Assessing the impact of UK Government energy and climate policies
10 November 2021
How has the Econometric Assessment research theme evaluated policies implemented on the back of the Climate Change Action, the Paris Agreement and the Net Zero Strategy? Professor Paolo Agnolucci reflects on the work of his research theme team over the last decade.
Climate targets set in the Climate Change Act, the Paris Agreement and later in the Net Zero Strategy have required the introduction of a robust and effective set of policies, affecting energy consumption and emissions across the sectors of the UK economy. As part of the policy cycle, effective policies need to be designed, carefully implemented and eventually their process, outcomes and impacts need to be evaluated so that the next set of policies can learn from ‘what works’ while existing policies can be fine-tuned to obtain maximum impact.
Working as part of interdisciplinary consortia, the Econometric Assessment theme at the UCL Institute for Sustainable Resources (ISR) has played a key role in the evaluation of several schemes introduced first by the Department of Energy and Climate Change and then by the Department for Business, Energy and Industrial Strategy. The UCL team, led by Professor Paolo Agnolucci, started with a focus on Quasi-Experimental Analysis (QEA), where the impact of a policy is assessed by comparing actual outcomes to what would have occurred if the policy had not been introduced. We later expanded into economic evaluations and machine learning analysis. Our expertise has played a role in schemes affecting the public, the industrial and the residential sectors.
Budget and finance constraints can have a significant impact on the ability to adopt technological solutions which reduce energy consumption and energy bills but require upfront payments. This can be a serious obstacle for households unable to access financial products and institutions in the public sector. ISR has delivered the evaluation of the impact of the Public Sector Energy Efficiency Loans Scheme (PSEELs) Evaluation, quantifying how the scheme affected energy consumption across Local Authorities, NHS / Foundation Trusts, schools (including academies), and further and higher Education Institutions (FEIs and HEIs). ISR work has been key to ensuring that lessons learnt from PSEELs were borne in mind when introducing the Public Sector Decarbonisation Scheme (PSDS) in response to the Covid-19 pandemic.
The UK Government has an established track record of facilitating the reduction in energy consumption in the industrial sector while recognising potential negative effects on competitiveness. As part of the UK Climate Change Levy (CCL), a tax on the consumption of energy in the business sector, Climate Change Agreements (CCAs) were offered to UK firms where a reduction in the levy was agreed in exchange for enforceable commitments taken by UK firms to achieve pre-defined energy reductions. After the expiration of the first scheme in 2011, the second scheme started in 2013 and will run until 31 March 2025. ISR has delivered the QEA evaluation of the second CCAs showing how stringent targets can deliver reductions comparable to those that would have been obtained by UK firms facing the full CCL levy, without the competiveness risks which they would have faced if full CCL rates had been paid.
As households on low incomes are at particular risk of fuel poverty, the annual £140 off the electricity bill of eligible households as part of the Warm Home Discount Scheme (WHDS) is very important, especially when market prices show strong upward trends. The implementation of the policy has benefited from the QEA evaluation delivered by the team at ISR with regard to the way eligible households spend the money they receive. This is key in establishing how the scheme impacts energy consumption, therefore quantifying its effectiveness in mitigating the risk of fuel poverty.
Looking forward to future UK energy and climate policies, the introduction of the UK Emission Trading Scheme (ETS) has been a key change in the national landscape; a change which requires careful co-ordination not only across UK departments but also between the UK government and the devolved administrations. ISR is proud to be leading the scoping work of the forthcoming UK ETS evaluation therefore helping to ensure that a solid framework is put in place to learn key lessons about process, outcomes and impacts of the scheme.
Finally, implementation of the Net Zero Strategy will require innovation to play a key role in the UK energy system in the coming decades. Stable and consistent policies will be required not only to facilitate the development of new innovations but also their diffusion and adoption by UK customers and firms. ISR is proud to lead the scoping of the counterfactual evaluation of the government’s Net Zero Innovation Portfolio (NZIP) of research, development and demonstration funding. We will also be part of the consortium which will be called upon to support the design of the evaluations of single schemes part of the wider portfolio.