UK net-zero strategy: Ten key points
The plans aim to accelerate decarbonisation in a number of different areas with a mix of investment and policy
The UK unveiled its net-zero strategy in October 2021, ahead of the Cop26 talks held in Glasgow in November. The strategy, published under Section 14 of the Climate Change Act 2008, sets out how the UK plans to meet its legally binding climate goals by 2050. The strategy builds on the UK’s ten-point plan for a green industrial revolution, published in November 2020. The objective remains to create conditions for the private sector to invest confidently to ensure that the UK achieves net zero by 2050.
The strategy lays out a comprehensive roadmap for the UK to achieve net-zero and is one of a series of climate change initiatives planned by the country. It is effectively a roadmap for how the British economy will be decarbonised, affecting nearly every business in the UK.
The strategy expects to achieve this by a combination of private sector investment, providing grants, establishing market mandates and using government-funded contracts such as contracts for differences (CfD).
Electrification, hydrogen and innovation are the key pillars of the strategy.
Here are the key points that businesses and investors need to know.
The key numbers
The UK aims to achieve net zero by 2050 and reduce its carbon emissions by 78pc by 2035. It expects the strategy to create 440,000 jobs and require £90bn ($120bn) of private investment by 2030. The UK estimates the cost of the transition could be 1-2pc of GDP by 2050. It also expects a shift away from fossil fuels to reduce tax revenues.
By 2035, the UK expects to be powered entirely by clean electricity such as renewables; nuclear; storage; natural gas with carbon capture, utilisation and storage (CCUS); and hydrogen—subject to security of supply considerations.
2050 – Date by which UK targets net zero
The UK is betting big on new nuclear and aims to secure FID on a large-scale nuclear plant by 2024. It also plans to launch a new £120mn future nuclear enabling fund to keep its options open for future nuclear technologies, including small modular reactors.
The UK continues its big bet on offshore wind, with £380mn of funding to achieve 40GW of offshore wind, including 1GW of floating offshore wind by 2030, together with more onshore solar, storage and other renewables. The current CfD model will be the critical mechanism for adding renewables to the grid.
The UK aims to make electricity bills cheaper by shifting environmental levies onto natural gas to encourage electrification.
The UK aims to have 5GW of hydrogen production capacity by 2030.
It has established the £140mn Industrial Decarbonisation and Hydrogen Revenue Support scheme to fund hydrogen and carbon-capture business models. A total of £100mn will be used to award 250MW of contracts for electrolytic hydrogen production capacity in 2023. Further allocation is planned for 2024.
The UK is also launching a hydrogen village trial to inform a decision on the role of hydrogen in the heating system by 2026.
A funding envelope to be announced in 2022 will enable the first contracts for industrial carbon-capture facilities and CCUS-enabled hydrogen production projects from 2023 through the cluster sequencing process. This will help deliver up to 3mn t CO₂/yr of industrial carbon capture and up to 1GW of CCUS-enabled hydrogen by the mid-2020s.
Further allocation rounds for all types of eligible low-carbon hydrogen production and industrial carbon capture from 2025 is planned to enable the UK to meet its 2030 deployment ambitions of 3mn t/yr CO₂ of industrial carbon capture, 5GW hydrogen production capacity, and four CCUS clusters.
From 2025, all revenue support for hydrogen production is intended to be funded by levies. The government is expected to consult and legislate on the matter.
The government also intends to introduce ‘climate compatibility checkpoints’ for future licensing on the UK continental shelf and regulate the oil and gas sector in a way that halves greenhouse gas emissions.
The UK has set an ambitious target to capture 20-30mn t/yr CO₂ by 2030 and at least 50mn t/yr CO₂ by the mid-2030s. The UK will deploy £315mn to future-proof industrial sectors through the Industrial Energy Transformation Fund.
The strategy builds on the UK’s ten-point plan for a green industrial revolution
The UK’s first two carbon-capture storage hubs will go forward for a government funding plan—it has allocated £1bn for four carbon-capture projects. The sites will be subject to value-for-money tests. By choosing areas with the most industrial activity, the UK aims to have many businesses use the same infrastructure to reduce costs.
The East Coast Cluster plans to develop the offshore infrastructure to transport and store CO₂ in the UK’s North Sea. The Hynet cluster plans to produce clean hydrogen and capture and store CO₂ from energy-intensive industries.
The UK will also consult on a net-zero consistent UK emissions trading system cap to incentivise cost-effective abatement in the industry at the pace and scale required to deliver net zero.
Heat and buildings
The UK intends to ensure that, by 2035, no new gas boilers will be sold. A new £450mn three-year boiler upgrade scheme will see households offered grants of up to £5,000 for low-carbon heating systems. A new £60mn heat pump ready programme will fund heat pump technologies to support the target of 600,000 installations a year by 2028.
The UK will also deploy nearly £3.2bn to fund the decarbonisation of social housing and public buildings and support home upgrades.
A new mandate will require carmakers to sell an increasing percentage of emissions-free vehicles from 2024 to help meet the 2030 target for the phase-out of petrol and diesel cars and the target that all cars must be fully zero-emission capable by 2035.
The government plans to have 100pc of its car and van fleet be zero-emission by 2027. A further £620mn is committed—on top of the £1.9bn already pledged—for zero-emission vehicle grants and local electric vehicle infrastructure.
The UK will also deploy £350mn from its £1bn Automotive Transformation Fund to support the electrification of UK vehicles and their supply chains; £2bn to enable 50pc of journeys in towns and cities to be cycled or walked by 2030; and £3bn to create integrated bus networks, more frequent services and bus lanes to speed journeys.
The UK also intends to transform local transport systems with 4,000 new zero-emission buses and the infrastructure to support them, plus a net-zero rail network by 2050, aiming to remove all diesel-only trains by 2040.
Shipping and aviation
The UK will also establish a UK Shipping Office for Reducing Emissions. The country aims to become a world leader in zero-emission flight and to kickstart the commercialisation of a UK sustainable aviation fuel (SAF) market to deliver 10pc SAF by 2030, with a £180mn funding for the development of SAF plants.
Natural resources, waste and fluorinated gases
The UK will support the existing £640mn Nature for Climate Fund with a further £124mn to invest in peat restoration and woodland creation and management by 2025. The objective is to restore 280,000 hectares of peat by 2050, treble woodland creation and increase planting rates to 30,000 hectares per year by 2024.
Greenhouse gas removal
The UK expects to deliver £100mn of investment in greenhouse gas removal (GGR) innovation to enable further deployment of GGR to leverage private investment and demand for transferrable engineering expertise from the UK’s oil and gas sector. The UK will explore options for regulatory oversight to provide robust monitoring, reporting and verification of GGR.
The UK will deliver at least £1.5bn of funding to support net-zero innovation projects. The new UK Infrastructure Bank (UKIB)—with an initial £12bn investment—is expected to provide leadership, help mitigate risks and support private sector investments in the development of new technologies—particularly to scale early-stage technologies that have moved through the research and development phase.
This is expected to support more than £40bn of investment and help low-carbon technologies and sectors achieve maturity and scale. The UK will also introduce a new sustainability disclosures regime, including mandatory climate-related financial disclosures and a UK green taxonomy. Furthermore, the UK will publish an annual progress update against a set of key indicators for achieving its climate goals.