The UK prepares for COP23 and plans for clean growth

United Kingdom Publication October 2017

The UK Government’s Clean Growth Strategy (the Strategy) published in October 2017 serves as an important re-commitment by an embattled Government to the climate change agenda and will certainly inform UK negotiations at COP23.

The core focus of the Strategy is to map a policy pathway for the UK to meet the emissions reduction trajectory set out in national legislation under the Climate Change Act, which requires that the UK  reduce its emissions by at least 80 per cent by 2050 compared to a 1990 base level. The Strategy seeks to achieve these domestic commitments at the lowest possible net cost to UK taxpayers, consumers and businesses and to maximise the social and economic benefits for UK PLC from this transition.

Up until now, progress towards emissions reductions has not come at the expense of growth: between 1990 and 2016, the UK reduced its emissions by 42 per cent, whilst the UK economy grew by 67 per cent. To date, reductions have been led by the power sector, with progress seen both in the deployment of low carbon generation and the adoption of energy efficiency measures, supported by technology advances and cost reductions in these areas. Diversion of waste from landfill and regulation to limit vehicle emissions have also contributed.

The Strategy recognises that the UK will need to nurture low carbon technologies, bring down the cost of energy, secure industrial and economic advantages and enable other countries (particularly developing countries) to adopt low carbon technologies more cheaply than the fossil fuel alternatives. It focuses on opportunities for the UK in the fields of science, financial and professional services, in the design and manufacturing sectors, as well as for the automotive industry and the offshore wind supply chain.

In the power sector, the Government has reiterated a commitment to phase out the use of unabated coal to produce electricity by 2025 and continues to emphasise the potential of offshore wind. The revival of ambitions to deploy Carbon Capture Usage and Storage (CCUS) in the UK will come as surprise to many. The Government plans to collaborate with global partners to invest up to £100 million in CCUS and work with industry through a new CCUS Council to put the UK on a path to deploy CCUS at scale in the UK and to maximise the industrial opportunity. The investment however is much lower than the £1 billion of funding for a competition cancelled in 2015 due to concerns about future costs to consumers. Notable by its absence is a role for onshore wind and solar photovoltaic power. These technologies are not mentioned. Instead there is a re-announcement of the policy intention to undertake a further allocation round for Contracts for Difference (the main current UK support scheme for renewable energy) for less established technologies including offshore wind but now also including wind energy on remote islands (subject to state aid approval).

In relation to heat, the core of the policy proposals is the reform of the Renewable Heat Incentive, with the aim of spending £4.5 billion to support innovative low carbon heat technologies in homes and businesses between 2016 and 2021.

The Strategy places a new emphasis on low carbon transport, which accounts for almost one quarter of UK emissions. The Government has reiterated plans to end the sale of new conventional petrol and diesel cars and vans by 2040. The Strategy also includes £1 billion supporting the take-up of ultra-low emission vehicles and includes the ambition to develop one of the best electric vehicle charging networks in the world by investing an additional £80m to support charging infrastructure deployment.

Whilst the Strategy is a welcome insight into the proposed pathway to achieving the 2050 targets, it will require numerous policies to be developed in more detail in the coming months and years. Commentators question whether the Strategy goes far enough; the Strategy itself acknowledges that the policies may not meet the Climate Change Act emissions reduction trajectories and raises the prospect of using the ‘flexibility’ mechanisms within the legislation (such as the purchase of good international carbon credits or carrying forwards surplus from previous budget periods) to make good any shortfall.

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