The Department for Energy and Climate Change (DECC) had a bumpy start. Forged in 2008 from “tree-hugging Defra types and coal-burning DTI types”, as one official remembers, one of its tasks was to bring together opposing Whitehall cultures and ensure trade-offs were properly confronted.
This was not helped by the fact that it began life as a “department with a hole”. Neither the Department for Environment, Food and Rural Affairs nor the Department for Trade and Industry had been willing to lose any corporate staff so it spent its first months without much in the way of HR, communications or private offices. The official remembers that as a “real brake on getting going”.
DECC’s second coming should be smoother. DESNZ (even the department doesn’t seem sure of how to pronounce its own name) has not had to scrounge for the basics. It keeps Grant Shapps – “a heavy hitter for the current government”, as former DECC secretary Amber Rudd told CSW. Many of the officials involved – including Jeremy Pocklington, the permanent secretary, and Clive Maxwell, his deputy – have long experience in energy policy. Its first weeks have been a flurry of activity.
While machinery of government changes are always costly and disruptive, the creation of DESNZ (name aside) passes the bar as being sensible. BEIS had become unwieldy. There were some benefits to bringing the energy and business portfolios together. But having lived through Brexit, Covid and then an energy crisis, its sprawling breadth came at the cost of strategic focus. Much of its time was spent fire fighting.
In the midst of negotiations over an exit deal, a BEIS official I spoke to estimated that energy accounted for just one tenth of the secretary of state’s time. That clearly changed following Putin’s invasion of Ukraine; but the idea that one department could support businesses and manage the energy transition through such turbulence proved unrealistic. Greg Hands pointed out that as energy minister, he was effectively doing what used to be four jobs.
DESNZ will have a much tighter focus. It’s already set out its priorities for this year – including energy security, cutting bills, and seizing the benefits of net zero – and made an early move to cut bills for energy-intensive industries. It should have more time to develop ideas – like Boris Johnson’s vague plan for British nuclear renaissance – into workable policies. Shapps has indicated that he hopes to address barriers like cumbersome planning approvals for renewables and the high cost of grid connections for charging infrastructure – both excellent targets.
“DESNZ will need a clear sense of where the UK has potential advantages – and the role of government in seizing them”
But the new department arrives at a crucial moment for UK climate policy. At Cop26 in November 2021, the UK could still credibly claim the mantle of climate leadership. It had cut its emissions faster than any other rich country and few, if any, others had published a detailed net zero strategy. Since then, momentum has stalled. In its latest assessment, the Climate Change Committee concluded that “tangible progress is lagging policy ambition”, pointing to major policy gaps and weak plans for delivery.
Other countries have been much busier. In the US, the Biden administration has passed the Inflation Reduction Act, a massive programme of tax subsidies to encourage investment in domestic green industries. The Congressional Budget Office has scored its value at $370bn (it has no upper limit so could end up at two or three times that). EU members, fretting about an exodus of green investment, are responding with their own proposals.
This backdrop is why one of the central messages in Chris Skidmore’s independent net-zero review, published in January, was that the UK “risks getting left behind”. His report has been well received – Rudd says “he’s given [ministers] the roadmap” – but not acted upon. The government has indicated that it could take months to formally respond, and appears hesitant about several of Skidmore’s recommendations, including boosting onshore wind and funding serious investment in upgrading what he describes as “the UK’s antiquated grid”.
The UK need not attempt to emulate the US’s largesse. In his first interview, Shapps expressed concern about whether the Inflation Reduction Act contravenes state aid rules, saying “obviously the WTO will be interested in it”. But DESNZ will need to work on the UK’s pitch to green industries. The collapse last month of Britishvolt – a startup aiming to make batteries for electric vehicles, seen as critical to the future of the UK automotive industry, raised howls about the absence of a green industrial strategy.
DESNZ will need a clear sense of where the UK has potential advantages – and the role of government in seizing them. That could mean doing more in terms of regulations to provide businesses and investors with clearer signals about the speed and direction of travel. It is likely to require rapid progress on the types of barriers Shapps has identified.
DESNZ could do worse than learning from its predecessor’s successes – and its failures. DECC overachieved in driving a transition towards renewables, particularly offshore wind. The design of Contracts for Difference, a market mechanism – alongside industrial and planning policies – constitutes one of the UK’s biggest policy successes of the last decade. Driving investment relied on a set of policies pulling in the same direction, maintained over years.
Where DECC struggled, as a small department with little clout, was influencing others. As one former official says, “did Defra or [the Department for] Transport care what DECC said? No.” This is more important now, because it is in sectors like agriculture and housing where the UK is falling off track for its climate commitments. An updated net-zero strategy is due in March, though officials say it is likely to look similar to the previous one with some updated numbers.
DECC was also seen as a department that was good at policy but guilty of “chucking schemes over the fence to delivery”, with little idea of how they would be implemented – notably in the case of the Green Deal, a failed energy-efficiency scheme.
DESNZ’s success will partly depend on support from the centre, and its ability to grip delivery. During the coalition years, DECC could rely on strong support from deputy PM Nick Clegg and chief Treasury secretary Danny Alexander, both members of the central quad. Rishi Sunak has shown little interest in spending political capital on advancing the net-zero agenda – though Jeremy Hunt and Michael Gove may be allies.
The government should also examine Skidmore’s proposals for creating a central office to unblock policy delivery – already proving complex in areas like EV charging.
One person likely to be pleased by all this is DECC’s first secretary of state: Ed Miliband. In public, the now-shadow climate and net-zero secretary has accused the government of “rearranging the deck chairs on the Titanic”. But the government has more or less recreated the department that he established and would like to inherit if Labour wins the next election. If he does, the transition could hardly be bumpier than the first time.