Lifestyle shift: sacrifices on the way to a carbon-neutral world

If we are to become net carbon neutral by 2050 then we shall need to change our lifestyles. Behavioural change will be driven by evolving cultural norms and by taxation. Some of these changes are already well underway, writes Victor Hill.

One step greener

The big event of the autumn of this year will be the COP26 climate conference to be held in Glasgow over 01-12 November. COP26 was supposed to have taken place last year but, like the Olympic Games and so much else, was postponed due to the coronavirus pandemic.

Scientists tell us the Earth has already warmed by 1.2 Celsius since the beginning of the industrial revolution (about 1800); and the objective of the Paris Accord (COP21, December 2915) was to cap that rise at 1.5 Celsius. COP26 is supposedly set to keep 1.5 alive – but that is increasingly looking unrealistic, even though real progress has been made. The danger is that COP26 will be perceived as another talking shop with little by way of tangible results.

Over the last six years most of the major industrial nations have committed to net zero carbon emissions – in the case of China, the world’s biggest emitter with 30 percent of global CO₂ emissions, by 2060. China led a record increase in renewable energy (wind and solar power) in 2020, even as it continued to build dirty coal-powered power stations. In fact, China accounted for more than half of the global growth in renewables last year. But China still has huge coal reserves and will most likely continue to use coal for some time to come.

Only Australia is yet to sign up to a net carbon zero future; and only Brazil is led by a voluble climate change sceptic. The Biden administration is fully committed to the fight against climate change and has appointed Senator John Kerryas First United States Special Envoy for Climate. Mr Kerry was in London last week.

COP21 tasked 196 countries and territories to pledge achievable targets and most have done so. Specifically, Britain has pledged to ban the sale of new ICE-powered vehicles by 2030. That notwithstanding, the global rebound from the pandemic-induced recession is set to drive emissions of greenhouse gases to record highs, according to a report released last week by the International Energy Agency (IEA), a club of 30 OECD countries.

The minister responsible in the UK government for the organisation and agenda of this important international gathering, which will be attended by all leading heads of government, is Alok Sharma MP. He bears the title President of COP26 and sits in cabinet. The prime minister’s spokesperson for COP26 is the seasoned former journalist, Allegra Stratton. Ms Stratton was originally hired by Mr Johnson to chair the proposed daily prime ministerial news conference. But in the wake of Mr Cummings’ bad-tempered departure from government at the end of last year, Downing Street thought better of this idea and re-deployed Ms Stratton to the climate front.

Ms Stratton and her team have been working on a public awareness campaign to bolster the impact of COP26 on public behaviour. It’s called the One Step Greener competition and it involves a nationwide search for climate ambassadors.

Thirteen such ambassadors have already been chosen. They include Formula-E racing driver Alice Powell; Dame Jackie Daniel, CEO, Newcastle Upon Tyne Hospitals NHS Foundation Trust, whose hospitals aim to be net carbon zero; Hugo Chambers, who monitors the carbon footprint of Sainsbury’s range of coffees; Toby McCartney who turns industrial waste into ecologically sound tarmac; and Jasmine Allen who is training to become a wind turbine engineer. Another thirteen climate ambassadors are yet to be appointed, making 26 in all.

One of the things the climate ambassadors hope to achieve is to propagate the small things that individuals can do to reduce their carbon emissions. These are called microsteps. For example, as Ms Stratton pointed out in a piece in The Daily Telegraph this week, Reckitt Benckiser (LON:RKT), which is a COP26 principal partner and is the manufacturer of a popular brand of dishwasher tablet (Finish), says it is not necessary to rinse dishes before they go in the dishwasher. Apparently, a study in the US showed that households which pre-rinsed their dirty dishes used almost 27,000 extra litres of water a year.

There are many other microsteps that people can take such as walking to the supermarket instead of driving there. (Carrying a backpack of shopping home is excellent full-body exercise.) Other measures that most people know about (not mentioned by Ms Stratton) include switching electrical appliances off at the mains when not in use rather than leaving them on standby; or only putting the minimum amount of water needed in the kettle when brewing a cup of tea or coffee. And drying laundry on a clothesline or rack is obviously less energy intensive than using a tumble dryer.

Gardeners have been widely encouraged this year not to mow their lawns as frequently as normal so as both to save energy and encourage biodiversity. May was designated No Mow May by the pressure group Plantlife. Indeed, in the gardening community there is a fast-moving debate about what constitutes a weed and what should be termed a wildflower. Again, that is cultural.

Many will argue that these microsteps, even if adopted universally, will not be enough to stop the march of global warming; but by raising awareness such measures will influence the way that industry and the state sector (for example Dame Jackie’s hospitals in the Northeast) conduct themselves. There is an emerging climate consciousness.

Charging cars

This week a parliamentary committee warned that the widespread charging of electric cars could cause power outages if drivers are not persuaded to charge EVs at night. Huw Merriman MP, the Tory chairman of the transport select committee said: Unless the national Grid gains more capacity, consumer behaviour will have to alter so that charging takes place when supply can meet additional demand. The alternative will be blackouts in parts of the country.

National Grid (LON:NG.) thinks that additional sources of renewable energy will be able to cope with additional demand – but only if time-of-use tariffs become standard. The company thinks that smart charging – internet connected chargers that only charge off-peak when electricity is less expensive – will ease the strain on the network. That would discourage EV owners from recharging at peak time when they get home from work in the early evening.

However, the House of Commons select committee thinks that it will still be necessary to educate people about charging – especially since many people will be unable to charge at home and will be obliged to use public charge points. Public charge points carry VAT at a level of 20 percent while domestic electricity is charged at just five percent VAT, thus domestic charging will be significantly cheaper.

The select committee also expressed concern that rural areas would be left behind in the rollout of the national charging network. The UK government has earmarked £1.3 billion for the installation of charge points – but mainly on motorways and A-roads.

And taxing them…

As more people drive EVs so the government will collect less road tax and excise duty on petrol, currently worth about £31 billion a year. EVs are currently zero-rated for road tax but there are rumours that the government will impose road taxes on them from 2025.

It is likely that pressure will mount to make up the shortfall from the loss of excise duty through road charging. Hitherto, governments have sanctioned toll bridges and tunnels (such as the QE2 bridge and tunnel which link Kent to Essex) and a few toll motorways (such as the M6 Toll). In addition, London has the Congestion Charge. Toll roads can cause travel delays; but the recent digitisation of these tolls (whereby drivers pay online within 24 hours of using them) shows how road charging might work in the future.

Although EVs have much less environmental impact than ICE-powered cars, they are not entirely carbon neutral. I wrote a few weeks ago about the issues around recycling EV batteries. Further, EVs use rubber tyres which emit carbon when they are manufactured and recycled. But they might also still cause congestion which carries an economic cost in terms of lost man hours and delayed delivery times. If motorists had to pay for their journey in accordance with distance travelled and the levels of congestion over their route, they would make more judicious decisions about when to travel and which route to take. That would mean a more efficient use of our road network which would have beneficial economic consequences.

Road charges could be flexible in accordance with the time of day, the day of the week, the type of car driven, the type of road (motorways would be more expensive than A-roads), the degree of congestion experienced and even, possibly, the status of the driver (learner, disabled etc.). Transport Secretary, Grant Shapps MP, recently unveiled his transport decarbonisation plan. But this did not specifically address the issue of road charging.

In future our satnavs might be programmed not just to calculate the quickest route from A to B, but the one that would incur the least road charges. An electronic gizmo in every car will be able to record a vehicle’s precise road usage and transmit this information to the charging authorities. Some may fear that if that data were hacked and fell into the wrong hands they could be compromised – but that applies to all the data that the state is accumulating about us.

Heating homes

Rumours emerged this week that the government’s target date to ban the installation of gas boilers in homes may be put back from 2035 to 2040. The domestic heating policy paper was due to be published in early July but has been postponed until the autumn. Reportedly, this might contain a proposal to impose a carbon tax on gases used to heat buildings – something that is also under consideration in Europe.

As I reported last month, there is much scepticism that older homes can be efficiently retro-fitted with heat pumps – all of which have to be imported, and which are expensive to install. They require large radiators, underfloor heating pipes and additional insulation. A heat pump-powered shower will take about two hours to heat to a tepid level of warmth. If this Johnsonian policy is implemented then the great British public will just have to get used to lukewarm showers planned in advance – especially in winter.

New homes can be fitted with the latest heating engineering as part of the construction process. But upgrading an existing home is messy, disruptive and expensive and best accomplished when the home is empty. Any government that compelled families to convert would quickly become unpopular; so, the best policy would be to incentivise homeowners voluntarily to upgrade as old gas boilers need to be replaced. Forcing people to replace gas boilers that still work (and are relatively efficient) would provoke outrage. The cost of housing in the UK is already at the top-end of the G-20: any attempt to forcibly decarbonise domestic heating would make house purchases even more difficult for first-time buyers.

But it will be impossible to get to net zero without making homes near carbon neutral. Residential and commercial property in the UK accounts for about 40 percent of our total carbon emissions given our need to provide warmth and hot water (and, increasingly, air conditioning). But out of 24 million private homes in the UK, 9.4 million were built before WWII, and five million before 1900. Of course, they could be much better insulated, and all old houses need new rooves every 30-50 years, which is a great opportunity to facilitate that.

The government’s official estimate that green energy retrofits will cost just £4,440 per home on average is optimistic to the point of inanity. Currently, the installation of a heat pump costs from £7,000 to £15,000, and sometimes much more. There is also a massive shortage of trained installers of heat pumps anyway – so this conversation is getting silly.

While Britons face the prospect of radically turning down their thermostats, consumption of natural gas globally is set to rise. By 2024, global gas demand will rise by seven percent on current levels according to the IEA, driven mostly by India, China, Russia and the Middle East.

The endorsement by the Biden administration of the Nord Stream 2 gas pipeline suggests that Americans and Europeans will go on using gas for domestic heating for some time to come. But not the British, if the Johnson government’s policy is instigated. UK and European gas prices have risen recently accordingly. One thing is for sure, subsidies or not – domestic heating bills are going up.

Working from home – for longer

A member of the Bank of England’s Monetary Policy Committee (MPC), Gertjan Vlieghe, floated the idea last week that one way to address the government’s ongoing fiscal headache will be to raise the retirement age. Many countries, he pointed out, including the UK, are in the process of raising the age before which citizens become eligible for a state pension – though few are keeping up with the rate at which longevity is increasing. (True, the increase in longevity has stalled of late – especially in the USA.) But the increased flexibility to work at home, accelerated by the pandemic, is most helpful to older workers who resent commuting the most.

Fewer journeys to work equate to lower carbon emissions – except that, at present, the animus against public transport (facemasks, with little social distancing) has provoked a move away from train travel back to car travel.

The cost of going green

The cost of going carbon neutral in the UK has been estimated by the Office for Budget Responsibility (OBR) at £469 billion over 30 years – but it’s not clear how that will be divided between government, homeowners and motorists, and companies. As for the government portion, most of that will have to be borrowed. (Just as the foreign aid budget is entirely borrowed, as if our largesse is our children’s problem.)

The IMF reckons that limiting global warming to even two degrees will require the imposition of carbon taxes globally equating to $75 a tonne by 2030. At least people have started to crunch numbers as well as set targets.

The future

In fifteen years’ time we shall drive less, though the journeys we take will be smarter. Fewer households will own a car than now. We shall fly less than we did, taking fewer but longer trips abroad – so no more city breaks.

We shall be more mindful of what we eat – meat consumption in particular will fall by the 30 percent or so envisaged by the national food strategy (discussed last week). We shall tolerate cooler homes, though we shall have greater resort to air conditioning. We shall work mostly from home: thus, well-appointed houses with gardens will carry a premium (something that is already evident as a result of the pandemic). Those gardens will be wilder – manicured lawns will be rare.

We shall do most of our shopping online – including food shopping, though a few high-end shopping centres with cinemas will continue to attract our custom. We shall entertain ourselves at home with new forms of virtual reality (VR) and augmented reality (AR) which will enable us to walk through the Hagia Sophia or perambulate the Louvre at will. The cost of energy will rise. We shall pay more taxes; and the state will spend more.

For all that, my best guess is that mankind will overshoot the 1.5 Celsius target before this decade is over: and that will accelerate the climate crisis – with inevitable policy responses. A report out on Thursday (29 July) by the UK Met Office confirmed that disruptive climate change in the UK is already underway. In just 30 years the UK has become 0.9 Celsius hotter and six percent wetter.

Climate campaigners are already describing COP26 as a cop-out. Organisations such as Avaaz claim the politicians have been captured by the big corporations. I’ll be considering whether that claim is justified, and the likely outcome of the conference, soon.

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This will be my last piece edited by James Faulkner, who moves on to pastures new at close of business today. James has been processing and posting my musings for more than six years. And he has taken out the editorial red ink quill on just a handful of occasions. As Editor in Chief, James has presided over a huge increase in our readership.

I daresay we shall be hearing more of James in due course – perhaps as a guest speaker at a future Master Investor Show. I wish him the very best, as I’m sure many of my readers do too.

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Editor’s note: Thank you, Victor, for your kind words. Being editor of Master Investor these past seven years has been a great privilege. It has given me the opportunity to learn from some remarkable people who are at the top of their game. Although it is finally time to move on to new opportunities, I shall remain a friend of Master Investor and an enthusiastic supporter of its mission to inspire and encourage ordinary people to take control of their financial future. To my readers, I wish you health, wealth and happiness – and I trust I shall bump into many of you again from time to time (possibly at a future Master Investor event!)

If any readers would like to keep track of my future endeavours I would suggest they follow me on twitter: @jameslfaulkner.