Director-General Tony Danker: CBI Achieving Net Zero speech in full

Good morning and welcome to the CBI’s Achieving Net Zero Conference.

I want to thank our strategic partners, Bain & Company, Equinor and National Grid, alongside our corporate partners, CGI, Estēe Lauder Companies, Hitachi Energy and Mott MacDonald - whose support makes this conference possible.

Each company has a story to tell about striving for net zero – and the number of partners with better and better stories to tell grows every year.

Three years ago, I would have said that the pressure from outside our companies to reach net zero was creating a burning platform. Now it’s clear to me the pressure to go further comes from within. Making our companies net zero is no less a commercial imperative than making our companies more digital. Put simply, if your strategy isn’t fit for a net zero future, you will fail.

So, when we organised this Conference, I planned to talk confidently this morning about a united movement – business, government, civil society – and our progress on the road to COP 27… Straightforward!

A GLOBAL STORM

But now I’d like to talk about something else. Because something has got in the way of what we thought was a straight line from COP26 to COP27. I’d like to talk about the cost of living. About global energy markets. And about the prospective slowdown in our economy.

The war in Ukraine changed the game. Morally, economically, and geopolitically. And not the way some might think. It doesn’t hail the return of fossil fuels as anything other than a vital bridge – which of course it is.

Why?

Because it makes impossible the plans of the EU and others to rely on fossil fuels from Russia, while they transition

It makes the price of fossil fuels, such as coal, and gas which has tripled since 2019, unaffordable at the scale we’re using them.[1] [2]

This war has therefore made the switch to clean energy more urgent – to guarantee global security, national security and the security of every family in our country.

Inflation changes the game too. It’s at 9% and unlikely to fall fast soon. People are struggling. Some are at breaking point. Food’s gone up. Energy’s gone up and it’s going up again in the autumn.

BREAKING POINT

People feel powerless. Their lives at the mercy of global storms that they and even their own government have little ability to control.

While the Government’s recent support package will help ease some of the pressure, they’re clear it’s a temporary solution.

But we’re not returning to normal any time soon: energy prices are likely to be higher, for longer than we imagined; but reimagining the supply side to reduce our fossil fuel use further will take years not months.

This is a long-term crisis that needs a long-term solution, but people need a fix now.

And it’s driving something of a backlash against net zero, partly understandable in the circumstances. Yet coming most forcefully from long-time sceptics. Arguing net zero is a costly distraction. Better we stick with fossil fuels.

Currently, the public don’t quite agree. Despite all the challenges, the surveys show continued commitment to tackling climate change.[3] [4]

But let us not be complacent. I’ve heard from members about focus groups where families ask if decarbonisation can be put on hold for now.

Well, it can’t. Business and government must take this seriously. We must show decarbonisation is the solution, not the problem, or we’ll lose that support. We must show now how it delivers lower bills, better jobs, and brighter economic prospects.[5]

So, today I’d like to make that case. On two fronts.

DECARBONISE TO REDUCE PEOPLE’S BILLS

My first argument this morning is this: going green will cut people’s energy bills.

By giving people more power to use less energy and limit the impact of rising fossil fuels prices on their lives.

The Government’s Energy Security Strategy commits to fresh targets on the supply side. It gives backing to nuclear power and hydrogen and recognises the need to speed up the roll-out of renewables.

But what it fails to do in this crisis is say anything about the demand side. Now, I know that demand measures – like asking people to turn down their thermostat - goes against every libertarian instinct of the Prime Minister and others in his Cabinet.

But I think they’re wrong. Energy waste is like food waste. It has no justification. It is not good for anyone. And there are lots of ways to help people bring down their bills.

We need to start being serious about energy efficiency. Because to date, we haven’t been.

The UK has some of Europe’s oldest, leakiest buildings.[6] Data collected from smart thermostats across Europe showed that UK homes lose heat up to three-times faster than more energy-efficient homes in countries, such as Germany.[7]

It’s estimated that government cuts to climate policies over the last decade, including energy efficiency measures, have added around £2.5bn to the nation’s energy bills, costing households over £40 a year.[8]

We also know that the average energy performance rating for homes in England and Wales is D. And improving the energy efficiency of these homes and those rated below to a C could save households around £500, based on the April price cap increase.[9]

Businesses can save too. It’s estimated UK SMEs could reduce their energy bills by up to a quarter through installing LED lighting, smart tech and other measures.[10]

So, what are we waiting for?

To be on track to achieve our targets, the UK needs to invest around £5.2bn every year to 2035 in making homes more energy efficient. That amounts to a split of around £1.7bn of public investment per year and £3.5bn private from landlords and homeowners able to pay.[11]

That sounds expensive. But higher energy bills and resulting inflation just cost the Chancellor £22bn’s worth of support in the Spring; £15bn in May; and we haven’t reached October yet.[12] [13]

Do we want a new normal of energy efficiency or a new normal of billion-pound bailouts every quarter?

So now we need to throw our whole weight behind this. We must fulfil the commitments this Government made to close the investment gap in energy efficiency. Commitments in their manifesto, no less.

Let’s learn lessons from where previous policies like the Green Homes Grant have failed. And get a plan in place.

We can get started really fast.

The ECO scheme has outlasted others. It supports fuel poor households to save through energy efficiency measures. As such, it’s the fastest tool we have to get thousands more homes upgraded before the winter.

It works simply. Obligated energy suppliers help promote and fund the installation of energy efficiency measures for these households, such as loft or wall insulation, or heating solutions, working together with installers.[14]

But households and suppliers still await confirmation of its next phase, nearly two months since its end in March, when the energy price rises really began to hit. But this can be addressed today.

The Government has the opportunity right now to prioritise the legislation of the fourth ECO scheme before the summer recess.

And we can also go further in our view and of those in industry too. We’re asking the UK Government to commit an additional £1bn of support annually and create ECO+, to help more households get started on the journey.

Under ECO+, government funding could be matched by customer contributions – and made affordable through government working with banks and employers to develop green finance options that help spread the cost.

Innovations abound in heating and energy efficiency. From district heating networks where we badly trail the Europeans, to solar panels. And a broad range of smart technologies.

For example, the roll out of smart meters – which show in real time the amount and cost of the energy your home is using – has resulted in 86% of users saying they have changed how they do things around their homes.[15]

Similarly, the tech behind innovative heating controls like smart thermostats is evolving not only to allow us to manage our heating remotely via an app, but also to adapt temperature levels automatically based on usage.[16]

It’s time to get serious about energy demand. There’s nothing libertarian about asking people to wait decades for Government to fix supply. Let’s do something now to give people the power they need – literally – to manage the cost of living.

DECARBONISE TO KEEP GROWING

My second argument this morning is this: going green will bring the UK economy its first post Brexit boom and allow us to genuinely outcompete the rest of the world.

The UK prize on offer is already worth tens of billions of pounds and rising. Research from January estimated that $3.5tn of extra investment a year is needed to get the world to net zero by 2050, taking overall annual global investment in these areas to $9.2tn.

This includes $3.4tn a year on average for new low-emissions vehicles, $1.7tn a year to make our homes green and nearly $2tn a year of investment into power generation, distribution and storage systems.

That’s some big markets people!... and if we move quickly, we have the chance to win share.[17]

And if we do, that means green jobs across the country, helping local economies ─ not just the national bottom line ─ all the while strengthening our global competitiveness for decades to come.

We’re living through potentially the greatest reallocation of global capital in our history, with $130 trillion – 40% of global financial assets, and more to come – already committed to holding warming to below 1.5⁰.[18] Let me be blunt. That’s $130 trillion looking to go after the best green growth projects in the world. The UK needs to be hungry and ready to compete for the lion’s share of that investment.

As I’ve said before, it’s not woke it’s wealth.

And if you want to know how the war in Ukraine impacts this, again follow the money. Bloomberg reported that in one week alone in March this year, investors shifted almost $1bn into clean energy funds.[19]

The evidence mounts that companies that move early on sustainable opportunities like this achieve greater success.[20] They’re more profitable – cutting costs from decarbonising their operations and supply chains and generating faster sales growth as more and more consumers choose green. As a result, they can secure cheaper capital and perform better overall.[21] [22]

At a time when growth is stalling in the UK and across the world, and the UK government is looking for solutions that won’t overheat the economy or break the bank. More than ever green growth is the growth bet we need. We at the CBI have reviewed in detail the opportunities the UK has in a post Brexit, post Covid economy. The money is green; and today we have a competitive advantage. But that position is under rapid attack from our competitors. We dare not squander it.

Those on the right of our politics in my view make a short-sighted argument about the costs of transition. They fail to see these enormous prizes. They fail to see how the UK, in a post Brexit world, can become a trading powerhouse in the largest growing market on earth.

But the Prime Minister to his credit has stayed a believer. And I urge him not to tone down his ambitions, but to double down on his government’s actions.

THE TIME FOR ACTION IS NOW

Here’s how.

First, unblock delays.

Publish an accelerated planning and consenting regime for offshore wind projects, to cut delivery time in half. And reform the onshore wind planning regime that currently prevent projects from being approved if just a single person objects.

Second, now back the critical technologies we've agreed upon.

Use the upcoming Energy Bill to provide the business model support mechanisms for hydrogen and carbon capture and storage so that the first Contracts for Difference can be awarded in Q1 of 2023.

And deploy two more Carbon Capture clusters by 2030 – these are among the most exciting levelling up projects in our country’s history.

Third, unlock private capital.

With $130tn of capital on the table, government must use its balance sheet creatively. One possible solution is offering guarantees to attract and leverage the billions in private investment we need in green infrastructure in the coming years.

These three big moves amount to a package the Prime Minister and Energy Secretary can be proud of – and the Chancellor can be too – no new policy, no new big funding ask. All announced already. It's now about delivery.

BUSINESS STAY ON TRACK

What we set out today – on energy demand and supply side, will allow Government to stop acting like a pressure cooker - forever responding to events when they boil over.

But there’s work for us too – all of us businesses in this room.

First of all, help your customers and employees cope with current hardship. Providing advice alongside direct assistance or payment plans to ease the burden.

As for energy suppliers, take measures, such as the Vulnerability Commitment, using data from smart and prepayment meters to target and strengthen support for vulnerable customers and continue to help customers fit energy efficiency upgrades and tools like smart thermostats.[23]

To every firm, stay on track on your own net zero journeys….

If you’re well on your way to decarbonising your operations, products and services, build on your achievements. Increase your ambitions. And look to see how you can help your customers, supply chains and other firms beyond your sector get on too.

And if you’re committed but struggling to make progress, the CBI is here to help you out.

Today, we’re launching our new network of sustainability professionals – the CBI Sustainability Community. It’s open to every CBI member, targeting those in charge of their company’s transition to net zero.

We’re going to build a genuine community where you’ll be able to share insight and practice; as well as solve common challenges together, hear from recognised experts on business sustainability, and be mentored and mentor other professionals working in this field.

So, come join us.

CONCLUSION

Crises are temporary, but net zero is permanent.

The war in Ukraine has devastated a people. It has also smashed a paradigm that depended on concentrated pockets of energy- concentrated in the hands of those we can no longer depend upon.

It’s time to give UK families control. Give UK government a more stable footing. And give UK business the chance to innovate and delivery prosperity for us all.

That means…

Securing the affordability, security, and resilience of our energy

Easing the squeeze on people’s pockets

And creating the future jobs and sustainable growth our country needs.

So, this isn’t just a point on a line from COP26 to COP27.

This is a game changer.

Let’s be even more purposeful than before; and let’s use this conference to get started.

Thank you.

[1] https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/global-economics-intelligence-executive-summary-february-2022

[2] https://eciu.net/insights/2022/out-with-the-old-gas-crisis-blows-up-conventional-wisdom-about-household-bills

[3] https://yougov.co.uk/topics/politics/trackers/the-most-important-issues-facing-the-country

[4] https://www.ukonward.com/reports/taking-the-temperature/

[5] Ibid

[6] https://www.bre.co.uk/filelibrary/Briefing%20papers/92993_BRE_Poor-Housing_in_-Europe.pdf

[7] https://www.tado.com/t/en/uk-homes-losing-heat-up-to-three-times-faster-than-european-neighbours/

[8] https://www.carbonbrief.org/analysis-cutting-the-green-crap-has-added-2-5bn-to-uk-energy-bills/

[9] https://9tj4025ol53byww26jdkao0x-wpengine.netdna-ssl.com/wp-content/uploads/Responding-to-the-UK-gas-crisis-E3G-Briefing.pdf

[10] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/417410/DECC_advice_guide.pdf

[11] https://www.theeeig.co.uk/facts/

[12] https://www.gov.uk/government/publications/cost-of-living-support/cost-of-living-support-factsheet-26-may-2022

[13] https://ifs.org.uk/publications/16066

[14] https://www.ofgem.gov.uk/environmental-and-social-schemes/energy-company-obligation-eco/energy-company-obligation-eco-support-improving-your-home#:~:text=Under%20ECO%2C%20medium%20and%20larger,domestic%20energy%20market%20in%20Britain

[15] https://www.smartenergygb.org/smart-meter-benefits

[16] https://www.lifewire.com/nest-home-automation-products-4159765#:~:text=Google%20Nest%20Thermostat,-Nest.com&text=It%20can%20control%20your%20heating,down%2C%20ultimately%20saving%20you%20energy.

[17] https://www.mckinsey.com/business-functions/sustainability/our-insights/the-net-zero-transition-what-it-would-cost-what-it-could-bring

[18] https://www.gfanzero.com/press/amount-of-finance-committed-to-achieving-1-5c-now-at-scale-needed-to-deliver-the-transition/

[19] https://www.bloomberg.com/news/articles/2022-03-14/money-flows-to-green-energy-funds-amid-vows-to-cut-russian-fuels#xj4y7vzkg

[20] https://investors-corner.bnpparibas-am.com/investing/sustainability-profitable/#:~:text=Research%20has%20shown%20that%20companies,the%20medium%20to%20long%20term.

[21] Ibid

[22] https://www.mckinsey.com/business-functions/sustainability/our-insights/playing-offense-to-create-value-in-the-net-zero-transition

[23] https://www.energy-uk.org.uk/media-and-campaigns/press-releases/526-2022/8082-smart-way-to-support-vulnerable-customers.html