Government commits to net zero economy

The government has set out its plans to clean up the UK’s energy system while keeping bills affordable as part of its strategy to transition to net zero by 2050

The Energy White Paper sets out specific steps the government will take over the next decade to cut emissions from industry, transport and buildings by 230m metric tonnes, while supporting up to 220,000 jobs as part of a green economic recovery from Covid. 

The job creation programme for the next ten years includes long-term jobs in major infrastructure projects for power generation, carbon capture storage and hydrogen, as well as a major programme of retrofitting homes for improved energy efficiency and clean heat.

There are plans to boost competition in the energy retail market to tackle the ‘loyalty penalty’ – longstanding customers who pay more than new ones – and to provide at least £6.7bn in support to the fuel poor and most vulnerable over the next six years.

This includes extending the Warm Home Discount Scheme to 2026 to cover an extra three quarters of a million households and giving eligible households £150 off their electricity bills each winter.

The £2bn Green Homes Grant announced by the Chancellor has been extended for a further year.

Alok Sharma, business and energy secretary, said: ‘Today’s plan establishes a decisive and permanent shift away from our dependence on fossil fuels, towards cleaner energy sources that will put our country at the forefront of the global green industrial revolution.

‘Through a major programme of investment and reform, we are determined to both decarbonise our economy in the most cost-effective way, while creating new sunrise industries and revitalising our industrial heartlands that will support new green jobs for generations to come.’

Rain Newton-Smith, chief economist at the Confederation of British Industry, said: ‘Business stands ready to deliver the investment and innovation needed to turn ambition into reality, and the proposals outlined in the Energy White Paper will give business further confidence to deliver new infrastructure, including electric vehicle charging, renewable power generation and low-carbon upgrades to people’s homes.’

Emissions Trading Scheme

The government has also said it is establishing a UK Emissions Trading Scheme (UK ETS) from 1 January 2021 to replace the current EU ETS at the end of the transition period.

The UK ETS will promote cost-effective decarbonisation, and will be the world’s first net zero carbon cap and trade market.

The Department for Business, Energy and Industrial Strategy (BEIS) said the scheme is more ambitious than the EU system it replaces – from day one the cap on emissions allowed within the system will be reduced by 5%, and the government will consult in due course on how to align with net zero.

The government is open to linking the UK ETS internationally in principle and BEIS is considering a range of options, but no decision on the preferred linking partners has yet been made.

The government has already legislated to establish the new UK ETS, and the technical system underpinning the scheme is in final stages of development and on track to be ready on time.

Other commitments for 2030 include delivering 40GW of offshore wind, enough to power every home in the country, and investing £1bn in carbon capture storage in four industrial clusters.

There are also plans to aim for 5GW of hydrogen production by 2030, backed up by a new £240m net zero Hydrogen Fund for low carbon hydrogen production.

In addition, the government is investing £1.3bn to accelerate the rollout of charge points for electric vehicles in homes, streets and on motorways as well as up to £1bn to support the electrification of cars, including for the mass-production of the batteries needed for electric vehicles.

There will be a series of consultations in spring 2021 to create the framework to introduce opt-in switching, consider reforms to the current roll-over tariff arrangements, and a call for evidence to begin a strategic dialogue between government, consumers and industry on affordability and fairness.

NAO report

Earlier this month, a report from the National Audit Office (NAO) described achieving net zero greenhouse gas emissions in the UK by 2050 as ‘a colossal challenge’.

The NAO said there are risks to cross-government arrangements that need to be considered carefully, such as ensuring individual departments give net zero sufficient priority and that there are the necessary skills across government.

The audit watchdog said the government has not clearly set out the roles of public bodies outside central departments, despite many, including local authorities, playing critical roles in the achievement of net zero.

In 2018, public sector buildings emitted 8m tonnes of greenhouse gases, representing 9% of all emissions in the buildings sector. To date, central government departments have reduced emissions from their buildings and operations by an estimated 46% since 2009-10. But targets have not covered significant areas of impact outside of central government, like schools and the NHS.

The NAO said the costs of achieving net zero are highly uncertain. The Climate Change Committee estimated in 2019 estimated this to be around 1–2% of GDP in 2050. BEIS is developing its own estimates of what net zero will cost between now and 2050, with this likely to be hundreds of billions of pounds. 

Gareth Davies, head of the NAO, said: ‘Government wants the UK to be a global leader in tackling climate change and achieving net zero is key to its ambitions.

‘While emissions have reduced steadily in recent years, achieving net zero is an enormously challenging long-term project, which will require well thought-out cross-government coordination to drive unprecedented changes across society and the economy.

‘Government needs to step up to the challenge, ensuring it has a clear strategy to achieve its goal and accurately monitoring progress.

‘It will have to reach outside of Whitehall and bring together the public sector, industry and all of us as citizens in a coordinated national effort spanning decades.’

NAO report: Achieving Net Zero

By Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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