Unleash the power of the Public-Private Partnership

by Julia Stewart, Consultant
12/03/2024

The pressing need for climate action is being felt across the world. Governments and companies have been promoting their credentials and actions, and these have in turn accelerated the momentum for a new approach to solving the challenge of climate change.

Action on climate change often seems impossible, the solutions are elusive or expensive and the capacity for backsliding is enormous, especially as governments deal with competing internal priorities as well increasing international obligations.

But global momentum for industry transition is building and many organisations are taking steps to decarbonise their operations. 

Despite this growing momentum and the development of low-carbon alternatives, decarbonising the hard-to-abate sectors, such as steel, metals and mining, and aviation, will not be easy. 

Policy certainty can only go so far, and handouts are few and far between from governments who are fiscally constrained and want to avoid criticisms of ‘corporate welfare’ – where public funds are used to effectively subsidise projects for which the private sector could reasonably fund themselves.

Climate change isn’t going anywhere, it will continue to trouble government leaders as the electorate pushes for more action. Nice platitudes and vague policy ideas no longer wash and, with it looking increasingly unlikely the world will meet its ‘Paris Agreement’ targets of limiting global warming, voters want to see their politicians prioritise the environment.

But governments can’t do it all and they can’t fund it all, so, what’s the alternative? 

It’s time to bring in the might of the private sector.

The public and private sector have always co-existed, but in recent times they feel more closely aligned. 

We only need to look to the infrastructure sector where Public-Private Partnerships (PPPs) are no stranger. Many large-scale projects are delivered through such a collaboration – whether it’s in design, construction, operations, maintenance or by fronting up with the finance. 

The public sector needs private sector cooperation to deliver its policies and services, while private sector companies are increasingly impacted by regulatory and legislative measures. PPPs combine the best of both worlds – the public sector’s ability to create enabling conditions and the private sectors know-how and financial backing.

The significant investment required to match the scale of change needed is a barrier, but one that can be overcome by merging private investment and experience with local knowledge. 

There’s also the flip side, where many heavy emitters want to decarbonise as well, but it’s just not commercially viable without public sector support.  In some cases, this could simply be creating the right policy settings, or it could be through incentives to complete work on time and within budget.

But what’s in it for the private sector? It’s clear what the public sector is getting – politically anyway – as leaders are pressed to do more, being able to show off your credentials on the world stage while also keeping the electorate happy is a win-win.

For the private sector, there are other considerations. Credibility suffers when organisations occupy one of two areas – disingenuous greenwashing or apathetic silence. It’s no longer acceptable to just talk-the-talk on sustainability, customers want to see action. And there are opportunities too – sustainability strategies serve to manage risk.

Capital providers are in search of bankable projects that align with their ESG targets and net-zero commitments as they work hard to position themselves as sustainability leaders, and governments are looking for ways to make their own differences that don’t rack up a big bill.

It’s a model that is increasingly being adopted worldwide, with examples here in the UK, but also found further afield in New Zealand.

In the UK, Bristol City Council has jumped on the opportunity a PPP offers – the Bristol City Leap is a joint venture between the Council and US clean tech company Ameresco that enables £1 billion of investment in clean energy solutions over the next 20 years. The partnership is playing a big role in decarbonising Bristol’s infrastructure, housing and commercial property.

In New Zealand, the country’s sole domestic steel maker partnered with the Government and a renewable energy generator-retailer to deliver the conditions to implement an electric arc furnace, reducing 800,000 tonnes of climate pollution each year or 1 percent of New Zealand’s total emissions. This project wouldn’t have been possible without government investment, policy certainty, and the competitive and innovative energy supply agreement. 

Back here in the UK, the Labour Party appears to be more positive about using PPPs – Leader Kier Starmer has pledged a ‘genuine partnership’ between public and private sectors to crowd in investment towards growth and jobs. While the Conservatives are a little more cautious, preferring to let the market lead the way, we have seen a similar arrangement to the one in New Zealand here between the Government and Tata Steel.

Regardless, both approaches still offer opportunities for the private sector. Any government, whether it’s an incumbent or an opposition moving into power, is looking to quickly satisfy the electorate, and, preferably, in a way that doesn’t have a huge price tag attached to it. A credible case that achieves government objectives, alongside generating political capital, that incur significant costs to the taxpayer will be compelling for any minister, particularly one grappling with a never-ending climate action wish list.

The private sector is poised to further momentum on decarbonisation, and it’s about time governments took them up on this offer and expanded the use of PPPs.

Through the pooling of resources and expertise, PPPs have the potential to develop and implement innovative climate change solutions that make a real and lasting difference. If we unleash the power of the public-private partnership, we might find it a little easier to achieve our environmental goals.