Comment Piece by Nicole Wyatt, GK Consultant
Ahead of the much-anticipated United Nations Conference on Climate Change, or COP26, commencing on 31st October in Glasgow, the Government has published a series of highly ambitious strategies to shape the green agenda for the next few decades, striving to ‘build back greener’.
On 19th October, the Department for Business, Energy and Industrial Strategy (BEIS) published the Net-Zero Strategy and the Heat and Buildings Strategy. To completement this, the Treasury published the Net Zero Review to analyse how much the green agenda costs, as well as the Green Finance Roadmap, which lays out the groundwork for green investments.
Overview of Net-Zero Strategy
The Net-Zero Strategy is this one of the Government’s hyped projects. It ambitiously sets out the UK’s plan to reduce greenhouse gas emissions and reach net-zero by 2050. This green strategy also completements the Government’s ‘levelling up’ plans as it promises to “support up to 440,000 jobs across sectors and across all parts of the UK in 2030″.
Some noteworthy points that can be observed in the strategy include the Government’s plan to fully decarbonise the UK’s power system by 2035. Moreover, the Government would like to see that no new gas boilers be sold after 2035 and all heating appliances in homes and offices be low carbon—but this is not going to be a legally binding commitment. Other measures include the £450 million Boiler Upgrade Scheme (more detail in the Heat and Building Strategy), £625 million for tree planting, decision about a nuclear plant by 2024, ending sale of new petrol and diesel cars by 2030 with £620 million for zero emission vehicle grants, and a focus to deliver 5GW of hydrogen production capacity by 2030 while halving oil and gas emissions.
Opinions of the strategy have been mixed with some worried about how much this will all cost the individual taxpayer or homeowner, and others concerned that these measures still won’t get the UK to their 2050 goal.
Overview of Heat and Buildings Strategy
With 21% of the UK’s total carbon emissions coming from heating and cooling buildings, the Government felt one of the main ways to achieve net-zero by 2050 was to address the housing sector. Their main target within the sector was gas boilers. Natural gas provides heating to approximately 85% of homes in the UK. Within the Heat and Building Strategy, the energy saving measure which has been allocated the highest level of importance is heat pump installation. From next April, homeowners in England and Wales will be offered subsidies of £5,000 to help them to replace old gas boilers with low carbon heat pumps through the Boiler Upgrade Scheme. These grants, totalling £450 million over three years, form part of the Government’s £3.9 billion plan to reduce carbon emissions from heating homes and buildings, by ensuring that no new gas boilers are sold after 2035. The emphasis on heat pump installation stems from real concern in Government that gas boilers possess a disproportionately high carbon footprint, with one report suggesting that gas boilers contribute twice as many carbon emissions as all the country’s gas-fired power stations combined.
However, the Government’s plans have already attracted criticism, due to the fact that the £450 million funding package for heat pump installation will only cover 90,000 new heat pumps over the next three years. This falls well short of the Government’s aim of installing 600,000 heat pumps per year by 2028.
Interestingly, there was very little focus on other energy efficiency technologies in the strategy. Despite the fact that the Government stated that they wanted a ‘fabric-first’ process to reduce costs for homeowners and address the core energy efficiency problems within the structure of buildings, this had little attention in the strategy. There was some mention of improved insulation to walls and lofts and even less mention of other technologies, such as triple glazing to windows and doors. Many industry leaders may be left wondering why.
The main takeaway from the Treasury’s analysis of the costs of the net-zero strategy is that “the costs of global inaction significantly outweigh the costs of action”. While due to the geography of the UK, much of the impacts of climate change may not be felt as directly in the UK, the indirect costs will be significant, especially in relation to global supply chains. The report sets out some of the economic benefits of green such as the fact that “improved air quality could deliver £35 billion worth of economic benefits in the form of reduced damage costs to society, reflecting for example lower respiratory hospital admissions”.
The bulk of the report lays out the expenses to individual households as the Government encourages people to improve the energy efficiency of their homes. Ultimately, the homeowner, but also businesses, taxpayers, motorists, will have to invest money to reduce carbon emissions from heating and cooling homes, but the report suggests there should be more policy to incentivise people to do so. The Heat and Buildings Strategy establishes grants for heat pump installations. The report also suggests more can be done to encourage people to get Electronic Vehicles (EV). The report finds that it’s impossible to forecast these costs over the next thirty years and emphasises that they will be disproportionately felt across different economic backgrounds.
Next, the Green Finance Roadmap lays out the Chancellor’s framework for how the UK’s financial sector can be greener. The financial sector plays a vital role in assisting the country to meet its decarbonisation goals by attracting Environment, Social and Governance (ESG) investments and utilising green bonds. Moreover, the aim of this report is to help align the financial sector with the green agenda.
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