Rishi Sunak laid out plans yesterday (3 November) to turn the UK into the world’s first “net-zero financial centre” by forcing companies to be more transparent about how they will reduce their carbon emissions. Under the proposal, from 2023 all financial institutions and companies listed on the London Stock Exchange (and private companies with over 500 employees) will be forced to publish their plans for how they will reach net zero by 2050.
That’s fine for banks, which will need to spend some time delving into their investments, but which can ultimately withdraw their business from the most polluting clients. Retailers, too, can switch up their supply chains. But what about the dirtiest companies – energy providers and oil extractors and airlines, for which emitting carbon is something of a sine qua non? How do they promise to reach net zero – and what happens if they can’t?
Which industries produce the most carbon emissions?
The UK’s most polluting companies are a heady mix of energy providers, steel manufacturers and airlines, according to research published by Sky at the end of last year. At the top is energy provider RWE, which made up 2.9 per cent of the UK’s carbon emissions last year. Also in the top 15 are household names such as EDF, British Steel, SSE, ExxonMobil and British Airways.
Do the heaviest polluters have plans to reduce their emissions?
Perhaps surprisingly, most of the industries that are heavily reliant on carbon-intensive processes do have plans in place to reach net zero, or as near as possible, by 2050.
The aviation sector, for example, makes up about 2-3 per cent of global CO2-equivalent emissions (not including other effects on heating). Its industry body, Aviation UK, has outlined a three-pronged approach to hitting net zero by 2050: by using sustainable jet fuel made from rubbish, new hydrogen-powered planes, and more efficient management of airspace (flying fewer, fuller planes).
Even the body behind the UK’s offshore oil and gas sector, Oil & Gas UK, claims it is clearing a “pathway to becoming a net-zero basin”, with plans to reduce emissions by 50 per cent by the end of this decade and to invest in hydrogen, carbon capture and storage, and solar.
Energy UK, which represents energy companies, told the New Statesman it has a plan to transition from fossil fuels to renewables, and has made good progress, cutting greenhouse gas emissions by 68 per cent over the past decade, “which represents over half of the UK’s reduction during this time”. “The energy sector is looking to reach net zero much earlier than 2050,” it said, citing a commitment it made last week to hit net zero “in the 2030s”.
What about the coal sector?
And the very dirtiest part of the very dirtiest sector – coal power? In the UK, the amount of power generated by coal has fallen fast, from 25 per cent of the UK’s electricity five years ago to just 1.6% last year. There are three coal-fired power stations left in the UK, but by 2024 they’ll have been phased out altogether.
Coal production has also plummeted, and hit an all-time low of 1.7 million tonnes last year, down from 92.8 million tonnes in 1990. But the government is currently considering opening a new coal mine in Cumbria, which would push up production.
“The companies that are in trouble are pure-play coal companies,” said Nina Seega, research director for sustainable finance at the Cambridge Institute for Sustainability Leadership. She said they are “in trouble for more than climate reasons – they are uneconomical to run.
“In some jurisdictions, we are at a stage of what’s called grid disruption, which means that effectively it’s cheaper to close down a coal power plant and build a renewable one than to continue running a coal power plant.”
Will companies avoid scrutiny by going private?
What if, instead of finding ways to clean up their acts, the dirtiest industries simply decide to delist from the stock exchange? Private equity firms spent more than £11bn taking British companies off the market in the first half of this year, and private companies are not held to the same corporate governance rules. Seega didn’t think this would be an issue in terms of carbon planning, however.
“Private equity companies have a very hard eye towards their profitability, and the dirtiest fossil fuels such as coal are fundamentally not profitable. So I don’t think that is a concern,” she said.
[See also: World signals the beginning of the end for coal]