Heating and transport will need to be significantly electrified. Photograph: Ondrej Cech/Getty Images Heating and transport will need to be significantly electrified. Photograph: Ondrej Cech/Getty Images

Sixth carbon budget: 78% climate goal will deliver £266bn benefits, says BEIS

The government has issued draft legislation to set the Sixth Carbon Budget, with an accompanying impact assessment concluding that its annual benefits will vastly exceed its costs.

The headline estimate is that delivering a 78% cut in emissions by 2032-37 will deliver a net benefit of £266bn over the next three decades. To put it in context, that figure is about half what the government will spend on public order and safety, if the current budget was maintained.

The Carbon Budget Order 2021 was laid before parliament on Friday, under sections 8(3) and 91(1) of the Climate Change Act 2008. Both houses of parliament will be required to endorse releasing greenhouse gases equivalent to no more than 965 million tonnes of CO2 over 2033-37. This equates to a 78% cut in emissions relative to 1990, or about 41% lower compared to last year, putting the country in line to hit net zero by 2050.

The 2028-2032 Fifth Carbon Budget has effectively been superseded by the 68% by 2030 target offered under the Paris Agreement last year. The government does not intend to amend the cap.

However, the new law will not deliver promised changes to the carbon budget regime. Regulations to extend it to cover international shipping and aviation for the first time, starting with the sixth budget, will follow in due course.

Though only a page long itself, the order’s critical importance is underlined by its 76 page impact assessment. Reaching the goal will be “challenging and technically stretching,” it admits, requiring electricity production to double by 2050 and relying on substantial use of hydrogen and biomass. Heating and transport will need to be significantly electrified, energy efficiency improved across the economy and carbon capture and storage deployed at scale, supplemented by afforestation and low-carbon agriculture.

“Consumers and producers will need to change the technologies they use, and in many cases the up-front costs of low carbon technologies, such as heat pumps, are currently higher than the technologies they replace. Supply chains for low carbon technologies will need to be significantly scaled up and, in some cases, need to be demonstrated before they can move to wider-scale deployment. Government intervention will be needed to overcome a broad range of barriers, including technical, market, behavioural and socio-political. In addition to maximising market-led decarbonisation, strengthening regulation is likely to be necessary in some cases,” says the assessment.

Its numbers are very close to the Climate Change Committee’s (CCC’s) own modelling, anticipating 28m electric vehicles, 40% decarbonisation of domestic heating, a 75% renewable power supply and up to 45 million tonnes per year of carbon capture and storage (CCS) capacity in place by 2035.

But it may have some flaws, suggested Tim Lord, who works on net zero and climate change at the Tony Blair Institute. The impact assessment predicts that electrolysis will account for only a limited amount of hydrogen production, compared to making it from natural gas (with CCS) and gasified biomass. 

“That could well change in my view”, he wrote on Twitter. The costs of green hydrogen production are expected to tumble over the coming years, in a similar manner to how renewables have become the cheapest form of electricity production.

In any case, the government expects hydrogen to play only a limited role in heating, with most going towards shipping and industrial production by 2050.

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