Good COP/Bad COP: How can international trade advance the UK’s net zero agenda?

Account Executive Ciaran Gill explores how the UK’s international trade strategy can make next year’s COP26 conference a success

2021 is set to be a big year for the UK. New Year’s Day will mark the end of the EU transition period, as well as the start of a year that will see the UK take on the G7 Presidency and host the COP26 conference in Glasgow. 2021 will also see the UK revert to an independent trade policy for the first time in over 40 years. The message that has been coming from government over the past few years is that once the transition period ends, it will be able to develop a new Global Britain identity and forge new and exciting links with the world.

Winds of change within the global community have pushed net zero considerations to the top of the international agenda. Leaders of China, Japan and South Korea, for instance, have all recently committed their countries to net zero, or carbon neutrality, goals by 2050 at the earliest.

The convergence of the crystallisation of a global net zero agenda and the UK’s emergence onto the world stage outside of the EU provides a substantial opportunity. In September, the Prime Minister declared that the UK has the potential to become the “Saudi Arabia of wind energy”. The following month, he told the Conservative Party conference of his intention for the UK, by 2030, to have 40GW of installed offshore wind capacity. Although the UK has the world’s largest offshore wind market, 4OGW would be a quadrupling of its current capacity.

In the search for a post-Brexit identity, and with COP26 one year away, we can therefore see that the UK Government is aiming to present the country as a global hub for a net zero world, encompassing not just renewable energy but also industries related to technologies concerning hydrogen fuel development and carbon capture and storage. In what ways could this interact with the UK’s construction of its post-Brexit international trade agenda?

(Sittin’ On) The Dock of Taipei

A very strong area that we can highlight when discussing the UK’s global trade opportunities is its offshore wind sector. The Global Wind Energy Council (GWEC) recently published data which showed that Asia’s share of the offshore wind market is set to rise from 24% in 2019 to 42% in 2025, with the bulk of Asian offshore growth set to take place off Chinese shores. Behind China, however, in GWEC’s figures, was Taiwan.

In November 2019, UK Export Finance, the Government’s export credit agency, announced that it was providing £230 million in support for the construction of the Formosa 2 wind farm in Taiwanese waters, helping UK companies working on the development in the process. In October of this year, Minister of State for Trade Policy Greg Hands MP oversaw an annual trade dialogue with his Taiwanese counterparts. Following the talks, he tweeted that they had discussed “removing remaining barriers” to UK firms in areas such as offshore wind.

Opportunities for offshore wind growth can also be found in Taiwan’s Asian neighbour Japan. Several weeks ago, Japan’s new Prime Minister Yoshihide Suga told Japanese lawmakers that the country, the world’s fifth-biggest emitter of carbon dioxide, will become carbon-neutral by 2050. Japan is aiming to have 10GW of offshore wind capacity installed by 2030, but the International Energy Agency has pointed out that Japan could feasibly satisfy its entire power needs nine times over via offshore wind.

In October 2020, the UK and Japan announced that a trade deal between the two is to come into force once the UK leaves its EU transition period. One of the provisions of the deal is that it will be easier for British and Japanese professionals to work in each other’s countries on a temporary basis. This, of course, would make it easier for UK offshore professionals to offer their services in Japan. A favourable UK-Japan trading environment, combined with similar levels of Government support that were provided to UK firms operating in Taiwan, could give a considerable boost to UK offshore wind companies seeking international business.

Trade negotiations have also been ongoing throughout the year between the UK and the US. Despite a massive coastline, US operational offshore wind capacity remains at a mere 42MW and so future trade negotiations between the two countries may yield further opportunities for low-carbon UK firms. Such opportunities may be more plentiful under a new Biden Administration than they would have been under President Trump. After all, President-elect Joe Biden has promised to “build back better” and readmit the US to the Paris Agreement, and in his recent call with the UK Prime Minister, Boris Johnson invited Biden to next year’s COP26 conference.

November Rain

This conference, to be held in Glasgow in November 2021, will provide the UK with a major opportunity to showcase its new post-Brexit global role. The ultimate responsibility for the conference rests with the Cabinet Office. It is fair to say, however, that the event will only be a true success if the principles underpinning COP26, i.e. the quest for net zero, are not just embedded within the Cabinet Office but also within the Department for International Trade (DIT), the Department for Business, Energy and Industrial Strategy (BEIS) and the Foreign, Commonwealth & Development Office (FCDO).

It could be argued that COP26, given that it falls under the UN umbrella, is ultimately a diplomatic endeavour and should therefore be overseen by the FCDO more than it has been. Indeed, one of the key drivers of international relations and diplomacy is soft power, and this element enables countries to persuade other countries to make certain commitments.

Soft power, however, is also advanced through international trading relationships. Japan, for instance, has accumulated a substantial amount of soft power through its export of electronics. With COP26 twelve months away, there is a chance for the UK to increase its soft power by forging trading relationships which accentuate the UK’s expertise within its green technology industries and expertise, for instance, within areas such as hydrogen development and battery storage solutions. This soft power, in turn, could make COP26 more likely to be a success.

The Final Countdown

Alignment is consequently needed between the Cabinet Office, BEIS, DIT and FCDO, as well as the devolved administrations, to ensure that net zero considerations are embedded into all government processes and that any opportunities arising from trade deals benefit all nations of the UK. A focused approach from DIT which would highlight UK net zero expertise in future trading relationships, could significantly enhance UK soft power and render COP26 a triumph. UK Export Finance’s involvement in Taiwan’s offshore wind industry could be a blueprint for future engagement.

Money and time, as so often, provide potential obstacles to UK action. In the summer, Germany announced a €7 billion hydrogen strategy which will seek to position it as one of the world’s leading hubs for the renewable energy source of green hydrogen. Last month, Australia announced a $36 billion project that will see it eventually export green hydrogen to Singapore from what will be the world’s largest solar and wind farm. The actions of these countries show that new geopolitical dynamics, via new types of trading relationships, are already being forged within the new net zero-focused world.

It has to be noted, of course, that Germany’s EU membership is not preventing it from advancing its energy industries. But in an uncertain world and with COP26 just one year away, trade could play a key role in the UK’s construction of a post-Brexit identity as a committed actor in the global quest for net zero, an identity that could be fully realised by a successful conference in November of next year.

Photo by Nicholas Doherty on Unsplash