Is Truss up to tackling climate and cost of living crises?

Investment commentators say new UK PM's support for fossil fuels and fracking 'worrying'

Tackling the cost-of-living crisis in the UK could go hand in hand with addressing climate change, but on day two of her new post few investment commentators think the new prime minister is up to the challenge.

Truss was voted the new Conservative Party leader on Monday 5 September with 57% share of votes and was sworn in by the Queen the following day, succeeding Boris Johnson who led the government from July 2019.

See also: – Leadership race risks damaging investors’ net-zero conviction

As Truss steps into 10 Downing Street, ESG professionals and environmentalists admitted “there are no easy answers” in addressing the high living costs brought about by soaring energy prices, and the ensuing inflation levels that are likely to top 15%. But there is a way to address both:

“The new prime minister has an opportunity to depoliticise the debate around the causes of the UK’s energy crisis, demonstrating that reducing the cost of living and transitioning to a net-zero economy can go hand in hand,” said Steve Malkin, CEO of Planet Mark.

However, “she’s made it clear she’s against the windfall tax on oil and gas companies and has stated she would support fracking where local communities are in favour of it,” highlighted Tara Clee, ESG analyst at Hargreaves Lansdown. “Rumours that she will award more than 100 new oil and gas licences in the North Sea have also hit the headlines this week. Truss’ support of a significant scale up of oil and gas exploration is worrying.”

Truss is missing an opportunity to take urgent steps to deliver a low carbon economy, Malkin added, which will create new jobs, skills and growth, level up communities, help to tackle the climate emergency and, importantly, bring down inflation and soaring energy bills. “Net zero is a genuine solution to, and not a cause of, today’s economic challenges.”

Unlawful net-zero strategy

The UK government needs to take climate action regardless of the cost-of-living crisis – its net-zero strategy was ruled unlawful in July and officials were given eight months to fix breaches of the Climate Change Act (CCA) where the UK did not sufficiently show how key emissions reductions targets will be met.

Truss has reaffirmed her support for the UK’s 2050 net-zero goal, but questions remain on how this will be delivered while supporting new fossil fuel plants, and she has also previously called large-scale rural solar farms as “paraphernalia”, Clee highlighted.

US’ inflation bill a consideration for UK

During the campaign trial, Truss “proposed tax cuts as the best way to help with soaring costs”, a note written by the UBS Wealth Management’s CIO office said as it warned on economic prospects.

“Without intervention to help households and businesses with soaring energy costs, the UK economy is likely heading for a sharp contraction in the fourth quarter. Consumption, production and investment are all likely to fall. Truss so far has not been in favour of windfall taxes on utilities, which suggests the budget deficit will grow.”

However, on the upside, the department led by CIO Mark Haefele pointed out, is that clean energy and related solutions are rapidly becoming more competitive.

The team also suggested the UK may consider following in the footsteps of the US, after the Senate recently embedded $300bn worth of climate initiatives into the US Inflation Reduction Act (IRA), as renewable investments now bring a more stable cost outlook in the medium- to-long term.

Along with the Infrastructure Investment and Jobs Act (2021) and the CHIPS Act (2022), the average annual spending on climate and clean energy by the US federal government is estimated to more than triple this decade compared to the 2010s, according to UBS.

“The breadth and scope of this unprecedented “climate bill” is clearly not the result of a sudden ideological shift — economics are now dictating the urgency,” Haefele’s team said.

The other options

There are other, some would say more realistic, possibilities from the new PM’s actions: a freeze on energy bills has been touted as a possible tool to bring down soaring costs of energy, while others have pointed to the role of smaller companies in the economy.

“Freezing energy bills might mean that consumers will not have to worry about further increases in the cost of energy per unit for the time being, but it would still leave the poorest households struggling to heat their homes and keep their lights on – pushing more and more into fuel poverty,” pointed out Myron Jobson, senior personal finance analyst at interactive investor.

Meanwhile, Planet Earth’s Malkin said empowering the UK’s many small- and medium-sized businesses is a “huge part of the solution”.

He explained: “Reducing their carbon emissions and helping them focus on driving the low carbon economic transition will lower their bills, helping them to navigate this immediate economic crisis, and it will enable them to kick start an economic revival. This can be achieved in the early stages of  Truss’ premiership and enable many SMES, the backbone of our economy, to trade through this crisis and keep our economy moving.”

For Friends of the Earth head of political affairs Dave Timms the solution is simple: “Say no to lifting the ban on fracking, no to new coal and no to exploiting more North Sea oil and gas.

“The out of touch, short-sighted proposals will do little to tackle the energy crisis and will only lock us into expensive and polluting fossil fuels for decades to come.”

He reiterated Truss has the solutions to address both the energy and climate crises “at her fingertips” and on their website Friends of the Earth has listed five ways the new PM can do so.

These include funding a free street-by-street home insulation programme, unlocking the UK’s renewable potential by removing the unfair planning barriers to onshore wind and scrapping the limit that restricts the quantity of solar and onshore wind projects, producing a lawful net-zero strategy and the restoration of nature.  

Lastly, he added: “Energy efficiency measures and cheap renewables are the best fixes for boosting energy security and bringing down fuel bills – they’re quick to develop and are universally popular with the public.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...