UK: The energy of earth, wind and fire and the green agenda. The new industrial revolution?
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Globally, notable incidents of extreme weather events causing destruction and death dominated the news. The increasing frequency of these erratic climate events has undoubtedly raised awareness of global warming and, politically, of the need for states to move faster towards green energies and reducing carbon emissions. Global warming is an inescapable problem that affects us all and has forced governments to elevate this problem to the top of the agenda, filtering down to economic policies that will affect most industrial sectors.
On October 31, 2021, representatives from over 200 countries will travel to the Scottish city of Glasgow for the United Nations Climate Change Conference; the 26the Conference of the Parties (COP26). During this world climate summit, world leaders are expected to talk about everything related to climate change. Commitments have already been made to vigorously combat global warming and reduce carbon emissions. Energy should therefore be high on the agenda.
The COPs have existed for almost 30 years, the most historic summit having taken place in Paris in 2015 (COP21). There, and for the first time, 196 countries adopted a binding international climate treaty known as the Paris Agreement. The main objective of the Paris Agreement was to limit global warming to 1.5 degrees Celsius in order to reduce the impacts of climate change. This reduction must be achieved primarily by reducing greenhouse gas emissions with the goal of reaching net zero by mid-century. The States signatories to the Paris Agreement “undertake and communicate ambitious efforts … in order to achieve the objective “ of the Agreement. [Article 3]. It is therefore not enough for the signatory states to content themselves with saying lip service to the issue of climate change and greenhouse gas emissions. Each state must show positive and tangible action and its commitment and compliance with the Paris Agreement will be measured against it.
It is in this context that COP26 is so important. Now is the time for the five-year review. Signatory states will update their respective emission reduction plans and decisive plans will have to be developed to achieve the reduction in global warming envisioned by the Paris Agreement.
We hope that players in the energy sector will follow the discussions closely. A commitment to reduce greenhouse gas emissions will inevitably have a significant impact on how energy is produced and used in the future. In order to achieve net zero, COP26 has already identified that countries will need to accelerate the phase-out of coal and the switch to electric vehicles and encourage investment in renewable energy. There is not only an expectation of states to do more, but also a legally binding obligation.
In terms of renewable energy projects, developed countries are (as expected by the Paris Agreement) more advanced than emerging countries, but many commentators say they are not far enough. Global consulting firm HKA shared with us their CRUX 2020 data which includes analysis of claims and disputes in the energy sector. Although HKA research focuses only on energy projects for which there is a known claim or dispute, it does provide a useful indication of the lay of the land. For example, in the United Kingdom, 28% of the energy projects in dispute relate to renewable energies, this figure falling to 20% for the United States. In the Caribbean and Latin America region, only 10.5% of disputed energy projects relate to renewables, and in the Middle East this figure drops significantly to 2%. The message is therefore clear. Countries around the world need to dramatically reduce their greenhouse gas emissions, and switching to renewable energy sources is likely to become an even higher priority. For many, however, it will require a change of mind and, most importantly, significant funding flows to get new projects started.
The green agenda will have an impact on almost all industrial sectors. Infrastructure projects are subject to further scrutiny for their effects on carbon emissions, especially roads and airports. We have already seen legal challenges in the UK regarding road projects, the HS2 high speed train project and the expansion of Heathrow Airport. Residential projects are also seeing more and more conditions imposed by planners to obtain more energy efficient buildings. Combination heating (for multi-unit buildings), air source heat, floor heat source and solar panels with battery storage are increasingly common on new construction projects. Off-site manufacturing may experience a resurgence given better energy efficiencies and cost and construction savings. The materials used in the construction industry, their source of supply, their carbon footprint and their durability are now relevant considerations. Smart buildings and sophisticated controls are being promoted as the way forward. Tenders and project bids will increasingly be required to show green credentials, especially with state-funded projects.
Given its role as president of COP26, the UK may well find itself in the spotlight with its plans to tackle energy efficiency and climate change under international scrutiny. The UK Department for Business, Energy and Industrial Strategy reports encouraging statistics for Q1 2021.1 Renewable energy production has been reported to “marginally “ exceed the production of fossil fuels. Sadly, in the UK we have to accept that we are largely in the hands of the unpredictable climate. There are also big projects in the works, as indicated in the “Ten point plan for a green industrial revolution ” 2 in November 2020. As might be expected, the focus is on renewable energies with 3 of the 10 points concerned with renewable energies:
- Advancing offshore wind
- Stimulate the growth of low carbon hydrogen
- Providing new and advanced nuclear energy
Over the past decade, we have witnessed a dramatic change in the field of energy. Clean and renewable energy has gained international importance and countries around the world are committed to doing better. COP26 is likely to increase the pressure, but it remains to be seen to what extent countries will set in motion positive change.
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