Today (22 April) marks ‘Earth Day’, a date in the diary to encourage support for environmental protection.
Amid the global drive to decarbonise, the IOE&IT Daily Update takes a look at environmental news from the world of international trade.
Net zero concerns
A report has warned that the UK is on a trajectory to miss its net zero renewable targets, owing partially to supply chain weaknesses.
Commissioned by the Department for Energy and Net Zero (DENZ) and released last week (17 April), the ‘readiness report’ found that its unlikely the UK will have sufficient steel, concrete and ships needed to build solar farms, transmission networks and wind farms necessary to reach its targets.
Wind farms in particular are threatened by supply chain weaknesses. A combination of high price competition and price pressure from developers has led to financial difficulty for major EU and US manufacturers – the UK’s major suppliers.
Concerns about China’s overcapacity in the sector prompted the EU to launch a subsidy probe earlier this month.
Industry representative body Global Wind Energy Council (GWEC) called for “fair and transparent trade practices” and “a level playing field”.
As demand increases in the coming years, the authors estimate initial surpluses in capacity will become shortfalls in the years 2025-28. This will be minor for components like turbine blades and nacelles (generator casing) and significant for the towers supporting the turbine.
This combined, with the need to upgrade factories and ports to accommodate the larger models favoured for energy efficiency, constitutes a major vulnerability for the UK.
Baringa’s Rob Gilbert and Stuart Williams, authors of the report, said: “Achieving the renewables deployment ambitions outlined in the British Energy Security Strategy will be very challenging without significant coordination across industry and Government to resolve supply chain constraints.”
Sunak ‘set back’ claim
Concerns about net zero strategy came as the leader of a UK climate change body criticised the prime minister, claiming Rishi Sunak has “set us back” on climate change.
Speaking to Laura Kuenssberg, Chris Stark, who leads the UK’s statutory body on the issue – the Climate Change Committee – said the PM has not prioritised climate change, putting the UK at risk of lagging behind other countries’ progress.
“The UK is less ambitious on climate than it once was, and that is extremely hard to recover.”
While he praised the UK’s success at decarbonising energy production, with a clear move away from coal power, he took aim at delays to other green measures.
“I think we have moved from a position where we were really at the forefront, pushing ahead as quickly as we could on something that I believe to be fundamental to the UK economy, fundamentally beneficial to the people living in this country.”
Last year, Sunak rowed back on several green policy targets, including delaying the ban on new petrol and diesel cars by five years to 2035, a move that was widely criticised by environmental groups and businesses.
A government spokesperson acknowledged delays in hitting some goals and said it was important that the UK “reach our net zero goals in a sustainable way”, which requires consideration for the cost to the public, as well as energy security.
Also speaking to Kuenssberg, energy secretary Claire Coutinho echoed these comments, defending the Sunak’s record on climate change yesterday (21 April) and said that any delays were to avoid “heap[ing] costs on families”.
Green subsidy warnings
The IMF cautioned the EU to avoid engaging in a subsidy race with the US and China, estimating this would permanently reduce the bloc’s GDP by 0.6%.
The IMF’s European director, Alfred Kammer, told the FT “our number-one advice to Europe is, don’t become protectionist”.
“Protectionism is going to be damaging globally and a subsidy race is not in Europe’s interest.”
The US passed the Inflation Reduction Act in 2022. The Act is a $US369bn package of investment, subsidies and tax cuts to stimulate green manufacturing, and incentivise firms to move to the US.
The EU included support for green manufacturing in its 2023 ‘Green Deal’, announced alongside the US’ second phase of funding to promote electric vehicle (EV) manufacturing, although with notably less funding available.
The introduction of these policies follow complaints from the EU and US that China’s green technology sector is ‘state-funded’ and could lead to overcapacity that risks ‘flooding global markets’ with cheap goods.
In the process of reviewing EU competitiveness, European Central Bank president and former Italian PM, Mario Draghi, said that some regions are “no longer playing by the rules and are actively devising policies to enhance their competitive position”.
“At best, these policies are designed to redirect investment towards their own economies at the expense of ours; and [at] worst, they are designed to make us permanently dependent on them.”
Apple’s green pledge
US tech giant Apple announced plans on Thursday (18 April) to ensure that most of its value chain uses renewable energy by 2030, ESG Today reports.
Apple revealed that over 320 of its suppliers worldwide (95%) had committed to reaching net zero by the target date, which would significantly reduce the firm’s carbon footprint given that approximately two thirds of emissions associated with Apple products are created in the manufacturing process.
The Verge highlights that the company’s environmental progress report shows a 22% reduction in emissions between 2022 and 2023, CO2 emissions falling from 20.6m metric tonnes to 16.1m.
These announcements also come alongside suggestions that the company may pivot away from China as a key supplier, following CEO Tim Cook’s visit to other East Asian manufacturing nations: Vietnam, Indonesia and Singapore.
Its unlikely that coal-powered China’s status as the world’s biggest polluter is the only factor prompting diversification, South-East Asian manufacturing nations have been the beneficiaries of the post-pandemic ‘China +1 policy’ trend, in which a combination of increased geopolitical tensions between China and the West, alongside higher Chinese wages, have pushed firms to look elsewhere to produce their goods.
Speaking to CNN, Wedbush Securities analyst Dan Ives described Vietnam as the “perfect landing spot” for tech companies.
Reflecting on the country’s appeal, he said that, contrary to popular perceptions of Vietnam, the country has increasing manufacturing capacity across a wide range of sectors.
“We’re not just talking about low-cost electronics. We’re talking higher up the value chain… That was not even on the radar (of foreign companies) two years ago.”