'Powering Up Britain' | What's next for the UK's net zero plans?
Published on 31st Mar 2023
The UK government has published an updated Net Zero Strategy and Green Finance Strategy alongside consultations on a UK carbon border adjustment mechanism and ZEV mandate
The government published over 2,500 pages of decarbonisation policy and data on Thursday 30 March 2023, dubbed "Green Day".
It had been required to publish an updated Net Zero Strategy by the end of March, as a result of a court decision last year that its previously published strategy did not comply with its obligations under its own climate change legislation.
Alongside what it needed to publish to comply with the court ruling, the government published an updated Green Finance Strategy and consultations on carbon leakage, zero emissions vehicle (ZEV) and sustainable aviation fuels mandates and planning policy changes.
We take you through the government announcements by topic and by date.
Timeline of announcements
Date Action 30 March 2023
Open of Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS)
Announcement of winning projects from the £240 million Net Zero Hydrogen Fund.
Announcement of initial 8 CCUS (carbon capture usage and storage) Track-1 capture projects and Track-2 cluster process
Consultations on five energy National Policy Statements covering renewables, oil and gas pipelines, electricity networks and gas generation, and an overarching energy statement
Consultation on ZEV mandate
April 2023 First phase of small modular reactor (SMR) competitive process: market engagement Summer 2023
Second phase of SMR competitive process: selection process
Grid connections action plan
Legislate for ECO+ scheme (aka "Great British Insulation Plan")
IFRS (International Financial Reporting Standards) Sustainability Disclosure Standards published
September 2023 Final framework for Taskforce for Nature-Related Financial Disclosures (TNFD)
Autumn 2023 REMA (review of energy markets) consultation 2023
Hydrogen production delivery roadmap to be published
Future Nuclear Enabling Fund pre-grant due diligence
Taskforce to deliver deployment of rooftop solar
Grid delivery action plan
Long term plan for UK ETS (emissions trading scheme)
Consultation on how to improve the energy efficiency of owner-occupied homes
Publish a summary of responses to the consultation on improving the energy performance of privately rented homes
Respond to the consultation on improving home energy performance through lenders.
Transition plan disclosure consultation
Solvency II reform legislation
January 2024 ZEV mandate will apply 2024
Outline a clear approach to gas vs. electricity "rebalancing" and make significant progress affecting relative prices.
Final investment decisions on SMR competitive process
Implement the Clean Heat Market Mechanism
Publish adaptation finance deliverables and action plan
Up to 1 GW of electrolytic hydrogen in operation or construction
Up to 1GW of CCUS-enabled hydrogen in operation or construction
Hydrogen transport and storage infrastructure business models in place
Sustainable Aviation Fuels mandate will apply to jet fuel suppliers
2028 Install over 600,000 heat pumps per year 2030
50GW offshore wind capacity
Up to 10GW of low carbon hydrogen production capacity
End sale of new petrol and diesel cars and vans
At least 10% (around 1.5 billion litres) of jet fuel to be made from sustainable sources
Up to 70GW of solar
Phase out all new and replacement natural gas boilers
All new cars and vans to be fully zero emission at the exhaust
At least 5Mt of CO2 removal through greenhouse gas removals
Civil nuclear deployment to up to 24GW
The government announced the first winning projects from the £240 million Net Zero Hydrogen Fund. The projects selected in the first electrolytic hydrogen allocation round amounting to up to 250MW of new electrolytic hydrogen production capacity will be funded by government until the hydrogen levy is in place.
A second electrolytic allocation round will run later this year, through which up to 750MW capacity will be supported. The first and second allocation rounds are intended to support the government's ambition of up to 1 GW of electrolytic hydrogen in operation or construction by the end of 2025.
The government says it will publish a hydrogen production delivery roadmap by the end of the year and legislate to give itself powers to bring forward hydrogen transport and storage infrastructure business models "when parliamentary time allows", so the business models are in place by 2025.
The government announced the initial 8 Track-1 capture projects with which it is entering into negotiations.
Later in the year, it will launch a process to bring in further projects within the Track-1 clusters by 2030 to connect into the HyNet and East Coast Clusters which could be potential alternatives to any of the initial Track-1 projects.
The government has also launched the Track-2 cluster process. Its initial view is that Acorn CCS cluster in Aberdeenshire and the Viking CCS cluster in Humber are the leading contenders for the Track-2 T&S (transport and storage) systems.
The government confirmed the launch of Great British Nuclear which will operate through British Nuclear Fuels Limited.
In April 2023, it will launch a competitive process to select the best SMR technologies with the first phase comprising "market engagement". The second phase, in summer 2023, will be selection process with an ambition to assess and decide on the leading technologies by autumn 2023. Two final investment decisions will be taken in the next Parliament, that is towards the end of 2024.
In addition, the government launched the Future Nuclear Enabling Fund of up to £120 million to provide targeted support for new nuclear to address barriers to entry and will announce a shortlist of applications to begin pre-grant award due-diligence "soon".
Floating offshore wind
The government has opened the Floating Offshore Wind Manufacturing Investment Scheme (FLOWMIS), which will provide up to £160 million to kick start investment in port infrastructure projects needed to deliver floating offshore wind projects.
The government has committed to not making changes to categories of agricultural land in ways that might constrain solar deployment and is seeking widespread deployment of rooftop solar in commercial, industrial and domestic properties across the UK.
To support those ambitions, it has accepted the recommendations from the "Independent Review of Net Zero" to set up a taskforce to deliver on this.
The sector has long been crying out for grid infrastructure investment and the speeding up of grid connections.
The government has tasked the Electricity Networks Commissioners to advise it on what more can be done to accelerate grid delivery, and present recommendations to ministers in June 2023, with the government publishing an action plan in 2023.
The government also plans to work with industry and Ofgem to reform the grid connections process, at both transmission and distribution levels and to publish a connections action plan in the summer.
Consultations have been published on five energy National Policy Statements covering renewables, oil and gas pipelines, electricity networks and gas generation, and an overarching energy statement which includes a new requirement for offshore wind to be considered as “critical national infrastructure”.
While many in the renewables sector were looking for a repeal of the effective ban on onshore wind, the government has resisted those calls, merely saying that it will respond "in due course" to the National Policy Planning Framework (NPPF) consultation to change planning policy to allow for a more flexible localist approach.
The government confirmed the funding that was announced in the autumn statement 2022 for the ECO+ scheme of £1bn by March 2026. This will support energy efficiency upgrades to 300,000 of least efficient homes. The government plans to lay legislation by summer 2023 to take that forward (though this had originally been slated to launch in April 2023).
There are promises to publish further plans: to consult by the end of this year on how to improve the energy efficiency of owner-occupied homes, to publish a summary of responses to the consultation on improving the energy performance of privately-rented homes and respond to the consultation on improving home energy performance through lenders.
The government also announced extensions to the Industrial Energy Transformation Fund and Climate Change Agreement schemes and will be piloting an energy advice service for SMEs.
The government has a commitment to install over 600,000 heat pumps per year by 2028. To help achieve that, it has launched a £30 million Heat Pump Investment Accelerator. It also intends to implement the Clean Heat Market Mechanism in 2024 to incentivise heating system manufacturers to deploy heat pumps as a proportion of fossil fuel boiler sales.
The government restated its ambition to phase out all new and replacement natural gas boilers by 2035.
Fuel price rebalancing
The government has accepted the Independent Net Zero Review recommendation that government should commit to outlining a clear approach to gas vs. electricity "rebalancing" by the end of 2023/4 and should make significant progress affecting relative prices by the end of 2024.
The government has launched a consultation on potential policy measures to address future carbon leakage risk, including a UK Carbon Border Adjustment Mechanism (UK CBAM) and product standards, which could be deployed from the mid-2020s onwards. This matches moves at EU level to introduce an EU CBAM.
The government has published a final consultation on a Zero Emission Vehicle mandate which will apply from January 2024 and its response to a consultation on Sustainable Aviation Fuels (SAF) mandate policy which will apply from 2025.
In terms of funding, the second application window for up to £165million Advanced Fuels Fund has opened and a grant has been awarded to scale-up research on ultra-low emissions and hydrogen aircraft.
The updated Green Finance Strategy summarises many of the actions that have already been taken by the government, regulators, the financial services sector and the wider economy and confirmation of steps that have previously been announced.
In particular, the government has confirmed:
- UK Taxonomy - As announced in the March 2023 Budget, the UK Taxonomy (a categorisation of environmentally friendly activities) will, subject to consultation, include nuclear. The government has seen the difficulties the sector has had with implementing the EU Taxonomy and so has taken the decision that the UK Taxonomy will be voluntary for the first two reporting years.
- Transition plan disclosures – These will be introduced for the financial services sector, listed companies and large private companies on a "comply or explain" basis. Consultation will take place once the Transition Plan Taskforce has completed its work in autumn/winter 2023.
- IFRS Sustainability Disclosure Standards – These are expected to be published in June 2023.
- Taskforce for Nature - Related Financial Disclosures (TNFD) – The final framework is expected to be published in September 2023 after which the government will explore how to incorporate it into "UK policy and legislative architecture". Nevertheless, as with TCFD disclosures, we expect many large organisations will begin to voluntarily disclose against the TNFD.
- Adaptation finance – There will be an announcement on deliverables and an action plan by the end of 2024.
- Solvency II reforms – These will be implemented in the "coming months". The reforms will provide incentives for insurers to increase investment of potentially £100 billion over the next ten years in long term productive assets, including green assets and renewable energy infrastructure.
Separately from the government, the Integrity Council for the Voluntary Carbon Market (ICVCM) published the Core Carbon Principles (CCP) – guidelines for certifiers of carbon credits. To be CCP-eligible, carbon credit certifiers such as Verra, Gold Standard and the American Carbon Registry will have to assess the risks of any negative environmental and social impacts (including on indigenous and local communities, articulate measures to mitigate those impacts and report on progress). The CCP sit alongside a draft code of conduct for businesses that use offsets to meet their decarbonisation goals.
There will be a further review of electricity market arrangements (REMA) consultation in autumn 2023.
The government has accepted the recommendation from the Independent Net Zero Review to set out a long-term pathway for the UK ETS and will publish that later this year.
There is confirmation that capital support will be extended to 2028 to facilitate the continued growth of low carbon heat networks, including £220 million for the Heat Network Transformation Programme over 2025/6 and 2026/7.
Osborne Clarke comment
There was something for nearly everyone in the UK government's announcements on so-called Green Day, though there was not much that was new and quite a few of the announcements amounted to promises to publish plans sometime in the future.
While the boost to CCUS and the carbon leakage consultation are welcome, the sector remains anxious for delivery on a number of other fronts – from grid connections to ZEV mandates. And we will need to wait until the autumn Budget for the UK government's response to the US Inflation Reduction Act and the EU's Green Deal Industrial Plan.
Many businesses are looking at the voluntary carbon markets as part of their net zero strategy. Improving the integrity of those markets and carbon reporting and the data available, so that business can adequately address the carbon in their supply chains (Scope 3 emissions), will be crucial for ensuring that businesses implement effective transition plans. The new guidelines published by the Integrity Council for the Voluntary Carbon Market are a huge step forward on that front. Hopefully the government will continue to build on and facilitate what industry is already doing for itself.