In a recent speech for the think tank Onward, the Chief Executive of the Climate Change Committee, Chris Stark, admitted that heat pumps are not yet ready for mass market. This will not be a surprise to anyone who has considered switching given heat pumps currently cost six times as much as gas boilers and are less effective at heating our homes. But it does point to a crucial question at the heart of net zero – how to ensure that the technology we need to decarbonise is good enough, and cost-effective enough, to meet the scale of the challenge.
This makes net zero essentially an innovation challenge as much as a political or economic challenge. Given the fact that net zero has been the law of the land for two years now, you would hope the highest emitting industries are throwing significant amounts of capital at new technologies to deliver against legislative commitments and to service consumer demand. Yet the reality is very different.
Two of the UK’s most carbon intensive industries, Land Transport and Construction, spend just 0.01 per cent and 0.09 per cent of turnover on research and development respectively. This has material effects on their ability to reduce emissions. The three carbon-intensive industries with the lowest R&D intensity – Transport, Construction and Agriculture – have decarbonised less than any other since 2010, apart from aviation.
The same is true if you consider climate-related patenting, a reasonable proxy for the level of innovation taking place. Between 2012 and 2016, Germany and China filed 246 per cent and 114 per cent more patents in environmentally-related technologies, respectively, than the UK. Where most G7 countries have increased the numbers of climate-related patents they file each year, the UK has seen climate-related patenting stagnate.
These stories are familiar in the UK. We have for some time suffered from chronic underinvestment in innovation, with a poor historical record at commercialising research. The good news is this is due to change. The Government has set a clear target to increase total R&D spending to 2.4 per cent of GDP by 2027, although delivering on that ambition will be no small task in its own right.
The question is how to make sure that this uplift, which will include billions in additional taxpayer funding as well as private cash, is harnessed effectively, and directed at the sectors and places which are in need of investment. To meet net zero, the Government should be working to ensure that a significant portion of this increase is directed towards green technologies by incentivising good practice, removing barriers and increasing clarity around future net zero plans.
One way to achieve this would be by creating a gold standard for carbon offsetting, whereby organisations’ carbon footprints are closely monitored with financial penalties for those who do not comply with the approved standard, enforced by a new regulator. This would financially incentivise organisations, in industries such as construction or agriculture, to invest in solutions to reduce their emissions.
Alongside creating the incentives for business to invest in R&D, ministers should also consider getting their own hands dirty – by creating a new institution focused on innovating and strengthening our energy network, akin to the Faraday Institute, the Culham Centre or the US’s national energy labs. This should specifically be focused on approaching high-risk technologies which are less likely to receive financial backing in the private sector, but which could be transformational if successful.
The current trajectory of emissions is not decreasing at a quick enough rate to reach net zero by 2050. A lot of emphasis is directed towards what the individual can do to help – eat less red meat, cycle to work, offset one’s flights abroad – but the reality is none of these actions get close to the scale of change that is needed without significant changes in the underlying technologies which drive our economies. Net zero cannot be about cutting things back, it must be about spurring innovation on.
The news this week has been more focused on getting drivers on the roads and pork on our tables. But as the gas crisis shows, the UK cannot afford to sit on its laurels and wait for change to happen organically. If we want to create resilience in our energy system, we need everyone – existing firms, new entrants and citizens – to be incentivised towards innovation.
Francesca Fraser is a researcher at Onward, a UK-based think tank producing research on economic and social issues.