower carbon way - that's ideal. As a consumer, I might not care where the electricity comes from at all. But if you could offer me that as zero carbon, that's much better. If the change is no hassle, you don't even have to convince consumers it is the right thing to do. 

The real problem comes where you have situations where a different and optimal arrangement seems to exist somewhere else - over there. But you need to get from one spot to another. 

Take cycling for example. If everyone cycled or walked, with just the odd electric or hydrogen-fuelled vehicle, that would be a great environment for cycling and walking. For now, we still have lots of cars with conventional engines, so there is poor air quality, congestion and the roads do not feel safe. So, many potential cyclists don’t get on their bikes, even though they would use them if most other people did. It's a classic problem of the difficult path to a desirable end state.

To get people to change, you need a catalyst

Where you have these long-running issues, you need to think about how you will get consumers over the line. Will you have to force them? Will you use regulation? Will you incentivise? What is the toolset you must work with? People have limited bandwidth for change; the best indicator of what I do tomorrow is what I did today and what I did yesterday. To get people to change, you need a catalyst. This is the bit that is missing from standard economics. 

You have been deeply embedded in government during your career. From where you are now, and what you can see, do you believe we are likely to reach net zero?

It depends on several factors. Technology is one of them. The fact China has set itself a 2060 target for net zero will really change the pace of innovation. I think we will see some quite dramatic changes. But it is fair to say we probably won’t get there if the government simply assumes a massive technological unicorn will appear.

Then there is the policy environment. At the last election there was quite a bit of policy competition about climate change, which was about whether 2050 was too late. We haven’t seen that in earlier elections and that is a positive sign. The outcome of the US election (which we don’t know yet) will be important too.

Has government worked hard enough to communicate the benefits of net zero to the public?

This is important, because many of the changes imply something better. For instance, it is probably better not to be trucking oil all around the world. You can have oil spills and the geopolitics are complicated. Having a domestically oriented energy supply with minimum transmission losses is good. 

We need politicians to perceive that being proactive on climate is a big political positive

The interesting part comes when public opinion shifts to a point where politicians believe they need to be seen to be acting effectively, and the public will judge them harshly if they do not. I am not sure we are there quite yet, but that is where you want the politicians to be. Rather than doing things by stealth, they will perceive that being proactive on climate is a big political positive.

If you were to make three key recommendations for government to ensure we hit net zero on target, what would they be?

The Prime Minister needs to say it is a priority and to task a senior member of the cabinet or Treasury to get the ducks in a row. Secondly, we need a detailed plan to be published by 2021, developed in partnership with those people who will have to deliver it, with the understanding the plan will evolve as the situation changes. The government needs to ensure its spending review aligns, and that policy instruments are coherent. It cannot just say it is a net zero government; it needs to show it. Thirdly, there needs to be much more levelling with the public about the different choices and trade-offs involved.

Want more content like this?

Sign up to receive our AIQ thought leadership content.

Please enable javascript in your browser in order to see this content.

I acknowledge that I qualify as a professional client or institutional/qualified investor. By submitting these details, I confirm that I would like to receive thought leadership email updates from Aviva Investors, in addition to any other email subscription I may have with Aviva Investors. You can unsubscribe or tailor your email preferences at any time.

For more information, please visit our privacy notice.

Important information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (AIGSL). Unless stated otherwise any views and opinions are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Information contained herein has been obtained from sources believed to be reliable but has not been independently verified by Aviva Investors and is not guaranteed to be accurate. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. Nothing in this material, including any references to specific securities, assets classes and financial markets is intended to or should be construed as advice or recommendations of any nature. This material is not a recommendation to sell or purchase any investment.

In Europe this document is issued by Aviva Investors Luxembourg S.A. Registered Office: 2 rue du Fort Bourbon, 1st Floor, 1249 Luxembourg. Supervised by Commission de Surveillance du Secteur Financier. An Aviva company. In the UK Issued by Aviva Investors Global Services Limited. Registered in England No. 1151805. Registered Office: St Helens, 1 Undershaft, London EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119178. In France, Aviva Investors France is a portfolio management company approved by the French Authority “Autorité des Marchés Financiers”, under n° GP 97-114, a limited liability company with Board of Directors and Supervisory Board, having a share capital of 17 793 700 euros, whose registered office is located at 14 rue Roquépine, 75008 Paris and registered in the Paris Company Register under n° 335 133 229. In Switzerland, this document is issued by Aviva Investors Schweiz GmbH.

In Singapore, this material is being circulated by way of an arrangement with Aviva Investors Asia Pte. Limited (AIAPL) for distribution to institutional investors only. Please note that AIAPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIAPL in respect of any matters arising from, or in connection with, this material. AIAPL, a company incorporated under the laws of Singapore with registration number 200813519W, holds a valid Capital Markets Services Licence to carry out fund management activities issued under the Securities and Futures Act (Singapore Statute Cap. 289) and Asian Exempt Financial Adviser for the purposes of the Financial Advisers Act (Singapore Statute Cap.110). Registered Office: 1Raffles Quay, #27-13 South Tower, Singapore 048583. In Australia, this material is being circulated by way of an arrangement with Aviva Investors Pacific Pty Ltd (AIPPL) for distribution to wholesale investors only. Please note that AIPPL does not provide any independent research or analysis in the substance or preparation of this material. Recipients of this material are to contact AIPPL in respect of any matters arising from, or in connection with, this material. AIPPL, a company incorporated under the laws of Australia with Australian Business No. 87 153 200 278 and Australian Company No. 153 200 278, holds an Australian Financial Services License (AFSL 411458) issued by the Australian Securities and Investments Commission. Business Address: Level 30, Collins Place, 35 Collins Street, Melbourne, Vic 3000, Australia.

The name “Aviva Investors” as used in this material refers to the global organization of affiliated asset management businesses operating under the Aviva Investors name. Each Aviva investors’ affiliate is a subsidiary of Aviva plc, a publicly- traded multi-national financial services company headquartered in the United Kingdom. Aviva Investors Canada, Inc. (“AIC”) is located in Toronto and is registered with the Ontario Securities Commission (“OSC”) as a Portfolio Manager, an Exempt Market Dealer, and a Commodity Trading Manager. Aviva Investors Americas LLC is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aviva Investors Americas is also a commodity trading advisor (“CTA”) registered with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). AIA’s Form ADV Part 2A, which provides background information about the firm and its business practices, is available upon written request to: Compliance Department, 225 West Wacker Drive, Suite 2250, Chicago, IL 60606.

Related views