The UK's Net Zero Strategy

Delivering the net zero transition? Last week the government published its long-awaited Net Zero Strategy, along with a variety of other plans detailing how the UK government proposes to deliver the transition to a net zero emission economy. The three main documents are the overall Net Zero Strategy: Build Back Greener, the Heat and Buildings Strategy and the Treasury’s Net Zero Review Final Report. For a short summary of policies outlined in these three documents, read this overview by the Financial Times.  

• Other net zero documents. Bringing together 19 climate-related reports published by the UK government last week, Carbon Brief’s Simon Evans collated a database of documents with links to each publication.

The Net Zero Strategy. The Net Zero Strategy outlines how the UK government plans to deliver its emissions targets of Net Zero by 2050 and a 78% reduction from 1990 to 2035. It estimates that additional capital investment must grow to “an average of £50-60bn per year through the late 2020s and 2030s”, with the private sector filling the majority of this. The Climate Change Committee’s (CCC) independent assessment concludes that it “sets an ambitious, credible path for UK decarbonisation, consistent with tough territorial emissions targets in the near and long-term that we (and others) assess to be in line with the demands of the Paris Agreement Implementation and delivery is what matters now”.

• “A very market-led strategy.” Chris Stark, the CCC’s chief executive, summarised the document as a “very market-led strategy” with “a striking use of mandates - obligations on business to deliver the change”. These include, for example, requiring car manufacturers to produce electric vehicles with a “zero-emission vehicle mandate” and mandates for boiler manufacturers to produce heat pumps. (See this box for a useful summary of the market-led policies for decarbonising each sector.) He continues: “it’s noticeable how frequently government puts the onus on business to invest and bring down the cost to the consumer. Many have criticised low public spending in some areas, but the government seem to be taking a different route. We shall see how that market-led approach fares.” 
• Public spending and delivery. ECF’s UK Director, Joss Garman, noted the continued shortfall in the overall envelope for public spending for carbon-cutting delivery, relative to what the OBR and CCC have said is needed. “The sum announced for home insulation today is billions short of Boris Johnson's promise in his own manifesto. Overall, the figures don't come close to the scale of funding Labour say they would put forward, which tees up a familiar debate on the size of the state relative to the role of the private sector, particularly in relation to insulating buildings and skilling-up the workforce.” James Meadway makes a similar argument for Novara Media. "Unless the Treasury’s attitude towards borrowing changes, the rest of the government’s decarbonisation strategy is futile. If it doesn’t have money to carry out its plans, no plans will be carried out.” 
• Briefing webinar. Join NEF’s special New Economics Briefing (Thursday 28th October 19:00-20:15) to hear what a public-sector-led decarbonisation strategy would look like and how it can be paid for. Speakers include NEF’s Frank van Lerven, UCL IIPP’s Katie Kedward, and economists Grace Blakeley and Laurie Macfarlane.

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Gaps: food, agriculture and behaviour change. Many have criticised the lack of delivery mechanisms in the Net Zero Strategy for decarbonising agriculture and land use, and the lack of emphasis on the issue of behaviour change (such as changing diets and demand for flights). 

• Decarbonising food. The Soil Association’s Rob Percival argued that the Net Zero strategy “falls short” in delivering the ambition for “an urgent transition to a nature-friendly, agro-ecological farming and sustainable diets”, as outlined in the National Food Strategy published in the Summer, which argued the UK should reduce meat consumption by a third. The UK’s demand for high-carbon commodities such as soy, palm oil, timber and beef, has been estimated to require an area of 88% of the size of the UK to produce. IPPR’s previous report on building a sustainable food system proposed policies to eliminate imported products which contribute to deforestation from UK food supply chains‍
• Behaviour change. NEF’s Alex Chapman noted how the government document Net Zero: principles for successful behaviour change initiatives has since been taken offline (but you can find it here) and previously included acknowledgement for the need for “behavioural interventions” to reduce demand for aviation. The waste advisory body WRAP has explored the possibility of consumer behaviour change and the Local Government Association and Global Good Awards have highlighted various practical projects to encourage it.

BEIS’s Heat and Buildings Strategy. The Heat and Buildings Strategy includes a target (not legally mandated) to end the sale of fossil fueled heating systems by 2035, and a £450m three year grant programme giving £5,000 to households to shift to low carbon heating systems (mainly air and ground source heat pumps). Read this commentary from Business Green.

• Not enough money. Business Green’s James Murray pointed to “serious concerns amongst policy wonks that the whole thing is badly underfunded”, particularly in support for reducing demand through higher energy efficiency. Friends of the Earth’s Mike Child’s noted that the money allocated would only pay for 90,000 heat pump installations over three years, which falls way short of the Prime Minister’s target of 600,000 a year by 2028. 
• Warmer homes for a cooler planet. IPPR’s Luke Murphy argued that a successful plan would include grants of £7,500 as well as covering the full costs for those suffering from fuel poverty, a legal commitment to phase out new boilers, a nationwide information campaign and a focus on local delivery and skills for a “retrofit army”. IPPR has provided a comprehensive plan to decarbonise the UK’s homes, setting out a blueprint for delivering a successful and fair national housing retrofit drive. Follow NEF’s campaign for a Great Homes Upgrade for more resources on decarbonising homes. ‍NEF has explained how a ‘Future Skills Scheme’ could help address the skills shortage, which it describes as a “binding constraint on decarbonisation initiatives, such as building retrofit”.

HMT’s Net Zero Review. It was widely predicted that the final report of the Treasury’s review of the costs and benefits of meeting the net zero target would focus mainly on the costs, as part of an apparent desire by Rishi Sunak to slow down the net zero momentum. But most commentators acknowledged that in the end it was a mostly reasonable assessment, suggesting that in the run up to COP26 Boris Johnson had won an internal fight with the Chancellor. 

• Public borrowing for the green transition. One interesting argument made in the review is that borrowing to finance public investment for decarbonisation would not be appropriate: “Seeking to pass the costs on to future taxpayers through borrowing would not be consistent with intergenerational fairness nor fiscal sustainability. This could also push up the economic cost of the transition.” Positive Money criticised this approach and drew attention to the need to see public spending as a “prudent investment that will pay for itself and deliver huge dividends for the whole of society”. E3G’s Heather McKay called the Review “half-baked”, overly focused on the costs over the benefits of the transition to net zero: “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”. 
• Discounting the future. More generally, economist Nick Stern argues in a forthcoming academic article that conventional economic analysis, of the kind exhibited in the Treasury review, systematically undervalues the lives of young people and future generations who will experience severe climate change. 
• Loss of tax revenue. The Treasury report expresses concern that the shift away from fossil fuels will lead to a reduction in tax revenue from taxes such as fuel duty. In a response, NEF’s Lukasz Krebel argues that reduced tax revenue can be “balanced by increasing the progressivity of the tax system, such as taxing wealth, especially excessive/unearned wealth, at fairer rates”, pointing to principles for green tax reform developed by Tax Justice UK and others. The Institute for Government’s Net zero and the tax system called for a “net zero tax audit” to ensure all taxes support the green transition, rather than just the few which the Treasury define as “environmental taxes”.
• Johnson v Sunak? Commenting on recent rows between the Treasury and No.10 over increasing public investment in decarbonisation, James Meadway argued that “the left should celebrate Boris Johnson’s clash with the Treasury… Johnson will be performing a great service to any future progressive administration” if his government can reduce the institutional power of the Treasury over other departments.  IPPR’s George Dibb gave evidence to the House of Commons Treasury Committee, arguing that the “Treasury’s pound-pinching and short-termism holds back industrial policy in this country” and highlights the need for an empowered counterweight to set long-term strategic economic direction.