The £1bn opportunity: How new Government funding could spur the low-carbon transition

After the Government announced that it will pour £1bn of funding into innovative research and development projects across the UK, edie explores five areas of the green economy which could use a funding boost if the nation is to reach future carbon targets.

Calls have been made for further Government investment across several areas in order to meet the nation's upcoming carbon budgets

Calls have been made for further Government investment across several areas in order to meet the nation's upcoming carbon budgets

After recently investing £180m in the Offshore Renewable Energy Catapult and Centre for Process Innovation, the Treasury announced on Friday (August 10) that it will assign an extra £780m to the UK’s catapult centres as the Government strives to meet the aims of its Industrial and Clean Growth strategies. Combined, this brings total Government investment into catapult centres to almost £1bn.

The fresh investment – which is the largest the Government has made into innovation research and development projects in four decades – is set to benefit aspects of the economy ranging from healthcare to aviation. However, the deal could also fast-track the nation’s efforts to meet future carbon budgets, by targeting solutions in the renewable energy, green aerospace and energy systems spheres.

But of course, the issues which these projects seek to tackle will form just a small part of the sustainability challenges which the Government is facing as it seeks to limit the UK’s annual emissions to 57% below 1990 levels by the year 2032 and 80% by 2050.

In fact, the funding announcement comes shortly after a Committee on Climate Change (CCC) report predicted that the UK will miss its future carbon budgets as a result of weak policies across transport, heat, agriculture and the built environment sector.

With this in mind, edie has explored five areas which are undoubtedly in need of further investment if they are to usher in an unprecedented transition to a low-carbon economy for the UK.

1) Carbon capture and storage (CCS)

CCS has re-emerged as an important part in the Government’s Clean Growth plan, which sets carbon reduction targets that rely on the technology being “deployed at scale during the 2030s, subject to costs coming down sufficiently”.

However, ministers have faced criticism over its handling of CCS projects since closing the £1bn competition fund in 2015, with critics claiming that the decision could cost the UK an additional £30bn if it is to meet its 2050 carbon targets.

Since closing the fund, the Government has pledged to spend up to £20m on a CCS demonstration as part of the Clean Growth Strategy – but this allocation brings its total budget to kick-start CCS to just £100m, or a tenth of 2014 levels.

This drop in funding comes despite research from the Energy Technologies Institute (ETI) finding that, if all the UK’s potential CCS sites were utilised, up to £2bn could be saved annually through the 2020s. The ETI additionally estimates that bioenergy carbon capture and storage (BECCS) could deliver roughly 55 million tonnes of net negative emissions a year in the UK – approximately half the nation’s emissions target – by the 2050s.

2) Decarbonising heat

On a global level, the consumption of renewable energy in heat has continued to struggle, growing by just 1% globally between 2010 and 2015, when the total stood at 24.8%, according to the latest figures from the United Nations Statistics Division (UNSD).

Decarbonising heat is widely seen as one of the greatest challenges facing the UK’s energy system. The Government has faced numerous warnings that it will miss crucial 2020 renewable heat targets unless "major policy improvements" are rapidly enforced. Similarly, an Energy and Climate Change Select Committee report from 2016 revealed that the UK is less than halfway to achieving the target of 12% of energy needs for heat generation coming from renewable sources.

Nonetheless, the Public Accounts Committee (PAC) has found that the Renewable Heat Incentive (RHI) is set to install barely one-fifth of the 513,000 new renewable and low-carbon heating systems which were promised to be delivered by the scheme.

Through the Clean Growth Strategy, the Government has committed to spending £4.5bn on projects which support renewable and low-carbon heat, including £184m for innovation programmes. However, with the cumulative additional cost of decarbonising the UK's heating system by 2050 estimated to be as high as £450bn, green groups are continuing to call for additional funding.

3) Greening the built environment

In a bid to tackle the challenge of decarbonising the nation’s building stock, Prime Minister Theresa May has vowed to halve the energy use from new buildings by 2030, as part of the Government's Industrial Strategy. The Government will also aim to halve the energy costs from the existing building stock - both domestically and commercially.

In a bid to achieve these aims, the Treasury has aside around £3.6bn of investment to upgrade around 500,000 homes through the Energy Company Obligation (ECO) scheme, while ministers last year struck an agreement with the construction industry to halve emissions in the built environment over the next eight years.

Nonetheless, the UK’s built environment sector, specifically the homebuilding sector, has been named by the CCC as a climate change laggard in the wake of the Government’s decisions to cancel plans to make new houses zero carbon and to axe home insulation incentives.

Similarly, new research from think tank IPPR has concluded that the nation will not meet its 2030 Fuel Poverty Strategy target of ensuring all fuel-poor homes are upgraded to an energy efficiency rating (EPC) of C by 2030 until the end of the century. This is due to the current pace of deployment under ECO, which is set to be formally re-launched for the period 2018-2022 later this year.

In the wake of these findings, campaigners have called on ministers to increase the ECO budget, which was recently cut by 40% to £640m.

The benefits of investment in greener buildings have been recognised by the Clean Growth Strategy, which notes that the market for investment in buildings that reduce emissions and are resilient to climate change in six key emerging economies in Asia has been estimated at more than $15trn up to 2030, according to the Climate Bonds Initiative.  

4) Electrifying transport

If the UK is to meet its fifth carbon budget, a big improvement will be needed in the transport sector, which overtook the power industry as the most emitting sector in 2016.

After failing to achieve the global average of 2.81% renewables mix in transport in 2015 - with a proportion of just 2.31% according to the UNSD - the UK Government has launched a £1bn support scheme for ultra-low emissions vehicles to support its 2040 phase-out for sales of new petrol and diesel cars.

It has additionally claimed that it will pour £840m of public funding into low-carbon transport innovation to accelerate new fuel uses through the Clean Growth Strategy, while working with industry to develop an Automotive Sector Deal to accelerate the uptake of zero-emission vehicles.

However, with research repeatedly concluding that slow infrastructure investment may hamper electric vehicle (EV) adoption in the UK, calls are now being made for the Government to do more to support the transition away from petrol and diesel ahead of its 2040 ban.

5) Recycling infrastructure improvements

England’s recycling rates dropped from 44.8% in 2014 to 43.9% in 2015, leading a string of big-name retailers to call for a regulation and infrastructure reform which would see more recycling collection points built, tax reliefs for recycled content introduced and a universal list of acceptable packaging materials published.

Moreover, following China's ban on the import of plastic and mixed paper waste last year, several key players in the UK’s waste management industry have claimed that now is the time for the UK to funnel investment into innovations aimed at improving recyclability as it strives to create stand-alone resource management systems.

Compounded by the UK’s aim to phase-out use of certain types of plastic by 2042, the likes of the Foodservice Packaging Association, Incpen and WRAP have campaigned for a reform of the existing Packaging Recovery Note (PRN) system to increase funding for recycling infrastructure. For the UK, the cost of purchasing PRNs is around €20 per tonne of packaging, but other European nations have an average of around €150 per tonne.

Producer Responsibility Obligations (PROs) from UK businesses, which create a legal obligation for packaging producers to ensure that a proportion of their marketed products are recovered and recycled, currently contribute to just 10% of the cost of waste disposal, with taxpayers paying the remaining 90%. A revamped investment approach could set the UK on a new trajectory for waste management; one that champions indigenous, closed-loop solutions.

Sarah George


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Clean Growth Strategy | Green Policy | Clean energy investment

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Green policy
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