• The US Inflation Reduction Act (IRA) has successfully stimulated economic growth, attracting billions of private investment and creating thousands of clean energy jobs. Other OECD governments have adopted similar policies.
• This new economic environment is creating challenges and opportunities for the UK economy. However, certain fears proved premature, including predictions that the IRA would threaten the UK economy, provoke a wave of protectionism, or decrease the role of the market in net zero industries.
• On trade, domestic content requirements have proven more flexible than initially feared, expanding to include neighbouring and allied countries.
• On subsidies, governments have adopted a variety of approaches, from more direct forms such as grants to more indirect tax deductions, and from targeted subsidies for particular sectors to broader-based funding.
• Governments have simplified permitting and set benchmarks to reassure investors that their goods have a reliable market, which has combined with subsidies to develop a hospitable environment for the private market.

POLICY CONSIDERATIONS

• The UK should focus on securing a trade deal with the EU to accelerate trade on net zero goods in specific industries, as the EU’s 40% domestic content requirements leaves the door open for British exports.
• The UK should identify sectors that would benefit from government support and provide at least £54 billion over 10 years in grants, loans and tax incentives to attract investment and avoid offshoring to other countries.
• The UK should set legally binding benchmarks for green goods beyond electric vehicles to assure private manufacturers of a market for their goods.
• The UK should streamline its planning system by prioritising net zero projects, creating permitting offices for combined authorities and devolved governments and providing permissions within 18 months of submission.

The post One year on from the Inflation Reduction Act: International responses to the IRA appeared first on Social Market Foundation..

• 1 in 25 households is part of a heat network, and in 1 in 12 in social housing.
• Heat networks have been treated as business-to-business sales, and so members have not as much protection as other households:
  • In some cases, bills have increased 700%
  • This has hit the worst-off particularly hard – one pensioner in Lambeth who saw their heating and hot water bill increase from £700 to £3,500.
• Existing heat networks face three challenges:
  • Poor energy efficiency and high maintenance costs
  • Most networks are not metered, leading to excessive energy use and unnecessary costs
  • A lack of regulatory protection from Ofgem, with heat networks currently in line with housing service charges

RECOMMENDATIONS

• In order to secure a fairer deal for heat networks, the Government should:
  • Improve the bill support scheme, with more generous help, pegged to domestic energy prices, targeted help for schemes in deficit, and a cap on service charges
  • Accelerate the transition to metered networks, removing exemptions, increasing grant funding, and encouraging the uptake of support
  • Improve regulation, with a target for Ofgem to start regulation by April 2024, and incentives for heat networks to improve efficiency
  • Dismantle old networks, mandating operators to run feasibility studies and providing funding for households in dismantled networks to transition to heat pumps.

The post We can’t keep heating like this: A fairer deal for heat networks appeared first on Social Market Foundation..

• The energy crisis has strengthened political will to raise chronically low installation rates, but it is unclear if recent policy announcements are enough to resolve entrenched structural and attitudinal barriers for households.
• Cost may be the biggest barrier to installing energy efficiency measures, but poor awareness and tenure type are also significant. Our work with Public First on energy bill support has given us deeper insight into barriers faced by homeowners.
  • Our analysis of Public First’s polling finds, surprisingly, that 54% of homeowners do not believe they need any/more insulation. Homeowners say that “other” barriers exist, but further research is required to identify them
• Majority of homeowners (74%) would be willing to co-contribute some of their own money for insulation (alongside a government energy efficiency scheme). That said, homeowners likely underestimate how difficult some upgrades may be.
• Not all groups experience the same barriers in the same way. Who lives in a property and the type of property they live in can have notable effect on which barriers are most significant to them. As it stands, dwelling and tenure characteristics account for greater variation in energy efficiency ratings than household characteristics.

A better understanding of the barriers and motivations for individual groups is needed to design an informed policy to encourage wider take up of efficiency measures.

The post Lagging behind: New insights into the barriers to energy efficiency uptake appeared first on Social Market Foundation..

• The new policy framework for spring 2024 should be a social tariff – households spending an excessive proportion of their income on energy bills should receive targeted financial support to reduce those bills
• Who gets relief should be determined by the state, with no need for households’ applying themselves – and take the form of a discount in their bills, provided by energy suppliers.
  • Our polling and focus-group evidence found that on average household bills of £3,000, people want a discount of around £900
• Eligibility for the social tariff should be based on household income and household energy consumption – to better reflect the complex relationship between energy use and need for support
  • Central government will need to develop a new mechanism for identifying these households – based on HMRC’s income data and energy suppliers’ energy use data.
  • Whilst these data do have their limitations, we conclude that even an imperfect new system would be better than the status quo.
• What form should the social tariff take? We argue for a formula-based lump sum payment, as the most progressive and fiscally efficient option
  • It would be lump sum payment that varies according to a formula that takes into account household income and energy use.
• Whatever level of support is delivered via the social tariff, funding should come from general taxation. This is an exercise of social policy rather than energy policy and should be funded by the state.

Energy efficiency-measures

We also looked at energy-efficiency measures, to prioritise fuel poverty over aggregate demand reduction, but keeping the latter a high priority of public policy in other areas

• Using the enhanced targeting system recommended in this report, the scale and ambition of the ECO regime should be significantly expanded.
• We do not argue for a fixed timetable for this ambition to be realised, but believe it can and should be delivered within the lifetime of a normal Parliament.
• Funding for this expanded ECO regime should continue to be raised via on-bill levies, consistent with the current approach.
  • Policymakers should engage more with public opinion to make the cases for this.

Other parts of the project – including polling, workshops and focus group summaries – can be found on the project website: www.smf.co.uk/future-of-energy-bills

The post Fairer, warmer, cheaper: New energy bill support policies to support British households in an age of high prices appeared first on Social Market Foundation..

Key findings

• There is currently a surplus of well-trained technicians to service and repair EVs for existing and near-future demand. While this is a welcome finding for existing and prospective EV drivers of today, this progress should not be taken for granted.
• Concerted action from government and industry is likely to be required to avert a looming skills crunch in 2027. The industry is set to face a shortfall of 25,100 EV-trained TechSafe technicians by 2030. This raises concerns for the safety and mobility of the UK, and achieving net zero targets.
• The industry not only faces this green skills challenge. The increasing computerisation of cars and efforts by manufacturers to monopolise the aftermarket space are seen as key concerns within the industry today.
• In speaking to workers and expert stakeholders, we learnt of upskilling barriers such as recruitment challenges, low confidence in Government plans for the EV transition, FE colleges capital constraints and the need for additional support for small workshops
• The EV transition represents a unique opportunity to get more young people into the auto technician sector who are passionate about climate action and technology.

Recommendations:

• Launch an attractive green careers campaign to get young people and those from underrepresented backgrounds into EV repairs.
• Key low-carbon industries, including EV repairs, should be central to the Government’s consultation on Apprenticeship Levy reform
• Develop a medium-term credible plan to upskill technicians for EVs
• Introduce a mandatory license to operate in the repair and maintenance industry
• Create the conditions for fair competition, as market structure should be allowed to evolve to ensure it is delivering good customer outcomes and can overcome issues of low demand for technicians in the future.

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• With average bills at £3,000, we calculate that 12m households would spend over 10% of their income after housing costs on energy. Of those 12m households in need, a quarter do not receive any social security.
• Long-term policies to help with bills should be targeted on households in need, but state needs better mechanisms for identifying people in need of help and getting it to them.
• Voters are increasingly prepared to accept higher taxation to fund bill support. In July, 52% of people we polled said they supported bill support policies “even if this means taxes rise as a result”. In October, this had risen to 64%.

Options for policy

• Bill support
  • We’ve estimated the policy designs for options of fixed payment discount, unit rate discount, rising block tariff and a real bill cap. We also found the real bill cap to garner the least public support, and risks giving biggest benefits to wealthiest and encouraging wasteful energy consumption.
• Energy efficiency
  • Targeted support for energy efficiency would require broader eligibility criteria than price support.
  • In choosing between the fuel poverty and demand reduction approach for providing government support, our modelling suggests that the former is less expensive – but has longer payback period
  • In principle, the public are very supportive of the idea that there should be a government energy efficiency scheme, but are divided on whether the support should be targeted or universal.

As an interim report, this document does not reach many firm conclusions or make recommendations. Instead, its primary purpose is to facilitate debate and thinking around long-term policymaking. To that purpose, the report ends with the questions we think arise from our work to date.

Those questions will form the basis of a consultation exercise that begins with the publication of this report and concludes in early 2023. We will then publish our final report, with recommendations for future policy in the spring of that year.

If you’re interested in our project, please do reach out to us at energy.bills@smf.co.uk

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• On the whole, farmers are open to using new technology and recognise its benefits – especially younger farmers, and those already using some technology – but there are barriers to be overcome.
• Investment decisions are most likely to be driven by evidence from trusted, local sources – such as ‘over the gate’ advice and from farming media
• Cost and policy uncertainty about the future of farming is holding back investment in technology – waiting and delaying investments has become relatively attractive.

We recommend five ways in which policymakers and the sector can promote the use of precision technology – such as electronic ID tags, smart weighing systems, GPS collars and farm management app:

1. Improve funding incentives: the SMF recommends that farming subsidies should be reoriented towards supporting investment in such technologies.
2. Facilitate better knowledge exchange: a new What Works Centre for agriculture must be established with government support within the next 12 months.
3. Create better data sharing infrastructure: the Livestock Information Service is a welcome step, but more needs to be done to make sure that farmers are able to actively make use of data to improve decision-making
4. Use regulation to promote change: for instance, requiring electronic IDs for cattle is a move that has improved the use of technology in other countries
5. Rejuvenate farm management: make farming more attractive as a career to younger people, including reviewing generosity and eligibility criteria of young farmer payments

The post Moovin’ on up: (How) can we use new technologies to improve productivity on Britain’s livestock farms? appeared first on Social Market Foundation..

• Policy assumptions about future generations and net zero should be open to public debate. They are not simply a technical matter for HM Treasury. 
• The key assumptions concern: moral attitudes towards the future; feelings about inequality and risk; and the scale of future GDP growth and climatic risks.  

RECOMMENDATIONS 

• If HM Treasury’s Net Zero Review assumptions hold true, the UK should be spending much more on climate mitigation now to avert future costs.  
• In particular, the UK government should reduce the “discount rate”, and alter the methodology used to calculate it. As at present, the discount rate should not be used in many areas of UK policy – for example, target-setting and carbon-pricing. 
• Carbon pricing should be greatly expanded by the mid-2020s, ensuring a “Net Zero-consistent” carbon price to avoid climate-related risks to future people. This will also raise significant revenues, thereby avoiding an over-reliance on “borrowing from the future” without sacrificing mitigation.

The post On Borrowed Time: Future Generations and the Net Zero Transition appeared first on Social Market Foundation..

This report makes the case that government should help to expand consumer choice and catalyse a consumer-led transition to more sustainable forms of protein.

Recommendations

1. BEIS should be tasked with developing a UK alternative protein strategy with cross-departmental input within the next 12 months.
2. The Government should commission an innovation needs assessment for alternative proteins to better understand the scale of R&D required and where money could be spent most effectively.
3. Supermarkets should publicly disclose what proportion of protein sales come from plant-based products, striving to reach 30% by 2030.
4. Reforms to Government Buying Standards for food should leverage the power of the public sector to aid the transition to meat, dairy and seafood alternatives.
5. Improve public data on animal-based protein consumption.

The post Putting British success on the menu: Time for a UK alternative proteins strategy appeared first on Social Market Foundation..