UK climate change policy

A critique of the climate policy in the Labour Party’s 2024 manifesto lists a range of positive aims, but also points to the absence of some “essential policies that must be pushed forwards in the next parliament” (Big Issue, 2024). Among the positive aims are expanding nature-rich habitats “as part of moving to a circular economy”, ending pollution of our rivers and seas through a range of sanctions on failing water firms, and reclaiming the UK’s “global climate and nature leadership role via an international Clean Power Alliance”. Fracking would be banned, there would be a new windfall tax on oil and gas companies, and a just transition to a clean energy future. Notably absent are any announcements to “revoke existing oil and gas licences, like Rosebank, and to end outrageous fossil fuel subsidies”. While FTSE 100 companies will be required to “implement transition plans that align with the Paris Agreement” there appears to be no obligation on the government to have a “credible 1.5°C plan”. While Labour “plans to deliver the Conservatives’ Environment Act targets” this 2021 Act is itself seen as inadequate: among other defects, it “doesn’t deal with the damage that the UK causes through our global ecological footprint”. A target of reversing environmental decline by 2030 would “show true leadership” and align national law with the UK’s international commitments.  The content of the Big Issue article will not be debated here, but some of its topics will be examined to provide context. These are the circular economy; UK oil and gas licences; the international Clean Power Alliance; windfall tax; fossil fuel subsidies; the obligations of FTSE 100 companies; global ecological footprint; and the UK Environment Act 2021.

Zoë Colosimo describes how the new Labour Government can support a circular economy in Circular Online, a “news and insights resource for sustainability professionals working in resources and waste” (Circular, 2024). The actions recommended include the integration of resource and waste policies into the agendas of government departments and changing individual and corporate attitudes to waste. The UK Environment Secretary is quoted as saying that achieving zero waste by 2050 could add a “£70 billion boost to the economy”. Colosimo is interested in directing resources to the millions of UK households in need of essentials and recommends reform of VAT rules on the donation of products, creation of multi-banks, the integration of food, baby, hygiene, furniture and clothes banks into single locations, and revision of the rules governing the distribution of surplus food. On a broader perspective, a circular economy has been described as one in which “things are made and consumed in a way that minimizes our use of the world’s resources, cuts waste and reduces carbon emissions. Products are kept in use for as long as possible, through repairing, recycling and redesign – so they can be used again and again” and at the end of a product’s life “the materials used to make it are kept in the economy and reused wherever possible” (WEF, 2023). This stands in contrast to the linear economy “sometimes referred to as the take-make-waste economy … a system where resources are extracted to make products that eventually end up as waste and are thrown away” (Ellen MacArthur, 2023).

A 2022 article on UK oil and gas licences provides a background to present concerns (Carbon Brief, 2022). While the UK had “made history in November 2021 by helping to secure the first mention of the need to tackle fossil fuels in a global climate agreement” (COP 26) by early 2022, unlike Denmark, Ireland and France, it had “not ruled out issuing new licences for offshore oil and gas exploration.” The government’s view was that new licensing rounds could take place so long as any new production was “in line with the country’s goal of reaching net-zero emissions by 2050.” It was argued that the (declining) demand for oil and gas in the years before 2050 would be better met by domestic production than by imports. Carbon Brief cites the counter argument that “there is no space for any new fossil fuel production, if the world is to meet its aspiration of limiting global warming to 1.5C above pre-industrial levels.”

“The plan to create a ‘Clean Power Alliance’ was one of the boldest commitments in the Labour manifesto” according to Camilleri and Roberts (2024). They refer to the alliance as a “reverse OPEC” in which members collaborate “to keep energy prices low, much as OPEC countries conspire to keep oil prices high.” The plan forms a key policy in Britain Reconnected which describes “A clean power alliance of developed and developing nations committed to 100 per cent clean power by 2030, a push to make climate action the fourth pillar of the UN and a new law against ecocide to help tackle the climate crisis” (Lammy, 2023). Camilleri and Roberts comment that only a small number of nations have committed to the 2030 target, and there is a risk that “to the rest of the world, such an alliance would look remote and out of touch”. They argue for a Clean Power Alliance of all countries, pointing out that “the UK already sits at the heart of several diplomatic alliances dedicated to catalysing the global energy transition” and citing the Powering Past Coal Alliance, Energy Transition Council, and Clean Energy Transition Partnership. They see the potential for the CPA to co-ordinate non-UK-led alliances such as the Global Offshore Wind Alliance, Accelerated Partnership for Renewables in Africa, and International Solar Alliance by acting as “a high-profile ‘umbrella’ platform for these groups.”

The windfall tax on oil and gas companies, otherwise known as the Energy Profits Levy (EPL) was announced in 2022 as “a new, temporary 25% levy on ring fence profits of oil and gas companies” It was later increased to 35% in response to “exceptionally high prices” that meant oil and gas companies were “benefiting from extraordinary profits” due to circumstances including “resurgent demand for energy post COVID-19 and the invasion of Ukraine by Russia” (EPL, 2022). EPL was intended to help fund a “package of targeted measures to help support households with the rising cost of living.”

According to an article in Ethical Consumer (2022), the UK’s tax regime at that time made it “the most profitable country in the world to develop big offshore oil and gas projects.” The author claimed that from 2016 to 2020 “companies received £9.9 billion in tax relief for new exploration and production, including £15 million of direct grants for exploration, and £3.7 billion in payments towards decommissioning costs” and that during a 2021 legal case which claimed that the UK government’s approach to offshore oil and gas was unlawful, it conceded that “oil and gas companies may make more from subsidies than they pay in tax.” The article goes on to develop the case against subsidies in some detail.

Some reasons why fossils fuels are subsidised are discussed in The Conversation, 2024. Explicit fossil fuel subsidies are distinguished from implicit subsidies; the former are “direct financial incentives such as tax breaks, direct payments, grants and price controls” while the latter exist because most “fossil fuel companies don’t have to pay a cent for the pollution their products cause” and this amounts to an indirect subsidy. Governments give fossil fuel companies money for many reasons, and the most important is that “wealthy countries have historically needed huge volumes of fossil fuels for manufacturing, transport and power.” Much easily accessible oil has already been extracted, many “countries want to shore up domestic sources of fossil fuels to boost energy security” and the advent of new energy sources has made it harder for some fossil fuel companies to remain profitable. An example of the use of subsidies is provided by the US where novel “approaches to extracting fossil gas and oil – boosted by major tax incentives” turned it from a “major importer of oil and gas into a net exporter.” Attempts to remove existing subsidies can be seen as threatening economic growth and stability. A 2023 report on fossil fuel subsidies claims that they “have increased rapidly in recent years as governments continue to set fuel prices at levels that do not reflect supply costs and the environmental damage from consumption” (fDi, 2023). The subsidies provided by a range of countries are compared; in absolute terms China was the highest provider, with Qatar leading on a per capita basis. In 2022 China spent over $ 2235 bn on total fuel subsidies, representing 12.46% of its GDP; the corresponding figures for the US were just over $ 757 bn representing 3.24% of its GDP; and for the UK just under $ 74 bn, representing 2.31% of its GDP.  Total fuel subsidies worldwide in 2022 according to an IMF report amounted to about $7tn, equivalent to 7.1% of global GDP, up by about 18.3% from the previous year.

Shortly before the 2024 UK general election, the international law firm Pinsent Masons predicted that if Labour were voted into government the “100 largest UK public companies and all UK-regulated financial services firms would be obliged to prepare and disclose credible transition plans that align with the 1.5C goal of the Paris Agreement” (Pinsent Masons, 2024). Banks, asset managers, pension funds and insurers would be subject to the obligations, making the UK the “green finance capital of the world”. A sustainable finance expert with the firm said that among the international community focused on addressing climate change “there is now broad consensus that the 1.5°C target will be missed” and “efforts are now focused on restricting temperature rises to no more than 2°C”. In that context the effect of more stringent UK targets would “involve a serious trade-off between environmental and social objectives”.

Ecological footprint is described by the Global Footprint Network as “a metric of human demand on ecosystems, or more precisely on the planet’s biocapacity” (GFN, 2024). Biocapacity “stands for the regenerative capacity of our planet’s ecosystems” and its metric “tracks ecosystem’s inherent ability to renew biomass” and “the size of human economies compared to the renewal capacity of the entire planet or any of its regions.” Calculations can involve world population and the biologically productive area on Earth, and in overall terms can result in statements such as “Humans use as much ecological resources as if we lived on 1.7 Earths”. Ecological footprint accounting can also be applied at regional, city and company scales.

The need for and scope of the UK Environment Act 2021 are discussed by ClientEarth, 2022: “Once the UK left the EU, rules on nature protection, water quality, clean air and other environmental protections that originally came from Brussels were at risk.” The Act was intended to fill the gap. “It provides the Government with powers to set new binding targets, including for air quality, water, biodiversity, and waste reduction. These should be ambitious, meaningful and informed by experts.” The article claims that the Act nevertheless falls short of the ambition behind it “particularly around provisions for environmental governance, forest protection, and clean air.” The Act itself can be seen at Legislation.gov.uk, 2021.

References

 

Big Issue, 2024, Labour's plan for the climate and nature: The good, the bad and the glaringly absent, D. Palmer, N. Miles and T. Tsui, 14 Jun 2024, online, accessed 27 August 2024

https://www.bigissue.com/news/environment/labour-manifesto-climate-change-nature-environment-can-bill/

Camilleri, H, and Roberts, L., 2024, Building a Clean Power Alliance, E3G, online, accessed 4 September 2024

https://www.e3g.org/news/building-a-clean-power-alliance/

Carbon Brief, 2022, Factcheck: Can new UK oil and gas licences ever be ‘climate compatible’? Carbon Brief Oil and Gas, online, accessed 2 September 2024

https://www.carbonbrief.org/factcheck-can-new-uk-oil-and-gas-licences-ever-be-climate-compatible/

Circular, 2024, How the Labour Government can support a circular economy, 24 August 2024, online, accessed 2 September 2024

https://www.circularonline.co.uk/opinions/how-the-labour-government-can-support-a-circular-economy/

ClientEarth, 2022, The UK Environment Act - what's happening now? ClientEarth, April 2022, online, accessed 2 September 2024

https://www.clientearth.org/latest/news/why-the-uk-environment-bill-matters/

Ellen MacArthur, 2023, What is the linear economy? Ellen MacArthur Foundation, online, accessed 2 September 2024

https://www.ellenmacarthurfoundation.org/what-is-the-linear-economy

EPL, 2022, Energy (Oil and Gas) Profits Levy, HM Revenue and Customs, online, accessed 4 September 2024

https://www.gov.uk/government/publications/changes-to-the-energy-oil-and-gas-profits-levy/energy-oil-and-gas-profits-levy

Ethical Consumer, 2022, Paid to pollute: fossil fuel subsidies in the UK and what you need to know, Ethical Consumer, online, accessed 4 September 2024

https://www.ethicalconsumer.org/energy/paid-pollute-fossil-fuel-subsidies-uk-what-you-need-know

fDi, 2023, Countries with the highest fossil fuel subsidies, Sept 2023, fDi Intelligence, online, accessed 5 September 2024

https://www.fdiintelligence.com/content/data-trends/countries-with-the-highest-fossil-fuel-subsidies-82965

GFN, 2024, What the Ecological Footprint measures, Global Footprint Network, online, accessed 7 September 2024

https://www.footprintnetwork.org/what-ecological-footprints-measure/

Lammy, D., 2023, Britain Reconnected, Fabian Society, online, accessed 4 September 2024

https://fabians.org.uk/wp-content/uploads/2023/03/David-Lammy-Britain-Reconnected-240323.pdf

Legislation.gov.uk, 2021, Environment Act 2021, online, accessed 7 September 2024

https://www.legislation.gov.uk/ukpga/2021/30/enacted

Pinsent Masons, 2024, Labour sets tough UK transition plan pledge, June 2024, Pinsent Masons, online, accessed 6 September 2024

https://www.pinsentmasons.com/out-law/news/labour-sets-tough-uk-transition-plan-pledge

The Conversation, 2024, For decades, governments have subsidised fossil fuels. But why? The Conversation, July, 2024, online, accessed 9 September 2024

https://theconversation.com/for-decades-governments-have-subsidised-fossil-fuels-but-why-213467

WEF, 2023, What is the circular economy, and why does it matter that it is shrinking? World Economic Forum, online, accessed 2 September 2024

https://www.weforum.org/agenda/2022/06/what-is-the-circular-economy/