Recapping a bumper week for UK green policy: Here’s what you need to know

To say it has been a busy week for green policy announcements in the UK would be an understatement. Here, edie recaps the key changes from the Net-Zero Strategy, Heat and Buildings Strategy, Environment Bill and HM Treasury.

Recapping a bumper week for UK green policy: Here’s what you need to know

From road expansions to the net-zero strategy, a lot of green frameworks have been challenged

Back in June, the Government was accused by its own climate advisors of having “no coherent plans” to lay the foundations for its commitment to net-zero by 2050. A string of important policy packages promised ahead of COP26 in November remained outstanding, while “climate contradictions” including the Cumbria deep coal mine and Cambo oilfield were making headlines.

Fast-forward to this week, and several metaphorical buses have come along at once. In the space of 72 hours, the Government published 21 net-zero-related documents, including consultations, policy packages and roadmaps, totalling thousands of pages.

While the general conclusion across the nation’s green economy is that further information is still needed and that the levels of funding promised must be built on, we now have a far clearer idea of the direction of travel than we did mere months ago. Here, edie summarises the headline announcements from this week.

Net-Zero Strategy

The Net-Zero Strategy is unquestionably the largest piece of policy to be published in this space this week. It has been badged as a roadmap for “transforming every sector of the UK and global economy” in line with net-zero by 2050, covering plans for high-emitting sectors including energy generation and transmission; transport; heavy industry, heat and buildings. There are also updates on nature-based and man-made carbon removal solutions.

Notably, time-bound, numerical, sector-specific decarbonisation targets are absent. Instead, the Strategy confirms several key decisions on technologies and timings.

In the fields of man-made carbon removals and energy, for example, the Strategy names the East Coast Cluster in North East England and the HyNet North West projects as the first two carbon capture, utilisation and storage (CCUS) clusters that are expected to enter operation. The Acorn Project in the Scottish Cluster was announced as a reserve. The Government is planning to mobilise £20bn in funding for greenhouse gas removal technologies by 2030, to deploy 5 MtCO2/year of capacity by that point. The Industrial Strategy is bolstered with a commitment to £14bn in public/private investment at a minimum through to 2030. This will deliver four CCUS clusters.

Also in the energy space, the Strategy pledges £380m in additional funding for offshore wind and £120m in a new Future Nuclear Enabling Fund. It states that a new large-scale nuclear power plant will be announced before 2024 and that the Government is keeping its options open for small modular reactors (SMRs). For oil and gas, the Strategy confirms a new “climate compatibility checkpoint” for future licencing on the UK Continental Shelf, but stops short of promising an end to new licencing.

Transport is the UK’s highest emitting sector and decarbonisation levels have stagnated in recent years. The Net-Zero Strategy defers to the Transport Decarbonisation Plan for some aspects, including active transport, bus networks and phasing out ICE HGVs. However, there are some new announcements, including:

  • A new Zero-Emission Vehicle Mandate for carmakers
  • A £350m addition to the £1bn Automotive Transformation Fund
  • £620m of new funding for charging infrastructure and zero-emission vehicle
  • Plans to leverage more than £220bn of public-private investments

Less is said on nature, but the existing £640m Nature for Climate Fund gets a £125m boost. There are also new commitments to treble woodland creation rates in England by 2050 and to restore 280,000 hectares of peatland within the same timeframe.

See the next part of this round-up for information on heat and buildings.

To read more about the “good, bad and untimely” of the Strategy, click here to access our latest blog, penned by edie’s content editor Matt Mace.

You can read edie’s round-up of reaction to the Net-Zero Strategy by clicking here.

Heat and Buildings Strategy

The Government put out a press release on the Heat and Buildings Strategy’s domestic boiler upgrade scheme on Monday night (18 October) then followed up with the full 202-page document on Tuesday (19 October). These two sectors account for around 40% of annual national emissions, meaning they should be priorities on the road to net-zero.

In total, the Strategy details about £3.9bn of funding to support the transition to low-carbon commercial and domestic buildings, with most of the information on the latter. Given that the Conservative Party manifesto committed £9.2bn to building energy efficiency alone, and that the new funding covers technology shifts, innovation and scheme administration as well as efficiency, there are hopes that the Strategy is just a starting point.

The Strategy sees the Government coming down firmly in favour of electric heat pumps in the short term. It delays a decision on the widespread use of hydrogen in heating until 2026, subject to trials of the UK’s first Hydrogen Village in 2025. Carbon capture, usage and storage (CCUS) is also confirmed as something that will be scaled up in the more distant future.

Heat pumps are positioned as a key solution for emissions from heat in UK homes, which are down just 14% on 1990 levels. The Strategy details a new £450m boiler upgrade scheme, whereby homes will be able to claim £5,000 each for heat pumps. BEIS has stated that this will bring the cost of a new heat pump to price parity with boilers, but some have disagreed. There have also been questions as to how the UK intends to hit its target of 6000,000 heat pump installations a year by 2028, when the upgrade scheme will only reach a maximum of 90,000 homes.

On energy efficiency, the Strategy outlines a £950m Home Upgrade Grant and an extension to the Social Housing Decarbonisation Fund, so that it will total £800m by 2025. It is hoped that these funds, plus other measures detailed, can bring up to 70% of England’s homes to Energy Productivity Certificate (EPC) band C or above by 2035, from approximately 40% at present. Additionally, BEIS will explore whether minimum energy performance standards should be set for the 2030s and 2040s.

Far less is said about commercial premises and even less still about heat for industrial processes. It seems that, on the latter, the Industrial Strategy will be the main point of reference

The Strategy acknowledges that, as the energy mix for heating changes, with natural gas scaling back and electrification and hydrogen scaling up, systems change is needed to maintain energy supply and security. However, there is a lack of in-depth information on how this will affect supply and demand, and how flexibility will be unlocked to help manage the transition.

You can read edie’s round-up of reaction to the Heat and Buildings Strategy by clicking here.

Environment Bill

The Environment Bill’s progress through Parliament has been hit by Covid-19-related delays. This week, it was up for discussion in the House of Commons once more, with several amendments voted for by the House of Lords in a bid to safeguard the environment post-Brexit and make good on the Government’s pledge to leave nature in a better state for the next generation.

Amendments included greater provisions for ancient woodland protection in planning frameworks; restrictions on ministerial powers to weaken habitat-related regulations; a legal duty on water companies to reduce raw sewage discharges into rivers and moves to strengthen the independence of the new watchdog, the Office for Environmental Protection (OEP).

All amendments backed by the Lords were rejected in the Commons, with many media outlets reporting that The Government is keen to see the Bill receiving Royal Assent ahead of COP26, and thus not receptive to requested changes at this stage. Environment Secretary George Eustice had recommended that all amendments be rejected.

This approach has been widely criticicised. The Greener UK Coalition’s senior parliamentary affairs associate Ruth Chambers called the decision “hugely disappointing, particularly on the eve of COP26”. Surfers Against Sewage’s chief executive Hugo Tagholm, called the decision “shocking” and called for “more ambitious thinking and law that builds protected nature back into public ownership rather than leaving it to the ravages of shareholder interests”.

Nonetheless, Ministers did vote to introduce measures to enable charges on single-use products of all materials, as has been done with retail carrier bags.

Treasury’s net-zero review

Following the publication of the interim report for its review into the costs and economic opportunities of the net-zero transition late last year, HM Treasury this week unveiled the final report.

According to the final report, the “eventual net impact of the transition on output is highly uncertain”, with timelines for costs and benefits largely dependent on how high-carbon markets shrink and low-carbon markets grow; how policy changes and how the cost of emerging solutions like man-made carbon removals falls.

On the one hand, the potential benefits are sizeable. The Net-Zero Strategy stipulates that up to £90bn of private investment could be leveraged this decade. On the other hand, the Treasury recognises that a disorganised transition could cost far more than the estimates put forward by the Climate Change Committee (CCC), of 0.5-1% of GDP annually through to 2050.

The final report does allude to some changes which are already extremely likely, including the phase-out of fossil fuels in sectors including road transport and electricity generation.

In the months between the interim and final reports, the Treasury has been accused by green groups and MPs of supporting tax measures and funding packages incompatible with the UK’s long-term climate targets. Next week’s Autumn Statement may well be an opportunity for changes in these fields, particularly the tax side of things.

Treasury’s Roadmap to Sustainable Investing

According to a poll of investors with more than $25.9trn in assets under management, greenwashing is considered the biggest challenge to investing sustainably.

The Treasury has, therefore, not only been called upon to increase funding for the net-zero transition in recent months – but to play its part in ensuring that green financial claims are trustworthy. Monday night (18 October) marked the publication of a package of new sustainability-related disclosure requirements for organisations across the UK’s financial space, entitled ‘Greening Finance: A Roadmap to Sustainable Investing’.

Key changes set to come about as a result of the Roadmap include:

  • A requirement for all firms offering financial products to publicly disclose their financial impacts (implementation date TBC)
  • A requirement for all firms offering financial products to explain any green claims they make about products or their strategy (implementation date TBC)
  • A mandate for certain businesses, starting with large firms in high-emitting sectors, to produce net-zero transition plans (implementation date TBC)
  • Further progress on the UK’s Green Finance Taxonomy – a set of rules determining which activities can be determined ‘green’ for government investment and, in turn, the private sector

The Roadmap will be followed by a broader Green Finance Strategy. The Treasury has promised publication in 2022.

To find out more about what the Roadmap entails and how the green economy has reacted, you can read edie’s full coverage here.

Sovereign green bond update

The UK Treasury confirmed the second sale of its green gilts package on Thursday (21 October), bringing total funding for projects assisting the net-zero transition to £16bn to date.

The UK launched its first £10bn green gilt package in September. Reuters first reported £90bn in orders – a figure which surpasses all previous records for debt sales by the UK Government or any of the devolved administrations.

The new, £6bn package takes the Treasury past the £15bn originally promised by the end of 2021. Its order book was, according to the Government, 12 times oversubscribed.

Expect more news on sovereign green bonds in the coming years; Chancellor Rishi Sunak has promised that these first packages will not be the UK’s last.

The moves from the UK come after the German Government’s issuance of a $7.3bn sovereign green gilt and the French Government’s issuance of a $12.9bn package.

Sarah George and Matt Mace

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