Government’s net zero plans: What we know so far

Four key elements of the government’s plans for reaching net zero by 2050 are due to be published imminently, though there are concerns that the Treasury is far from on board. Here’s what to expect.

The Net Zero Strategy and its accompanying papers had been expected for publication today. Photograph: Monty Rakusen

The Net Zero Strategy, Net Zero Review, Green Finance Roadmap and Heat and Buildings Strategy will be published this week

Last week, multiple sources told ENDS that the four papers would be published on Monday, after being signed off during a cabinet ‘away day’ on Friday. However, they have now been pushed back slightly, as a mark of respect following the assassination of David Amess MP that day.

Rumours are now that they could emerge tomorrow or perhaps on Thursday. They could not be delayed further for fear of undermining their influence on the COP26 talks, which will open in only a fortnight.

The Net Zero Strategy will tie the government’s green plans together

The government has set multiple climate targets over the past year: a 68% cut by 2030, 78% by 2035 and most recently a plan to eliminate greenhouse gas emissions from power generation by the same date. But little has been offered on what regulations, taxes, subsidies and other policies will be used to push the agenda forward.

To be credible, the Green Alliance said that the Net Zero Strategy will have to detail how the UK will meet the 2030 target, which was presented as a nationally determined contribution under the Paris Agreement, for every sector of the economy. The think tank also said that it will need to include:

  • A zero emission vehicle mandate on car manufacturers, as proposed in the Transport Decarbonisation Plan.
  • A phase-out date for fossil-fuelled trucks.
  • A plan to slash methane emissions from agriculture by 30% by 2030.
  • A target to halve resource consumption by 2050.
  • A target to achieve near-zero emissions steel production by 2035.
  • £22bn of extra funding.

New nuclear projects look likely

The Financial Times reports that ministers “will put nuclear power at the heart of Britain’s strategy to reach net zero carbon emissions by 2050”, and will lay out how the schemes will be funded. All of the UK’s existing reactors are due to be retired by 2035, posing a problem for the power industry target. The government is also expected to endorse the ‘regulated asset base’ model for financing new nuclear projects, already used for the Thames Tideway super sewer.

The model should promote investment as it would generate returns long before any installation is switched on. French firm EDF and US company Westinghouse are planning to use the scheme to finance plants at Sizewell in Suffolk and Wylfa in Anglesey, respectively, while a consortium led by Rolls-Royce is backing scaled-down small modular reactors.

“Nuclear power has a key role to play as we work to build a strong, home-grown energy sector to further reduce our reliance on fossil fuels and exposure to volatile global gas prices. We are seeking to approve at least one more large-scale nuclear project in the next few years to strengthen energy security and create thousands of jobs,” a government spokesman said.

Further investment in offshore wind power, attaching carbon capture and storage systems to gas-fired and biomass power stations will further decarbonise the grid.

Meat is not on the menu

The Net Zero Strategy is not expected to address consumption of meat, even though the Climate Change Committee said that consumption needs to be cut by a third by 2050. It has been deemed too politically sensitive.

New boilers to go by 2035

The Heat and Buildings Strategy’s plan for the installation of new boilers to be banned by 2035 has been widely reported already. The expense of heat pump installation will be offset by grants of £5,000 for air-source and £6,000 for ground-source models, ENDS understands, replacing the existing Renewable Heat Incentive subsidy scheme.

The objective will be apparently supported by a £400m scheme, providing £5,000 grants for an air-source heat pump (ASHP) or £6,000 for a ground source model – generally more powerful but more complex to install.

Gas bills up, power bills down

More broadly, the strategy is expected to shift ‘policy costs’ from electricity onto gas, reflecting how as grid steadily decarbonises it makes little sense to penalise a cleaner source of energy. This will be phased in over ten years, ENDS understands.

However, there were also reports over the weekend that VAT could be struck off energy bills, which are rising in response to a spike in wholesale costs, slammed as an effective subsidy on gas by the Institute for Fiscal Studies.

READ MORE: What to expect from the Heat and Buildings Strategy

The Net Zero Review will emphasise costs

The Treasury’s long delayed Net Zero Review will quantify the costs of net zero and who will pay them.

An interim paper published last year said that the goal could be an economic boon.

However, leaked papers indicate that the final version will be “half baked” according to E3G. It is expected to neglect the benefits that will accrue, such as jobs, warmer homes and cheaper energy, painting “a highly unbalanced view of the economic impact of reaching net zero” that is “insufficient to inform government policy”, it has warned. This means that it will also fail to consider the costs of unmitigated climate change to the economy.

“Paraphrasing Oscar Wilde, the Treasury knows the cost of everything and the value of nothing,” said Heather McKay, the climate think tank’s policy advisor on UK sustainable finance.

“A Net Zero Review which considers only the upfront capital investment costs and doesn’t look at significant value that the investment will return, risks derailing the growing support for net zero investment by business and the public,” she added in a briefing.

It is rumoured that a rift is growing between Johnson and Sunak

The disappointing Net Zero Review is said to be a sign of an increasing dispute between 10 and 11 Downing Street, and a gift to climate sceptics on the Conservative back benches.

Only on Friday, the prime minister boasted that £6bn of foreign direct investment and 56,000 jobs had been created on the back of his Ten Point Plan for a Green Industrial Revolution a year ago, “yet more evidence that going green means creating high quality jobs across the United Kingdom”.

However, internal Treasury papers leaked to the Observer emphasise the risk of carbon leakage and that, “more green investment is likely to attract diminishing returns, reducing the positive impact of ever more investment on GDP” and that the erosion of the fossil fuel tax base means that other taxes will have to rise in consequence.

In contrast, a report from the Office for Budget Responsibility this summer found that ramping up carbon taxes and investment from the middle of this decade would add less to the national debt over 30 years than the pandemic will in two. It could even save the government money if the costs of the transition are met within existing spending plans and road user charging is introduced, it said.

The newspaper said that Sunak appears to be currying favour with the likes of Steve Baker and Craig Mackinley to boost his popularity with rank and file members of the party, while a source at the Department for Business, Energy and Industrial Strategy confirmed that the Treasury was “kicking back” against Johnson and business secretary Kwasi Kwarteng’s green agenda.

In response, a statement from the Treasury said it is “playing a crucial role” in the Ten-Point Plan by allocating £12bn to fund it, “setting up the UK infrastructure bank to invest in net zero, and committing to raise £15bn for projects like zero-emissions buses, offshore wind and schemes to decarbonise homes.”