Episode 2: Global Infrastructure Initiative Series

Harvey Weaver:

Welcome to the latest edition of the Business Agenda podcast. I'm Harvey Weaver, an Ashurst partner in our projects practise, based in London. This is the second episode in our two-part series with McKinsey & Company on its new Global Infrastructure Initiative. A summit on the Global Infrastructure Initiative recently took place in Tokyo with senior stakeholders from around the globe, who met to discuss what needs to be done to create pathways to sustainable infrastructure.

In this episode, I'm delighted to be joined by Adrian Dwyer, CEO of Infrastructure Partnerships Australia, and James Heath, Chief Executive of the UKs National Infrastructure Commission and we'll discuss the key takeaways of the summit.

By way of introduction, Adrian's career has spanned policy and public service roles across the private sector and New South Wales and Australian Governments and he has had a number of policy roles in Infrastructure Partnerships Australia before being appointed CEO in 2018. Infrastructure Partnerships Australia itself is an independent statutory body and an industry think tank which provide advice on infrastructure, policy and regulatory reforms. And exists to shape public debate and drive reform for the national interest.

James Heath is a public policy and strategy expert. And held a number of policy roles in Government and organisations such as the BBC, before becoming the Chief Executive Officer of the National Infrastructure Commission. The National Infrastructure Commission is an executive agency of HM Treasury, and provides government with impartial expert advice on major long-term infrastructure challenges. It advises government across all sectors of economic infrastructure and recently added climate change and resilience as core objectives to focus on. I hope you enjoy our discussion.

The summit looked at quite a range of issues over the course of the three days. Examples that spring to my mind were: need for government intervention on issues such as net-zero, increasing independency between energy and transport solutions as these new technologies develop, supply chain shortages, efficiency in construction, for example. And, obviously, the inflationary pressures were mentioned a lot. And, also, the increasing importance, as we move towards digitalization, of more data protection and cybersecurity. Those were just some of the themes that occurred to me. Adrian, maybe I can turn to you first. What were the key themes that came to you out of the summit?

Adrian Dwyer:

I've been lucky enough to go to a couple of physical GII summits, and attend the virtual ones during the unpleasantness over the last couple of years with COVID. And what was striking for me this time versus the other times is actually the consensus that existed around the key issues and particularly net-zero. Previously, I found there was quite different priorities, depending where you are in the world and what stage you're on in the journey. Whereas, this time, there was a real pinpoint around net-zero as being the target that the whole world's aiming at. But, of course, that was against the context of inflation, cost of living, equity, et cetera, et cetera, all these other external stimuli that we discussed a lot. And through the three days, the conversation really moved. And I think there were a lot of answers to those things started to emerge. But the striking thing was that everybody's aiming at the same problem. And we don't all have the same solutions, and I don't think anybody's got the complete solution. But we all at least agree on the problems we're tackling, which is actually quite refreshing.

Harvey Weaver:

And, James, any particular thoughts from you?

James Heath:

I was hit by the size of the opportunity, actually, for economic infrastructure to fix, I suppose, some of the biggest problems facing most countries in the world. There's obviously the net-zero piece. Here in the UK, I think about 70% of CO2 emissions are from infrastructure. But there's also the debate about infrastructure's role in enhancing site resilience, obviously to climate risks, like flooding and drought. And, also, the piece around infrastructure's role in sustainable economic growth.

So there's a real, if you like, a consensus on the size of the opportunity. But also, I think there was a recognition among most people about, actually, the challenge is equally great. And all those things I've just mentioned, climate mitigation, climate change, and economic growth, all of them are going to require this huge wave of sustained large-scale investment, both from public and private sectors, to help fix. So trillions of dollars per year to finance these solutions. That's going to have to be done at a time of huge affordability challenges in most countries and big headwinds. So I took away from it, if you like, at the end, how on earth do you square this circle? And put the conditions in place to get that level of investment that's going to be needed to sort out these big challenges and seize those huge opportunities.

Harvey Weaver:

Yeah, I think one of the things I took away was that what's quite interesting, as you both said, is that there was a, yeah, obviously, net-zero, a big thing at the moment. And definitely came up in the summit quite a lot. But a lot of the focus, and we'll come onto this maybe in a few minutes, is about government. In that, a lot of the messages given is that people everywhere, investors, sponsors, whatever, you're a contractor, everyone recognises the problems. And, actually, there's a lot of private money out there looking for a home, that realises if you can find a way to fix these problems, they're very attractive investments. It didn't come across, attending that summit, as though everyone was worried where you would get the money from. It was almost a question of making sure that money is put in the right way. And giving investors either the right regulatory regimes, the right government stimulus, or whatever, to actually go into there.

Because I think everyone realises that there are major challenges. But if you see yourself as a business and part of the infrastructure community, you have to be part of the solution. And, therefore, there's lots of opportunities as well. But as you say, at the moment, there's an element, there's lots of challenges. There's both the net-zero, there's the inflationary pressures, there's a cost of living prices, et cetera, et cetera. And I think it's just trying to narrow down and getting those first wave projects away, that I know quite a lot of that countries are looking at.

Adrian Dwyer:

On the face of it, it's actually a pretty simple equation. And it's been the same since time immemorial. Capital's a coward, it goes to where it's treated well. And if treating capital well means reasonable risk adjusted returns... So if the projects and the commercial structures, or the government funding structures around them, means that a reasonable buck can be made, there'll be capital available. I think that the challenge is more about adjusting the way we do things to the new paradigm of net-zero. Within the context of all those other challenges that we spoke about.

One of the striking things about infrastructure is we tend to do bits of infrastructure, pretty much, the same way as we did the last ones. There'll be, of course, mild iterations and changes and improvements. But there's a radical challenge coming and, therefore, a need to radically change the way we do those things. We can get the capital as long as we construct all these projects correctly. I think the problem is if we keep millions of tonnes of concrete into the ground that is nowhere near carbon efficient, and we try and transition the energy system by doing things slightly better than we did last time, then we're not going to meet the collective targets we've all agreed to. And that's where the challenges around productivity, innovation, changing the way we do things start to emerge. And some of those answers, I thought, came through a lot in the discussions we had in Tokyo.

Harvey Weaver:

Yeah. And I think one thing, there's been lots of talk about resilient infrastructure, and I think, James, we mentioned in the intro that that's one of the focuses for the National Infrastructure Commission, looking at that resilience as well. And I think one of the things, to take on your point, Adrian, we've started to see here a little bit in the UK is people looking at how better to procure projects. Getting away from that traditional mindset and looking more at the end state they want to achieve. Sometimes, it's called the target state. You look at the end of your project. What do you want your consumer, customer to have? And then work back as how the best way to do it.
 
Just turning to actually... We've mentioned government a few times there. The concept of government role and intervention came up quite a few times at the summit, certainly in the context of helping to kick start business models for areas, such as net-zero. In the context of making sure different arms of government are speaking, when it comes to joining the dots on, say, carbon reduction and transport and those kind of links. You're both members of organisations that work pretty closely with government, obviously. Do you think governments are doing enough to facilitate that change? And what could their key areas of focus be?

Adrian Dwyer:

The short answer in Australia is that we see government simultaneously doing too much and too little. So on the things they do too much, there is this tendency to intervene in markets for very plausible reasons. So if I think about the energy market, there's a tendency from government to go for direct interventions to relieve cost of living pressures. To cap particular inputs to the market and distort that market. And even do direct intervention, in terms of building things or financing things. All with good intentions but, unfortunately, the road to hell is paved with good intentions. And each of those things begins to undermine confidence in the market. So in some areas, there's too much happening. And then we see other areas, where there's clear market failure, where we're not seeing government intervention. In large part because the political ducks don't line up.

So I guess where we'd like to see governments focus their attention is intervene where there's genuine market failure. But those interventions should be, first and foremost, by setting the rules of the game, not playing the game. And not getting directly in it. Because, inevitably, that begins to distort the incentives which begets more intervention, which begets more intervention. You end up with a collapse of the structures that have actually fared us well in the Australian infrastructure sector for 30 years or more. And, actually, we should be preserving and enhancing those and making them right size for the new paradigm, rather than this need to do something.

James Heath:

Really interesting perspective, Adrian. I think, in the UK, one of the big challenges here is there's clearly going to be a significant amount of public investment going in from governments. But probably the vast majority of the investment that's going to be required to fix problems around net-zero, or indeed, climate adaptation, is going to come from the private sector. So, therefore, how do you get that wave of capital in, while keeping the costs of capital low is a real challenge for government. And I suppose the first thing it needs to do, where I think the UK government's been pretty good, is setting long-term ambitious targets and goals that the market can then orientate itself around. The UK's been pretty good on that, into areas like net-zero, but also some of the longer term targets you're starting to see on biodiversity and water.

But those ambitious goals then need to be matched with the necessary pace of change. And I think that is where the UK can do more. I think, far too frequently, delivery on the ground is lagging behind the ambition of those goals. And I think, overall, we probably do need a more consistent, long-term, committed approach, both to policy and delivery. Because the chopping and changing of policy, which we have seen in some areas, does create uncertainty. And investors don't like that uncertainty. An example of the stop start approach in the UK to energy efficiency has led to quite low rates of installations over the past decade. But, if you like, it contrasts that with where we've got it right, where policy stability from governance created, if you like, the mechanisms that resulted in big deployment of renewable energy. So I think we need more staying power on policy.

We probably need... This is where I probably disagree a bit Adrian, perhaps, with you. I think we probably do need some fewer, bigger, better interventions. I think we probably need some more pace, rather than perfection here, if we're going to try and make real progress on climate change. I think there's a real risk of delay now becoming bigger than the risk of getting a few things wrong. And I think government's going to take some strategic bets on this. And I think, finally, I'd just say, there probably needs to be, in the UK, even more devolution of funding and decision making to a local level. Because lots of these problems, particularly in transport, are going to be solved at the local level.

Adrian Dwyer:

Well, I'm really interested in the inertia that you spoke about. Is it risk aversion that's led to inertia? Is it transactional capability? Why isn't it moving?

James Heath:

It's an interesting question. There's this debate in a number of the areas, particularly around energy, whether it's hydrogen networks or CC carbon capture storage networks, about this balance between, if you like, preserving optionality and seeing how the market develops. Versus government taking some risk and taking some bets. And what that balance is, in terms of government policy. And if you like, both schools have different risks and different rewards. But I feel as though we might be reaching a point, actually, where the risks of delay on making some of these calls are actually starting to be greater than the risks of getting some things wrong. Which you're inevitably going to do when you're looking at billion dollar transitions. We are going to get some stuff wrong.

But given some of the targets in the UK, particularly 2035, and major reductions, that's getting very quick. And to reform your grid, rollout EV charging, make major progress in decarbonization within the space of 10 years, there's some significant challenges there. And I think we're only going to make progress if we're probably willing to take some bigger and bolder steps and overcome some of the inertia that's in the system.

Harvey Weaver:

Yes, I think, taking those themes, one is that pace of chain, and I think you're right. I think one of the things that came out in the summit was, there's lots of talk. Now, there needs to be some action. Otherwise, if we're talking in five, 10 years, it's all far too late. And I think, from a government point of view, if I took some of your themes there, it's almost creating that investability, almost leading with these first of a kind projects. Which I know a lot of the work the UK are doing in carbon capture and hydrogen is trying to accelerate that. But almost setting up that framework for the private sector to invest in. And, obviously, those projects have got to have the right risk allocation. And then, effectively, the market effectively will take over. And when you've got that opportunity off and running, where there's those opportunities then, effectively, the market will then effectively develop itself. So it's almost giving those first of a kind opportunities.

And I think the other one is, and however good that may be, it's looking at areas like the red tape, putting in new electricity generation. It's great as we move to more EV and everything else. But, obviously, if constructing it is one thing, if you've got to get there, then the transmissions line to market and they take 10 years or whatever, then you're creating a different sort of problem.

And I think the other thing we're starting to see, when we're talking to clients in the market, is that there's now much more of a need to government to be joined up in terms of linking. So for example, you're taking new hydrogen, for example, production to try and stimulate that area. That's something that, certainly, a lot of people in the transport area, for example, are looking at as well. And it's making sure that the policy around encouraging those type of hydrogen projects, to take one example, and the need for people looking at hydrogen trains and everything else. It's making sure that the two areas develop, if you like, if you're looking at it from government, to make sure you can join those dots. Because, otherwise, there could be lots of good work in one area and good work in another. But, actually, unless you can join the two together, obviously, you're going to create a problem. And you're going to be much, much less effective.

So I think that's some of the themes we're seeing people we're talking to in the market. It's quite a key focus and where they're looking, I suppose, for leadership on.

Adrian Dwyer:
There's some interesting parallels with the Australian market, in that Australia's really interesting from an energy transition perspective. Because, as you know, there was a lot of denial here for a period of time. Obviously, Australia exports a lot of coal, has high per capita carbon emissions, particularly from our energy systems because there's just an abundance of coal. And that's the way the system was built up. But, simultaneously, had the highest uptake of rooftop solar anywhere in the world. So it actually, despite the rhetoric of governments, and a former government that had a war around climate, we'd actually done pretty well. And Australia is blessed with extraordinary renewable resources. So the hydrogen piece that's being spoken about here is an export opportunity. So effectively turning Australian sunlight and wind into hydrogen, and exporting it to countries that have less sunlight and less wind.

The problem still comes back to the grid. How do you move that sunlight, in particular, from the middle of Australia, where it's really sunny, to where the people live on the edge of Australia, or where the ports are, to export that as hydrogen to elsewhere? I'd say it all comes back to a pure infrastructure play. Which is how do you fund, finance, construct, and operate a massively larger transmission grid to be able to accommodate diffuse sources of solar? And I think the challenge is, and I'm sure James would agree on this, is how do the whole of the Western world do that at the same time? We're all aiming at the same target. We all have targets of 2030, 2035, and ultimately, 2050. We're all aiming at the same doorway. And I don't think that's ever happened before. I don't think we've ever all been focused on achieving exactly the same outcome. Now, how does that rubber hit the road on that? Well, if you're a high voltage electrical engineer, you're about to have a busy couple of decades. And we haven't got nearly enough of them to do what we need to do.

James Heath:

No, Adrian, it's a good point. If you like, Australia's challenge on a solar is our challenge on offshore wind. So in the UK, we are building offshore wind at a significant pace. I think we've got a target of about 50 gigawatts offshore wind by 2030. But we're building it much faster than we're building the transmission infrastructure to get that wind on shore and move it around to where it's used. I think I heard a stat from the National Grid, which is obviously the UK's big electricity infrastructure company, that given growing demand for electricity, they've got to build about five times as much transmission infrastructure in the next seven to eight years as they did in the last 30.

And if you like, one of the biggest constraints here is... There's the investment constraint. But actually the planning system constraint, where it's taking... I think this is a Western world problem, it's a France and Germany problem as much as a UK problem. I don't know the extent it's from Australia, but it takes about 10 years to build a transmission line. Three years to build it but seven years for the consenting and the planning. And I think that's longer than it took to create the entire original grid in the UK in the '20s and '30s. So how we fix this problem, and how we accelerate that planning system and the consent system is huge. I've got a few ideas on how it can be done. But unless it's done, it's probably going to become the major constraint on the delivery of net-zero over time.

Adrian Dwyer:

I'll give you a practical example of how that happens here, James. The roof I'm talking to from under has solar panels on it. And I got them installed five, six years ago. It took six weeks between deciding I wanted them, getting quotes, and getting them installed. An at scale solar farm, at least six years, if you can connect it to the grid. Because the grid is constrained and there's limited coordination about where it comes in. Efficiencies of scale and scope tell you it doesn't really make sense to put solar panels on everybody's roof. You're much better off with an at scale solar farm. The only reason that there is such a high penetration of solar panels on Australian's roofs is there is deemed planning consent to do it. You don't have to seek consent. You can just get solar panels. And it takes six years to get up to a farm. So it's a common issue. There's nothing like a crisis to solve these problems. And we're staring down the barrel of a crisis and we shouldn't waste it.

James Heath:

We do need to be quite creative, and perhaps when we're interviewing, how we're thinking about solving some of these problems. Of course, we can try and streamline the planning system and basically try and squeeze each stage. The UK can be much clearer, in terms of strategic direction, on what it wants to build where. And get, if you like, political agreement on that, which then aids things going through the consenting system. But I also wonder whether we've got to be more creative in looking at things like undergrounding cables, where that's possible. It's always going to be expensive at a unit level, but it's not necessarily expensive in the overall scale of a power system. Clearly, it won't be suitable everywhere. It will take a lot of land. But I just wonder whether that's an area that needs to be looked at more.

And, also, a more strategic approach to community benefit, that places are hosting this infrastructure that they don't really want and that they don't really gain from. But there's a wider public good. And, therefore, what sort of benefit should people be receiving for doing that? And there's a debate going in the UK about electricity price discounts for people who live near to onshore wind farms. Should we be looking at similar type models for people who are close to transmission and distribution infrastructure? There's lots of issues here to be debated. But I think unless we look at some more creative, innovative solutions, I don't think we're going to accelerate the system to actually meet the level of demand that's going to be on us in a few years' time.

Harvey Weaver:

Yeah. And just to pick up on that point, James, actually that's an interesting one about when you look at transmission lines and planning consents and everything else, which as you say take a long time, and everyone, I think, obviously, supports all that expansion going. But as we've seen for years and years, when it actually comes to being in the locality, that's very different. And I think it's almost there's no magic answer getting that balance, as you say. Is it a question of saying, "We will need to put transmissions lines here. Obviously, the benefit is wider to everyone. But, actually, there are some be real cost benefits to you in having these assets there." Obviously, there's issues, such as safety and other things. But, certainly, if you look at what we're in the minute, a cost of living crisis, electricity prices going up, inflation going up. If there could be actually some financial benefits that make it more attractive... It's not trying to obviously suggest you can force them through come what may. But actually giving people the ability to look at that trade-off and make decisions themselves.

Now, obviously, it sounds... How you'd implement it would obviously take quite a lot of thought. But, certainly, you come up with that problem where you've got a net-zero issue you're trying to solve. You've got a transmission line issue, where you need to get them. Everyone knows net-zero is a key thing. There's government commitments. I think, now, the climate sceptics have... Not that there are not anymore, but that furor has died down a bit. And it's trying to marry them together. And I think, obviously, that's where government does have a role to play. But, actually, it comes again to that point I was making earlier about different arms of government, making sure they're talking, and working out a solution. And as you said, I think, earlier, knowing that to an extent there may be a bit of failure or problems, or with hindsight you'd have done things in a different way. But I think you're right, the dangers of not doing something are now much worse, than doing something in a probably slightly inefficient way, that, hopefully, you will then learn from when you roll this out in the future.

Just turning to, we've obviously talked about Australia quite a lot, the UK, a lot of the issues we've talked about are very much in the developed countries where we are at the moment. I think one of the things that were mentioned a few times that the summit was, obviously, the disparity between developed and developing countries. And the power sector being a good example. We've talked quite a lot here about net-zero, and solar, and wind, and all that kind of stuff. Where, in some countries, the issue simply of having enough power is the one that's paramount. And how clean it is, is almost a secondary issue. Do you think we recognise that enough? And, obviously, we sit here from a developed country perspective a bit. Do you think there's things that can be passed on to developed countries, things that you can help facilitate them probably getting up the curve a bit quicker?

Adrian Dwyer:

I don't want to stray into areas of moral philosophy but, quite clearly, we've had all the advantages of using cheap fossil fuels to develop as countries. And there's a perfectly legitimate argument for us to then say, "Well, having benefited from that, that others can't." Largely, because of a problem we've contributed more than others. Clearly, there are opportunities ahead, around things like technology transfer, and the things that have emerged from COP with wealth transfer to be able to support transition in other countries. So I think there's a balance needed here. But we also just need to acknowledge, and I think it was mentioned a few times in Tokyo, and you said it there, Harvey, there are still people in places like India, significant millions, tens, hundreds of millions of people in places like India, who simply don't have access to reliable power. And it's pretty rich for us to be saying, "No, you can't have that," when we have. So I think we just need to be a little bit careful about how we approach it.

Harvey Weaver:

Yeah, it's almost a question of basically passing that technology transfer, as you say. And maybe instead of going from a fossil fuel type development through, eventually, to more renewables, actually enabling with that technology transfer. And as, hopefully, inflationary pressures apart, costs coming down, some of this equipment, they almost miss steps. And we've seen in place like Vietnam recently, big programmes where actually they're filling that power hole, if you like. Is actually you go straight to trying to do it with renewables and things like that, instead of going through that more fossil fuel intensive phase.

James Heath:

The challenge is pretty stark. You do have this what feels like a growing gap between the needs of developing countries, in terms of the impacts they're facing from climate change. And then the ability of developing countries to actually finance the transition which, on any estimate, is going to cost trillions of dollars to sort out. So I think that, in terms of developed country's role, that package of how do you mobilise finance? Whether it's grants, or guarantees, or [inaudible 00:29:54], whatever it is. How do you mobilise finance, including from international financial institutions, plus as you said Adrian... Because I was looking at technology transfer and cooperation technology plus capacity building. That type of package at scale feels like what is going to be needed to deal with this problem. But it's huge.

Harvey Weaver:

In Asia, obviously, you've got organisations like Asian Development Bank and whatever, trying to lead on that. But as you say, the key issue is the scale.

Adrian Dwyer:

It's also a really difficult argument to deploy in the midst of cost of living crisis in places like the UK and Australia. And I have observed it more in the UK than perhaps in Australia, where it's not as high a political issue at the moment. But there are things like cuts to international development budgets consistently over time in the UK. From perfectly reasonable standing points of people saying, "Well, hold on a second, why are we sending money to do this, when I can't afford to heat my house?" Or, "I'm visiting a food bank," or whatever the challenge is now. On a personal level, I happen to think that there's very good reasons why we should still be doing that development funding. But as James said, this requires a step change in the volume of funding to assist other countries to make the transition that we're going to go through. And that's a really hard argument to make in the current climate.

Harvey Weaver:

We've obviously had quite a focus on Australia and the UK and obviously looked at the developing countries as well. In terms of from where you're sitting now in the shorter term... And, Adrian, actually you've mentioned the cost of living crisis. Again, which is proving challenges for everyone, including infrastructure. Over the next couple of years, what would you say you see the key challenges in Australia being? But, obviously, also, the key opportunities, where actually there can be some real step changes, if you like? And how do you see that short-term landscape?

Adrian Dwyer:

So I'll go for challenges first. I'll infrastructure theme it for you. PPP, but not public private partnerships, people, prices, and politics are the three challenges over the next couple of years. So just to break those down. People, we have under 4% unemployment in Australia. It was often said during the mining boom in Australia up to about 2011, that if you were in Perth walking down the street and you had a pulse, you could get a job. We're at the point now where the pulse, frankly, is a nice to have. We shut the borders for a long time during COVID. We couldn't bring people in. We've had people retire from the workforce. And I know this is an issue facing the UK as well. We just cannot get enough people to deliver some of the non-negotiable parts of the infrastructure build.

Which goes to prices, of course that's one price input, the inflation in the cost of getting scarce people to do that. But also scarce resources in a global environment, where we're competing for some of the same bits of technology. We'll all be wanting the same offshore wind turbines, for instance. So there's a danger of competing up prices there. How do you make sure that you get the infrastructure efficiently within an affordable envelope?

And then just the politics, again, driven in large part by the cost of living prices, the tendency of governments to want to intervene directly. The tendency of governments, with perfectly legitimate motivations, seek to allocate money in particular places, and allocate interventions in particular places, that are tactically laudable but strategically bad. And we have to try and accept that some of that will happen, but try and suppress it as much possible.

On opportunities, they're abound. Australia, once again, is blessed, as it was with the last energy boom, of having things, like gas and coal and other things, that we could sell to the rest of the world. We have extraordinary renewable resources, sun, onshore wind, offshore wind. The capacity, and the smarts, to be able to turn that into a massive export industry is huge, as well as decarbonizing the domestic grid as well. Alongside all sorts of other opportunities to do things well. So in general, I'm an optimist and I'm very optimistic. But there's certainly some challenges to overcome over the next few years.

Harvey Weaver:

And, James, from a UK perspective?

James Heath:

Yeah, so look, I'd go back to where I started at the beginning of this discussion. That there's some big opportunities, if we get infrastructure policy and planning right, for infrastructure to help solve some of the big questions around decarbonization economies, around adapting to climate change, and around sustainable economic growth. But to meet those challenges, it's by no way of getting away from the fact that infrastructure investment overall will need to go up. And I think, if we pick the net-zero challenge, the decarbonization challenge, this is effectively going to be capital intensive, isn't it? It's going to involve substituting new capital assets, like wind turbines and the reinforced electricity grids that me and Adrian were talking about, for the OpEx costs of fossil fuels.

And while there definitely should be significant savings for households from those type of investments, given that the operating costs of low carbon technologies, like EVs, should come down over time, those savings will materialise over a longer period of time.

So the costs of those upfront investments are going to have to be borne at some potential cost of household consumption in the short-term. And that gets you into interesting political economy questions. It's right back to Adrian's point about politics. About whose consumption is affected, and when, is going to depend on the different funding routes that we choose. Whether that's going to be households self-funding, households paying via their water bills and electricity bills. Or are we going to try and do this mainly through general taxation? And what funding mechanism you pick is going to have really important distributional consequences and political consequences. And, therefore, how we do this, having an open and honest debate about the cost of net-zero alongside the benefits, which there are undoubtedly are of net-zero, I think needs to happen. Trying to pretend it's all upside and that there's no major cost, I think will take us in the wrong direction.

Adrian Dwyer:

I absolutely agree with that, the need for honesty in this. I think on net-zero generally, we've gone from long on rhetoric to, now, people focusing on the practical realities. But there's an honesty missing in the debate. And we need to acknowledge that, whilst there is long-term upside and potentially lower costs, in the short-term, this is going to require some really hard decisions. And as James said, in particular, that intergenerational equity piece is a real political flashpoint. And one we just have to have an honest debate.

Harvey Weaver:

Okay. I think we'll wrap it up there. So, again, thanks very much, Adrian and James, for your time. Interesting to hear the different perspectives. But, also, a lot the similarities between what's been experienced in Australia and the UK, in terms of the challenges and opportunities. So thanks again, we really appreciate your insight, and for your participating today.

Adrian Dwyer:

Thanks very much, Harvey, and good to reconnect with yourself and James again.

James Heath:

I really enjoyed the discussion. Great to see you again, Adrian, and thanks for convening, Harvey.

Harvey Weaver:

Thanks so much for listening. And thanks again to Adrian and James for their time, thoughts, and insights. To make sure you don't miss any of our future episodes, please subscribe to this podcast via Apple Podcast, Spotify, or wherever you listen to your podcasts. While you're there, you can also listen to our first episode on the Tokyo Global Infrastructure Summit. And please feel free to leave us a rating or review. In the meantime, thanks again for listening and goodbye for now.

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