What does a Liz Truss government mean for the green agenda?
Liz Truss, the UK’s fourth prime minister in six years, came at a critical time when the country needs stability. War in Europe, a cost of living crisis and the threat of a recession are just some of the challenges Truss faces.
While these issues have all made headlines recently, the climate emergency continues to bubble beneath the surface. In July, the UK government’s net zero carbon strategy was declared illegal because it failed to explain how targets would be achieved, breaching obligations under the 2008 Climate Change Act.
But is Truss committed to reaching net zero and addressing the climate emergency? Here’s a look at his firm’s green credentials and what it could mean for responsible investors.
This article is not personal advice. If you are unsure whether an investment is right for you, seek financial advice.
Concerns about Truss’ green credentials?
Truss has held many positions in the cabinet, including environment secretary and, most recently, foreign secretary. Throughout her campaign, she has troubled environmentalists with her statements about fossil fuels and renewable energy. She favors increased oil and gas drilling and fracking to boost UK energy security, while promising to prevent fields from being filled with ‘props’ like solar farms.
However, his personal opinions remain unclear. Truss said she “was an environmentalist before it was fashionable”. She claimed to build on the Conservative Party’s green record by doubling down on the 2050 net zero reduction in her green manifesto at the Conservative Environmental Network.
Since taking office, she has replaced Boris Johnson loyalists with allies of her own and some environmental campaigners have viewed her cabinet choices with some trepidation.
Jacob Rees-Mogg has been appointed Secretary of State for Business, Energy and Industrial Strategy. This tasks him with navigating the UK’s climate and energy strategy, which includes the plan to reach net zero.
Many saw this as controversial as he previously dismissed climate science as “alarmist”. Rees-Mogg believes that “the last drop” of oil and gas should be extracted from the North Sea, and that “2050 is a long way off – we’re not trying to reach net zero tomorrow”.
Matthew Sinclair, who will lead economic unit No 10, is an outspoken free trader who has advocated for climate pledges to be dropped. In 2011, he published the book “Let Them Eat Carbon”. He said global heating could bring benefits and that “draconian regulations limiting emissions will cost more jobs than they create”.
While some questions have been raised about the cabinet reshuffle, there have been appointments with a more positive outlook for the green agenda.
Graham Stuart becomes Minister of State for Climate. Stuart was one of the leading voices urging Theresa May to legislate net zero. He is also a long-time involved with the Globe lawmakers group which lobbies for laws mandating climate action to be passed by national parliaments.
Former Secretary of State in the Department for Business, Energy and Industrial Strategy, Kwasi Kwarteng, has been appointed as the new Chancellor of the Exchequer. He was seen as extremely pro-renewable and has previously opposed a return to fracking.
What green policies are on the table?
Truss reaffirmed its support for the UK’s net zero target by 2050, in particular focusing on home insulation, offshore wind and rooftop solar capacity. She sees increasing the energy efficiency of homes as a key long-term solution to rising energy prices.
It is also committed to accelerating the deployment of clean and renewable technologies, including hydrogen, solar power, carbon capture and storage, and wind power.
At the same time, the Prime Minister announced the launch of a new government body, called Great British Nuclear, which will propose new nuclear projects, backed by substantial funding. Great British Nuclear is thought to help nuclear power produce around a quarter of our electricity by 2050. The aim is to make the UK a net exporter of energy by 2040.
However, there is an ongoing debate as to whether nuclear energy can be classified as “clean” energy. Nuclear power could contribute to a low-carbon energy supply. But there are operational risks, unresolved waste management issues, nuclear weapons proliferation issues and unfavorable public opinion.
Truss is also putting in place a cap that will freeze the average UK energy bill at £2,500 for the next two years. This will not be funded by a windfall tax, as Labor suggests, as Truss believes it would discourage investment in energy supply.
The Prime Minister announced the suspension of green levies, which represent approximately 8% of household energy bills. This portion of energy bills is used to improve the energy efficiency of homes and businesses by improving insulation, as well as to fund research into renewable energy.
Under the new energy strategy, the government will award around 100 new oil and gas licenses in the North Sea. Truss is also seeking to lift the ban on hydraulic fracturing.
To face the energy crisis, we must deploy renewable energies. Indeed, the relatively small amount of oil and gas we will extract from the North Sea and hydraulic fracturing will not be large enough to bring down the bills. Onshore wind and solar can often be deployed faster and cheaper than fossil fuel extraction.
What does this mean for investors?
It will take time to see if Truss can keep what she promised. But the longer serious climate action takes, the harsher the policy response will need to be if the UK is to reach its net zero target by 2050.
This policy response will impact all businesses. It is therefore important for investors to understand the risks by knowing how the companies they invest in operate and how they address climate challenges. Also how they intend to adapt to a net zero future.
Investors could also consider climate opportunities by investing in companies that directly contribute to the transition to renewable energy. It’s important to review investments regularly to make sure they still meet your goals and attitude to risk.
If you want to learn more about responsible investing, check out the Responsible Investing section of our website. It includes helpful tips and tricks for investing ideas to help you start investing responsibly.
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