UK businesses want a consistent net zero policy – not a laissez-faire approach

09 May 2024 - The Energy Security and Net Zero Secretary's mixed messaging around net zero last week could bruise investor confidence in the green economy, writes Beverley Cornaby, Director of the UK Corporate Leaders Group.

First published in BusinessGreen on 03 May 2024

Conferences are usually quiet, predictable, affairs where you go to connect with like-minded individuals and learn from each other. This week's Innovation Zero event, pitched as the UK's largest net zero congress, didn't quite end up like that. 

With the Secretary of State for Energy Security and Net Zero, Claire Coutinho (once described as ‘quietly ruthless') headlining, crowds assembled in their droves. But when she finally came on stage for her address, it was hard to hear above the noise, due to climate protesters speaking over her. Both Coutinho and Conservative MP Liam Fox were challenged by campaigners hidden in the audience who called for a stop to the Rosebank oil and gas field licensing in the North Sea and claimed the government was "pushing us into an unliveable future". 

Despite the disruption, the Energy Secretary's speech is still what made the headlines, as she seemed to suggest that net zero was bad for business.  

First, she called for more innovation and continued investment in clean tech. She praised the progress already made in areas where the UK has often taken the lead, including the government-led Contracts for Difference scheme and the Green Industries Growth Accelerator. Both of these initiatives have helped drive the markets towards low carbon solutions - which has helped the UK to reduce its emissions. 

But she also said the UK risked going down a path where the "net zero leviathan of central planning crushes our brilliant enterprise economy".  

You could say the Energy Secretary was following in Rishi Sunak's footsteps after his speech last Autumn, which pointed to the need for ‘sensible green leadership'. Specifically, he spoke about how using rhetorical language in climate policy decisions undermines the climate action itself.

Often in green politics, the content of the speech is good, but the way it is portrayed is aimed at headline-grabbing, meaning it can come across as anti-net zero. In this case, the politics of Coutinho's decision was clear and sets out a dividing line with Labour. But the language used appealed to those who are not as supportive of net zero as this government actually is. This could be a fatal mistake. 

The inference of what Claire Coutinho said is that net zero is a bad idea, leading to over-regulation and therefore conflicting with business interests. The logic being that we should give up on implementing new net zero policies, and peel back those that already exist, as they are stifling innovation. If this is what she is implying, it would be in keeping with the recent government approach of rolling back key green policies, for instance heat pumps or the ban on new petrol and diesel cars. 

The irony is, businesses are not calling for no new net zero policies or an over-regulated approach, all they want is the right policies in the right place to unlock investment and sustainable innovation.  

The right policies will lead to new regulation, without a doubt. However, it will also mean removing existing blockers to progress. Evidence already exists for how current policies can stifle investment and innovation. For example, current regulation of the water sector can lock in a reliance on concrete and chemical solutions to water management rather than climate positive, nature-based ones. 

The Energy Secretary also warned that the net zero path requires some uncertainty. Here, I think she conflates two types of uncertainty – the first around government policy and the second around market demand. I'm not sure anyone is asking the state to stipulate what the market for green goods and services will be, which seems a caricature of what businesses are calling for. Instead, businesses want certainty from government about policy objectives and the interim targets along the UK's net zero journey. This level of confidence would help provide some stability in an inherently uncertain environment. 

It is not just us. Countries all over the world don't know if they can reduce emissions fast enough to prevent the worst climate impacts that risk majorly disrupting and stifling business. Just look at the severe flooding that hit Dubai last week and how a city that is not adapted to extreme rain ground to a halt - with major impacts on infrastructure and people's lives. Businesses are desperate to avoid this kind of disruption. They are keen to build climate resilience and invest in adaptation, to protect themselves and their consumers. 

So far, we have seen policy help to unlock some progress on net zero, for example the renewable energy roll-out. Governments have shown they can set targets, support new technologies and ensure supportive policy on issues like skill-building and more green jobs. This does not mean picking winners or "central planning" but identifying which sectors of the economy will help the UK reach its climate goals and are areas of competitive advantage within the economy.  

This is nothing new. When it hosted the COP26 Climate Summit, the UK government was clear which path they thought businesses should follow. They proactively encouraged corporates to sign on to the UN-backed Race to Zero campaign, setting net zero targets and creating clear transition plans that would help them get there. Last year's Net Zero Growth Plan continued the journey, recognising the economic opportunities from net zero and government's role in securing these. 

However, the recent reversals in policy have muddied the path businesses should follow.  But a clear, consistent policy framework supported by an overarching vision would provide a more secure path for business to follow.  

While innovation and the market have a vital role to play in solving the climate crisis, the government has its own pivotal part to play. Claire Coutinho was right to say the government cannot outspend the private sector, but nor can it take a completely laissez-faire approach. Solutions require policy enablers and government coordination. Climate change is too urgent a challenge for this – it can never be just the state or just the market.