The UK remains among the leaders of the global net zero transition, but it faces significant barriers if it is to deliver on the next wave of decarbonisation goals over the coming decades.
That is the conclusion of the latest Net Zero Readiness Report from consultancy giant KPMG, released today, which highlights how “net zero is weaving itself into the world’s economic systems” even if challenges remain in decarbonising buildings, industry, and other carbon intensive sectors.
The report reiterates how the UK has cut its absolute carbon emissions by 37 per cent since 2005 while cutting carbon intensity by 49 per cent.
In contrast, Germany has cut absolute emissions by 20 per cent over the same period, while France has cut emissions by 21 per cent and the US has reduced emissions by 15 per cent.
Large emerging economies have continued to see emissions rise since 2005, with China’s emissions soaring 86 per cent and India’s climbing 79 per cent. However, the carbon intensity of both economies has been slashed, falling 50 per cent in China and 34 per cent in India, and providing further evidence that economic growth and emissions growth has decoupled.
The report further reinforces the UK government’s claims that the UK has decarbonised faster than any other major economy in recent decades.
However, it also warns that decarbonisation rates have slowed in recent years following the phasing down of coal power generation over the past decade. A recent analysis showed that since the signing of the Paris Agreement in 2015, Germany has delivered the steepest emissions cuts among G20 nations, pushing the UK from the top spot.
“The UK, despite almost halving greenhouse gas (GHG) emissions since 1990, still faces an uphill battle to reduce emissions on transport, buildings, and industry,” the KPMG report stated. “Collectively these three sectors made up 60 per cent of all greenhouse gas emissions in 2022 yet have seen less progress than in the power sector.”
The report highlights the challenge in decarbonising heating as evidence of how the UK is currently off to meet its target of installing 600,000 heat pumps a year by 2028. “The actual installation figure is around one ninth of this target and lagging some of its European neighbours,” KPMG said. “Similarly, while electric vehicle adoption has been strong with 23 per cent of cars sold in 2022 being electric, progress on aviation and shipping is nowhere near the same level.”
“In many ways the UK has been a leader in net zero policies, with a strong track record on the adoption of renewables, significant progress in reducing dependency on coal, and high reporting standards for business,” said Simon Virley, vice chair and head of energy and natural resources at KPMG in the UK. “But past achievements are no guarantee of future success, and we are seeing many other nations catch up on the technology and policies needed, creating greater competition for green investment.”
Echoing myriad calls from business leaders in recent months, Virley called on policymakers and investors to redouble efforts to accelerate the net zero transition. “Getting to net zero can deliver warmer homes, lower bills, and a cleaner environment,” he said. “It will require a huge effort. But it also provides great opportunities for jobs and investment, which we will miss out on if we pull back now.”
The report analyses net zero policies and trends in 24 leading economies, concluding that while several leading economies have strengthened their net zero goals and are “weaving net zero” into their policy frameworks concerns over upfront clean tech costs and infrastructure impacts risk fuelling a “backlash” against some decarbonisation policies.
“Despite incremental momentum and specific successes such as the scaling up of low-carbon energy production from some of the world’s largest emitters, including the US, China, Brazil, Canada and the EU, progress is constrained by a backlash over the cost of decarbonisation and conflict over its domestic impact,” KPMG said. “In certain markets and sectors, the impact of low carbon projects on local wildlife, biodiversity and communities is triggering a rise in ‘green on green’ conflicts, causing clashes between renewable projects and the local environment. On an individual country level, meaningful progress is hindered by opposition to measures that are perceived to have a considerable cost to people’s livelihoods.”
However, the report also highlighted how surging renewables deployment and booming demand for EVs is demonstrating how clean tech adoption curves can rapidly accelerate as costs fall.
Mike Hayes, climate change and decarbonisation leader and global head of renewable energy at KPMG International, urged policymakers and investors to redouble their decarbonisation efforts in the face of political and economic challenges.
“Governments, businesses, and society should continue to pursue action to address climate change,” he said. “Further divisions between local communities and global interests are to be expected, but if we are to truly make meaningful strides towards net zero, at the necessary pace, while ensuring a stable energy supply, much greater focus is required. This includes in areas such as the policy environment (both carrot and stick), technical innovation, and educating society about the transformational changes that are required in our consumption and investment behaviours.”
The report came in the same week as a new analysis from trade body the REA, which similarly highlighted how further policy interventions are required to ensure the UK’s clean energy transition does not stall.
The REA’s Energy Transition Readiness Index (ETRI) 2023 asserts that while the UK has set ambitious decarbonisation goals backed by regulatory efforts to reach net zero, current policy priorities are too focused on short-term political imperatives, which is in turn increasing investment uncertainty.
In order to better attract much-needed investment to drive the net zero transition, it calls for clearer governance and regulatory stability in the UK, warning that at present “the signals are simply not strong enough”.
The Index assesses and compares the electricity markets in 14 European countries, and finds that the UK has risen slightly in the overall rankings compared to last year’s report, and now sits above the likes of Germany, Italy and Switzerland.
However, it warns the UK is still lagging behind many other nations that have stronger energy flexibility markets that “deliver fair, transparent and simple access”, highlighting the importance of flexibility for stabilising electricity grids largely powered by intermittent, diversified renewables.
It therefore calls for the UK to better identify future low carbon assets, prioritise and accelerate flexibility market reforms, and urgently address technology and process barriers.
Frank Gordon, director of policy at the REA – the Association for Renewable Energy and Clean Technology – said that with ambitious clean energy targets for 2030 and beyond, it was imperative that such aims are swiftly accompanied by comparable growth in grid flexibility capability.
He therefore urged the government to “shift away from prioritising the short term, if we are to meet these targets and increase investment certainty”, as he bemoaned the recent green policy rollbacks for dampening “public and political confidence regarding the energy transition”.
“Significant action from the government to remove the barriers facing our industry is essential: proper long-term planning; prioritising and accelerating market reforms; and urgently addressing current investment barriers – all are desperately needed to help put the UK on the right path,” he explained.
“The REA continues to urge all political parties to pull the levers to accelerate the UK’s energy transition readiness. With the right policy and regulatory environment, the government can ensure that we do not fall behind.”
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