Clean Growth Strategy - Leading the way to a low carbon future 2017

2000. Fuel savings valued using 2015 prices. DfT (2017) National Travel Survey; DfT (2017) Vehicles Statistics; ICCT (2015) From Laboratory to Road; BEIS (2016) Green Book supplementary appraisal guidance 12 Defra (2016) ENV18 - Local authority collected waste: annual results tables: https://www.gov.uk/government/statistical-data-sets/ env18-local-authority-collected-waste-annual-results-tables The Clean Growth Strategy 7 • This progress has been aided by the falling This progress has altered the way that we see costs of many low carbon technologies: many of the trade-offs between investing in low renewable power sources like solar and carbon technologies that help secure our future wind are comparable in cost to coal and but that might incur costs today. It is clear that gas in many countries13; energy efficient actions to cut our emissions can be a win- light bulbs are over 80 per cent cheaper win: cutting consumer bills, driving economic today than in 201014; and the cost of electric growth, creating high value jobs and helping to vehicle battery packs has tumbled by over improve our quality of life. 70 per cent in this time15. Of course, greenhouse gas emissions are a • As a result of this technological innovation, global problem and action is needed from new high value jobs, industries and all countries. The UK has played a key role companies have been created. And this is in demonstrating international leadership on driving a new, technologically innovative, tackling climate change through its domestic high growth and high value “low carbon” action, climate diplomacy and financial support. sector of the UK economy. Not only are The UK was among the first to recognise we rapidly decarbonising parts of the climate change as an economic and political domestic economy, but thanks to our world issue as opposed to solely an environmental leading expertise in technologies such as one and has used its world leading economic, offshore wind, power electronics for low science and technical skills to shape the global carbon vehicles and electric motors, and debate around climate change, for instance global leadership in green finance, we are making the economic case for climate action successfully exporting goods and services in the landmark Stern Report in 200618. The UK around the world – for example, one in has also used its influence and resources to every five electric vehicles driven in Europe help developing countries with their own clean is made in the UK16. This progress now growth – and our actions to date are expected means there are more than 430,000 jobs to save almost 500 million tonnes of carbon in low carbon businesses and their supply dioxide over the lifetime of the projects19, more chains, employing people in locations right than the entire annual emissions of France20. across the country17. While we do not count these results against our domestic targets, we can be proud of the impact of the UK’s commitment to global climate action. 13 New Climate Economy (2014) Better Growth, Better Climate http://newclimateeconomy.report/ 14 International Energy Agency (2016) Energy Efficiency Market Report https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF 15 Bloomberg New Energy Finance (2016) 2016 lithium-ion battery price survey https://www.bnef.com/core/insights/15597 16 European Alternative Fuels Observatory (2017) Top 5 selling BEV analysis: http://www.eafo.eu/vehicle-statistics/m1 17 ONS (2016) UK Environmental Accounts: Low Carbon and Renewable Energy Economy Survey, Final estimates: 2015 https://www.ons.gov.uk/economy/ environmentalaccounts/bulletins/finalestimates/2015results 18 HM Treasury (2006) Stern Review on the Economics of Climate Change DfID (2017) 2017 UK Climate Finance Results https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/625457/2017-UK-Climate-Finance- 19 Results.pdf 20 UNFCCC 2015 data (retrieved September 2017) http://di.unfccc.int/time_series 8 Department for Business, Energy and Industrial Strategy The Opportunities and Challenges Capturing part of the global opportunity while continuing to drive down carbon emissions The UK played a central role in securing the from our own activities could provide a real 2015 Paris Agreement in which, for the first time, national economic boost. The UK low carbon 195 countries (representing over 90 per cent of economy could grow by an estimated 11 per global economic activity21) agreed stretching cent per year between 2015 and 2030 – four national targets to keep the global temperature times faster than the rest of the economy25 – rise below two degrees. The actions and and could deliver between £60 billion and £170 investments that will be needed to meet the billion of export sales of goods and services by Paris commitments will ensure the shift to clean 203026. This means that clean growth can play growth will be at the forefront of policy and a central part in our Industrial Strategy – building economic decisions made by governments and on our strengths to drive economic growth and businesses in the coming decades. This creates boost earning power across the country. enormous potential economic opportunity –– an estimated $13.5 trillion of public and private Action to deliver clean growth can also have investment in the global energy sector alone wider benefits. For example, the co-benefit of will be required between 2015 and 2030 if the cutting transport emissions is cleaner air, which signatories to the Paris Agreement are to meet has an important effect on public health, the their national targets22. The decision by the US economy, and the environment. to withdraw from the Paris Agreement served to bring together and bolster action internationally on But hitting our carbon budgets and expanding climate change with many countries underlining the low carbon economy will not be easy. We their commitment to the Paris Agreement in the have achieved significant results in the power days and weeks that followed. and waste sectors and now need to replicate this success across the economy, particularly in The UK is well placed to take advantage of the transport, business and industrial sectors. this economic opportunity. Our early action on We also need to reduce the emissions created clean growth means that we have nurtured a by heating our homes and businesses, which broad range of low carbon industries, including account for almost a third of UK emissions. some sectors in which we have world leading If done in the right way, cutting emissions in positions. This success is built upon wider these areas can benefit us all through reduced strengths – our scientific research base23, energy bills, which will help improve the UK’s expertise in high-value service and financial productivity, and improved air quality, while the industries24, and a regulatory framework that innovation and investment required to drive provides long-term direction and support for these emissions down can create more jobs innovation and excellence in the design and and more export opportunities. manufacturing of leading edge technology. 21 World Bank (retrieved September 2017) https://data.worldbank.org/indicator/NY.GDP.MKTP.CD 22 International Energy Agency (2015) Climate pledges for COP21 slow energy sector emissions growth dramatically https://www.iea.org/newsroom/news/2015/ october/climate-pledges-for-cop21-slow-energy-sector-emissions-growth-dramatically.html 23 BIS (2013) International Comparative Performance of the UK Research Base – 2013 https://www.gov.uk/government/publications/ performance-of-the-uk-research-base-international-comparison-2013 24 GreenAlliance (2016) Will the UK economy succeed in a low carbon world? http://www.green-alliance.org.uk/UK_low_carbon.php 25 Ricardo Energy and Environment for the Committee on Climate Change (2017) UK business opportunities of moving to a low carbon economy https://www.theccc. org.uk/publication/uk-energy-prices-and-bills-2017-report-supporting-research/ 26 Ricardo Energy and Environment for the Committee on Climate Change (2017) UK business opportunities of moving to a low-carbon economy (supporting data tables) https://www.theccc.org.uk/publication/uk-energy-prices-and-bills-2017-report-supporting-research/ The Clean Growth Strategy 9 Figure 2: UK emissions by sector, 201527 Public Sector 2% Homes Business and Industry 13% 25% Heating in Natural Resources buildings 15% and industry creates around 32% of total UK emissions 24% Transport 21% Power 100% = 496 Mt Source: BEIS In order to meet the fourth and fifth carbon our carbon budgets. However, we are prepared budgets (covering the periods 2023-2027 and to use the flexibilities available to us to meet 2028-2032) we will need to drive a significant carbon budgets, subject to the requirements set acceleration in the pace of decarbonisation out in the Climate Change Act, if this presents and in this Strategy we have set out stretching better value for UK taxpayers, businesses and domestic policies that keep us on track to meet domestic consumers. 27 BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015) https://www.gov.uk/government/collections/final-uk-greenhouse-gas-emissions-national- statistics; BEIS analysis 10 Department for Business, Energy and Industrial Strategy Every action that we take to cut emissions Our Clean Growth Strategy must be done while ensuring our economy remains competitive. As we set out in our This Strategy sets out a comprehensive set of Industrial Strategy Green Paper, we attach policies and proposals that aim to accelerate the great importance to making sure our energy is pace of “clean growth”, i.e. deliver increased affordable28. This is why the Government has economic growth and decreased emissions. commissioned an independent review into the Our Approach cost of energy led by Professor Dieter Helm CBE. This review will recommend ways to In the context of the UK’s legal requirements deliver the Government’s carbon targets and under the Climate Change Act, the UK’s ensure security of supply at minimum cost to approach to reducing emissions has two both industry and domestic consumers. Once guiding objectives: Ministers have had the opportunity to consider

1. To meet our domestic commitments at the the review’s proposals, the Government will lowest possible net cost to UK taxpayers, incorporate its recommendations into the consumers and businesses; and, further development of the Clean Growth Strategy as appropriate. 2. To maximise the social and economic benefits for the UK from this transition. Another imminent challenge is to manage any impact of leaving the European Union as In order to meet these objectives, the UK will the Government fulfils its commitment to the need to nurture low carbon technologies, British people. Leaving the EU will not affect our processes and systems that are as cheap statutory commitments under our own domestic as possible. Climate Change Act and indeed our domestic binding emissions reduction targets are more We need to do this for several reasons. First, we ambitious than those set by EU legislation. need to protect our businesses and households The exact nature of the UK’s future relationship from high energy costs. Second, if we can with the EU and the long-term shape of our develop low cost, low carbon technologies in involvement in areas like the EU Emissions the UK, we can secure the most industrial and Trading System are still to be determined. economic advantage from the global transition There are also emerging opportunities to drive to a low carbon economy. Third, if we want more action – for example by putting emission to see other countries, particularly developing reductions and land stewardship at the heart countries, follow our example, we need low of a post EU agricultural support policy. We carbon technologies to be cheaper and to offer will therefore carefully examine each area of more value than high carbon ones. common interest with our EU partners and work We cannot predict every technological to deliver policies and programmes that are at breakthrough that will help us meet our targets. least as beneficial as the current arrangements. Instead, we must create the best possible 28 BEIS (2017) Building our Industrial Strategy https://www.gov.uk/government/consultations/building-our-industrial-strategy The Clean Growth Strategy 11 environment for the private sector to innovate Actions taken by the Government on clean and invest. Our approach will maintain that of growth will be consistent with broader our Industrial Strategy: building on the UK’s Government priorities, such as delivering clean strengths, improving productivity across the air. All parts of the UK have a major role to play UK and ensuring we are the best place for in delivering our ambitions on clean growth, and innovators and new business to start-up and the Devolved Administrations have a range of grow. We are clear about the need to design plans and policies in place to deliver emission competitive markets and smart regulation to reductions. We will work closely with them, support entrepreneurs and investors who will and with local leaders across the UK, as we develop the new technologies at the scale we develop the policies and proposals set out in need. This will help our wider aim of improving this Strategy. the UK’s earning power. The changes to our infrastructure and the pace It is only through innovation – nurturing better of innovation will require significant investment products, processes and systems – that we from the private sector. The first steps to will see the cost of clean technologies come support the growth of the green finance sector down. That is why this Strategy sets out for the in the UK are set out in this Strategy. We are first time how over £2.5 billion will be invested building on a position of global leadership by the Government to support low carbon in finance and investment. These steps will innovation from 2015 to 2021. More broadly, be followed by ambitious policy proposals to the National Productivity Investment Fund will further accelerate investments to deliver our provide an additional £4.7 billion, with an extra Clean Growth Strategy. To help develop this £2 billion a year by 2020-21, representing longer-term work, the Government has set up the largest increase in public spending on UK a new Green Finance Taskforce, comprising science, research and innovation since 197929. senior representatives from the finance industry The UK is also working collaboratively as a core and Government. member of “Mission Innovation”30, a group of leading countries which aims to drive forward Key Policies and Proposals clean energy innovation on a global scale. The key actions that this Government will In addition to supporting innovation, we are take as part of our Strategy are set out below. focused on policies that deliver social and While these policies and proposals will drive economic benefits beyond the imperative to emissions down throughout the next decade, reduce emissions. Higher quality, more energy our focus is on the areas where we need to do efficient buildings are healthier places to live and more to achieve the fifth carbon budget through work. Reducing the amount of heat we waste domestic action in the UK. will reduce bills. Accelerating the rollout of low Through preparing this Strategy, we have emission vehicles contains a triple win for the identified areas where we will need to see the UK in terms of industrial opportunity, cleaner greatest progress, both through technological air and lower greenhouse gas emissions. And breakthroughs and large-scale deployment, if crucially, many of the actions in the Clean we are to meet the fifth carbon budget through Growth Strategy will enhance the UK’s energy domestic action. security by delivering a more diverse and reliable energy mix. 29 HM Treasury (2016) Autumn Statement 2016 https://www.gov.uk/government/topical-events/autumn-statement-2016 30 Mission Innovation http://mission-innovation.net/ 12 Department for Business, Energy and Industrial Strategy Key Policies and Proposals in the Strategy Accelerating Clean Growth

1. Develop world leading Green Finance capabilities, including by: • Setting up a Green Finance Taskforce to provide recommendations for delivery of the public and private investment we need to meet our carbon budgets and maximise the UK’s share of the global green finance market • Working with the British Standards Institution to develop a set of voluntary green and sustainable finance management standards • Providing up to £20 million to support a new clean technology early stage investment fund • Working with mortgage lenders to develop green mortgage products that take account of the lower lending risk and enhanced repayment associated with more energy efficient properties Improving Business and Industry Efficiency – 25% of UK Emissions

2. Develop a package of measures to support businesses to improve their energy productivity, by at least 20 per cent by 2030, including by: • Following the outcome of the independent review of Building Regulations and fire safety, and subject to its conclusions, we intend to consult on improving the energy efficiency of new and existing commercial buildings • Consulting on raising minimum standards of energy efficiency for rented commercial buildings • Exploring how voluntary building standards can support improvements in the energy efficiency performance of business buildings, and how we can improve the provision of information and advice on energy efficiency to SMEs • Simplifying the requirements for businesses to measure and report on energy use, to help them identify where they can cut bills

3. Establish an Industrial Energy Efficiency scheme to help large companies install measures to cut their energy use and bills

4. Publish joint industrial decarbonisation and energy efficiency action plans with seven of the most energy intensive industrial sectors

5. Demonstrate international leadership in carbon capture usage and storage (CCUS), by collaborating with our global partners and investing up to £100 million in leading edge CCUS and industrial innovation to drive down costs

6. Work in partnership with industry, through a new CCUS Council, to put us on a path to meet our ambition of having the option of deploying CCUS at scale in the UK, and to maximise its industrial opportunity The Clean Growth Strategy 13

7. Develop our strategic approach to greenhouse gas removal technologies, building on the Government’s programme of research and development and addressing the barriers to their long term deployment

8. Phase out the installation of high carbon forms of fossil fuel heating in new and existing businesses off the gas grid during the 2020s, starting with new build

9. Support the recycling of heat produced in industrial processes, to reduce business energy bills and benefit local communities

10.Innovation: • Invest around £162 million of public funds in research and innovation in Energy, Resource and Process efficiency, including up to £20 million to encourage switching to lower carbon fuels • Support innovative energy technologies and processes with £14 million of further investment through the Energy Entrepreneurs Fund Improving Our Homes – 13% of UK Emissions Improving the energy efficiency of our homes

11.Support around £3.6 billion of investment to upgrade around a million homes through the Energy Company Obligation (ECO), and extend support for home energy efficiency improvements until 2028 at the current level of ECO funding

12.We want all fuel poor homes to be upgraded to Energy Performance Certificate (EPC) Band C by 2030 and our aspiration is for as many homes as possible to be EPC Band C by 2035 where practical, cost-effective and affordable

13.Develop a long term trajectory to improve the energy performance standards of privately- rented homes, with the aim of upgrading as many as possible to EPC Band C by 2030 where practical, cost-effective and affordable

14.Consult on how social housing can meet similar standards over this period

15.Following the outcome of the independent review of Building Regulations and fire safety, and subject to its conclusions, we intend to consult on strengthening energy performance standards for new and existing homes under Building Regulations, including futureproofing new homes for low carbon heating systems

16.Offer all households the opportunity to have a smart meter to help them save energy by the end of 2020 Rolling out low carbon heating

17.Build and extend heat networks across the country, underpinned with public funding (allocated in the Spending Review 2015) out to 2021

18.Phase out the installation of high carbon fossil fuel heating in new and existing homes currently off the gas grid during the 2020s, starting with new homes 14 Department for Business, Energy and Industrial Strategy Rolling out low carbon heating (continued)

19.Improve standards on the 1.2 million new boilers installed every year in England and require installations of control devices to help people save energy

20.Invest in low carbon heating by reforming the Renewable Heat Incentive, spending £4.5 billion to support innovative low carbon heat technologies in homes and businesses between 2016 and 2021

21.Innovation: Invest around £184 million of public funds, including two new £10 million innovation programmes to develop new energy efficiency and heating technologies to enable lower cost low carbon homes Accelerating the Shift to Low Carbon Transport – 24% of UK Emissions

22.End the sale of new conventional petrol and diesel cars and vans by 2040

23.Spend £1 billion supporting the take-up of ultra low emission vehicles (ULEV), including helping consumers to overcome the upfront cost of an electric car

24.Develop one of the best electric vehicle charging networks in the world by: • Investing an additional £80 million, alongside £15 million from Highways England, to support charging infrastructure deployment • Taking new powers under the Automated and Electric Vehicles Bill, allowing the Government to set requirements for the provision of charging points

25.Accelerate the uptake of low emission taxis and buses by: • Providing £50 million for the Plug-in Taxi programme, which gives taxi drivers up to £7,500 off the purchase price of a new ULEV taxi, alongside £14 million to support 10 local areas to deliver dedicated charge points for taxis • Providing £100 million for a national programme of support for retrofitting and new low emission buses in England and Wales

26.Work with industry as they develop an Automotive Sector Deal to accelerate the transition to zero emission vehicles

27.Announce plans for the public sector to lead the way in transitioning to zero emissions vehicles

28.Invest £1.2 billion to make cycling and walking the natural choice for shorter journeys

29.Work to enable cost-effective options for shifting more freight from road to rail, including using low emission rail freight for deliveries into urban areas, with zero emission last mile deliveries

30.Position the UK at the forefront of research, development and demonstration of Connected and Autonomous Vehicle technologies, including through the establishment of the Centre for Connected and Autonomous Vehicles and investment of over £250 million, matched by industry The Clean Growth Strategy 15

31.Innovation: Invest around £841 million of public funds in innovation in low carbon transport technology and fuels including: • Ensuring the UK builds on its strengths and leads the world in the design, development and manufacture of electric batteries through investment of up to £246 million in the Faraday Challenge • Delivering trials of Heavy Goods Vehicle (HGV) platoons, which could deliver significant fuel and emissions savings Delivering Clean, Smart, Flexible Power – 21% of UK Emissions

32.Reduce power costs for households and businesses by: • Implementing the smart systems plan, which will help consumers to use energy more flexibly and could unlock savings of up to £40 billion to 2050 • Working with Ofgem and National Grid to create a more independent system operator to keep bills low through greater competition, coordination and innovation across the system • Responding to the forthcoming independent review into the cost of energy led by Professor Dieter Helm CBE • Publishing a draft bill to require Ofgem to impose a cap on standard variable and default tariffs across the whole market

33.Phase out the use of unabated coal to produce electricity by 2025

34.Deliver new nuclear power through Hinkley Point C and progress discussions with developers to secure a competitive price for future projects in the pipeline

35.Improve the route to market for renewable technologies such as offshore wind through: • Up to £557 million for further Pot 2 Contract for Difference auctions, with the next one planned for spring 2019 • Working with industry as they develop an ambitious Sector Deal for offshore wind, which could result in 10 gigawatts of new capacity, with the opportunity for additional deployment if this is cost effective, built in the 2020s

36.Target a total carbon price in the power sector which will give businesses greater clarity on the total price they will pay for each tonne of emissions. Further details on carbon prices for the 2020s will be set out in the Autumn 2017 Budget

37.Innovation: Invest around £900 million of public funds, including around: • £265 million in smart systems to reduce the cost of electricity storage, advance innovative demand response technologies and develop new ways of balancing the grid • £460 million in nuclear to support work in areas including future nuclear fuels, new nuclear manufacturing techniques, recycling and reprocessing, and advanced reactor design • £177 million to further reduce the cost of renewables, including innovation in offshore wind turbine blade technology and foundations 16 Department for Business, Energy and Industrial Strategy Enhancing the Benefits and Value of Our Natural Resources – 15% of UK Emissions

38.As we leave the EU, design a new system of future agricultural support to focus on delivering better environmental outcomes, including addressing climate change more directly

39.Establish a new network of forests in England including new woodland on farmland, and fund larger-scale woodland and forest creation, in support of our commitment to plant 11 million trees, and increase the amount of UK timber used in construction

40.Work towards our ambition for zero avoidable waste by 2050, maximising the value we extract from our resources, and minimising the negative environmental and carbon impacts associated with their extraction, use and disposal

41.Publish a new Resources and Waste Strategy to make the UK a world leader in terms of competitiveness, resource productivity and resource efficiency

42.Explore new and innovative ways to manage emissions from landfill

43.Support peatland through a £10 million capital grant scheme for peat restoration

44.Innovation: Invest £99 million in innovative technology and research for agri-tech, land use, greenhouse gas removal technologies, waste and resource efficiency Leading in the Public Sector – 2% of UK Emissions

45.Agree tighter targets for 2020 for central government and actions to further reduce greenhouse gas emissions beyond this date

46.Introduce a voluntary public sector target of a 30 per cent reduction in carbon emissions by 2020-21 for the wider public sector

47.Provide £255 million of funding for energy efficiency improvements in England and help public bodies access sources of funding Government Leadership in Driving Clean Growth

48.Work with businesses and civil society to introduce a “Green Great Britain” week to promote clean growth

49.Reinstate a regular Clean Growth Inter-Ministerial Group responsible for monitoring the implementation of this Strategy and driving ambitious clean growth policies

50.Report annually on our performance in delivering GDP growth and reduced emissions through an “Emissions Intensity Ratio” The Clean Growth Strategy 17 INVESTMENT IN INNOVATION FOR CLEAN GROWTH To achieve the clean growth we want, the UK will need to nurture low carbon technologies, processes and systems that are as cheap as possible. It is only through innovation that we will see new technologies developed and the cost of clean technologies come down. Government has significantly increased This strategy sets out, for the first time, its investment in low carbon innovation where Government funding is targeted Transport 33% Power 25% £2.5 £2.5 Cross-sector 15% billion billion Smart Systems 10% Homes 7% allocated Business & Industry 6% 2015-2021 Land Use & Waste 4% Investment will be made at all stages of Innovation creates jobs and helps technology development: from basic research companies grow to pre-commercial trials The Energy Entrepreneurs Fund is a competitive funding scheme to support the development and demonstration of state of the art technologies, products and processes. The impact of Phases 1-5 is: Technology demonstration Basic & applied research 109 £62 million Projects Private supported investment Technology leveraged development 296 90 42 Jobs Patents Products supported applied for launched 18 Department for Business, Energy and Industrial Strategy Tracking Our Progress We will also launch the following Government consultations during 2017 and 2018 on: We want to deliver increased economic growth and reduced emissions. We have developed • The design of a new industrial heat recovery an Emissions Intensity Ratio (EIR) to measure programme our clean growth performance which we will publish each year so we can track progress. • Making the private rented sector energy To reach our 2032 targets we will need to drive efficiency regulations more effective, and the emissions intensity of the economy down setting longer term energy performance by an average of five per cent per year to 2032, standards across both the domestic private an acceleration in the four per cent annual fall and social rented sectors since 199031. • A streamlined and more effective energy and carbon reporting framework for UK The Emissions Intensity Ratio (EIR) businesses to help them identify where they can cut bills This measures the amount of greenhouse gases (tonnes of carbon dioxide equivalent) • A package of measures to support produced for each unit of Gross Domestic businesses to improve how productively Product (GDP) created. Currently the EIR is they use energy 270 tonnes/£ million and it was 720 tonnes/£ • Our strategic approach to the aviation million in 1990. By 2032, we expect the EIR sector in a series of consultations over the will need to be nearly as low as 100 tonnes/£ next 18 months. million to meet our ambitions. A full list of the actions and milestones arising from this Strategy is set out at Annex B. Next Steps Many of the future actions the Government will This Strategy is not the end of the process. be taking, expanding on the proposals above, While this is an important milestone in our will be set out in the 25 Year Environment work to decarbonise the UK while growing our Plan, which will be designed to be a sister economy, our approach will develop and adapt document to this Strategy, and in a long term to changing circumstances. We will update key strategy for the UK’s transition to zero road elements of the Strategy in line with our annual vehicle emissions. Taken together, these set statutory responses to the Committee on out the Government’s approach to fulfilling Climate Change’s reports on progress, ahead its commitment to leave the environment in of setting the sixth carbon budget by 30 June a better state than it inherited. Along with the

2021. Industrial Strategy White Paper, to be published later in 2017, these will form a critical part of our future progress. BEIS analysis; ONS (2016) Quarterly National Accounts; BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015); OBR (March 2017) Economic and Fiscal 31 Outlook; OBR (January 2017) Fiscal Sustainability Report The Clean Growth Strategy 19 The Government cannot achieve the changes We welcome views and comments on our needed to our economy by itself. Outside action approach and these should be sent to on public sector emissions, the Government’s CleanGrowthStrategy@beis.gov.uk by 31 key role is to set the framework for action across December 2017. Views received in response the economy. Beyond that, clean growth has to to both this Strategy and the detailed policy be a shared endeavour between Government, proposals which will follow it, will be considered business, civil society and the British people. as we update key elements of our Strategy Creating this supportive environment will before setting the sixth carbon budget by 30 help attract the domestic and international June 2021. investment the UK wants. Therefore from 2018 we will work with private partners and NGOs to introduce a Green Great Britain Week. Green Great Britain Week An annual event to: • Focus on climate and air quality issues across • Share the latest climate science the UK • Highlight and promote economic opportunities • Demonstrate our progress and successes on arising from clean growth especially to climate action international investors. Chapter 1: UK Leadership and Progress The Clean Growth Strategy 21 Our strategy for clean growth starts In 2008, we became the first country to set a legally binding emissions reduction target from a position of strength. The through the Climate Change Act. UK was one of the first countries This has driven significant progress in cutting to recognise and act on the threat emissions. In 2016 alone UK emissions fell by of climate change and continues six per cent compared to the year before32. to play an important leadership Overall, between 1990 and 2016, the UK reduced emissions by 42 per cent33. Today, the role today. Climate Action Network ranks the UK third in the world for action on climate change34. What the Climate Change Act Requires The Climate Change Act requires the UK to on the greenhouse gas emissions that can reduce its emissions by at least 80 per cent be emitted across the UK during a five-year by 205035. This means greenhouse gas period. Five carbon budgets have been set to emissions falling from around 14 tonnes per date, putting in place caps on greenhouse gas person in 1990 to around 2 tonnes per person emissions from 2008 out to 2032. In July 2016, in 2050. To ensure steady progress towards we set the fifth carbon budget, which requires our 2050 goal, the Climate Change Act a 57 per cent average reduction in emissions requires the Government to set intermediate over 2028-32 across the UK compared to a targets – ‘carbon budgets’. These are caps 1990 baseline. Figure 3: UK carbon budgets and 2050 target35 Base Year 3,018 Mt 2,782 Mt 2,544 Mt 1,950 Mt 1,725 Mt 80% (25% lower) (31% lower) (37% lower) (51% lower) (57% lower) reduction 1990 First Second Third Fourth Fifth 2050 carbon carbon carbon carbon carbon budget budget budget budget budget (2008-12) (2013-17) (2018-22) (2023-27) (2028-32) Source: UK legislation; BEIS 33 BEIS (2017) Provisional UK greenhouse gas emissions national statistics 2016 https://www.gov.uk/government/statistics/ provisional-uk-greenhouse-gas-emissions-national-statistics-2016 33 Ibid 34 Climate Action Network (2017) Climate Change Performance Index Results 2017 http://www.caneurope.org/docman/ climate-energy-targets/3015-climate-change-performance-index-2017/file 35 On 1990 levels 36 1990 base year emissions 803 Mt, equivalent to 4,013 Mt over a 5-year period, BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015) https://www.gov.uk/ government/collections/final-uk-greenhouse-gas-emissions-national-statistics 22 Department for Business, Energy and Industrial Strategy This progress has not come at the expense Progress Has Been Made Across the of the economic growth we need to support UK Economy our public services and invest in our future. Between 1990 and 2016, while the UK reduced Some of the largest falls in emissions since 1990 its emissions by 42 per cent37 the economy have been seen in the power sector, where grew by 67 per cent38. The UK has reduced emissions have fallen by almost half43 as the emissions per person faster than any other G7 UK has switched away from coal and increased nation (and indeed more than any other G20 the share of renewables and gas in electricity nation39) while at the same time leading the G7 generation. In 2016 nearly one quarter of the in GDP growth per capita since 199040. PwC’s UK’s electricity generation was provided by Low Carbon Economy Index shows that the renewables44 and on 7 June this year renewable UK was the fastest of any country in the G20 to energy sources supplied over 50 per cent of UK decarbonise in 201641. electricity for the first time in history45. Figure 4: UK and G7 economic growth and emissions reductions41 180 UK GDP +67% 160 G7 GDP +61% 140 Index (1990 = 100) 120 100 G7 emissions -3% (1990-2015) 80 60 UK emissions -42% 40 20 1990 1995 2000 2005 2010 2015 Source: UNFCCC; World Bank; BEIS 37 BEIS (2017) Provisional Greenhouse Gas Emissions Inventory Statistics 2016 https://www.gov.uk/government/statistics/ provisional-uk-greenhouse-gas-emissions-national-statistics-2016 38 ONS (2016) Quarterly National Accounts Statistical bulletins (Series ABMI. Seasonally adjusted chained volume measures) https://www.ons.gov.uk/economy/ grossdomesticproductgdp/timeseries/abmi 39 World Resources Institute (retrieved September 2017) CAIT Climate Data Explorer http://cait.wri.org Data to 2013 World Bank (retrieved September 2017) World Development Indicators, International Comparison Program database http://data.worldbank.org/indicator/NY.GDP. 40 MKTP.PP.KD. Data to 2015 41 PwC (2017) Low Carbon Economy Index http://www.pwc.co.uk/services/sustainability-climate-change/insights/low-carbon-economy-index.html 42 UNFCCC Data Interface, http://di.unfccc.int/time_series; World Bank, World Development Indicators, http://data.worldbank.org/indicator/NY.GDP.MKTP.PP.KD; BEIS (2017) Final GHG Emissions Inventory Statistics (1990-2015) https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 43 BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015) https://www.gov.uk/government/collections/final-uk-greenhouse-gas-emissions-national-statistics 44 BEIS (August 2017) Energy Trends https://www.gov.uk/government/statistics/electricity-section-5-energy-trends 45 BBC (2017) Renewables provide more than half UK electricity for first time http://www.bbc.co.uk/news/business-40198567 The Clean Growth Strategy 23 Table 1: Greenhouse gas emissions by sector, 1990-201546 Emissions (Mt) Percentage change Sector 1990 base year47 2015 1990-2015 Business and industry 231 123 -47% Transport 122 120 -2% Power 204 104 -49% Natural resources 152 77 -50% Homes 80 64 -20% Public sector 13 8 -40% Total 803 496 -38%48 Source: BEIS There have also been significant falls in 5.5 per cent of sales in July 201751. In our homes, emissions from waste and industry – driven average household energy consumption has partly by a change in the UK’s economic fallen by over 17 per cent since 1990, in part structure from manufacturing to services but due to tighter standards and obligations on also by a large reduction in waste being sent energy suppliers to improve energy efficiency52. to landfill. This has been driven by initiatives like the Landfill Tax which helped reduce the Falling Costs and Rapid Technology Uptake amount of taxable waste sent to landfill by 76 This progress has been aided by the falling per cent between 1997 and 201649. costs of many low carbon technologies We have made progress in other sectors, globally, coupled with accelerating momentum including transport, where tighter regulations in the deployment of the technologies have helped drive down the average car’s we need to reduce emissions, as a result carbon emissions per kilometre by up to 16 per of early policy action by the UK, other cent since 200050 while hybrid and ultra low governments and substantial public and private emission vehicles (ULEVs), such as electric and sector investment. hydrogen fuel cell cars, accounted for a record 46 BEIS (2017) UK Greenhouse Gas Inventory Provisional Statistics (1990-2016) https://www.gov.uk/government/statistics/ provisional-uk-greenhouse-gas-emissions-national-statistics-2016 47 In line with the Climate Change Act the base year is comprised of 1990 for carbon dioxide, methane and nitrous oxide, and 1995 for fluorinated compounds 48 Provisional 2016 estimate: -42 change 1990-2016. BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015) https://www.gov.uk/government/collections/ final-uk-greenhouse-gas-emissions-national-statistics 49 HMRC Landfill Tax bulletin https://www.gov.uk/government/statistics/landfill-tax-bulletin 50 Fuel efficiencies are from DfT modelling using DfT (2017) Vehicle statistics; ICCT (2015) From Laboratory to Road: A 2015 update http://www.theicct.org/ laboratory-road-2015-update 51 SMMT (2017) EV & AFV Registrations, July 2017 and Year-to-Date https://www.smmt.co.uk/vehicle-data/evs-and-afvs-registrations/ 52 BEIS (2017) Energy Consumption in the UK https://www.gov.uk/government/statistics/energy-consumption-in-the-uk Change in average consumption per household 1990-2016 24 Department for Business, Energy and Industrial Strategy For example, the power sector has seen wind power by 50 per cent since 200955. The dramatic falls in the price of renewable energy cost of offshore wind is falling even faster; in due to government policies, with global the UK, government investment has helped to investment estimated at $2.8 trillion since deliver a 50 per cent drop in costs over just the

200753. This has driven down the cost of solar last two years56. This means that wind and solar cells by 80 per cent since 200854, meaning we energy are increasingly cost competitive with are now beginning to see solar deploying in the coal and gas in many countries57. UK without government support, and onshore Figure 5: Change in global renewable energy costs57 350 300 250 200 Price per MWh ($) 150 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 Onshore wind Offshore wind Solar PV Gas (2016 range) Source: Bloomberg New Energy Finance 53 Bloomberg New Energy Finance (2017) Clean Energy Investment Trends 2Q 2017 https://about.bnef.com/blog/clean-energy-investment-2q-2017-figures-2/ 54 Bloomberg New Energy Finance (2016) Summit keynote presentation http://www.bbhub.io/bnef/sites/4/2016/04/BNEF-Summit-Keynote-2016.pdf 55 Ibid 56 Gov.uk (2017) New clean energy projects set to power 36 million homes https://www.gov.uk/government/news/ new-clean-energy-projects-set-to-power-36-million-homes 57 New Climate Economy (2014) Better Growth, Better Climate http://newclimateeconomy.report/2014/ 58 Bloomberg New Energy Finance (2016), H2 2016 Global Levelised Cost of Electricity Update https://about.newenergyfinance.com/about/blog/ h2-2016-lcoe-giant-fall-generating-costs-offshore-wind/ The Clean Growth Strategy 25 Global investment in energy efficiency is also A High Growth Low Carbon Economy growing, having already reached $221 billion in 2015, an increase of six per cent on the year As a result of this technological innovation and before59. This included $12 billion of investment investment, new high value jobs, industries and in improving the efficiency of appliances and has companies have been created. The UK low led to an improvement in the average efficiency carbon economy – encompassing activities of major appliance categories60 of more than such as the design and building of low carbon 16 per cent between 2005 and 201561. power and heat projects, the manufacture of electric vehicles, the development of energy The transport sector is seeing the beginnings of efficient products and systems for buildings, a rapid shift to clean technology. Between 2011 and green finance – already supports over and 2016, the number of electric vehicles on 430,000 jobs directly and through supply the road globally increased thirtyfold62. This has chains65. We have developed world leading been aided by the falling costs of the battery expertise in technologies such as offshore wind packs that power electric vehicles, which have and power electronics for low carbon vehicles come down by nearly 80 per cent since 201063. and electric motors, and we are a global leader In the future, the cost of electric vehicles is in green finance. now forecast to fall below that of conventional vehicles in the early to mid-2020s64. This progress has altered the way that we see many of the trade-offs between investing in low carbon technologies that help secure our future but that might incur costs today. Actions to cut our emissions can be a win-win: cutting consumer bills, driving economic growth, creating high value jobs and helping to improve our quality of life. 59 International Energy Agency (2016) Energy Efficiency Market Report https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF 60 Refrigerators, freezers, washing machines, dishwashers, heating equipment, cooling equipment, water heating equipment and lighting (luminaires and lamps) and controls. 61 International Energy Agency (2016) Energy Efficiency Market Report https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF 62 International Energy Agency (2016) Global EV Outlook 2017 https://www.iea.org/publications/freepublications/publication/global-ev-outlook-2017.html 63 McKinsey & Co (2017) Electrifying insights: How automakers can drive electrified vehicle sales and profitability http://www.mckinsey.com/industries/ automotive-and-assembly/our-insights/electrifying-insights-how-automakers-can-drive-electrified-vehicle-sales-and-profitability 64 OLEV analysis. This is based on the whole-life cost of electric vehicles. The up-front cost of these vehicles is expected to fall below that of conventional vehicles in the second half of the 2020s. 65 ONS (2017) Low Carbon and Renewable Energy Economy Survey, final estimates: 2015 https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results 26 Department for Business, Energy and Industrial Strategy The UK’s Low Carbon Economy: Driving Regional Growth The growth in the UK’s low carbon economy has taken place across the country, with centres of excellence in many parts of the UK. Scotland: Turnover of the low carbon economy North: Low carbon investment was £5.5 billion in 2015, has encouraged innovation and supporting 31,000 jobs generation of clean energy, and and 20,000 businesses developed local supply chains, all of which has helped drive regeneration Northern Ireland: Turnover was almost North East: The Siemens £1 billion, supporting offshore wind blade factory 5,000 jobs and 4,000 at Alexandra Dock in Hull businesses directly supports 1,000 jobs with £310 million investment Midlands: Leading region for the design and manufacture of low carbon vehicles, with more than £1.5 billion (more than 60 per cent) of UK automotive R&D carried out in the region Wales: Turnover was £1.7 billion in 2015 with 11,000 jobs and 4,500 businesses South East: The low carbon South West: The low carbon economy in Oxfordshire has sector in Bristol employs a turnover of £1.15 billion over 9,000 people and over supporting 8,800 jobs, and 19,000 in the whole of the is 7 per cent of the local West of England, generating economy £2.4 billion Sources: Scotland, Wales, Northern Ireland: ONS (2016): Low Carbon and Renewable Energy Economy Survey. Direct activity only - excludes supply chains. North East: DECC published news story (2014) Siemens to build major offshore wind manufacturing site in the UK South East: Low Carbon Oxford and the Environmental Change Institute at the University of Oxford (2014) Joining the crowd: Growing a new economy for Oxfordshire South West: Bristol City Council (2015) State of Bristol - Key Facts Midlands: DIT (2017) https://www.gov.uk/government/publications/midlands-engine-investment-portfolio/midlands-engine-investment-portfolio North: Aldersgate Group Report (2016) Setting the Pace: Northern England’s Low Carbon Economy The Clean Growth Strategy 27 The UK’s International Leadership and Actions to Reduce Emissions Overseas Climate change is a global challenge requiring climate and arranging the first discussion of action from all countries. The UK has played climate change in the UN Security Council. a key role in demonstrating international leadership on reducing emissions and We also played a critical role in securing supporting other countries to do the same. the 2015 Paris Agreement, the first ever international climate change agreement The UK was the first country in the world to where 195 countries (representing over 90 introduce legally binding emissions reduction per cent of global economic activity68) made targets under the Climate Change Act, which a commitment to reduce emissions with the has been used as a model around the world, long-term goal of limiting global temperature including in France, Denmark, Sweden and increases to “well below 2 degrees”, and to Mexico. The UK was among the first to review progress every five years, mirroring the recognize that climate change is an economic UK’s ground-breaking processes. and political issue not just an environmental one, and to put serious climate expertise in The Agreement puts pressure on all countries our embassies to influence and help countries to bring forward long-term emissions reduction to act. strategies by 2020. The Clean Growth Strategy, as the UK’s long-term emissions We have used our world leading economic, reduction strategy, shows the UK is leading science and technical skills to shape the the world in response to this important step. debate around climate change and have The UK also led the way in pledging to phase been at the forefront of the debate through down the use of hydrofluorocarbons (HFCs) our world leading scientists at the Met by 79 per cent by 2030, and following this lead Office, the landmark 2006 Stern Report66 197 countries agreed a global phase down of and the more recent New Climate Economy HFCs – delivering an 85 per cent phase down project67, having one of the first Foreign by 2036 - under the United Nations Montreal Secretary Special Representatives on Protocol in October 2016. 66 HM Treasury (2006) Stern Review on the Economics of Climate Change http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/sternreview_index.htm 67 New Climate Economy (2014) http://newclimateeconomy.report/ 68 World Bank (retrieved September 2017) https://data.worldbank.org/indicator/NY.GDP.MKTP.CD 28 Department for Business, Energy and Industrial Strategy The UK’s International Leadership and Actions to Reduce Emissions Overseas (continued) The UK is among the largest contributors international frameworks and mobilising of climate finance, committing to provide at partnerships to deliver on them – to meet least £5.8 billion from 2016 to 2020, to help shared goals such as ending forest loss by developing countries mitigate and adapt 2030, and eliminating deforestation from the to the impacts of climate change, reduce production of key agricultural commodities by deforestation and support cleaner economic 2020. Together with Germany and Norway, we growth. From 2011 we have used our have collectively pledged $5 billion between International Climate Finance to install more 2015 and 2020 to incentivise ambitious than 400 megawatts of clean energy capacity, governments, companies and communities mobilised £2.7 billion of additional public and to protect our largest natural global carbon private finance, supported more than 34 sinks. This includes supporting a 30 per million people in adapting to the impacts of cent reduction in deforestation in Colombia’s climate change and helped resilient economic Amazon, improving livelihoods in conflict- development in over 70 countries69. affected areas71. This support takes many forms, for instance Our actions to date are expected to save nearly investment in the Climate Investment Funds, 500 Mt over the lifetime of the projects72, more through which the UK has helped support than the entire annual emissions of France73. renewable energy, climate resilience and And while we do not count these results forestry projects in 72 countries70. The UK against our domestic budgets, we can be has also been at the forefront of global action proud of the impact of the UK’s commitment to halt deforestation – helping negotiate to global climate action. DfID (2017) 2017 UK Climate Finance Results https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/625457/2017-UK-Climate-Finance- 69 Results.pdf 70 The Climate Invest Funds (CIFs) https://www.gov.uk/government/case-studies/the-climate-investment-funds-cifs 71 BEIS assessment DfID (2017) 2017 UK Climate Finance Results https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/625457/2017-UK-Climate-Finance- 72 Results.pdf 73 UNFCCC (retrieved September 2017) http://di.unfccc.int/time_series,2015 data The Clean Growth Strategy 29 The Renewable Energy Performance Platform supports small to medium-sized renewable energy projects throughout sub-Saharan Africa. In West Kenya, two mini-hydro power plants will provide electrification to local rural communities, helping to stimulate rural economic growth. Importantly, after 20 years of operation the project will be fully transferred to the local community. Chapter 2: The Opportunities and Challenges The Clean Growth Strategy 31 The Size of the Clean Growth Opportunity Looking across sectors, to assess the size of the opportunity, highlights several key areas. The commitments made in the Paris Agreement – shifting to cleaner, low carbon technologies The power sector has seen some of the in power, transport, heating and cooling, most significant early action on climate industrial processes and agriculture – will change, given its status as the largest source require enormous investment of public and of emissions in most countries. Annual new private capital. An estimated $13.5 trillion of global investment in renewable electricity grew public and private investment will be required in more than threefold since 2005, reaching over the energy sector alone74. $240 billion in 201676. This trend is happening everywhere. In Europe, over 80 per cent of We have a high degree of confidence that these new power generating capacity built in 2016 investments will be made given the scale of was from renewables77. Globally, clean energy political support and the transformational impact technologies are estimated to account for over of investment to date – indeed decarbonisation is 85 per cent of the $10.2 trillion investment cited as one of the ‘megatrends’ that will reshape in power generation projected between now the global economy over the years to come75. and 204078. We are determined to ensure that this trend works to the advantage of the UK economy and that we embed it at the core of our Industrial Strategy. Figure 6: Estimated global investment in power generation79 3,000 2,500 2,000 $billion (real 2016) 1,500 1,000 500 0 2017-20 2021-25 2026-30 2031-35 2036-40 Low carbon Fossil fuel Source: Bloomberg New Energy Finance 74 IEA (2015) Climate pledges for COP21 slow energy sector emissions growth dramatically https://www.iea.org/newsroom/news/2015/october/climate-pledges-for- cop21-slow-energy-sector-emissions-growth-dramatically.html 75 World Economic Forum, OECD, World Bank, PwC, Ernst & Young 76 FS-UNEP Collaborating Centre (2017) Global Trends in Renewable Energy Investment 2017 http://fs-unep-centre.org/sites/default/files/publications/ globaltrendsinrenewableenergyinvestment2017.pdf 77 REN21 (2017) Renewables 2017 Global Status Report http://www.ren21.net/wp-content/uploads/2017/06/170607_GSR_2017_Full_Report.pdf 78 Bloomberg New Energy Finance (2017) New Energy Outlook 2017 https://about.bnef.com/new-energy-outlook/ 79 Bloomberg New Energy Finance (2017) New Energy Outlook 2017 https://about.bnef.com/new-energy-outlook/ 32 Department for Business, Energy and Industrial Strategy Clean Growth in China and India Both China and India are driving the global These ambitions have translated into transition to the low carbon economy, impressive plans. India plans to increase its supported by political will80,81, falling renewable power fivefold to 175 gigawatts technology costs82 and a desire to seize the by 202287, including 60 gigawatts of wind economic opportunity83,84. and 100 gigawatts of solar; and China has committed to invest $360 billion in low carbon China has put ‘Green Development’ at power by 202088, increasing its renewable the heart of its current five year economic energy capacity by around 40 per cent. strategy85 and committed to reduce its level of carbon emissions per unit of economic This ambition extends to the transport sector. activity by 60 per cent to 65 per cent by 2030 China currently has an electric car market compared to 2005. share close to 1.5 per cent89 and is aiming for ten per cent of its manufacturing output in the India’s targets commit to reducing emissions country to be either low or zero emission from by 33 to 35 per cent over the same period, 2019, rising to 12 per cent in 2020. India has and Prime Minister Modi has plans to make stated an aspiration for all new cars sold to be India a leader in solar and renewable energy86. electric by 203090. The transport sector is also seeing the acceleration petrol and diesel car sales by 204093, Norway of a rapid shift to clean technology supported is aiming for 100 per cent ultra low emissions by government leadership and global investment. vehicle sales by 202594, and China has recently announced a requirement for at least 10 per Between 2011 and 2016, the number of electric cent of auto manufacturers’ output in the vehicles (EVs) on the road globally increased country to be either low or zero emission from thirtyfold91 and governments are announcing 2019, rising to 12 per cent in 202095. increasingly ambitious targets that are driving even more rapid changes. The Government Meanwhile auto manufacturers are rapidly has announced an end to the sale of all new expanding their plans for new ultra low emission conventional petrol and diesel cars and vans by vehicle models, from just ten in 2010 to more

204092. France has also announced the end of than 200 in 202096. 80 LSE Grantham Institute (2015) China’s “new normal”: structural change, better growth, and peak emissions http://www.lse.ac.uk/GranthamInstitute/publication/ chinas-new-normal-structural-change-better-growth-and-peak-emissions/ 81 Government of India (2017) Draft National Energy Policy 82 Bloomberg New Energy Finance (2017) LCOE Comparison and Visualisation database 83 LSE Grantham Institute (2016) China’s 13th Five-Year Plan http://www.lse.ac.uk/GranthamInstitute/law/13th-five-year-plan/ 84 Government of India (2017) Draft National Energy Policy 85 LSE Grantham Institute (2016) China’s 13th Five-Year Plan http://www.lse.ac.uk/GranthamInstitute/law/13th-five-year-plan/ 86 Government of India (2017) Draft National Energy Policy 87 Government of India Ministry of New and Renewable Energy (2016) Draft National Wind-Solar Hybrid Policy: http://tinyurl.com/mwfgwyp 88 Reuters (2017) China to plow $361 billion into renewable fuel by 2020 https://www.reuters.com/article/us-china-energy-renewables/ china-to-plow-361-billion-into-renewable-fuel-by-2020-idUSKBN14P06P 89 International Energy Agency (2017) Global EV Outlook 2017 https://www.iea.org/publications/freepublications/publication/global-ev-outlook-2017.html 90 Financial Times (2017) India power minister promotes renewables and ‘cleaner’ coal https://www.ft.com/content/a106c468-3567-11e7-99bd-13beb0903fa3 91 International Energy Agency (2017) Global EV Outlook 2017 https://www.iea.org/publications/freepublications/publication/global-ev-outlook-2017.html 92 Defra, DfT (2017) Air quality plan for nitrogen dioxide (NO2) in UK (2017) https://www.gov.uk/government/publications/ air-quality-plan-for-nitrogen-dioxide-no2-in-uk-2017 93 Financial Times (2017) France plans to end sale of petrol and diesel cars by 2040 https://www.ft.com/content/af2fccb0-a29e-3347-bd0f-7597186b5a2a 94 Norsk Elbilforening (2017) Norwegian EV Policy http://elbil.no/english/norwegian-ev-policy/ 95 Bloomberg (2017) https://www.bloomberg.com/news/articles/2017-09-28/china-to-start-new-energy-vehicle-production-quota-from-2019 96 Bloomberg New Energy Finance (2017) Global EV and charging policy support database The Clean Growth Strategy 33 Figure 7: Global deployment forecasts for electric vehicles have been improving over time97 600 500 400 Million vehicles 300 200 100 0 2020 2025 2030 2035 2040 2017 projection 2016 projection Source: Bloomberg New Energy Finance projections Globally, sales of EVs are expected to be five Global markets for energy efficient buildings, times higher in 2020 compared to 201598 and and for low carbon heating and cooling, are to take a rapidly increasing share of the market already growing and the market for investment in in an industry whose revenue in 2016 was more buildings that reduce emissions and are resilient than $2 trillion99. to climate change in just six key emerging economies in Asia has been estimated at more The global construction sector will also than $15 trillion up to 2030100. be boosted by investment in sustainable infrastructure to meet decarbonisation goals. There is also a significant expansion in the use of innovative green finance to support the investment needed to realise these opportunities with the global markets for green bonds growing rapidly from $7.2 billion in 2012 to over $80 billion in 2016 and expected to break these records in 2017101. 97 Bloomberg New Energy Finance (2017) Comparison of Long-Term EV Adoption Forecasts https://www.bnef.com/core/insights/16595 98 Bloomberg New Energy Finance (2017) Annual long-term forecast of the world’s electric vehicle market. https://data.bloomberglp.com/bnef/sites/14/2017/07/BNEF_ EVO_2017_ExecutiveSummary.pdf IBISWorld (2017) Global Car & Automobile Manufacturing: Market Research Report https://www.ibisworld.com/industry-trends/global-industry-reports/ 99 manufacturing/car-automobile-manufacturing.html 100 International Finance Corporation (2016) Climate Investment Opportunities in Emerging Markets 101 Climate Bonds Initiative https://www.climatebonds.net/ 34 Department for Business, Energy and Industrial Strategy Opportunities for the UK • A policy and regulatory environment that provides long-term direction and supports Just as the UK has led the world diplomatically innovation, with some of the most liberalised in addressing climate change, we are also well- gas and electricity markets; a long-term placed to take advantage of the global shift to policy framework set by the Climate Change a clean energy economy as we benefit from Act and carbon budgets; and an energy significant economic competitive advantages, regulator which is pioneering in its approach including: to encouraging companies to innovate105 • The most productive science base102 of with programmes like the ‘regulatory the G7 countries – a critical asset, given sandbox’106. the extensive innovation required for We have already capitalised on these strengths decarbonisation in many sectors; to take a leadership position in some important • World leading expertise in high-value emerging low carbon sectors: services103, with strengths in areas such • Power: The UK has the most offshore wind as finance, law, consultancy, software and generation built anywhere in the world, with data services – all important to enabling the around 40 per cent of the global installed low carbon transition; capacity107. British companies are now • Excellence in the design and manufacture of benefiting from exports in areas such as products based on advanced technologies cable installation, repairing equipment, as in the automotive and aerospace construction work and consulting108. sectors104; and • Electric vehicles: In 2016, one in five battery electric cars driven in Europe was built in the UK109 and low emission vehicle exports were estimated to be worth nearly £2.5 billion in 2015110. BIS (2013) International Comparative Performance of the UK Research Base – 2013 https://www.gov.uk/government/publications/ 102 performance-of-the-uk-research-base-international-comparison-2013 103 Green Alliance (2016) Will the UK economy succeed in a low carbon world? http://www.green-alliance.org.uk/UK_low_carbon.php, citing : World Trade Organisation (2015) World trade report 2015 https://www.wto.org/english/res_e/booksp_e/world_trade_report15_e.pdf (Data table, ‘Leading exporters and importers of commercial services, 2014’, p28); ONS (2016) International trade in services 2014 (‘Total trade in services, all industries (excluding travel, transport, and banking) analysed by product 2014’) 104 BEIS (2017) Building our Industrial Strategy https://www.gov.uk/government/consultations/building-our-industrial-strategy OECD (2002) Reviews of Regulatory Reform, Regulatory Reform in the United Kingdom, Regulatory Reform in Gas and Electricity and the Professions https://www. 105 oecd.org/regreform/2766184.pdf 106 Ofgem (2017) Innovation Link – Open Letter: https://www.ofgem.gov.uk/system/files/docs/2017/02/open_letter_regulatory_sandbox_6_february_2017.pdf 107 IRENA (retrieved September 2017) http://www.irena.org/home/index.aspx 108 Energy UK (2017) Response to Industrial Strategy consultation http://www.energy-uk.org.uk/press-releases/370-2017/6150-energy-uk-comments-on-the- industrial-strategy-consultation.html 109 European Alternative Fuels Observatory (2017) Top 5 selling BEV analysis http://www.eafo.eu/vehicle-statistics/m1 110 ONS (2017) Low Carbon and Renewable Energy Economy Survey, final estimates: 2015 https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results The Clean Growth Strategy 35 • Low carbon financial and professional behind a third of new clean energy projects services: London is emerging as a leader globally between 2007 and 2012112. The UK in low carbon finance, the centre of global is home to the largest speciality insurance carbon trading, and with 50 green bonds market in the world113, and is a leading listed on the London Stock Exchange, provider of insurance cover for climate- raising a combined $14.8 billion111 across related risks and for large-scale low carbon seven currencies. It has been estimated infrastructure projects. that UK legal and finance advice was Figure 8: Offshore wind installed capacity by country114 6,000 5,000 Total installed capacity 2016 (MW) 4,000 3,000 2,000 1,000 0 K an y hina ark nd lg en pa n Ko a d S d Sp n ay U nm s iu m ed re Finl U la n ai or m C rla Ja an Ire w er De he Be Sw S N G et N Source: International Renewable Energy Agency 111 London Stock Exchange 2017 Green Alliance (2016) Will the UK economy succeed in a low carbon world? http://www.green-alliance.org.uk/resources/UKeconomy_lowcarbonworld Bloomberg 112 New Energy Finance (2017) Clean energy and energy smart technologies league tables, 2007-2012 https://about.bnef.com/blog/2016-league-tables-clean-energy/ 113 Boston Consulting Group (2017) London Matters: The competitive position of the London Insurance market https://www.londonmarketgroup.co.uk/lm-2017 114 IRENA (retrieved September 2017) http://www.irena.org/home/index.aspx 36 Department for Business, Energy and Industrial Strategy Analysis for the Committee on Climate Change economy overall which would mean the low has suggested that if we continue to develop carbon economy would increase from around and build on our strengths we can capture two per cent of the UK’s total output at present significant economic benefits from these to around eight per cent by 2030114. The same decarbonising trends. The UK’s low carbon study estimates that UK exports of low carbon economy could grow at around 11 per cent a goods and services could be worth between year between 2015 and 2030, some four times £60 billion and £170 billion by 2030. faster than the average growth rate for the UK Figure 9: Potential growth in UK low carbon economy116 600 UK low carbon economy 500 growth opportunity +11% per annum 400 Index (2015=100) 300 200 Projected UK GDP growth +2.7% per annum 100 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: Ricardo-AEA for the CCC; OECD 115 Ricardo Energy and Environment for the Committee on Climate Change (2017) UK business opportunities of moving to a low carbon economy https://www.theccc. org.uk/publication/uk-energy-prices-and-bills-2017-report-supporting-research/ Ricardo Energy and Environment for the Committee on Climate Change (2017) https://www.theccc.org.uk/publication/uk-energy-prices-and-bills-2017-report- 116 supporting-research/; OECD Long-term GDP forecast https://data.oecd.org/gdp/gdp-long-term-forecast.htm The Clean Growth Strategy 37 Clean Growth and the UK placements, and Institutes of Technology to Industrial Strategy deliver higher education in STEM subjects. We will ensure that these reforms help train our As we form our Industrial Strategy, we will aim innovators of the future and provide businesses to maximise the UK industrial advantages from with the skilled professionals they need to thrive the global shift to a low carbon economy. We in the clean energy economy119. will build and link together the strengths we already have, while nurturing new ones, so that We have welcomed early work on sector our whole economy can seize the opportunities deals in nuclear, auto manufacturing and presented by this global economic trend. industrial digitalisation, all of which are central to productivity in the low carbon economy, and We have already committed to the largest we will challenge businesses in all sectors to increase in public spending for investment increase their competitiveness in relation to the in science, research and innovation in almost shift to clean energy. 40 years117. We will ensure that this is invested to catalyse low carbon innovation across In return, and to maximise the domestic and multiple sectors of the economy. international opportunities for the UK, we will strengthen our support for businesses as We have also committed to upgrading our part of the transition to the low carbon economy. digital, energy, transport, housing, water We have added billions of pounds in potential and flood defence infrastructure, including support for UK exporters, doubling the capacity through investment in the National Productivity of UK Export Finance and increasing available Investment Fund, with annual central cover for individual markets by up to 100 per government infrastructure investment rising cent120, and will dedicate resources within the each year from around £2 billion in 2016/17 Department for International Trade to promote to over £5 billion in 2020/21118. We will ensure investment into the UK renewable energy that these investments strengthen market landscape, develop this supply chain further demand for the innovative new clean energy and support UK exports. So far this has helped technologies and services that our businesses to secure investments across the country: into are creating. a turbine blade manufacturing plant in Hull121, a We have announced significant reforms to transition pieces yard in Teesside122 and an MHI technical education, with the creation of Vestas investment into the Isle of Wight123, which new qualifications (T-levels), high-quality work collectively support over 1,400 new jobs. 117 HM Treasury (2016) Autumn Statement 2016 https://www.gov.uk/government/topical-events/autumn-statement-20161 118 Ibid HM Government (2016) Post-16 skills plan and independent report on technical education https://www.gov.uk/government/publications/ 119 post-16-skills-plan-and-independent-report-on-technical-education 120 HM Government (2016) Autumn Statement 2016 https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016 121 Siemens http://www.siemens.co.uk/en/wind/hull.htm 122 4C Offshore (2015) Offshore Structures (Britain) opens its doors http://tinyurl.com/m3yn5px 123 MHI Vestas Offshore Wind commences hiring for over 200 jobs on the Isle of Wight, UK http://tinyurl.com/l5nrs25 38 Department for Business, Energy and Industrial Strategy We are committed to making the most of use of their local skills and resources, so that the diverse strengths of all of Britain’s through the clean energy economy they can cities and regions, to grasp the opportunities drive productivity, job creation and growth. that could drive faster growth and increased earning power in each of them. To support this, And we will set out our plans to build on this we have allocated an additional £1.8 billion progress in the Industrial Strategy White Paper, from the Local Growth Fund for a new set of to be published later in 2017, positioning the Growth Deals between Government and Local UK as a leader in the low carbon economy, Enterprise Partnerships (LEPs)124. Each region investing in the foundations required for of the UK differs in its local energy resources, its economic success and ensuring our industries industrial and domestic energy needs, and its succeed in an economic transition that we are expertise. We will ensure that local communities helping to shape and lead. and LEPs are empowered to make the best 124 HM Government (2016) Autumn Statement 2016 https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016 The Clean Growth Strategy 39 The Challenges to Delivering Clean Growth Our achievements to date have been substantially driven by significant We have high aspirations and are committed decarbonisation of the power and waste to delivering clean growth. But we face three sectors and we now need to replicate this significant challenges that we must overcome success across the economy, particularly in the if we are to continue progress: ensuring we transport, business and industry sectors which deliver affordable energy for households and account for almost half of current emissions. businesses; decarbonising “harder to reach” And we need further action on heating across parts of the UK economy; and establishing key sectors, which is responsible for around a a post-EU emissions and environmental third of emissions. framework that is at least as beneficial as current arrangements. These are the “harder to reach” parts of the economy requiring more investment, concerted Decarbonising Harder to Reach Sectors joined up working between government, and the Use of Flexibilities industry and consumers, or big technological As a result of our actions so far we have already breakthroughs to drive substantial shifts driven emissions per head down by nearly down in carbon emissions. This Strategy sets half since 1990. This progress meant that we out how we plan to address some of these exceeded the target emissions reductions of our difficulties, including how we will target our first carbon budget (2008 to 2012) by one per innovation investment. Cutting emissions in cent125 and we project that we will outperform these areas can benefit us all through cleaner against our second and third budgets covering air and reduced energy bills which will help the years 2013 to 2022 by almost five per cent improve the UK’s productivity. In addition, the and four per cent respectively126. This will be a innovation and investment required to drive significant achievement. these emissions down can create more jobs and more export opportunities. 125 DECC (2014) Final statement for the first carbon budget period https://www.gov.uk/government/statistics/final-statement-for-the-first-carbon-budget-period 126 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 40 Department for Business, Energy and Industrial Strategy Figure 10: UK emissions by sector, 2015127 Public Sector 2% Homes Business and Industry 13% 25% Heating in Natural Resources buildings 15% and industry creates around 32% of total UK emissions 24% Transport 21% Power 100% = 496 Mt Source: BEIS Our approach is pragmatic. Given how much Our current estimated projection for the fourth uncertainty underlies projections, we need an and fifth carbon budgets suggests that we approach that is flexible in response to shifting could deliver 94 per cent and 93 per cent of evidence, not least about the impact of policies. our required performance against 1990 levels It is also right, in our economic circumstances, – for carbon budgets which will end in ten and to be rigorous in examining the costs and fifteen years’ time respectively129. While we benefits of action to reduce emissions, and the have the option to use flexibilities to fully meet right pace of change. The Climate Change Act our carbon budgets, the ambitious policies and permits us to use “flexibilities”, such as surplus proposals set out in this Strategy, and the rapid from previous carbon budgets or the purchase progress and accelerating pace of changes in of good quality international carbon credits128, to low carbon technologies so far, suggest that we meet carbon budgets. We are prepared to use may not need to use this option. We will decide the flexibilities available to us to meet carbon whether to use flexibilities following consultation budgets, subject to the requirements set out with the Devolved Administrations, and having in the Climate Change Act, if this presents obtained and taken into account advice from better value for UK taxpayers, businesses and the Committee on Climate Change. domestic consumers. 127 BEIS (2017) UK Greenhouse Gas Inventory Statistics (1990-2015) https://www.gov.uk/government/collections/final-uk-greenhouse-gas-emissions-national- statistics; BEIS analysis 128 A good quality carbon credit is one with its emission reduction and sustainability credentials assured. 129 This includes an initial estimate of 30 Mt and 80 Mt of additional savings in the fourth and fifth carbon budgets respectively from the more advanced policies and proposals in the Clean Growth Strategy. As we move forward and develop the full range of policies and proposals, we will publish individual impact assessments as appropriate with updated analysis. The Clean Growth Strategy 41 Table 2: Performance against carbon budgets130 Carbon Budget 1 2 3 4 5 2008-12 2013-17 2018-22 2023-27 2028-32 Budget, cumulative emissions, Mt 3,018 2,782 2,544 1,950 1,725 Average reduction vs 1990 emissions, % -25% -31% -37% -51% -57% Projected emissions, 2,982 2,650 2,453 2,096 1,972 Existing cumulative emissions, Mt actual E E E E policies Result vs. Budget,% -1.2% -4.7% -3.6% +7.5% +14.3% Projected emissions, 2,982 2,650 2,453 2,066 1,892 cumulative emissions, Mt actual E E E E Existing and new Result vs. Budget, -36 -132 -91 +116 +167 policies and cumulative emissions, Mt proposals131 Result vs. Budget,% -1.2% -4.7% -3.6% +6.0% +9.7% Cumulative surplus (+) or deficit (-), Mt +132 +223 +107 -60 The Cimate Change Act 2008132 The Act allows Government some flexibility on 2. Carry back from later carbon budgets: when and how to reduce UK emissions on route The Act allows for the Government to to 2050 but before doing so the Government increase the carbon budget in one period must obtain and take into account the advice with a corresponding tightening of the of the Committee on Climate Change and next carbon budget. This ‘borrowing’ is consult the Devolved Administrations. There limited to one per cent of the later carbon are three options: budget.

1. Carry forward over-achievement 3. Use international carbon credits: The from earlier budgets: The Act allows Act allows for the purchase of good quality for Government to carry forward over- international carbon credits to contribute achievement from one carbon budget to to meeting carbon budgets but with a limit the next, so that early action to reduce on the use of these credits set 18 months emissions increases the following budget133. in advance of the relevant carbon budget. 130 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 131 BEIS initial estimates of a subset of new early stage policies and proposals show an additional potential reduction of up to 30 Mt and 80 Mt over the fourth and fifth carbon budget periods respectively; these and other policies will be developed building on the proposals outlined in the Strategy. The Act sets out specific requirements to follow before deciding to use a particular flexibility (such as seeking advice from the Committee on Climate Change before 132 banking) or when creating a framework for a decision to be taken within (such as setting a limit on the amount of carbon units which can be used to meet carbon budgets). Any use of flexibilities needs to be consistent with keeping the UK on track to meet its long term target in 2050 having regard to domestic action. 133 Government will take a decision on whether to bank any surplus from the second to third carbon budget by May 2019 and from the third to the fourth carbon budgets in May 2024. The decision will be made after taking into account advice from the Committee on Climate Change and consulting with the Devolved Administrations. 42 Department for Business, Energy and Industrial Strategy Delivering Affordable Energy households and investing in upgrading our buildings accounts for around 12 per cent of Actions taken to tackle emissions have helped an average gas and electricity bill. However, to reduce average energy bills for households these costs are on average more than offset as efficiency savings have more than offset the by savings from improvements to the energy cost of financial support provided for developing efficiency of people’s homes, delivering a saving low carbon technologies. The cost of policies of £14 on average in 2016 (see figure 11). delivering cleaner energy, support for vulnerable Figure 11: Average annual household dual fuel bill, 2012 and 2016 1400 £1,308 Policy impacts: 2012 Policy impacts: 2016 £1,199 1200 £126 £147 1000 Electricity £576 Dual fuel bill £ (real 2016) Electricity -£128 £564 -£161 800 Policy costs Policy energy Policy costs Policy energy 600 efficiency efficiency savings savings 400 Gas £732 Gas £635 200 0 2012 2016 Source: BEIS The Clean Growth Strategy 43 Going forward, our efforts to decarbonise will electricity prices are less competitive for large require increased investment across the energy industrial users. system. However, our focus on innovation will ensure we minimise the costs of this Every action to cut emissions must be investment as much as possible and further taken while ensuring our economy remains improvements in energy efficiency will continue competitive. As we have set out in our to drive down bills. We have already seen the Industrial Strategy Green Paper, we attach costs of offshore wind projects fall 50 per cent great importance to making sure our energy since 2015 and we are now seeing investment is affordable. The Government has already in solar without government support. We will supported UK businesses to help them with also make sure that those least able to pay are energy costs through various programmes. protected through our work on fuel poverty, and For instance the Government has taken steps are publishing a draft bill to require Ofgem to to reduce the cumulative impact of energy and impose a cap on standard variable and default climate change policies on industrial electricity tariffs across the whole market. prices for key Energy Intensive Industries (EIIs) in sectors such as steel, plastics, cement and On industrial energy, there is more to be done. chemicals. This includes a package of relief for The UK has some of the lowest gas prices in EIIs worth £260 million in 2016 and over £500 the EU, including for industry. However, our million since 2013134. Figure 12: Industrial electricity and gas prices for large consumers in the EU15 in 2016, including taxes135 Gas prices Electricity prices Finland Italy Sweden UK Austria Germany Germany Ireland Portugal Portugal Ireland Denmark Greece Belgium Luxembourg Spain Netherlands Greece Spain Austria Italy France Denmark Netherlands France Finland UK Sweden Belgium Luxembourg 0 0.5 1 1.5 2 2.5 3 3.5 0 2 4 6 8 10 12 p/kWh p/kWh Source: BEIS 134 BEIS analysis. Figure includes compensation for indirect costs from EU Emissions Trading System, Carbon Price Support, Renewables Obligation, and Feed in Tariffs BEIS (2017) Quarterly Energy Prices https://www.gov.uk/government/collections/quarterly-energy-prices. Notes: Large gas consumers are those consuming 27,778 - 135 277,777 MWh per annum; large electricity consumers are those consuming 20,000 - 69,999 MWh per annum. 44 Department for Business, Energy and Industrial Strategy But we want to continue to do everything But there are extremely important current we can to ensure our energy prices are arrangements between the UK and the EU competitive. This is why the Government has that bring material benefits for all the countries commissioned an independent review into involved and it is critical that we get the detail of the cost of energy led by Professor Dieter our exit negotiations right. Helm CBE which will recommend ways to deliver the Government’s carbon targets and There are four main areas where the UK’s current ensure security of supply at minimum cost to emissions policies rely on EU mechanisms: both industry and domestic consumers. The • The EU Emissions Trading System (EU review will report on the full supply chain of ETS) covering the “traded sector” (power, electricity generation, transmission, distribution heavy industry and intra EEA aviation) which and supply, and consider the opportunities to collectively account for around 40 per cent reduce costs in each part. It will set out options of UK emissions under carbon budgets. We for a long term roadmap for the power sector. remain committed to reducing emissions Once Ministers have considered the review’s in these sectors and the UK already has proposals, the Government will incorporate its a range of domestic policies in place to recommendations into the further development support this. We will seek to ensure that our of the Clean Growth Strategy as appropriate. future approach is at least as ambitious as Leaving the EU the existing scheme and provide a smooth transition for the relevant sectors. The British people have voted to leave the European Union and the Government is • For sectors not covered by the EU ETS, two working to get the best deal for the UK. Leaving sector policies operate at EU rather than the EU offers a unique opportunity to shape UK level and are particularly important for our environment and economy for the benefit driving emissions reductions – new car and of all – to have the freedom to make our own van CO2 regulations, and EU fluorinated gas decisions on a whole host of matters. quotas. We remain committed to reducing emissions in these areas and will offer And whatever our future relationship with the certainty to industry as soon as possible on EU, the UK’s commitment and leadership role our future relationship with the EU. We will in tackling climate change remains undimmed seek to ensure our future approach is at least and working closely with the EU on this global as ambitious as the current arrangements. challenge will remain important. Leaving the EU will not change any of our statutory commitments • EU products policy which sets minimum to reduce our emissions according to our standards for a range of products such as Climate Change Act – indeed those targets white goods and lighting, which improve are more ambitious and challenging than those energy efficiency. We continue to support set by EU legislation. There is also no need to these policy measures, which cut energy change our domestic targets under the Act bills, increase energy security, reduce as a result of leaving the EU, as these targets emissions and help customers make are rooted in climate science. The UK remains informed choices, and we will keep step with strongly committed to the Paris Agreement and equivalent standards wherever possible and whatever the form of our future partnership appropriate, or even exceed them where it is with the EU we will satisfy our international in the UK’s interest to do so. This may include obligations under the Agreement. products not yet covered by European legislation, such as smart appliances. The Clean Growth Strategy 45 • Non-energy and climate EU frameworks and Detailed future policies will emerge as we policies which affect the UK, such as the negotiate the exact form of the UK’s exit from Common Agricultural Policy. For instance, the EU but while the UK is a member of the we will take the opportunity of leaving the European Union, existing rules still apply and Common Agricultural Policy to address we will continue to engage constructively on climate change more directly by designing a new and existing EU legislation. Our Clean new system to support the future of farming Growth Strategy therefore uses existing policy and the countryside, with a strong focus on as the basis for the UK’s emissions projections. delivering better environmental outcomes, including tackling climate change. Carbon Pricing and Emissions Trading Pricing emissions provides a cost-effective However, a surplus of allowances in the and technology neutral way of reducing EU ETS has caused the price to fall and it carbon emissions and mobilising the private currently provides little incentive for low carbon sector and in the UK pricing policies like investment. As a result the UK introduced CPS Carbon Price Support (CPS), and the EU in April 2013 which acts as a top up to the EU Emissions Trading System (EU ETS) have ETS price in the power sector. The UK also already helped to drive a switch from coal to supports measures to strengthen the EU ETS, gas generation in the power sector. with notable success in recent negotiations. We will continue to drive for ambitious reform The UK is a pioneer in developing carbon for the next phase of the system. pricing. In 2002 the UK launched the UK ETS, which served as a pilot for the EU The Government is considering the UK’s future ETS, giving businesses early experience of participation in the EU ETS after our exit from emissions trading and establishing London the EU and we remain firmly committed to as its global centre. carbon pricing as an emissions reduction tool whilst ensuring energy and trade intensive The EU ETS is the largest cap-and-trade businesses are appropriately protected from system for carbon emissions in the world. Each any detrimental impacts on competitiveness. year, every participant must surrender one allowance for each tonne of carbon dioxide Specifically in relation to the power sector and (or equivalent) emitted, and allowances are CPS, starting in 2021/2022, the Government auctioned or allocated between participants. will target a total carbon price which will give The cap on allowances is reduced annually in businesses greater clarity on the total price line with the EU’s climate ambition. they will pay for each tonne of emissions, and we will set out more detail on carbon prices for the 2020s in the 2017 Autumn Budget. Chapter 3: Our Clean Growth Strategy The Clean Growth Strategy 47 Our Approach support entrepreneurs and investors who will develop the new technologies at the scale we In the context of the UK’s legal requirements need. It is only through innovation – nurturing under the Climate Change Act, our approach to better products, processes and systems – that reducing emissions has two guiding objectives: we will see the cost of clean technologies come

1. To meet our domestic commitments at the down. This Strategy sets out how more than lowest possible net cost to UK taxpayers, £2.5 billion will be invested by the Government consumers and businesses. to support low carbon energy innovation from 2015-2021. These actions will help our wider

2. To maximise the social and economic aim of improving the UK’s earning power. benefits for the UK from this transition. In addition to supporting innovation, we In order to meet these objectives, the UK will are focused on policies that deliver social, need to nurture low carbon technologies, environmental and economic benefits beyond processes and systems that are as cheap as the imperative to reduce emissions. Better possible. We need to do this for several reasons. buildings are healthier places to live and work. First, we need to protect our businesses and Reducing the amount of heat we waste will households from high energy costs. Second, reduce bills. High ambition on electric cars and if we can develop the low cost, low carbon other low emission vehicles contains a triple technologies in the UK, we can secure the win for the UK in terms of industrial opportunity, most industrial and economic advantage from cleaner air and lower greenhouse gas emissions. the global transition to a low carbon economy. Crucially, many of the actions included here will Third, if we want to see other countries, enhance the UK’s energy security. particularly developing countries, follow our example, we need low carbon technologies to Alongside these actions, we are laying the be cheaper and to offer more value than high groundwork for major decisions in the areas carbon ones. where we face greatest uncertainty and challenge: in how we reduce the emissions that We cannot predict every technological result from heating our homes and businesses; breakthrough that will help us meet our targets. how we decarbonise our transport system; Instead, we must create the best possible and how we work with industry to make environment for the private sector to innovate carbon capture, usage and storage (CCUS) and invest. Our approach will mirror that of a viable future option. This has been shaped our Industrial Strategy: building on the UK’s by our analysis of plausible pathways out to strengths (see Chapter 2 and below on green 2050, reflecting the huge uncertainties. In finance); improving productivity across the every section of the Strategy, we also explore UK; and ensuring we are the best place for the opportunity to shape new commercial innovators and new business to start up and opportunities for the UK that can help improve grow. We are clear about the need to design skills and create good jobs. competitive markets and smart regulation to 48 Department for Business, Energy and Industrial Strategy Building on the UK’s Strengths: To meet our decarbonisation challenge we Green Finance will need to mobilise more private capital in sustainable projects and develop more Private sector investment in low carbon innovative risk sharing financial structures for technology and infrastructure will be key to investment in domestic and commercial low meeting our carbon budgets and realising the carbon technology. This is a major business economic opportunities from the low carbon and export opportunity for the UK and could transition. Around £180 billion of investment cement the UK’s position as the leading hub for is already in the pipeline to build the power global low carbon investment. stations needed in the UK to produce clean and secure supplies of electricity and the networks to deliver this to homes and businesses136. UK Leadership in Green Finance We already demonstrate global leadership On 31st July 2017, Anglian Water released the on green finance around the world through first ever public utility Sterling Green Bond on initiatives like the G20 Green Finance Study the London Stock Exchange. Group, which we co-chair; the Green Finance Initiative, a partnership between the financial Improving the energy performance of homes and professional services sector, academics is vital in decarbonising our economy. and civil society, which promotes the UK as Mortgage lenders have a significant financial a leading global centre for green finance; stake in these properties, their future value, and through participation in senior global and their customers’ ability to make their multilateral fora such as the Financial Stability repayments. This is why the Government Board’s Task Force on Climate-related supported the LENDERS138 project with Financial Disclosures (TCFD), which recently funding from Innovate UK. We want to see published its final recommendations. the project recommendations implemented, including improving mortgage affordability The first offshore green bond issued by assessments on energy bills, and lenders to an Indian entity and the first green bond develop a range of innovative new “green issued by a Chinese bank were listed on the mortgage” products to encourage consumers London Stock Exchange and 50 green bonds to purchase more efficient homes, or improve denominated in seven currencies with a value their efficiency. of $14.8 billion are now listed in the UK137. 136 Figure is total for electricity generation, electricity distribution and electricity transmission. Real 2015/16 prices. Gov.uk (2016) National Infrastructure and Construction Pipeline https://www.gov.uk/government/publications/national-infrastructure-and-construction-pipeline-2016 137 London Stock Exchange 2017 138 UKGBC (2017) Lenders core report https://www.ukgbc.org/ukgbc-work/lenders-core-report/ The Clean Growth Strategy 49 To capture and exploit this opportunity we need Ensuring the UK is the Best Place for Low to go further. This is why we have set out in Carbon Innovators this Strategy a series of policies and proposals to develop our expertise in, as well as the Our Industrial Strategy Green Paper made clear opportunity from, new green finance solutions. that, for the UK economy to flourish, it must These include: do things other advanced economies cannot do, or do them in better ways. This is the • Setting up a Green Finance Taskforce139, essence of innovation. This is a core part of our comprising senior representatives from approach to decarbonising the UK’s economy the finance industry and Government, to where investment in innovation will help us to: develop ambitious policy proposals which could further accelerate private sector • Drive down the cost of key technologies, investments to deliver our Clean Growth systems and processes and increase the Strategy. value they deliver to consumers (such as with batteries and electric vehicles); • Endorsing the recommendations put forward by the Financial Stability Board’s Task Force • Lay the groundwork for decisions where the on Climate-related Financial Disclosures right technology choices are currently less and encouraging publicly-listed companies clear (such as how we will heat our homes to implement these recommendations. and businesses in the future); and • Working with the British Standards Institution • Nurture technologies and businesses where (BSI) to develop a set of voluntary green and the UK is a global leader, leveraging private sustainable finance management standards sector investment and building international to promote responsible investment practices partnerships to create export opportunities. globally. The BSI will have completed the Innovation involves incremental improvements, necessary standards scoping exercises and cross-sector knowledge sharing, and have the first standard in production by the “breakthroughs”. It results from competition within first half of 2018. the private sector and from collaboration between • Providing up to £20 million of new investment the private sector and Government, as well as to support clean technology early stage other organisations; each has a role in producing, funding, alongside creating an online spreading and adopting novel technologies and platform to showcase UK businesses which approaches. The Government is often more active have received innovation support from the at earlier stages of innovation, through investment Government. This will make this information in research, education and skills. Later on, private easily accessible for early stage investors firms play a bigger role, bringing new technologies to help increase the flow of investment into to market. However, there is no single, linear innovative businesses in the UK. route for innovations to progress from concept to commercialisation and often innovation in one • Working with mortgage lenders to develop area has applications in others. green mortgage products that take account of the lower lending risk associated with We want to use the power of Government to more efficient properties and the reduced support innovation in a low carbon economy outgoings for customers living in more using all the tools available to us, including efficient homes. market design, taxation and regulation, as well as investment in our education system, our 139 The list of members can be found at https://www.gov.uk/guidance/green-finance 50 Department for Business, Energy and Industrial Strategy science base and innovative companies. Our • Up to £1.2 billion of funding from the aim is to become one of the best places in the combination of UK Research Councils and world for low carbon innovation. We understand Innovate UK – now being brought into one the need for Government funding that is organisation with the creation of UK Research accessible to private, public and community and Innovation. These investments include sector organisations with all playing key roles in funding for the Energy Systems Catapult and supporting and harnessing innovation. the Offshore Renewable Energy Catapult. Government funding can be key to stimulating • Up to £246 million for the Faraday Challenge, private sector investment from the UK and which will ensure the UK builds on its strengths overseas, both through direct leverage and by and leads the world in the design, development creating confidence in the potential to attract and manufacture of electric batteries142. follow-on investment for particular innovations. Public investment brings in around 30 per cent • Up to £620 million from a range of additional private funding over the short term, Departments, including BEIS, DfT, DfID with this increasing in the longer term140. and Defra and additional Industrial Strategy Challenge Fund (ISCF) support. The Government has significantly increased its investment in low carbon innovation. Between In addition to this Government funding, Ofgem is 2015 and 2021 we expect to invest more making up to £720 million of regulated expenditure than £2.5 billion in research, development and available to gas and electricity network companies demonstration of low carbon energy, transport, in Great Britain, to support smarter, more flexible, agriculture and waste. This includes: efficient, and resilient networks. The Government is also stimulating industry-academia collaboration, • Up to £505 million from BEIS’s Energy for example through the Agri-tech catalyst, which Innovation Programme141, which aims to will help improve agricultural productivity and accelerate the commercialisation of innovative contribute to more environmentally sustainable clean energy technologies and processes. agricultural systems. BEIS Energy Innovation Programme New projects announced as part of the BEIS • Up to £20 million in a carbon capture and Energy Innovation Programme in the Clean utilisation demonstration programme Growth Strategy include: • Up to £20 million to demonstrate the viability •U p to £10 million for innovations that of switching to low carbon fuels for industry provide low carbon heat in domestic and commercial buildings • Up to £7 million to develop further the capability of nuclear regulators who support • Up to £10 million for innovations that improve and assess advanced nuclear technologies the energy efficiency of existing buildings • Up to £20 million to support clean technology •A n extra £14 million for the Energy early stage funding Entrepreneurs Fund, including a new sixth fund 140 BIS (2014) Analysis Paper 04 Estimating the effect of UK direct public support for innovation https://www.gov.uk/government/publications/ innovation-effect-of-public-support 141 The £505 million BEIS Energy Innovation Programme will invest around £70 million in smart systems, around £90 million in the built environment (energy efficiency and heating), £100 million in industrial decarbonisation and carbon capture, usage and storage (CCUS), around £180 million in nuclear innovation, around £15 million in renewables innovation, and around £50 million in support for energy entrepreneurs and green financing. 142 BEIS press release (2017) https://www.gov.uk/government/news/business-secretary-to-establish-uk-as-world-leader-in-battery-technology-as-part-of-modern- industrial-strategy The Clean Growth Strategy 51 Last November, the Prime Minister announced aims to reinvigorate and accelerate global clean £4.7 billion of additional research and energy innovation and to make clean energy development funding143 – a bigger increase widely affordable. As part of our commitment than in any Parliament since 1979. This within Mission Innovation, the UK will invest at funding aims to kick start the development least £100 million in 2020-21 on projects that of disruptive technologies, including low will help to address the clean energy needs of carbon technologies, that have the potential developing countries146. to transform the UK economy144. It includes the Faraday Challenge and £93 million for How we spend money is just as important as how Robotics and Autonomous Systems, and we much we spend. To ensure a strategic approach, are exploring the scope to fund further clean a new Energy Innovation Board was launched in growth innovation challenges. 2016147, to bring together senior representatives from across the Government, Innovate UK, Internationally, governments around the world Research Councils, and Ofgem, to align public are investing around $15 billion a year in low investments in low carbon innovation. The carbon innovation, and this figure is set to Board aims to co-ordinate the UK’s domestic rise significantly145. A key component of our and international clean energy and low carbon innovation strategy is identifying opportunities innovation activities to maximise their impact, for global partnership. In particular, the UK is and to ensure that those investments leverage committed to clean energy innovation as a increased private sector investment. member of ‘Mission Innovation’. This initiative Energy Entrepreneurs Fund The Government is also launching a sixth million in 102 companies, which leveraged a round of the Energy Entrepreneurs Fund, further £35 million from the private sector. For which has been running since 2012, and those companies that have completed their aims to support, through capital grants, the projects, over £63 million in follow-on private development and demonstration of innovative investment has been secured. energy technologies and processes, with a particular focus on assisting small and For instance Vantage Power in West London medium sized enterprises. This sixth round retrofit buses to a low carbon standard. This will offer up to £10 million in funding. Alongside is done at a fraction of the cost of purchasing this, a further £4 million has been offered to new hybrid buses, and means that operators companies who applied for the fifth funding can reduce their fuel consumption and round, bringing the total to £14 million across emissions. Vantage Power were beneficiaries the projects supported148. of the Energy Entrepreneurs Fund, and the buses they have retrofitted have reported up Over phases one to five of the Energy to 40 per cent lower fuel consumption and 92 Entrepreneurs Fund, we have invested £47.2 per cent lower emissions of nitrogen oxides. 143 HM Treasury (2016) Autumn Statement 2016: https://www.gov.uk/government/publications/autumn-statement-2016-documents/autumn-statement-2016 Section 4.1 BEIS press release (2017) https://www.gov.uk/government/news/business-secretary-announces-industrial-strategy-challenge-fund-investments Investment 144 subject to business case approval. 145 Mission Innovation website, Baseline and Doubling Plans: http://tinyurl.com/mkgyvlx 146 DECC press release (2015) UK joins international clean energy initiative: https://www.gov.uk/government/news/uk-joins-new-international-clean-energy-initiative 147 Further information on the Energy Innovation Board available here: https://www.gov.uk/government/groups/energy-innovation-board 148 The Energy Entrepreneurs Fund is funded through the £505 million BEIS Energy Innovation Programme 52 Department for Business, Energy and Industrial Strategy Table 3: Government investments in clean growth technology 2015-2021149 Forecast Clean Technology Innovation Spend £ million (across Innovate UK, Research Councils, BEIS, DfT, DfID, Defra) Basic & Applied Technology Technology Total Research Development Demonstration Innovation in Smart Systems (including 175 43 47 265 energy storage) Innovation in the Power Sector (including 209 276 154 638 renewables) Innovation in Homes (including heat and 100 31 53 184 energy efficiency) Innovation in the Transport Sector 296 413 132 841 (including electric vehicles and batteries) Innovation for Business and Industry, including 57 47 58 162 carbon capture, usage and storage (CCUS) Innovation in Natural 69 30 0 99 Resources Cross-sector Clean Tech Innovation 234 62 91 387 (including for entrepreneurs) Total (£ million) 1,140 902 534 2,576 NB All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests. 149 Final spending commitments are subject to competitive bidding processes across sectors and value for money tests. Excludes £720 million of regulated expenditure being made available by Ofgem to support innovation in gas and electricity networks. The Clean Growth Strategy 53 Clean Growth Innovation Challenges To get the clean growth we want, we need these technologies can integrate smoothly breakthroughs in clean technologies. in the energy system, including finding local Government funding and innovations in solutions, so that consumers benefit from universities are crucial, but such breakthroughs lower energy and transport costs. also need the creativity and energy of the private sector. We have identified the key Power challenges we believe need to be overcome if We need to bring down the costs of nuclear we are to meet future carbon budgets: power through developing new materials and Hydrogen and bioenergy manufacturing processes, and exploring the opportunities of new fuels and reactor designs. Clean fuels such as hydrogen and bioenergy To further reduce the cost of offshore wind, could be used for transport, industry, and to we need to deliver larger turbines, extend heat our homes and businesses. We need to existing asset life, optimise performance and test how they work in the existing gas network, reduce operational maintenance. whether they can fire industrial processes, and how they could be used in domestic Industry appliances. These options need to work as We need to find alternatives to industrial fuels well and as cheaply as current technologies. which are energy intensive to produce, without Homes increasing cost or reducing performance. The cost of CCUS technologies will need to fall. We need energy efficiency and heat technologies that are less costly and easier to Waste install, and commercial innovation to ensure We need to minimise the impacts of anaerobic retrofits are attractive for homeowners. To digestion, particularly in relation to air quality. build lower cost, lower carbon homes, we This includes developing improved digestion need to use innovative construction methods and ammonia and phosphate extraction including factory production and off-site technologies and reducing methane manufacturing. emissions. Innovative techniques are also Batteries needed to reduce the impact of landfills at the end of their use. To rapidly decarbonise transport, including rail and EVs, we need innovation in batteries: Land use to extend their range and lifetime, bring down To support greater productivity of agricultural their cost, and ensure they can be disposed land, we need to: increase carbon storage of sustainably. New methods for charging through fertilising crops more effectively, are needed to make electric vehicles easier develop new animal and plant breeding to use, including super-fast charge points, technologies, use precision farming wireless charging and dynamic charging. technologies on smaller scale farms, Smart energy system and develop robotics and new sensor technologies. We also need to reduce plant Clean technologies such as electric vehicles, and tree disease and investigate methods to batteries, fuel cells and renewable energy improve soil health and carbon stocks. are all falling in cost. We need to ensure 54 Department for Business, Energy and Industrial Strategy Getting to 2032 • Emissions from homes falling by 19 per cent from today, with household energy use falling nine per We cannot predict the exact technological cent, through a combination of switching low- changes that will help us deliver on the fourth carbon heating and greater energy efficiency and fifth carbon budgets (and beyond). Some which in turn will help to reduce bills. We will technologies will develop faster than expected, also need to bring down the cost of low carbon making it easier to reduce emissions in particular alternatives to the gas boiler. This is supported by sectors. Some technologies may develop less the proposals set out in this Strategy, including quickly than we hope. investments in upgrading homes and proposals To explore this uncertainty, we test different to improve energy performance standards potential versions of the future based on current across the housing sector. knowledge. These are not firm predictions of • Emissions from transport falling by 29 the future and should not be taken as sectoral per cent from today, largely achieved by targets. However, they allow us to identify accelerating the shift to electric and other areas where progress is most needed to meet low emission vehicles. This transition could our future carbon budgets, especially the fifth involve reducing the energy and emissions carbon budget, and where action now is unlikely intensity of road transport151 by 30 per cent to be wasted. The policies and proposals set and 44 per cent respectively. Our proposals, out in this Strategy reflect that understanding. such as those to encourage uptake of Our Clean Growth Strategy sets out in detail a ULEVs, will contribute to this. possible pathway for meeting the fifth carbon • Emissions from power falling by 80 per cent budget through domestic action, including on today’s levels, by increasing the share of many of the policies and proposals set out clean electricity generation to over 80 per here. The route we ultimately take to meeting cent of demand and moving to a smarter, our targets will depend on a range of factors, more flexible system and reducing demand in particular ensuring we are mindful of any by improving the efficiency of appliances. impact on energy costs for households and The proposals set out in this Strategy, businesses, and changes in costs as a result for example providing further funding for of innovation. Contract for Difference auctions for renewable The approach could involve150: technologies, will help to deliver this. • Emissions from business and the public • Emissions from land use and agriculture falling by sector falling by 30 per cent on today’s 26 per cent on today’s levels. This could mean levels, through significant improvements in that woodland cover increases by up to 16 per energy efficiency, reducing energy use per cent and the emissions intensity of agricultural unit of output as well as reducing the carbon outputs could improve by 27 per cent. Emissions content of industrial energy use by at least from waste and F-gases fall to around 14 Mt by 14 per cent through switching to cleaner 2032, 53 per cent lower than today. This could fuels. Our proposals will contribute to this, mean that the amount of biodegradable waste for example improving business energy sent to landfill in 2032 is around 45 per cent efficiency and standards for commercial lower than that seen in 2015. This is supported buildings, and agreeing tighter targets to by the proposals in this Strategy, such as those reduce central government emissions. to reduce emissions from waste and to establish a new network of forests. 150 Total sector emissions reductions are compared against estimated 2017 levels. Supplementary metrics, where relevant, compared the 2032 pathway with 2015 official statistics. See Table 4 in Annex D, and Table 6 in the Technical Annex for details. 151 Covering cars, van and freight The Clean Growth Strategy 55 BBOXX BBOXX was formed by students at Imperial College London in 2010. In addition to $2 million in private funding, since 2013 BBOXX received £1.2 million, including from the EPSRC and DfID, to tackle the challenges and opportunities arising from unreliable electrical supplies in rural Africa. By providing households with off-grid electric lighting, children can do their homework and families can run a business without incurring threats to their health from paraffin smoke. Since 2006, BBOXX has created a sustainable non- subsidised business model. Rapidly expanding from three founders to a global staff of 140, BBOXX products have already saved energy worth over $2 million and offset over 40,000 tonnes of CO2. BBOXX aims to provide up to 20 million people with electricity by 2020. Innovation can deliver dramatic results, as we Beyond the Fifth Carbon Budget, have seen with the rapid falls in the costs of some Towards 2050 clean technologies over the past ten years, and this Strategy sets out ambitious proposals on There is even greater uncertainty about which funding innovation to further reduce costs. We technologies will help us reduce emissions by take a cautious approach towards quantifying at least 80 per cent by 2050152. It is even more the contribution of current and future innovation challenging to predict what the UK economy to emissions savings. As we cannot say precisely will look like in 2050 than in 2032. However, how our investments today will impact on the exploring the plausible potential pathways to UK’s emissions in the future, we have omitted any 2050 helps us to identify low-regrets steps estimates from this analysis. we can take in the next few years common to many versions of the future, as well as key We estimate the combination of existing policies technologies and uncertainties. To demonstrate and new measures in this Strategy that can this, we present three illustrative long-term be quantified could deliver 93 per cent of the pathways in this Strategy: required level of emissions savings for the fifth carbon budget, against our 1990 baseline. As well as setting out policies within this Strategy, we identify areas where we will need to drive further progress through future consultations, innovation spend and policy design. This is set out in more detail at Annex A. 152 On a 1990 baseline. 56 Department for Business, Energy and Industrial Strategy • Electricity pathway: Under this pathway, that builds on further innovation. This approach electricity is the main source of energy in will also be consistent with Government’s

2050. There are many more electric vehicles commitments on clean air out to 2050. (EVs), we replace our gas boilers with electric heating and industry moves to cleaner fuels. The purpose of these illustrations is to Altogether this means we use around 80 demonstrate a range of practical ways in which per cent more electricity than today, and emission reduction aims can be delivered with virtually all of it comes from clean sources technology known today, and to underline some (renewables and nuclear). In this pathway, of the steps common to all. These include: CCUS is not used in the UK by 2050. • making our homes and commercial buildings • Hydrogen pathway: Under this pathway, more energy efficient; we use hydrogen to heat our homes and • shifting to low carbon sources of heating, buildings, as well as to fuel many of the such as through more district heating; vehicles we drive in 2050 and power the UK’s industry. We adapt existing gas • continuing to decarbonise electricity; infrastructure to deliver hydrogen for heating • ensuring our electricity system is smart and and a national network of hydrogen fuelling flexible to respond to changes in demand stations supports the use of hydrogen and decarbonise at least cost; vehicles. A large new industry supports hydrogen production using natural gas and • increasing the number of ultra low emission capturing the emissions with CCUS. vehicles in the UK; and • Emissions removal pathway: Under • working with industry on how to improve this pathway, sustainable biomass power efficiency and transition to clean fuels. stations are used in tandem with CCUS technology. Carbon is removed from the Greenhouse Gas Removal Technologies atmosphere by plants (biomass) as they As the UK approaches 2050, its remaining grow and, when the biomass is used to emissions will likely be in the sectors where it generate electricity, emissions are captured is the most difficult to cut them – in industry, and stored instead of returning to the agriculture, aviation and shipping. Under the atmosphere. There is still a significant clean Paris Agreement, as well as seeking to limit transition in other sectors but successful warming to well below 2 degrees, and to pursue innovation in emissions removal allows more 1.5 degrees, the UK is committed to working time for some of these changes. with other countries to achieve global net zero These illustrative pathways should not be seen emissions in the second half of the century153. as predictions, as we are continuing to build This will require a step change in action to our understanding of the best approach. The tackle climate change and has strong links to ultimate way forward might in fact be some how the Sustainable Development Goals will be combination of these, or another approach achieved. 153 This means that global GHG emissions will not be greater than the amount of GHGs which are absorbed through natural processes or technology. The Clean Growth Strategy 57 As highlighted by the Committee on Climate • The Government will consider the scope Change154, greenhouse gas removal (GGR) for removing barriers and strengthening technologies are likely to have an important role incentives to support the deployment of to play in offsetting difficult-to-cut emissions, GGR, to position the UK at the leading edge by removing greenhouse gases from the air. of GGR development. This includes, for As we learn more about how GGRs could be example, considering options for developing developed and deployed, we want the UK’s a carbon offset market and exploring how UK entrepreneurs, universities and engineering timber could be used in construction. We are industries to be well placed to exploit the also considering how best to take forward advantages of global demand for these new CCUS, as set out in ’Improving Business technologies. and Industry Efficiency and Supporting Clean Growth’. We will conduct a study There is a diverse set of GGR technologies with on how GGR activity can be incentivised, varying potential scale and at varying stages in the UK and in other countries, which of development. These include afforestation, will help us develop policy and accounting bio-energy with carbon capture and storage frameworks fit for the future. And we will also (BECCS), direct air capture (capturing carbon consider how legal, financial and regulatory dioxide from the air and storing it), enhanced frameworks could support the rollout of weathering (crushing suitable rocks that react GGR technologies at scale. with carbon dioxide and spreading over land), and methods for storing carbon in the oceans, We will develop our strategic approach for such as ocean liming. GGR technologies, including consideration of whether to reprioritise existing innovation We are therefore taking active steps to spend, in light of these pieces of work. strengthen our understanding of these technologies and, where appropriate, move Global Net Zero Emissions forward with deployment. The Government’s strategic approach to GGR has two main As well as seeking to limit warming to well below elements: 2 degrees, and to pursue 1.5 degrees, the Paris Agreement includes an aim of achieving • A Government programme of research net zero global greenhouse gas emissions in and development, which aims to improve the second half of the century. Our obligations our understanding of GGR technologies, under the Climate Change Act only take us to to help overcome the uncertainties around 2050, and the Government agrees with the their costs, deployment potential, and Committee on Climate Change that now is not impacts on the environment. We have the right time to set a post-2050 net zero goal. been working with the Research Councils, We need to understand more about the global who launched a new £8.6 million research path to net zero emissions, and believe that our programme looking at all GGR technologies focus should be on meeting our existing targets. in April 2017. We will also develop robust However, the Government believes the UK will estimates of sustainable biomass resource need to legislate for a net zero emissions target available to the UK, reporting during 2018, at an appropriate point in the future, to provide and consider Royal Society scientific views legal certainty on where the UK is heading. on GGR. 154 Committee on Climate Change (2016) UK climate action following the Paris agreement: https://www.theccc.org.uk/publication/uk-action-following-paris/ 58 Department for Business, Energy and Industrial Strategy Measuring the Delivery of the Clean amount of carbon emitted for each pound of Growth Strategy national income generated - fell by four per cent per year on average. We want to build This Strategy sets out a comprehensive set on this success and accelerate clean growth. of policies and proposals that will allow us To reach our targets, the emissions intensity to accelerate the pace of clean growth. We will have to fall by an average five per cent per want to continue the UK’s strong economic year to 2032. We will therefore introduce a new growth while achieving that growth in a way measure of progress, the Emissions Intensity that sees emissions fall. Between 1990 and Ratio (see below) and publish our performance 2016 emissions fell by 42 per cent whilst GDP against this intensity ratio on an annual basis. grew by 67 per cent which meant that the “emissions intensity” of our economy – the The Emissions Intensity Ratio (EIR) This will measure the amount of greenhouse 270 tonnes/£ million and it was 720 tonnes/£ gases (tonnes of carbon dioxide equivalent) million in 1990. By 2032, we expect the EIR produced for each unit of Gross Domestic will need to be nearly as low as 100 tonnes/£ Product (GDP) created. Currently the EIR is million to meet our ambitions. Figure 13: Historic and projected Emissions Intensity Ratio (EIR) 800 700 Emissions Intensity Ratio (tonnes per £ million) 600 500 400 4% per year 5% per year Average fall in emissions Our ambition to 2032 intensity of the economy 300 between 1990 and 2016 200 100 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Source: BEIS The Clean Growth Strategy 59 Government Leadership Creating this supportive environment will help attract the domestic and international To maintain cross-Government progress on investment the UK wants. Therefore, from clean growth, we will reinstate a regular Clean 2018, we will work with private partners and Growth Inter-Ministerial Group, which will be NGOs to introduce a Green Great Britain responsible for monitoring the implementation Week, to engage as many people as possible of this Strategy and driving ambitious clean in the importance of tackling climate change growth policies. and improving air quality. A week of high The Government cannot achieve the changes profile activity, this will be an opportunity to needed to our economy by itself. Outside action both celebrate UK leadership on climate on public sector emissions, the Government’s change and look ahead to explore how we key role is to set the framework for action across can continue to drive ambitious action in the the economy. Beyond that, clean growth has to future. This annual event will be an important be a shared endeavour between Government, moment to bring together all parts of society, business, civil society and the British people. from business through to the general public, to better understand the different ways the UK can further harness clean growth to boost economic performance, reduce emissions and create a cleaner environment. Green Great Britain Week An annual event to: • Share the latest climate science, providing a platform for the latest research on • Focus on climate and air quality issues the impacts of climate change and the across the UK, demonstrating how all parts importance of taking ambitious action. of the country and sectors of the economy are working towards a cleaner future. • Promote UK leadership on tackling climate change and air quality across • Demonstrate our progress and successes our economy, and how we are driving by showcasing how taking action on forward innovation to create economic climate change and air quality can opportunities from reducing emissions, provide opportunities for UK businesses especially to international investors. and citizens. Chapter 4: Sectors The Clean Growth Strategy 61 Improving Business and Industry Efficiency and Supporting Clean Growth Progress of steel produced in the UK requires 40 per cent less energy to produce than 40 years ago155. Since 1990, emissions from business and industry have almost halved, mainly due to In addition, we have also improved the energy efficiency gains and a shift in manufacturing to efficiency of non-domestic buildings since 1990 cleaner fuels, as well as changes to the industrial with emissions 18 per cent lower in 2015156. structure of the UK economy. Much of this The number of properties registering as having reduction has taken place in the most energy the lowest Energy Performance Certificates intensive industries. For instance, each tonne (EPC Bands F and G) has dropped from 19 per cent to 13 per cent between 2010 and 2016157. Figure 14: Distribution of energy use, turnover, and employment by business size (2016)158 34% Energy use (all uses) 20% 45% Energy use (buildings 14% 13% 16% 58% only) Of the 5.5 million Turnover 19% 15% 14% 53% businesses in the UK, the majority of energy use comes from around 7,000 Employment 32% 15% 12% 40% large companies 4% Businesses 96% 0% 20% 40% 60% 80% 100% Micro (<10 employees) Small (10-49) Medium (50-249) Large (250+) Source: Derived from Business population estimates, Non-Domestic National Energy Efficiency Data-Framework and Business Energy Efficiency Survey 155 WSP and Parsons Brinckerhoff & DNV GL (2015) Report prepared for DECC & BIS: Industrial Decarbonisation & Energy Efficiency Roadmaps to 2050 https://www. gov.uk/government/publications/industrial-decarbonisation-and-energy-efficiency-roadmaps-to-2050 156 BEIS (2017) Final UK greenhouse gas emissions national statistics: 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 157 DCLG (2017) Live tables on Energy Performance of Buildings Certificates https://www.gov.uk/government/statistical-data-sets/ live-tables-on-energy-performance-of-buildings-certificates 158 BEIS (2016) Business population estimates 2016 https://www.gov.uk/government/statistics/business-population-estimates-2016; BEIS (2014) Non-domestic National Energy Efficiency Data-Framework (ND-NEED) https://www.gov.uk/government/statistics/non-domestic-national-energy-efficiency-data-framework-energy-statistics-2006-12 62 Department for Business, Energy and Industrial Strategy Overall, business and industry now account for cost-effective energy efficiency technologies. approximately 25 per cent of the UK’s emissions Roughly half of these savings are available (excluding fluorinated gases or F-gases)159, through improving the efficiency of buildings with around two thirds of industrial emissions and processes, including by fitting better coming from a small number of energy intensive insulation and smarter energy controls. The sectors (for example chemicals, iron and steel)160. other half can be realised through eliminating Businesses and industry are also major users of electricity waste in business for example electricity, accounting for over 50 per cent of using better lighting and energy management electricity use161. systems. This is consistent with research from EEF, the manufacturers’ trade association, We now have a much greater understanding which found that a 14 per cent reduction in of the potential for cost-effective energy electricity consumption could be made across efficiency in the commercial and industrial the manufacturing sector, equivalent to over £1 sector. Our analysis says that up to £6 billion162 billion a year in savings163. could be saved in 2030 through investment in Figure 15: 2015 final energy expenditure164 on energy by end use and fuel, £ billion, 2016 prices. Services 2.5 Buildings 9.4 – Electricity Expenditure of business varies 7.6 Buildings – Gas & Other Fuels by sector, for some expenditure £21 billion 11.9 Industrial processes is driven by 7.2 – Electricity process, for others by building use 0.7 Industrial processes 1.8 – Gas & Other Fuels 1.4 Manufacturing Source: Energy Consumption in the UK & Building Energy Efficiency Survey 159 BEIS (2017) Final UK greenhouse gas emissions national statistics: 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 160 BEIS (2017) Final UK greenhouse gas emissions national statistics: 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 161 BEIS (2017) Digest of UK Energy Statistics 2017 https://www.gov.uk/government/statistics/energy-chapter-1-digest-of-united-kingdom-energy-statistics-dukes 162 Total energy efficiency potential across business and Industry EEF (2016) Upgrading Power: Delivering a flexible electricity system https://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/ 163 upgrading-power-report 164 Excluding expenditure on energy used for raw material extraction or transformation to other fuels (e.g. oil extraction and refining) and excluding energy used for transportation The Clean Growth Strategy 63 CRESS Systems CRESS Systems, based in Darlington, have developed a flywheel to reduce the energy required to drive cranes at shipping ports. They received Energy Entrepreneurs Fund grants of £800,000 to build and test the first system at the Port of Felixstowe. Since then, they have secured investment from Enterprise Ventures’ Northern Powerhouse Investment Fund and private investors to finalise the product and make first sales into the port market world-wide. Ambition cent by 2030. This will contribute to overall economic growth by reducing the amount of The Government is determined to help energy required per unit of output. We will take businesses improve their productivity and a final decision on the level of this goal and how competitiveness as part of our Industrial best to measure progress toward it in 2018, Strategy. This includes working together to taking into account the recommendations of unlock any potential energy savings to help the independent review into the cost of energy, keep bills as low as possible. led by Professor Dieter Helm CBE. Our goal is to enable businesses and industry to improve energy efficiency by at least 20 per 64 Department for Business, Energy and Industrial Strategy Figure 16: Actual and projected emissions in business and industry, taking into account the clean growth pathway, 1990-2050 350 Emissions from the business and industry By 2032 emissions could be as Emissions from business and sectors have decreased by 47% since 1990 low as 83 Mt industry could need to be as 300 low as 49 Mt by 2050 250 Emissions (Mt) 200 150 100 Existing policy 2050 indicative 2032 pathway range 50 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS The Government will put in place a simpler, Energy intensive industries will require steps more ambitious and long-term policy and beyond energy efficiency. Out to 2030, this will regulatory framework. This will: require industry to make progress in switching from fossil fuel use to low carbon fuels such • Make it easier for businesses to identify as sustainable biomass, in line with broader where they can save energy by simplifying Government priorities on delivering clean the energy and carbon reporting framework. air, and clean electricity. Beyond 2030, this • Ensure that those who lease premises to switching will need to substantially increase in businesses, including in the service sector, scale and be coupled with the deployment of continue to refurbish and improve the new technologies, for example carbon capture, performance of their buildings. In parallel, usage and storage (CCUS). Over the course of all new commercial and industrial buildings this Parliament, we will therefore also develop should be more energy efficient. a framework to support the decarbonisation of heavy industry. Overall, one possible pathway • Help to understand how we can encourage to 2032 could involve emissions from business greater investment in energy efficiency and industry falling by around 30 per cent on measures and technologies, including today’s levels to as low as 83 Mt by 2032. establishing an Industrial Energy Efficiency scheme to help large companies install measures to cut their energy use, and working with the financial sector to identify how such measures can be taken forward. The Clean Growth Strategy 65 Figure 17: Carbon reduction opportunities across industry (2050)165 50 45 40 Others Deep decarbonisation Carbon reduction opportunity (Mt) of industry will need 35 CCUS to go beyond energy efficiency and deploy more 30 innovative technologies Fuel switching such as CCUS 25 20 Energy efficiency 15 10 5 0 2050 Source: 2050 Roadmaps Cross-Sector Summary report (2015). This illustrates the technical potential for emissions savings in the report’s ‘MAX TECH’ pathway. Opportunities the UK, building the energy efficiency market would place UK businesses and industry in a The UK energy efficiency sector already turns prime position to further increase the export over £20.3 billion, employs 144,000 people of knowledge, skills and products to other and sells exports worth over £1 billion166. We countries. It would also involve greater flows know the potential for further energy efficiency of external finance, a sector where the UK is in businesses and industry is significant - up already a market leader. For example, the UK to £6 billion could be saved by 2030 through energy services market is estimated to have a investment in cost-effective energy efficiency potential annual size of €1 billion per year and technologies in buildings and industrial would require significantly more third party processes. As well as reducing bills across finance than we see currently167. BIS, DECC (2017) Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050 https://www.gov.uk/government/publications/industrial-decarbonisation- 165 and-energy-efficiency-roadmaps-to-2050 ‘Fuel switching’ includes a small amount of bioenergy used for feedstock 166 ONS (2017) Low Carbon and Renewable Energy Economy Survey, final estimates: 2015 https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results EC (2014) The European ESCO Market Report 2013 https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/ 167 european-esco-market-report-2013 66 Department for Business, Energy and Industrial Strategy Policies and Proposals 6. The Government will work with stakeholders to improve the market for energy services, Unlocking Business Energy Efficiency building confidence across commercial and

1. The Government will develop a package of industrial customers. measures to support businesses to improve 7. Alongside this Strategy, we are consulting how productively they use energy and will on a new and streamlined energy and consult on this in 2018, with the aim of carbon reporting framework to replace some improving energy efficiency by at least 20 existing schemes, such as the reporting per cent by 2030. element of the CRC Energy Efficiency

2. The Government will ensure incentives for Scheme, and align with mandatory annual investment in energy efficiency are regularly greenhouse gas reporting by UK quoted reviewed, for instance the list of products companies. This will improve the way in that qualify for enhanced capital allowances which businesses report their energy use, tax relief. and provide businesses with the information needed to identify how they can reduce

3. We will continue with plans to close the energy bills. CRC Energy Efficiency Scheme following the 2018-19 compliance year. We will 8. The Government will establish an Industrial drive energy efficiency by implementing Energy Efficiency scheme to help large the previously announced increase to the companies install measures to cut their main rates of the Climate Change Levy energy use and their bills. from 2019. 9. We are consulting on the design of a new

4. We will undertake an evaluation of the industrial heat recovery programme. This Climate Change Agreements to inform any £18 million fund will encourage investment successor scheme from 2023. by manufacturers to recover and reuse heat from industrial processes that would

5. The Government will build on existing otherwise be wasted. schemes such as the Energy Savings Opportunity Scheme (ESOS), undertaking 10.The Government will explore with a comprehensive assessment of its stakeholders how we can improve the effectiveness and consider any future provision of information and advice to SMEs reforms. to encourage the uptake of energy efficiency technologies. The Clean Growth Strategy 67 Anglian Water Anglian Water’s ‘Love Every Drop’ campaign aims to significantly reduce carbon emissions, including in their supply chain, and encourage customers to be more resource efficient and cut down their carbon emissions. Their manifesto, published in 2015, aims to raise awareness about how essential water is to life, to people and the environment, and to a vibrant and growing economy too. This helped to save £2.5 million in energy costs in 2016. They have also issued the first ever public utility green bond this year, raising £250 million to finance a range of sustainable projects and support the company’s vision of sustainability, carbon reduction, water efficiency and environmental stewardship. More Energy Efficient Commercial and 13.The Government will explore how Industrial Buildings voluntary building standards can support future improvements in business building

11.The Government has commissioned an performance. independent review of Building Regulations and fire safety, being led by Dame Judith 14.As we work to understand different options Hackitt. The review will report in spring 2018. for the long term decarbonisation of heat, Subject to the conclusions of that review, the we will need to tackle the challenge of Government intends to consult on making those business properties off the gas grid, improvements to Building Regulations particularly those heated by oil boilers requirements for new and existing and facing volatile costs. Beyond support commercial buildings where there are cost- through the Renewable Heat Incentive (RHI), effective and affordable opportunities, and our ambition is to phase out the installation it is safe and practical to do so. This will of high carbon fossil fuel heating in new look to promote low carbon and higher and existing business buildings off the gas energy efficiency heating, ventilation and grid during the 2020s, starting with new air conditioning systems in new commercial buildings as these lend themselves more buildings. readily to other forms of low carbon heating. We will involve businesses and industry 12.42 per cent of business buildings’ energy in developing our new policy, in line with use is in the private rented sector168. We broader Government priorities on delivering will consult in 2018 on how best to improve clean air. the energy performance of these buildings through tighter minimum energy standards. 168 BEIS (2016) Building Energy Efficiency Survey (BEES) https://www.gov.uk/government/publications/building-energy-efficiency-survey-bees 68 Department for Business, Energy and Industrial Strategy Transforming Manufacturing and Government Innovation Investment Heavy Industry The Government expects to invest around £162

15.Alongside this Strategy, we have published million169 of innovation funding out to 2021, joint industrial decarbonisation and energy in research, development and demonstration efficiency action plans with seven of the most of energy, resource and process efficiency energy intensive industrial sectors, building alongside better low carbon fuels and CCUS. on three years of joint industry-Government This includes: co-operation. These action plans identify steps by industry and Government that • Energy efficiency: We need to drive down can be taken now to support long term the cost of new technologies to integrate low carbon growth, energy efficiency and them into existing processes and improve emissions reductions on a sector by sector performance without affecting reliability. The basis. These include the sharing of best Government is providing £9.2 million for an practice and innovation opportunities, Industrial Energy Efficiency Accelerator, to including through a new online portal, help reduce the emissions from UK industry facilitating dialogue to improve access to by increasing the commercially viable finance and cross-sector consideration of options available. the best uses of biomass across industry. • Processes, resource and material efficiency:

16.The Government remains committed to Over time we will need to replace materials using carbon pricing as an emissions which are energy intensive to produce reduction tool and will ensure that a clear with lower carbon ones at competitive price signal continues to incentivise industrial prices, known as “advanced materials”. emissions reduction. Government will work through Industrial Strategy sector deals and the Industrial

17.We will develop a framework to support Strategy Challenge Fund to stimulate the long term low carbon development of innovation in advanced materials. We will energy intensive industrial processes, such also need to encourage more resource as CCUS and electrification. efficient business models, extend product life and reduce waste volumes. The Industrial Digitalisation Review will investigate how the design, development and deployment of digital technologies can drive increased national productivity. 169 All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests The Clean Growth Strategy 69 • Fuel Switching: Firing industrial processes operations. Government will invest up to £20 with low carbon fuels (such as hydrogen) is million in competitions from 2018, initially currently viewed as prohibitively expensive for research followed by competitions for and disruptive. Innovation can prove the demonstrator projects across industry. viability of these fuels without impacting Carbon Capture, Usage and Storage There is a broad international consensus that technologies and to seek the maximum carbon capture, usage and storage (CCUS) possible benefits from investment for has a vital future role in reducing emissions. improving the productivity of the UK economy. This could be across a wide range of activities While we have explored ways to deploy such as producing lower-emission power, CCUS at scale in the UK since 2007, the lack decarbonising industry where fossil fuels are of a technological breakthrough to reduce the used and/or industrial processes as well as cost of CCUS and the cost structures and providing a decarbonised production method risk sharing that potential large-scale projects for hydrogen which can be used in heating have demanded has been too high a price for and transport. This makes CCUS a potentially consumers and taxpayers. It is clear from the large global economic opportunity for the UK. relative lack of deployment of the technology The International Energy Agency estimates that other governments have reached a there will be a global CCUS market worth similar conclusion. over £100 billion - with even a modest share of this global market, UK GVA could increase However, we have continued to invest in to between £5 billion and £9 billion per year innovation and technology development by 2030170. both in the UK and overseas. To date we have invested over £130 million in R&D and However, the current technology is expensive innovation support to develop CCUS in the UK, and there are only 21 large-scale plants supporting the development of technologies operating, or in construction, across the world including NET Power’s Allam cycle, Carbon – of which 16 rely on revenue from providing Clean Solutions and C-Capture. We are also carbon dioxide for enhanced oil recovery171. one of the leaders in providing aid support to CCUS internationally through our support to Our Clean Growth Strategy is underpinned CCUS pilot projects in countries with a fossil by three commitments: to reduce our fuel-intensive energy sector, such as Mexico, emissions in the most cost-effective way: to South Africa, and Indonesia. maximise innovation to develop world leading 170 CCSA & TUC (2014) The economic benefits of carbon capture and storage in the UK http://www.ccsassociation.org/press-centre/reports-and-publications/ 171 Large-scale CCS facilities http://www.globalccsinstitute.com/projects/large-scale-ccs-projects 70 Department for Business, Energy and Industrial Strategy Carbon Capture, Usage and Storage (continued) Investing in cutting edge technology to achieve global cost reductions in CCUS As a global leader in supporting the development of cutting edge technologies, the Government provided £7.5 million for the early development support to the UK invented Allam cycle technology used by NET Power. This technology has the potential to capture 100 per cent of the carbon dioxide emitted at a cost similar to that of an unabated Combined Cycle Gas Turbine (CCGT). a deployment pathway for CCUS in 2018, setting out the steps needed to meet our This early support from the Government in a ambition of deploying CCUS at scale during cutting edge technology has been critical to the 2030s, subject to costs coming down developing the technology and for the 8 Rivers sufficiently. This will include looking at the NET Power project to reach demonstration options for permanent storage of carbon scale. In March 2016, construction began dioxide domestically as well as elsewhere via on the NET Power pilot project, a 50 MWth international shipping. first-of-its-kind natural gas-fired power plant located in Texas and the plant is expected to Following the advice from the Parliamentary start operations in late 2017. The pilot project Advisory Group on CCUS the Government also includes significant UK content with two will review the delivery and investment models UK companies – Goodwins Steel Castings for CCUS in the UK to understand how the Ltd and Heatric involved in the project. barriers to deployment can be reduced, and how the private and public sectors can work We now see a new opportunity for the UK together to deliver the Government’s ambition to become the global technology leader for for CCUS. CCUS, working internationally with industry and governments to bring about global cost We will work with the ongoing initiatives in Teesside, reductions. We will do this through: Merseyside, South Wales and Grangemouth to test the potential for development of CCUS Re-affirming our commitment to deploying industrial decarbonisation clusters. CCUS in the UK subject to cost reduction: We will set up a new Ministerial-led CCUS We will build on the success of the Offshore Council with industry to review our progress Wind Cost Reduction Taskforce172 and and priorities. Through the CCUS Council convene a CCUS Cost Challenge Taskforce we will also monitor costs and deployment to deliver a plan to reduce the cost of potential with the option of revising our deploying CCUS. This will then underpin deployment path accordingly. 172 Offshore Wind Cost Reduction Taskforce https://www.gov.uk/government/groups/offshore-wind-cost-reduction-task-force The Clean Growth Strategy 71 International collaboration: The Government dioxide. The programme will also support next will convene and lead a new international generation capture technologies, with an aim working group to drive down the cost and to lower the cost of capture compared to the accelerate deployment of CCUS, including by: current best performing technologies; and small-scale industrial capture demonstrations • Participating in Mission Innovation and its to reduce the risks associated with carbon Carbon Capture Challenge and working capture on an industrial site. We also intend closely with private-sector led initiatives to support the application of CCUS in low such as the Oil and Gas Climate Initiative; carbon hydrogen production; develop our • Developing closer collaborative working understanding of the role of GGR technologies, with countries such as Norway, the United including bio-energy with carbon capture and States, Canada and Australia including storage; and support innovations that reduce joint working on innovation and carbon the cost of transporting and storing carbon dioxide transport and storage solutions dioxide. The Government intends to set out and working multi-laterally through the further detail in 2018. Carbon Sequestration Leadership Forum Investing in supporting new UK CCUS and North Sea Basin Task Force; technologies and companies • Continuing to be a global leader in CCUS The Government has provided over £4 million investments through the UK’s £60 million to support Carbon Clean Solutions Ltd, a UK international CCS programme which has headquartered company. This has supported been running since 2012, by investing a the research, development and deployment further £10 million in the programme. This of their novel carbon capture solvent will further strengthen international action technologies contributing to cost reductions on CCUS and draw on UK technical and in both the capital and operating costs of the commercial expertise; and technologies. • Organising an international Global Carbon In early 2017, building on this early support Capture Usage and Storage Conference in from the UK Government, Carbon Clean 2018 with international partners. Solutions launched an innovative carbon Innovation: The Government will spend up to capture and utilisation project in India. In £100 million from the BEIS Energy Innovation March 2017 Carbon Clean Solutions signed Programme to support Industry and CCUS a partnership agreement with the global innovation and deployment in the UK resource management company, Veolia, for a including £20 million of funding available for a large-scale rollout of Carbon Clean Solution’s carbon capture and utilisation demonstration carbon capture technology in a number of programme to invest in new innovative industrial processes. technologies that capture and utilise carbon 72 Department for Business, Energy and Industrial Strategy Improving Our Homes Progress better boilers; the uptake of insulation and other energy efficiency measures, mainly delivered Homes now account for 13 per cent173 of the through obligations on energy suppliers; and UK’s emissions (rising to 22 per cent once greater awareness of potential energy savings. electricity use is taken into account174). The average household’s energy consumption has While there are now approximately a quarter fallen by over 17 per cent since 1990175. This more homes than in 1990, the overall total has been driven by a combination of: tighter of emissions from the sector has reduced by building and products standards, in particular about a fifth over this period176. Figure 18: Total energy consumption and emissions of UK homes, 1990-2015 140 120 100 Index (1990 = 100) 80 60 40 20 0 1990 1995 2000 2005 2010 2015 Total final energy consumption Total emissions Source: BEIS Energy Consumption in the UK, 2017 173 BEIS (2017) UK Greenhouse Gas Emissions https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 BEIS (2017) Annex 1990 – 2015 Final emissions by end user and fuel type https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/604354/ 174 Annex_1990-2015_Final_emissions_by_end_user_and_fuel_type.pdf A minor adjustment for fluorinated gases has been made, which are accounted with the Natural Resources sector BEIS (2017) Energy Consumption in the UK https://www.gov.uk/government/statistics/energy-consumption-in-the-uk Change in average consumption per 175 household 1990-2016. 176 BEIS (2017) UK Greenhouse Gas Emissions https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 The Clean Growth Strategy 73 Reducing emissions through the measures Improved energy efficiency also offers listed above not only creates better quality substantial health benefits. There is a clear homes but cuts the costs of heating them. link between cold homes and ill-health, where Almost 79 per cent of homes in England in existing conditions (such as respiratory illnesses 2015 had an Energy Performance Certificate or mental health conditions) are exacerbated. (EPC) rating of Band D or better compared The Building Research Establishment (BRE) has to 39 per cent in 2005177. Upgrading energy estimated, conservatively, that the cost of cold efficiency from an EPC Band E to an EPC Band and damp homes to the NHS is approximately D reduces energy costs by £380 per year on £760 million per year179. Increasing resilience average. For example, the annual running cost to rising temperatures is also a potentially of a Band C rated home are £270 lower than significant climate change challenge and we the average Band D rated home and £650 less are undertaking research into whether further than the average Band E rated home178. measures on overheating are necessary for new homes. Figure 19: Average annual cost of energy in homes by energy efficiency rating, 2014180 3,500 3,000 2,500 Average cost (£) 2,000 1,500 1,000 500 0 A /B C D E F G Source: DCLG 177 DCLG (2017) English Housing Survey 2015 to 2016 178 BEIS analysis based on English Housing Survey data 179 Building Research Establishment (2011) The cost of poor housing to the NHS BEIS analysis based on English Housing Survey data 180 BEIS analysis based on English Housing Survey data 74 Department for Business, Energy and Industrial Strategy Obligations on energy suppliers such as In particular, progress has been made to the Energy Company Obligation (ECO) upgrade the homes of those living in fuel are estimated to have reduced dual fuel poverty: the number of fuel poor households customers’ bills by over £800 million across in England living in homes at energy efficiency the UK in 2016181. Since 2013, ECO has rating E or below reduced from 1.8 million in driven the installation of 2.1 million energy 2010 to 920,000 in 2015184. efficiency measures in 1.7 million properties182. Separately, the Domestic Renewable Heat In parallel, the roll-out of smart meters is Incentive has enabled householders to install helping to give households more control over over 55,000 low carbon heating technologies their energy use, based on near real-time such as heat pumps, biomass boilers and information. As of June 2017, 7.7 million smart solar water heating183. and advanced meters were operating in homes and small business sites across the country185. Figure 20: Actual and projected emissions in homes, taking into account the clean growth pathway, 1990-2050 120 Emissions from homes have decreased By 2032 emissions could be as Emissions from homes could need by 20% since 1990 low as 58 Mt to be as low as 6 Mt by 2050 100 80 Existing policy MtCO2e 60 2032 pathway 40 2050 indicative range 20 0 1990 2000 2010 2020 2030 2040 2050 Source: BEIS 181 BEIS analysis 182 BEIS (August 2017) Household Energy Efficiency National Statistics https://www.gov.uk/government/collections/household-energy-efficiency-national-statistics 183 BEIS (July 2017) Renewable Heat Incentive Statistics https://www.gov.uk/government/collections/renewable-heat-incentive-statistics 184 BEIS (2017) Fuel Poverty Trends https://www.gov.uk/government/statistics/fuel-poverty-trends-2017 185 BEIS (Quarter 2 2017) Smart Metering Statistics https://www.gov.uk/government/statistics/statistical-release-and-data-smart-meters-great-britain-quarter-2-2017 The Clean Growth Strategy 75 Ambition using low carbon gases (such as hydrogen) in our existing gas grid and district heat networks. We want to further reduce emissions from However, at present it is not certain which homes while ensuring that everyone has a approaches or combination of them will work home that is comfortable, heathy and affordable best at scale and offers the most cost-effective to run. Our objective is to ensure our policies long-term answer. Decarbonising heat is our will encourage people to improve their homes most difficult policy and technology challenge where it is cost effective and affordable for to meet our carbon targets. them to do so. One possible pathway to 2032 could involve emissions from homes falling by We will therefore need to lay the groundwork almost one fifth compared to today, to around this Parliament so we are ready to make 58 Mt by 2032. decisions in the first half of the next decade about the long term future of how we heat To achieve this 2032 pathway, we will need our homes, including the future of the gas grid to ensure existing buildings waste even less (please see box below on the Future of Heat energy. This pathway could see a further six Decarbonisation). This includes support for to nine million properties insulated, especially innovation to test and bring down the cost focusing on those in fuel poverty where we are of low carbon heating technologies, many of aiming to have the 2.5 million fuel poor homes which are currently too expensive. in England improved to energy efficiency rating C or better by 2030186. More broadly, our Ahead of these decisions, we can take further aspiration is that as many homes as possible action to reduce emissions from heating the are improved to EPC Band C by 2035, where 850,000 homes187 currently not connected practical, cost-effective and affordable. to the gas grid in England and that use oil for heating. We also need to avoid new homes Reducing demand for energy will not be needing to be retrofitted later and ensure that enough on its own to meet our ambitions for they can all accommodate low carbon heating. homes. By 2050, we will also likely need to This could involve all new homes off the gas fully decarbonise how we heat our homes. grid from the mid-2020s being heated by a low There are a number of low carbon heating carbon system, such as a heat pump. technologies with the potential to support the scale of change needed, including heat pumps, 186 Conservatives (2017) https://www.conservatives.com/manifesto 187 BEIS analysis based on English Housing Survey data 76 Department for Business, Energy and Industrial Strategy Opportunities the opportunity to become a trusted leader in the quality, service and installation of low The energy efficiency industry already carbon and energy efficiency products and contributes substantially to the low carbon an exporter of knowledge, skills and products economy, supporting 144,000 direct to other countries. These markets can build employees . In 2016, investment in energy 187 on the success of the UK gas boiler market efficiency globally grew by nine per cent – the biggest boiler market in the world, in with substantial levels of global investment terms of value and volume (the annual market in energy efficiency predicted to deliver on value for boilers in the UK is around £2.5-£3 the Paris Agreement. This is coupled with billion188) with some of the most experienced a potentially substantial domestic market manufacturers and installers. of 27 million homes. The UK, therefore, has Exeter Road Project by 80 per cent per flat, saving residents as much as £500 a year. Exeter Road resident Enfield’s award-winning Exeter Road Project Ms Adeleke says: “I am very happy with the combined energy efficiency measures with heating, it keeps my home warm all of the the installation of a ground source heat pump time. My old heating didn’t work properly all system to provide a new heating and hot day and wasn’t in every room. It is cheaper to water system to 185 flats. The new heating run than the other heating so far this winter.” system is estimated to reduce fuel costs 187 ONS (2017) Low Carbon and Renewable Energy Economy Survey, final estimates: 2015 https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results 188 Delta Energy & Environment (2016) Heat Insight Service, August 2016 Briefing note The Clean Growth Strategy 77 Policies and Proposals Government will also look at how social housing can meet similar standards on the Improving People’s Homes and same timetable. When looking at this we Reducing Bills will need to take account of the findings of

1. ECO will upgrade around a million homes, the independent public inquiry into the fire supporting £3.6 billion of investment. We at Grenfell Tower189 and the Government’s have changed the scheme so it is more separate work looking at wider social focused on households with low incomes. housing policy issues190. We will extend support for home energy 4. We want all fuel poor homes to be upgraded efficiency out to 2028 at least at the current to EPC Band C by 2030, and our aspiration level of ECO funding. We will review the best is that, across the whole housing stock, as form of support beyond 2022 recognising many homes as possible reach a similar the need to both save carbon and meet the standard by 2035, where practical, cost- Government’s commitment to upgrade all effective and affordable. fuel poor homes to EPC Band C by 2030.

5. To build the market for energy efficiency,

2. For privately rented homes, we have we need to make it as easy as possible for legislated so that from April 2018, landlords people to pay for and make home energy of the worst performing properties will efficiency improvements. We are publishing need to improve those properties to a a call for evidence on additional measures minimum of EPC Band E before they can to encourage energy performance be let, lowering bills for some of the most improvements, including a focus on: vulnerable private tenants while ensuring costs of improvements are reasonable and • Working with mortgage lenders to affordable. We will consult shortly on steps incorporate energy efficiency into their to make these regulations more effective. lending decisions, alongside developing innovative “green mortgage” products.

3. The Government will look at a long term The Government is now exploring ways trajectory for energy performance standards that it could support the launch of more across the private rented sector, with the products, and further details are included aim of as many private rented homes as in our call for evidence. possible being upgraded to EPC Band C by 2030, where practical, cost-effective and • Looking at incentives and other levers that affordable. We will consider options with a could encourage homeowners to invest in view to consulting in 2018. In addition, the energy efficiency improvements. 189 Grenfell Tower Inquiry (2017) Terms of Reference https://www.grenfelltowerinquiry.org.uk/news/prime-minister-announces-inquiry-terms-reference/ 190 Prime Minister’s response of 15th August 2017 https://www.grenfelltowerinquiry.org.uk/key-documents/ 78 Department for Business, Energy and Industrial Strategy

6. We will work with industry to implement 9. Following the sale of the Green Deal Finance the independent, industry-led Each Home Company, the Government is publishing Counts191 review to improve quality and a call for evidence on how to reform and standards for all retrofit energy efficiency streamline the Green Deal framework to and renewable energy installations. make the “Pay as You Save” system more accessible to businesses, while ensuring

7. We will replace the existing, telephone- adequate protection for consumers. only Energy Saving Advice Service with a digitally-led service by spring 2018, 10.It could be possible to extend EPCs to working closely with the Each Home Counts other trigger points and we will issue a Call implementation, offering tailored advice for Evidence by spring 2018 seeking views on improving the energy performance of in this area, as well as wider views on how people’s homes. EPCs could be further improved, in light of new sources of data and capabilities. As the

8. Homeowners expect building work that EPC requirements derive from the Energy improves the energy efficiency of a property Performance of Buildings Directive, any to be high quality, helping them reduce future changes will need to be considered in energy bills and making their homes the context of leaving the European Union. more comfortable. The Government has commissioned an independent review of 11.Energy performance improvements installed Building Regulations and fire safety, being in both new build and existing properties can led by Dame Judith Hackitt. The review fall short of expectations. The Government will report in spring 2018. Subject to the has commissioned an independent review conclusions of that review, the Government of Building Regulations and fire safety, intends to consult on making improvements being led by Dame Judith Hackitt192. The to Building Regulations requirements, so review will report in spring 2018. Following that any new work (i.e. extensions to a the outcome of this review and subject to property and other building work) to existing its conclusions we will look at the potential properties meets a high standard of energy for any further action on compliance and efficiency, where the evidence shows enforcement related to energy performance. there are cost-effective and affordable We will also continue to explore innovative opportunities and that it is safe and practical solutions to this problem, such as measuring to do so. Any improvements would focus actual building performance using data from on the standards of the work carried out smart meters, and working with the industry on properties itself, and would not include to develop a ‘quality mark’ to drive up any wider “consequential” improvements to standards. other parts of the property. 191 DCLG (2016) Each Home Counts: Review of Consumer Advice, Protection, Standards, and Enforcement for Energy Efficiency and Renewable Energy https://www.gov. uk/government/publications/each-home-counts-review-of-consumer-advice-protection-standards-and-enforcement-for-energy-efficiency-and-renewable-energy 192 Grenfell Tower Inquiry (2017) Terms of Reference https://www.gov.uk/government/news/independent-review-of-building-regulations-and-fire-safety-publication-of- terms-of-reference The Clean Growth Strategy 79

12.We will ensure every home is offered a smart 15.Beyond the RHI, our ambition is to phase meter by the end of 2020 and we expect out the installation of high carbon fossil energy suppliers to make every effort to fuel heating in new and existing off gas provide smart meters to all their customers. grid residential buildings (which are mostly We will: in rural areas) during the 2020s, starting with new homes as these lend themselves • Continue to work with suppliers to ensure more readily to other forms of low carbon that people are provided with tailored heating. In line with broader Government advice when a smart meter is installed; priorities on delivering clean air, we are • Trial the provision of regular information considering a range of policy options to about their energy use to encourage long- support this, and are investing £10 million term energy savings; and in an innovation challenge fund to support low carbon heating systems. We will involve • Explore how the data available through consumers and industry in developing our the national smart metering platform new policy so that it is straightforward for can, with customers’ consent, support people to get new technologies installed. personalised recommendations for saving The Government will also explore the use energy, more targeted policy interventions of the £200 million package of Growth and help businesses develop energy Programme and Countryside Productivity saving offers. offers to support renewable energy projects in rural areas195.

13. Alongside this Strategy, the Government has published Boiler Plus, improving standards 16.In the Spending Review 2015, we allocated for the 1.2 million new boilers193 installed funding out to 2021 to grow the UK heat in England every year and ensuring control networks market so it is self-sustaining in the devices are included with every installation longer term. This could support significant so people can more easily control comfort in investment of private and other capital by their own homes for less fuel from April 2018. 2021. This will enable the construction of heat networks in areas of high heat Encouraging the Take-up of Cleaner demand density such as urban centres, Heating Systems campuses and business parks, including in

14.Through the Renewable Heat Incentive rural locations. Following recommendations (RHI), we are spending £4.5 billion between from an industry taskforce, we will also 2016 and 2021 to support innovative low examine the measures necessary to create carbon heat technologies in homes and an effective long-term market framework for businesses, such as heat pumps, biomass the sector beyond 2020. boilers and solar water heaters. We are also reforming the RHI to focus the scheme towards long-term decarbonisation through greater uptake of technologies such as heat pumps and bio methane (biogas to grid)194. 193 BEIS (2017) Boiler Standards IA https://www.gov.uk/government/consultations/heat-in-buildings-the-future-of-heat 194 BEIS (2016) The Renewable Heat Incentive: A reformed and refocused scheme https://www.gov.uk/government/consultations/ the-renewable-heat-incentive-a-reformed-and-refocused-scheme 195 Defra (2017) £200 million boost for rural England https://www.gov.uk/government/news/200-million-boost-for-rural-england 80 Department for Business, Energy and Industrial Strategy

17.The Government has commissioned an are investing over £70 million in energy independent review of Building Regulations efficiency, including £22 million in buildings and fire safety, being led by Dame Judith research. In addition, we will run: Hackitt. The review will report in Spring 2018. Following the outcome of the independent • A new £10 million grant fund for the review, and subject to its conclusions, innovation of new insulation materials, the Government intends to consult on installation methods and business models improving requirements for new homes for existing buildings. where the evidence suggests that there are • A further £10 million grant fund will cost-effective and affordable opportunities, focus on making low carbon heating and it is safe and practical to do so. This will technologies more affordable, better look to ensure that new homes are future- performing, and attractive to the proofed for the installation of lower carbon consumer. heating systems where this is cost-effective and affordable. This will help to phase out • We also need to ensure that existing high carbon fossil fuels in the future, starting regulation does not impede the with homes off the gas grid. development of new low cost energy efficiency technologies. This will be Government Innovation Investment considered as part of our call for evidence on additional measures to encourage The Government expects to invest £184 energy improvements alongside this million196 out to 2021 in research, development Strategy. and deployment of innovative energy efficiency and heating technologies, and the gas network. • Building lower cost, low carbon homes. These will address the key innovation challenges New methods in construction including to meet our long-term goals, including: factory production and off-site manufacturing may help us build new energy efficient • Developing better energy efficiency and homes more quickly and more cheaply. heating technologies. We need innovation The Government is currently tendering a in products, supply chain capacity and skills, £1.4 million three-year research project to and new business models to reduce the address the drivers, barriers, and challenges expense and challenge of retrofit solutions. of new low carbon homes. To deliver this the Research Councils 196 All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests. The Clean Growth Strategy 81 Econovate Econovate, based in Hemel Hempstead produce construction ‘blocks’ made from recycled waste which might otherwise end up in landfill. They received an Energy Entrepreneurs Fund grant of £800,000, and their product is now fully certified for use. Econovate have subsequently raised over £645,000 capital funding to grow the manufacturing of their award winning product which has a high level of performance, saving more than 300kg of CO2 per cubic metre compared to standard concrete, and which is four times stronger than current blocks. • Behaviour change. Innovation can help • Supporting innovation through policy overcome non-financial barriers, in particular instruments. We recognise that the behavioural barriers, to energy efficiency. way in which Government policies are Research Councils are planning to invest designed can have an impact on the rate of around £19 million to research how people’s deployment of new, innovative low carbon energy choices can help them stop wasting and energy efficient technologies. As such, as much energy. Government is investing in we will explore ways in which we could smart ways of developing heating services, make it easier for innovative approaches with work led by the Energy Systems or products to be installed under our Catapult. consumer-facing schemes such as ECO – potentially reducing costs, improving the • Network solutions. To inform the decisions overall performance of the technologies, that will be needed on our long term approach and building a stronger evidence base on to decarbonising heat (please see box below the savings they deliver. on the Future of Heat Decarbonisation), we will run a £25 million project on using • Ofgem is making available up to £195 hydrogen as an alternative to natural gas197, million for gas network companies in Great including looking at regulatory standards Britain to develop and demonstrate new and the development of appliances. technologies as well as new operating and commercial arrangements. 197 BEIS (July 2017) Funding for innovative approaches to a low carbon built environment https://www.gov.uk/government/publications/ funding-for-innovative-approaches-to-using-hydrogen-gas-for-heating 82 Department for Business, Energy and Industrial Strategy The Future of Heat Decarbonisation heat pumps; decarbonising the gas grid by substituting natural gas with low carbon gases Heating our homes, businesses and industry like biogas and hydrogen; and heat networks accounts for nearly half of all energy use in the (which are likely to be particularly effective UK and a third of our carbon emissions. Nearly in dense urban areas). At present, it is not 70 per cent of our heat is produced from clear which approach will work best at scale natural gas. Meeting our target of reducing and offer the most cost-effective, long term emissions by at least 80 per cent by 2050 answer. We will work with industry, network implies decarbonising nearly all heat in buildings operators, manufacturers, and consumers to and most industrial processes. Reducing the achieve a clear and shared understanding of demand for heat through improved energy the potential as well as the costs and benefits efficiency will have an important role to play but and implications of different pathways for will not by itself suffice to meet our 2050 target. the long term decarbonisation of heat. This We need to lay the groundwork in this includes modelling the costs and benefits of Parliament to set up decisions in the first different approaches, establishing the likely half of the next decade about the long term level of change for households and demands future of heat. The demands on our energy on the electricity grid building on the work of infrastructure will change as low carbon others in this field. heating technologies take over from fossil Government has commissioned research into fuels, with a greater dependence on electricity different heat demand scenarios, the use of and potentially new infrastructure needed for hydrogen, what changes might be needed system balancing and the generation of low to the electricity grid in response to large carbon gases. Supply chains will need time scale uptake of heat pumps, the role that to grow to provide products and services bioenergy might play in decarbonising heat consumers across the country will need. and international activity. We plan to publish There is a range of low carbon heating initial findings from a number of studies later technologies with the potential to support this year, and a full report on our review of the the scale of change needed. These include evidence by summer 2018. the electrification of heating with households moving away from gas or oil boilers, to electric The Clean Growth Strategy 83 Accelerating the Shift to Low Carbon Transport Progress been largely offset by a nine per cent increase in road traffic to 2015201, with the number of Transport emissions in 2015 were down two per registered vehicles increasing over the same cent compared to 1990198,199. While new cars in period from 28.9 million to 36.5 million202. The the UK are up to 16 per cent more efficient than transport sector now accounts for 24 per cent they were in 2000200, this improvement has of the UK’s emissions203. Figure 21: Emissions intensity of road transport (cars, vans and HGVs) 1990-2015 140 120 100 Index (1990=100) 80 60 40 20 0 1990 1995 2000 2005 2010 2015 Road transport travel (km) Road transport emissions intensity (grams/km) Source: DfT, BEIS 198 BEIS (2017) Final UK greenhouse gas emissions statistics 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 Provisional statistics suggest that GHG emissions from transport may show an increase 1990-2016. BEIS (2017) Provisional UK greenhouse gas emissions statistics 199 2016 https://www.gov.uk/government/statistics/provisional-uk-greenhouse-gas-emissions-national-statistics-2016 200 Fuel efficiencies are from DfT modelling using DfT (2017) Vehicle statistics; ICCT (2015) From Laboratory to Road: A 2015 update http://www.theicct.org/ laboratory-road-2015-update 201 DfT (2016) Road traffic estimates in Great Britain: 2015 https://www.gov.uk/government/statistics/road-traffic-estimates-in-great-britain-2015. Measured in ‘vehicle miles’ which combines the number of vehicles on the road and how far they drive. 202 DfT (2017) Licensed vehicles and new registration tables https://www.gov.uk/government/statistical-data-sets/all-vehicles-veh01 VEH0102 203 BEIS (2017) Final UK greenhouse gas emissions statistics 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 84 Department for Business, Energy and Industrial Strategy Improvements by manufacturers in the fuel We are now seeing greater innovation from efficiency of vehicles have largely been driven carmakers, beyond the internal combustion by tighter regulation, mainly set at EU level204. engine, as the world accelerates towards mass Driving a new car bought in 2015 would have adoption of zero emission vehicles. The UK now saved car owners up to £200 on their annual has over 115,000 ULEVs on the road210. ULEV fuel bill, compared to a car bought new in the uptake has been driven through a combination year 2000205. of grants, which reduce the upfront costs of ultra low emission cars by up to £4,500211, together The fuel we use in our cars is also lower carbon, with improved charging infrastructure212 and with the Renewable Transport Fuel Obligation new approaches like the £40 million Go Ultra (RTFO) driving the greater use of biofuels. Low Cities scheme, through which eight local Biofuels now account for around three per cent authority areas are trialling local initiatives of fuel sales, with around half of that derived including city centre charge point hubs, free from wastes206. Average greenhouse gas parking and access to bus lanes for ULEVs213. savings from biofuels are around 70 per cent compared to petrol and diesel207. The RTFO has On public transport, Government has invested stimulated around £1 billion of investment in UK £37 billion in the public transport system production facilities208 including, for instance, between 2011 and 2016214. Rail passenger Argent Energy’s £75 million production plant in journeys are now at their highest level since the Cheshire which is using innovative technology 1920s215. to turn sewage waste into biodiesel209. 204 With a target of 95g/km for cars in 2021 (down from 146g/km in 2009) - Reducing CO2 Emissions from passenger cars, https://ec.europa.eu/clima/policies/ transport/vehicles/cars_en Annual average household saving from driving a car purchased new in 2015 (the latest year for which data is available) compared to driving a car purchased new in 205

2000. Fuel savings valued using 2015 prices. DfT (2017) National Travel Survey; DfT (2017) Vehicles Statistics; ICCT (2015) From Laboratory to Road; BEIS (2016) Green Book supplementary appraisal guidance 206 DfT (2017) Renewable Transport Fuel Obligation statistics: https://www.gov.uk/government/collections/biofuels-statistics Period 9 2016/17, report 2 207 DfT (2017) Renewable Transport Fuel Obligation statistics: https://www.gov.uk/government/collections/biofuels-statistics Period 8 2015/16, report 6 208 DfT (2014) Renewable Transport Fuel Obligation: Post Implementation Review https://www.gov.uk/government/consultations/ renewable-transport-fuel-obligation-a-draft-post-implementation-review 209 DfT press release (2016) Transport Minister views plans to boost Port of Liverpool https://www.gov.uk/government/news/ transport-minister-views-plans-to-boost-port-of-liverpool 210 DfT (2017) Vehicles registered for the first time by body type, monthly: Great Britain and United Kingdom https://www.gov.uk/government/statistical-data-sets/ allvehicles-veh01 Table VEH0150 211 Currently up to £4,500 for cars, £1,500 for motorcycles, £8,000 for vans, £7,500 for taxis, and through competitive funding support for low emission buses and taxis. 212 Currently up to £500 for home charge-points, up to £300 per socket for workplace charging and up to £7,500 per charge points for local authorities putting charging in residential areas. 213 £40 million to drive green car revolution across UK cities https://www.gov.uk/government/news/40-million-to-drive-green-car-revolution-across-uk-cities 214 HM Treasury (2016) Country and regional analysis: 2016 https://www.gov.uk/government/statistics/country-and-regional-analysis-2016 215 DfT (2017) Rail Trends Factsheet 2016 https://www.gov.uk/government/statistics/rail-factsheets-2016 The Clean Growth Strategy 85 Ambition UK’s overall 2050 target. Walking and cycling will be made easier for many shorter journeys. We want a more modern transport system By 2040, we want cycling and walking to be – one that is clean, affordable and easy to the natural choices for shorter journeys, or as use. That means cutting our carbon dioxide part of a longer journey. emissions, and improving our air quality – clean air is one of the most basic requirements of a We will continue to modernise our aviation and healthy environment for us all to live, work and shipping sectors, both through international bring up families. action, such as standards and offsetting schemes, and domestically, for example To meet our 2050 target, almost every car and through support for sustainable alternative fuels, van will need to be zero emission by 2050. The improved efficiency and new technologies216. Government has announced an end to the sale of all new conventional petrol and diesel cars One possible pathway to 2032 could involve and vans by 2040. emissions from transport falling by almost 30 per cent compared to today (to around 83 Mt Emissions from heavy goods vehicles (HGVs) by 2032). will also need to reduce significantly to make a meaningful contribution towards meeting the Figure 22: Actual and projected emissions in transport, taking into account the clean growth pathway,1990-2050 180 Emissions from transport have decreased By 2032 emissions could be as Emissions from transport 160 by 2% since 1990 low as 83 Mt could need to be as low as 3 Mt by 2050 140 120 Million tonnes Existing policy 100 80 2032 pathway 60 40 2050 indicative range 20 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS, DfT 216 Although emissions from international aviation and shipping are not currently included in the UK’s targets under the Climate Change Act, our carbon budgets put the UK on a trajectory consistent with a 2050 target that includes these emissions. The Government has not reached a final view on the appropriate level of aviation emissions in 2050. For details on modelling assumptions, please see the technical annex. 86 Department for Business, Energy and Industrial Strategy To achieve this 2032 pathway, we need to emission buses. We will seek more use of further upgrade our transport system: electric, bi-mode (electric and diesel hybrid) and alternative fuel traction on the railway, • ULEVs on the market today are already and will continue to invest in route an attractive proposition for a significant electrification where it benefits passengers220. proportion of motorists given the significantly lower running costs, but we can do more to • It will be important to reduce the number of accelerate ULEV development and uptake. shorter journeys made by car, by supporting ULEVs should become progressively more people to use alternative forms of transport affordable as economies of scale are for these trips such as cycling and walking. realised and they could provide savings for consumers compared to equivalent internal • We want to see a near doubling of sustainable combustion engine cars by the mid-2020s bioenergy used in the transport sector. or sooner217. As a result, at least 30 per cent Opportunities of new car sales are expected to be ULEVs by 2030, and possibly as many as 70 per The UK already has a thriving automotive sector, cent. For new vans, up to 40 per cent of producing 1.7 million cars annually, employing sales could be ULEVs by 2030. over 160,000 people and generating £40 billion in exports221. The sector’s skilled workforce, • There needs to be significant improvement established manufacturing bases and high in the efficiency of HGVs, with new HGVs productivity ideally place it to be a world leader needing to be up to 15 per cent more in the low emission vehicle market. In 2015, efficient by 2030. We also need to take low emission vehicle exports were already steps to encourage the industry in moving estimated to be worth £2.5 billion to the UK towards low emission technologies. economy222. With 80 per cent of UK produced • We need a cleaner public transport system. vehicles already exported across the world223 Low emission buses now represent 13 and increasing global demand for low emission per cent of all buses in the UK218,219, but vehicles the UK industry has real opportunity to we want to go well beyond this to achieve further expand. significant uptake of ultra low and zero 217 This is based on the whole-life cost of electric vehicles. The up-front cost of these vehicles is expected to fall below that of conventional vehicles in the second half of the 2020s. Bloomberg New Energy Finance (2015) Are the economics of EVs competitive with conventional cars?; Element Energy (2016) Low carbon cars in the 2020s; International Council on Clean Transportation (2016) Evolution of incentives to sustain the transition to a global electric vehicle fleet. 218 Low Carbon Vehicle Partnership (retrieved August 2017): http://www.lowcvp.org.uk/Hubs/leb/Home.htm DfT (2016) Vehicle stocks technology and equipment https://www.gov.uk/government/statistical-data-sets/bus06-vehicle-stocks-technology-and-equipment 219 BUS0601 220 DfT (2017) Written Statement to Parliament: Rail update: bi-mode train technology https://www.gov.uk/government/speeches/rail-update-bi-mode-train-technology Automotive Council (2017) The UK Automotive Sector: core briefing, http://www.automotivecouncil.co.uk/wp-content/uploads/sites/13/2017/03/UK-Automotive- 221 Sector-Core-Briefing-March-2017.pdf 222 ONS (2017) Low Carbon and Renewable Energy Economy Survey, final estimates: 2015 https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results Automotive Council UK (2017) The UK Automotive Sector: core briefing, http://www.automotivecouncil.co.uk/wp-content/uploads/sites/13/2017/03/UK- 223 Automotive-Sector-Core-Briefing-March-2017.pdf The Clean Growth Strategy 87 Health Benefits The Government has pledged to be the The most immediate challenge is the problem first generation to leave the environment of nitrogen dioxide concentrations around in a better state than it inherited. As well some roads, due mainly to conventional as significantly reducing greenhouse gas road vehicles, and the Government has emissions, wide-scale adoption of ULEVs published a plan to address this224. As part will improve our health and quality of life by of this plan, the Government announced a making the air cleaner in our towns and cities. £255 million Implementation Fund to help local authorities develop and deliver targeted While air quality in the UK has been improving action to improve air quality, and committed in recent decades and will continue to do so to establishing a new Clean Air Fund. due to Government action and investment of over £3 billion in air quality and cleaner In 2018, the Government will also publish a transport, there are some parts of the country wider Clean Air Strategy, setting out how it where there are unacceptable levels of air will significantly reduce the emissions of five pollution. Poor air quality remains the largest damaging air pollutants by 2020 and 2030. environmental risk to public health in the UK. Policies and Proposals 4. We want to have one of the best electric vehicle (EV) charging networks in the world. Accelerating Take up of Ultra Low We will set out our strategy to achieve Emission Vehicles this using regulation, funding and private investment. To support this:

1. The Government has announced an end to the sale of all new conventional petrol and • In addition to workplace and residential diesel cars and vans by 2040. charging support, the Government has also allocated an additional £80

2. We are spending £1 billion to drive the million to support charging infrastructure uptake of ULEVs. If battery prices continue deployment, alongside £15 million from to fall there will be less need for Government Highways England to ensure rapid charge subsidies for new vehicles in the future. We points every 20 miles across 95 per cent will provide support for ULEVs to help the of England’s Strategic Road Network225. development of a mature and self-sufficient market. • New powers under the Automated and Electric Vehicles Bill226 will allow the

3. We will encourage ULEV uptake through Government to set specific requirements schemes that build on our experience in for the provision of EV charge points delivering initiatives - for example the £40 or hydrogen refuelling infrastructure at million ‘Go Ultra Low Cities’ scheme. motorway service stations and large fuel retailers, as well as ensuring that charge points are convenient to access and work seamlessly right across the UK. 224 DEFRA (2017) UK plan for tackling roadside nitrogen dioxide concentration: Detailed plan. See: https://www.gov.uk/government/uploads/system/uploads/ attachment_data/file/633270/air-quality-plan-detail.pdf 225 UK Parliament (2017) Electric Vehicles: Written question – 59924 http://www.parliament.uk/business/publications/written-questions-answers-statements/ written-question/Commons/2017-01-13/59924/ Cabinet Office (2017) Queen’s Speech Background Briefing Notes 2017 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/620838/ 226 Queens_speech_2017_background_notes.pdf 88 Department for Business, Energy and Industrial Strategy Electric Cars Sue Bentley from Runcorn, Cheshire: “When I purchased an electric car I was the only one in my neighbourhood at that time. I believe electric vehicles are the way forward, they’re easy to run, reliable and good for the planet. Now seven people in my neighbourhood have one and they love them!”. • The Bill will also allow the Government 6. We will announce plans for the public to require all new charge points sold or sector to lead the way in transitioning to installed in the UK to be ‘smart’ enabled. zero emission vehicles, with an ambitious This will help shift charging away from uptake requirement for central government peak times of the day, reducing demand and new Buying Standards to encourage on the electricity system and keeping procurers to choose the cleanest, low costs lower for everyone. emission vehicle. • We will consider the role of 7. We will support the uptake of low emission regulation to accelerate the UK’s taxis: transition to widespread provision of ULEV infrastructure. • The Government will provide £50 million for the Plug-in Taxi programme, which

5. The Government has provided £4.8 gives taxi drivers up to £7,500 off the million through the Hydrogen for Transport purchase price of a new ULEV taxi, Advancement Programme to create a alongside £14 million to support ten local network of 12 hydrogen refuelling stations, areas to deliver dedicated charge points and £2 million through the Fuel Cell Electric for taxis228. Vehicle Fleet Support Scheme to increase uptake of hydrogen fuel cell cars and vans • We will consider whether our revised in the public and private sector. A new best practice guidance to local £23 million fund was recently announced taxi and private hire vehicle (PHV) to boost the creation of hydrogen fuel licensing authorities in England should infrastructure and encourage roll-out of recommend zero emission capability hydrogen vehicles227. in urban areas by 2032. In considering the Law Commission’s recommendation for national taxi and PHV standards in England, we will examine the potential for Government to make this target mandatory. DfT (2017) £23 million boost for hydrogen-powered vehicles and infrastructure https://www.gov.uk/government/ 227 news/23-million-boost-for-hydrogen-powered-vehicles-and-infrastructure BEIS, DfT (2017) 1,000 jobs created at new £325 million factory for electric taxis https://www.gov.uk/government/ 228 news/1000-jobs-created-at-new-300-million-factory-for-electric-taxis The Clean Growth Strategy 89

8. ‘Go Ultra Low’229 brings the Government 12.We are consulting on proposals to allow and leading vehicle manufacturers together category B (car) licence holders to drive to explain the benefits of ULEVs to slightly heavier vans if they are powered motorists and businesses, and its success by a low emission technology, effectively has been internationally recognised. We offsetting the additional weight of the will continue to work with industry on powertrain232. This will encourage further consumer communications on ULEVs until uptake of cleaner goods vehicles. at least 2020.

13.The Government’s Freight Carbon

9. The Government will set out further detail on Review , published in February 2017, 233 a long term strategy for the UK’s transition to identified a range of measures to help fleet zero road vehicle emissions by March 2018. operators reduce their emissions, including through improved fuel efficiency. The Enabling our Automotive Industry Energy Saving Trust is piloting a scheme to to Become a World Leader in Zero advise HGV fleet operators on reducing fuel Emission Technologies consumption. The Government will set out

10.The Automotive Council is now developing further measures to support the pathway to an Industrial Strategy Sector Deal, building low emission freight by March 2018, as part on the £1 billion Advanced Propulsion of a long term strategy for the UK’s transition Centre, which is seeking to establish the UK to zero vehicle emissions. as a world leader in zero emission vehicle 14.Our 2016 Rail Freight Strategy234 highlighted technologies230. The Sector Deal will aim to the potential to reduce emissions by growing accelerate the transition to zero emission rail freight and reducing HGV journeys. We vehicles, complemented by Automotive will accelerate our activity to enable cost- Council research to determine UK priorities effective options for shifting more freight from for the EV supply chain. road to rail, including using low emission rail freight for deliveries into urban areas, with Developing a More Efficient and Low zero emission last mile deliveries. Carbon Freight System

11.Low emission vans and HGVs between 3.5 and 44 tonnes have been eligible since late 2016 for plug-in grants worth up to £20,000 for the first 200 vehicles bought using the grant231. 229 Go Ultra Low https://www.goultralow.com/ 230 Advanced Propulsion Centre: Background http://www.apcuk.co.uk/about-apc/background/ DfT, BEIS (2016) £4 million boost to help businesses switch vans and trucks to electric https://www.gov.uk/government/ 231 news/4-million-boost-to-help-businesses-switch-vans-and-trucks-to-electric 232 DfT (2017) Consultation: Regulatory changes to support the take-up of alternatively-fuelled light commercial vehicles https://www.gov.uk/government/consultations/ category-b-driving-licence-derogation-for-alternatively-fuelled-commercial-vehicles 233 DfT (2017) Freight Carbon Review 2017: Moving Britain Ahead https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/590922/freight- carbon-review-2017.pdf 234 DfT (2016) Rail Freight Strategy: Moving Britain Ahead https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/552492/rail-freight-strategy.pdf 90 Department for Business, Energy and Industrial Strategy University of Cambridge – Centre for Sustainable Road Freight The Centre for Sustainable Road Freight at the University of Cambridge has developed a new trailer design for articulated vehicles that makes the vehicle more aerodynamic. They were awarded £4.4 million in funding from the Engineering and Physical Sciences Research Council and £1.4 million in joint funding from an industrial consortium comprising freight operators such as DHL, John Lewis Partnership, Tesco and Wincanton, as well as vehicle industry partners including Firestone, Goodyear, Haldex and Volvo. Their innovation cuts fuel consumption and pollution by articulated vehicles by around seven per cent. Waitrose has already added 36 of the modified trucks to its fleet and Warburtons will use the new design for all future fleet purchases. Encouraging Low Carbon Alternatives to 18.The Government will seek more use of Car Journeys electric, bi-mode (electric and diesel hybrid) and alternative fuel traction on the

15.We will continue to invest in our public railway. We will continue to invest in route transport network, and help people to cycle, electrification where it provides benefits to walk or travel by bus or train. passengers. The industry is also developing

16. Our Cycling and Walking Investment trains powered by alternative fuels, for Strategy235 identifies £1.2 billion which may example using battery and hydrogen power. be invested in cycling and walking from 2016-21. Under this new strategic approach, More Efficient Vehicles and Local Cycling and Walking Infrastructure Driving Behaviour Plans identify improvements required at the 19.As we leave the EU, we want the UK to local level, and enable a long-term approach continue to be a world leader in low carbon to developing local cycling and walking transport, and we will look for opportunities networks, ideally over a ten year period. to strengthen further the controls on vehicle

17.As announced in the 2016 Autumn CO2 emissions. We will pursue an approach Statement, the Government will provide which offers certainty to industry, and is at £100 million for a national programme of least as ambitious as current arrangements. support for retrofitting and new low emission buses in England and Wales, including hundreds of new low emission buses and retrofitting of thousands of older buses. 235 DfT (2017) Cycling and Walking Investment Strategy https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/603527/cycling-walking- investment-strategy.pdf The Clean Growth Strategy 91

20.We will continue to help promote and support 25.On domestic shipping, the Government will efficient driving behaviours amongst fleets continue to work with industry to develop and private drivers, seeking to maximise the improved fuel efficiency technologies, potential of new technologies including early including new propulsion systems, hull adoption in public sector fleets and close design and aerodynamic structures. working with other programmes to improve driver standards. 26.We will work with ship owners and ports to identify the barriers faced in supplying Lower Carbon Fuels and using sustainable alternative fuels and cleaner emissions technologies, to explore

21.We will promote sustainable alternative possible solutions. In addition, we expect fuels, which reduce the carbon emissions operational improvements to play a role, from petrol and diesel vehicles, and we including better use of ship capacity. will set targets to support development of advanced fuels suitable for HGVs and Government Innovation Investment aviation. The Government expects to invest around

22.We have recently relaunched the Future £841 million out to 2021 in innovation in low Fuels for Flight and Freight Competition carbon transport technology and fuels, primarily – a £22 million industry competition to through programmes run by DfT, OLEV, the encourage development and deployment of Research Councils, Innovate UK, and BEIS238. low carbon HGV and aviation fuels. The Government will build on this investment Modernising the Domestic Aviation and to make the UK one of the world’s leading Shipping Sectors innovators in new low carbon technologies. Investments include:

23. We will set out our strategic approach to the aviation sector in a series of consultations • Electric vehicle and battery technology. over the next 18 months236, including a paper Government investment will help bring down on how to support growth while tackling the the cost of EVs and increase their range. environmental impacts of aviation. This will Through the Industrial Strategy Challenge culminate in the publication of a new Aviation Fund (ISCF), we will invest £246 million over Strategy for the UK by the end of 2018. four years in the design, development and manufacture of batteries for the electrification

24.Industry and the Government have made a of vehicles, as part of the ‘Faraday joint £3.9 billion commitment between 2013 Challenge’239. The Government has also and 2026 to the development of new aircraft awarded £10 million to build UK capability technology with the Aerospace Technology in the development and commercialisation Institute237. We have announced that we will of automotive battery packs. extend the RTFO to include incentives to use biofuels in aviation. HM Government (2017) Beyond the Horizon: The future of UK aviation – a call for evidence on a new strategy https://www.gov.uk/government/ 236 consultations/a-new-aviation-strategy-for-the-uk-call-for-evidence 237 Aerospace Technology Institute http://www.ati.org.uk/ 238 All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests. BEIS (2017) Business Secretary announces Industrial Strategy Challenge Fund investments https://www.gov.uk/government/news/ 239 business-secretary-announces-industrial-strategy-challenge-fund-investments 92 Department for Business, Energy and Industrial Strategy • Charging and grid support. We will • HGV platoons. HGV platooning, using provide at least £70 million over the next advanced vehicle technologies, enables five years to support innovation in energy lorries to move in a group and could deliver storage, demand side response and other significant fuel and emissions savings. We smart energy technologies, including up will be delivering trials of HGV platoons, to £20 million for vehicle-to-grid products with joint funding from Highways England, and services240. This is focused on how to assess the feasibility and potential costs an expanded fleet of EVs could provide and benefits of this technology on UK roads. network flexibility and system balancing In August 2017, we announced a trial of while potentially offering benefits to bill HGV platoons, jointly funded with Highways payers. England, which will see up to three HGVs travelling in convoy, with acceleration and • Advanced fuels. There are fewer options braking controlled by the lead vehicle, and for reducing emissions in the freight and with a driver ready to take control at any aviation sectors, and here innovation in fuel time in all the HGVs. Platooning trials have technology can play an important role. We been conducted across Europe and the are providing £40 million out to 2021, to fund USA, and these trials will assess whether the development of advanced low carbon the technology is appropriate and beneficial fuels derived from wastes or industrial and on UK roads. agricultural by-products. In August 2017 we relaunched the Future Fuels for Flight and Government has also established the Centre for Freight Competition - a £22 million industry Connected and Autonomous Vehicles (CCAV) competition to encourage development and and invested over £250 million, matched by deployment of low carbon HGV and aviation industry, to position the UK at the forefront of fuels. research, development, and demonstration. These technologies have the potential to • Zero emission HGVs. In January 2017, smooth traffic flows and increase efficiency we announced the winners of over £20 of road transport. CCAV is also coordinating million for the Low Emission Freight and engagement with the wider research base and Logistics Trial241. Twenty different projects industry, identifying and reducing barriers to are receiving funding to demonstrate and innovation or business expansion. trial low and zero emission vehicles in UK fleets, for example using hydrogen, electric and biogas technologies. In the longer term, there is an opportunity to take forward projects to support innovative technologies such as ‘dynamic charging’ as a potential solution to decarbonising freight. 240 BEIS (2017) Funding for innovative smart energy systems https://www.gov.uk/guidance/funding-for-innovative-smart-energy-systems 241 DfT (2017) Low emission freight and logistics trial competition winners announced https://www.gov.uk/government/news/ low-emmission-freight-and-logistics-trial-competition-winners-announced The Clean Growth Strategy 93 Delivering Clean, Smart, Flexible Power Progress our economy242. Last year, 47 per cent of our electricity came from low carbon sources, with Power sector emissions have fallen 49 per the rest mainly coming from coal and gas243. cent since 1990 as we have switched from Coal use fell to record low levels last year, and coal to gas and renewable power such as on 21 April 2017, for the first time since 1882, wind and solar, with biomass conversions we did not use any coal for a 24-hour period244. also playing an important transitional role, At the same time, we have ensured a secure alongside improvements in the efficiency of supply of electricity. Figure 23: UK electricity generation by fuel type, 2000-2016245 350 300 250 Electricity generated (TWh) Clean power 200 has grown by 64% per cent over the last 10 150 years, displacing fossil fuels 100 50 0 2000 2005 2010 2015 Fossil fuel power Clean power Source: BEIS 242 BEIS (2017) Final UK greenhouse gas emissions national statistics: 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 243 BEIS (2017): Digest of UK Energy Statistics 2017 https://www.gov.uk/government/statistics/energy-chapter-1-digest-of-united-kingdom-energy-statistics-dukes 244 Financial Times (2017) Britain passes historic milestone with first days of coal-free power https://www.ft.com/content/fc2c8d12-191d-11e6-bb7d-ee563a5a1cc1 245 BEIS (2017) Energy Trends June 2017 https://www.gov.uk/government/collections/energy-trends 94 Department for Business, Energy and Industrial Strategy The costs of low carbon and more efficient bills in 2016 were around 10 per cent lower than technologies have fallen significantly since 2010 in 2008, when the Climate Change Act was through a series of innovations and growth introduced249. While policy costs on bills have in deployment. Solar photovoltaic modules increased over this period, this has been more are now almost 80 per cent cheaper246, LED than offset by reduced electricity use, thanks lightbulbs over 80 per cent cheaper247, and in part to tightening standards on electrical batteries for electric vehicles (EVs) over 70 per products. cent cheaper248. Average household electricity Figure 24: UK electricity generation mix, 2016 (left) and UK electricity generation from coal and renewables 2010-16 (right)250 120 Coal Renewables Other Coal 3% 100 Electricity generated (TWh) Renewables 9% 80 47% of electricity came from clean 25% 60 sources in 2016, and renewables generated more 42% 40 than coal 21% 20 Nuclear Gas 0 2010 2016 Source: BEIS Source: BEIS IRENA & IEA (2017) Perspectives for the energy transition: Investment needs for a low carbon energy system http://www.irena.org/DocumentDownloads/ 246 Publications/Perspectives_for_the_Energy_Transition_2017.pdf 247 International Energy Agency (2016) Energy Efficiency Market Report https://www.iea.org/eemr16/files/medium-term-energy-efficiency-2016_WEB.PDF 248 Bloomberg New Energy Finance (2016) 2016 lithium-ion battery price survey https://www.bnef.com/core/insights/15597 249 CCC (2017) Energy prices and bills report https://www.theccc.org.uk/publication/energy-prices-and-bills-report-2017/ 250 BEIS (2017) Energy Trends https://www.gov.uk/government/collections/energy-trends The Clean Growth Strategy 95 Ambition By 2050, we anticipate that emissions from the power sector could need to be close to zero251. We want a diverse electricity system that Indeed, we may even see negative emissions – supplies our homes and businesses with that is, greenhouse gases being removed from secure, affordable and clean power. That means the atmosphere – from the sector if sustainable developing low carbon sources of electricity bio-energy and carbon capture and storage are that are both cheap and clean, taking into used together. At the same time, many more account wider system impacts for all sources people are expected to drive EVs, many homes of generation. It also means upgrading our and offices may have efficient electric heating electricity system so it is smarter (using data to and cooling, and more industrial sites could be provide greater control), more flexible (providing powered by clean electricity. There are however energy when it is needed) and takes advantage alternatives to electrification, such as hydrogen, of rapidly developing technologies such as which could mean that electricity demand is energy storage. more similar to today. Figure 25: Actual and projected power sector emissions, taking into account the clean growth pathway, 1990-2050 250 Emissions from power have By 2032 emissions could By 2050 emissions from power almost halved since 1990 be as low as 16 Mt could need to be as low as 4 Mt, or even negative 200 150 Emissions (Mt) 100 50 2050 indicative range 2032 pathway 0 -50 1990 2000 2010 2020 2030 2040 2050 Source: BEIS 251 BEIS internal analysis of 2050 pathways 96 Department for Business, Energy and Industrial Strategy One possible pathway to 2032 could see • Keeping costs down for consumers by power emissions fall by 80 per cent compared reducing any wasted energy, including more to today, to around 16 Mt252. This could be efficient electrical products. achieved by: To achieve this we need to continue bringing • Growing low carbon sources such as down the costs of low carbon generation from renewables and nuclear to over 80 per cent renewables and nuclear power, and ensure of electricity generation, and phasing out that the UK can deploy CCUS at scale during unabated coal power. the 2030s, subject to costs coming down sufficiently. We also need to remove barriers • Enabling a smarter, more flexible system, and improve price signals for smart energy unlocking significant expansion of innovations which improve the efficiency and interconnection, electricity storage, and flexibility of the system. demand side response, the first steps of which are set out in the Smart Systems and Flexibility Plan253. For consumers, this could mean smart appliances and smart tariffs which help balance the grid in return for lower bills. Oxis Energy OXIS energy, based in Oxfordshire has developed a high performing rechargeable battery which is lighter, more efficient and cheaper than competitor products. The company has received £2.7m in funding from Innovate UK and has grown to employ 60 staff. Their most recent grant is supporting them to produce a revolutionary electric vehicle battery. 252 BEIS internal analysis of 2032 pathway BEIS and Ofgem (2017) Upgrading our energy system: smart systems and flexibility plan https://www.gov.uk/government/publications/ 253 upgrading-our-energy-system-smart-systems-and-flexibility-plan The Clean Growth Strategy 97 Powering Electric Vehicles and Heating Electric vehicles, electric heating and energy demand and around 4 per cent in peak efficiency are key options for reducing demand in 2032, and how this can be met emissions in transport and buildings. The through a mix of technologies. In practice, we impacts of these measures on the power do not yet know exactly how quickly costs sector are taken into account in our 2032 will fall and take-up will increase for electric pathway and summarised below. It shows a net vehicles, or the role that electrification could increase of around 3 per cent in the electricity play in the long-term decarbonisation of heat. Generation (2032) Capacity (2032) Extra demand: 10 TWh (+3%) Extra peak demand: 2.8 GW (+4%) Impact of the 2032 pathway (compared to Extra capacity and flexibility: Extra supply: BEIS reference case) Demand-side response 4.9 GW Clean generators 3 TWh Storage 0.3 GW Interconnection 4 TWh Clean generators 0.5 GW Fossil fuels 4 TWh Fossil fuels 1.2 GW Source: BEIS internal analysis of GB power system Note: The impact of the 2032 pathway is assessed against an updated version of the published BEIS 2016 reference case254. Not all extra capacity and flexibility is available to help meet peak demand. Numbers may not sum due to rounding. For this analysis, we took into account the tariff255. This ‘demand-side response’ – potential for smart charging of electric vehicles adjusting energy consumption to when it is and smart use of heat pumps. For example, plentiful and cheap – would help to balance we assumed potential to shift charging of the grid and reduce peak demand. Our Smart most electric vehicles to overnight, which Systems and Flexibility Plan is about unlocking could reduce bills for consumers on a smart this potential256. 254 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 A number of model updates and improvements have been made regarding the electricity demand profiles of key technologies and how this demand might be shifted, the availability of electricity storage technologies, and assumed system operability requirements. 255 Fisher, J., Gammon, R. and Irvine, K.N. (2015) My Electric Avenue https://www.dora.dmu.ac.uk/xmlui/handle/2086/12180 There is considerable uncertainty on the extent to which customers will change their behaviours and we will be monitoring the evidence here. BEIS and Ofgem (2017) Upgrading our energy system: smart systems and flexibility plan https://www.gov.uk/government/publications/ 256 upgrading-our-energy-system-smart-systems-and-flexibility-plan 98 Department for Business, Energy and Industrial Strategy Opportunities There is an opportunity for the UK to become one of the most advanced economies for The UK is well placed to benefit from the smart energy and technologies, which is a core transition to a cleaner, smarter power sector component of our Industrial Strategy, while and we already see jobs, regional investment upgrading our power infrastructure will improve and export sales flowing from UK supply chains energy security and air quality. Consumers will for clean power technologies. In 2015, the low benefit from a smarter, more flexible power carbon electricity sector generated over £12 system to keep down costs, and will have more billion in turnover and directly supported 47,000 control of their energy through smart meters, jobs, with more in supply chains257. with near real-time information on energy use and cost. Clayhill solar farm Clayhill solar farm and energy storage facility is the first in the UK to be built without subsidy. Consisting of over 30,000 solar panels, it can generate enough power for 2,500 homes. Five onsite batteries allow electricity to be stored and utilised when needed, providing services for the electricity grid, such as frequency response. Co-locating storage at new renewable sites, combined with significant reductions in generation and storage technology costs, may allow more subsidy free sites to be built – providing services that help to maintain the reliability of the grid and clean electricity at low cost. 257 ONS (2016) Low Carbon Economy and Renewable Energy Economy Survey https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ finalestimates/2015results The Clean Growth Strategy 99 Policies and Proposals 4. We want to see more people investing in solar without government support Growing Low Carbon Sources of Electricity and are currently considering options for

1. We confirm the Government’s intention our approach to small scale low carbon to phase out unabated coal generation generation beyond 2019, and will provide by 2025, and we will shortly publish the an update later this year. More nascent Government’s detailed response to the technologies such as wave, tidal stream consultation. and tidal range, could also have a role in the long-term decarbonisation of the UK, but

2. We are delivering new nuclear capacity they will need to demonstrate how they can through the final investment decision compete with other forms of generation. on Hinkley Point C, and will progress discussions with developers to secure a 5. We remain committed to carbon pricing to competitive price for future projects in the help reduce emissions in the power sector. pipeline. Further details on carbon prices for the 2020s will be set out in the autumn 2017

3. We will work with industry as they develop Budget. an ambitious Sector Deal for offshore wind. Provided costs continue to fall, this could Delivering Smarter, More Efficient Energy result in 10 gigawatts of new capacity built in 6. The Government will ensure that every the 2020s, with the potential to support high household is offered a smart meter by their value jobs and a sustainable UK industry energy supplier by the end of 2020, and exporting goods and services around we expect energy suppliers to make every the world. We will also consider whether effort to provide smart meters to all their there could be opportunities for additional customers. offshore wind deployment in the 2020s, if this is cost-effective and deliverable. This 7. The Government, Ofgem and industry would mean up to £557 million for further will implement the 29 actions set out in Pot 2 Contract for Difference auctions, with the Smart Systems and Flexibility Plan the next one planned for spring 2019. We published on 24 July. These will enable will work with the Crown Estate and the technologies such as energy storage Crown Estate (Scotland) to understand the and demand side response to compete potential for deployment of offshore wind effectively within the energy market, help in the late 2020s and beyond and it is our integrate more low carbon generation current intention that wind projects on the such as solar into our energy system, and remote islands of Scotland that directly deliver secure, smart appliances and smart benefit local communities will be eligible for tariffs to allow consumers to benefit from the next Pot 2 auction, subject to obtaining using energy at times when it is cheaper. State aid approval. Innovations and other steps to increase flexibility could unlock up to £40 billion in energy cost savings up to 2050258. BEIS and Ofgem (2017) Upgrading our energy system: smart systems and flexibility plan https://www.gov.uk/government/publications/ 258 upgrading-our-energy-system-smart-systems-and-flexibility-plan 100 Department for Business, Energy and Industrial Strategy

8. We will continue to work with Ofgem Keeping Energy Costs Down for and the National Grid to create a more Businesses and Households independent system operator which will help to keep household bills low through greater 13.The Government has commissioned competition, coordination and innovation an independent review into the cost of across the system. energy led by Professor Dieter Helm CBE which will recommend ways to deliver the

9. We will work with Ofgem to ensure Government’s carbon targets and ensure the necessary regulatory and market security of supply at minimum cost to arrangements evolve to support the both industry and domestic consumers. development of a clean, smart and flexible Once Ministers have had the opportunity energy system as outlined in their strategy to consider the Helm review’s proposals, for regulating the future energy system259. the Clean Growth Strategy will incorporate its recommendations into our further policy

10.We will work to ensure significant private development as appropriate. investment in new electricity interconnectors, which will help keep prices low for 14.We are publishing a draft bill to require consumers, ensure a more secure grid and Ofgem to impose a cap on standard variable help integrate clean generation. Project and default tariffs across the whole market. assessments indicate the potential for at least 9.5 gigawatts more interconnection 15.The existing Levy Control Framework will be by the early-to-mid 2020s, in addition to the replaced by a new set of controls beyond 4 gigawatts today and the 4.4 gigawatts 2020/21. These will be set out later this year. under construction260,261. 16.We are evaluating the results of the Electricity

11.Ofgem’s price control regime will enable up Demand Reduction Pilot, which has offered to £26 billion of investment in upgrading organisations £5.4 million of funding for and operating our electricity distribution projects that could reduce bills and improve networks from 2015-23262 and we will work security of supply through making energy closely with industry to capitalise on the savings at peak times. opportunities for smart integration of electric Government Innovation Investment vehicles into the electricity system. The Government expects to invest around

12.We confirm that when an installer installs £900 million264 of public funds between 2015 solar panels with a battery in residential and 2021 in research and innovation in the accommodation, this can attract a reduced power sector. VAT rate of 5 per cent if the installation conditions are met263. We will keep the tax • Power and smart systems: Ensuring that treatment of technologies such as solar, the power system is smart and resilient to storage and heat networks under review. new demands and new sources of supply Ofgem (2017) Our strategy for regulating the future energy system https://www.ofgem.gov.uk/publications-and-updates/ 259 our-strategy-regulating-future-energy-system 260 Ofgem https://www.ofgem.gov.uk/electricity/transmission-networks/electricity-interconnectors Ofgem (2017) Cap and floor regime: Initial Project Assessment of the GridLink, NeuConnect and NorthConnect Interconnectors https://www.ofgem.gov.uk/ 261 publications-and-updates/cap-and-floor-regime-initial-project-assessment-gridlink-neuconnect-and-northconnect-interconnectors 262 Ofgem (2017) RIIO ED1 Annual Report 2015-16 https://www.ofgem.gov.uk/publications-and-updates/riio-electricity-distribution-annual-report-2015-16 263 Each case will be considered on the specific facts. If batteries are sold separately and retrofitted to existing solar systems, VAT will be charged at the standard rate of 20%. 264 All figures are indicative and are subject to competitive bidding processes across sectors and value for money tests. Numbers may not sum due to rounding. The Clean Growth Strategy 101 will be important for energy security, cost and • Renewables: The UK already has a world industrial opportunities. The Government, leading offshore wind sector and is well in partnership with the Research Councils placed to benefit from further investment and Innovate UK, expects to invest around in renewables innovation to accelerate cost £265 million in research, development and reduction. The Government, in partnership deployment in this area which will help with the Research Councils and Innovate to reduce the cost of electricity storage, UK, expects to invest around £177 million advance innovative demand response to further reduce the cost of renewables, technologies and develop new ways of including innovation in offshore wind turbine balancing the grid, for example using EVs. blade technology and foundations. New innovation opportunities are likely to arise • Nuclear: We need to bring down the in a number of areas, including floating costs of nuclear power while maintaining offshore wind platforms, and advanced safety by investing in innovation that will solar PV technologies. help plants to be built to time and budget. The Government, in partnership with the • Carbon capture, usage and storage: CCUS Research Councils and Innovate UK, expects could reduce the cost of meeting our 2050 to invest around £460 million to support target by supporting emissions reductions work in areas including future nuclear fuels, in industry, power, heating and transport265. new nuclear manufacturing techniques, Our new approach to CCUS is set out in the recycling and reprocessing, and advanced Business chapter. reactor design. The Government has asked the Nuclear Innovation and Research Office • Ofgem is making available to GB electricity (NIRO) to convene a new advisory Board, network companies up to £525 million of building on the success of the Nuclear regulated expenditure between 2016 and Innovation and Research Advisory Board 2021266. The goal is to support smarter, (NIRAB). The Board will provide independent flexible networks, from enabling the expertise and advice to support and inform integration of clean generation through the Government’s Nuclear Innovation to customer-focussed energy efficiency Programme. The Government is also measures. This builds on previous network announcing that it will invest £7 million to company innovation which delivered 4.5 – further develop the capability and capacity 6.5 times more benefits for consumers than of the nuclear regulators to support the it cost267. development of advanced technologies. Industry is developing a potential nuclear sector deal as part of the Government’s Industrial Strategy, co-ordinated around the objective of achieving cost reductions. 265 BEIS internal analysis of 2050 pathways 266 Ofgem internal analysis 267 Poyry and Ricardo Energy & Environment (2016) An independent evaluation of the LCNF https://www.ofgem.gov.uk/system/files/docs/2016/11/evaluation_of_the_ lcnf_0.pdf 102 Department for Business, Energy and Industrial Strategy Enhancing the Benefits and Value of Our Natural Resources ICON Progress has been driven by taxing waste to landfill, increased recycling and more and better The UK is generating more value from the use of waste infrastructure. We have seen household our natural resources (covering livestock, crops, recycling rates increase from 11 per cent to trees, land use and waste) while also cutting 44 per cent between 2000/1 and 2015/16269. emissions. We have halved our emissions from At the same time, the UK waste sector has these sectors since 1990 and they now only become an important contributor to electricity account for 15 per cent of total UK emissions268. generation. Waste helped to generate 14 During this time emissions from the waste per cent of UK renewable electricity in 2015, sector have decreased by 73 per cent. This enough to power 2.3 million homes270. Figure 26: Changes in emissions from waste and economic growth, 1990-2015 200 180 160 140 120 Emissions from Index (1990=100) waste have 100 reduced as the economy 80 has grown 60 40 20 0 1990 1995 2000 2005 2010 2015 UK waste emissions UK gross domestic product Source: ONS, BEIS 268 BEIS (2017) Final UK greenhouse gas emissions national statistics: 1990-2015 https://www.gov.uk/government/collections/ final-uk-greenhouse-gas-emissions-national-statistics Defra (2016) ENV18 - Local authority collected waste: annual results tables https://www.gov.uk/government/statistical-data-sets/ 269 env18-local-authority-collected-waste-annual-results-tables 270 BEIS (2017) Energy Trends: Renewables https://www.gov.uk/government/statistics/energy-trends-section-6-renewables The Clean Growth Strategy 103 This shift in resource efficiency has also been Reducing emissions from natural resources will seen in agriculture – since 1990 emissions from be important for meeting the 2050 target cost- producing a kilogram of pork have decreased effectively. Emissions from natural resources by 30 per cent and by 16 per cent for a litre of could fall by 30 per cent, with tree cover in milk. Many of our farms are using more efficient England increasing by 180,000 hectares from agricultural practices, for example improving 9.8 per cent to 11 per cent, as they are nurtured crop nutrient and crop health management. from saplings into maturity, providing essential spaces for our communities and enhancing our Ambition carbon sink. We want low emission, highly productive One possible pathway to 2032 could involve land while ensuring we hand our environment emissions from our natural resources falling on to the next generation in a better state by almost two fifths compared to today, and is than we found it. As part of this, we want consistent with meeting the Government’s 2060 the UK to become a world leader in terms of aspiration, to increase England’s woodland cover competitiveness, resource productivity and from 10 per cent to 12 per cent. The pathway resource efficiency: maximising the value we ramps-up planting in the 2020s recognising the extract from our resources, and minimising the significant contribution trees make to later carbon negative environmental and carbon impacts budget periods. associated with their extraction, use and disposal. We will work toward achieving zero avoidable waste by 2050. Figure 27: Changes in emissions from agriculture and agricultural outputs, 1990-2015271 150 140 130 120 Output from Index (1990=100) 110 land has remained 100 stable as emissions 90 have fallen 80 70 60 50 1990 1995 2000 2005 2010 2015 Agricultural Emissions Agricultural Output Source: ONS; BEIS Greenhouse Gas Inventory Statistics ONS (2016) Annual and quarterly low level aggregates of UK output gross value added (GVA), https://www.ons.gov.uk/economy/grossdomesticproductgdp/ 271 datasets/ukgdpolowlevelaggregates/current 104 Department for Business, Energy and Industrial Strategy Figure 28: Actual and projected emissions in natural resources, taking into account the clean growth pathway, 1990-2050 200 Emissions from land, waste & F-gases By 2032 they could be Emissions from natural 180 have halved since 1990 as low as 41 Mt resources are particularly uncertain but our 2050 160 pathways show that emissions from land, waste & F-gases 140 could be as low as 46 Mt by 2050 120 Million tonnes 100 80 2050 indicative range 60 Existing policy 40 2032 pathway 20 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS, DEFRA To achieve this 2032 pathway, we need to support will give us the opportunity to ensure that our farmers and land managers have address climate change more directly. the right incentives to promote environmental We will design a new system to support improvement while encouraging consumers, the future of farming and the countryside, businesses and industry to further reduce with a strong focus on delivering better waste and improve their resource efficiency, environmental outcomes, including tackling resulting in reduced bills. This means: climate change. An Agriculture Bill was announced in the Queen’s Speech following • Leaving the Common Agricultural Policy and the 2017 general election, the details of designing a new system of future agricultural which will be announced shortly. The Clean Growth Strategy 105 • Our indicative pathway could involve planting There are clear economic benefits to be gained up to 130,000 hectares of new woodland from driving resource productivity, a more and implement plans for farmers to plant efficient farming sector and developing the UK’s more trees across England, providing not land use sector. Forestry is a growth sector, just carbon reduction but recreational space with forestry and wood processing providing for our growing communities and timber for 43,000 jobs in the UK and contributing £2 our bioeconomy. billion to the economy272. This, in turn, provides an important carbon sink – the doubling of • We will develop new ambitious plans for woodland cover over the past century means the sustainable management of our natural UK forests currently absorb 20 million tonnes of environment including capturing more carbon dioxide a year. carbon by our plants and soil. Analysis from the Waste and Resources Action • Action to divert more food waste than ever Programme (WRAP) suggests progress to before from landfill, to support resource a more resource efficient economy has the productivity and avoid further emissions by potential to create up to 205,000 jobs273. preventing food waste in the first place. Some 54,000 of these jobs could be created Opportunities in regions and at pay grades where there is spare capacity, making a net contribution to UK The UK has some of the most dynamic and employment. innovative businesses working on using our natural resources more efficiently. Government will work with them to deliver smart and ambitious regulation and targets to help us meet new environmental demands while also driving growth from these sectors. Manchester City of Trees Manchester City of Trees is an urban community partnership focussed on tree planting, woodland management and re- connecting communities to green spaces. The goals of the project are 3 million trees planted, one for every man, woman and child across Greater Manchester, 2,000 hectares of unmanaged woodland brought back into a productive state, and to connect people to the trees and woods around them. 272 Forestry Commission (2016) Forestry Statistics 2016 https://www.forestry.gov.uk/pdf/Ch8_Finance_FS2016.pdf/$FILE/Ch8_Finance_FS2016.pdf; https://www. forestry.gov.uk/pdf/Ch7_Employment_FS2016.pdf/$FILE/Ch7_Employment_FS2016.pdf Estimate of economic value and jobs relates to forestry and primary wood processing; National Atmospheric Emissions Inventory (2017) Projections of emissions and removals from the LULUCF sector to 2050 http://naei.beis.gov.uk/reports/ reports?report_id=927 273 Waste and Resources Action Programme (2015) Employment and the Circular Economy http://www.wrap.org.uk/content/employment-and-circular-economy 106 Department for Business, Energy and Industrial Strategy Policies and Proposals 3. We will work with industry to encourage the use of low-emissions fertiliser. We will review The Government’s 25 Year Environment Plan will the levels of take up over the next five years set out the Government’s approach to improving using data from the British Fertiliser Practice our natural environment, including reducing Survey. This will provide evidence to shape both carbon emissions and other dangerous our future policies. pollutants. In meeting carbon budgets we are committed to policy development that 4. We will work with industry to produce a enhances our natural assets, helps prepare for UK Bioeconomy Strategy that will bring the impacts of climate change and supports together biological industries, academia our commitments on clean air. and innovators, linking up farmers and land managers with high tech industries. Through Farmers and Rural Businesses Benefit from a thriving innovation-based bioeconomy, we Clean Growth Opportunities will develop less carbon intensive products We want our land and agriculture sectors to such as bio-based chemicals, plastics and play a significant role in low carbon growth, other materials. supported through a system of incentives to 5. We will develop a new incentive structure to improve efficiency and improve our natural harness the potential for growth in forestry environment: and renewables being supplied from within

1. The Government will introduce a new agri- the UK, including on bioenergy, as part of environment system to support the future of our ambitions for strengthening the rural farming and the countryside, with a strong economy and encouraging diversification of focus on delivering better environmental farm businesses. outcomes, including mitigation of and 6. Funding from the £200 million package adaptation to climate change. of Rural Development Plan for England

2. We aim to support industry in strengthening (RDPE)274 Growth Programme and farm biosecurity to improve productivity, Countryside Productivity Offers, announced reduce reliance on veterinary medicines in July 2017, could be used to support and reduce emissions. To begin this, we renewable energy projects, such as solar are developing a scheme to directly tackle panels or small wind turbines linked to endemic diseases in beef and dairy herds. battery storage. 274 Rural Development Programme for England (RDPE), which works to make England’s agriculture and forestry sectors more competitive, to improve the quality of life in rural areas and to diversify rural economies. The Clean Growth Strategy 107 Natural Capital What is natural capital? Natural capital Why is natural capital relevant for reducing enables us to think about our natural carbon emissions? The Climate Change Act environment and the countryside as a set of requires that our plan for reducing emissions valuable assets (for example, forests, clean contribute to sustainability. As part of this air, soils, species, freshwaters, oceans and work we have looked at how measures and minerals). Like any asset, natural capital, if policies could have impacts on our natural maintained and invested in, provides flows assets, including the impact of reducing of services to the economy and society. carbon emissions. Natural capital can also These include food, energy, carbon contribute significantly to reducing levels of sequestration, pollutant removal, flood risk greenhouse gases through land use and land reduction, recreational and educational use change. This is described in the Technical opportunities, health benefits and many Annex. The Government’s wider work on others. Many of these benefits do not have a natural capital will be set out in the 25 Year direct market value. Environment Plan. Making Sure Our Land Plays a Central 8. We will develop a new network of English Role in Capturing Carbon and Enhancing forests with the right incentives and rules Natural Capital to establish and support new regional and national community woodlands to

7. During the 2020s we need to accelerate the help reach 12 per cent woodland cover rate of tree planting, working towards our 12 in England by 2060. We have allocated per cent tree cover aspiration by 2060. To funding to woodland planting to support our do this will require investment by the private commitment to plant 11 million trees276. and charitable sectors, not just government. A number of our policy proposals will create 9. We will set up a stronger and more attractive the conditions for that investment to come domestic carbon offset market that will forward. We will need new skills in forest encourage more businesses to support design, a reliable supply of resilient planting cost-effective emissions reductions, such as stock, new opportunities for domestic through planting trees. We will also explore timber, and a new generation of skilled how we could extend this market to include people helping to enhance our towns, cities other land activities. and countryside. Recently published natural capital accounts by the Office for National 10.We will unlock private finance to invest in Statistics show that Britain’s woodlands forestry by establishing forestry investment provide services of £2.3 billion per year to zones to offer investors streamlined decision the economy in terms of recreation, carbon making and more certainty, within shorter sequestration, timber and air pollutant timelines. removal275. 11.We will fund larger-scale woodland and ONS (2017) UK natural capital: ecosystem accounts for freshwater, farmland and woodland https://www.ons.gov.uk/economy/environmentalaccounts/bulletins/ 275 uknaturalcapital/landandhabitatecosystemaccounts Forestry Commission and Natural England (2017) Countryside Stewardship opens for 2017 https://www.gov.uk/government/news/ 276 countryside-stewardship-opens-for-2017 108 Department for Business, Energy and Industrial Strategy forest creation, and we will design woodland 16.By working in partnership with industry, creation incentives that attract more we will be able to seek out opportunities landowners and farmers to plant on marginal to achieve even greater levels of recycling, land, including through agroforestry and improve the utilisation of our food and bio- bioenergy production, to help diversify land- waste and incentivise activities such as reuse, based businesses and enhance the farmed repair and remanufacturing – protecting environment. our environment and strengthening our economy in the long-term.

12.Peatland, like woodland, forms a key part of the UK’s natural capital, but is widely 17.We will work towards no food waste entering degraded. We launched a £10 million landfill by 2030. Many local authorities have capital grant scheme for peat restoration in introduced separate collection of food July 2017 to target peatlands in England. waste and we will work to support more Funds are available from April 2018 for three so that the amount of food waste sent to years277. landfill continues to decline.

13.We will work with industry to increase the 18.We will set out a new Resources and Waste amount of UK timber used in construction, strategy which seeks to maximise resource creating a conveyor belt of locked-in carbon productivity, reduce waste in our energy in our homes and buildings. and resource systems, promote well- functioning markets for secondary materials The UK will work towards being a Zero and incentivise producers to design better Avoidable Waste economy by 2050 products. The strategy will focus on three

14. Zero avoidable waste equates to eliminating key areas: all waste where it is technologically, • Maximising resource productivity - environmentally and economically practicable through more efficient manufacturing to do so and working to support innovation processes in new materials, products and processes that extend the range of materials covered • Maximising the value we get from by this categorisation. resources throughout their lifetimes - by designing products more smartly to

15.Working in partnership with business increase longevity and enable recyclability and civil society toward our shared zero avoidable waste ambition, we will support • Managing materials at end of life – by the transition to a highly productive targeting environmental impacts and competitive economy where we unlock the environmental and economic benefits associated with greater resource productivity without imposing negative costs on business or society. 277 Defra press release (2017) New £10 million fund to restore peatland https://www.gov.uk/government/news/new-10-million-fund-to-restore-peatland The Clean Growth Strategy 109

19.We will explore how data can support the 22.We will explore new and innovative ways to development of a network of resource manage emissions from landfill, undertaking efficiency clusters led by Local Enterprise research and analysis to support new Partnerships (LEPs), whereby LEPs would approaches such as optimising surface develop local level strategies to drive methane oxidation. We will also investigate greater resource efficiency, supporting accelerating the breakdown of waste in processes such as industrial symbiosis and landfill to improve the quantity and quality of the development of new disruptive business landfill gas captured. This research should models that challenge inefficient practice. identify innovation to bring down the costs of low carbon technologies and lay the

20.We will explore how we can better incentivise groundwork for future decisions. producers to manage resources more efficiently through producer responsibility Government Innovation Investment schemes. The Government expects to invest £99

21. We will take action through the Courtauld 2025 million out to 2021 on innovation in natural Agreement to reduce the amount of food that resources. The Government wants the UK to is wasted in the UK. This could deliver up to be at the forefront of land-based innovation – £20 billion worth of savings to the UK economy ensuring our industry remains at the cutting between 2015 and 2025278. We will also divert edge of agricultural and bio-based technology more food from landfill to support resource development through the forthcoming productivity and avoid further emissions. bioeconomy strategy and through the existing £160 million Agri-Tech Strategy279: Recycling Technologies Recycling Technologies, based in Swindon, has developed a new process that can recycle mixed plastic waste, which normally goes to landfill or is incinerated, into a clean fuel. With the support of an Energy Entrepreneurs Fund grant of around £700,000, testing has shown that this product can be used in industrial burners or marine engines. As an alternative, the product could be distilled and used as feedstock to make more new plastics, paints, polishes or lubricants. Recycling Technologies recently raised £5 million in private investment and are now actively on the lookout for further manufacturing sites. WRAP (2016) The Courtauld Commitment 2025 to transform UK food and drink http://www.wrap.org.uk/content/ 278 courtauld-commitment-2025-transform-uk-food-and-drink 279 Defra (2015) Agricultural technologies (agri-tech) strategy https://www.gov.uk/government/collections/agricultural-technologies-agri-tech-strategy 110 Department for Business, Energy and Industrial Strategy • Innovative technology: The Government To complement this early action on innovation, has supported research on innovative the Government believes there are further technologies in agriculture via the Agri-Tech opportunities for innovation linked to natural Catalyst, to accelerate the translation of resources. In determining these we have research into practical solutions to improve focused where the Government can add the agricultural productivity, whilst reducing most value and develop UK opportunities. the environmental impact of agricultural The main innovation challenges that could be production, some of which has additional unlocked are below, with detail on opportunities low carbon benefits. for UK investment. • Centres for Agri-tech Innovation: Four Land centres have been funded in partnership with industry, academia and Government: Improving productivity and management skills on farms, coupled with technological • Agrimetrics - £11.8 million for a ‘big- innovation, will provide the tools for achieving a data’ centre of excellence for Agri- step change in the level of carbon savings. metrics to utilise data science and modelling to build a more productive, • Fertiliser: We will develop affordable low sustainable and efficient food system. carbon fertiliser products to reduce and replace fertilisers; explore the potential • Agricultural Engineering Precision for bio-stimulants to improve nutrient Innovation Centre (Agri-EPI) - £17.7 use efficiency; and explore the viability of million on precision agriculture to help fertiliser production by recovering nutrients the UK’s agri-food sector develop from wastes and other organic materials. more productive and sustainable UK agriculture and export markets. • Soil health: We will aim to target new sustainable land management techniques • Centre for Crop Health and Protection to overcome the decline in soil quality in (CHAP) - £21.3 million to revolutionise the UK and the impact on productivity. We how farmers manage crop threats are already funding UK research into soils including pests and disease, both in the to deliver greenhouse gas removals (GGR) UK and overseas. and abatement technologies as part of the • Centre for Innovation Excellence in £8.6 million research on GGRs280. Livestock (CIEL) - £29.1 million to create • Crops and livestock genetics: We will new livestock technology and products explore the mitigation potential of new to boost the profitability and productivity breeding technologies and any barriers to of livestock farming. their deployment to improve agricultural and forestry productivity and resilience. 280 The National Environment Research Council (2017) £8.6 million UK research programme on greenhouse gas removal http://www.nerc.ac.uk/press/ releases/2017/09-greenhousegas/ The Clean Growth Strategy 111 • Low emission farming techniques: We will • Resource efficiency. We will encourage reduce the costs of resource use in crop the development of business models which and livestock production by: improving our encourage resource efficiency, extend understanding of crop soil interactions; product life, conserve resources, and explore the potential of robotics and the prevent material from becoming waste. latest sensor technologies; precision farming Innovate UK’s £15 million Manufacturing technologies more viable on smaller scale and Materials Competition will support the farms, investigate the potential of improving development of more flexible and efficient soil health and carbon stocks. processes and materials. • Forestry innovation: We need to improve • Energy recovery processes. We will work the resilience and productivity of our forests with the waste sector to ensure that different such as through greater understanding of waste materials going into energy recovery how tree genetics can contribute to GGRs, processes are treated in the best possible especially as we approach 2050. way, to minimise environmental impact and maximise their potential as a resource. The Innovate UK will also ensure that future rounds National Infrastructure Commission’s work of its health and life science calls encourage on different pathways for the treatment of bids which directly or indirectly support waste will feed into this. We will also work practices that may have a positive impact on with businesses to explore the use of bio- climate change. based materials and to promote recyclable Waste packaging so that more is recycled. • Anaerobic Digestion. We need to ensure • Landfill gas capture and management. the sector continues to support our carbon There is an opportunity to undertake further and air quality goals, and that best practice research to accelerate methane production is followed when digestate is spread to in the early life of a landfill site to reduce the land to minimise ammonia release and air length of aftercare required. This could help quality and pollutant impacts. This includes to reduce emissions from landfill further and development of improved digestion and in a sustainable way. ammonia and phosphate extraction technologies while working with the sector to focus on reducing methane emissions. 112 Department for Business, Energy and Industrial Strategy Fluorinated Gases Fluorinated gases (F-gases) are powerful The UK led the way in pledging to phase down greenhouse gases with a climate change use of hydrofluorocarbons (HFCs) by 79 per effect up to 23,000 times greater than cent by 2030. Following the UK lead, 197 carbon dioxide281. Often used as refrigerants, countries agreed under the United Nations the reduction in F-gas emissions has been Montreal Protocol to a global phase down of a major success story as we decarbonise HFCs which will see the UK and other developed the economy. UK emissions decreased by countries go even further by delivering an 85 20 per cent between 1995 and 2015. Our per cent phase down by 2036. It is estimated current policies will cut UK F-gas emissions that this deal will reduce emissions equating from 17 MtCO2e in 2015 (about 3 per cent of to 0.5ºC of avoided temperature change283 by total UK emissions) to 9.3 MtCO2e by 2023, 2100, making a major contribution to the Paris 6.6 MtCO2e by 2027 and 3.2 MtCO2e by Agreement on climate change and the goal of 2035, representing an 81 per cent cut from keeping the global temperature increase well 2015 levels282. below 2 degrees. Figure 29: F-gas reduction steps, 2015-2036284 100 90 80 F-gas regulations limit the total amount of the most 70 important F-gases that Percentage of 2014 sales can be sold in the EU, 60 phasing them down in steps to 21% of 2014 50 sales by 2030. The UN 40 Montreal Protocol requires an additional 30 6% reduction by 2036 20 10 0 2015 2020 2025 2030 2035 HFC phase down under EU Regulation HFC phase down under UN Montreal Protocol IPCC (2007) Climate Change 2007: Working Group I: The Physical Science Basis https://www.ipcc.ch/publications_and_data/publications_ipcc_fourth_ 281 assessment_report_wg1_report_the_physical_science_basis.htm 282 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 National Institute for Public Health and the Environment – Netherlands (2016) RIVM research basis for historic climate agreement on HFCs http://www.rivm.nl/en/ 283 Documents_and_publications/Common_and_Present/Newsmessages/2016/RIVM_research_basis_for_historic_climate_agreement_on_HFCs 284 European Parliament and Council (2014) Annex V of Regulation (EU) no 517/2014 of the European Parliament and of the Council of 16 April 2014 on fluorinated greenhouse gases and repealing Regulation (EC) No 842/2006 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0517&from=EN The Clean Growth Strategy 113 Leading in the Public Sector Progress baseline so new targets were set in January 2017, with the aim of achieving a 32 per cent Since 1990, the public sector – including reduction by 2019/20. central and local government, health, education and emergency services – has Outside central government, energy efficiency reduced its emissions by 40 per cent285 as a has been supported by an interest-free loan result of energy efficiency and rationalisation of scheme, managed by Salix Finance. To date, the the central government estate. loan scheme has funded over 16,000 projects, improving public sector and higher education Central government and its agencies have led buildings for its users and is projected to save by example through the Greening Government the sector around £55 million on energy bills Commitments (GGC), which include a this year287. In addition, the Re:Fit programme, greenhouse gas reduction target. As of managed by Local Partnerships, has helped 2015/16, we have succeeded in meeting the public sector organisations invest in energy target by delivering a 27 per cent emissions efficiency and energy generation projects reduction and £127 million of savings against by helping them to establish energy service 2009/10 levels286. The original target was a 25 contracts. per cent reduction compared to the 2009/10 285 Compared to 2015 levels. Sustainable Development Unit (2016) Sustainable Development in Health and Care Report – Health Check 2016 http://www.sduhealth.org. uk/policy-strategy/reporting/sustainable-development-in-health-and-care-report-2016.aspx Defra (2017) Greening Government Commitments 2015-2016 Annual Report https://www.gov.uk/government/publications/greening-government-commitments- 286 2015-to-2016-annual-report This includes all end use emissions 287 Salix Finance: Public Sector Loan Scheme https://www.salixfinance.co.uk/ 114 Department for Business, Energy and Industrial Strategy Figure 30: Annual energy bill savings from public sector Energy Efficiency Loans 50 40 Annual savings, 2017 £ million 30 20 10 0 2004 2006 2008 2010 2012 2014 2016 Source: Public Sector Energy Efficiency Loan Scheme BEIS model Ambition buildings in England and Wales is estimated to be around £2 billion288 and this could be We want the public sector to be a leader in reduced significantly, releasing funds for front reducing carbon emissions; an approach that line services. The public sector also has a key will also save organisations significant amounts role to play in demonstrating best practice, of money. While central government has shown promoting transparency over emissions what is possible, we now want the wider public reporting and catalysing markets in energy sector to reap the benefits of this approach. efficiency by implementing measures at scale. The annual energy bill across all public sector 288 BEIS (2016) Building Energy and Efficiency Survey https://www.gov.uk/government/publications/building-energy-efficiency-survey-bees The Clean Growth Strategy 115 Figure 31: Actual and projected emissions in the public sector, taking into account the clean growth pathway, 1990-2050 30 Emissions from the public sector By 2032 this could be Emissions from the public have decreased by 40% since 1990 as low as 4 Mt sector could need to be as low as 1 Mt by 2050 25 20 Emissions (Mt) 15 10 Existing policy 2050 5 indicative 2032 pathway range 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS To meet the UK’s 2050 target, emissions from • Address barriers to energy efficiency and the buildings and activities of the public sector low carbon investment, such as supporting will need to be near zero. As with homes and organisations to access finance, and make commercial property, this means improving the case for action internally. energy efficiency and energy management, and decarbonising the heating and cooling of Opportunities buildings as far as possible. Ambitious action in the public sector will catalyse Our pathway to 2032 sees emissions from further innovation in low carbon products the public sector falling by around 50 per and services, generating new business and cent compared to today. To achieve this, the employment opportunities, and acting as a Government will need to: springboard for the wider low carbon market in the UK and internationally. • Set longer term emissions reduction targets across the public sector, and encourage transparent reporting on these. 116 Department for Business, Energy and Industrial Strategy Spotlight: NHS The NHS is responsible for around a third289 on reducing carbon emissions, improving of public sector carbon emissions and in energy efficiency, increasing local energy 2015/16 around £570 million was spent generation and understanding the health by the NHS Trust on energy290. Emissions and financial impacts of travel293. NHS from energy and travel alone have an annual organisations are expected to report carbon footprint of 7.4 million tonnes291 annually on carbon reduction with 69 per demonstrating the important role of the NHS cent of providers and Clinical Commissioning and the health supply chain in reducing the Groups meeting minimum standards. Health UK’s emissions. Despite the challenges in organisations are also strongly encouraged the sector, over the last ten years the health to adopt and report on progress against a system has reduced its annual carbon carbon reduction target of 34 per cent in line emissions by 3.6 million tonnes and saved with the Climate Change Act with an NHS almost £2 billion in energy costs292. Health baseline of 2007/08294. Forty one per cent295 organisations have in place mandatory of trusts already report they are on track to Sustainable Development Management meet the 34 per cent target by 2020/21. Plans which include recommendations Dryden School Dryden School is a secondary special school in Gateshead. They cut their energy bill using a 100 per cent interest free loan of almost £80,000, funded by the Government’s Salix scheme. By installing LED lighting, pipework insulation and improving the Building Energy Management System and hydrotherapy pool ventilation system they cut their bill by £17,000 a year – saving over £342 per pupil, and meaning their loan pays back in just over four years. 289 BEIS (2016) Building Energy Efficiency Survey (BEES) https://www.gov.uk/government/publications/building-energy-efficiency-survey-bees 290 NHS Digital (2017) Hospital Estates and Facilities Statistics http://hefs.hscic.gov.uk/DataFiles.asp 291 Sustainable Development Unit (2016) Carbon Footprint update for NHS in England http://www.sduhealth.org.uk/policy-strategy/reporting/nhs-carbon-footprint.aspx Sustainable Development Unit (2016) Securing Healthy Returns http://www.sduhealth.org.uk/policy-strategy/engagement-resources/fnancial-value-of-sustainable- 292 development.aspx 293 Sustainable Development Unit (2017) Health Outcomes Travel Tool http://www.sduhealth.org.uk/delivery/measure/health-outcomes-travel-tool.aspx 294 Sustainable Development Unit (2014) Sustainable Development Strategy http://www.sduhealth.org.uk/policy-strategy/engagement-resources.aspx Hospital Estates and Facilities Statistics http://hefs.hscic.gov.uk/ReportFilterConfirm.asp?FilterOpen=&Year=2015%2F2016+01&Level=T&Section=S&SHA=&Org_ 295 Type=&Foundation=&Site_Type=&PFI=&getReport=Get+Report The Clean Growth Strategy 117 Policies and Proposals Supporting Access To Finance Setting Targets and Reporting Against Them 3. In the 2015 Spending Review, the Government announced £295 million

1. Outside central government, some parts of new funding for public sector energy of the wider public and higher education efficiency across the UK. In England, this sectors have already set emission reduction increased funding is invested in the existing targets to encourage organisations to focus public sector energy efficiency loan scheme, on cutting carbon and energy bills. However which is available to the wider public and there is no common target that covers the higher education sectors. The loan scheme whole sector. Therefore, the Government will administrator currently manages £210 introduce a voluntary wider public and higher million, and this will rise to some £385 education sector target of a 30 per cent million by 2020. This revolving loan scheme reduction in greenhouse gases by 2020/21, will continue to be recycled to at least 2025. against a 2009/10 baseline, and will publish Similar schemes run in Scotland and Wales a Call for Evidence alongside this document received £40 million of the 2015 spending to gain views from the sector on the target review award. and a proportionate reporting framework to underpin this, as well as further policies to 4. An Energy Performance Contract provides realise carbon and cost saving potential. We finance to organisations so that they can will review progress against this voluntary invest in cost-effective energy conservation target by 2020, with a view to moving to measures, without incurring any upfront a more ambitious target during the 2020s capital costs. The Government will (such as a 50 per cent reduction by 2030). continue to support their expansion in the Once a reporting framework is in place, public sector, as they offer a new route to and there is clear evidence of the impact of improve energy efficiency, while producing voluntary action, a mandatory target could guaranteed savings. To underpin this also be considered. approach we are continuing support to the RE: FIT programme in 2017/18, alongside

2. For central government, the Greening Local Partnerships. Government Commitments (GGCs) have already produced significant emissions savings across departments and agencies. We are currently working with departments to agree higher targets for 2020 and actions to further reduce greenhouse gas emissions beyond this date. We will publish the new targets in due course. 118 Department for Business, Energy and Industrial Strategy Local Leadership Moving to a productive low carbon economy The Government is committed to supporting cannot be achieved by central government local leadership and has already given alone; it is a shared responsibility across additional powers and responsibilities through the country. Local areas are best placed the Cities and Local Government Devolution to drive emission reductions through their Act 2016; many of the Local Devolution deals unique position of managing policy on land, agreed to date include energy commitments. buildings, water, waste and transport. They We work with local areas to support delivery, can embed low carbon measures in strategic develop partnerships, and enable access to plans across areas such as health and social low carbon procurement frameworks. care, transport, and housing. In 2017, in England we funded 13 Local The Government recognises the importance Enterprise Partnerships (LEPs) to develop of anchoring economic growth in the local energy strategies and will support the strengths of local areas. Indeed, each local remaining 25 LEPs to produce their own area will be responsible for coordinating its later this year. We will also launch a new own local industrial strategy in alignment with Local Energy programme to support local the national Industrial Strategy296. areas in England to play a greater role in decarbonisation. This will increase local Local leaders are already rising to the capacity and capability across England and challenge and putting local carbon targets provide on the ground practical support and and strategies in place. Nearly 70 local expertise to unlock local energy opportunities. authorities are signed up to using 100 per cent clean energy by 2050 as part of the The programme will start to support delivery UK100 network297, reflecting the leadership of the Industrial Strategy and Smart Systems shown by mayors globally on climate change Plan, working with local areas to demonstrate and clean energy. Partnerships across public, that deep decarbonisation can be achieved private and community sector organisations through local system change in a way that can unlock powerful integrated local energy keeps costs down and maximises economic solutions. benefit. The Clean Growth Strategy 119 Innovation at the local level is also vital. The Local Leadership: Cornwall Energy Innovation Board will ensure that all relevant clean technology innovation funds Cornwall hosts a wealth of renewable energy are accessible to local actors including local resources including wind, solar, geothermal authorities, Local Enterprise Partnerships, and marine energy. Cornwall now contributes community sector organisations and others, more than 768 MW of sustainable energy as appropriate. generation to the UK energy mix296, with approximately 25 per cent in local ownership, Government will continue to work with and including 8 MW of Council-owned solar PV support local leaders. We will establish a and more than 1MW owned by community Local Energy Contact Group, building on the groups supported by England’s first valuable work of the previous Community community energy revolving fund with £2.5 Energy Contact Group, to continue the million council funds297. crucial dialogue between local stakeholders and Ministers. 296 Regen (2016) Renewable Energy: a local progress report for England https://www.regensw.co.uk/renewable-energy-progress-reports Cornwall Council press release (2017) https://www.cornwall.gov.uk/council-and-democracy/council-news-room/media-releases/news-from-2017/ 297 news-from-march-2017/community-energy-remains-at-the-heart-of-cornwall-council-s-energy-agenda/ Chapter 5: Next Steps The Clean Growth Strategy 121 This Strategy sets out our plan to From 2018, we will use the Government’s response to the Committee on Climate meet our future carbon budgets. Change’s annual progress report to bring Chapter 4 sets out the potential together reporting against this strategy on the to reduce emissions across emission intensity ratio, metrics and actions. We will publish our performance against the each sector and our policies and Emissions Intensity Ratio on an annual basis. proposals to unlock the further We will also update key elements of the Strategy savings needed. The timeframes in line with our annual statutory responses to the Committee on Climate Change’s reports for these actions are set out in full on progress, ahead of setting the sixth carbon in annexes A and B. budget by 30 June 2021. We welcome views on this Strategy. In addition to the Emissions Intensity Ratio, we Comments and suggestions should be sent have also developed a set of metrics which to CleanGrowthStrategy@beis.gov.uk by the will help us assess and understand progress. end of December 2017. Government intends These metrics are summarised below and set that the individual departmental policies out in Annex D. and proposals contained within the plan will be consulted on separately, where such This Strategy is not the end of the process. consultation has not already taken place. Views Our policies and proposals will evolve as we received in response to both this Strategy and respond to costs coming down, to lessons the detailed policy proposals which will follow it about what does and does not work, to will be considered as we update key elements improved evidence, and to wider trends in the of our strategy before setting the sixth carbon economy, society, technology and innovation. budget by 30 June 2021. To keep track of this moving picture and our progress towards carbon budgets, we will be The Government will also launch an annual monitoring and reporting against each element week focusing on climate issues across the of this Strategy. UK, to showcase our progress and successes on climate action, share the latest climate science, and highlight and promote economic opportunities arising from clean growth around the country. 122 Whole economy We will report progress against this framework of economy-wide and sector-level metrics annually. Details of each metric are set out in Annex D Emissions per capita 800 Emissions intensity of GDP Final energy consumption intensity of GDP (tCO2e/person) (MWh/£ million) 700 15 2,000 14 600 1530 500 1,500 10 400 gCO2e/£ 8 4% per year 5% per year 1,000 300 872 Average fall in emissions Our ambition to 2032 intensity of the economy 200 548 between 1990 and 2016 5 4 500 100 0 0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 1990 2015 2032 1990 2015 2032 Non-industrial Industrial Land & Homes Transport Power business & business environment public sector Department for Business, Energy and Industrial Strategy Home energy use per Road transport emissions Emissions from Non-industrial business Industrial business Biodegradable waste sent household per vehicle kilometre generation and public energy use energy use per £ million to landfill (Million tonnes) (MWh/household) (gCO2e/km) (MtCO2e) per £m output output (MWh/£ million) 25 300 300 400 (MWh/£ million) 2,000 40 21 260 1,756 36 20 17 213 204 302 200 300 30 15 200 15 1,005 120 200 1,000 833 104 20 10 100 100 164 5 100 79 8 16 10 0 0 0 4 0 0 1990 2015 2032 1990 2015 2032 1990 2015 2032 1990 2015 2032 1990 2015 2032 0 1995 2015 2032 Emissions intensity of Road transport emissions Share of electricity supply Emissions intensity of Emissions intensity of Total UK conventional woodland home energy use per energy use from clean sources (%) non-industrial business and industrial business area (thousand hectares) (gCO2e/kWh) (gCO2e/kWh) public energy use energy use (gCO2e/kWh) 200 300 100 200 (gCO2e/kWh) 1,000 4,000 3,648 169 85% 3,155 150 140 231 227 3,000 2,778 120 200 183 121 100 100 96 500 488 2,000 50 45% 403 345 100 46 50 1,000 21% 0 0 0 0 0 1990 2015 2032 1990 2015 2032 0 1990 2015 2032 1990 2015 2032 1990 2015 2032 1990 2015 2032 The Clean Growth Strategy 123 124 Department for Business, Energy and Industrial Strategy Annexes The Clean Growth Strategy 125 Annex A: Decision pathways These following decision pathways give an overview of how the policies and proposals set out in this Strategy map over time. They include future policy development such as publications, key decisions, reviews and consultations, which aim to unlock further carbon savings. Some Government programmes, such as the Industrial Strategy, cut across several sectors and so are not reflected below. Business and Industry 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 126 New, simplified Reporting Framework of energy use and emissions by businesses Consultation on Streamlined Energy and Carbon Reporting Framework Proposed date for introduction of new reporting framework Greater New policy framework to drive business energy efficiency efficiency across Consultation on package of measures to increase business energy efficiency all business EU Emissions Trading System (or alternative policy approach post-EU Exit) Phase IV negotiations End of phase III Phase IV Minimum standards for new build and existing build Possible consultation on improving requirements Better commercial Consultation on PRS Min. Standards buildings Minimum standards in the private rented sector Smart meter roll-out Helping businesses off the gas grid to move to cleaner heating options Decision on successor policy Renewable Heat Incentive Department for Business, Energy and Industrial Strategy Strengthening carbon pricing CCL rebalancing Industrial Energy Efficiency Scheme Development of scheme Action plans published Transforming manufacturing 2050 Industrial Decarbonisation Action Plans and heavy industry Development of policy framework to support the decarbonisation of heavy industry. Industrial Heat Recovery Scheme Consultation published Heat Strategic Options work Carbon capture, usage and storage (CCUS) Develop CCUS Develop our ambition of deploying CCUS at scale during the 2030s, subject to costs coming down sufficiently, deployment pathway building on our innovation programme and international collaboration. Energy Efficiency Accelerator Fund Homes 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 ECO ECO Decision to extend scheme to 2028 Decision about design of ECO for 2022-28 Standards in PRS and social housing Improve the PRS Band E minimum standard goes live 2018 quality and Consultation Decision on consulting on PRS and Social Housing trajectories value of peoples’ Existing homes homes Possible consultation and review of energy performance standards in Building Regulations Owner occupied housing Call for Evidence on additional market based measures Publish action plan on additional market based measures Transition to sustainable heat networks market Make it easier Funding allocated in Spending Review 2015 for people to to support investment in heat networks reduce the cost of running Taskforce Examine plans for long- their home term market framework Improve boiler standards and heating controls Renewable Heat Incentive Decision on successor policy Framework of measures to enable phase out of high carbon fossil fuel heating Encourage New build – Building regulations encourage future-proofing new homes for low carbon heat the take-up of cleaner heating Possible broader consultation of energy performance standards in Building Regulations in Spring 2019 systems Call for evidence by end 2017 Regulations come into force in 2020 Heat Strategic Options Work Industry to implement Each Home Count Review recommendations The Clean Growth Strategy Encourage better market Stakeholder event to launch plans services and creating Improve the availability of finance for home energy improvements valuable jobs 127 Call for Evidence on reform of the Green Deal framework Transport 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 128 Pathway to Zero Emission Road Transport Strategy Accelerating Regulation / standards the uptake of ultralow Automated EU regulation on car/van CO2 emission & Electric set for period to 2030 vehicle Bill vehicles UK to set out regulatory EU car/van New govt. approach in context of EU exit CO2 buying regulation standards proposals Supporting the UK automotive industry in their ambition to become Working with Innovate UK and through the Advanced Propulsion Centre (collaborative R&D with industry) and Automotive Council (to determine trade and investment priorities) world leading developer of zero emission technologies Evidence gathering to enable decisions Department for Business, Energy and Industrial Strategy Encouraging a Initial findings from Findings from Findings from Final year of ten-year, large trial more efficient Govt. research Innovate UK trials on platooning trial on longer semi-trailers and low carbon low emission vehicles frieght system EST pilot, advising SMEs EU HDV CO2 emission EU and UK regulation Consult on HGV levy reform reporting and monitoring Expect EU regulation for 2021-30 (UK to set out approach in context of EU exit) Cost-effective Rail electrification and Bi-mode rollout Encouraging low carbon Zero emission bus uptake alternatives to car journeys Investment in walking / cycling Publish Cycling and Walking Investment Strategy Modernising UK Aviation Green Papers the domestic Finish £3.9bn aviation and IMO ICAO IMO aerospace shipping sectors initial regime final R&D plan begins plan Cross cutting Biofuels Regulation Power 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Cost of Energy Review Continued control over policy costs Renewables Obligation Scheme closes to all grace period applicants Small-scale Feed-in Tariff We want to see more people investing without government support Update on future policy approach Growing low Contracts for Difference (CF Ds) carbon sources of electricity Next Pot 2 CFD round open for applications Offshore wind contracted to build at £57.50 per MWh in Spring 2019 New Nuclear Progress discussions with developers to secure a competitive price for future projects EDF target commissioning date for Hinkley Point C Carbon capture, usage and storage (CCUS) – see Business chapter Unabated coal Detailed response to consultation Close unabated coal generation by 2025 Capacity Market Statutory review Smart systems and flexibility Delivering smarter, more Smart meter rollout complete Modified license efficient energy for storage from Ofgem Legally separate System Operator Smart System Plan published with 29 actions for Government, Ofgem and industry Networks Interconnection: 4.4GW under construction and 9.5GW more could be in consumers’ interests Distribution networks: Up to £26 billion investment over 2015-23 The Clean Growth Strategy 129 Natural resources 130 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 New framework to support agriculture, land use and wider rural economy following EU exit Farmers and Sector deal(s) support bioeconomy growth New farm woodland rural businesses benefit from Bioeconomy strategy clean growth Greenhouse Gas Action Plan (GHGAP) opportunities Review published Update on agriculture metrics Set out concept Identify FIZ’s Set out proposals and consultation Forestry Investment Zones Making sure Centres for agri-tech innovation our land plays a central role £10 million on Peatland restoration in capturing carbon and RDPE – rural renewables enhancing Open for bids natural capital Planting 11 Million more trees Department for Business, Energy and Industrial Strategy Woodland carbon funding Resources and Waste Strategy 25 year environment plan Publication of 25 year environment plan Revised EU legislative proposal on waste (2030 targets currently subject to negotiations / subject to outcome of EU exit negotiations) The UK will be zero affordable Decisions this Parliament about what follows the EU Waste Framework Directive waste by 2050 Common EU target for 50% re-use and recycling of certain materials from household waste; 70% preparing for re-use, recycling and other recovery of construction and demolition waste EU Landfill Directive (currently subject to negotiations and subject to outcome of EU exit) Target to restrict Biodegradable Municipal Waste landfilled to 35% of the 1995 baseline Courtauld Commitment 2025 Phase down use of hydrofluorocarbons (HFCs) by 79% F-gases Montreal Protocol – 85% reduction by 2036 Public sector 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Review progress of GHG emission reduction targets to 2020 Greening Government More ambitious 2020 GHG emission reduction targets announced Commitments – Greenhouse gas (GHG) emissions Consider future Government action to reduce GHG emissions beyond 2020 reductions targets Publish Call for Evidence Develop a reporting framework Public Sector Review voluntary target and consult on future targets Target Review the evidence for the introduction of a mandatory target in 2025 Introduce voluntary public sector target in April 2018 The Clean Growth Strategy 131 132 Department for Business, Energy and Industrial Strategy Annex B: Actions and milestones This annex sets out actions and the Government’s response to the milestones that the Government is Committee on Climate Change’s committing to in this plan, and related annual progress report. Details of the publications. Actions will be updated Government’s Innovation Investment and progress reported through are set out in Chapter 4. Lead department Description Timing Improving Business and Industry Efficiency and Supporting Clean Growth Consult on new and streamlined energy and carbon reporting framework. This will Published alongside replace some existing schemes, such as the reporting element of the CRC Energy this Strategy, with BEIS Efficiency Scheme, and align with mandatory annual greenhouse gas reporting by UK proposed introduction of quoted companies. new framework by 2019 Published alongside BEIS Consult on the design of a new £18 million industrial heat recovery programme. this Strategy Publish joint industrial decarbonisation and energy efficiency action plans with seven Published alongside BEIS of the most energy intensive industrial sectors, building on three years of joint industry- this Strategy Government cooperation. BEIS New Ministerial-led CCUS Council with industry established. From 2017 CCUS Cost Challenge Taskforce established to deliver a plan to reduce the cost of BEIS From 2017 deploying CCUS. BEIS Establish an Industrial Energy Efficiency scheme. From 2017 Consult on how best to improve the performance of the commercial and private rented BEIS/DCLG sector, through tighter minimum building standards in the Private Rented Sector. 2018 BEIS Deployment pathway for CCUS produced. 2018 Work with industrial clusters to identify the most appropriate way forward to test the BEIS potential for development of CCUS industrial decarbonisation clusters. 2018 BEIS Organise an international CCUS event with international partners. 2018 BEIS Commit to provide further details on CCUS innovation spend. 2018 Develop and consult on a package of measures to support businesses to improve BEIS how productively they use energy. From 2018 Ensure incentives for investment in energy efficiency are regularly reviewed, BEIS/HMT for instance the list of products that qualify for enhanced capital allowances tax relief. On-going Undertake an evaluation of the Climate Change Agreements to inform any successor Expected to BEIS scheme from 2023. commence in 2018 The Clean Growth Strategy 133 Lead department Description Timing Following the outcome of the independent review of Building Regulations and fire DCLG safety, and subject to its conclusions, the Government intends to consult on improving 2018 the energy efficiency of new and existing commercial buildings. Beyond support through the RHI, ambition to phase out high fossil fuel heating in BEIS businesses off the gas grid during the 2020s. Businesses and industry will be involved During the 2020s in developing the new policy. Develop a clear policy framework to support decarbonisation in energy BEIS intensive industries. By 2022 Improving our Homes Publish a call for evidence on additional measures to encourage energy performance, Published alongside BEIS particularly amongst owner occupiers. this Strategy Publish a call for evidence on how to reform and streamline the Green Deal framework Published alongside BEIS to make the “Pay as You Save” system more accessible to businesses, while ensuring this Strategy adequate protection for consumers. Work with industry to implement the independent industry led Each Home Counts BEIS review to improve quality and standards for all retrofit energy efficiency and renewable 2017 energy installations. Work with mortgage lenders to incorporate energy efficiency into their lending BEIS/HMT decisions, and look at incentives and other levers that could encourage home-owners 2017 to invest in energy efficiency improvements. Explore ways in which we could make it easier for innovative approaches or BEIS products to be installed under our consumer-facing schemes such as the Energy 2017 Company Obligation. For privately rented homes, from April 2018, landlords of the worst performing properties will need to improve those properties to a minimum of EPC E before they BEIS can be let; lowering bills for some of the most vulnerable private tenants. We will 2017 consult shortly on steps to make these regulations more effective. BEIS Consult on ECO’s operation through to 2022. 2018 Reform the RHI to focus the scheme towards long-term decarbonisation through BEIS greater uptake of technologies such as heat pumps and bio methane (biogas to grid). 2017 Continue to work with suppliers to ensure that people are provided with tailored advice BEIS when a smart meter is installed. 2017 Alongside this Strategy, the Government has published Boiler Plus, improving standards for the 1.2 million new boilers installed in England every year and ensuring BEIS control devices are included with every installation so people can control comfort in Spring 2018 their own homes for less from April 2018. Replace the existing, telephone-only Energy Saving Advice Service with a digitally led- BEIS service working closely with the Each Home Counts implementation, offering tailored Spring 2018 advice on improving the energy performance of people’s homes. Issue a Call for Evidence seeking views on further triggers points for Energy BEIS/DCLG Performance Certificates (EPCs) to be updated, as well as wider views on how EPCs Spring 2018 could be further improved, in light of new sources of data and capabilities 134 Department for Business, Energy and Industrial Strategy Lead department Description Timing The Government will look at a long term trajectory for energy performance standards across the private rented sector, with the aim of as many private rented homes BEIS/DCLG as possible being upgraded to EPC C by 2030 where practical, cost-effective 2018 and affordable. The Government will also look at introducing similar energy performance standards across the social housing sector, where practical, cost-effective and affordable. This BEIS/DCLG will need to take account of the findings of the independent public inquiry into the fire 2018 at Grenfell Tower and the Government’s separate work looking at wider social housing policy issues. Following recommendations from the review of Building Regulations and fire safety currently underway explore innovative solutions to energy performance improvements BEIS/DCLG not performing as well as predicted, including potential actions on compliance and By 2019 enforcement of energy performance. Roll out complete by BEIS Continue smart meter roll out. end of 2020 BEIS Funding allocated in the Spending Review 2015 to grow the UK’s heat networks market. By 2021 Beyond support through the RHI, ambition to phase out high fossil fuel heating in BEIS homes off the gas grid during the 2020s. Consumers and industry will be involved in During the 2020s developing the new policy. Accelerating the Shift to Low Carbon Transport Series of consultation papers setting out the Government’s strategic approach to avia- DfT tion, including how to support growth whilst tackling environmental impacts. 2017-2018 Regulation to improve EV charge point provision and consumer access under the DfT Automated and Electric Vehicle Bill. 2017 Deployment of £80 million ULEV infrastructure funding announced in Autumn DfT Statement 2016. 2017-2021 DfT Consider outcome and next steps in light of SME HGV fleet review pilot. 2017 DfT Pathway to Zero Emission Road Transport Strategy Document. By early March 2018 DfT/Defra Updating Government vehicle buying standards. End 2018 DfT EU HGV CO2 emission reporting and monitoring starts. January 2019 HMT Decision(s) on future fiscal support/tax incentives for ULEVs. Ongoing The Clean Growth Strategy 135 Lead department Description Timing DfT Report from Low Emission Freight and Logistics Trial. 2019 Decision on domestic regulatory regime for car/van CO2 regulations in context of DfT EU exit. 2019 Decisions on support for cycling and walking following end of current funding period HMT (to 2019/20). 2020 DfT Decision on next steps in light of platooning and longer semi-trailer trials. 2020 onwards Decision on domestic regulatory regime for freight CO2 regulations in context of DfT EU exit. Mid 2020s DfT Active participation in the IMO to address GHG emissions from shipping. Ongoing Clean, Smart, Flexible Power Publish a full response to the consultation on ending unabated coal generation in BEIS Great Britain. Shortly BEIS Publish independent Cost of Energy Review, undertaken by Professor Dieter Helm CBE. Autumn 2017 HMT Set out further details on carbon prices beyond 2020/21. Autumn 2017 Work with industry to develop a nuclear Sector Deal as part of the Industrial Strategy, BEIS looking at boosting competitiveness and skills across the sector. Autumn 2017 BEIS/HMT Set out new controls to replace the Levy Control Framework beyond 2020/21. End 2017 BEIS Provide an update on our approach for small scale low carbon generation beyond 2019. End 2017 Ofgem Introduce a modified generation license for storage to improve regulatory clarity. Summer 2018 Continue to work with nuclear developers on their new build proposals, including on BEIS financing plans. 2018 Ofgem/National Create a legally separate system operator. April 2019 Grid BEIS Planned Pot 2 Contract for Difference auction. Spring 2019 Continue to work with Ofgem and industry to implement the 29 actions in the Smart BEIS Systems and Flexibility Plan. 2020 136 Department for Business, Energy and Industrial Strategy Lead department Description Timing Enhancing the Benefits and Value of our Natural Resources Set out approach to bring together biological industries, academia and innovators, linking up farmers and land managers with high tech industries to make the most of BEIS existing resources and develop advance feed stocks that are essential for the future By end of 2017 low carbon economy. BEIS New Bioeconomy Strategy. By end of 2017 Set up a stronger and more attractive domestic carbon offset market that will encourage more businesses to support cost-effective emissions reductions such as Defra & BEIS through planting trees. We will also explore how we could extend this market to include 2017 onwards other land activities. Defra Establish forestry investment zones. 2017 onwards Defra Set out 25 Year Environment Plan. 2017 onwards Defra Government to publish a new Resources and Waste Strategy. 2018 Defra Publish a Clean Air Strategy. 2018 Funds available from Defra £10 million capital grant scheme for peat restoration. April 2018 for 3 years Continue working with the Organisation for Economic Co-operation and Development Project concludes end Defra (OECD) on their project to improve the modelling of macroeconomic effects of the of 2018 transition to a circular economy. Commit to make available up to £200 million to support rural communities over the Defra next two years and set out agroforestry decisions. By end of 2019 Defra Allocated funding to woodland planting to plant 11 million trees. 2020 Defra EU target of at least 50% of household waste being recycled by 2020. 2020 Defra Woodland Carbon Fund: £19.2 million to fund larger-scale woodland and forest creation. By 2021 Work with industry to encourage the use of low-emissions fertiliser, and review the Defra levels of take up using data from the British Fertiliser Practice Survey. Over next 5 years Targets of a 20% reduction in food and drink waste arising in the UK, a 20% reduction Concludes in 2025, with in the greenhouse gas intensity of food and drink consumed in the UK, and a reduction Defra in impact associated with water use in the supply chain through delivery of the an on-going review of progress Courtauld Commitment 2025. Defra Work towards no food waste entering landfill by 2030. 2030 Defra UK to phase down use of hydrofluorocarbons (HFCs) by 79% by 2030. 2030 UK to phase down use of HFCs by 85% by 2036 under the United Nations Defra Montreal Protocol. 2036 Defra Ambition for the UK to be zero avoidable waste economy by 2050. 2050 The Clean Growth Strategy 137 Lead department Description Timing Leading in the Public Sector Continue to fund further improvements in the wider public sector with £295 million of BEIS funding allocated to the public sector energy efficiency loan scheme, across the UK, in On going the 2015 Spending Review. Introduce a voluntary wider public and higher education sector target of 30% reduction in greenhouse gases by 2020/21, against a 2009/10 baseline, and will publish a Call for Evidence. We will review progress against this voluntary target by 2020, with a view to BEIS moving to a more ambitious target during the 2020s (e.g. 50% reduction by 2030). Once 2018 a reporting framework is in place, and there is clear evidence of the impact of voluntary action, a mandatory target could be considered. Review existing carbon saving policies impacting the public sector to assess whether BEIS changes or new policies are needed to realise the carbon and costs savings potential. 2017 We will explore this further through a Call for Evidence. Currently assessing how much the current 2020 greenhouse gas emission reduction BEIS target under the GGCs could be stretched to be more ambitious yet achievable. We 2018 also aim to set an appropriate level of ambition beyond 2020. Continue to support the expansion of Energy Performance Contracts in the public We are providing BEIS sector which can offer a new route for investment in energy efficiency alongside continuing support in guaranteed savings. 2017/18 138 Department for Business, Energy and Industrial Strategy Annex C: Climate science UK and international climate emissions; (ii) the scientific rationale action is underpinned by a robust behind the internationally-agreed evidence base on the science global temperature goals; (iii) UK of climate change. In this annex climate action; and (iv) future we summarise (i) the scientific scientific priorities from a UK evidence that reinforces the need government perspective. for ambitious action to reduce 1: Why we are committed to ambitious records began in 1979 and sea level has risen action on climate change by about 3 mm a year since the early 1990s303. In addition, increased uptake of carbon dioxide We are already seeing the impacts of climate by the oceans has caused the pH of ocean change. The global average temperature of the surface water to decrease by 0.1 units since the Earth’s surface has risen around 1°C since pre- beginning of the industrial era, corresponding industrial times298. All but one of the top sixteen to a 26 per cent increase in acidity304. Without warmest years on record have occurred since action to reduce the level of greenhouse 2000299, and each of the last three decades has gases we emit globally, climate change is set been successively warmer at the Earth’s surface to continue with increasing temperatures on than any preceding decades since 1850300. 2015 the land and in our oceans. This will result in and 2016 were the warmest years on record by further increases in sea levels, more frequent quite some margin301 -albeit enhanced by the El and more severe heat waves and a changing Niño effect- and the impacts of climate change rainfall pattern leading to more droughts and are already widespread and are affecting many floods in some regions; and disruption to some sectors of society302. Arctic sea ice extent has ecosystems305. Without significant reductions in declined by about 4 per cent every decade since emissions, the world is likely to be on course for 298 Met Office (2016) Indicators of change 2016 http://www.metoffice.gov.uk/news/in-depth/indicators 299 Met Office press release (2016) http://www.metoffice.gov.uk/news/releases/2017/2016-record-breaking-year-for-global-temperature 300 World Meteorological Organization press release (2017) https://public.wmo.int/en/media/press-release/climate-breaks-multiple-records-2016-global-impacts 301 World Meteorological Organization press release (2017) https://public.wmo.int/en/media/press-release/climate-breaks-multiple-records-2016-global-impacts IPCC (2014) Climate: Summary for Policymakers. In: Climate Change 2014: Impacts, Adaptation, and Vulnerability, Summary for Policymakers. http://www.ipcc. 302 ch/report/ar5/wg2/. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 303 IPCC (2014) Climate Change 2014: Synthesis Report https://www.ipcc.ch/report/ar5/syr/ Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 304 IPCC (2014) Climate Change 2014: Synthesis Report https://www.ipcc.ch/report/ar5/syr/ Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 305 IPCC (2014) Climate Change 2014: Synthesis Report https://www.ipcc.ch/report/ar5/syr/ Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 306 IPCC (2014) Climate Change 2014: Synthesis Report https://www.ipcc.ch/report/ar5/syr/ Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change The Clean Growth Strategy 139 average temperature rise in excess of 2°C above UN, Pentagon and UK’s National Security pre-industrial levels, and possibly as much as and Strategic Defence Reviews cite climate 5°C for the highest emissions scenarios, by the change as a stress multiplier. end of this century306. Additionally, continuing acidification of the oceans will pose substantial The UK is likely to feel the impact of climate risks to marine ecosystems. change both directly and through impacts in other parts of the world which will affect our food This growing level of global climate instability and materials prices, trade, investments and poses great risks to natural ecosystems, security. In its recent UK Climate Change Risk global food production, supply chains and Assessment307 the Government endorsed the economic development. It is likely to lead to six key climate change risks for the UK identified the displacement of vulnerable people and in an independent review by the Adaptation migration, impact water availability globally, Sub-Committee308: flooding and coastal and result in greater human, animal and change; shortages in public water supply; risks plant disease. Climate change can indirectly to health, wellbeing and productivity from high increase the risks of violent conflicts by temperatures; risks to natural capital and our amplifying drivers of conflicts such as poverty ecosystems; risks to food security and trade; and economic shocks. For this reason the and new pests and diseases. Figure 32: Global near-surface annual average temperature relative to a pre-industrial baseline (1850-1900) from 1850 to 2016 1.4 1.2 1 0.8 0.6 0.4 °C 0.2 0 -0.2 -0.4 -0.6 1850 1865 1880 1895 1910 1925 1940 1955 1970 1985 2000 2015 95% confidence interval Temperature difference from 1850-1900 average Source: HadCRUT4, Met Office 307 HM Government (2017) UK Climate Change Risk Assessment 2017 https://www.gov.uk/government/publications/uk-climate-change-risk-assessment-2017 CCC (2017) UK Climate Change Risk Assessment 2017 Evidence Report https://www.theccc.org.uk/tackling-climate-change/preparing-for-climate-change/ 308 uk-climate-change-risk-assessment-2017/ccra-chapters/ 140 Department for Business, Energy and Industrial Strategy 2: Global temperature goals and our which will be a key determinant of whether progress towards them the world will meet the long-term global temperature goal. Scientific evidence shows that increasing magnitudes of warming increase the likelihood These assessments show that NDCs represent of severe, pervasive and irreversible impacts a significant deviation from the 4 to 5°C on people and ecosystems309. These climate temperature rise projected if there were no change risks increase rapidly above 2°C but further policies to reduce emissions beyond some risks are considerable below 2ºC. This is those in place or planned today. Action would why, as part of the Paris Agreement in 2015, also provide other co-benefits such as limiting 195 countries committed to hold “the increase the rate of ocean acidification and improving air in the global average temperature to well below quality. Nevertheless it is clear that greater action 2°C above pre-industrial levels and to pursue is needed from all countries if we are to limit efforts to limit the temperature increase to global temperature increases to well below 2°C. 1.5°C above pre-industrial levels, recognising that this would significantly reduce the risks and 3: UK climate action impacts of climate change”. The Agreement The UK’s current target is to reduce its recognised that in order to achieve this goal, greenhouse gas emissions by at least 80 per global emissions of greenhouse gases would cent by the year 2050, relative to 1990 levels. need to peak as soon as possible, reduce This 2050 target was set to be consistent rapidly thereafter and reach a net zero level in with keeping the global average temperature the second half of this century. to around 2°C above pre-industrial levels with As part of the Paris Agreement countries also a 50 per cent likelihood. In October 2016 the committed to reduce or limit their greenhouse Committee on Climate Change (CCC) said311 gas emissions. These are contained in their that the Paris Agreement target “is more ‘Nationally Determined Contributions’ (NDCs). ambitious than both the ambition underpinning A number of studies310 consider how close the UK 2050 target and previous international these commitments bring us to staying below agreements”, but that the UK should not set 2°C, and estimate that if they were met we new UK emissions targets now, as it already would be on a path to a global temperature rise has stretching targets and achieving them will of 2.7 to 3.7 °C above pre-industrial levels by be a positive contribution to global climate

2100. It is worth noting that these assessments action. The CCC advised that the UK’s fair have different assumptions regarding both the contribution to the Paris Agreement should extent to which countries meet their NDCs include measures to maintain flexibility to go and, crucially, the actions that will be taken by further on UK targets, the development of countries to reduce their emissions after 2030, options to remove greenhouse gases from the air, and that its targets should be kept under review. IPCC (2014) Climate Change (2014) Impacts, Adaptation, and Vulnerability, Summary for policymakers http://www.ipcc.ch/report/ar5/wg2/ Part A: Global and 309 Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 310 For example: UNEP (2016) The Emissions Gap Report 2016 http://www.unep.org/emissionsgap/ 311 CCC press release (2016) https://www.theccc.org.uk/2016/10/13/concrete-action-needed-to-meet-uk-climate-commitments-following-paris-agreement-and- brexit-vote/ The Clean Growth Strategy 141 There will be an unavoidable level of climate human activity, to the severity of the expected change, regardless of future global emissions, impacts and the level of action required to because of the existing accumulation of address climate change through a combination greenhouse gases in the atmosphere. As a of adaptation and mitigation. Our knowledge has consequence, some level of adaptation will be increased significantly but many key research necessary in the UK. To this end, the UK is already priorities remain. As developed and agreed by considering climate risks and what actions will the Government Chief Scientific Advisers (CSAs) be required through its five-yearly policy cycle our current science priorities are: of a Climate Change Risk Assessment followed by a National Adaptation Programme312. The 1. Present weather and climate risks globally scale of the potential investments, the risks and within the UK; associated with failure, and the long lifetimes 2. Future climate over this century under and lead-times of the infrastructure, together different emissions scenarios globally and mean that future investments are likely to be within the UK, including extreme weather highly sensitive to how climate change evolves events315; over the next two to three decades.

3. Climate risks and impacts from future Actions to mitigate climate change can have climate variability and change; wider positive impacts on the economy and the environment, beyond the direct benefits 4. Emission pathways compatible with different of avoided climate change313. There is strong levels of warming including timing and a evidence that well-designed climate mitigation consideration of technologies to achieve net action can provide substantial co-benefits while zero emissions; minimising any possible adverse side-effects314.

5. Impacts and opportunities of mitigation and For example, co-benefits can include substantial adaptation; and air quality improvements from avoided fuel combustion and health and wellbeing benefits 6. The case for early action: implications of of active travel. delaying mitigation actions. 4: Future scientific priorities and UK The UK is a global leader in climate science leadership and will play a key role in addressing these research needs. In recent years the debate and focus of scientific research has shifted from whether climate change is happening and/or is being caused by The second UK Climate Change Risk Assessment was completed in 2017 and this is being used to inform the second National Adaptation Programme due for 312 completion in 2018. The third Climate Change Risk Assessment will be delivered in 2022 313 Royal Commission on Environmental Pollution (2007) The Urban Environment http://www.rcep.org.uk/reports/26-urban/26-urban.htm 314 IPCC (2014) In: Climate Change 2014: Mitigation of Climate Change, Summary for Policymakers http://ipcc.ch/report/ar5/wg3/ Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change 315 For example, this includes a better understanding of climate sensitivity and cloud processes, and improving the ability of global climate models to represent regional climate and extremes. 142 Department for Business, Energy and Industrial Strategy Annex D: Changes that illustrate how our pathway could be delivered316 This table illustrates key changes in 2032 pathway. It is possible that each sector that could lead to the equivalent emissions savings could emissions reductions set out in our be achieved in different ways. Table 4: Key historic and future changes by sector 1990 2015 2032 Emissions per capita (tCO2e/person) 14 8 4 Overall Emissions Intensity Ratio, EIR (tCO2e/£ million of GDP) 717 271 107 Final energy consumption intensity of GDP (MWh/£ million) 1,530 872 548 Non-industrial business and public energy use per £ million output 302 164 79 (MWh/£ million) Emissions intensity of non-industrial business and public energy Business and 121 96 46 use (gCO2e/kWh) public sector Industrial business energy use per £ million output (MWh/£ million) 1,756 1,005 833 Emissions intensity of industrial business energy use (gCO2e/kWh) 488 403 345 Home energy use per household (MWh/household) 21 17 15 Homes Emissions intensity of home energy use (gCO2e/kWh) 169 140 120 Road transport energy use per 1,000 vehicle kilometres (kWh/km) 1,127 941 655 Transport Road transport emissions per vehicle kilometre (gCO2e/km) 260 213 120 Road transport emissions per energy use (gCO2e/kWh) 231 227 183 Emissions from generation (MtCO2e) 204 104 16 Power Share of electricity supply from clean sources (%) 21% 45% 85% Total UK conventional woodland area (thousand hectares) 2,778 3,155 3,648 Natural Emissions intensity per £m agricultural output (tCO2e/£ million) 5,354 3,841 2,817 Resources Biodegradable waste sent to landfill (Million Tonnes) 36317 8 4 Greenhouse gas emissions from landfill (MtCO2e) 60 12 7 316 Based upon BEIS, Defra, DfT and DCLG analysis. Further information on sources is made available in the technical annex. 317 Covers the period 1995 as the earliest data available The Clean Growth Strategy 143 Technical Annex UK Carbon Budgets Explained Legislated carbon budgets Framework Five carbon budgets have been set to date, covering 2008 to 2032319. The fourth carbon Parliament passed the Climate Change Act budget (covering 2023 to 2027) was set in (the Act) in 2008, establishing the UK’s 2050 June 2011320. The fifth carbon budget (covering target and the supporting framework of carbon 2028 to 2032) was set in July 2016321. budgets. Under the Act, the UK is legally required to reduce greenhouse gas emissions Accounting for emissions by at least 80 per cent by 2050 on 1990 levels318. In order to put the UK on a pathway The UK’s performance against its 2050 target to achieving the 2050 target, the Government and carbon budgets is assessed through the is obliged to set legally binding five-year caps UK’s net carbon account, measured in tonnes on emissions – ‘carbon budgets’ – twelve years of carbon dioxide equivalent (tCO2e)322. in advance and then to publish a report setting The net carbon account323 comprises out the policies and proposals to meet that greenhouse gas emissions from the UK, budget and those budgets previously set. emissions which are captured and stored The Committee on Climate Change from land use, land-use change and forestry (LULUCF) and net purchases of international The Act also established the Committee carbon units. Carbon units include allowances on Climate Change (CCC), an independent issued under cap and trade systems, such as statutory body, to advise the Government and the EU Emissions Trading System (EU ETS) the Devolved Administrations on setting and and international carbon credits issued under meeting carbon budgets. The CCC advises international schemes, such as the Clean on the level of each budget, the respective Development Mechanism324. contributions that different sectors could make and the extent to which carbon budgets could be met through the use of flexibilities. 318 The target covers a selection of greenhouse gases in addition to carbon dioxide, namely methane, nitrous oxide, and a range of fluorinated gases (F-gases), specifically hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride. The 1990 baseline consists of emissions in 1990 for all greenhouse gases except for the F-gases, for which the baseline is 1995. The baseline is revised annually in line with updates made to the UK’s greenhouse gas inventory (the official record of UK greenhouse gas emissions). BEIS (2017) Final greenhouse gas emissions inventory statistics 1990-2015 https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 319 UK Legislation (2009) The Carbon Budgets 2009 http://www.legislation.gov.uk/uksi/2009/1259/article/2/made Covering first three carbon budgets 320 UK Legislation (2011) The Carbon Budget Order 2011 http://www.legislation.gov.uk/uksi/2011/1603/made 321 UK Legislation (2016) The Carbon Budget Order 2016 http://www.legislation.gov.uk/uksi/2016/785/made Given the size of the UK economy, we typically describe targets in terms of millions of tonnes of carbon dioxide equivalent (MtCO2e) – so the fifth carbon budget limits 322 UK emissions to 1,725 MtCO2e or 1,725,000,000 tCO2e 323 The Annual Statement of Emissions sets out the net carbon account. BEIS (2017) https://www.gov.uk/government/collections/annual-statements-of-emissions 324 Clean Development Mechanism: https://cdm.unfccc.int/ 144 Department for Business, Energy and Industrial Strategy The net carbon account for each budget is with the CCC confirming that there is presently calculated according to rules set out in Carbon no need for the UK to change its targets in Accounting Regulations325. Under current light of the Paris Agreement (see Annex C on regulations, the net carbon account reflects Climate Science). the UK’s share of the EU ETS for power, heavy industry and domestic aviation. The EU ETS As well as our obligations under Paris, as a sets a total cap on the amount of greenhouse current member of the EU, the UK has EU- gases that can be emitted by heavy industry level targets to 2020. In October 2014, the and power plants in the participating countries. European Council agreed an EU level target of For the “non-traded” sectors which fall outside at least a 40 per cent reduction in EU domestic the EU ETS, the net carbon account reflects emissions from 1990 levels by 2030. This the UK’s reported emissions under the United target will be split into an EU-wide target for the Nations Framework Convention. traded sector, governed by the EU ETS, and member state-level targets for the non-traded The UK’s 2050 target and carbon budgets sector, set via the Effort Sharing Regulation currently exclude emissions from international (ESR). A separate Land Use, Land Use Change aviation and international shipping, but the and Forestry Regulation will cover emissions Act states that in setting carbon budgets, the from those activities. The EU ETS, ESR and the Government must take these emissions into LULUCF Regulation for the period 2021-2030 account326. The CCC advises that the UK should are still under negotiation in Brussels, though we plan for international aviation and shipping anticipate that the emissions reductions under emissions of around 41 MtCO2e in 2050 – this the UK’s domestic Climate Change Act will be has been incorporated into our scenarios and more ambitious and challenging than those set will be kept under review. Further information by the EU. The EU legislation on greenhouse is set out in the 2050 pathways section of this gas emissions is among the important current technical annex. arrangements between the UK and EU that will be addressed as part of the UK’s EU exit International actions negotiations. However, whatever the form The 2015 Paris Agreement under the UN of the UK’s partnership with the EU, working established the goal of keeping the global mean closely together to address the global challenge temperature rise to well below two degrees, of climate change will remain important. whilst pursuing efforts to limit the rise to under 1.5°C. The UK is already playing its part, 325 For each carbon budget the Government proposes accounting rules for Parliament to agree. Carbon accounting rules for the first and second carbon budget can be found here: https://www.gov.uk/government/publications/2010-to-2015-government-policy-greenhouse-gas-emissions/2010-to-2015-government-policy- greenhouse-gas-emissions#appendix-4-carbon-budgets 326 Climate Change Act: Section 30 http://www.legislation.gov.uk/ukpga/2008/27/section/30 The Clean Growth Strategy 145 The Role of Carbon Markets Since establishing the first multi-industry The UK supports a number of initiatives to carbon trading scheme in the world in 2002 encourage development of carbon markets, - the voluntary UK ETS - the UK has had an such as the Carbon Initiative for Development influential role in establishing the EU Emissions and the Forest Carbon Partnership Facility Trading System (EU ETS), the first and largest Carbon Fund. These deliver development carbon trading scheme. According to the benefits while incentivising high quality, high Institute for Public Policy Research, 93.5 per volume supplies of carbon credits. cent of the global market in carbon exchanges is in London, making it the carbon trading Looking beyond 2020, the Paris Agreement capital of the world327. provides an opportunity to stimulate international co-operation. The agreement Putting a price on carbon is set to play an includes a framework for carbon trading, increasing role in moving to a global low carbon currently under development through economy. Carbon markets can help reduce international negotiations. It also provides the cost of reducing emissions by enabling incentives to engage the private sector to get the reductions to occur where it is least cost more actively involved in the transition to a to do so328. Already 40 national jurisdictions low carbon future. The opportunity to develop and over 20 cities, states and regions put a a trade in good quality carbon units is at the price on carbon amounting to 13 per cent heart of the UK Government’s vision for an of global greenhouse gas emissions329.With efficient global carbon market. China implementing a national emissions scheme this year, this will rise substantially. Projections of UK energy and emissions to continue. They estimate that between 2015 and 2020 we will reduce emissions by 17 per The Government projects what our energy cent, while the OBR forecasts the economy is demand, fuel mix and emissions might look set to grow by nine per cent (in real terms) over like as a result of our existing policies. These this period330. Energy and Emissions Projections (EEP) give us a sense of whether we are on track to meet We have met our first carbon budget and our carbon budgets. The latest projections current central projections show us exceeding were published on 15 March 2017. We are requirements for both the second and third continually working to improve our projections. carbon budgets331. Emissions are projected to In 2018 we will share more details of the continue to fall through the 2020s, but there is methodology, enabling further understanding. an estimated shortfall against the fourth and fifth carbon budgets, based on estimates of Our latest projections show the trend of falling emissions reductions from existing policies. emissions while growing our economy is set 327 IPPR (2017) https://www.ippr.org/public/index.php/news-and-media/press-releases/londons-status-as-carbon-trading-capital-of-the-world-at-risk 328 World Bank Group (2016) State and Trends of Carbon Pricing 2016 https://www.openknowledge.worldbank.org/handle/10986/25160 329 World Bank & Ecofys (2017) Carbon Pricing Watch 2017 http://www.ecofys.com/files/files/world-bank-ecofys-carbon-pricing-watch-2017.pdf 330 OBR (2017) Economic and fiscal outlook – March 2017 http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-march-2017/ 331 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 146 Department for Business, Energy and Industrial Strategy Table 5: Performance against carbon budgets332 Carbon Budget 1 2 3 4 5 2008-12 2013-17 2018-22 2023-27 2028-32 Budget, cumulative emissions, MtCO2e 3,018 2,782 2,544 1,950 1,725 Average reduction vs 1990 emissions, % -25% -31% -37% -51% -57% Projected emissions, 2,982 2,650 2,453 2,096 1,972 Existing cumulative emissions, MtCO2e actual E E E E policies Result vs. Budget,% -1.2% -4.7% -3.6% +7.5% +14.3% Projected emissions, 2,982 2,650 2,453 2,066 1,892 cumulative emissions, MtCO2e actual E E E E Existing and new Result vs. Budget, cumulative -36 -132 -91 +116 +167 policies and emissions, MtCO2e proposals333 Result vs. Budget,% -1.2% -4.7% -3.6% +6.0% +9.7% Cumulative surplus (+) or deficit (-), MtCO2e +132 +223 +107 -60 We expect our shortfall against the fifth carbon will develop over the next decade. Indeed as the budget to reduce significantly based on the past few years have shown we cannot predict our policies and proposals set out in this Strategy. Initial future energy mix since global action can transform estimates of these new early stage policies and the cost and installation of different technologies, proposals show an additional potential reduction driving very different outcomes to those expected. of up to 30 MtCO2e and 80 MtCO2e over the fourth and fifth carbon budget periods respectively334; Other uncertainties include: these and other policies will be developed building Macroeconomic factors: such as population, on the proposals outlined in the Strategy. public employment, and gas prices. The Climate Change Act permits the Secretary of Policy impacts: How society will respond to State, at certain points in budgetary cycles, to decide incentives such as taxes or regulation. to “carry forward” our over achievements from previous budgetary periods or credit carbon units Evidence base: Scientific knowledge evolves to the net carbon account. These flexibilities may over time, as does our knowledge of technology be utilised to meet any shortfalls that crystalised335. performance. As is evident from the above table, there is currently Changing behaviours: Consumer and business sufficient projected surplus available to carry forward behaviour will evolve over time as new priorities to meet the fourth carbon budget and some of change and fashions develop. the fifth carbon budget; any shortfall that persists following any carry forward may be met through This is why we have used “pathways” for the purchase of international credits, subject to the each sector rather than specific estimates of requirements of the Climate Change Act. emissions reductions from individual policies, to make sure we take an approach that is robust The current projections are subject to significant to these uncertainties. uncertainty. For example, we cannot predict exactly what type and scale of global technical innovation 332 BEIS (2017) Energy and Emissions Projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 333 BEIS initial estimates of a subset of new early stage policies and proposals show an additional potential reduction of up to 30 Mt and 80 Mt over the fourth and fifth carbon budget periods respectively; these and other policies will be developed building on the proposals outlined in the Strategy. 334 BEIS initial estimates Chapter 2 sets out more detail on the Climate Change Act requirements Government will need to follow when taking any decisions on use of flexibilities to meet carbon 335 budgets. The Clean Growth Strategy 147 The 2032 pathway level of the fifth carbon budget336. In doing so, a marginal abatement cost curve (MACC) was This section provides further details on the estimated, indicating the extent, cost, and type impact of the economy-wide pathway presented of potential for available emissions reductions in Chapter 4 on UK emissions over the period opportunities. This is shown in Figure 33. to 2032. Our latest energy and emissions projections provide the starting point for Table 6 on the following page compares GHG developing the 2032 pathway set out in Chapter emissions in 2017, 2032 and over the fifth 3, and are based on our existing policies. carbon budget period based on a) projected emissions under existing (and past) policies, Emissions reductions beyond our existing and b) the 2032 pathway for meeting the fifth policies are then based on the maximum carbon budget set out in Chapter 4. theoretical potential for further abatement identified in the Impact Assessment for the Figure 33: Non-traded sector MACC showing maximum theoretical potential (central case, 2028-2032) Countryside stewardship Non-traded cost-effectiveness (£/tonne, 2015 prices) 800 Solid wall insulation 700 Increased recycling Heat pumps 600 Insulation and glazing Heat pumps Heat pumps HGV efficiency and ULEVs 500 Ventilation efficiency Heat recovery District heating 400 Car efficiency and ULEVs Heat pumps Livestock diets 300 District heating Van efficiency and ULEVs Biomass boiler 200 Energy forest 100 Heating controls Heating controls 0 50 100 150 200 250 300 350 400 450 500 550 Sustainable travel Cumulative non-traded carbon reductions, 2028-32 (MtCO2e) -100 Shift from pastoral to arable farming Ventilation efficiency Livestock health improvements Business, Industry & Public Sector -200 Homes Transport Natural Resources Source: DECC 336 DECC (2016) Impact Assessment for the level of the fifth carbon budget http://www.legislation.gov.uk/uksi/2016/785/impacts Section 3.3.4 148 Department for Business, Energy and Industrial Strategy Table 6: Direct337 greenhouse gas emissions by sector MtCO2e338 Current level Current policies339 2032 pathway Fifth Carbon Fifth Carbon 2017 2032 Budget 2032 Budget 2028-2032 2028-2032 Traded 70 63 317 54 283 Business and Non-Traded 46 37 192 30 158 Industry Total 116 100 509 83 441 Traded 0 0 0 0 1340 Homes Non-Traded 72 74 366 58 301 Total 72 74 366 58 302 Traded 2 2 10 2 10 Transport Non-Traded 115 103 516 81 435 Total 117 105 526 83 446 Traded 80 15 79 16 82 Power 341 Non-Traded 0 0 0 0 0 Total 80 15 79 16 82 Traded 0 0 0 0 0 Natural Non-Traded 66 53 265 41 215 resources Total 66 53 265 41 215 Traded 0 0 1 0 1 Public sector Non-Traded 8 8 41 4 22 Total 8 9 42 4 23 Traded 151 79 407 72 377 Non-traded 308 276 1,380 213 1,132 Total UK emissions 459 355 1,787 285 1,509 Total Assumed UK share of EU 590 590 ETS allowances342 UK Net Carbon Account (non-traded emissions 1,972343 1,722 plus UK share of EU ETS allowances) Source: BEIS, DfT, Defra and DCLG analysis 337 Direct emissions are those produced immediately within the housing sector, and exclude for example emissions from electricity generation. 338 Figures may not sum due to rounding 339 Beyond 2020, the emissions scenario for the power sector provides an illustration only. 340 Increase due to large-scale heat networks 341 Analysis of the power sector 2032 pathway is based on the BEIS (2017) Energy and Emissions Projections Reference scenario, 2016 https://www.gov.uk/ government/publications/updated-energy-and-emissions-projections-2016. The analysis additionally takes into account changes in electricity demand resulting from actions outlined in the 2032 pathway in energy-consuming sectors (e.g. transport, homes, industry). Furthermore, a number of model updates and improvements have been made regarding the electricity demand profiles of key technologies and how this demand might be shifted, the availability of electricity storage technologies, and assumed system operability requirements. 342 The UK Net Carbon Account is defined by UK Carbon Accounting Regulations. Current regulations require that emissions covered by the EU Emissions Trading System (Traded emissions) are included as being equal to the UK’s allocation of permits under the System, rather than actual UK territorial emissions. When setting the fifth carbon budget, this allocation was estimated to be 590 MtCO2e during the fifth carbon budget period. 343 Net carbon account as published in the BEIS (2016) Energy and Emissions Projections Reference Scenario prior to the additional analysis made on the power sector (see note above). The Clean Growth Strategy 149 Table 7: Non-traded emissions reductions during 2028-2032: Maximum theoretical potential, and the 2032 pathway344 Maximum theoretical potential for Non-traded sector emissions MtCO2e reducing non-traded emissions reductions resulting from the during 2028-2032 2032 pathway Business, Industry and public buildings 82 53 Homes 145 65 Transport 107 80 Natural resources 193 50 Total 527 248 Source: DECC, BEIS This evidence was combined with judgements Indicative annual range about the barriers to delivering emissions reductions, the rate at which low carbon Section 12 of the Climate Change Act 2008 options could be adopted and the timescales requires the Government to publish an of key decisions set out in the Decision indicative annual range for the net UK carbon Pathways annex. The pathway is based on account for each year over which the levels of our current expectations of the availability and carbon budgets are set. An indicative annual performance of low carbon options, but there range is a range within which the Secretary of is considerable uncertainty about how these State expects the amount of the net UK carbon will develop, and this is only one of several account for the year to fall. Table 8 shows plausible pathways. these ranges for the fifth carbon budget, taking account of the emissions savings implied by the The maximum theoretical potential for 2032 pathway. The range reflects uncertainty in emissions abatement across the UK economy emissions projections under existing policies. is compared with the emissions reductions in the 2032 pathway (relative to the central emissions projection) in Table 7. Table 8: Indicative annual range for the net UK carbon account, 2028-2032 (MtCO2e) Carbon Budget 5 2028-2032 Indicative net UK carbon account 2028 2029 2030 2031 2032 Upper Bound 382 381 372 363 358 Central 357 354 345 336 331 Lower Bound 343 341 331 324 319 Source: BEIS, DfT, Defra and DCLG analysis 344 DECC (2016) Impact Assessment for the level of the fifth carbon budget http://www.legislation.gov.uk/uksi/2016/785/impacts Section 3.3.4 150 Department for Business, Energy and Industrial Strategy Table 9: Costs and benefits of the 2032 pathway Capital and The incremental costs of installing and running low carbon technologies operating costs Finance costs The real social cost of providing finance for capital investments, which varies between sectors The value of lower energy use due to improved efficiency of energy consumption, or switching from fossil fuels Energy savings ort to low carbon alternatives The benefits associated with reduced emissions. Where emissions are covered by the EU ETS, this benefit Greenhouse Gas will be the avoided financial cost of purchasing EU emissions allowances. Reductions in non-traded emissions emissions impacts are valued using the Government’s non-traded carbon values Impacts on air The benefits associated with lower emissions of NOx, PM2.5 and other air pollutants detrimental to the quality health of individuals Other cost and These include the hassle cost to households for installing measures, benefits of shorter journey times due to benefits lower congestion, less noise pollution and warmer homes from energy efficiency improvements Positive economic value The impact assessment also set out the sensitivity of these estimates to a range of Delivering the 2032 pathway described in this underlying social and economic factors. These Strategy would result in a wide range of costs factors in particular included uncertainty and benefits as described in Table 9. These costs around technology costs, energy prices, and benefits can vary significantly. In particular underlying drivers of UK emissions, and non- they will depend on a wide range of social and cost barriers to delivery. economic factors such as growth in population and gross domestic product; they will depend on As noted, these estimates only provide an how innovation results in new and lower cost low illustration of the potential scale of impacts. carbon technologies; and importantly the costs The 2032 pathway shows what is considered and benefits will also depend on the precise possible through domestic action, although actions that are taken as a result of the Strategy. this is only one of several plausible pathways. As Government delivers its Clean Growth The extent of these costs and benefits is not Strategy and finalises policies, these will fully known at this point in time because they will be accompanied with their own impact depend on the final design of the policies and assessments where appropriate, which will proposals to meet carbon budgets. When setting set out the specific costs and benefits of the the fifth carbon budget an indicative set of costs proposals. and benefits were estimated and set out in the accompanying impact assessment345. Overall, it was estimated that meeting the fifth carbon budget through domestic action alone could be achieved with a net benefit to the UK of up to £5.5 billion over the fifth carbon budget period. 345 DECC (2016) Impact Assessment for the level of the fifth carbon budget http://www.legislation.gov.uk/uksi/2016/785/impacts Section 4.1 The Clean Growth Strategy 151 2050 pathways industry sector, making up around one-third of fuel demand. Around one in five buildings Developing our illustrative 2050 pathways use a largely low carbon district heat network. To explore the range of opportunities for the In this pathway carbon capture, usage and UK out to 2050 we have used UK TIMES, a storage (CCUS) technologies are not available, model of the whole UK energy and greenhouse which means there are no negative emissions. gas system (see further detail below). The Hydrogen production is very low and industry model allows us to explore different possible sector emissions are higher than in the other outcomes by considering the availability, two pathways. performance, feasible build rates, and costs Pathway 2: Hydrogen of existing and new technologies, as well as how the future economy might differ from This pathway sees a key role for low carbon today. This model has been developed by hydrogen in decarbonising our vehicles and the Government in partnership with University buildings. All cars and vans are fuelled by College London (UCL) over a number of years, hydrogen and the majority of buildings use a in consultation with many partners. hydrogen grid. Electricity and district heat still play a role in both residential and commercial/ There are many ways the 2050 target could be public buildings. Overall hydrogen production is met. To illustrate key potential technologies and around 700 TWh in 2050, with Steam Methane uncertainties we investigated three pathways Reforming and CCUS being the primary in depth. These three have all been deliberately generation method. The role for CCUS in this selected to illustrate a wide range of possible pathway is greater than the other pathways pathways; for example, from 100 per cent with over 170 MtCO2e being captured and battery electric cars to 100 per cent hydrogen stored in 2050. Because hydrogen is the fuel cell cars. However, different pathways main energy source for heating and transport, within this range, and beyond this range, electricity demand and therefore generation is are also possible. All three 2050 pathways lower than the other pathways at around 340 are consistent with the sector emissions TWh (around the same level as today). levels in the 2032 pathway presented in this Strategy. They do not represent the most likely Pathway 3: Emissions removal or preferred pathways to meeting the 2050 target, but show that the 2032 pathway would This pathway illustrates the role that a negative leave open a wide range of options for 2050. emissions technology (in this case bio-energy with carbon capture and storage) could play A detailed overview of the three pathways in meeting the 2050 target. Here negative is given below, together with an explanation emissions in the electricity sector of around 20 of the methodology used to develop these MtCO2e create “headroom” for other sectors pathways. such as transport, buildings and agriculture to decarbonise more slowly. In this pathway Details of the three 2050 pathways total electricity generation is around 570 TWh. Pathway 1: Electricity Around four of every five cars and vans on our roads are electric and three in every five This pathway sees UK electricity generation buildings are heated by low carbon electricity. increasing to around 650 TWh in 2050. All Around one in every five buildings uses a cars and vans are electric and four in five largely low carbon district heat network. buildings use electric heating. Electricity is also the main low carbon energy source to the 152 Department for Business, Energy and Industrial Strategy Table 10: Characteristics of the 2050 pathways in 2050 Pathway 1: Pathway 2: Pathway 3: Electricity Hydrogen Emissions removal Emissions (MtCO2e) 3 1 1 Non-industrial Share of district heat use in heating (per cent) 17% 24% 18% business and public sector Share of electricity use heating (per cent) 83% 13% 80% Share of hydrogen use in heating (per cent) 0% 56% 0% Emissions (MtCO2e) 58 59 48 Share of electricity use (per cent) 33% 23% 30% Industrial Share of hydrogen use (per cent) 0% 32% 28% business Share of bioenergy use (per cent) 20% 15% 9% Captured emissions from industrial businesses (MtCO2e) 0 165 37 Emissions (MtCO2e) 8 6 19 Share of district heat use in heating (per cent) 17% 17% 17% Homes Share of electricity use in heating (per cent) 76% 14% 60% Share of hydrogen use in heating (per cent) 0% 62% 0% Emissions (MtCO2e) 3 5 15 Share of car and van km in battery electric vehicles 100% 0% 85% (per cent) Transport Share of car and van km in hydrogen fuel cell electric 0% 100% 0% vehicles (per cent) Share of HGV km in zero emission vehicles (per cent) 55% 19% 93% Emissions (MtCO2e) 4 3 -22 Power Electricity generation (TWh) 647 339 572 Share of clean electricity generation (per cent) 99% 99% 99% Natural Emissions (MtCO2e) 46 46 60 resources Aviation and Emissions (MtCO2e) 44 44 44 shipping346 Total Emissions (MtCO2e) 165 165 165 346 Includes domestic and international aviation and shipping, in line with advice from the Committee on Climate Change. CCC (2015) Sectoral scenarios for the fifth carbon budget https://www.theccc.org.uk/publication/sectoral-scenarios-for-the-fifth-carbon-budget-technical-report/ The Clean Growth Strategy 153 Overview of the methodology used to Second, it confirms all of the pathways are develop 2050 pathways consistent with meeting the 2050 and fifth carbon budget emissions reduction targets. The 2050 analysis uses UK TIMES, a model of the whole UK energy and greenhouse gas The modelled pathways were constructed in system covering the period 2010 to 2060347. UK TIMES by varying input assumptions for: The model identifies the least cost technology pathway capable of both producing an • Availability of technologies. For example, assumed set of outputs (e.g. industrial output, CCUS is not available in pathway 1 and space heating, and passenger distances negative emissions technologies are only travelled) and an emissions reduction profile. available in pathway 3. The technology pathway identified by the model • The extent or speed at which technologies will vary according to the input assumptions can be rolled out e.g. faster growth in for technology and resource performance, hydrogen production is allowed in pathway cost and availability. The model can also be set 2, whilst expansion of electric heating is up to roll out specific technologies in line with more restricted. a given deployment profile. When the model is used in this way it will take account of the • Entering fixed deployment profiles for some deployment profiles for specific technologies, technologies e.g. 100 per cent of cars and and identify the least cost mix of remaining vans are set to be powered by electricity or options. hydrogen in pathways 1 and 2 respectively. The 2050 pathways analysis has two primary Other assumptions were kept the same across objectives. the pathways. For instance the consumption and output projection assumptions are First, it examines three substantially different consistent with current official economic “pathways” of economy-wide decarbonisation growth and population projections and were to understand the range of possible long-term the same for each of the modelled 2050 outcomes. pathways. Technology and resource costs Through previous modelling, research and and performance assumptions were also kept external engagement, BEIS has identified the same and sector emissions were aligned the three areas of technology and resource to those in the 2032 pathway described in uncertainty likely to have a big impact on the this Strategy. 2050 energy system. The pathways were then Impact of international aviation and developed in consultation with internal sector shipping on 2050 emissions experts to illustrate potential futures based on contrasting roles for these factors: International aviation and shipping emissions are not currently included within the UK’s targets • The role of electrification; under the Climate Change Act. However, • The role of hydrogen; carbon budgets have been set in a way that takes these emissions into account – the UK • The role of bioenergy production with CCUS is on a trajectory that could be consistent with to produce ‘negative emissions’. a 2050 target that includes emissions from international aviation and shipping. 347 For this analysis, model version v1.2.3_d0.6.0_DNP has been used. 154 Department for Business, Energy and Industrial Strategy The Government has not reached a final view This scenario for gross UK aviation emissions on the appropriate level of international aviation above the CCC planning assumption provides and shipping emissions in 2050. The CCC in a useful basis for a sensitivity test. Our analysis their advice on the fifth carbon budget advised shows that it is possible to meet the 2050 target leaving space in the 2050 target of around under the Climate Change Act domestically 41 MtCO2e. This has been the modelling if aviation emissions are 44 MtCO2e350 – this assumption used throughout this Strategy348. is the case for our three pathways to 2050. Further action could be taken after the fifth We have undertaken sensitivity analysis to test carbon budget in order to offset these higher the potential impact of higher or lower aviation aviation emissions through action elsewhere emissions on how the UK could meet its 2050 in the UK. The action taken in the remaining target (focusing on aviation emissions as they UK sectors depends on the wider pathway are greater than shipping emissions). to 2050. There are a number of policy measures Consideration of wider circumstances available, both at the domestic and international levels, to address aviation emissions. It is likely The Climate Change Act requires the that a combination of approaches and policy Government to take into account a range measures will be required. Examples of action of factors in developing its plan for meeting available to countries include: international carbon budgets. These factors are discussed level action to tackle aviation emissions throughout the Strategy and its annexes. For (such as through international standards and a number of these factors it is not currently offsetting schemes) and domestic action to possible to know the full impacts as these will tackle aviation emissions (such as through depend on the detailed design of the individual support for sustainable alternative fuel uptake policies that will be developed in the coming in aviation or improved operational efficiency). years as the Strategy is delivered. We have explored the feasibility of taking Nevertheless, it is possible to estimate the nature domestic policy action to offset aviation of potential impacts and the considerations emissions to 2050 above the CCC planning that will need to be made as policies are assumption. We have analysed a scenario developed. In delivering the Strategy, the from the Airports Commission’s (AC) work on Government will undertake analysis to inform aviation capacity. For the case of expansion policy development. Where appropriate, impact at Heathrow (a new northwest runway), the assessments supporting the policy design will AC estimated UK gross aviation emissions in be produced. its “carbon traded” scenario to be around 44 MtCO2e in 2050349. CCC (2015) Sectoral scenarios for the fifth carbon budget https://www.theccc.org.uk/publication/sectoral-scenarios-for-the-fifth-carbon-budget-technical-report/. 348 The CCC’s central scenario allows 37.5 MtCO2e for aviation emissions in 2050, of which 36.2 MtCO2e 349 The AC used two scenarios – one called “carbon capped”, and one called “carbon-traded”. In the “carbon-capped” scenario, the AC’s analysis showed that policies are available to limit UK aviation emissions to the CCC planning assumption of 37.5 MtCO2e in 2050 (domestic and international). In the “carbon traded” scenario, there is a global carbon market allowing reductions to be made where they are most efficient across the global economy resulting in UK aviation emissions of 44 MtCO2e (domestic and international). 350 47 MtCO2e total international aviation and shipping emission assumed in this scenario The Clean Growth Strategy 155 Economic circumstances Fiscal circumstances Impacts on growth and competitiveness of the Impacts on taxation, public spending, and UK economy can arise through a number of public borrowing can arise for a number of channels, as a result of actions taken to deliver reasons: the Strategy. These arise due to: • The Government currently provides financial • Impacts on the timing and scale of support for the take-up of low carbon investment spending; technologies. Changes to existing policies or new policies may affect this expenditure; • Impacts on business output resulting from improvements in energy efficiency, and • Impacts on GDP, for the reasons set out changes in expenditure on capital assets; above, can affect tax revenues; • Reorientation of consumption patterns away • Behaviour change can affect revenues from emissions-intensive products and relating to environmental taxes (e.g. landfill towards more energy-efficient products; tax); • Impacts from changes to energy prices as • Decisions may be taken in the future with a result of energy demand changes, and regards to the wider tax system to take any changes in the costs of policy delivery account of the broader fiscal position. mechanisms included in energy bills; Social circumstances • Long-term benefits from innovation, including the development of nascent Delivering the Strategy may have impacts on industries, associated spillover benefits into fuel poverty in the UK and its nations. The other sectors, and the increase in exports UK Government has a statutory target to of knowledge and new technologies; raise as many English fuel poor homes as is reasonably practicable to energy efficiency • Indirect effects on growth through changes Band C by 2030, with milestones of Band E in exposure to energy price volatility and by 2020 and Band D by 2025. The Devolved supply disruptions; Administrations in Scotland and Wales have separate legal fuel poverty targets. • Transition costs that could materialise, for example the potential impact of stranded The pathway set out in the Strategy could assets and any transitional unemployment; affect fuel poverty through a number of and channels. These include impacts on energy prices, impacts on the energy needs of • Multiplier effects associated with the households through improved building fabric, above impacts, including any impacts on and changes in the way heat is supplied. We employment. will assess the impact on fuel poverty as part The Government has undertaken analysis of the implementation of the individual policies to assess the likely range of impacts from outlined in the Strategy. meeting the range of budgets. This analysis was undertaken in order to inform the setting of the fifth carbon budget and is set out in section 4.1 of the impact assessment. 156 Department for Business, Energy and Industrial Strategy Energy policy and energy supplies per million pounds of GDP in 2032, under the EEP 2016 reference emissions scenario based Energy security is about ensuring secure, on existing policies. In the 2032 pathway, reliable, uninterrupted supplies to consumers, energy intensity could be as low as 548 MWh and having a system that can effectively and per million pounds of GDP by 2032. efficiently respond and adapt to changes and shocks. It is made up of three characteristics: Delivering the 2032 pathway would result flexibility, adequacy and resilience. The in changes in fuel consumption across the Government is committed to ensuring there whole economy, with estimated impacts set are secure supplies for consumers whatever out in Table 11. In total, the 2032 pathway the energy mix. would reduce final consumption by around 13 per cent in 2032 relative to projected energy The energy intensity of the UK economy has consumption under existing policies, as a fallen significantly since 1990 and this trend result of further improvements in fuel efficiency. is expected to continue. The energy intensity The reduction in fossil fuel consumption will of the UK economy in 1990, as measured help improve energy security but the pathway through final energy demand, was 1,530 is also characterised by a shift from end-user MWh of energy per million pounds of GDP. fossil fuel consumption towards biomass and In comparison, the energy intensity of the UK electricity. economy is projected to be around 630 MWh Table 11: Change in annual final energy consumption in 2032, relative to the existing policies scenario Potential saving (-) or additional Percentage impact relative to consumption (+) in 2032 (TWh/year) existing policies Electricity +14 +4% Gas -124 -23% Coal -6 -38% Oil -126 -25% Bioenergy +28 +29% Total -215 -14% The Clean Growth Strategy 157 The capacity mechanism will use competition Sustainability (including the impact on to find the most cost-effective mix of natural capital) technologies to ensure we have sufficient reliable capacity to meet electricity demand. Section 13(3) of the Climate Change Act 2008 states that proposals and policies for meeting The power sector’s response to these carbon budgets must, when taken as a whole, changes in demand has been modelled using ‘be such as to contribute to sustainable BEIS’s Dynamic Dispatch Model (DDM)351. All development’. Tackling climate change is other things being equal increased electricity essential for maintaining a healthy, resilient natural consumption results in overall increases in the environment, and the Government is committed marginal costs of power supply, due to the to ensuring that the value of nature is appropriately need to dispatch more expensive generating reflected in all relevant policy decisions. technologies to meet consumption. The precise impacts depend on a range of factors, Actions taken to meet our carbon budgets can including the technology mix, technology create both risks and opportunities relating costs, and fossil fuel and carbon prices. to the quality of our environment. We refer to the stocks of natural assets (e.g., forests, While electricity consumption is lower than the clean air, soils, species, freshwaters, oceans reference case projections (existing policies) in and minerals) that provide flows of natural the early 2020s, over the fifth carbon budget resource inputs and ecosystem services as as a whole 1.5 per cent more electricity is natural capital. Government set up the Natural used. This is met through additional supply Capital Committee (NCC) in 2012 to advise it from clean generation, gas generation and on the sustainable use of natural capital, and interconnection. how the services provided by, and risks to, natural assets can be better accounted for A smarter electricity system reduces the and valued in decision-making. This thinking is additional capacity and costs from higher informing revisions to the HM Treasury Green electrification of transport and heat through Book to ensure a structured and consistent deploying energy storage technologies, approach to assessing impacts on natural and shifting electric vehicle charging and capital in policy appraisal. heat pump demand. Smart flexibility and technologies have the effect of reducing To produce an assessment of natural capital electricity consumption at peak times and impacts for the Strategy, a screening exercise shifting consumption to times when overall was conducted to identify which policies and consumption is lower and more low-cost proposals might be expected to have natural electricity generation capacity is available. capital impacts. For these an assessment framework was designed to ensure that potential impacts on natural capital assets and their services were considered in a consistent way. Assessments prompted consideration of the spatial effects of each measure, the timeframe of these effects and a range of environmental assets that could be affected. 351 DECC (2014) Dynamic Dispatch Model https://www.gov.uk/government/publications/dynamic-dispatch-model-ddm 158 Department for Business, Energy and Industrial Strategy The detail of the assessments showed that The work also highlighted the need to consider impacts can vary depending on the context natural capital impacts across groups of and policy approach which is important to policies. These considerations will be taken consider when developing policy. forward as specific measures are designed and appraised in detail in accordance with Important risks and opportunities identified Green Book guidance. included: Assumptions and evidence base • Increasing forestry cover can have a number of benefits to natural capital The analysis of the 2032 and 2050 pathways including creating new habitats for are underpinned by a common set of animals and reducing flood risk. Likewise assumptions about future economic and changes to farming practices can reduce demographic trends, which align with those the demands placed on natural resources used for the 2016 Energy and Emissions and aid biodiversity. However, context is Projections352. The EEP 2016 Reference very important when changing land use. scenario, representing future emissions under For example, benefits vary by species the UK’s current suite of climate policies, is of tree planted, or the previous use of also used as the reference for GHG emissions land converted to produce less emission and energy consumption in each sector. The intensive crops. analysis uses assumptions about future energy prices, published as part of supplementary • Transport sector measures such as Green Book appraisal guidance. the deployment of ULEVs may provide significant opportunities to reduce Wherever possible technical assumptions emissions of harmful air pollutants including on costs, performance and availability of Particulate Matter (PM) and nitrous oxides. technologies have been aligned between the There are also potential benefits in less UK TIMES model used for the 2050 pathways pollution running off from road and reduced analysis and the models used to for the 2032 noise levels. pathway analysis, although due to differences in modelling approaches there are some minor • Burning biomass for heat or power and differences. biofuels for transport can create some harmful emission including Particulate Matter (PM) and Volatile Organic Compounds (VOCs). More broadly, while there are some risks, there are significant opportunities to both reduce greenhouse gas emissions while also reducing harmful air pollutants. 352 BEIS (2017) Updated energy and emissions projections 2016 https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 The Clean Growth Strategy 159 Evidence base Commercial and public buildings: 2032 pathway analysis was based on the BEIS Non-domestic Building model using evidence from the Digest of UK Energy Statistics, Energy and Emissions Projections, ECUK and the Building Energy Efficiency Survey (BEES) to estimate heating, cooling and ventilation demand to 2032. Technology evidence was taken from BEES; RHI statistics and an interim heat pump performance report; an AECOM report on heat network costs and performance; and cost data from Heat Networks Delivery Unit (HNDU) sponsored projects. The Products Policy model was used for ventilation scenarios. For the 2050 pathways additional assumptions were taken from Carbon Trust; Valuations Office Agency and Poyry. Industry: The 2032 pathway was developed using BEIS Industry Pathways Models, split into eight industry sectors. A capital cost uplift of 10 per cent has been applied in the 2032 analysis to reflect potential hidden costs of delivering measures. For iron and steel, paper, cement and a part of chemicals actual production steps are modelled, using evidence from the Usable Energy Database353. The remaining sectors (other chemicals, non-metallic minerals, non-ferrous metals, food and drink and ‘other’ industry) are split into the different energy service demand categories (e.g. high temperature heat, low temperature heat) and generic technologies that produce these types of energy are modelled. Assumptions for these sectors are mainly based on UK MARKAL. Evidence from the Government’s 2050 Industrial Decarbonisation and Energy Efficiency Roadmaps, published in 2015, was incorporated into the modelling; in particular, the timing and extent of technologies deployed in the 2032 pathway analysis. Transport: The 2032 pathway was developed using the Department of Transport’s National Transport Model (NTM)354 for road measures and the Rail Emissions Model for rail measures. The NTM forecasts emissions and traffic accounting for impacts on vehicle fuel efficiency and fuel mix. The ECCo model was used to develop uptake scenarios for Ultra Low Emissions Vehicles. Impacts of sustainable travel measures were based on evidence from the evaluation of the Sustainable Travel Towns355. The NTM covers Great Britain, so an uplift has been applied to account for transport emissions from Northern Ireland. This is the standard approach taken by DfT. For 2050 pathways analysis, nine vehicle groups are represented (e.g. car, bus, lorry), each with different types of vehicle choice (e.g. electric or hydrogen). Car and LGV assumptions were based on Element Energy’s ECCo Cost and Performance Database; HGV assumptions from a Ricardo report to the CCC (A review of the efficiency and cost assumptions for road transport vehicles to 2050); and maximum growth and delivery rate assumptions from DfT/ University College London (UCL). 353 UKERC Energy Data Centre, Industrial Energy use: http://tinyurl.com/k8nohc7 354 DfT (2012) Transport appraisal and modelling tools https://www.gov.uk/government/collections/transport-appraisal-and-modelling-tools 355 Sloman et al. (2010) The effects of smarter choice programmes in the sustainable travel towns: research report https://www.gov.uk/government/publications/ the-effects-of-smarter-choice-programmes-in-the-sustainable-travel-towns-full-report 160 Department for Business, Energy and Industrial Strategy Domestic buildings: The 2032 pathway for existing buildings covers energy efficiency, heating technologies, heat networks, and behaviour change. The pathway was developed through the BEIS Domestic Buildings Scenario Model. Cost and performance assumptions for energy efficiency and heat measures is based on published analysis for the Renewable Heat Incentive (RHI) and Energy Company Obligation. For new homes, build rate assumptions were taken from the 2015 Housing Standards Review Impact Assessment, and impacts of low carbon heat measures was based on analysis conducted by an AECOM-led consortium. Additional assumptions for the 2050 pathways analysis are taken from UCL, Office of National Statistics (ONS) and Energy Consumption in the UK (ECUK). Power: The power sector’s response to the changes in demand under the 2032 pathway has been modelled using BEIS’s Dynamic Dispatch Model356. The DDM is a comprehensive fully-integrated power market model covering the market in Great Britain over the medium to long-term. The model enables analysis of electricity dispatch from GB power generators and investment decisions in generating capacity from 2010 through to 2050. It considers electricity demand and supply on a half-hourly basis for sample days. Investment decisions are based on projected revenue and cash flows taking into account policy impacts and changes in the generation mix. The full lifecycle of power generated plant is modelled, from planning through to decommissioning. The modelling accounts for risk and uncertainty involved in investment decisions. UK TIMES 2050 modelling uses the same technology assumptions as the DDM where possible, and also includes additional evidence from UCL, National Grid, EPRI and Carbon Trust. Agriculture and land use: Agriculture: Evidence has been scaled from England to cover all of the UK Greenhouse Gas Emissions Inventory for England, Scotland, Wales and Northern Ireland (1990-2015). The scaling factor is based on a five-year average of the national contributions to overall agricultural emissions from the national inventory report (the 2014 common reporting format tables). From that data the average English contribution to agricultural GHGs is 63 per cent and estimates are scaled up on this basis. Forestry: Emissions reductions are projected using an off-line version of the CARBINE carbon accounting model with policy specific mixes of woodland types. Biomass supply from relevant harvest fractions are included in the scenario analysis, but carbon storage and emissions reductions associated with the use of harvested wood products are not. This evidence has been scaled from England to cover all of the UK, based on both the share of current and historical activity357 and afforestation scenarios developed with DA forestry leads through the LULUCF GHG inventory and projections project funded by the BEIS Science team. Soils: The 2032 pathway analysis for England uses analysis of the potential GHG savings from different types of peatland restoration. Emission reductions are estimated using preliminary findings from an forthcoming BEIS-funded research project combined with cost data from the peatland code, agri-environment payments and reports for the CCC Adaptation sub-Committee. In order to cover the UK as a whole the England-only data has been scaled based on estimates of total UK peatland area. Agriculture and land use is represented in the 2050 pathway analysis by applying a fixed emissions profile with a series of mitigation options available. This profile combines components from land use, crops and livestock. 356 DECC (2014) Dynamic Dispatch Model https://www.gov.uk/government/publications/dynamic-dispatch-model-ddm 357 Forestry Commission (2017) Forestry Statistics https://www.forestry.gov.uk/forestry/infd-7aqdgc The Clean Growth Strategy 161 Waste: The emission saving from waste in the 2032 pathway has been informed by a variety of sources. Food waste prevention savings are based on WRAP analysis associated with the Courtauld Commitment 2025. Landfill diversion was based on Defra’s Routemap. Projections of waste arising are a key input to the model. Landfill gas capture and oxidation assumptions were developed in an expert elicitation exercise with the Environment Agency. Cover the UK as a whole, the England only data has been scaled based on the Greenhouse Gas Emissions Inventory for England, Scotland, Wales and Northern Ireland (1990-2015). Economic growth and demographic changes: The 2032 pathway analysis used the same growth assumptions as the 2016 Energy and Emissions projections. In the UK TIMES model used for 2050 pathway analysis, there are 60-plus growth drivers which are exogenous to the model and based on a variety of assumptions including: BEIS Energy Demand Model outputs, GDP growth assumption, ONS population growth, Department for Communities and Local Government (DCLG) household projections and Department for Transport (DfT) transport driver estimates. Fossil fuel prices: Fossil fuel prices assumptions are based on the BEIS Fossil Fuel Price Assumptions 2016358. Carbon Values: The Government’s current approach to carbon valuation was adopted in 2009 based on a “target-consistent” methodology. This is set out here https://www.gov.uk/ government/collections/carbon-valuation--2. Aviation and Shipping (A&S): The CCC planning assumption is used to set the aviation and shipping “headroom” level in 2050. Domestic aviation and shipping is modelled as part of carbon budgets leading up to 2050. Bioresource: Bioresource availability is based on the Bioenergy Feedstock Availability Model359. The assumed land area available for energy crops has been limited by excluding a wide range of sensitive sites on both landscape and biodiversity grounds. Domestic and imported bioresource costs are from a range of sources including CCC, E4tech, Carbon Trust and Nix Farm Management. Air quality: Air quality emissions factors are provided by the National Atmospheric Emissions Inventory and Aether. Air quality damage costs are consistent with COMEAP guidance on air pollution. Hydrogen: Hydrogen assumptions were developed by University College London360. The costs are based on the assumption that a new network would need to be built to allow heating to be supplied by hydrogen. EU ETS: Assumptions for the UK’s share of EU ETS allowances are aligned with the levels assumed at the time of setting the respective budgets. These are 1,078 MtCO2e (second carbon budget); 985 MtCO2e (third); 690 MtCO2e (fourth); and 590 MtCO2e (fifth). 358 BEIS (2016) Fossil Fuel Price Assumptions 2016 https://www.gov.uk/government/publications/fossil-fuel-price-assumptions-2016 359 BEIS (2017) The UK and global bioenergy resource model 360 Dodds PE, Mcdowall, W. (2012) A review of hydrogen production technologies for energy system models http://discovery.ucl.ac.uk/1402719/ 162 Department for Business, Energy and Industrial Strategy Source information for metrics see Annex D: Changes that illustrate how our pathway could be delivered Overarching: Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics361 and 2032 pathway analysis. Population data (historical and projected) are sourced from the Office for National statistics (2017)362. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics (DUKES)363 and 2032 pathway analysis. Gross Domestic Product (GDP) estimates to 2015 are taken from the Office for National Statistics364. Emissions and energy use projections are based upon BEIS (2017) Energy and Emissions Projections 2016365. GDP projections are taken from the Office for Budget Responsibility (OBR) Economic and Fiscal Outlook November 2016. Business and public sector: Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics and 2032 pathway analysis. Output gross value added (GVA) estimates for services and industry are sourced from the Office for National Statistics on a constant price basis366. There are no official projections of output GVA; estimated trends have been made consistent with assumptions used in BEIS (2017) Energy and Emissions Projections. Homes: Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data are taken from the BEIS (2016) Digest of UK Energy Statistics and 2032 pathway analysis. UK Household historical estimates have been taken from BEIS (2017) Energy Consumption in the UK367 with projections sourced from BEIS (2017) Energy and Emissions Projections 2016, both of which are consistent with DCLG household modelling. Transport: The road transport metrics cover cars, vans and freight only. Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Energy data for road transport are taken from BEIS (2016) Energy Consumption in the UK, consistent with DUKES. Projected energy estimates are taken from the 2032 pathway analysis. Road transport demand estimates (in vehicle kilometres) are taken from DfT (2017) Road Traffic statistics368 (Table TRA0201) and 2032 pathway analysis. 361 BEIS (2017) Final GHG Emissions Inventory Statistics, https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-2015 362 ONS (2017) population and migration statistics, https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration 363 BEIS (2016) Digest of UK Energy Statistics, https://www.gov.uk/government/collections/digest-of-uk-energy-statistics-dukes Office for National Statistics (2017), Gross Domestic Product: chained volume measures: https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ 364 abmi/pn2 365 BEIS (2016) Energy and Emissions Projections, https://www.gov.uk/government/publications/updated-energy-and-emissions-projections-2016 ONS (2016) Annual and quarterly low level aggregates of UK output gross value added (GVA), https://www.ons.gov.uk/economy/grossdomesticproductgdp/ 366 datasets/ukgdpolowlevelaggregates/current 367 BEIS (2017) Energy Consumption in the UK, https://www.gov.uk/government/statistics/energy-consumption-in-the-uk 368 DfT (2017) Road Traffic Statistics, www.gov.uk/government/organisations/department-for-transport/series/road-traffic-statistics The Clean Growth Strategy 163 Power: Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Low carbon generation data are taken from BEIS (2016) Digest of UK Energy statistics, chapter 5, with projections sourced from 2032 pathway analysis. Natural Resources: Emissions estimates for these metrics are taken from the BEIS (2017) GHG emissions statistics and 2032 pathway analysis. Estimates of biodegradable waste to landfill are taken from the Defra (2017) Digest of Waste and Resource statistics369 and 2032 pathway analysis. Estimates of total conventional woodland cover are sourced from the Forestry Commission’s (2017) Forestry statistics370 and 2032 pathway analysis. Output gross value added (GVA) estimates for agriculture are sourced from the Office for National Statistics on a constant price basis. There are no official projections of output GVA; Defra analysts have estimated future GVA based on historic trends. 369 Defra (2017) digest of waste and resource statistics, https://www.gov.uk/government/collections/digest-of-waste-and-resource-statistics 370 Forestry Commission (2016) Forestry Statistics, https://www.forestry.gov.uk/forestry/infd-7aqdgc 164 Department for Business, Energy and Industrial Strategy Image references Page 4, Burbo Bank offshore wind farm Page 20, Construction of the Blyth offshore wind farm Page 29, Mathioya site for mini-hydro plant in West Kenya Page 30, Gateshead combined heat and power (CHP) plant Page 38, Engineer in wind turbine nacelle Page 46, Electric taxi factory, Coventry Page 55, BBOXX staff, Rwanda Page 60, Electric vehicle charging point Page 63, Crane in Felixstowe port equipped with CRESS technology Page 67, Anglian Water installation Page 70, Power plant with NET Power technology installed Page 81, Econovate recycled waste blocks Page 88, Sue Bentley and her electric car Page 90, Installed articulated vehicle trailer design by The Centre for Sustainable Road Freight at the University of Cambridge Page 96, Oxis Energy laboratory Page 98, Clayhill solar farm Page 105, Manchester City of Trees planting scheme at Snipe Clough, Oldham, Greater Manchester Page 109, Recycling Technologies equipment Page 116, Dryden School, Gateshead Page 119, Cornwall County Council community renewable project Page 120, Loft insulation being installed Page 124, UK landscape and town