The first post net-zero budget

Budget 2020 was unique – the first since legislating for net-zero, the first for Rishi Sunak and the first with interest rates cut by the Bank of England to the lowest ever levels in response to COVID-19.

Eyes had been focused on this being the ‘green’ budget to stimulate investment and jobs, setting a pathway to 2050 and a backdrop to COP26. We saw some intent, but not with the zeal and commitments expected and needed – along with a few oversights.

Nature restoration, research and development (R&D), electric vehicles (EVs) and carbon capture and storage (CCS) featured prominently in the budget, alongside road building and a continued freeze on fuel duty. Some contradictions in there, but also good foundations for the government’s Year of Climate Action.

Highlights from across sectors below give an indication of where progress is coming, but the absence of energy efficiency, particularly for our existing buildings and homes (the leakiest in Europe), is a glaring hole.

We will see more from the Treasury in the coming months, as they publish their review on the economic costs and opportunities of reaching net zero. Perhaps a blueprint for COP26 negotiations.

Innovation and R&D

Nuclear fusion, space exploration and EVs are the priorities called out to be principal recipients of the £22 billion investment per year by 2024-25, and within this, climate change is acknowledged as one of societies ‘greatest challenges’ requiring R&D investment. A small nod to our climate emergency.

The Energy Innovation Programme, a key pillar of the Clean Growth Strategy, will also see a doubling in investment – amounts to be confirmed in the Comprehensive Spending Review later in the year – with a focus on new decarbonisation technologies to ‘meet the challenge of net zero’.

Transport

Good news for EVs all round in the budget, with £500 million investment in the rollout of rapid charging hubs to include a Rapid Charging Fund to support businesses with grid connection costs. Aligned to this, the Office for Low Emission Vehicles will undertake an EV charging infrastructure review.

The government has stated that it will continue to consider future financial incentives for zero emission vehicles, and while this much-needed stimulus package is being developed, they have announced £403 million for the Plug-in Car Grant and £129.5 million to extend the Plug-in Grants for vans, taxis and motorcycles.

£304 million additional funds have also been allocated to local authorities to reduce NOx emissions, mostly caused by road traffic, along with the tax relief for off-road vehicles known as ‘red diesel’ to end for most sectors in 2022. The latter is estimated at saving 14 million tonnes of CO2.

ENERGY

The Climate Change Levy is to be frozen on electricity, but from 2022 through to 2024 it will increase on gas. This is a clear signal, alongside the introduction of a Green Gas Levy (to be consulted on), that the greening of the gas grid is an understood priority.

Heat featured somewhat, with householders and small businesses to be supported with a new Low Carbon Heat grant scheme (to be consulted on) for the installation of heat pumps and biomass boilers, that comes with £100 million in new funding. The Heat Networks Investment Project followed by a new Green Heat Networks Scheme will also receive £96 million and £270 million respectively.

Carbon capture and storage (CCS) will receive £800 million across two or more CCS clusters, the first by 2025 and the second by 2030. A consumer subsidy led construction of the UK’s first CCS power plant was also announced.

Even though CCS spending commitments are welcomed, a question mark as to whether it is enough to get us to 2050 will be raised. The government also confirmed that it will legislate in the Finance Bill 2020 to enable a UK Emissions Trading System (ETS) and a carbon emissions tax, to be consulted on in spring 2020.

The standalone commitment to home energy efficiency, came in the form of the Future Homes Standard, only applicable to new builds.

ENVIRONMENT

The pledge from the Chancellor ‘to be the first in history to leave our natural environment in a better state than we found it’, is the closest sentiment we could get to what we actually need. Budget announcements today must be seen as just a step in the direction towards delivering this bold promise.

The £640 million Nature for Climate Fund to protect natural habitats including 30,000 hectares of new trees, £25 million (England only) Nature Recovery Network Fund to protect, restore and support existing habitats and wildlife, and the £10 million Natural Environment Impact Fund focussing on stimulating commercial investment in environmental restoration, are well received.

And finally, following the original consultation in 2018, the plastic packaging tax will be introduced for manufacturers and importers, set at £200 per tonne. It applies to all packaging containing less than 30% recycled content. It should be noted that the scope of the tax will also include the importation of filled plastic packaging. However a minimum threshold of 10 tonnes will be applied to protect smaller businesses, the government says.

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