Last night (17th November), the UK Government launched its much-anticipated 10 Point Plan for the climate. The country – which is hosting important UN climate negotiations (COP 26) next year – has been under national and international pressure to deliver an ambitious climate strategy that shows leadership, setting the bar high as countries around the world come to the table to pledge greater climate ambition.
The UK is not yet delivering the scale of investment needed to meet its commitments under the Paris Agreement – investing only 12% of the funds required to tackle climate change, according to the think tank IPPR.
While there are welcome ambitions in the plan – with the targets for cars, offshore wind and heating rightfully stretching – these are not followed through with the long-term spending commitments needed to deliver a green recovery. Meeting these targets will remain a pipeline dream until the Treasury sets out an investable proposition which can match these commitments.
Without long-term finance and strategy, business and investors will lack the certainty needed to invest in supply chains and innovation in the UK – and may turn else where in Europe. France has committed around £27bn billion over two years to green recovery measures, and Germany has committed £45bn to “invest in a future-friendly Germany”.
The Prime Minister may have green ambitions, but its clear negotiations with Treasury need to be won in order to use the plan as a launch pad to a green recovery. The forthcoming Spending Review – expected later this month – will be the first test.
E3G takes a look under the bonnet of the new commitments, inspecting progress as well as shortcoming that will need addressing in the run up to next year’s UN meeting.
Point 1: Investing in offshore wind
As expected, the Government has committed to invest 40GW more capacity in offshore wind by 2030, of which 1GW is floating. This represents a welcome step up in ambition. However, to realise the opportunities presented by offshore wind expansion, concrete policy actions must be implemented now – and properly capitalised to ensure the target can be delivered upon. These should allow the efficient design and implementation of an integrated offshore grid, the establishment of an ambitious long-term trajectory of offshore wind deployment, and a post-Brexit regime for the design of offshore markets and trading electricity between countries.
Point 2: Hydrogen Strategy
The Plan targets 5GW of electrolyser capacity for hydrogen production by 2030, committing up to £500 million. By comparison, Germany has pledged €9bnv for 5 GW of hydrogen production capacity by 2030, with another 5 GW a decade later.
It will be important that the UK’s focus is green hydrogen – but this has not been confirmed in the Plan. Green hydrogen which uses renewable energy to produce hydrogen from water, is taking off around the globe. Its supporters say the fuel could play an important role in decarbonising hard-to-electrify sectors of the economy, such as long-haul trucking, aviation, and heavy manufacturing. By comparison, other forms of hydrogen – blue and grey – rely on fossil fuels, and therefore are not zero carbon, unless accompanied by CCS.
The Plan does not set out which sectors hydrogen will be prioritised in. For example, while there is consensus that hydrogen could play a major role in decarbonising heavy industry and freight, there are questions concerning whether it should be an area of focus for heat decarbonisation – particularly if it diverts attention and money from readily available zero carbon heating solutions, such as heat pumps and district heating networks.
The Government has committed to develop a Hydrogen Neighbourhood in 2023, moving to a Hydrogen Village by 2025, with an aim for a Hydrogen Town – equivalent to tens of thousands of homes – before the end of the decade. For perspective: by the end of the decade, many hundreds of towns will need to shift to clean heating and energy systems. While there’s a role for exploring future technologies, this must not distract from solutions available today.
Moving forward, the government will need to present a Hydrogen Strategy outlining how to use this scarce, premium good such as green hydrogen to fast forward UK industry into the future in a cost-effective way.
Point 3: Delivering New and Advanced Nuclear
Nuclear is an expensive and inflexible energy source, and not considered a cost-effective answer to getting the UK on track for zero carbon. The Plan seeks to advance nuclear as a clean energy source, across large scale nuclear and developing the next generation of small and advanced reactors, which could support 10,000 jobs. However, only £525 million new investment has been committed to help develop large and smaller-scale nuclear plants, and research and develop new advanced modular reactors. Given the limits of nuclear power, this might not be a bad thing.
Point 4. Electric Vehicles
The transport sector is now the sector with the highest level of emissions in the UK – 24% in 2019. Emissions have flat-lined for many years and to get on track to net-zero, urgent action is required to help shift people out of cars on to public transport, as well as increasing walking and cycling options. The Plan will bring forward the target to ban the sale of new Internal Combustion Engine (ICE) vehicles, with a 2035 target to ban hybrids. The UK will support this with:
- £1.3 billion to accelerate the rollout of charge points for electric vehicles in homes, streets and on motorways across England, so people can more easily and conveniently charge their cars.
- £582 million in grants for those buying zero or ultra-low emission vehicles to make them cheaper to buy and incentivise more people to make the transition.
- Nearly £500 million to be spent in the next four years for the development and mass-scale production of electric vehicle batteries, as part of our commitment to provide up to £1 billion, boosting international investment into manufacturing bases including in the Midlands and North East.
This sends out a very positive signal internationally ahead of COP 26, with the UK adopting one of the most ambitious targets for banning ICE vehicles. The focus on areas outside of London will help support the levelling up agenda, providing a welcome boost for green jobs.
Point 5 Public Transport, cycling and walking
The Plan contains £5bn for alternative greener ways of travel including cycling, walking, and buses. We note that government pledged this £5bn in February, to improve bus and cycling services in England. This is a move in the right direction, but with public transport having taken a particularly heavy toll from the pandemic-induced lockdown, it’s likely more will be needed to revive the sector and get it on track for zero carbon.
Point 6. Jet Zero and Greener Maritime
The Plan seeks to support difficult-to-decarbonise industries to become greener through research projects for zero-emission planes and ships by running a competition. However, the plan has only allotted £20 million to the to develop clean maritime technology. Much more would be needed to get these sectors on track for zero carbon. It’s also worth noting that at the recent International Maritime Organisation (IMO) meeting, the UK was among those that didn’t support more climate ambition from the shipping sector.
Point 7. Homes and Public Buildings
The built environment represents around 40% of the UK’s greenhouse gas emissions, with rapid progress essential to put the UK on track for zero emissions. The extension to the Green Homes Grant is welcome, following industry concerns that the short timelines associated with the stimulus measure were inconsistent with a sustained, long-term green recovery. £1 billion of new money is also committed, although it is unclear where this will be allocated.
E3G welcomes the commitment to target 600,000 heat pumps per year by 2028 as a much-needed step forward that sets the signal needed to provided certainty for industry and finance to scale up investment in skills, technologies and supply chains. However – as is the reoccurring theme – it is unclear what public finance will be provided to support this target. The forthcoming Heat & Buildings Strategy and delayed Comprehensive Spending Review, now expected next year, need to set out the roadmap and financing plans, to show the targets aren’t more than a gesture.
As well as funding commitments, E3G was disappointed the 10-point plan wasn’t used to announce that the Future Home Standard would be moved forward from 2025 to 2023. The new Standard would ensure that new homes are low carbon and fit for the future, saving homeowners from costly retrofits to get their homes on track for zero emissions. We hope to see this announcement in the forthcoming Heat & Building Strategy.
Point 8. Investing in Carbon Capture Usage and Storage (CCUS)
The Plan seeks to see the UK become a world-leader in technology to capture and store emissions away from the atmosphere, with a target to remove 10MT of carbon dioxide by 2030, equivalent to all emissions of the industrial Humber today.
This might sound like a lot, but to put it into context: if the UK was to use fossil-based hydrogen as a heating source, this would need to average 35 mega tonnes removal per year for the next 30 years. A more underlying question might be: why are we spending money to remove carbon from industrial and energy operations, when we could work to decarbonise these processes altogether? While certain industries will be harder to transition to low carbon business models, for other activities, such as heating, zero carbon alternatives already exist. Money may be better spent pursuing these options, rather than carbon-emitting alternatives that will rely on costly CCUS for decades to come.
Point 9: Investing in the Natural Environment
The plan names a number of initiatives for ‘protecting and restoring our natural environment’. A commitment was made in the Prime Minister’s speech to plant 30,000 hectares of trees every year, while creating and retaining thousands of jobs. This is further to other funding that was announced – £40 million of additional investment in the Green Recovery Challenge Fund to be given to charities and partners to help restore natural habitats in England. 10 landscape recovery projects are also due to be announced and new national parks will be created. Much more will be still needed to support the UK’s heavily depleted biodiversity.
Point 10: Innovation and Finance
The plan mentions the need to develop the cutting-edge technologies needed to achieve the clean energy transition. To this end, it states that it will be driven forward by significant investment set out over the last year, including the £1 billion energy innovation fund to stay ahead of the latest technologies needed to reach new energy targets. While a welcome uplift, to achieve the goals stated by the plan, more investment is needed as well as a clear sense of direction for this funding.
Key areas where the UK should focus innovation include taking the lead on the race to zero carbon heating solutions, as well as sustainable approaches to construction. In addition, the Government has pledged a Fusion Energy Moon-shot – UK fusion plant by 2040. While it’s easy to get excited by moon-shot ideas, it is important that these don’t act as red herrings that distract from the solutions that are already scalable today.
The Plan seeks to make the city of London the global centre of green finance, but we are disappointed not to see the creation of dedicated institution to create new markets and mobilise private finance for policy goals – a new National Infrastructure Bank. Without this contribution, the stated intention of mobilising more than three times as much from the private sector as the £12 billion public sector commitments is unrealistic, particularly in the context of the UK’s withdrawal from the European Investment Bank which means removes access to billions of annual funding for new UK infrastructure. We hope to see an announcement in the forthcoming Spending Review.
The announcements made today do not add to the suite of announcements made by the Chancellor last week, which included a UK Sovereign green bond, mandatory TCFD by 2025 (a regulatory roadmap to climate risk disclosure), and a new green taxonomy for the UK. These policies reinforce the UK’s position within the leading group of countries working for green finance reforms. Further ambition will be required to show innovative international leadership on green finance and to achieve the Government’s green recovery goals.
The ten-point plan is a starting place to get the UK on track for zero emissions, but there’s clearly still a way to go if the UK wants to lead the way on climate ambition in the run up to COP 26.
One of the crucial gaps is for the UK to produce a strategic plan for delivering net-zero by 2050, including a plan for mobilising sufficient finance to support this economic transition in a way that is fair and equitable for all of the UK, in line with a just transition.
We also need to understand how the Government plans to increase flexibility of the UK electricity system through networks and storage. As the UK moves to electrify its vehicle fleet and heating systems, there are concerns of the impact this extra load will have on the UK’s existing electricity systems. Flexibility will be key for ensuring demand can be met through renewable sources, with upgrades to networks and storage required to achieve this.
E3G would like to hear more from the UK on how it will work with other countries to deliver systemic financial reforms during its G7 and COP26 Presidencies. Last week’s announcement that the UK would join the International Platform on Sustainable Finance was a good start, but there is scope for the UK to take many more leading actions to co-ordinate the international financial system to support the goals of the Paris Agreement and the SDGs particularly in light of the economic challenges associated with the pandemic
Furthermore, the plan omits to mention the greening of UK export finance, and any further legislation to support the net-zero transition of the finance sector. We would hope to see the government implement more ambitious and innovative financing actions next year towards COP26, such as implementing a national financing strategy.
Summary: Five out of Ten from E3G
While certain aspects of the plan – such as new targets for offshore wind, heat pumps and electric vehicles – are a sign of real ambition, the lack of underpinning strategy or investment means that the new Plan falls far short of what would be needed for a sustained, green recovery. The UK still has a way to go if it wants to show leadership ahead of COP 26. It’s time for the Treasury to get serious and scale up the finance needed to turn green into a recovery We expect to see more from the UK over the next 12 months as it steps out ahead of the pack in the context of its G7 and COP26 Presidencies.