COP29: What a far-off climate summit means for UK firms and landlords
Handelsbanken Insights Blog
By Richard Winder, Head of Sustainability
Published: 06 January 2025 Reading time: Three minutes
The UN’s latest climate change summit, COP29 was held 2,500 miles from Britain in Azerbaijan. As our Head of Sustainability Richard Winder says, Baku may not match the milestone summits of Paris or Kyoto, but its impact could be felt in accelerated action back in the UK.
One question rising in volume over the last 12 months is ‘What happened to UK climate leadership?’. In some ways this international perception was ill-founded, in that, despite the previous government’s talk of slowing the net zero pace, in fact many important policy measures continued behind the scenes.
But an essential part of leading is being seen to lead. Arguably, announcing row-backs on buildings and EVs alongside the expansion of oil and gas reserves sends a simple signal beyond our borders: it’s time for other countries to take the lead.
However, a series of ministerial speeches has highlighted the centrality of climate to UK infrastructure plans, inward investment, foreign policy and overall economic outlook. This reached its crescendo at COP with a UK Prime Ministerial commitment to tougher national targets: by 2035 the UK must reduce its greenhouse gas emissions by 81% compared to 1990. The previous target was a 78% reduction.
What does this mean in practice?
A difference of three percentage points over the next decade may not in itself look like much, but that’s against the backdrop of criticism of UK climate change progress by the UK’s own climate watchdog
Opens in a new window. Thus, the emissions reduction path from here to 2035 is much steeper than the announced increase suggests, and now the race is on.
Since taking power, Labour manifesto commitments to accelerate investment into clean technologies and clear the path ahead are becoming real-world policy – despite it scaling back a pledge for an extra £28bn annually to meet the UK’s Net Zero target.
Here are some of its remaining policies:
Confirming the target of net zero electricity by 2030.
Lifting a de facto block on onshore wind projects.
The biggest ever round of clean energy project funding.
Confirmation minimum energy efficiency standards (MEES) will be introduced for private landlords, with an anticipated threshold of EPC C by 2030, while implementation deadlines for non-domestic real estate MEES look set to be announced over the coming months, with the EPC B by 2030 target to be confirmed and the interim EPC C deadline likely to be pushed back to 2028.
Additional money for insulating low income and energy inefficient homes, incentivising heat pump installations, and building out the nationwide EV charging network.
Establishing a National Wealth Fund to channel public investment into clean infrastructure, looking to ‘crowd in’ many times more in private finance.
Allocating tens of billions to carbon capture, green hydrogen and clean district heating.
Plans for millions more UK homes to be equipped with solar panels.
Of all the above points, no doubt the first can have the broadest and deepest effect on UK emissions. By removing carbon from the electricity grid, the rapid, economy-wide electrification of vehicles, heating, and industrial processes becomes an entirely clean transition.
Businesses are beginning to recognise the scale of additional generation required to meet this demand-side increase, forecast to be between two and three times today’s grid capacity. With security of supply, grid demand flexibility and long-term cost savings in mind, many are moving to install local generation and battery storage to meet some or all of their energy demands. Others are meeting their long-term power demands by contracting to take electricity from specific renewables projects, through so-called power purchase agreements. These contracts in their turn attract investment into further such projects, thus forming a virtuous circle.
Opportunities and risks ahead
The new administration coincides with headwinds for other developed countries’ climate agendas. Whilst collective international progress is vastly preferable, indeed essential, to any chance of keeping climate change within the ‘safe’ bounds of the Paris Agreement, it is also true that taking the lead in creating and adopting clean technologies and sustainable practices creates economic advantage between nations, just as it does between companies.
One opportunity given a boost at COP29 is for landowners and enterprises involved in creating and selling carbon credits. New market standards were agreed, which will increase confidence in purchasing these credits, set to be needed on a vast scale across the hardest-to-abate sectors of the economy such as cement, steel or aviation, in order to offset any residual carbon emissions.
All the while the risks of inaction only grow. The price of emitting carbon will continue to increase, expanding to all economic activities. Investors will prefer to back future-proofed market leaders. Corporate tenants, with their own targets to consider, will come to view energy performance as a hygiene factor. Private renters, homebuyers and drivers will refuse to pay the rising price of fossil energy just to be part of the problem. Consumers - exposed directly and through their supply chains and newsfeeds to a more volatile climate - will increasingly choose green over grey or brown.
