The UK road to Net Zero just got steeper

By Ross Melton

The road to Net Zero just became a lot steeper, as the Prime Minister carved a new political dividing line ahead of the next General Election at the cost of the UK’s Net Zero commitments.

After days of speculation and inevitable pressure for some corners of the Conservative Party, on Wednesday afternoon the Prime Minister Rishi Sunak MP dealt what many in the energy industry and those focused on the environment will feel like a major blow to progress.

Perhaps this week’s announcements that the Government would be delaying the ban on the sale of new internal combustion engine vehicles and the implementation of low carbon heating technologies until 2035, were the logical continuation of the narrative championed by some Conservative commentators and outriders that the Party’s unexpected Uxbridge byelection success proved that there are votes to be won by rolling back climate change action. Though it remains to be seen whether the ULEZ-effect can be replicated across the country.

Perhaps the Prime Minister was swayed by the advice of Conservative General Election Strategist Isaac Levido to rerun the climate-sceptic election approach which successfully delivered a victory at the ballot box for Scott Morrison’s Australian Liberal Party in 2019, but came unstuck in last year’s Australian General Election.

Perhaps internal polling of Party faithful indicates that opposition to climate change action may galvanise a weary campaign base ahead of a General Election next year.

Or perhaps the famously spreadsheet-loving former Chancellor baulked at the spending commitments required to meet the targets set by his Conservative Downing Street predecessors, ignoring the economic reality that the costs of decarbonisation increase with every passing day – delay only multiplies the costs to households tomorrow.

While each of these motivations will have shaped the Prime Minister’s thinking ahead of Wednesday afternoons announcements, the aim was clear: breaking with the recent political consensus to manufacture a dividing line between the Conservative and Labour Party’s before next year’s General Election.

The Prime Minister’s decision to move the goal posts, watering down climate action targets that he considers too difficult or costly, sends a clear signal to UK industry, investors and supply chains that the Government is no longer committed to making the hard choices necessary to deliver a cleaner, greener and more profitable future.

By injecting uncertainty where the UK had previously appeared steadfast, the Prime Minister has weakened the business case for investment in the UK’s Green Transition in return for an uncertain potential political payoff.

It isn’t a stretch to describe the responses from some as scathing. Complaints from leading UK businesses range from investors warning changes make the UK “more dependent on foreign oil and gas” and “at the mercy of…exploitative energy companies” to renewable generators describing the decision as “an economic misjudgement of historic proportions”, “putting us into the slow lane in the race to net zero”. But criticism has not been uniform, with some automotive manufacturers and think tanks welcoming the policy shifts as a proportionate response to the UK’s economic and environmental challenges.

But while the delaying or reducing of commitments is being viewed by many as bad news, there are several welcome policy changes from the Prime Minister’s speech that should accelerate progress towards Net Zero.

Increasing the Boiler Upgrade Grant for the installation of heat pumps to £7,500 will provide a more realistic level of support for systems that can cost up to £15,000 to retrofit. By lengthening the timeframe for low carbon heating and EV charging infrastructure, the Prime Minister is giving the supply chain and skilled workforce more time to develop to meet the rate of installations required. But at the same time, Wednesday’s announcements remove the urgency of action, reducing the motivation to invest in low carbon technologies.

Another welcome announcement was the Prime Minister’s commitment to reforming grid connections; implementing a more streamlined connection queue system based upon project milestones rather than a “first-come, first connected” basis. He also confirmed plans for a new “Spatial Plan” – which may support accelerated grid connections and presumed planning in some UK regions. These key changes could significantly accelerate the connection of renewable generation and storage but remain at odds with the Prime Minister’s decision to maintain an effective ban on new onshore wind projects in England, with local councils still empowered to unilaterally block developments in their areas. The devil will be in the detail – it is currently unclear whether these reforms will only cover large project connections or whether smaller low carbon technologies will also benefit.

As the Prime Minister phrased it, a more “pragmatic, proportionate and realistic” approach to Net Zero is needed.  With YouGov polling indicating that 49% of voters do not think the UK Government is doing enough to respond to Climate Change, it remains to be seen whether his own recent contributions to the discussion meet his own definition.

Related Article:

3 questions left unanswered by Rishi Sunak’s “Powering Up Britain” strategy

To stay formed about the global transition to Net Zero and what it means for your business, your investors, and your growth strategy, reach out to Ross Melton, Associate Director, at ross.melton@instinctif.com or get in touch via tellmemore@instinctif.com.