Net zero: getting it done in the UK will require a green bazooka
March 17, 2020
Planting enough trees to cover an area the size of Birmingham. Allocating millions on research and development to help decarbonise whisky distilleries. Introducing a tax on plastic packaging.
These measures, along with a collection of other “green economy” policies announced in the UK budget last week, are certainly eye-catching. But anyone looking for a budgetary bazooka for the UK’s transition to a net zero world will have been disappointed.
We expected the government might defer significant spending decisions related to climate and the environment until the budget in the autumn, following Treasury’s analysis of how to achieve net zero by 2050, in advance of COP26 in Glasgow in November.
But with the sudden onset of the coronavirus pandemic, responding to the climate emergency has slipped down the agenda as funding is directed to more pressing priorities.
Budget 2020: sowing the seeds for sustainability?
That said, three notable building blocks have been put in place:
Electric vehicles (EVs) - Investing £500m in electric vehicle charging infrastructure so that drivers are never more than 30 miles from a rapid charging station is a big step. The risk of running out of power has been a big turn-off for many would-be switchers from fossil fuel vehicles, as PwC explored in a recent report.
Carbon capture and storage – As much as £800m will be invested through a carbon capture and storage (CCS) fund in two UK CCS sites, one by the mid-2020s, a second by 2030. This is a significant commitment to supporting the development and commercialisation of the technology.
Plastic packaging – From 2022, manufacturers and importers of plastic packaging with less than 30% recycled content are set to be subject to a tax of £200 per tonne (above a threshold weight of 10 tonnes). The tax will also apply to imported “filled plastic packaging” – a boon for UK manufacturers who were concerned that some production might have to be shifted offshore if imported goods weren’t taxed.
All eyes will now be on four moments in the calendar:
1. the unveiling of a national infrastructure strategy in the spring;
2. the UK Committee on Climate Change’s sixth carbon budget recommendations in September (which will confirm the UK’s net-zero-compatible 2030 target);
3. the autumn spending review; and
4. the Treasury’s economic analysis of delivering net zero, due before COP 26 in November.
In the autumn budget, we are looking for the government to set out strategic priorities and consult on plans to bring fossil fuel subsidies and overseas funding of fossil fuel-promoting projects to an end.
Simplification of the UK’s carbon taxes, increased carbon tax rates, and application of carbon taxes to currently untaxed sectors should be considered as a way of providing the price signals necessary to drive behavioural change. Achieving this in a way that doesn’t compromise UK competitiveness and balances affordability and security of supply for energy will be vital.
The budget should also ensure enough funding is allocated to meet the UK’s legislated climate targets, including an enhanced 2030 target and net zero by 2050.
As for the Treasury’s net zero review, we expect this to provide the evidence base for earmarking funds to deliver this transformation. There was, for example, little in the latest budget directly related to the government’s manifesto pledge to invest £9bn in energy efficiency for homes.
Net zero must remain a priority
Whatever emerges, bold policy intervention will be needed. While Covid-19 remains a priority, we still need to halve global emissions by 2030 to give us a chance of limiting warming to 1.5 degrees centigrade above pre-industrial levels.
And for that, we need a bazooka loaded with regulation, incentives, subsidies and taxes and large-scale investment in research and development, and infrastructure.