From Climate Scepticism

BY MARK HODGSON

There is – to me at least – little doubt that the UK’s infrastructure is a mess. Severely potholed roads; a shambolic and unreliable rail system; a massive push for electric vehicles before reliable at-scale electric charging points have been put in place; poor rural bus services; leaking water pipes; repeated discharge of sewage into rivers and onto beaches; coal-fired power plants destroyed before adequate and reliable alternatives have been provided; the Scottish ferries shambles. The list goes on and on. No doubt you can add to it. It’s such a shame that nobody has responsibility for these matters. Oh, wait a minute…

The UK Infrastructure Bank (“the Bank”)

The Bank was launched (with up to £22 billion of public money over its first five years) supposedly with a view to encouraging private finance alongside public investment. Specifically, it is supposed to achieve two strategic objectives – first “helping to tackle climate change” and secondly to support regional and local growth. Immediately I am struck by the hubris. As we at Cliscep (and others) never tire of pointing out, nothing the UK (as the ongoing emitter of around 1% of global greenhouse gases) does can possibly tackle climate change. The idea that a bank spending perhaps £4.4 billion p.a. (a lot of money, admittedly) directly, or with a view to encouraging investment in UK infrastructure, can make the slightest difference to climate change is beyond ridiculous.

That is not to say that investment in infrastructure is a bad idea, nor is it to say that the creation of the Bank was misguided. For example, I have opined in comments at Cliscep to the effect that the UK is more likely to run short of water due to an ever-expanding population (combined with ongoing water leaks and a lack of investment in basic infrastructure such as reservoirs) than it is to do so due to climate change.

But what does the Bank actually do?

Primarily, it seems to obsess about climate change. In the last week or so it has made an announcement regarding its “first natural capital transaction”, a £12 million investment “to support an innovative nature restoration project in the Scottish Highlands and Islands with the aim of stimulating natural capital markets, and helping to tackle climate change, boost biodiversity, and deliver benefits to the local community.” Quite what that has to do with infrastructure is beyond me: my Concise Oxford English Dictionary defines infrastructure as “the basic physical and organizational structures (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise”.

None of which seems to be affected by this much-trumpeted investment. Never mind, it’s helping to tackle climate change – apparently:

The Bank’s finance is expected to enable the restoration of temperate rainforest on the Estate, which, once restored, can absorb carbon dioxide, removing it from the atmosphere. The west of Scotland is home to one of the most important remaining temperate rainforest sites in Europe, with this rare habitat now making up just 2% of Scottish woodland.

As noted in the Scottish Government’s 2018-2032 Climate Change Plan, habitat restoration can play an important role in reducing greenhouse gas emissions, enhancing biodiversity, and delivering wider co-benefits. The restoration activities planned for the Tayvallich Estate also support the Treasury’s strategic steer to the Bank that nature-based solutions can contribute to its twin objectives of tackling climate change and supporting regional and local economic growth.

The Bank’s loan will enable Highlands Rewilding Limited to move to further rounds of funding with potential investors, with a view to developing new natural capital business and revenue models on the Tayvallich Estate.

Well, I suppose that satisfies the Bank’s first (and fourth – see below) investment principles, the first being to “support the Bank’s objectives to drive regional and local economic growth or support tackling climate change.” As for its second investment principle, however, I fail to see that it makes the grade:

The investment is in infrastructure assets or networks, or in new infrastructure technology. The Bank will operate across a range of sectors, but will prioritise in particular clean energy, transport, digital, water and waste.

Do bear in mind that the Bank’s four investment principles (the other two relate to delivering a positive financial return and “crowding in” significant private capital over time) are cumulative. All four are supposed to be met – one, two or three being satisfied should not suffice:

To be eligible for financing, private sector projects must meet our four investment principles.

Still, if it’s to do with climate change, perhaps the rules can be bent? Under almost no circumstances, however, will the Bank invest in infrastructure projects that involve nasty “carbon” (presumably not even if they would support our energy infrastructure):

We do not invest in projects involving extraction, production, transportation and refining of crude oil, natural gas or thermal coal with very limited exemptions. These exemptions include projects improving efficiency, health and safety and environmental standards (without substantially increasing the lifetime of assets), for Carbon Capture and Storage (CCS) or Carbon Capture, Usage and Storage (CCUS) where projects will significantly reduce emissions over the lifetime of the asset, or those supporting the decommissioning of existing fossil fuel assets. We will also not support any fossil-fuel fired power plants, unless part of an integrated natural gas-fueled CCS or CCUS generation asset. This policy will be updated over time to reflect changes in government policy and regulatory standards.

It seems that net zero and climate change will always trump sensible infrastructure investments.

So much for policy. How has the Bank performed to date with regard to other criteria?

On 25^th January 2023, a report was issued by the UK Parliament’s Public Accounts Committee (“PAC”), regarding the Bank. The mainstream media don’t seem to have shown much interest in either the Bank or the PAC’s report, but I think it’s well worth a look. It makes a number of criticisms and recommendations, though needless to say no criticism is made of what seems to me to be a disproportionate focus on climate change and net zero at the expense of dealing with our crumbling infrastructure. I recommend reading the report, but for current purposes, this paragraph from the report will suffice:

We are not convinced the Bank has a strategic view of where it best needs to target its investments. The Bank’s 10 deals to date have mostly been relatively conventional investments, including seven loans. While the Bank’s early deals reflected a sensibly cautious approach, it is not yet capable of making the full range of investments it could potentially make, and will not be able to do so until it has sufficient staff qualified to make more complex transactions. The Bank claims to be filling gaps in the market and making investments the private sector would not consider, but so far the Bank has provided financing to deliver broadband and build solar farms, both relatively common projects. The Bank struggled to articulate the priority areas for investment, and how it will recruit staff necessary to fulfil its role. The Bank can only deliver on the government’s ambition and wider objectives if it moves beyond making “safe” investments, because the scale of the challenge is so severe. The Bank has not demonstrated it has a clear idea of how its investments complement each other and provide additionality. In addition, they are not yet making direct equity investments, instead investing through equity funds.

National Infrastructure Commission

The National Infrastructure Commission website does at least recognise what infrastructure consists of, identifying eight infrastructure themes – transport; energy & waste; digital & data; water & floods; place; environment; design & funding; and regulation & resilience. So far so good, but then one moves down the website, only to find this: “YPP discusses net zero for the next generation”. It rapidly becomes obvious that the Commission is as net-zero fixated as is the Bank:

The UK is home to over 22 million people under the age of 30, many of whom are increasingly aware of the uncertainty surrounding their future due to climate change. Young people, both today and in the future, will bear the consequences of the decisions made today on net zero. It is therefore crucial that young people have a say in these decisions.

The National Infrastructure Commission (NIC) Young Professionals Panel’s recent ‘net zero for the next generation’ roundtable brought together 20 young professionals with NIC Commissioners, to discuss their priorities for the net zero transition.

And so it goes, the next feature on the website being “Go big where it counts to hit economic and climate goals, says Commission”. Another piece on the website tells us:

We need to move from setting targets to delivering on the ground, making it easier for every household to make the greener choices necessary to meet our climate commitments.

“We welcomed the investment in CCUS when it was first announced and it is good to see further steps in forming carbon capture clusters. We must keep up this pace to ensure the UK regains pace in this internationally competitive sector.

“We look forward to seeing the promised draft national policy statements for energy. Once finalised, these should speed up decision making and help provide greater certainty to developers, investors and communities.

“The extension of the Boiler Upgrade Scheme will give it more time to make an impact, but without a drop in upfront costs for consumers it is difficult to see how it will prompt the necessary uptick in heat pump installations. The lack of a revised spending commitment means it is hard to assess the contribution the scheme will make to government’s own target of installing 600,000 heat pumps a year by 2028.

“The intention to rebalance gas and electricity prices will help reduce the operating costs of heat pumps, electric vehicles and other low carbon technologies. The sooner this can be achieved, the better.

“The Commission will continue to monitor delivery of infrastructure commitments made as a result of our own recommendations. Shortly we will publish a report on the planning regime for major infrastructure projects, and later this year we will publish our second National Infrastructure Assessment to look ahead to the next phase of the net zero journey, including the infrastructure networks needed to underpin CCUS and hydrogen technologies.”

Well, I suppose it is at least talking about infrastructure, even if I don’t like the way it’s talking.

National Infrastructure Assessments

The Commission has issued its Second National Infrastructure Assessment Baseline Report, which “[s]ets out the current state of the UK’s economic infrastructure and identifies key challenges for the coming decades.” The Second National Infrastructure Assessment will itself be published in the second half of 2023.

Although this is important work, and some of the Assessment’s findings will be valuable, this offers further evidence of the fixation of the establishment with climate change, since this guarantees that it sees the world in a certain way, and defines its priorities accordingly. By way of example, the first issue the Baseline Report mentions when saying what more needs to be done is this: “greenhouse gas emissions from economic infrastructure must reduce further, fast”.

It says that future trends and government commitments will bring new challenges. The first challenge it mentions is this: “climate change will make it harder to make and keep infrastructure resilience”.

Nine key challenges have been identified for the Second Assessment – climate change and net zero take pride of place, with the challenges including these (five out of the nine):

the electricity system must decarbonise fast to meet the sixth Carbon Budget

decarbonising heat will require major changes to the way people heat their homes

new networks will be needed for hydrogen and carbon capture and storage

good asset management will be crucial as the effects of climate change increase

action is needed to improve surface water management as flood risk increases

Nationally Significant Infrastructure Projects (“NSIPs”)

A brief word on NSIPs. An overview can be found here. Broadly, they are projects of certain types, over a certain size, which are considered by the Government to be so big and nationally important that permission to build them needs to be given at a national level, by the responsible Government minister (the ‘Secretary of State’). Instead of applying to the local authority for Planning Permission, the developer must apply to the Planning Inspectorate for a different permission called a Development Consent Order (DCO).

The system is undergoing a review, and a policy paper was published on 23^rd February 2003. The thinking behind the proposals seems to be summed up by the tagline “Better, faster, greener, fairer, and more resilient”, and as always, net zero is in the mix:

Improving energy security, achieving net zero and delivering the transport connectivity, water and waste management facilities this country needs demands investment in infrastructure. We must have a planning system fit to deliver it, while keeping communities and the environment at the heart of decision-making.

The Nationally Significant Infrastructure Project (NSIP) consenting process has served the UK well for more than a decade. However, the demands on the system are changing, and its speed has slowed. The number and complexity of cases coming into the system is increasing. Policy changes are more frequent in response to a changing world.

Cumulative impacts, particularly in the offshore wind and electricity networks sector, require strategic solutions outside the remit of individual projects.

Supposedly, the “greener” part of the tagline is expressed thus:

by delivering positive outcomes for the environment and following the mitigation hierarchy with proactive plans for environmental protection and enhancement

Given the proliferation of wind farms and solar parks blighting the environment, their idea of “environmental protection and enhancement” differs markedly from mine. I suspect that their environmental thinking (if it can be so described) goes no further than “tackling climate change”.

Our integrated plan for delivering clean and plentiful water

It sounds great, doesn’t it? My attention was drawn to this DEFRA document dated 4^th April 2023 by an article by James Woudhuysen on the Spiked website. Titled “Why water rationing is coming down the pipeline – Instead of securing our water supply, the government plans to radically reduce home usage”, it gives a downbeat assessment of the “integrated plan” just issued by DEFRA. I recommend that you read both the DEFRA report and James Woudhuysen’s scathing summary of it, then you can make your own mind up.

Apart from the inevitable genuflection to climate change (apparently it “is making…pressures worse. We are facing longer and more frequent droughts which are increasing interruptions to our water supplies. Wetter winters and more frequent, heavier storms are leading to more flooding and more pollutants being washed off fields and urban areas”), there is much that sounds positive in the document – we all want cleaner water and a better environment.

For current purposes, however (i.e. discussion relating to infrastructure issues) this is probably the crucial paragraph:

The supply/demand gap – Water companies provide around 14 billion litres of water a day for public water supply. On average households use 144 litres of water per person per day. The National Infrastructure Commission has recommended, due to the increasing pressures, that around 4 billion litres of additional water a day will be needed in England by 2050. The challenge increases when considering the regional variation of water use across England (see figure 3) caused by different types of industry and population levels, as well as current levels of water company leakage (figure 4). This Plan sets out how we will close this gap through increased supply and greater water efficiency, including reducing leakage.

Read on (as far as page 61) and you learn that “Half of the 4 billion litre a day gap in public water supply by 2050 will be delivered through increased supply.” What of the other half? If you make it to page 67, you will find out: “The other half of the 4 billion litre a day gap in public water supply by 2050 will be delivered through improving water efficiency, reducing demand, and cutting wasted water.”

And how is this to be achieved? Like this:

To drive progress to close the gap, we have set a new legally binding target under the Environment Act 2021 to reduce the use of public water supply in England per head of population by 20% by 2038. To achieve this we will reduce household water use to 122 litres per person per day, reduce leakage by 37%, and reduce non-household (for example, businesses) water use by 9% by 31 March 2038. This is part of the trajectory to achieving 110 litres per person per day household water use, a 50% reduction in leakage and a 15% reduction in non-household water use by 2050.

Or as James Woudhuysen puts it:

Last month, a House of Lords select committee reported that no new reservoirs will be built before 2029. It also said that water regulator Ofwat has ‘historically given more focus to a short-term desire to keep water bills low at the expense of long-term environmental and security-of-supply considerations’. In other words, the regulator has fallen asleep at the wheel, letting leaks multiply, sewage pile up and reservoirs fall into disrepair. Yet the implication of Our Water Plan is that we consumers are mostly at fault for the water shortages of the future. It is we who must tighten our belts, and we who must install smart meters to ration our use…

…The problem with the government’s plan is that it is far keener on social engineering – in creating parsimonious, ecologically conscious citizens – than it is on the actual engineering of leak detection, leak repair, pipe replacement and all the rest…

…Calls for demand management and behaviour change are simply codewords for austerity and rationing. The government wants us to accept the blame for the shocking state of our water infrastructure ourselves, and to endure poor personal and home hygiene as a consequence.

Conclusion

Not everything that is being done by those in authority is bad or misguided (or both). The water plan seems to contain some positive stuff that I imagine most people could sign up to. For the good of the environment it might not be a bad thing if society was less demanding and we all used fewer precious resources. However, we seem to be reaching (indeed, we may already have reached) a stage where rationing (via euphemisms such as “demand management” or “smart meters”) is becoming inevitable because those charged with ensuring our infrastructure is in good enough shape to supply our needs have failed us. We have to stop using gas and petrol and diesel and rely on electricity for everything, but electricity supplies are looking increasingly shaky, thanks not least to net zero, yet net zero is embedded in all aspects of insfrastructure planning. The great advance UK society has made since the Victorian era is the provision of plentiful water, allowing for personal cleanliness and a healthier society, yet now it seems we will all be expected to get by with less and less water use in our homes. It strikes me that something is rotten in the state, and an obsession with net zero and a fanciful belief that the UK can “tackle climate change” is at the heart of it. Personally, I would prefer a functioning infrastructure, and I suspect most citizens would too. However, we aren’t to be given a choice. As James Woudhuysen concludes: “It’s time we caused a stink about it.”