UK companies must brace for the government to deliberately disrupt or phase out business areas that are unfit for a net zero-carbon economy, according to a report.
The UK Energy Research Centre (UKERC) has said many companies will face fundamental change, including the phasing out of the UK’s most polluting business activities.
The government is to begin “purposefully disrupting” industries to spur the move to a zero-carbon economy, after voting through the 2050 target this month.
Jim Watson, a director at the UKERC, said many companies were not ready for deliberate government-led disruption.
“Some sectors are more ready than others,” he said. “The electricity sector has already gone through a major change, for example, but other sectors are at the starting point and the government is going to have to be the disruptor here.”
He said companies involved in running the UK’s gas networks, or working in the North Sea, may need to consider “an exit, or managed decline”.
The sectors facing the biggest shake-up include heating, transport and construction, according to the report. It says they face “starkly divergent futures – including futures where their core assets will need to be phased out”.
Prof Jillian Anable, a co-director at the UKERC, said it would prove “politically challenging” for ministers to deliberately disrupt companies, global trade networks, governance and lifestyles.
The report identified gaping policy gaps in the government’s plan to move to a zero-carbon economy. Researchers said ministers’ own models provided only limited insights about the potential impact of a major shake-up to the economy.
Anable said whole-scale changes were needed in the transport system, the largest carbon emitter in the UK economy. “The UK transport sector is nearly 100% fuelled by fossil fuels, with only tiny niches of electrified and bio-fuelled vehicles,” she said.
The government has already set a deadline for the sale of new traditional combustion engine cars to end by 2040. But hybrid vehicles, which are exempt from the ban, will need to be included in it for transport to be “effectively zero carbon” by 2040.
The transport sector made up 33% of the UK’s greenhouse gas emissions last year. The UK’s energy supply contributed 28%, while homes and business added 18% each.
The report said the construction industry would also need to “undergo disruptive change” to deliver energy efficient building stock compatible with climate targets.
But there was “little sign at present” that the policies or skills were in place to retrofit the UK’s draughty homes and businesses, the report said.
“Related to this, it remains unclear what changes incumbent firms in heating will need to implement to deliver decarbonisation, and whether they will have the capacity to do so,” the report added.