Net Zero Strategy: Build Back Greener

2030. We have committed over £12 billion of domestic green investment since March 2020, and have doubled our International Climate Finance commitment to £11.6 billion between 2021-2025. This Strategy sets out the next steps we will take to cut our emissions, seize green economic opportunities, and leverage further private investment into net zero. The policies and spending brought forward in the Net Zero Strategy mean that since the Ten Point Plan we have mobilised over £26 billion of government capital investment for the green industrial revolution. Along with regulations, this will support 190,000 jobs by 2025, and 440,000 jobs by 2030, and leverage up to £90 billion of private investment by 2030. This will put us on an ambitious path to meet our Sixth Carbon Budget and our Nationally Now is the time the world needs to go further Determined Contribution, cutting emissions and faster to tackle climate change. The UK is by at least 68% by 2030 on 1990 levels, and stepping up to that challenge. Here we set out reaching net zero by 2050. our ambitious strategy – the first of its kind in We know economic growth and reducing the world of a major economy - to create new emissions can go hand-in-hand. As jobs, develop new industries with innovative we continue to build back better from new technologies and become a more energy the COVID-19 pandemic, we will fuel a secure nation with clean green British energy. Green Industrial Revolution, creating jobs At the same time we will reduce greenhouse and business growth opportunities, and gas emissions across the economy to reach establishing the UK as a global leader in the net zero by 2050. technologies to tackle climate change. We will deliver the commitments in the Prime Minister’s Ten Point Plan and Build Back Better: our plan for growth, and go further to build a resilient economy and level up the UK. 10 Foreword from the Secretary of State for Business, Energy & Industrial Strategy The changes will have wider benefits for across local and national government, the public and businesses alike. We will all the Devolved Administrations, and with enjoy cleaner air, increased biodiversity and businesses and civil society organisations. And improved access to green spaces. We will we will make it easier and fairer for individuals, see greater efficiency in the way we travel businesses and households to decarbonise, and heat our buildings, which will be better so that our whole society can work together to protected from more extreme weather events. reduce emissions. This strategy demonstrates We will also put consumers at the heart of how the UK is leading by example, with a clear this transition, helping them make their homes plan for the future. warmer, more efficient, and ensure that they pay a fair, affordable prices for their energy. The Rt Hon Kwasi Kwarteng Secretary of State for Business, Energy & But we cannot tackle climate change alone. Industrial Strategy We will take a coordinated approach, working 11 Net Zero Strategy: Build Back Greener Executive Summary 13 Net Zero Strategy: Build Back Greener What is net zero and why do we need to act? From heating our homes to filling up our cars, But the good news is that there is, still, a path burning fossil fuels releases the greenhouses to avoid catastrophic climate change. The gases that increase global temperatures. science could not be clearer: by the middle of We are already seeing the effects here in this century the world has to reduce emissions the UK, with devastating floods in the West to as close to zero as possible, with the small Midlands in January and torrential downpours amount of remaining emissions absorbed submerging London Underground stations through natural carbon sinks like forests, earlier this summer. and new technologies like carbon capture. If we can achieve this, global emissions of People are rightly concerned, with the latest greenhouse gases will be ‘net zero’. IPCC report showing that if we fail to limit global warming to 1.5°C above pre-industrial Delivering this requires urgent global action, levels, the floods and fires we have seen including ending coal fired power generation, around the world this year will get more retiring petrol and diesel engines from all cars, frequent and more fierce, crops will be more and halting deforestation. These are the steps likely to fail, and sea levels will rise driving that the UK is calling for at COP26, the global mass migration as millions are forced from climate change talks in Glasgow next month. their homes. Above 1.5°C we risk reaching climatic tipping points like the melting of arctic permafrost – releasing millennia of stored greenhouse gases – meaning we could lose control of our climate for good. 14 Executive Summary Why should the UK act first? Since 1990 the UK has almost halved our The question is whether the new clean greenhouse gas emissions. Thanks to the machinery of the net zero future will be efforts of successive governments, we are “made elsewhere” or “made in Britain”. By almost half-way to ending the UK’s domestic moving first, the UK can get ahead of the contribution to man-made climate change, pack and make the birthplace of the industrial and in 2019 the UK became the first major revolution the home of the new Green economy in the world to legislate to finish the Industrial Revolution. job with a binding target to reach net zero emissions by 2050. Indeed, as we produce more of our own electricity – from wind farms in the North Sea We are proud to lead the world in ending and state-of-the-art British nuclear reactors our own contribution to climate change, – families will be much better protected not just because it is the right thing to do, from energy price spikes caused by volatile but because we are determined to seize international fossil fuel markets. At the same the unprecedented economic opportunity it time, by getting ahead of the curve in driving brings. We want to build back better from down the costs of the latest clean technology, the pandemic by building back greener and more consumers will enjoy more efficient cars levelling up our country with new high skilled, and heating systems sooner. Furthermore, high wage, sustainable jobs in every part of by accelerating the deployment of cheap our United Kingdom. renewable power, and rolling out further energy efficiency measures, government Removing dirty fossil fuels will require the decarbonisation policies mean that the transformation of every sector of the global average consumer energy bill in 2024 will likely economy. It means no longer burning fossil be cheaper than it would otherwise have been. fuels for power or heating; it means new ways of making concrete, cement, steel; it means We have shown the world that green and the end of the petrol and diesel engine. These growth go hand in hand, and as a result other changes are already beginning to happen. countries are already following our lead with Renewable energy is now the cheapest source their own net zero targets. When the UK was of power across two-thirds of the globe. confirmed as host of COP26, less than 30% Clean, cheap power is already driving the of global GDP was signed up to net zero or decarbonisation of heavy industry around the carbon neutrality targets. Today, in part again world. Almost all major car companies are because of UK leadership, that figure is now now developing or producing zero emissions over 80% – and rising. vehicles as battery technology improves and costs reduce. 15 Net Zero Strategy: Build Back Greener The Ten Point Plan for a Green Industrial Revolution Last year, the government kick-started its need for these new high wage green jobs, mission to get ahead of the pack, by setting though our Lifetime Skills Guarantee, and we out a Ten Point Plan for a Green Industrial are helping investors to access capital for Revolution. Our ambition was to create the green projects by making the City of London conditions for the private sector to invest with the global centre of Green Finance. confidence, unleashing the unique creativity of capitalism to generate and grow new At the Global Investment Summit in October green industries. 2021, the Prime Minister announced a package of 18 deals worth £9.7 billion that will We mobilised £12 billion of government support green growth and create an estimated investment, shared some of the risks of 30,000 UK jobs. This is on top of the £5.8 pioneering new industries, and began to billion already committed for sustainable introduce regulations to assure industry of the projects since the Prime Minister launched his future demand for green products – such as Ten Point Plan in November 2020. Now we through our decision to end the sale of new need to build on this progress with a strategy petrol and diesel cars by 2030. We have also to take us to net zero by 2050. invested in the skills the British workforce will Our Strategy for Net Zero Since 1990 the UK has reduced our 3. We will ensure that the most vulnerable greenhouse gas emissions by 44%, while are protected through Government support growing our economy by over 75%. This in the form of energy bill discounts, energy strategy sets out this Government’s long- efficiency upgrades, and more term plan to finish the job and end the UK’s domestic contribution to man-made climate 4. We will work with businesses to change by 2050. continue delivering deep cost reductions in low carbon tech through support for Although every study shows that the costs of the latest state of the art kit to bring down inaction on climate are far greater, there will, of costs for consumers and deliver benefits course, be costs to the investments needed for businesses. to make this transition happen. So we will approach these with four key principles: This strategy is a long-term plan for a transition that will take place over the next

1. We will work with the grain of consumer three decades. Many of the policies in the choice: no one will be required to rip out their strategy will be phased in over the next existing boiler or scrap their current car decade or longer. Given our success in decarbonisation to date we are confident

2. We will ensure the biggest polluters in our approach, but this strategy does not pay the most for the transition through intend to predict the exact shape of the British fair carbon pricing economy in 2050 and neither should it. 16 Executive Summary We are making the decisions that are needed We have consistently underestimated how now to drive investment into new low carbon quickly the costs of clean technology would technologies and as these develop and we fall to date. There will be many more decisions test our approach, we will make informed to take, and many more steps on the journey decisions over how we scale to reach to the finish line. But this strategy marks the net zero by 2050. beginning of the end of the UK’s domestic contribution to climate change. What is in the Strategy? Ending the UK’s contribution to climate The policies and spending brought forward change is a long-term shift, and the Climate in the Net Zero Strategy mean that since Change Act breaks up this challenge the Ten Point Plan, HMG has mobilised £26 into bitesize chunks – five-year long billion of government capital investment for carbon budgets. the green industrial revolution. Along with regulations, this will support up to 190,000 We have hit all of our carbon budgets to date. jobs by 2025, and up to 440,000 jobs by This document sets out clear policies and 2030, and leverage up to £90 billion of private proposals for keeping us on track for our investment by 2030. coming carbon budgets, our ambitious Nationally Determined Contribution (NDC), and then sets out our vision for a decarbonised economy in 2050. Whilst there are a range of ways in which net zero could be achieved in the UK, we set out a delivery pathway showing indicative emissions reductions across sectors to meet our targets up to the sixth carbon budget (2033-2037). This is based on our current understanding of each sector’s potential, and a whole system view of where abatement is most effective. But we must be adaptable over time, as innovation will increase our understanding of the challenges, bring forward new technologies and drive down the costs of existing ones. 17 Net Zero Strategy: Build Back Greener Figure 1: Indicative delivery pathway to 2037 by sector Source: BEIS Analysis (2021) So this strategy sets out our plans for reducing emissions from each sector of our economy, while hoovering up any remaining emissions with greenhouse gas removals – either natural, like trees, or technological, using carbon capture. This is an historic plan. Taken together the transitions set out below for every sector of the UK economy meets Carbon Budgets 4 and 5, and puts us on the path for Carbon Budget 6 – and ultimately on course for net zero by 2050. 18 Net Zero Strategy: An overview Executive Summary Power Power Going further faster to decarbonise our electricity system The policies and proposals for power in the Net Zero Strategy will … Industry and fuel supply Support forTransitioning up to 59,000to a lowStart carbon future additional to mobilise Fully decarbonise our jobs in 2024 and up to public and private investment power system by 2035 120,000 jobs in 2030 of £150-270 billion, in line with Heat and buildings our 2037 delivery pathway Decarbonising how we heat and power our buildings The net zero economy will be underpinned renewables, cutting edge new nuclear power by cheap clean electricity, made in Britain. A stations, and be underpinned by flexibility clean, reliable power system is the foundation including storage, gas with CCS, hydrogen Transport of a productive net zero economy as we and ensure reliable power is always there at Setting the pace for greener, electrify other sectors – so we will fully better transport the flick of a switch. The transformation of the decarbonise our power system by 2035, power sector will bring high skill, high wage subject to security of supply. Our power job opportunities right across the UK. system will consist Naturalofresources, abundant, cheap waste, British and fluorinated gases Harnessing nature for net zero Key policies: • Greenhouse By 2035 the UK willgas removalsentirely by clean electricity, subject to be powered Balancing residual security of supply. emissions to achieve net zero • Secure a final investment decision on a large-scale nuclear plant by the end of this Parliament, and launch a new £120 million Future Nuclear Enabling Fund, retaining Innovation and investment options for future nuclear technologies, including Small Modular Reactors, with a Leading the world in innovation and green finance number of potential sites including Wylfa in North Wales. • 40GW of offshore wind by 2030, with more onshore, solar, and other renewables – with a new approach to onshore and offshore electricity networks to incorporate Green jobs, skills, and industries new low carbon generation and demand in the most efficient manner that takes Creating the skilled workforce to deliver net zero and putting UK account of the needs of local communities like those in East Anglia. supply chains at the forefront of global markets • Moving towards 1GW of floating offshore wind by 2030 to put us at the forefront of this new technology that can utilise our North and Celtic Seas – backed by £380 Embedding in government and local action million overall funding for our world-leading offshore wind sector. Prioritising decarbonisation at every level of government • Deployment of new flexibility measures including storage to help smooth out future price spikes. Green choices Moving towards a net zero society together 19 Net Zero Strategy: Build Back Greener Fuel Supply & Hydrogen The policies and proposals for fuel supply and hydrogen in the Net Zero Strategy will… Support up to 10,000 jobs in Start to mobilise additional Deliver 5 GW of hydrogen 2030 in fuel supply public and private investment production capacity by 2030, of £20-30 billion, in line with whilst halving emissions our 2037 delivery pathway from oil and gas While electricity will be the primary source whilst scaling-up the production of low carbon of energy, we cannot rely on it alone. Many alternatives such as hydrogen and biofuels. sectors require low carbon energy, including Current gas prices spikes underline the need those where electrification is not a viable to get off hydrocarbons as quickly as possible, option, making the supply of cleaner fuels but we will manage the transition in a way that essential to achieving net zero. Building on protects jobs and investment, uses existing commitments in the North Sea Transition infrastructure, maintains security of supply, Deal, we will significantly reduce emissions and minimises environmental impacts. from traditional oil and gas fuel supplies, Key policies: • We have set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new hydrogen and industrial carbon capture business models. We will be providing up to £140 million to establish the scheme, including up to £100 million to award contracts of up to 250MW of electrolytic hydrogen production capacity in 2023 with further allocation in 2024. • Introducing a new climate compatibility checkpoint for future licensing on the UK Continental Shelf and regulating the oil and gas sector in a way that minimises greenhouse gases through the revised Oil and Gas Authority strategy. 20 Power Going further faster to decarbonise our electricity system Executive Summary Industry Industry and fuel supply Transitioning to a low carbon future The policies and proposals for industry in the Net Zero Strategy will… Heat and buildings Support upDecarbonising to 54,000 jobs how in we heat Start and power to mobilise our buildingsDeliver four carbon capture additional 2030 in industry public and private investment usage and storage (CCUS) of at least £14 billion in clusters, capturing 20-30 Transport industry, in line with our 2037 MtCO2 across the economy, delivery pathway Setting the pace for greener, better transport including 6 MtCO2 of industrial emissions, per year by 2030 We will decarbonise industry in line with CCUS and renewable energy will put our our net zero Natural resources, goals whilst waste, and fluorinated simultaneously gases industrial ‘SuperPlaces’ at the forefront of Harnessing nature for net transforming our industrial heartlands by zero technological development – accelerating attracting inward investment, future-proofing decarbonisation in ‘clusters’, which account businesses, and securing high wage, high skill for approximately half of the UK’s industrial jobs. We will do this by supporting industry emissions. These clusters could have Greenhouse gas removals to switch to cleaner fuels; helping them the opportunity to access support under Balancing residual emissions to achieve net zero improve their resource and energy efficiency, government’s CCUS programme, which and through fair carbon pricing to drive deep includes the £1 billion CCS Infrastructure Fund decarbonisation of industry. Growing new and revenue support mechanisms. industries in low carbon and Innovation hydrogen alongside investment Leading the world in innovation and green finance Key policies: Green jobs, skills, and industries • Following the Phase Creating 1 of the the skilled Cluster Sequencing workforce to deliver netprocess, zero and theputting Hynet UK and East Coastsupply Clusters, will at chains actthe as forefront economicof hubs for green global marketsjobs in line with our ambition to capture 20-30 MtCO2 per year by 2030. This puts Teesside and the Humber, Merseyside and North Wales, along with the North East of Scotland as a reserve Embedding cluster, among thein government potential and local action early SuperPlaces which will be transformed over Prioritising the next decade.decarbonisation at every level of government • Future-proofing industrial sectors, and the communities they employ through the £315 million Industrial Energy Transformation Fund (IETF), (£289 million for England, GreenNorthern Wales and choicesIreland, £26 million for Scotland). Moving towards a net zero society together • Incentivise cost-effective abatement in industry at the pace and scale required to deliver net zero, through the UK ETS by consulting on a net zero consistent UK ETS cap (in partnership with the Devolved Administrations). 21 Industry and fuel supply Net Zero Strategy: Build to Transitioning Back Greener a low carbon future Heat and Buildings Heat and buildings Decarbonising how we heat and power our buildings The policies and proposals for heat and buildings in the Net Zero Strategy will… Transport Support upSetting the pace to 100,000 jobs nfor greener, better transport Start to mobilise additional Set a path to all new heating the middle of the 2020s and public and private investment appliances in homes and up to 175,000 in 2030 of approximately £200 workplaces from 2035 Natural resources, billion, waste,inand line with our 2037 fluorinated gases being low carbon delivery pathway Harnessing nature for net zero Reaching net zero means tackling all sources works with the grain of consumer choice. But of emissions – and heating for homes and the costs of low carbon technology can fall workspaces Greenhouse makes up almost gas aremovals third of all quickly – working with industry, we expect a Balancing residual UK carbon emissions. So we will improve emissions to achieve heatnet zeroto be as cheap to buy and run as pump the energy efficiency of housing and non- a gas boiler this decade. We want to reduce domestic properties across the UK, ensuring electricity costs so when the current gas they require less energy to Innovation and heat, making them investment spike subsides we will look at options to shift cheaper to run and more comfortable to live Leading the world in innovation and green or rebalance finance energy levies (such as RO and and work in while reducing our dependence FiTs) and obligations (such ECO) away from on imported energy. We are setting the electricity to gas over this decade. This will ambition that, by 2035, once costs have come include looking at options to expand carbon Green jobs, skills, and down, all new heating appliances installed in industries pricing and remove costs from electricity bills homes and Creating workplaces thewill be skilled workforce to deliver low-carbon net zero while andthat ensuring putting we UK continue to limit any supply chains at the technologies, like electric heat pumps or forefront of global markets impact on bills overall. We know that in the hydrogen boilers. We will take a decision long run, green products are more efficient in 2026 on the role of hydrogen Embedding heating. and local in government and cheaper, and we are putting fairness and action Crucially, thisPrioritising will be a gradual transition that decarbonisation affordability at every level at the heart of our approach. of government Key policies: Green choices • Movingthat An ambition towards a netnozero by 2035, newsociety together gas boilers will be sold. • A new £450 million three-year Boiler Upgrade Scheme will see households offered grants of up to £5,000 for low-carbon heating systems so they cost the same as a gas boiler now. • A new £60 million Heat Pump Ready programme that will provide funding for pioneering heat pump technologies and will support the government’s target of 600,000 installations a year by 2028. • Delivering cheaper electricity by rebalancing of policy costs from electricity bills to gas bills this decade. 22 Executive Summary • Further funding for the Social Housing Decarbonisation Scheme and Home Upgrade Grants, investing £1.75 billion. Additional funding of £1.425 billion for Public Sector Decarbonisation, with the aim of reducing emissions from public sector buildings by 75% by 2037. • Launching a Hydrogen Village trial to inform a decision on the role of hydrogen in the heating system by 2026. 23 Heat and buildings Net Zero Strategy: Build Back Decarbonising Greener how we heat and power our buildings Transport Transport Setting the pace for greener, better transport The policies and proposals for transport in the Net Zero Strategy will … Natural resources, waste, and fluorinated gases Harnessing nature for net zero Support for up to 22,000 Start to mobilise additional Remove all road emissions at jobs in 2024 and up to public and private investment the tailpipe and kickstart zero 74,000 jobs in 2030 of around £220 billion, emissions international travel in line with our 2037 Greenhouse gas removals delivery pathway Balancing residual emissions to achieve net zero We will transform our cities and towns with chargepoint provision. We will increase the greener, faster and more efficient transport. share of journeys taken by public transport, Innovation Our streets will be cleaner and andinvestment people cycling and walking, electrifying more railway Leading the world in innovation healthier from breathing cleaner air, walking and green lines, finance investing £3 billion to transform bus and cycling more. Our zero emissions vehicle services and £2 billion for cycling. We will (ZEV) mandate will guarantee greater number build on our strong maritime heritage and the of zero emission Greenvehicles jobs, on our roads, skills, and industries success of the Clean Maritime Demonstration unlocking theCreating transformation of our road the skilled workforce Competition to deliver net zero andto deliver puttinga more UK ambitious multi- transport. Additional fundingatwill supply chains thesupport ourof global forefront year programme for the sector. Setting out markets automotive sector to stay at the cutting edge an ambitious position on SAF will set us on a and capture jobs of the future. Significant path to decarbonise this challenging sector. Embedding in government new investment in vehicle grants and electric and local action Accelerating the decarbonisation of transport Prioritising decarbonisation vehicle infrastructure will ensure that we at every level of government will save lives and significantly reduce noise, see even more green vans delivering our making our urban centres more enjoyable goods and big improvements in local public places to live. Green choices Moving towards a net zero society together Key policies: • A zero emission vehicle mandate to improve consumer choice and ensure we maximise the economic benefit from this transition by giving a clear signal to investors. This will deliver on our 2030 commitment to end the sale of new petrol and diesel cars, and 2035 commitment that all cars must be fully zero emissions capable. • Further funding of £620 million for zero emission vehicle grants and EV Infrastructure, including further funding for local EV Infrastructure, with a focus on local on street residential charging. • Allocating a further £350 million of our up to £1 billion Automotive Transformation Fund (ATF) to support the electrification of UK vehicles and their supply chains. • Building on the success of our £20 million zero emission road freight trials, we will expand these to trial three zero emission HGV technologies at scale on UK roads to determine their operational benefits, as well as their infrastructure needs. 24 Executive Summary • £2 billion investment which will help enable half of journeys in towns and cities to be cycled or walked by 2030. • £3 billion to create integrated bus networks, more frequent services and bus lanes to speed journeys. • Transformation of local transport systems, with 4,000 new zero emission buses and the infrastructure to support them, and a net zero rail network by 2050, with the ambition to remove all diesel-only trains by 2040. • Building on the success of the Clean Maritime Demonstration Competition, we will be extending this to a multi-year programme, delivering real-world demonstrations and technology trials of clean maritime vessels and infrastructure to decarbonise the maritime sector. This is part of our commitment to a UK Shipping Office for Reducing Emissions. • Significant investment in rail electrification and city rapid transit systems. • Aim to become a world-leader in zero emission flight and kick-starting the commercialisation of the UK sustainable aviation fuel so people can fly, and connect without guilt. Our ambition is to enable delivery of 10% SAF by 2030 and will be supporting UK industry with £180 million funding for the development of SAF plants. 25 Decarbonising how we heat and power our buildings Transport Net Zero Strategy: Build Back Greener Setting the pace for greener, better transport Natural Resources, waste and  Natural resources, waste, and fluorinated gases fluorinated gases Harnessing nature for net zero Greenhouse The policies and gasfor proposals removals natural resources, waste, and fluorinated gases in the Net Zero Strategy will… residual emissions to achieve net zero Balancing New employment Start to mobilise additional Treble woodland creation opportunities across the UK. public and private investment rates in England, contributing Innovation and investment Afforestation in England could of approximately £30 to the UK’s overall target of Leading the world in innovation and green finance support up to 1,900 jobs in billion, in line with our 2037 increasing planting rates to 2024 and 2,000 jobs in 2030 delivery pathway 30,000 hectares per year by the end of this Parliament Green jobs, skills, and industries Creating Halting climate changetheandskilled workforce protecting to deliver the natural net world arezero twoand putting sides of theUK same coin, so we will restore our supply chains countryside to at the forefront reduce emissions,of global markets sequester carbon and build our resilience to climate change at the same time. We will support farmers to implement a range of low carbon farming practices that can help increase productivity and enable more efficient use of land, such as Embedding in government and local action through agroforestry. We will increase tree planting to sequester carbon, and protect and restore Prioritising decarbonisation at every level of government our peatlands. As part of reforms to the resources and waste system, we also will move towards a circular economy, improve resource efficiency, and achieve near elimination of biodegradable waste to landfill. We will continue to phase down the use of F-gases in line with domestic regulations and Greeninternational choices commitments. Moving towards a net zero society together Key policies: • Supporting low-carbon farming and agricultural innovation through the Farming Investment Fund and the Farming Innovation Programme to invest in equipment, technology, and infrastructure to improve profitability, benefit the environment and support emissions reductions. • We will boost the existing £640 million Nature for Climate Fund with a further £124 million of new money, ensuring total spend of more than £750 million by 2025 on peat restoration, woodland creation and management – above and beyond what was promised in the manifesto. This will enable more opportunities for farmers and landowners to support Net Zero through land use change. • Restoring approximately 280,000 hectares of peat in England by 2050 and trebling woodland creation rates in England, contributing to the UK’s overall target of increasing planting rates to 30,000 hectares per year by the end of the Parliament. • £75 million on net zero related R&D across Natural Resources, Waste & F-gases, to inform our pathway to 2037. 26 Executive Summary • To support our commitment to explore options for the near elimination of biodegradable municipal waste to landfill from 2028, we are bringing forward £295 million of capital funding which will allow local authorities in England to prepare to implement free separate food waste collections for all households from 2025. 27 Natural resources, waste, and fluorinated gases Net Zero Strategy: Buildnature Harnessing Backfor Greener net zero Greenhouse Gas Removals Greenhouse gas removals Balancing residual emissions to achieve net zero The policies and proposals for GGRs in the Net Zero Strategy will provide… Innovation and investment New, highlyLeading the world skilled, jobs in our in Start innovation and green to mobilise finance An ambition to deploy additional industrial heartlands public and private at least 5 MtCO2/year of investment of around £20 engineered GGRs by 2030. Green jobs, skills, andbillion, in line with our 2037 industries delivery pathway Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Our most important step to achieving net zero Government intervention in the short term is to take ambitious decarbonisation measures will support early commercial deployment of Embedding across society. in government However, greenhouse gas and local action GGRs, with an ambition to move towards a Prioritising decarbonisation removals (GGRs) will also play a critical role at every level of government market-based framework for GGRs. This will in balancing residual emissions from the support our delivery of net zero emissions and hardest to decarbonise sectors such as position us to export our skills and expertise, aviation, agriculture, and heavy industry. Our Green choices capitalising on economic opportunities for the innovation-led approach position the UK as a Moving towards a net zero society together UK and supporting the global shift to net zero. global leader in this rapidly developing sector. Key policies: • Delivering £100 million of investment in GGR innovation could enable further deployment of GGRs, which in turn will leverage private investment and demand for transferrable engineering expertise from the UK’s oil and gas sector. • Explore options for regulatory oversight to provide robust monitoring, reporting and verification (MRV) of GGRs, following the recommendations of the BEIS-led MRV Task & Finish Group involving experts from industry and academia. 28 Embedding in government and local action Prioritising decarbonisation at every level of government Executive Summary Green choices Moving towards a net zero society together Supporting the transition with  cross-cutting action We will maximise the opportunities of this We will put consumers at the heart of the transition, and make sure we are geared transition and our goal is to make choosing up to deliver these changes by also taking green options significantly easier, cheaper, cross-cutting action. As the host nation and more rewarding. We will back training for COP26 in Glasgow this year, we will and skills, supporting workers to retrain and use our global platform to continue to urge upskill and build low carbon industries with countries to set targets to get to net zero by strong UK supply chains that are resilient to 2050, and more ambitious 2030 emissions changes. We will also take a place-based reduction targets to get us there. We will approach to net zero, working with local back innovation and our world-leading green government to ensure that all local areas have finance sector. We will support each stage of the capability and capacity for net zero delivery the innovation chain to drive down costs and as we level up the country. And Government bring through key technologies and ideas to is leading the way – embedding climate into meet net zero. We will work with the private our policy and spending decisions, increasing sector to leverage private investment to the transparency of our progress on climate provide the finance needed, while providing goals, and providing funding to drive ambitious the conditions for green finance to flourish. emissions reductions in schools and hospitals. Key policies: • Deliver at least £1.5 billion of funding to support net zero innovation projects. • Use the UK Infrastructure Bank (UKIB) to crowd in private finance, support more than £40 billion of investment, and pull through low carbon technologies and sectors to maturity and scale. • Introduce a new Sustainability Disclosures Regime, including mandatory climate related financial disclosures and a UK green taxonomy. • Reform the skills system so that training providers, employers and learners are incentivised and equipped to play their part in delivering the transition to net zero. • Publish an annual progress update against a set of key indicators for achieving our climate goals. 29 Net Zero Strategy: Build Back Greener Delivering the Prime Minister’s Ten Point Plan In the past year, we have already taken important action on climate change, delivering on the commitments in the Prime Minister’s Ten Point Plan. 56,000 jobs have been protected and created over the last ten months, since the publication of the Prime Minister’s Ten Point Plan and wider green agenda - with some already on line and others set to come on line over the coming decade We committed to… Since then we have… Point 1: Advancing Offshore – Supported manufacturers via government investment schemes. Six Wind, including: manufacturers have already announced major investments in the UK offshore wind sectors and delivering up to 3,600 jobs by 2030. – 40GW of offshore wind by 2030 including 1GW of – Built our Offshore Wind capacity to 10.5GW, enough in 2020 to power floating wind (wind turbines 4.5 trillion LED light bulbs. This increased our share of electricity generating electricity generated by Offshore Wind from 1% to 13% over the last decade. in water depths) – Kicked off the biggest-ever round of our flagship renewable energy – £160 million into modern scheme for low carbon electricity (Contract for Difference) with £200 ports and manufacturing million for offshore wind projects and £24m for floating offshore wind. infrastructure – Launched a £17.5 million competition to support innovative floating – The Offshore wind ideas from industry and joined the ORE Catapult’s FOW Centre of Transmission Network Review Excellence, contributing £2 million. – Leveraged over £1.5 billion investment into our offshore wind industry, following the £160 million to upgrade ports and infrastructure. – Published the Offshore Transmission Network Review, setting out two initial policy consultations to move to a coordinated approach for both in- flight and future offshore wind projects. Point 2: Driving the Growth – Published the Hydrogen Strategy, setting out our comprehensive of Low Carbon Hydrogen, approach to growing the UK hydrogen economy. including: – Commenced an allocation process for electrolytic hydrogen in 2022 to – An ambition for 5GW of low award up to 100MW of contracts in 2023 and up to 400MW of contracts carbon hydrogen production in 2024 and announcing a funding envelope in 2022 that will enable capacity by 2030 us to award the first contracts to CCUS-enabled hydrogen from 2023 through the Cluster Sequencing process, to deliver up to 1GW of CCUS- – £240 million Net enabled hydrogen. Zero Hydrogen Fund – Following our consultation on a proposed hydrogen business model, – Hydrogen trials to test use of design of the £240 million Net Zero Hydrogen Fund and on a UK low hydrogen in heating carbon hydrogen standard. – Invested £3 million to kick start the Tees Valley hydrogen transport hub, which is building early collaborations and operational learning. – Announced a £60 million competition to fund projects to develop innovative low carbon hydrogen supply solutions. – Started preparations for a hydrogen heating neighbourhood trial in Levenmouth, Fife led by SGN following funding awards by Ofgem and Scottish Government. 30 Executive Summary We committed to… Since then we have… Point 3: Delivering New and – Announced our aim to bring at least one large-scale nuclear project to the Advanced Nuclear Power, point of Final Investment Decision by the end of this Parliament, subject including: to value for money and all relevant approvals. Entered into negotiations with the developer of Sizewell C power station in December 2020. – Pursuing large-scale nuclear projects, subject to – Launched a Call for Evidence on Government’s preference to explore the value for money potential of High Temperature Gas Reactors (HTGRs) to enable an AMR demonstration by the early 2030s. – Legislating for a new financing model for nuclear projects – £385 million Advanced Nuclear Fund to enable up to £215 million into Small Modular Reactors – £170 million for a R&D programme on Advanced Modular Reactors Point 4: Accelerating the Shift – Announced we will introduce a ZEV mandate to deliver our end of sales to Zero Emission Vehicles, dates for new petrol and diesel cars and vans. including: – Announced funding for the UK’s first large-scale gigafactory as part of the – End the sale of new pure Automotive Transformation Fund. The investor has committed to creating petrol and diesel cars and 1,000 jobs which will be realised during the period to 2025/26 as the vans by 2030 and consult on facility is built and becomes operational. phase out for diesel HGVs – Secured an additional 950 jobs through other automotive projects, for a – £1 billion to support total of 1,950 jobs to be realised through to 2025/26. electrification of UK vehicles and their supply chains – Built on existing successful projects, such as the Advanced Propulsion Centre - according to participating companies, APC projects agreed this – £1.3 billion to accelerate year will support up to 5,200 direct jobs. the roll-out of charging infrastructure – Seen increased demand for ZEVs – industry figures state that nearly one in ten of all new cars sold so far this year in the UK is fully electric and – Publish a Green Paper in over 650,000 plug-in cars have been registered in the UK since 2010. 2021 on the UK’s post-EU emissions regulation – For this financial year, committed £70 million to roll out home, on-street and workplace chargepoints. – 70% of motorway service areas now have plans to install at least 6 high- powered chargers by 2023. – Announced the winners of the £20 million Zero Emission Road Freight Trials – projects that will help to design and develop cost-effective, zero emission HGVs and refuelling infrastructure. – Consulted on the phase out of non-zero emission HGVs. 31 Net Zero Strategy: Build Back Greener We committed to… Since then we have… Point 5: Green Public Transport, – Launched the National Bus Strategy and a consultation on phase out of Cycling and Walking, including: new non-zero emission buses and the £120 million Zero Emission Bus Regional Area (ZEBRA) scheme to support local transport authorities – £120 million to begin outside London. introducing at least 4,000 zero emission buses – Supported Coventry to become UK’s first all-electric bus city, with £50 million to fund up to 300 electric buses and charging infrastructure. – Billions of pounds in enhancements and renewals – Committed £17.5 billion in the November 2020 Spending Review in of the rail network capital funding for renewals, upgrades, and enhancements of the existing rail network up to 2024. – £5 billion to support buses, cycling and walking – Delivered more than 300 walking and cycling schemes. Point 6: Jet Zero and Green – Consulted on our proposals for reaching net zero aviation by 2050 Ships, including: and following a consultation on a UK Sustainable Aviation Fuels (SAF) mandate, confirmed our ambition for it to enable delivery of 10% – A Jet Zero Council SAF by 2030 , and we will make £180 million available to support the development of the UK SAF industry. – £15 million to support production of – Announced the shortlist for the £15 million Green Fuels, Green Skies Sustainable Aviation Fuels competition, to support UK pioneers in Sustainable Aviation Fuels. – £20 million for the – Co-invested £150 million per year through the Aerospace Technology Clean Maritime Institute to support greener aircraft technology like Rolls-Royce’s next gen Demonstration Programme UltraFan jet engine which aims to cut emissions by 25% and ZeroAvia’s zero-emission hydrogen propulsion system. – Allocated up to £23 million of match-funding to 55 projects through the Clean Maritime Demonstration Competition to support the development of zero emission technologies and greener ports. Point 7: Greener Buildings, – Supported approximately 45,000 jobs in greener buildings in the first year including: since the Ten Point Plan was launched.1 – Ambition to install 600,000 – Announced that we will tighten Minimum Energy Efficiency Standards heat pumps per year by 2028 to ensure that landlords can no longer let properties covered by the Domestic Minimum Energy Efficiency Standards Regulations if they have – Energy efficiency funding, an EPC rating below E, unless they have a valid exemption in place. including the Public Sector Decarbonisation Scheme – Allocated £1 billion funds from the Public Sector Decarbonisation and Social Housing Scheme, supporting up to 30,000 jobs.2 Decarbonisation Fund – Awarded £62 million to 19 projects in the Social Housing Decarbonisation – Strengthened energy Fund Demonstrator, with over 2,300 homes in the process of efficiency requirements for being improved. private sector landlords 32 Executive Summary We committed to… Since then we have… Point 8: Investing in Carbon – We have set up the Industrial Decarbonisation and Hydrogen Revenue Capture, Usage and Storage, Support (IDHRS) scheme, providing up to up to £140 million to fund our including new hydrogen and industrial carbon capture business models. – Commitment for two industrial – Announced £19.5 million of grant funding for projects developing novel clusters by mid 2020s, and CCUS technology and processes that reduce the cost of deployment. an aim for four sites by 2030, capturing up to 10Mt CO2 – Kicked off the process to decide the first carbon capture cluster locations emissions per year in our industrial heartlands. – £1 billion CCUS – Published details of the design of funding mechanisms, including the Infrastructure Fund business model for CO2 transport and storage, industrial CCUS, power CCUS, as well as the CCS Infrastructure Fund. Point 9: Protecting Our Natural – Supported an estimated 850 jobs in environmental protection Environment, including and enhancement. – £5.2 billion for flood and – Launched the floods investment programme that is on track to better coastal defences protect 336,000 properties from flooding. – New National Parks and Areas – Natural England has set out plans to start the process to designate of Outstanding Natural Beauty four new areas of outstanding natural beauty - Yorkshire Wolds AONB, Cheshire Sandstone Ridge AONB, an extension to the Surrey Hills AONB, – £40 million second and an extension to the Chilterns AONB. round for the Green Recovery Challenge Fund – Announced 90 projects awarded grants under round 2 of the £80 million Green Recovery Challenge Fund (GRCF). Across all 159 projects, the – Establish 10 long-term GRCF is set to plant almost 1 million trees and create and retain up Landscape Recovery projects to 2,500 jobs. over the next four years – Held three Landscape Recovery market engagement events and, subject to feedback, we aim to open applications for the first wave of pilot projects later this year. – Launched several schemes under the Nature for Climate Fund to expand our pipeline of tree planting and peatland restoration projects in England, including the new England Woodland Creation Offer and Tree Production Innovation Fund. Point 10: Green Finance and – Launched the Net Zero Innovation Portfoliow, providing funding for Innovation, including low-carbon technologies and systems across the areas of the 10 Point Plan, including: – £1 billion Net Zero Innovation Portfolio (NZIP), including – Up to £68 million across two competition streams for Longer Duration £100 million for Direct Energy Storage Demonstration. Air Capture and other Greenhouse Gas Removal – Funding for the first phase of GGR studies, which could remove (GGR) technologies between 100 and 1,000 tonnes of CO2e per year in 2025. – UK’s first – Issued £10 billion Sovereign Green Bond, to raise money for green Sovereign Green Bond government projects like zero-emission buses, offshore wind, and decarbonising homes. – Green Jobs Taskforce – Launched the Green Jobs Taskforce in November 2020, which reported 15 recommendations in July 2021. 33 Net Zero Strategy: Build Back Greener Endnotes 1 Estimate based on internal HMG analysis. 2 This figure is already included in the headline 45,000 figure for greener buildings. 34 Executive Summary 35 Net Zero Strategy: Build Back Greener Why Net Zero 1 Chapter 37 Net Zero Strategy: Build Back Greener Levelling up the country, ending our domestic contribution to climate change, and leading the world to a greener, more sustainable future The case for action

1. We are at a crossroads in our history. As Panel on Climate Change (IPCC) shows,2 we recover from the impact of the pandemic this is no longer a challenge for tomorrow: on our lives and livelihoods, we know that we are already seeing the impacts today it will not be enough to go back to the way with increased incidence of events such as things were before. The science is clear, we extreme heat, floods, and wildfires across the know that human activity is changing our globe. We need to act urgently and reduce climate and that this will have a devasting emissions globally to limit further global impact on human lives, the economy, and the warming. The landmark 2015 Paris Agreement natural world – ranging from the extinction agreed to hold the increase in the global of some species and the melting of ice caps average temperature to well below 2°C above to extreme weather patterns threatening our pre-industrial levels, and to pursue efforts to homes, businesses, and communities.1 As limit it to 1.5°C. the latest report by the Intergovernmental 38 Chapter 1 – Why Net Zero The UK’s net zero target The UK was the first major economy to create a legally binding target to bring greenhouse gas emissions to net zero by 2050. This target was set considering the latest scientific evidence and was recommended by the Climate Change Committee (CCC), the UK’s independent climate advisory body. The net zero target also responds to the overwhelming public support for acting on climate change. In recent surveys of the UK public, 80% of participants expressed concern about climate change.3 Government is committed to ambitious decarbonisation measures across society. However, we know that this does not mean emissions will drop to absolute zero by 2050 – we acknowledge that sectors such as industry, agriculture, and aviation are difficult to decarbonise completely. Greenhouse gas removals (GGR), like trees and carbon capture and storage technology, are therefore essential to compensate for the residual emissions arising from these hard to decarbonise sectors, so we can reach net zero by 2050.

2. The sooner we act on climate change markets which have caused the recent spike the lower the costs will be. Globally, the in gas prices. costs of failing to get climate change under control would far exceed the costs of bringing 3. The UK has long led the way in tackling greenhouse gas emissions down to net climate change, and immediate action to zero. The Office for Budget Responsibility reduce emissions brings enormous economic concluded that there could be significant opportunities to revitalise our economy and fiscal benefits from early action to transition deliver on our priority to level up the country. to net zero, meaning the costs will be lower Across the globe, as governments, people and than if we delay.4 Delaying action would businesses rise to this challenge, a growing only serve to put future generations at risk global green economy has the potential to of crossing critical thresholds resulting in create millions of new jobs. We are uniquely severe and irreversible changes to the planet, placed to seize this once-in-a generation the environment, and human society. On opportunity and deliver a transition to net zero the other hand, early and ambitious action that has the potential to create thousands of would help protect lives and livelihoods, while jobs in every part of the UK. maximising the co-benefits for people, society, 4. We must, therefore, build back better. Our the environment, and the economy.5 As part vision, building on the Prime Minister’s Ten of the transition to net zero emissions, we will Point Plan for a Green Industrial Revolution, is transform our energy system away from fossil to level up our country with new green jobs, fuels to low carbon sources of energy, such as end our contribution to climate change, and renewable electricity generated in the UK. This reverse the decline of our natural environment, will ensure sustainable and affordable energy leading the world to a greener, more supplies and protect consumers by reducing sustainable future. our exposure to volatile international fossil fuel 39 Net Zero Strategy: Build Back Greener Plan for Growth and green sector vision This strategy sets out how we will build on Build Back Better: Our Plan for Growth the Prime Minister’s Ten Point Plan with sets out the Government’s commitment to our vision to create new jobs and net zero supporting future growth sectors based on industries as we meet our climate targets. the UK’s comparative advantage and growth In turn, this will support levelling up the potential, and commits to publishing sector country, and put the UK at the forefront of the visions across these sectors. This strategy global green markets. articulates our vision for the green economy. We will build on this with more detail in further We are laying the foundations for businesses Sector and Supply Chain Development Plans to invest in the UK’s green economy, taking – such as the CCUS supply chains roadmap action to ensure we have the right skills published earlier this year, and the Hydrogen to deliver a green industrial revolution and Sector Development Action Plan which we will committing to work with industry to develop publish in 2022. sector and supply chain action plans in areas where the UK has an economic advantage. 40 Chapter 1 – Why Net Zero Driving a green industrial revolution and levelling up the UK

5. The UK has long proved that tackling carbon economy and its supply chains across climate change and delivering economic the country, with an estimated turnover of growth can go hand in hand. Between 1990 £42.6 billion in 2019.8 These numbers are and 2019, we cut emissions faster than any even higher once we account for the jobs other G7 country, a 44% reduction.6 We and economic activity supporting broader achieved this whilst growing our economy environmental policies such as climate by 78%.7 Our latest official estimates show adaptation and biodiversity. that 410,000 people work in the UK’s low Figure 2: UK vs Rest of G7 GDP and GHG Emissions9 200 UK GDP +78% 180 160 Rest of G7 GDP +72% 140 Index (1900=100) 120 100 Rest of G7 emissions -4% 80 60 UK emissions -44% 40 20 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: The World Bank, UNFCCC National Inventory Submissions, ONS, BEIS Greenhouse Gas Inventory.

6. As the world moves to tackle climate City of London is long established as a change, new opportunities will arise for UK leader in green finance.11 In the long term, companies in domestic and international evidence from the Energy Innovation Needs markets. Updated analysis, based on the BEIS Assessment (2019) and subsequent analysis, Energy Innovation Needs Assessment (EINA) point to domestic and export opportunities suggests key net zero aligned sectors in the for the UK in electric vehicle technologies and UK could contribute up to £60 billion of gross manufacturing, the next generation of offshore value added (GVA) a year by 2050.10 wind (including new approaches such as floating offshore wind), carbon capture, usage

7. We have immediate opportunities to and storage (CCUS), low carbon hydrogen, capitalise on our core strengths: the largest smart energy systems and storage, and direct market for offshore wind in the world, a air carbon capture and storage (DACCS). world-class oil and gas sector, and the 41 Net Zero Strategy: Build Back Greener

8. The opportunities for British innovation, of new opportunities in the green economy. expertise, and products will not just be But the link between net zero and levelling confined to these shores. The value of goods up is wider than just the economy, net zero and services exported by UK low carbon and can deliver wider benefits for people and renewable energy businesses exceeds £7 communities across the UK by helping spread billion.12 The net zero transition will create new opportunity and restore pride in place. growth opportunities for UK based companies, such as Livingstone based FoundOcean 10. We are already taking action to make and Trelleborg’s North West England based the most of these opportunities. We have operation, who won contracts with the embedded a net zero principle in our levelling support of UK Export Finance (UKEF) to up funding initiatives, such as the Levelling supply Taiwan’s growing offshore wind market. Up Fund and the Towns Fund, so that these schemes can contribute to meeting our net

9. These opportunities show that net zero zero targets and help places to reduce their and levelling up go hand in hand. Delivering carbon impacts. Later this year, we will publish net zero allows us to boost living standards by a Levelling Up White Paper. This will build on supporting jobs and attracting investment in the actions the government is already taking the green industries of the future, which can to both deliver net zero and level up across be in areas that need this the most. Crucially, the country, including the ones set out in delivering net zero also involves supporting this strategy, and set out new interventions workers employed in high carbon industries to improve livelihoods and drive economic that will be affected by the transition, by giving growth in all parts of the UK. them the skills they need to make the most Maximising opportunities after leaving the EU Following the UK’s departure from the European Union in January 2020 the UK now has the flexibility to determine our own decarbonisation pathways to 2050, in a way that fully utilises the unique strengths and opportunities of UK diplomacy, industry and innovation. Since leaving the EU, the UK has built on our climate leadership, demonstrating an independent and ambitious approach to meeting our 2050 target: • Setting an ambitious Nationally Determined Contribution (NDC) under the Paris Agreement, committing to the fastest rate of reducing emissions on 1990 levels of any major economy. • Setting out ambitious plans with bold policy action across key sectors of the economy, such as the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, the Energy White Paper, North Sea Transition Deal, Industrial Decarbonisation Strategy, Transport Decarbonisation Plan, Hydrogen Strategy, and the Heat and Buildings Strategy. • Establishing a UK Emissions Trading Scheme (UK ETS), to replace the UK’s participation in the EU ETS, that demonstrates the UK’s commitment to carbon pricing as an effective tool that will help fulfil our climate change objectives. The UK ETS will be aligned to our net zero target, giving industry the certainty they need to invest in low carbon technologies. 42 Chapter 1 – Why Net Zero Supporting green jobs across the UK 14. The impact of the transition to net zero on the UK’s labour market could be significant:

11. Last year, the Prime Minister set out with one estimate suggesting up to 20% of his Ten Point Plan for a Green Industrial the workforce could see demand for their Revolution, laying the foundations for a skills affected, either positively or negatively.13 green economic recovery from the impact of Furthermore, as set out by HM Treasury’s Net COVID-19, outlining how we will level up the Zero Review, although the net macroeconomic country and put the UK at the forefront of the impact is likely to be small in 2050 relative to growing global green economy. total growth over the period, impacts between

12. This strategy builds upon that approach: and within regions over the next three decades the package of policies will support up to can vary. Our approach will need to reflect 190,000 jobs by the middle of the 2020s that benefits and impacts of the transition and up to 440,000 jobs in 2030. These will be dependent on individual household jobs will contribute to our wider ambition characteristics, such as their housing type and of 2 million green jobs by 2030, which also current vehicle usage, to support those low- factor in employment that contributes to income households most affected by individual other environmental goals. Updated analysis technology transitions. suggests that around 56,000 green jobs 15. Our approach to supporting green jobs, have been secured or created across the UK attracting private investment, and tackling economy, with some being already online and climate change will benefit the whole of the others in the pipeline over the next decade. UK, including areas where a large proportion

13. There will be opportunities for each region of people are currently employed in high- of the UK. For example, we are supporting carbon sectors. However, while employment new investment in hydrogen and CCUS into opportunities in green industries will emerge, industrial clusters across the UK. We are also high-carbon sectors will have to adapt or driving the electrification of vehicles impacting decline, resulting in a need to transition local manufacturing and supply chains in Wales, the labour markets to ensure people have the right Midlands and North East England, developing skills to make the most of these opportunities. Gigafactories in the UK, accelerating the roll 16. Our sector deals, including on nuclear, out of charging infrastructure across the UK, offshore wind, automotive and the North Sea and supporting roll-out of zero emission buses Transition Deal considered the skills needs which would boost manufacturers in Scotland and support for the labour market transition and Northern Ireland. We are also supporting to net zero on a sectoral basis. The North the development of new offshore wind power Sea Transition Deal, for example, will support off the coast of England, Scotland, and Wales; workers, businesses, and the supply chain and already investing in nuclear power in the throughout the transition by harnessing the South East and West of England. sector’s existing capabilities, infrastructure, and private investment potential to exploit new and emerging technologies such as hydrogen production, CCUS, offshore wind and decommissioning. Through the Deal, the sector, government, and unions will work together over the next decade and beyond to deliver the skills, innovation, and new infrastructure required to decarbonise North Sea production. 43 Net Zero Strategy: Build Back Greener

17. Our Automotive Transformation Fund and industrial clusters framework will help these industries, transition to a sustainable future. We are also taking action to enable local employers to set out their green skills needs, and support workers to gain the skills they need to access green jobs - such as through our Skills Bootcamps.

18. Supporting innovation will also help unlock jobs across low carbon sectors. For example, our portfolio of net zero innovation will provide at least £1.5 billion of government funding to help commercialise clean technologies and boost private investment across the UK. 44 Net Zero Strategy: Build Back Greener Examples of clean growth investment across the UK Scotland, Aberdeen Scotland, Orkney Scotland has a technology hub Hydrogen in an Integrated for offshore wind, including the Maritime Energy Transition’ first successful floating turbines in project £1.6 million from the UK Aberdeen. The city is benefiting Government match-funding a from funding for the Aberdeen £2.3 million project to develop Energy Transition Zone and the hydrogen-based clean maritime Global Underwater Hub, as well solutions. as the Net Zero Technology Transition Programme. Wales Wales, Cwmbran Northern Ireland, South Wales Industrial Cluster EPIC - Electric Powertrain Belfast Nearly £20 million to support the Integration for heavy Wrightbus zero-emission Commercial vehicles £31.8 buses £11.2 million from the deployment of decarbonisaton million project (£15.8 million from UK Government to develop infrastructure will go to the South the UK government) to develop hydrogen-fuel technology. Wales Industrial Cluster which lightweight electric powertrains aims to create a net zero industrial for heavy goods to manage zone from Pembrokeshire to the extreme levels of electrical power. Welsh/English border by 2040. North West North West, West Midlands Ellesmere Port plant Greater Manchester Public Sector Decarbonisation transforming to build electric People Powered Retrofit Scheme £2 million from the vans £100 million from UK Government to Windsor £1 million from the UK Stellantis to build electric vans, Academy Trust for heat Government to support initial safeguarding 1,000 jobs. decarbonisation and energy business development, leading efficiency measures across to 1,150 homes retrofitted and seven schools. 3,500 local contractors retrained over the next five years. South West & East South West, Somerset of England Hinkley Point C Nuclear Power £84.6 million invested by Station) £3.5 billion already government and industry in spent with companies in the 3 ambitious aerospace R&D South West and 12,786 jobs projects based in Bedford, Bristol created so far, including 787 and Cranfield to help the industry apprentices. Key build back greener. Heat Pumps Heat Pumps Heat Networks Low Carbon Public CCUS Retrofit Hydrogen Transport and Cycling UK-wide CCUS Electricity Offshore Wind Nuclear Networks Onshore Wind Offshore Wind Automotive Aerospace Green Finance Solar Rail Forestry Maritime Tidal Automotive Waste and Oil and Gas Agriculture Smart Systems Circular Rail Economy Science and Steel Nature Innovation Conservation Climate Change & Restoration Adaptation Waste and Circ Economy 46 46 Climate Chang Adaptation Chapter 1 – Why Net Zero North East, Teesside North East Whitetail Clean Energy Gateshead District Energy 8 Rivers Capital and Sembcorp Scheme £5.9 million of UK Energy UK’s 300MW NET power government funding for heat plant, creating over network project with mine water 2000 construction and source heat pump connecting 200 operational jobs. 5 buildings and up to 1,250 new homes to the Gateshead District North East Energy Scheme. Transforming automotive manufacturing £1 billion announced by Nissan and Envision AESC to create an electric vehicle manufacturing hub supporting 6,200 jobs. Yorkshire and Yorkshire and the Humber the Humber Able Marine Energy Park Siemens Gamesa offshore Up to £75 million from the wind factory expansion UK Government to facilitate £186 million from Siemens a c.£500 million offshore Gamesa to expand their offshore wind manufacturing port hub, wind turbine blade factory, supporting up to 3,000 creating and safeguarding up to local jobs. 1,080 local jobs. East Midlands East of England Tackling Climate Change on Advanced Greenhouses the River Rase £200,000 from £120million from Greencoat the UK Government for nature- Capital backed by UK pension based solutions in the River funds to build 2 greenhouses Rase catchment helping climate (covering 72 acres) warmed by adaptation. heat pumps utilising warm waste water, creating 360 new green jobs and 120 seasonal jobs. Low Carbon Public Transport Heat Networks and Cycling Hydrogen Midlands, Coventry Retrofit Electricity Onshore Wind Networks Coventry will be the first zero emission bus town awarded ten of millions to replace the entire local operator bus fleet with Nuclear Green Finance Solarbuses. electric Aerospace Maritime Tidal Forestry Agriculture Smart Systems cular Oil and Gas Steel Nature Conservation & Restoration Science and 47 ge Innovation Net Zero Strategy: Build Back Greener Case Study: North East of England This region is leading the way in championing Nissan and Envision AESC have reaffirmed new technologies, whether it is electric their belief in the region and in Britain’s vehicles (EVs), carbon capture, hydrogen, plans to shift to EVs, through their £1 billion or renewables. Research undertaken for flagship investment to establish an Electric government indicates that the North East Vehicle Hub in Sunderland. The hub will bring could gain an extra 27,000 jobs by 2050 together electric vehicles, renewable energy, arising from UK climate action.14 The research and battery production. Nissan will invest up indicates that the gains to the region over to £423 million to produce a new-generation time come to a large extent from specific all-electric vehicle in the UK. Envision AESC investments needed for the UK to meet net will invest £450 million to build the UK’s first zero, rather than baseline economic growth. large‑scale Gigafactory. In depth interviews with regional and industry stakeholders has also revealed a real and justified optimism about the region’s potential to level up due to the Green Industrial Revolution and remain an attractive location for people to live and work. The optimism is backed by significant investments in offshore wind and EV manufacturing. Spurred on by our 40 GW offshore wind deployment plans and £160 million investment in ports and manufacturing, we have seen almost £1.5 billion in investment in our offshore wind manufacturing capabilities. Recently announced projects include GE Renewable Energy's plans for a new blade factory in Teesside, South Korea’s SeAH Wind, and GRI Renewable Industries’ construction of factories in the Humber and Smulders (Newcastle), and the expansion of Siemens Gamesa's existing site in Hull.15 Combined these projects will support up to 3,600, direct green jobs. 48 Chapter 1 – Why Net Zero Leveraging private investment and innovators to mobilise the private investment required to deliver net zero.

19. We estimate that additional capital investment must grow from present levels to 22. Government has an important role to an average of £50-60 billion per year through play in ensuring a comprehensive financing the late 2020s and 2030s. Most of this offer, long-term investment signalling and investment will come from the private sector, fit-for-purpose business models coupled providing new opportunities for businesses with investment from numerous private and investors. Over the same period, we could sources. We will work to create an attractive see additional resource savings of around environment to secure the right investment in £180 billion as a result of our reduced use of UK projects, with benefits to UK business and oil and natural gas. communities. By building on our strengths, including potential for rapid scale up across

20. The policies and spending brought the domestic value chain, and coupling this forward in the Net Zero Strategy mean that with a strategic approach from government on since the Ten Point Plan, HMG has mobilised policy and investment, we can create the right £26 billion of government capital investment conditions to unlock the significant scale of for the green industrial revolution. Along with private investment that will be needed. regulations, this will support up to 190,000 jobs in 2025, and up to 440,000 jobs in 23. Recent steps include establishing a 2030, and leverage up to £90 billion of private new Office for Investment (OFI), which will investment by 2030. support high value investment opportunities into the UK which align with key government

21. Development of existing clean energy priorities. The new UK Infrastructure Bank industries can give a sense of the scale of will provide leadership to the market in the investment we will likely need to develop and development of new technologies, particularly grow new low carbon sectors. According in the scaling early-stage technologies that to Wind Europe16, from 2010-20 the UK have moved through the R&D phase. With an leveraged around £47 billion in our world initial £12 billion of investment the Bank will leading offshore wind industry, almost half crowd in private investment to accelerate our of all European investment in the sector. As progress to net zero whilst helping to level up existing strengths expand and newer strengths across the UK. (See Green Investment chapter emerge, we will work with industry, investors, for more detail). 49 Net Zero Strategy: Build Back Greener Creating wider benefits for society, ü Supporting biodiversity by planting the economy and the environment woodlands and restoring peatlands. ü Physical and mental health benefits, and

24. Acting on climate change also brings better connectivity to jobs, public services, the opportunity for wider benefits for our and each other, by promoting more society individual wellbeing,17 economy, and walking and cycling, and improving access environment from improving public health to to green spaces. protecting biodiversity. These include:

25. We know central government cannot and ü Cleaner air and less noise pollution, by should not deliver these benefits by acting replacing fossil fuels with renewables alone. We want to work in partnership with for generating electricity and moving to people and communities across the country. electric vehicles. To do so, we will empower local leaders to ü Better insulated homes will reduce energy kickstart their own net zero initiatives, taking consumption and lower bills, alongside responsibility for improving their areas and health benefits. shaping their own futures. ü Opportunities to tackle mitigation and adaptation together, and bring wider benefits. For example, sustainable land management can reduce emissions from land, assist adaptation, improve food security, and protect wildlife.18 UK framework for ending our domestic contribution to climate change

26. The UK has long been a global leader in 28. In 2020, we communicated to the UN tackling climate change. The 2008 Climate Framework Convention on Climate Change Change Act sets the legal framework for (UNFCCC) our NDC pledge to reduce UK reducing emissions across the UK economy. emissions by at least 68% by 2030 on In 2019, we became the first major economy 1990 levels.19,20 to legislate to reach net zero by 2050.

29. In June 2021, the Government set in

27. On our pathway to net zero, the UK has law the sixth carbon budget (CB6) limiting interim targets called carbon budgets and the volume of greenhouse gases emitted Nationally Determined Contributions (NDCs). from 2033 to 2037. CB6 reduces emissions Carbon budgets restrict the total amount by approximately 78% by 2035 compared of greenhouse gases that the UK can emit to 1990 levels. For the first time, this carbon over five-year periods, ensuring continued budget formally incorporates the UK’s share of progress towards our long-term climate target. international aviation and shipping emissions, NDCs are commitments made by Parties enabling these emissions to be accounted to the Paris Agreement. They show how for consistently with other emissions and Parties intend to reduce their greenhouse gas demonstrating leadership in how we account emissions to meet the temperature goal of the for our emissions.21 Paris Agreement. 50 Chapter 1 – Why Net Zero

30. This strategy sets out the action we will take to keep us on track for the UK’s carbon budgets and 2030 NDC, and establishes our longer-term pathway towards net zero by

2050. The Net Zero Strategy will be submitted to the UNFCCC as our second Long-Term Low Greenhouse Gas Emission Development Strategy under the Paris Agreement. 51 Net Zero Strategy: Build Back Greener Emission reduction targets in Scotland, Wales, and Northern Ireland The UK Government’s net zero Wales target covers the whole of the UK. In March 2021, the Senedd passed a suite All parts of the UK have an integral of regulations to set a Net Zero Wales 2050 role to play in delivering the UK- target, increase Wales decadal emissions wide carbon budgets on the path targets, and set Wales Carbon Budgets 2 and to net zero by 2050. Each nation 3 in line with them. Relative to the baseline faces different challenges based established in legislation, the targets and budgets set in law are: on the share of its emissions from hard-to-treat sectors. For example, • Carbon Budget 2 (2021-25): 37% average Northern Ireland has a higher reduction with a 0% offset limit proportion of its total emissions from • Carbon Budget 3 (2026-30): 58% agriculture (29%), compared to the average reduction UK overall (11%).22 • 2030: 63% reduction • 2040: 89% reduction Scotland • 2050: at least 100% reduction (net zero) The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019, which amends Welsh legislation requires Welsh Government the Climate Change (Scotland) Act 2009, sets Ministers to publish a plan for meeting each targets to reduce Scotland’s emissions of all of its carbon budgets. Net Zero Wales will greenhouse gases to net zero by 2045 at the be published before COP26 and will set out latest, with interim targets for reductions of the policies and proposals to meet Wales 75% by 2030 and 90% by 2040 and annual Carbon Budget 2 (2021-25) and set Wales on targets for other years. Scotland's net zero a longer-term pathway to net zero. target is in line with the independent, expert advice of the Climate Change Committee. The update to the Scottish Government’s 2018-2032 Climate Change Plan sets out the pathway to its new and ambitious targets set by the Climate Change Act 2019. It is also a key strategic document for its green recovery from COVID-19. 52 Chapter 1 – Why Net Zero Northern Ireland The current legislative framework for tackling climate change in Northern Ireland is the UK Climate Change Act 2008. Although this extends to Northern Ireland, it does not set a specific greenhouse gas emissions reduction target for Northern Ireland. It is implicit, and based on independent advice of the Climate Change Committee, that Northern Ireland contributes its fair share of required greenhouse gas emission reductions to meet the UK‑wide net zero by 2050 target and the UK Government’s 5-yearly carbon budgets set under the UK Climate Change Act. A Climate Change Act for Northern Ireland, whilst not yet introduced, is currently being progressed and remains a priority for delivery during the current Assembly mandate, by March 2022. The Northern Ireland Executive is also currently developing a multi-decade Green Growth Strategy. This longer-term Strategy will be delivered through a series of Climate Action Plans, which will set out the actions to meet sector-specific greenhouse gas emission targets. 53 Net Zero Strategy: Build Back Greener Leading the world to a greener, more sustainable future

31. The UK accounts for less than 1% of 34. The four goals for the UK’s COP26 global emissions.23 It is essential to enhance Presidency are: international collaboration with other countries and take urgent, concrete action globally to a. Mitigation: bring parties together to reduce emissions in the near-term. The 2020s deliver commitments on mitigation. is a critical decade in determining whether the All countries should come forward with Paris temperature goals can be kept within ambitious 2030 climate plans (Nationally reach. The UK’s role in international climate Determined Contributions, or NDCs) and action is set out in the International Climate long-term strategies to reach net zero Leadership and Collaboration chapter. greenhouse gas emissions, with the aim of keeping the goal of limiting global warming

32. The UK is leading the way in global to 1.5℃ in reach. climate action. Countries that are covered by b. Adaptation: establish a new consensus a commitment to net zero or carbon neutrality on protecting people and nature from now account for around 75% of global GHG climate change impacts. All countries emissions, and around 80% of global GDP. should come forward with ambitious When the UK took the role of incoming COP adaptation plans and communications to Presidency in December 2019, coverage help their societies and economies adapt was less than 30% of world GDP. We have a to climate change. unique opportunity to further this leadership through our G7 Presidency in 2021, and c. Finance: To deliver on our first two goals, as the host and president of the COP26 developed countries must deliver on their summit, in partnership with Italy. The COP26 promise to mobilise at least $100 billion summit will bring together nearly 200 Parties in climate finance per year by 2020, and to accelerate action towards the goals of the through to 2025, to help developing Paris Agreement and the UNFCCC, and our countries tackle and adapt to climate drive towards global net zero. change. International financial institutions must play their part and we need work

33. COP26 will be the forum to define the towards unleashing the trillions in private decisive decade of climate action and setting and public sector finance required to the path to global net zero emissions. The UK secure global net zero. is urging all parties to demonstrate how they d. Collaboration: bring countries together will reach net zero greenhouse gas emissions to reach an outcome accelerating through near term 2030 NDC targets and climate action and finalising the Paris Long-Term Strategies to 2050, protect people Rulebook. Use the power of a fair and nature from climate change impacts, and inclusive Presidency to enhance fund climate action, and work together to international collaboration among policy deliver immediate steps to keep warming makers, investors, business, young within 1.5℃. There will also be a renewed people, indigenous peoples, and civil focus on accelerating near-term action in society. This can help to solve key the top priority areas of coal phase out, challenges and accelerate the delivery of zero-emission vehicles, climate finance, and the Paris Agreement goals, particularly: halting deforestation. adaptation and resilience, nature, clean energy and transport, and finance. 54 Chapter 1 – Why Net Zero

35. In delivering net zero, the UK also 36. As the world economy moves to meet the has the opportunity to be at the forefront Paris commitments, with over 80% of world of large, expanding global markets and GDP now committed to net zero, the UK capitalise on export opportunities in low will set a clear direction and give businesses carbon technologies and services. This the certainty they need to invest, grow, and includes renewables, CCUS, hydrogen, smart develop the technologies of the future. Some energy systems and storage, Greenhouse commentators estimate global investment Gas Removals (GGRs), Advanced Modular in energy supply and infrastructure to reach Reactors (AMRs), and transport. By leading $92 trillion and $173 trillion over the next the world in the transition to a net zero thirty years. To achieve this level, the global future, the UK will be well placed to benefit economy will need to more than double economically by leading in the export of annual investments from around $1.7 trillion sustainable technologies and solutions. per year to between $3.1 and $5.8 trillion per year on average.24

37. This strategy sets out our approach to reaching net zero emissions and securing the vast wider benefits as we transition to a greener, more sustainable future. We urge other countries to follow this example with ambitious commitments at COP26 and detailed plans to deliver on them. 55 Net Zero Strategy: Build Back Greener Endnotes 1 IPCC (2018), ‘Global warming of 1.5°C’, https://www.ipcc.ch/sr15/download/ 2 IPCC (2021), ‘Sixth Assessment Report’, https://www.ipcc.ch/assessment-report/ar6/ 3 BEIS (2021), ‘Climate change and net zero: public awareness and perceptions’, https:// www.gov.uk/government/publications/climate-change-and-net-zero-public-awareness-and- perceptions 4 OBR (2021), ‘Fiscal Risk Report – July 2021’, https://obr.uk/frr/fiscal-risks-report-july-2021/ 5 IPCC (2021), ‘Working Group 1 contribution to the Sixth Assessment Report’, https://www. ipcc.ch/report/ar6/wg1/#FullReport 6 Note, emissions figures exclude IAS. UNFCCC, ‘GHG emissions with LULUCF’, https:// di.unfccc.int/time_series 7 GDP, PPP (constant 2017 international $), World Bank https://data.worldbank.org/indicator/ NY.GDP.MKTP.PP.KD 8 ONS (2021), ‘Low Carbon and Renewable Energy Economy (LCREE) Survey direct and indirect estimates of employment, UK, 2014 to 2019’, https://www.ons.gov.uk/economy/ environmentalaccounts/adhocs/13181lowcarbonandrenewableenergyeconomylcreesurvey directandindirectestimatesofemploymentuk2014to2019; ONS (2021), ‘Low carbon and renewable energy economy UK:2019’, https://www.ons.gov.uk/ releases/lowcarbonandrenewableenergyeconomyuk2019 9 Emissions data excludes IAS emissions. World Bank, https://data.worldbank.org/indicator/ NY.GDP.MKTP.PP.KD UNFCCC, BEIS Greenhouse Gas Inventory, ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https://www.gov.uk/government/statistics/final-uk- greenhouse-gas-emissions-national-statistics-1990-to-2019; National Inventory Submissions 10 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments, 38 11 The UK has a comparative advantage in a product or activity if it can produce it at a lower opportunity cost than its competitors. The principle implies that the UK should focus on production of those high-value goods, services and innovative activities where it is most competitive. It can then trade these for other goods and services where other countries have a comparative advantage over the UK. Consumers and producers in the UK and trading partners enjoy the efficiency gains from each country specialising and trading. 12 ONS (2021), ‘Low carbon and renewable energy economy, UK:2019’, https://www.ons.gov.uk/ economy/environmentalaccounts/bulletins/finalestimates/2019 13 LSE Grantham Institute (2021), Green economy: how the transition to net-zero could affect UK jobs across the country. https://www.lse.ac.uk/granthaminstitute/news/green-economy-how- the-transition-to-net-zero-could-affect-uk-jobs-across-the-country/ 14 BEIS (2021) Net zero in the North East: Regional transition impacts, research commissioned for BEIS 56 Chapter 1 – Why Net Zero 15 BEIS (2021), ‘Second wind for the Humber, Teesside and UK energy industry’, [Press release], https://www.gov.uk/government/news/second-wind-for-the-humber-teeside-and-uk-energy- industry 16 Wind Europe (2021), ‘Offshore Wind in Europe, Key Trends and Statistics 2020’, exchange rate based on monthly average between Jan 2011 and Dec 2020, https://windeurope.org/ intelligence-platform/product/offshore-wind-in-europe-key-trends-and-statistics-2020/ 17 HM Treasury (2021), ‘Green Book supplementary guidance: wellbeing’, https://assets. publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1005388/ Wellbeing_guidance_for_appraisal_-_supplementary_Green_Book_guidance.pdf 18 IPCC (2021), ‘Working Group 1 contribution to the Sixth Assessment Report’, https://www. ipcc.ch/report/ar6/wg1/#FullReport 19 BEIS (2020), ‘The UK’s Nationally Determined Contribution under the Paris Agreement’, https://www.gov.uk/government/publications/the-uks-nationally-determined-contribution- communication-to-the-unfccc 20 The UK NDC is based on territorial emissions – greenhouse gases emitted from sources within the UK – so does not include emissions from international aviation and shipping. This is in line with international reporting requirements, international expectations, and advice from the Climate Change Committee. 21 CCC (2020), ‘Sixth Carbon Budget’, https://www.theccc.org.uk/publication/sixth-carbon- budget/ 22 BEIS analysis (2021), Greenhouse Gas Inventories for England, Scotland, Wales & Northern Ireland: 1990-2019 using AR5 with climate feedback Global Warming Potentials https://uk-air. defra.gov.uk/reports/cat09/2106240841_DA_GHGI_1990-2019_Final_Issue1.2.xlsx 23 PBL (2020), Trends in Global CO2 and Total Greenhouse Gas Emissions; 2020 Report, https:// www.pbl.nl/en/publications/trends-in-global-co2-and-total-greenhouse-gas-emissions-2020- report 24 BloombergNEF (2021), ‘New Energy Outlook 2021’, https://about.bnef.com/new-energy- outlook/ 57 Net Zero Strategy: Build Back Greener The Journey to Net Zero 2 Chapter 59 Net Zero Strategy: Build Back Greener

1. Transforming the UK’s economy over the 2. The policies to drive these changes, next three decades to reach net zero will and the opportunities arising for individuals be a journey of unprecedented opportunity and the UK economy, are set out across and change. Our greenhouse gas emissions the remaining chapters of this Strategy. have fallen by more than two-fifths in the last This chapter first explores what reaching thirty years, with particular progress in the net zero by 2050 could mean for the UK; decarbonisation of our electricity system, potential scenarios of how we will get there; but we need to go further and faster in the and an indicative pathway to deliver on our next thirty years, right across the economy.1 ambitious carbon budgets along the way, It will mean developing and rolling out new, while navigating the inherent uncertainty. We innovative, and climate resilient technologies; look at this journey from a whole-economy embracing new ways of doing things – perspective, considering the key interactions from new ways of travelling, heating our between sectors, technologies and the homes, and using our land; and creating energy system that need to be planned for as new industries and jobs through our green we decarbonise. industrial revolution. 60 Chapter 2 – The Journey to Net Zero The UK’s Net Zero Future Our industrial heartlands are Our journeys are made in reinvigorated, with innovation zero emission vehicles, with and private investment in trains, ships and planes clean technologies – such running on new low carbon as wind, carbon capture and energy sources. hydrogen in multiple locations across the UK including the North East; or the manufacture Our towns and cities have of batteries and electric vehicles cleaner air for everyone, and in the Midlands. support walking and cycling with benefits for health. Our green economy and its supply chains Our goods are designed to last provide sustainable jobs for longer and be more efficient, highly-skilled workers – in while being used, repaired construction, manufacturing, and remanufactured within a engineering, science, nature circular economy. conservation, finance and more, across the economy and Our natural environment is the UK, including in rural areas. protected, enhanced, and more diverse, with healthy Our businesses are delivering ecosystems and increased the latest low carbon biodiversity, supporting a technologies, services and sustainable rural economy innovations for the UK and and providing wider benefits, export markets; and are more including improved mental resilient to the global net zero health and protection from risks transition. like flooding and overheating. Our homes are warm and comfortable, powered and heated by clean, affordable energy. 61 Net Zero Strategy: Build Back Greener A systems approach to the net zero journey

3. The characteristics of the net zero 5. We have implemented several key elements challenge – requiring action by multiple of a systems approach, including: parties across the public and private sectors, delivery at pace, and management of large • Establishing forums for delivering shared uncertainties – underline the need for strong net zero goals and identifying key issues coordination in policy development and clear through cross-system governance signalling to markets. Government taking structures, including two new Cabinet a systems approach to policy will help to committees; navigate this complexity. We must consider • Working towards a shared understanding the environment, society, and economy as of interdependencies and risks across parts of an interconnected system, where different parts of the net zero challenge, for changes to one area can directly or indirectly example through £2 million funding from impact others. This will help to ensure we the Shared Outcomes Fund to develop design policy to maximise benefits, account systems tools; for dependencies, mitigate conflicting interests • Testing and determining feasible net zero and take account of learning as we go. It scenarios with our whole energy systems reduces the risk of unintended consequences, modelling suite, and supporting our work ensuring individual decisions designed to help to identify high leverage, systemic actions achieve net zero do not end up hindering it or such as CCUS that will be necessary in a other important objectives. wide range of scenarios.

4. A systems approach does not attempt 6. Work will continue to develop this approach to design a ‘perfect’ net zero end-state further. This Strategy encompasses changes thirty years into the future. It aims to enable from across the system that will need to be innovative and desirable solutions to be delivered to achieve net zero. developed, and to ensure that decisions are made when needed, based on the best 7. As summarised in Figure 3 below, each evidence available at that time and with sector of the economy will play a vital role the fullest possible range of considerations in the future net zero system, and these are brought to bear. This includes taking a highly connected – changes in one area can dynamic approach to policymaking and directly or indirectly impact others. updating our assumptions on an ongoing 8. Applying a systems approach to basis; considering public reactions to a policy; policymaking can help to address complex accounting for where a particular investment policy challenges, including to identify or technology deployment may affect another interdependencies. The case study below for sector’s decarbonisation; and considering the electric vehicles demonstrates the need to net costs and benefits across different parts of understand the complex interactions which the economy and environment. drive change. Government will continue to test and update its understanding of systems and how they relate to one another, which forms an important part of how we will monitor delivery, explored further in the Embedding net zero in government chapter. 62 63 Net Zero Strategy: Build Back Greener Figure 3: The role of each sector in the future net zero system Power Role of sector: generates electricity to meet low carbon energy demand across all sectors. Natural Resources & Waste Relationship with other sectors: depends Role of sector: land provides both on demand across end use sectors, while energy sources and natural carbon specific forms of generation can use carbon sinks, while polluting areas, including capture technology, hydrogen, and waste. agriculture and the treatment of waste, must decarbonise. Relationship with other sectors: depends on developing new ways of using land sustainably, while end uses like agricultural machinery will rely on low carbon energy. Greenhouse Gas Removals Industry Role of sector: alongside natural Role of sector: develops cleaner ways to carbon sinks, engineered removals produce the wide range of products we all deliver negative emissions, either rely on, from food and drink to iron and steel. directly from the air or as a co- Relationship with other sectors: depends benefit of methods to generate on low carbon energy supply from power power, fuels and products. and hydrogen, as well as the use of carbon Relationship with other capture technology alongside power, sectors: compensates any hydrogen and greenhouse gas removals. residual emissions to ensure a net zero system. Engineered removals also use electricity. 64 Chapter 2 – The Journey to Net Zero Heat & Buildings Role of sector: our public, business, industrial and residential buildings, as well as products we use for cooking and everyday living, move to green forms of energy. Relationship with other sectors: depends on low carbon energy, while different heat options will in turn affect the development of supply sectors. Transport Role of sector: all forms of travel that keep modern society moving – road, rail, aviation, and shipping – run on green forms of energy. Relationship with other sectors: depends on low carbon energy, while different transport options will in turn impact the development of supply sectors. Fuel Supply & Hydrogen Role of sector: supports energy supply, especially in areas that are harder to electrify such as heavier transport. Oil and gas play a far reduced role where needed and abated by carbon capture technology where possible. Relationship with other sectors: depends on demand across end use sectors, while different types of hydrogen production use electricity, carbon capture, and biomass. 65 Net Zero Strategy: Build Back Greener Case study of a ‘systems approach’: Electric Vehicle (EV) roll out The transition to EVs is central to The roll out of EVs will have an impact on decarbonising road transport. Higher sales demand for petrol and diesel, with potential of EVs means overall electricity demand to impact through the supply chain, from will increase, requiring greater electricity production to processing, distribution and generation and grid capacity. Over the lifetime retail. Uptake will also have an impact on of an EV, overall carbon emissions are already R&D, investment, and manufacturing of both significantly lower than a traditional internal EVs, and the infrastructure required to use combustion engine car and, as the electricity them. The effect of investment in these areas grid continues to decarbonise, the lifetime would be wider availability of the infrastructure of emissions from driving an EV reduce. The required for charging, reduction in the cost of transition to EVs therefore has a potential manufacturing, and further advances in EV knock-on impact on the industrial sector and technology. its wider supply chains, particularly in certain regions of the UK, for example creating Manufacturing costs will likely fall as additional demand for new wind turbine production increases at scale and investment manufacture and installation. in R&D will bring down the costs of components. Wider availability of reliable More EVs will affect both the scale and charging infrastructure should remove range nature of electricity demand, including the anxiety for EV drivers and streamlining timing and scale of peaks, as patterns of payment methods should improve the charging behaviour develop (e.g. many people consumer experience. These two factors choosing to charge at the end of the working will then encourage further take up of EVs day). The changes this could bring need to be with these sets of relationships representing carefully thought through, and opportunities positive feedback loops. seized. For example, innovative technology could support smoothing of electricity The examples above are a significant demand, by allowing electricity stored in simplification of some of the interactions batteries to be fed back into the grid between sectors as EV roll out progresses. at times of low renewable generation The below systems map shows a more or high demand (vehicle-to-grid granular picture, though this is also a technology). Smart charging (enabled simplification and some variables will have by regulations that Government plans other influences that are not displayed here. to lay later this year) will also help to move demand away from peak times as well as helping consumers to benefit from lower cost off-peak electricity. 66 Chapter 2 – The Journey to Net Zero Figure 4: Example of a ‘systems map’ showing some interactions to consider in the roll out of electric vehicles 67 Net Zero Strategy: Build Back Greener Pathways to net zero by 2050 Key features of the net zero green sectors, reducing air pollution with transition benefits for health, and enhancing biodiversity. We also expect costs to continue to fall

9. There are a range of ways in which net zero as green technology advances, industries could be achieved in the UK. Our exact route decarbonise, and private sector investment will depend on the availability and deployment grows. Recent cost benefit analysis for the of key technologies, supported by long-term sixth carbon budget4 suggests that the market growth, as well as the extent to which significant benefits of net zero more than offset individuals and businesses adopt green the costs, resulting in a net benefit. choices. Our approach must consider physical factors, such as land availability and climate 12. Most costs are the additional capital change risks like drought and flooding. As a costs (and associated financing) of low carbon principle, we will pursue options that leave technologies, although significant fuel savings the environment in a better state for the next help to offset these. We estimate that the generation by improving biodiversity, air quality, net cost, excluding air quality and emissions water quality, natural capital, and resilience to savings benefits, will be equivalent to 1-2% of climate change where appropriate. GDP in 2050. Our approach will need to reflect that benefits and impacts of the transition

10. As we increase our efforts to decarbonise will be dependent on individual household domestically, we must ensure production, and characteristics, such as their housing type and the associated greenhouse gas emissions, current vehicle usage, to support those low- does not shift to other countries with lower income households most affected by individual climate obligations. In the Net Zero Review technology transitions. The government’s we consider the carbon leakage risk facing approach will also support the principle that UK businesses on a sectoral basis and those who produce the pollution should bear discuss the approaches to help address this the costs of managing it. Further information risk.2 In addition to encouraging our trading on the economic impacts is set out in HM partners to increase their own efforts, we are Treasury’s Net Zero Review, which informs engaging with industry to better understand our approach to achieving a transition that the risks and consider the full range of options works for households, businesses and public to address these, including through the UK finances, and maximises economic growth. Emissions Trading Scheme, discussed further in the Industry chapter. 13. The exact technology and energy mix in 2050 cannot be known now, and our path to

11. While there are significant costs in net zero will respond to the innovation and reaching net zero, the cost of inaction is much adoption of new technologies over time. We higher. The Office for Budget Responsibility’s expect, however, to rely on the following key recent report showed unmitigated climate green technologies and energy carriers, which change resulting in “debt spiralling up to interact to meet demand across sectors and around 290% of GDP thanks to the cost of to remain low carbon. adapting to an ever hotter climate and of more frequent and more costly economic • Electricity from low carbon generation shocks”.3 In addition to reducing the risks of and storage technologies meets higher catastrophic climate change, net zero will also demand for low carbon power in buildings, bring significant benefits and opportunities, industry, transport, and agriculture; such as economic growth and jobs in new 68 Chapter 2 – The Journey to Net Zero • Hydrogen can complement the electricity • Biomass combined with CCUS can system, especially in harder to electrify remove carbon from the atmosphere areas like parts of industry and heating, and support low carbon electricity and and in heavier transport such as aviation hydrogen generation. Biomass and other and shipping. A range of low carbon wastes can also support low carbon fuels production methods could be used;5 for industry, buildings, and transport. • Carbon capture usage and storage 14. These new technologies could transform (CCUS) can capture CO2 from power our energy system by 2050. Electricity, low generation, hydrogen production, carbon hydrogen, and BECCS could all and industrial processes – storing it scale up, while reliance on fossil fuels will underground or using it. This technology drop considerably and can be combined also supports negative emissions from with carbon capture technology to abate engineered greenhouse gas removals – emissions, with any residual emissions offset bioenergy with carbon capture and storage by greenhouse gas removals. (BECCS) and Direct Air Carbon Capture and Storage (DACCS); Figure 5: 2019 energy generation and end uses6 69 Net Zero Strategy: Build Back Greener Illustrative 2050 scenarios

15. Modelling illustrative net zero scenarios allows us to explore possible energy and technology solutions in 2050, better understand important system-wide interactions, and identify features common to all options. Below we show three modelled scenarios all reaching net zero by 2050 through the same pace of decarbonisation, which demonstrate a range of practical ways in which net zero could feasibly be delivered with technology and resources known today.7 They do not represent ‘most likely’ or ‘preferred’ solutions, and the actual position in 2050 may also vary outside of these scenarios. There is a great deal of uncertainty inherent in any modelling as far into the future as 2050, which is highly sensitive to economic, societal, and technological developments – see the Technical Annex for details of the modelling. 70 Chapter 2 – The Journey to Net Zero 2050 Scenario 1: High electrification Explores the impact of widespread electrification to support transport, heating, and industry decarbonisation, relative to other scenarios, with deep decarbonisation of electricity supply. This pathway sees UK electricity generation increasing to around 690 TWh, more than doubling from today,8 and low carbon hydrogen production scaling up to 240 TWh by 2050. Sectors such as road transport and buildings reach near zero emissions, through widespread electrification, with small residual emissions possible in personal and heavy goods transport; while the majority of buildings use electric heating, with the remainder using connected low carbon district heat networks. Industry emissions are near zero, through the full suite of green technologies (electricity, hydrogen, and CCUS), alongside energy efficiency measures. Electricity generation is overwhelmingly decarbonised, through widespread deployment of renewables alongside other low carbon generation including nuclear power and gas with CCUS. Residual emissions remain in aviation, agriculture, and waste, though these reduce from today’s levels through, for example, sustainable aviation fuels, more efficient farm practices, and reduction in landfill waste. These emissions are balanced by significant afforestation, together with engineered removals (primarily BECCS but also DACCS).9 Figure 6: High electrification scenario: energy generation and end uses in 2050 Figure 7: High electrification scenario: residual emissions in 2050 Power Fuel supply & Hydrogen Industry Heat & Buildings Domestic transport International aviation & shipping Agriculture & LULUCF Waste & F-gases -100 -50 0 50 100 Greenhouse Gas Removals Emissions in MtCO2e 71 Net Zero Strategy: Build Back Greener 2050 Scenario 2: High resource Explores the impact of using low carbon hydrogen more extensively, particularly for decarbonising buildings, power, and heavy vehicles. It also assumes higher levels of tree- planting are achievable, increasing the ‘negative emissions’ available from land-use sinks. This pathway sees low carbon hydrogen generation increasing to around 500 TWh. As hydrogen is the main energy source for heating, electricity demand and therefore generation is lower than in scenario 1 at 610 TWh. Electricity and district heat still play a role in both residential and non- domestic buildings but the majority of building heat demand is assumed to be met by hydrogen. End users of energy (e.g. transport and buildings) reach similar levels of decarbonisation as in scenario 1. In heavy transport, there is a shift to increased use of hydrogen. Compared to scenario 1, greater levels of tree planting allow for slightly higher residual emissions to remain, primarily in hydrogen production. Engineered removals are at a similar scale to scenario 1 to offset remaining residual emissions in the hardest-to-decarbonise sectors of aviation and agriculture. Figure 8: High resource scenario: energy generation and end uses in 2050 Figure 9: High resource scenario: residual emissions in 2050 Power Fuel supply & Hydrogen Industry Heat & Buildings Domestic transport International aviation & shipping Agriculture & LULUCF Waste & F-gases -100 -50 0 50 100 Greenhouse Gas Removals Emissions in MtCO2e 72 Chapter 2 – The Journey to Net Zero 2050 Scenario 3: High innovation Explores a world in which successful innovations enable lower residual emissions to be reached in aviation, while higher capture rates increase the impact of carbon capture technologies, with higher levels of DACCS deployed over the 2040s. In scenarios 1 and 2, end users of energy such as transport, industry, and buildings are decarbonised extensively, while accounting for residual emissions in aviation and baseline assumptions on the technological potential for carbon capture. In this scenario more optimistic assumptions around carbon capture and aviation, such as the availability of sustainable fuels at scale and zero emission aircraft, cause a divergence from scenarios 1 and 2 in the deployment of certain technologies. With lower residual emissions in aviation and improvement in capture or negative emission potential, end use sectors such as transport, buildings, agriculture and industrial dispersed sites can decarbonise to a lesser extent. This pathway sees electricity and low carbon hydrogen generation requirements in between the two scenarios explored previously, at 670 TWh and 330 TWh respectively. Figure 10: High innovation scenario: energy generation and end uses in 2050 Figure 11: High innovation scenario: residual emissions in 2050 Power Fuel supply & Hydrogen Industry Heat & Buildings Domestic transport International aviation & shipping Agriculture & LULUCF Waste & F-gases -100 -50 0 50 100 Greenhouse Gas Removals Emissions in MtCO2e 73 Net Zero Strategy: Build Back Greener Insights from potential 2050 outcomes for net zero journey

16. Despite the uncertainties, we can draw • Both electricity and hydrogen demand some broad conclusions from the illustrative grow significantly from today, and need scenarios above to help shape our approach to be produced with very low levels to net zero: of emissions by 2050. Biomass also becomes a key energy carrier to enable • Extensive decarbonisation is required engineered removals and support low across transport, buildings, and industry, carbon fuel production; given the need to account for possible residual emissions in agriculture, aviation, • Given the need to plan for some residual waste, and heavy industry and possible emissions, it is appropriate to plan for use limitations on deployment of greenhouse of greenhouse gas removals. The carbon gas removals; capture processes needed for this are likely to play a significant role in wider • Given this, extensive energy efficiency decarbonisation, for example in power; measures across these sectors are likely to be beneficial to bring down energy • Primary energy sources increase in demand and cost across the system. number and diversify, including a range Every scenario sees overall energy demand of renewables, and from biomass from end use sectors reduce substantially; and waste. This diversified system for energy generation also becomes • Different technologies for these sectors more interdependent to ensure can be accommodated (for example, security of supply. predominantly electric heat pumps or hydrogen for heating), meaning wide ranges of possible electricity and hydrogen demand remain plausible; Indicative delivery pathway to 2037 An indicative pathway meeting our and must respond flexibly to changes that emissions targets up to Carbon arise over time. Budget 6 18. The pathway is based on our understanding now of the potential for each

17. Drawing on the insights from our sector to reduce emissions up to 2037, illustrative 2050 scenarios, we have developed considering the balance between sectors that a delivery pathway: an indicative trajectory of is optimal for the entire economy in terms emissions reductions which meets our targets of delivery and cost. Emission reductions up to the sixth carbon budget ending in 2037. beyond our existing policies combine evidence This is broadly consistent with all three 2050 on theoretical potential for abatement with scenarios and follows decarbonisation that judgements about barriers to delivery, the rate we aim to achieve through this Strategy. The at which low carbon options could be adopted uncertainties inherent in our 2050 scenarios in practice and timescales for key decisions. also apply to our 2037 delivery pathway. It is We take an economy-wide view, including to designed only to provide an indicative basis balance end use sector demands with supply on which to make policy and plan to deliver side considerations, such as infrastructure and on our whole-economy emissions targets. the operation of the electricity and other fuel The exact path we take is likely to differ supply sectors. 74 Chapter 2 – The Journey to Net Zero

19. As a general principle, our indicative range of options presented in the illustrative pathway to 2037 prioritises emissions 2050 scenarios open. The Embedding Net reductions where known technologies and Zero in Government chapter sets out how solutions exist and thereby minimises reliance Government will monitor progress to ensure on the use of greenhouse gas removals we stay on track for our emissions targets to meet our targets. It is designed to drive and respond to developments affecting our progress in the short-term, while creating long-term goals. options in a way that seeks to keep the 75 Net Zero Strategy: Build Back Greener Figure 12: Indicative emissions reductions to meet UK carbon budgets and NDC10 900 4500 800 4000 700 3500 Emissions in MtCO2e 5 year budget MtCO2e 600 3000 500 2500 400 CB1 2000 Headroom for IAS CB2 300 1500 CB3 CB4 200 1000 CB5 100 CB6 500 0 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2025 – 55% reduction (excluding international aviation and shipping emissions) 2030 – NDC target for at least 68% reduction (excluding international aviation and shipping) 2035 – 78% reduction (including international aviation and shipping) 2050 – 100% reduction To meet whole-economy net zero target 76 Chapter 2 – The Journey to Net Zero Indicative sectoral decarbonisation Given the interdependencies and interactions pathways within and between sectors, the exact areas for emissions savings may shift, as our

20. Broken down by sector, our indicative understanding increases. These pathways delivery pathway implies the reduction in are therefore not predictions or targets: the emissions up to 2037. These indicative sector emissions savings ultimately contributed by pathways, presented as ranges for residual each sector are likely to differ as we respond emissions to reflect the inherent uncertainty, to real-world changes. help to drive change and to plan how we can remain on track to meet our targets. Figure 13: Indicative delivery pathway to 2037 by sector Source: BEIS analysis 77 Net Zero Strategy: Build Back Greener

21. The pathway considers that sectors financing, and infrastructure; and the need have the potential to make progress at to overcome wider delivery barriers. These different rates, for example, depending on the constraints and action to overcome them are availability and deployment of technological summarised below and explored in more detail solutions; development of supply chains, in subsequent chapters. Expected % of UK reduction emissions by 2035 Key features of the delivery pathway Sector (2019)11 from 1990 to 2037 11% Power 80-85% By 2035, all our electricity will need to come from low carbon sources, subject to security of supply, moving to a fully decarbonised power system whilst meeting a 40-60% increase in demand. Expected residual emissions will be limited to CCUS plants, unabated gas, and energy from waste. This means increased investment in the grid network, electricity storage solutions and flexible grid management, to ensure decarbonisation without risking security of supply. 5% Fuel supply 53-60% Large potential from electrification of oil and and Hydrogen gas installations and addressing venting and flaring in the existing fuel supply sectors where demand is expected to fall over time. Emissions savings in the incumbent fuel supply sector will be marginally offset by emissions expected from low carbon hydrogen and fuel production, which will enable significant emissions savings through fuel switching across a range of end use sectors. Hydrogen production is expected to establish in the 2020s before a significant ramp up in the early 2030s, using a range of production methods to meet demand. 15% Industry 63-76% Deep decarbonisation through resource and energy efficiency, fuel switching, and CCUS deployment are all required, starting with industrial clusters and major emitters, such as the steel sector. Decarbonisation of smaller and more dispersed sites will also be needed, placing demands on associated infrastructure. 78 Chapter 2 – The Journey to Net Zero 17% Heat and 47-62% Addressing heat emissions will require a Buildings substantial increase in the uptake of low carbon heating up to 2035, when all new installations will be net zero compatible. In any heat pathway, improved energy efficiency – through investment in buildings fabrics and better product standards – will reduce overall energy use and costs. Advanced smart meters will inform consumers and businesses about their energy use, encouraging energy-saving behaviour. 32% Transport12 47-59% Road transport is transformed through increasing use of zero emission vehicles, driven in part by ending the sale of new petrol and diesel cars and vans by 2030 and supported by increasing the share of trips taken by cycling, walking, and public transport. Progress is expected to decarbonise aviation and shipping through efficiency improvements and the uptake of low carbon fuels. These will require international coordination. 20% Natural 39-51% Increased afforestation and peat restoration Resources contribute significantly, though with long lead-in times. By 2035, perennial energy crop and short rotation forestry can contribute significantly to carbon sequestration, with potential to support power, fuel supply, industry, and transport through BECCS and generation of biofuels. Waste emissions reduce with increased diversion of municipal biodegradable waste streams away from landfill, and potential savings from other parts of the sector, such as wastewater. Use and therefore emissions of F-gases continues to reduce in response to future control measures. Agriculture emissions are largely from livestock and nutrient management. The pathway assumes emissions will be reduced through improved and innovative farming practices. Greenhouse Not applicable Deployment of BECCS and DACCS. Deployment Gas Removals dependent on development of UK CCUS infrastructure and the availability of suitable, sustainable, and low-cost biomass feedstocks. 79 Net Zero Strategy: Build Back Greener

22. The changes we expect in sectors 2037 while overall, energy demand reduces will evolve over time. In some cases, significantly through increased efficiency and alternative measures within a sector could fossil fuels are replaced by new sources of achieve broadly the same level of emissions energy. Electricity generation increases to abatement. In other cases, we will need meet a larger share of energy demand, and to respond to strategic decisions that low carbon hydrogen grows from a near zero government makes in the future. One of the base to play a significant role from the 2030s. most significant decisions that will affect our pathway will be on the balance of types of low 24. Decisions in 2026 around hydrogen’s carbon heating solutions, mainly electricity and role in providing heat in buildings will have hydrogen, deployed in buildings. The Heat a substantial impact on relative hydrogen and Buildings Strategy commits to strategic and electricity demands – Figure 14 shows decisions on the relative roles of hydrogen a scenario where hydrogen is not used and electrification for on-grid homes by 2026 to heat buildings, which is predominantly and the relevant sector chapter in this strategy decarbonised via electrification through heat explores alternative options that are consistent pumps. In a scenario where hydrogen has a with the level of ambition implied by our more significant role in decarbonising heat in delivery pathway. buildings, hydrogen demand would increase by 70 TWh by 2035 and electricity demand Key energy changes and deployment would decrease by 20 TWh (due to the high implied by the delivery pathway efficiency of heat pumps more hydrogen is required to produce the same amount of heat).

23. Assumed energy demand in our pathway Beyond heat, the indicative delivery pathway is based on government’s central assumptions describes just one scenario for potential about required technology uptake, with a hydrogen demand in industry, transport, and variation to reflect the outstanding strategic power – the UK Hydrogen Strategy takes decision on the potential role of hydrogen a wider view to consider greater ranges for to heat buildings. We expect both natural hydrogen use in all sectors.13 gas and oil demand to more than halve by 80 Chapter 2 – The Journey to Net Zero Figure 14: Energy demands up to 2037 assumed by delivery pathway 2,500 2,000 1,500 TWh 1,000 500 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Natural gas Oil Bioenergy Electricity Hydrogen Source: BEIS analysis Note: for illustrative purposes, this shows energy demands in a scenario in which electricity is predominantly used to heat buildings. See the Technical Annex for hydrogen for heat scenario. 81 Net Zero Strategy: Build Back Greener

25. Meeting the increasing demand for low • Carbon capture is expected to need to carbon energy across the economy relies reach capacity for a total of ~20-30 MtCO2 on scaling up significantly, the new green per year by the early 2030s across the technologies and energy carriers identified economy – more than double what was above. While the deployment of these will set out in the Ten Point Plan – and at least respond to changes over time, our indicative ~50 MtCO2 by the mid-2030s; pathway suggests they are central to • Biomass is anticipated to need decarbonisation over the next 15 years: increases in feedstock supply from the • Electricity sees an expected 40-60% 2020s to support BECCS deployment increase in demand by 2035, all met through various routes for use in from low carbon sources to bring forward ‘hard‑to‑decarbonise’ areas. These the government’s commitment to a fully resources will be explored in the decarbonised power system by 15 years, Biomass Strategy. subject to security of supply; 26. Figure 15 below shows some wider • Hydrogen production capacity ambition illustrative deployment of technologies for 5 GW by 2030, which is expected or measures assumed in our pathway to to increase to around 10 or 17 GW demonstrate a sense of the scale and pace by 2035 (depending on the role of of change required. These are based on hydrogen for heat); modelling assumptions, which are detailed in the Technical Annex, and do not represent targets – the delivery of such measures will depend on, and respond to, real- world change. 82 Chapter 2 – The Journey to Net Zero Figure 15: Illustrative examples of deployment implied by the delivery pathway Today Mid 2020s Early 2030s Mid 2030s Zero emission cars As a proportion of total car fleet 1 icon = 5 % points Low carbon homes* Cumulative homes with low carbon heating 1 icon = 1m Electricity generation Total UK generation 1 icon = 50 TWh Carbon Capture Total annual CO2 captured across sectors 1 icon = 5 MtCO2 Trees Annual area of afforestation in UK 1 icon = 10,000 ha Note: For illustrative purposes, icons represent approximate and rounded figures from our modelling. Where there are ranges, an approximate central point has been shown. * Homes with low carbon heating includes homes heated by heat pumps, hydrogen or connected to heat networks 83 Net Zero Strategy: Build Back Greener Essential activity driving the delivery pathway

27. It is, of course, impossible to predict every a path which maintains flexibility in the future, possible path to net zero that might arise over while ensuring we do not delay the action the next 30 years – we do not seek to do so. we know is needed in the near-term. This New innovations may emerge, enabling the aims to provide the certainty to drive forward market to move more quickly or at lower cost investment and change, while allowing the than expected, while in other areas progress market to respond to new opportunities and may be hindered by unexpected deployment challenges which arise from the transition. The challenges as technologies are brought to UK Emissions Trading Scheme is a crucial way scale. This Strategy does not attempt to in which we ensure that our pathway is rooted ignore these uncertainties, but rather to plot in cost-effective, market-led solutions. 84 Chapter 2 – The Journey to Net Zero UK Emissions Trading Scheme as a key driver of our path to net zero The UK ETS, a ‘cap and trade’ scheme, To mitigate the risk of carbon leakage, is a market-based pricing mechanism to in which production and associated incentivise and control the reduction of greenhouse gas emissions are offshored emissions in a cost-effective way. A cap is set in ways that would not have happened if on the total amount of certain greenhouse the pricing of emissions across jurisdictions gases that can be emitted by the sectors was implemented in an equivalent way, we covered by the scheme over a given period. currently give at risk sectors a proportion The cap is divided into allowances, and of their allowances for free to reduce their participants receive or purchase allowances exposure to the carbon price. We initiated a which they can sell and buy with one another review of free allocation policy earlier this year as needed. This UK ETS cap will reduce over with a call for evidence and plan to consult in time, providing a long-term market signal so the coming months, as part of a wider review companies can plan and invest in abatement into the UK ETS. This review will focus on how accordingly – offering new trade and export free allocations can be better targeted in line opportunities. The cap is initially set 5% below with a reduction to the overall cap, while still the UK’s notional share of the EU ETS cap preserving the incentive to decarbonise. for Phase IV of the EU ETS. We will consult in the coming months on an appropriate cap consistent with net zero. The UK ETS acts as a cross-cutting policy lever to drive market-based abatement, incentivising industries to find the most cost-effective solutions to decarbonise. This ensures that, as industries develop lower carbon processes, our path to net zero adapts to cost-effective abatement routed in market- based solutions. We have committed to exploring expanding the UK ETS to the two thirds of uncovered emissions and we will provide a further update in due course. It remains important, however, that we develop policies which actively support and encourage sectors to decarbonise, rather than rely on applying an emissions cap and the consequent carbon pricing as our sole mechanism. Our delivery pathway provides a sound basis to underpin those policies to decarbonise, set out in the chapters that follow. 85 Net Zero Strategy: Build Back Greener

28. Our analysis points to the following • Innovation for new technologies. essential planks that we can be confident Green technology, including research net zero will depend on. These underpin the and development into new options, is a chapters that follow in this Strategy. cornerstone of the net zero journey. As well as the supply-side technologies discussed • Integration of low carbon energy above, this also means new technologies sources in a smart and flexible in end use sectors – for example, installing way. For example, fully decarbonising zero carbon heating and delivering our electricity system – in addition to zero emission surface transport, while renewables, nuclear, and power CCUS – transforming the way we use natural could also rely on large-scale long duration resources, farm our land, and manage our storage, as well as use of BECCS and waste. Different types of public and private hydrogen-fired generation, to manage support are required to develop nascent peaks in demand. Hydrogen could require technologies and deploy known ones at substantial electricity for production via scale. Government has a role to play in a electrolysis, but in turn could help improve financing offer, investment signalling, and the efficiency of a high-renewables developing business models. electricity system by using excess supply during periods of high generation and low • Green investment. Private investment demand, as well as further energy storage. will provide most of the financing needed to commercialise early technologies • Increasing diversity of energy sources and scale low carbon sectors. We need for end uses. The removal of unabated additional net zero investment to reach c. fossil fuels from the system which currently £50-60 billion/year in the late-2020s and supply most of the energy requirements 2030s. However, public finance and public in end use sectors, such as transport and finance institutions will provide much of heating, has potential to lead to a greater the early investment, intervention, and range of technologies and energy carriers signalling that will create the conditions playing a part in future. This could create for an acceleration of net zero investment. some resilience, though there may not This will also generate significant financial always be scope for direct substitution. savings if achieved and accompanied by • Increasing energy efficiency. effective policy, thereby lowering the cost The low carbon energy system depends of capital for investment. on overall energy demands reducing • Demand-side changes and public significantly. This means all demand engagement. The rollout of low carbon sectors becoming far more efficient, solutions relies on positive public through adoption of new technologies, reception and demand to adopt them. better energy management, and direct Consumers need to have access to investment in energy efficiency measures. the right technologies, understand their Such measures can be considered ‘low benefits, and have confidence that they regret’ to pursue throughout the transition will be protected if they use them. The and will, in turn, affect the level of energy deployment of technologies should also supply and carbon capture required respond to their reception by consumers, in the system. and go with the grain on consumer behaviour and trends. We also need our workforce to have the skills to meet increasing demand, including in areas such as housing retrofit, heat pump installation, electric vehicle manufacturing, charge 86 Chapter 2 – The Journey to Net Zero point installation and forestry. More widely, • Sustainable use of resources. low carbon and environmental practices Net zero will mean maximising the value of will require people and businesses to make resources within a more efficient circular green choices, and government has a role economy. It will need a significant increase to play in making these as easy, attractive, in the use of certain types of resources – and accessible as possible. The net zero critical minerals like lithium, graphite, and journey must be a joint one and will be cobalt, as well an increased demand on affected by how engaged and supportive resources like copper and steel – from the public are. manufacturing green technologies to • New standards and regulation. In certain building large-scale infrastructure. This areas government will need to support and will require new robust supply chains complement market-led decarbonisation and provide economic opportunities, but with standards and regulation to ensure there will be environmental trade-offs, and that, where appropriate, green options are potential negative impacts on habitats, pursued, while high carbon options are biodiversity, and water resources to be phased out. This will help to accelerate managed carefully. For example, ammonia low regrets areas like energy efficiency, emissions from anaerobic digestion, which such as ensuring our homes are built to can use waste as a feedstock, can also new standards, and high impact areas like affect biodiversity and health. zero emission vehicles. It will also ensure • Understanding land use trade-offs. suppliers of higher-carbon technologies Like other resources, our land is finite and and fuels provide low carbon alternatives, competition for it will need to be managed driving deployment at scale. as we rely on natural resources and use • Planning and infrastructure. land for multiple new purposes, such as Low carbon solutions rely on transforming perennial energy crops and short rotation the infrastructure needed to deliver them. forestry for energy generation, while Increasing electricity generation needs to allowing for afforestation and peatland be accompanied by building out a flexible restoration to sequester and avoid grid. Alongside dedicated hydrogen emissions. We will also need to ensure net infrastructure, new CO2 transport and zero is compatible with wider uses of land storage infrastructure is needed for the use such as agriculture, housing, infrastructure, of CCUS which will require investment of and environmental goals. These land use around £15 billion from now to the end of challenges are exacerbated by the impact the Carbon Budget 6 period. We need to of climate change on the availability of ensure that low carbon energy generation productive land and water in future. can be connected to sources of demand 29. These features underpin the critical geographically, which means improving activity driving decarbonisation across sectors knowledge of local circumstances and of the economy. A summary is provided opportunities for generation. We also below up to 2035, which is not exhaustive recognise the importance of the planning but focuses on the new technologies which system to common challenges like need to be developed and deployed over the combating climate change and supporting next decade. Policies and proposals to detail sustainable growth. how this activity is achieved are set out in subsequent chapters. 87 88 Figure 16: high-level essential activity across sectors to 2035 Market mechanisms continue to evolve to support electricity system decarbonisation, especially from the 2030s Building out electricity infrastructure, especially in the 2020s Strategic approach to energy networks, smart technologies, and market reform to incorporate low carbon and flexible technologies efficiently 6 longer duration storage demonstrations Opening of Allocation Round 4 – UK’s largest ever renewables auction Hinkley Point C operational (EDF 40 GW offshore wind Full Power (including a minimum budget for floating offshore wind) estimate) decarbonisation Nuclear fusion strategy of power SMR designs complete regulatory Decision on next steps for long duration storage approval for UK deployment First SMRs and AMR Nuclear roadmap Final Investment Decision demonstrator deployed for deployment on Sizewell C At least 1 CCUS plant by mid-2020s Development and implementation of regulatory and market frameworks for hydrogen Small scale electrolytic hydrogen production Increased scale and range Large scale electrolytic and CCUS-enabled electrolytic hydrogen production of hydrogen production (e.g. nuclear, biomass) Review barriers to electrification of oil and gas production 1GW low carbon 5GW low carbon hydrogen hydrogen production Fuel production capacity capacity Net Zero Strategy: Build Back Greener Supply & Launch Net Zero Decide on blending 10% reduction Hydrogen Hydrogen Fund hydrogen into gas grid in oil and gas 25% reduction in oil 50% reduction in oil production and gas production and gas production Finalise hydrogen business model emissions emissions by 2025 emissions by 2050 and low carbon standard by 2025 Increasing resource efficiency, energy efficiency and fuel switching (mainly to electricity and low carbon hydrogen) Introduction of demand-side measures (e.g. product standards, product labelling) Develop business models and negotiate contracts for initial industrial CCUS, including transport & storage Potential CCUS Build CCUS capacity and infrastructure in clusters, including transport and storage networks expansion beyond clusters Industry Net Zero consistent UK Emissions 4 CCUS clusters CCUS Trading Scheme cap (by 2024 latest) At least 2 CCUS clusters by mid-2020s capturing 6MtCO2 capturing industrial emissions 9MtCO2 per year by 2030 industrial emissions per year by 2035 Improvements to energy efficiency of buildings to reduce emissions and make them ready for low-carbon heating technologies Accelerate heat pump rollout, reducing costs by growing and expanding UK manufacturing Deployment of low carbon heat increases and market continues to Phase out new gas transform – technology mix dependent on role of hydrogen boilers in line with Transformation of heat networks – introducing the market framework and zoning natural cycle so all heating by 2050 is Hydrogen net zero compatible Depending on hydrogen decision, prepare for conversion of gas grid village trial Hydrogen town before Decide on role of hydrogen in buildings the end of the decade, Heat & 600,000 heat pumps installed per year subject to hydrogen 13 million low carbon Hydrogen Off-gas-grid Future Homes homes, including 7-11 decision Buildings neighbourhood regulations for & Future million heat pumps trial non-domestic Buildings Upgrading fuel poor buildings, subject Standards Off-gas-grid regulations for homes to EPC Band to consultation from 2025 domestic buildings, subject to consultation C by 2030 where affordable & practicable 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 Note: Markers indicate the year milestones will occur rather than the precise point in a given year, while arrows of activity are inclusive of the years in which they start and finish Accelerate modal shift to public and active transport Increasing targets for low carbon fuels and development of key infrastructure, including ongoing rail electrification and EV chargepoints Continue to accelerate the uptake of zero emission vehicles 6,000 high Hydrogen trials: buses, HGVs, rail, shipping powered EV chargepoints R&D into low carbon aviation & shipping Ramp up supply and production of sustainable aviation fuels, and deployment of new zero emission vessels and fuels on England’s strategic road Transport Mandate supply of sustainable 50% of all journey network aviation fuel, subject to consultation in towns & cities cycled or walked All new cars and vans sold New CO2 wregulatory Sale of new petrol & zero emission at framework for all road Decision on HGVs technology in mid-2020s diesel cars & vans the tailpipe vehicles introduced phased out from 2030 Explore introduction of proven agricultural innovation measures, potentially including the use of feed additives for livestock Treble tree planting rates by the end of this parliament Sustainable increase in tree-planting, peatland restoration and perennial energy crops Continue to develop evidence of land-use synergies and trade- Rollout of environmental land management schemes: Sustainable Farming Incentive, Local Nature Recovery offs to inform policy approach scheme, Landscape Recovery scheme Explore policies to work towards the near elimnation of biodegradable municipal waste to landfill by 2028 Hydroflurocarbonson Reduce amount of Natural market reduced by municipal waste 79% on 2015 levels going to landfill to Interim outcome of Resources, Piloting and early roll out of new environmental land by 2030 10% by 2035 land use change 30,000 hectares tree planting analyses inform management schemes Waste per year across the UK from 2025 onwards approach Biomass Strategy to determine amount of & F-gases Work with water Recycle 65% sustainable biomass available to UK 35,000 hectares peatland municipal waste Launch of Farming for companies to plant 11m restored by 2025 by 2035 Net Zero campaign Launch Farming Innovation Programme trees by 2030 CCUS transport and storage rollout provides capacity for capture CO2 Regulatory framework unlocks capital for early projectsand long term market Greenhouse gas removals business models enable early ‘First of a Kind’ plants ‘First of a kind’ greenhouse gas removals deploy at scale & increasing Engineered removals Green- Consult on innovative financing capturing at least models for DACCS & other GGRs 5MtCO2 house Gas per year from 2030 Removals Review options Review pace of GGRs GGRs deployed for deploying Biomass Strategy to inform role scale up at scale, GGRs at scale, that BECCS can play and options following reaching for deployment demonstration around 23MtCO2 competition captured per year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 Note: Markers indicate the year milestones will rather than the precise point in a given year, while arrows of activity are inclusive of the year they run to start and finish 89 Chapter 2 – The Journey to Net Zero Net Zero Strategy: Build Back Greener Endnotes 1 BEIS analysis (2021), ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national- statistics-1990-to-2019 2 HM Treasury (2021), ‘Net Zero Review: Final Report’. 3 OBR (2021), ‘Fiscal Risks Report’, https://obr.uk/frr/fiscal-risks-report-july-2021/ 4 BEIS (2021), ‘Impact Assessment for the sixth carbon budget’, https://www.legislation.gov.uk/ ukdsi/2021/9780348222616/impacts 5 Production methods include: electrolysis, which splits water into hydrogen and oxygen using electricity; steam methane reformation with CCUS, which uses heat, steam, and catalysts to break methane (from natural gas) into hydrogen and carbon dioxide which is then stored underground; and biomass gasification with CCUS, where heating biomass in special conditions produces a mix of gases including hydrogen and carbon dioxide which is used or permanently stored. 6 BEIS analysis based on 2019 data from the BEIS, Digest of UK Energy Statistics, https://www. gov.uk/government/collections/digest-of-uk-energy-statistics-dukes#2021 7 These scenarios have been developed using whole system cost-optimisation modelling (UK TIMES) to produce a feasible range of least-cost solutions and deployment requirements for given emissions targets. 8 Terrawatt-hour is a unit of energy equal to one trillion watts for one hour to indicate energy generation and demand. 9 Emissions from Greenhouse Gas Removals only include engineered removals. Nature-based solutions, such as afforestation, are included in the Agriculture and LULUCF subsector. For further detail see the Natural Resources, Waste & F-Gases and Greenhouse Gas Removals chapters. 10 Estimates of historical UK GHG emissions are revised annually to incorporate methodological improvements, updated data and changes to international guidelines. The percentage reductions implied by CB levels are therefore subject to change. 11 BEIS analysis (2021), ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national- statistics-1990-to-2019 12 Transport emissions include emissions from domestic transport and international aviation and shipping. 13 BEIS (2021), ‘UK Hydrogen Strategy’, https://www.gov.uk/government/publications/uk- hydrogen-strategy 90 Chapter 2 – The Journey to Net Zero 91 Net Zero Strategy: Build Back Greener Reducing Emissions across the Economy 3 Chapter 93 Net Zero Strategy: Build Back Greener 3i. Power Delivering a decarbonised power system by 2035 Our Key Commitments • Take action so that by 2035, all our electricity will come from low carbon sources, subject to security of supply, bringing forward the government’s commitment to a fully decarbonised power system by 15 years. • Accelerate deployment of low-cost renewable generation, such as wind and solar through the Contracts for Difference scheme by undertaking a review of the frequency of the CfD auctions. • Deliver 40GW of offshore wind, including 1GW of innovative floating offshore wind by 2030. • Implement the Dispatchable Power Agreement (DPA) to support the deployment of first of a kind power CCUS plant(s). • Secure a final investment decision on a large-scale nuclear plant by the end of this Parliament whilst taking measures to inform investment decisions during the next Parliament on further nuclear projects as we work towards our net zero target. • Adopt a new approach to onshore and offshore electricity networks to incorporate new low carbon generation and demand in the most efficient manner, taking account of the environment and local communities. • Deliver the actions in our recent Smart Systems and Flexibility Plan and Energy Digitalisation Strategy to maximise system flexibility. • Provide £380m for our world-leading offshore wind sector, investing in supply chains, infrastructure and early-coordination of offshore transmission networks, securing jobs and benefitting communities across the UK. • Reform system governance so that the whole system can achieve our net zero ambitions and meet consumers’ needs. • Drive market-wide rollout of smart meters with a new four-year policy framework that introduces fixed minimum annual installation targets for energy suppliers from 1 January 2022. • Consider whether broader reforms to our market frameworks are needed to unlock the full potential of low carbon technologies to take us all the way to net zero. • Ensure that consumers pay a fair, affordable price for their energy, and can engage with a retail energy market that offers the products and services required to make choices that support net zero. 94 Chapter 3 – Reducing Emissions across the Economy • Ensure the planning system can support the deployment of low carbon energy infrastructure. • Explore the system need and case for further market intervention for long duration storage and hydrogen in power. Progress to date

1. The transformation of the power sector decade. Since then we have launched a over the last 30 years provides a strong basis £17.5 million competition to support innovative on which to move forward, on our way to floating wind ideas for industry and initiated reaching net zero emissions by 2050 across this year’s Contract for Difference allocation the UK economy. Decarbonising the power round, with a £200 million budget for offshore sector has led the UK’s efforts to reduce GHG wind and £24 million for floating offshore wind. emissions overall. On delivering new and advanced nuclear power, we have committed to reaching a final

2. In 2019, net UK GHG emissions from investment decision on a large-scale nuclear the power sector totalled 58 MtCO2e and plant this parliament, subject to value for accounted for 11% of total net UK GHG money and approvals. We are in negotiations emissions.1 This is a reduction of 72% with the developer on Sizewell C project in between 1990 and 2019. In 1990, the Suffolk. We have since taken further steps: power sector accounted for 23% of UK in June, we announced that phasing out of GHG emissions.2 This has largely been unabated coal generation will be brought achieved through natural gas generation forward by one year, to October 2024.3 In and renewables displacing coal, and more July, we published the Smart Systems and energy efficient appliances contributing to the Flexibility plan 2021 and the UK’s first Energy reduction of electricity demand. Today, the Digitalisation Strategy, jointly developed with country gets over half of its power from low InnovateUK. Our approach includes measures carbon technologies. to facilitate flexibility from consumers,

3. In 2020, we published the Ten Point Plan removing barriers to flexibility on the grid for a Green Industrial Revolution and the including long duration storage, reforming Energy White Paper, including commitments markets to reward flexibility, and digitalising to put the power sector on an ambitious our energy system. decarbonisation pathway over the next 95 Net Zero Strategy: Build Back Greener Net zero transition and opportunities for the sector Our 2050 vision and how 6. Based on our whole-system modelling, we get there by 2050, emissions associated with power could need to drop by 95-98% compared to

4. Reliable and affordable power is a 2019, down to 1-3 MtCO2e. In the interim, to foundation of a modern industrial economy. meet our NDC and CB6 targets, we expect It is also critical in decarbonising the economy emissions could fall by 71-76% by 2030 and and achieving our net zero goal cost 80-85% by 2035, compared to 2019 levels. effectively. Although ambitious decarbonisation These figures are based on an indicative is required in every sector, deep reductions in power sector pathway contributing to the emissions from power could offset the need whole-economy net zero and interim targets for relatively more expensive decarbonisation (see figure 17 below). efforts elsewhere. Our exposure to volatile gas prices shows the importance of our plan for a strong home-grown renewable power sector to strengthen our energy security into the future.

5. The next 30 years will see a decisive and permanent shift away from the use of unabated oil and gas as the engine of our economy. In the Energy White Paper, published in December 2020, we set out what this means for the power sector.4 Low carbon power is expected to become the predominant form of energy in 2050. It will account for approximately 50% or higher share of final energy consumption, up from 10% in 2019,5 as it displaces petrol in light vehicles and gas for heat in homes. 96 Chapter 3 – Reducing Emissions across the Economy Figure 17: Indicative power emissions pathway to 2037 250 200 Emissions (MtCO2e) 150 100 50 Pre-EWP & NZS policies and proposals 2050 Range NZS delivery pathway 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis

7. Even with major improvements in overall 9. Our understanding of the role of power energy efficiency and increased flexibility in in 2050, what the system will look like and the energy system, this could represent a the level of demand it will need to meet, will potential doubling of demand. This would evolve over time. This will be informed by the require a four-fold increase in low carbon approach to decarbonising other sectors, electricity generation and significant expansion such as the extent to which hydrogen is of the networks that transport it to where it used for heat, and what we learn about the is needed. cost and achievability of those approaches. It will also be informed by the availability and

8. We will need to achieve this whilst costs of GHG removal technologies, such as maintaining a reliable and affordable supply of bioenergy with carbon capture and storage power. We cannot compromise the essential (BECCS) and direct air carbon capture and resilience and reliability of the energy system. storage (DACCS). It is essential for the critical services we rely on – from hospitals to traffic lights and mobile devices – and its reliability will be fundamental to consumer confidence in adopting new ways of powering their cars or heating their homes. 97 Net Zero Strategy: Build Back Greener

10. The Energy White Paper set out our goal 12. Our Carbon Budget 6 trajectory of a fully decarbonised, reliable, and low-cost suggests that we will need to build all of power system by 2050. CB6 represents these technologies at, or close to, their a very significant increase in the pace of maximum technical limit, to meet the twin power sector decarbonisation, coupled with challenge of accelerating decarbonisation and increased demand due to the accelerated servicing increased demand. This represents action in other sectors dependent on low a considerable delivery challenge. While carbon electricity. Although the Energy White unabated gas generation currently plays Paper envisaged achieving an overwhelmingly a critical role in keeping the UK electricity decarbonised power system during the 2030s, system secure and stable, it will be used less we have since increased our ambition further. frequently in the future, running only when the By 2035, all our electricity will need to come system most needs it for security of supply. from low carbon sources, subject to security of supply, bringing forward the government’s 13. The government is actively taking steps commitment to a fully decarbonised power to bring forward low carbon technologies system by 15 years, whilst meeting a 40-60% capable of replicating the role of unabated increase in demand. gas in the electricity system, including CCUS-enabled generation, hydrogen-fired

11. However, the Energy White Paper’s generation, BECCS, and flexible storage. We fundamental approach remains unchanged. A are also bringing forward measures to ensure low-cost, net zero consistent electricity system that any new build combustion power stations, is most likely to be composed predominantly including gas, can convert to clean alternatives of wind and solar generation, whether in in the future. We issued a call for evidence on 2035 or 2050. To ensure the system is our plans for Decarbonisation Readiness in reliable, intermittent renewables need to be the summer and subject to feedback on the complemented by known technologies such proposals and parliamentary time, we aim to as nuclear and power CCUS, and flexible implement these requirements by 2023.6 technologies such as interconnectors, electricity storage, and demand-side 14. The use of hydrogen to generate response. These flexible technologies can electricity can reduce reliance on unabated help to minimise the amount of generation natural gas. It can also provide additional and network capacity needed to meet our system flexibility if produced through demand needs, for example, by matching new electrolysis and where there is hydrogen sources of demand to renewable generation storage. This could contribute to energy both nationally and locally. To do this, the new security, lowering emissions and system costs. critical supply chains for these technologies There are trade-offs between the deliverability, also need to be resilient to ensure the optimal fit, and other benefits of emerging UK can build the capacity it needs for a technologies versus known technologies. reliable system. Waiting for emerging technologies before deciding to deploy nuclear and power CCUS at scale could put our CB6 and net zero ambitions at risk. Over the next decade we need to continue to deploy all known low carbon technologies at scale to ensure optionality is maintained, whilst developing new options to mitigate delivery risk and reduce costs. 98 Chapter 3 – Reducing Emissions across the Economy

15. However, a reliable power system is contribute to our industrial ‘SuperPlaces’, not only about having a balanced mix of providing plentiful low carbon electricity to generation technologies. We also need to enable the low carbon technologies such as ensure that the networks can transport hydrogen, which also offers a renewed era for electricity to where it is required in a our industrial heartlands. cost‑effective manner, and to enable crucial system services such as frequency response. 18. To fully decarbonise the power sector Markets should determine the best solution at the pace we have set out whilst meeting for such a system. We are not targeting a increasing demand, total public and private particular solution but will rely on competition investment of £280-400 billion is needed to spur investment in technologies which are in generation capacity and flexible assets cheaper and more efficient; and on innovation – around £150-270 billion of this reflects to reduce the cost of existing options. The increased ambition from Carbon Budget 6. government’s role is to ensure a market The electricity transmission and distribution framework which encourages effective networks will also both require significant competition and delivers an affordable, secure, expenditures with an additional £20-30 billion and reliable system that is, consistent with net required by 2037 to maintain and reinforce zero emissions. We will intervene to address Great Britain’s electricity network. any potential market failures and continue to 19. The offshore wind sector alone will invest in innovation which helps commercialise see over £20 billion in private investment new technologies and increase the options by 2030, and in the last six months around available to meet this challenge. £1.5 billion of investment has already been

16. The CCC’s Independent Assessment announced. This includes two purpose-built of UK Climate Risk (June 2021)7 set out manufacturing ports and five offshore wind that climate change will likely result in more turbine component factories. extreme weather that has the potential 20. Decarbonising the power sector will to negatively impact GB’s power sector. regenerate communities and open up new We continue to work closely with industry, employment opportunities right around the regulators, sector bodies, and other UK. Based on current estimates, policies and stakeholders to ensure that our electricity proposals to reduce emissions in the sector system is resilient and secure, including to the could support up to 59,000 jobs in 2024 and impacts of climate change. up to 120,000 jobs in 2030. Seizing new opportunities 21. For example, the offshore wind sector could support up to 60,000 jobs by 2030,

17. Transforming the power system offers including in the supply chain, with further significant opportunities for UK businesses to employment opportunities during construction. exploit technology and know-how in domestic Increased deployment of storage and demand and global markets. Investments in innovation side flexibility could support up to 7,000 will enable new technologies to deliver benefits jobs, levelling up the power sector across to the system and this will be crucial to help Great Britain. us meeting our carbon reduction targets. Innovation will create value by accelerating the commercialisation of low carbon power systems. It can bring costs down, enable us to preserve and develop options and bring forward information to reduce future uncertainty. Renewable energy can also help 99 Net Zero Strategy: Build Back Greener Policies and proposals Prioritising critical system enablers building, ownership, and operation of onshore network assets, on which we published a

22. Crucially, a whole system approach consultation in August. puts more emphasis on addressing critical system enablers. These measures will 24. We will look to deliver these changes integrate different low carbon technologies whilst minimising the impacts on citizens into a coherent, single entity and optimise the and communities. Network companies work system most efficiently and cost-effectively, in closely with local and transport authorities and the interest of consumers. are incentivised to deliver network upgrades as efficiently as possible both domestically

23. This means adopting a new approach to and through the RIIO price control framework, developing and delivering electricity networks, for example by laying larger cables to avoid both onshore and offshore, to ensure that new reopening roads twice. Connection upgrades low carbon generation can be connected to are becoming increasingly digitalised for growing sources of demand. The Offshore domestic customers looking to install a Transmission Network Review (OTNR) heat pump or electric vehicle chargepoints. is transforming how the connections for In cases where network upgrades require offshore wind and other offshore transmission a temporary power disruption, network infrastructure is planned, designed, and companies are required to give notice to delivered with changes being progressed customers of planned outages. Advice and across the near, medium, and long term. ongoing information is also provided including Coordination in how we connect offshore support for vulnerable customers, such as wind can potentially save consumers between providing generators for customers who are £3-6 billion by 2050 and reduce the number medically dependent on electricity. of assets and onshore landing points by up to 50%.8 Ofgem has recently consulted 25. The deployment of smart technologies upon regulatory changes to enable offshore and flexibility will underpin our energy security coordination for in-flight projects, including and the transition to net zero. Flexibility from potentially allowing anticipatory investment. technologies such as energy storage, smart BEIS is currently consulting on a new and bidirectional charging of electric vehicles, long‑term policy regime for offshore networks. flexible heating systems, and interconnection Onshore, we welcome electricity networks’ could save up to £10 billion per year by efforts to invest strategically ahead of need in 2050 by reducing the amount of generation new capacity, where it is efficient to do so, as and network needed to decarbonise.9 well as Ofgem’s work to create a price control These technologies offset the need for more framework which allows and encourages this. expensive capital investment in traditional In recognition of the essential role of electricity infrastructure, as well as help optimise how networks as an enabler of net zero, we will efficiently the system operates by better publish, jointly with Ofgem, an Electricity integrating intermittent renewables into the Network Strategy, which will set out how we system and reducing peak demand. will facilitate an agile, flexible onshore network that allows the rapid, transformational change required while responding to consumer and energy system needs. This will include our plans to introduce competition in the 100 Chapter 3 – Reducing Emissions across the Economy

26. A key enabler for demand side flexibility 28. This transformation of the energy system will be smart meters, which enable innovative means our approach to system governance products and services such as smart needs to evolve to help the whole energy time‑of‑use tariffs. These tariffs reward system achieve our net zero ambitions and consumers financially for using energy meet consumers’ needs at the least cost. outside peak times, when demand is low or BEIS and Ofgem have jointly consulted on when there is excess generation available. the future of system operation.11 We set out Technologies such as electric vehicles and proposals for an expert and impartial Future smart appliances can be automatically System Operator (FSO) with responsibilities programmed to take advantage of cheaper across both the electricity and gas systems, rates, cost-effectively integrating them to drive progress towards net zero while with renewable energy sources and saving maintaining energy security and minimising consumers money. At the end of June 2021, costs for consumers. These proposals set out there were 25.2 million smart and advanced how detailed expertise gained from system meters in homes and small businesses operation could be used to provide a whole across Great Britain, representing 46% energy system approach to coordination smart coverage.10 and planning while ensuring that market participants and government has confidence

27. The Smart Systems and Flexibility Plan in the impartiality of the FSO’s advice sets out a vision, analysis, and actions for and facilitation of markets, competition, delivering a smart and flexible energy system. and system development. We have also, We will facilitate flexibility from consumers and jointly with Ofgem, consulted on the future remove barriers to flexibility on the grid, both governance of energy codes, which set out for small-scale and large-scale long-duration the detailed technical and commercial rules electricity storage, as well as driving policy to for the system, building on the government increase interconnector capacity. The Plan and Ofgem’s joint review of code governance also sets out actions to improve market design and the work of the independent panel on and coordination so that flexibility providers engineering standards.12 can secure revenues across multiple markets. Data and digitalisation are a core aspect of 29. Significant progress towards net zero can the future system; we have set out a strategic happen, and is already happening, within our approach to digitalisation and opening data existing market framework. This combines across the energy sector through the Energy markets for wholesale power, balancing, and Digitalisation Strategy. system services with a Contracts for Difference scheme (CfD) for low carbon generation and a capacity market to ensure security of supply. We have recently published a Call for Evidence on actions to better align the capacity market with net zero,13 including potential actions to encourage the participation of more low carbon capacity. However, it will be necessary to consider whether broader reforms to our market frameworks are needed to unlock the full potential of low carbon technologies to take us to net zero. 101 Net Zero Strategy: Build Back Greener

30. Throughout the transition, consumers 32. We will need to consider how low should pay a fair, affordable price for their carbon energy infrastructure can be electricity, and be able to engage with a retail deployed at an unprecedented scale and energy market that offers the products and pace sympathetically alongside the interests services that allow them to make choices that of communities and consistent with our support net zero. To support these aims, the obligations to a sustainable environment, both government is considering what reforms to land-based and marine. We will also need to the retail energy market are needed to support streamline the consenting process to ensure progress to net zero through the 2020s, that the deployment needed to stay on track including the role of suppliers and how they for our 2030 and CB6 targets is delivered. are regulated.14 In considering these reforms, the government will take account of the 33. In addition, we will need to grow lessons of the current market, in which high our supply of skilled workers and further gas prices have placed financial pressures strengthen the UK supply chain to service on suppliers. In the future, the market will the demands of energy infrastructure, need to be resilient and sustainable, and creating economic opportunity for citizens continue to protect consumers as we move and communities across the UK. The to a net zero system. The market will also £160 million announced in the Ten Point need to remain competitive, and consumers Plan, has substantially grown our industrial will need to be engaged with positive choices capabilities in the offshore wind sector. To about their energy supply. To support these help keep us on track for our Carbon Budget choices, consumers should receive accurate 6 and net zero targets we will need to deploy information about the carbon content of substantial volumes of floating offshore wind. their energy products, and we will consider Our target of 1 GW floating offshore wind by the case for reforming the framework which 2030 is a stepping stone to further growth underpins green electricity tariffs and wider in the UK, which will also develop jobs and environmental carbon accounting schemes. opportunities in the associated industrial supply chain putting us at the forefront of this

31. We will also need to address new technology that can utilise our North and cross‑cutting, overarching enablers such Celtic Seas. We will build on this with £380m as ensuring the planning system has the for our world-leading offshore wind sector, capacity to support the deployment of low investing in supply chains, infrastructure and carbon energy infrastructure, while also early-coordination of offshore transmission representing the interests of the environment networks, securing jobs and benefitting and of the communities which host this communities across the UK. infrastructure. We will do this by updating the energy National Policy Statements to provide greater clarity on the need and urgency for low carbon infrastructure, exploring ways of streamlining processes through the Nationally Significant Infrastructure Projects (NSIP) reform programme and addressing issues at a strategic level, for example through the Offshore Wind Enabling Actions Programme. 102 Chapter 3 – Reducing Emissions across the Economy Supporting sustained deployment of 37. This step change in renewable low carbon generation deployment will be achieved primarily by providing ongoing support through the CfD

34. While our strategic approach to scheme, starting with allocation round 4 this decarbonising power in line with CB6 is December – which will be the biggest-ever predicated on a whole system approach, round of our flagship renewable energy with a key role for the market in delivering scheme. The CfD will be key to delivering the most efficient solution, part of the CB6 the levels of generation required by 2030. To challenge is nonetheless one of deploying low support this step change we will undertake a carbon electricity generation infrastructure review of the frequency of the CfD auctions. at an unprecedented scale and pace whilst Looking beyond this, ensuring we retain maintaining optionality for more nascent effective means to provide long-term stability sources for power generation, such as will be crucial throughout the 2030s to achieve hydrogen, to help reduce the risk of delivery. affordable, scalable deployment. In a scenario with higher electricity demand, if there is no hydrogen generation in the power 38. We also need to increase our nuclear sector, we are likely to need to build all known capacity, which is why we said in the Energy technologies at or close to their maximum White Paper that we will aim to bring at deployment potential by the mid-2030s. least one large-scale nuclear project to the point of final investment decision by the end

35. In the Energy White Paper, we committed of this Parliament, subject to clear value to a target of 40 GW of offshore wind by for money and all relevant approvals. In 2030, including 1 GW floating wind, alongside December 2020 we announced the start of the expansion of other low-cost renewable formal negotiations on Sizewell C and those technologies. We need to continue to drive negotiations are ongoing. To facilitate a rapid deployment of renewables, for example decision this Parliament, we plan to establish offshore wind, so we can reach substantially the Regulated Asset Base model to fund new greater capacity beyond 2030, and accelerate nuclear projects at a low cost of capital, saving the cost reduction and commercialisation of consumers money. floating offshore wind. As we decarbonise our electricity system our wholesale prices 39. The government will also take measures will become less exposed to fluctuations in to inform investment decisions during the global fossil fuel prices, and we would expect next Parliament on further nuclear projects wholesale prices to be lower. as we work towards our net zero target. This will include consideration of large-

36. CB6 also requires a sustained increase scale and advanced nuclear technologies, to the deployment of land-based renewables including Small Modular Reactors (SMRs) such as locally supported onshore wind and and potentially Advanced Modular Reactors solar in the 2020s and beyond. We will seek (AMRs). As part of this, we are announcing to ensure a facilitative environment for the a new £120 million Future Nuclear Enabling deployment of unsubsidised rooftop solar to Fund to provide targeted support in relation complement our market-based approach of to barriers to entry. Further details of how this ensuring exporters receive a fair price through fund will operate will be published in 2022 the Smart Export Guarantee. We also have alongside details of a roadmap for deployment one of the best ocean energy resources in the that takes into account value for money. world and we continue to explore the role of marine technologies in net zero. 103 Net Zero Strategy: Build Back Greener

40. We are also providing funding for a 42. Bioenergy has already played a significant SMR design through our £385m Advanced role in decarbonising the electricity system, Nuclear Fund and are progressing plans for an accounting for 12.6% of total renewables Advanced Modular Reactor demonstrator in generation in 2019.15 Technological changes the early 2030s. Whether large- or small-scale mean that biomass usage can now go beyond projects, there remain a number of possible carbon-neutral and deliver negative emissions sites available for these options, including by combining it with carbon capture and Wylfa in North Wales. storage (BECCS). As committed to in the Energy White Paper, we will publish a Biomass

41. To help deliver emissions reductions to Strategy in 2022 that will set out how BECCS keep us on track for Carbon Budget 6, we will could be deployed. As is the case with all need significant expansion of power CCUS UK biomass use, any future BECCS projects beyond the Energy White Paper commitment will need to meet stringent sustainability and of one power plant by 2030. To do this we will air quality requirements for the production implement the Dispatchable Power Agreement and use of biomass, as will be set out in the (DPA), and seek to bring forward at least one Biomass Strategy. power CCUS plant in the mid 2020’s through the CCUS Cluster Sequencing Process, subject to the outcome of that process including value for money and affordability considerations. We will also aim to begin competitive allocation in the 2020’s to support a future pipeline of projects and cost reduction via increased deployment and competitive tension. Finally, we will continue to review and evolve the policy framework to stimulate the delivery of future power CCUS projects. 104 Chapter 3 – Reducing Emissions across the Economy Reducing delivery risk • Maximising system flexibility, including through storage technologies, demand

43. Although we need to ensure we can side response, and interconnectors – deploy existing low carbon generation to integrate renewables, balancing the technologies at close to their maximum to intermittency of renewables and helping to reach Carbon Budget 6, we also need to maintain system operability; de-risk the delivery challenge. We will pursue • Promoting more ambitious and innovative technology solutions which ease sustained demand reduction and the pressure, including: energy efficiency measures to reduce • Exploring the system need and case for overall power demand – allowing market intervention for long duration demand to increase unconstrained as storage and hydrogen in power – we electrify other parts of the economy both technologies have the potential to could prevent us hitting very low levels of provide important low carbon peaking emissions during the 2030s. capacity during periods of high demand and over extreme events such as long periods of low wind. Long duration storage technologies could provide a range of system stability services such as the provision of inertia. An expansion of hydrogen in power could also reduce the need to build other technologies at the limit of what is technically feasible and could be a form of storage for excess power generated by renewables. We are supporting innovation in longer duration energy storage projects through a £68 million competition for prototypes and demonstrators;16 • Reducing emissions from the energy from waste sector – emissions from energy from waste plants represent a significant part of the residual emissions in the power sector. We are exploring options to reduce emissions from these plants within the power sector, including whether support for CCUS at Energy from Waste plants could be provided by the Industrial Carbon Capture Business Model. The Government’s approach in respect of this is still under consideration and we intend to provide further details later this year; 105 Net Zero Strategy: Build Back Greener Working together across the UK Examples of policy action by the Scottish Government, Welsh Government, and Northern Ireland Executive UK Government is working across all A further £80 million of this funding will levels of government and with Devolved be directed to projects supporting the Administrations to ensure consistent action development of carbon capture, utilisation and to reduce emissions across the power sector, storage and negative emission technology and across the UK. projects in Scotland. Wales The purpose of the hydrogen funding programme is to support the delivery of the The Welsh Government has supported the Scottish Government’s upcoming Hydrogen development of four regional energy strategies Action Plan, the development of a hydrogen that identify the scale of change needed economy in Scotland, to help overcome to reach a low carbon energy system and challenges to scaling up hydrogen production establish regional priorities for energy. This and to deliver lasting benefits for business and work models future demand for power, heat communities. and transport, and assesses the economic impact of delivering the proposed ambitions. Northern Ireland In addition, Conwy and Newport local Northern Ireland has already demonstrated authority areas are piloting local area energy its commitment to decarbonisation of the planning. This work will identify the low-regret power sector through rolling out renewable actions to decarbonise a local energy system electricity generation under the Northern and can be used by grid network operators to Ireland Renewables Obligation (NIRO) - 45.4% inform their infrastructure investment. of the electricity consumed in Northern Ireland between 1 July 2020 and 30 June 2021 Scotland was generated from renewable sources. The Scottish Government’s £62 million Energy Building on this achievement and with a Transition Fund will support Scotland’s energy view to meeting the ambition of net zero sector and the North East, over the next five by 2050, the Minister for the Economy, in years, to make progress on energy transition considering requirements for the NI Energy as Scotland moves toward a net zero Strategy (to be published by end of 2021), has society by 2045. set a renewable electricity target of at least 70% by 2030. The Emerging Energy Technologies Fund is a £180 million package of funding over five years that will provide capital support to accelerate low carbon infrastructure projects that will be essential to deliver net zero. The Fund will make £100 million available to support hydrogen projects in line with the Scottish Government’s Hydrogen Policy Statement. 106 Chapter 3 – Reducing Emissions across the Economy 3ii. Fuel Supply and Hydrogen Transitioning to a low carbon future Our Key Commitments • An ambition for 5 GW UK low carbon hydrogen production capacity by 2030. • We have set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new hydrogen and industrial carbon capture business models. We will be providing up to £140m to establish the scheme, including up to £100m to award contracts of up to 250MW of electrolytic hydrogen production capacity in 2023 with further allocation in 2024. • Implement the £240 million Net Zero Hydrogen Fund and finalise the Hydrogen Business Model and the Low Carbon Hydrogen Standard in 2022. • Work with the sector to help develop a low carbon fuel strategy for transport for publication in 2022, as announced in the recent Transport Decarbonisation Plan, and deliver commitments on sustainable aviation fuels. • Work with stakeholders to address barriers to electrification of oil and gas production by Q4 2022 and continue to drive down routine flaring and venting. • Regulate the oil and gas sector in a way that minimises GHG emissions, notably through the revised Oil and Gas Authority strategy, which empowers the OGA to assess operators’ plans to reduce their emissions levels against effectively a net zero test, and establish a climate compatibility checkpoint for future licensing on the UK Continental Shelf. Progress to date

1. In 2019 net UK GHG emissions from fuel • Transportation (‘midstream’) – supply totalled 26 MtCO2e and accounted for transportation and storage of oil and gas 5% of total net UK GHG emissions. Emissions including pipelines, pumping stations, today mainly derive from fossil fuels and can trucks, and transcontinental tankers; be attributed to stages of the supply journey.17 This chapter covers all aspects of fuel supply emissions: • Extraction (‘upstream’) – exploration and production of oil and gas including drilling, surfacing resources and onshore processing at gas plants; 107 Net Zero Strategy: Build Back Greener • Refinement (‘downstream’) – refining oil 3. We have also made progress in low carbon into products including transport fuels, fuel production. An estimated 10-27 TWh of bitumen, lubricating oils, liquid petroleum hydrogen production now exists today but gasses, heating oils, marine fuels, is almost all derived from fossil fuels without polymers, solvents, and alcohols. Refining carbon capture and for use outside of the emissions are counted as part of the energy system.18 In 2019, renewable fuels industry sector but are discussed in this supplied under the Renewable Transport chapter to take a holistic view of supply. Fuel Obligation (RFTO) accounted for 5% of total road and non-road mobile machinery

2. Overall, between 1990 and 2019, net fuel. This mainly consisted of biodiesel and UK GHG emissions from fuel supply have bioethanol but also included biomethane and decreased by 61%. North Sea production renewable hydrogen.19 has fallen; older, more polluting installations have been decommissioned whilst cleaner 4. Building on the Ten Point Plan, we recently ones have been brought online; regulatory published the UK Hydrogen Strategy and frameworks have supported efficiency gains; associated consultations on a hydrogen coal mines have closed; and iron pipes have business model, the Net Zero Hydrogen Fund been replaced with plastic to reduce methane (NZHF) and a low carbon hydrogen standard, leakage across the gas network. outlining our approach to kickstarting the production of low carbon hydrogen and developing a robust UK hydrogen economy. Net zero transition and economic opportunities Our 2050 vision and how we 6. Our fuel supply will look very different by get there 2050. Oil and gas production will contract significantly as the UK Continental Shelf

5. There is a need for widespread matures and investment in the North Sea electrification across the economy, but we pivots to new opportunities from CCUS cannot rely on electricity alone. Many end use and hydrogen, accelerated by widespread sectors require low carbon energy including electrification and low carbon fuel switching. those where electrification is not viable or This shift away from fossil fuels will protect cost-effective, making the supply of cleaner consumers from volatile gas prices. Remaining fuels essential to achieving net zero. oil and gas installations will use low carbon power, with residual emissions minimised. In the Energy White Paper, we committed to this, by stating that we will work with the oil and gas sector to transform the UK Continental Shelf into a net zero basin by 2050.

7. Refineries can play an important role in low carbon clusters utilising CCUS and low carbon fuels, and the production of low carbon fuels will increase significantly to meet demand where electrification is not viable. In these areas there will be significant scale up of hydrogen networks and storage, from new and repurposed existing infrastructure. 108 Chapter 3 – Reducing Emissions across the Economy

8. Based on our whole-system modelling, by 53-60% by 2035, compared to 2019 levels. 2050, emissions associated with fuel supply These figures are based on an indicative fuel could need to drop by 71-99% compared to supply sector pathway contributing to the 2019, down to 0-8 MtCO2e. In the interim, to whole-economy net zero and interim targets meet our NDC and CB6 targets, we expect (see figure 18 below). emissions could fall by 37-45% by 2030 and Figure 18: Indicative fuel supply emissions pathway to 2037 80 70 60 Emissions (MtCO2e) 50 40 30 Pre-Hydrogen Strategy & NSTD & NZS policies and proposals 20 2050 Range 10 NZS delivery pathway 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis

9. We have agreed ambitious interim targets to fund projects to develop innovative low for emissions reductions with industry through carbon hydrogen solutions. The UK Hydrogen the North Sea Transition Deal (NSTD) including Strategy further sets out our comprehensive 10% by 2025, 25% by 2027, and 50% by approach to growing a UK hydrogen economy, 2030 compared to a 2018 baseline. indicating that use of low carbon hydrogen enabled by 5 GW of production capacity could

10. The Ten Point Plan announced our deliver total emissions savings of 41 MtCO2e ambition for 5 GW of low carbon hydrogen between 2023 and 2032, the equivalent of the production capacity by 2030, alongside steps carbon captured by 700 million trees over the to drive the uptake of sustainable aviation fuels same period. (SAF). Since then we have invested £3 million in kick starting the Tees Valley Hydrogen 11. Looking across a range of end use Transport Hub and announced a £60 million scenarios, the UK Hydrogen Strategy Low Carbon Hydrogen Supply 2 Competition suggests that we could need 7-20 GW of 109 Net Zero Strategy: Build Back Greener production capacity in 2035 and 15-60 GW 13. Drawing on the OECD’s ‘Trade in in 2050, depending on developments across Embodied CO2’ database, as well as the heat, industry, transport, and power.20 Using relative levels of trade openness of UK more specific end use assumptions, the sectors, our analysis suggests that refineries illustrative pathway in this Strategy suggests are currently amongst the areas most at production capacity in 2035 would need to risk of carbon leakage. We are committed be 10 GW if heat is electrified, or 17 GW if to mitigating this risk by engaging with hydrogen is used widely for heat.21 industry to better understand their concerns around carbon leakage. Further analysis and

12. As the production of low carbon fuels information on the potential mitigations for replaces fossil fuels, we intend to follow the consideration are set out in HM Treasury’s Net following principles: Zero Review. • Integrating a whole system view. We will take an economy-wide view, Seizing new opportunities including to balance end-use sector 14. To achieve the level of emissions demands with supply side considerations, reductions in the fuel supply sector indicated such as infrastructure and the operation by our delivery pathway to 2037, we will need of the electricity and other fuel additional public and private investment of supply sectors. £20-30 billion. • Taking a portfolio approach.

15. Government investment in domestic We will remain flexible to a supply mix of hydrogen production, to de-risk early projects, low carbon fuels that could be affected could also unlock private sector capital co- by technologies in early development. As investment of over £4 billion by 2030. This demand grows, we expect innovators, could increase to £10-22 billion to meet the investors and producers will respond 2037 delivery pathway in electrification and with advances delivering further cost hydrogen scenarios for heat respectively.22 or emissions savings. Our hydrogen modelling assumes a combination of electrolysis from renewable electricity, methane reformation with CCUS, and BECCS but we are aware of industry plans involving other production methods and will update our modelling with new technologies as evidence develops. • Minimising environmental impacts. Any impacts from low carbon fuel production on air quality or the environment must be kept under consideration and comply with evolving regulatory standards. We must maintain strict sustainability requirements for fuels to be eligible for government support schemes to achieve genuine emissions savings compared to fossil fuels and minimise environmental impacts. 110 Chapter 3 – Reducing Emissions across the Economy

16. Decarbonising fuel supply and growth 18. Achieving our 5 GW ambition for of the hydrogen sector will regenerate hydrogen production capacity could support communities and open up new employment over 9,000 jobs in 2030, across the full opportunities right around the UK. Based hydrogen value chain. Meeting the delivery on current estimates, policies and proposals pathways set out in the Journey to Net Zero to reduce emissions in fuel supply and chapter could support 13,000-19,000 jobs growing the hydrogen sector could support across the hydrogen economy by 2035.23 up to 10,000 jobs in 2030. We will build on existing commitments in the NSTD to facilitate 19. Oil and gas will continue to play an reskilling and support 40,000 jobs across the important role as we transform from an supply chain, ensuring everyone employed economy based on fossil fuels to one based in the sector can fulfil their potential. Many on clean energy. We will manage the transition skills will also be transferable to clean growth in a way that protects jobs and investment, industries like offshore wind, CCUS and uses existing infrastructure, maintains security hydrogen production. Producing low carbon of supply, and accounts for climate risk. hydrogen at scale will be made possible by carbon capture and storage infrastructure, and we plan to grow both of these new British industries side by side in industrail ‘SuperPlaces’.

17. The development of a domestic SAF industry alone could generate support up to 1,000 jobs in 2030, with new jobs as plants are developed as well as opportunities to retain existing fuel expertise across the country. Industry has committed to creating an integrated skills plan to help its transition and diversification with strong support from government, academia, and trade unions. Case study: The Phillips 66 Humber refinery The sector can already compete on the world stage and provide domestic resilience by producing products essential for decarbonisation. UK refining includes a global leader and the only European producer of high-grade speciality coke for batteries used in electric vehicles and consumer electronic goods. The Phillips 66 Humber refinery’s world scale production capability is equivalent to 1.3 million electric vehicles (EV) per year. . Whilst the majority is currently exported, it has the potential to underpin a domestic UK battery industry and development of a broader EV battery manufacturing base in the UK. 111 Net Zero Strategy: Build Back Greener Policies and proposals Oil and gas supply 22. The Oil and Gas Authority (OGA) published its revised strategy in February,

20. We have always been clear that as we enshrining a range of new net zero obligations reduce our dependence on fossil fuels, the for the UK oil and gas industry. This is North Sea basin has a key role to play. Our reflected through the suite of levers available approach will ensure that it does contribute to to the OGA, making net zero a key factor in the transition, driving investment in transition its decisions, including to grant consent for technologies and providing the skills needed projects. It empowers the OGA to assess for net zero. However, we are clear that we do operators’ plans to reduce their emissions need to reduce our reliance on hydrocarbons levels against effectively a net zero test, in as swiftly as possible. The best way to protect accordance with its revised strategy, the OFS British businesses and consumers from can now encourage operators to invest in volatile international fossil fuel markets is to get transition technologies such as CCUS and our economy off hydrocarbons. hydrogen – seizing the economic opportunities

21. Upstream, the North Sea Transition Deal available to the sector in a net zero future (NSTD) has set us on a transformational path and living up to the commitments of the to deliver the long‑term skills, innovation, Transition Deal. The Strategy also introduces infrastructure, and investment required to full societal carbon cost assessments into the decarbonise oil and gas production and approvals process. industry more widely. The deal will hold the 23. Step-change abatement will be delivered industry to account on commitments it has by the electrification of existing and new made to halve its operational emissions offshore assets, through connections to by 2030, while supporting up to 40,000 onshore networks or offshore renewables. We high‑quality direct and indirect supply will work with regulators to review supporting chain jobs in Scotland and our industrial infrastructure in the Offshore Transmission heartlands in the North East, North West Network Review and to address regulatory and East of England. It also emphasises barriers. We will support removing further our shared commitment to achieving 10 barriers through £1 million of additional MtCO2/year of CCUS capacity, with industry funding from 2021 to 2022. leveraging existing infrastructure to provide key transport and storage capability; and positions the sector to help deliver our 5 GW hydrogen ambition. 112 Chapter 3 – Reducing Emissions across the Economy

24. Beyond power generation, flaring and 27. Additional work is being carried out by venting account for most remaining upstream the government and regulators to review emissions and we will need to be ambitious to what action can be taken to further reduce allow us to stay on track for our CB6 target. emissions. Improved measurement, reporting We have endorsed industry’s commitment in and verification will play a critical role in this. the NSTD to accelerate reductions beyond The government, including the Offshore the World Bank’s ‘Zero Routine Flaring by Petroleum Regulator for Environment and 2030’ initiative and new OGA guidance sets Decommissioning, is working closely with out the expectation that all facilities should the OGA to collect robust industry data have zero routine flaring and venting by 2030 which will enable effective implementation of or sooner. Industry is taking steps through their strategy. The OGA’s tracking of overall its Methane Action Plan for continuous emissions reductions and benchmarking emissions reductions with specific methane of flaring and venting data will also improve emissions reduction targets, whilst setting the performance across industry. Government and expectation that assets will have individual regulators will continue to work with industry action plans by 2022. to drive emissions reductions, including through improved process efficiency, to stay

25. Further, following the conclusion of our on track for CB6. review into the future of offshore oil and gas licensing earlier this year, we will also introduce 28. Midstream, the gas network must be a formal climate compatibility checkpoint effective at minimising gas leakage and on future licensing rounds for oil and gas associated emissions by replacing iron exploration. This will ensure future licences pipes with plastic, even with gas demand are only awarded following a compatibility decreasing leading to 2050. Through network assessment against the government’s price controls, Ofgem has set gas distribution broad climate change ambitions, including companies a target to replace 15,500km of reaching net zero by 2050. This checkpoint iron mains and associated services in 5 years, will be designed by the end of 2021. We will from April 2021. This will reduce leakage by be seeking input on the design through a 17% and emissions by 0.5 MtCO2e. Additional consultation to be published before COP26. financial incentives will encourage further action through pressure management and gas

26. This checkpoint builds on the existing conditioning. We continue to work with Ofgem checks within our regulatory system, including and HSE to review how best to continue to the OGA Strategy, and the role of the reduce methane leakage to 0% in all future Offshore Petroleum Regulator for Environment decarbonisation scenarios. and Decommissioning (OPRED). These checks include a full environmental impact 29. Blending hydrogen into the gas grid assessment and a public consultation. could also support initial steps to decarbonise heating. This will consider the air quality impacts of hydrogen combustion in domestic settings. Government is working closely with key delivery partners to explore options to blend hydrogen up to 20% by volume into the gas distribution network, and up to 2% into the gas transmission network, along with biomethane and natural gas. Subject to both the economic and safety case for blending being demonstrated, we are aiming to make a final decision on blending by the end of 2023. 113 Net Zero Strategy: Build Back Greener

30. We recognise that industry will need early 31. Acknowledging that the future demand sight of decisions should blending proceed for gas will decline as we decarbonise, means and propose five principles for delivery: that the gas system will need to change to meet the net zero targets. We will publish a • Safety. Blending must remain within call for evidence this autumn, seeking views safe limits set by the Health and Safety from stakeholders on the future of the gas Executive and changes to gas quality system, with a focus on infrastructure and and infrastructure must meet all safety markets. This will enable us to determine how requirements; the gas market will need to evolve to ensure • Operability. Changes to gas quality and the right market and regulatory signals are in infrastructure must maintain existing place to offer the necessary level of investment system, pipeline, and consumer appliance and maintenance throughout the transition. operability; Gathering evidence on the amount of natural • Security of Supply. Blending must not gas, biomethane, and hydrogen available and prevent consumers’ secure gas supply; the ongoing role for gas will inform what action we must take. • Affordability. Costs to consumers should be affordable and value for money; and 32. Downstream, UK refineries already • Temporary. Blending could support initial underpin major CCUS and hydrogen projects development of the hydrogen economy but in key industrial clusters. These include is not a preferred long-term solution. Gigastack (Phillips 66), Humber Zero (Phillips 66) and HyNet (Essar Oil UK). The Industrial Energy Transformation Fund recently awarded £7 million and £800,000 to Essar Stanlow and Phillips 66 respectively, in support of hydrogen focussed net zero projects. We are also encouraged to see operators investing in the production of low carbon fuels and will continue to work with the sector to encourage innovation, maximise economic opportunities from net zero, and remove regulatory barriers which hinder the transition away from fossil fuels. Case study: Fulcrum BioEnergy Fulcrum BioEnergy has announced plans to develop its first UK residual waste to low carbon SAF plant. The ‘Fulcrum NorthPoint’ biorefinery will be located at the Essar Oil (UK) Limited refinery at Stanlow, Ellesmere Port in the North West of England.

33. We have also published the draft secure fuel supplies are maintained during the Downstream Oil Resilience Bill which will give transition to net zero. the government the powers it needs to ensure 114 Chapter 3 – Reducing Emissions across the Economy Low carbon fuel supply 38. To accelerate the development of UK plants to produce advanced fuels we have

34. The UK has a unique opportunity to be provided grant funding through schemes a leader in low carbon fuel production and including the Future Fuels for Flight and Freight this will be captured in strategies that we will Competition (F4C) and Advanced Biofuels publish in 2022. Demonstration Competition (ABDC). Delivering

35. A new Biomass Strategy will set how on the Ten Point Plan we also recently sustainable biomass could be best used announced the shortlist for the £15 million across the economy to help achieve net Green Fuels, Green Skies Competition (GFGS) zero, including to produce low carbon fuels. supporting eight companies pioneering It will also assess our existing sustainability new SAF technologies. To accompany this standards, already some of the world’s most announcement, we published a consultation stringent, and set out where and how we can on proposals for a new UK SAF blending improve them further. When coupled with mandate aiming for introduction in 2025. carbon capture and storage, it is possible It included design questions on which that sustainable biomass can not only enable feedstocks and technologies should be production of low carbon fuels but could also eligible and welcomed views on what our deliver vital negative emissions. Any future SAF ambition and targets should be. We are BECCS project will need to meet stringent currently reviewing the responses to the SAF sustainability requirements for the production mandate consultation, but our ambition is for and use of biomass, as will be set out in the a comprehensive policy framework, including Biomass Strategy. the mandate, to enable the delivery of 10% SAF by 2030. Further detail can be found in

36. This will be complemented by a long-term the Transport chapter. strategy for low carbon fuels as announced in our recent Transport Decarbonisation Plan. Hydrogen production The strategy will consider how to maximise

39. The UK’s skills, capabilities, assets, and emissions savings from low carbon fuels infrastructure mean that we have the potential used across different transport modes in the to excel in both CCUS-enabled and electrolytic period to 2050. low carbon hydrogen production. Alongside

37. The latter of the two strategies will build the scale of production that CCUS-enabled on the success of the Renewable Transport methane reformation or ‘blue’ hydrogen can Fuel Obligation (RTFO), which has supported bring, our renewables can support the growth the market for low carbon fuel supply since of electrolytic or ‘green’ hydrogen, bringing

2008. Fuels supported under the RTFO down costs and increasing production need to comply with sustainability criteria capacity whilst new production technologies such as minimum GHG thresholds, and by such as hydrogen from nuclear and biomass incentivising fuels produced from wastes, it are developed. Supporting a variety of different saved 5.37 MtCO2e in 2019 alone. Further to production methods will enable us to develop sub-targets for so-called development fuels low carbon hydrogen rapidly at scale during of strategic importance, we have recently the 2020s and 2030s to deliver what is widened support to more diverse fuels and needed for CB6 and net zero. announced more ambitious targets for the RTFO to 2032 set at 14.6% of total liquid fuel supply. 115 Net Zero Strategy: Build Back Greener

40. Our approach to scaling up the UK 43. In August this year we published our hydrogen economy in the 2020s is set out consultation on our preferred hydrogen in our recent UK Hydrogen Strategy, which business model25 to provide revenue support describes our key policies and proposals to hydrogen producers and help overcome to overcome key barriers to development. the cost challenge to bring through investment Alongside the Strategy, we published a in new low carbon hydrogen projects. As set package of documents consulting on out in the Industry chapter, and Hydrogen proposed policy support mechanisms for new Revenue Support (IDHRS) scheme to fund our hydrogen production. This approach, subject new hydrogen and industrial carbon capture to further policy development following these business models. We will be providing up to consultations, and together with the ambition £140 million to establish the scheme, including shown by proposed hydrogen projects, up to £100 million to award contracts of up to provides confidence we can achieve low 250 MW of electrolytic hydrogen production carbon production sufficient to deliver on our capacity in 2023 with further allocation in targets under the Climate Change Act. We 2024. The IDHRS will fund the allocation of the know there will be more to do and will keep hydrogen business model contracts to both our policy approach under review as the use electrolytic and CCUS-enabled projects from of hydrogen in the energy system develops 2023, resulting in up to 1.5 GW of low carbon and production methods evolve. hydrogen contracts awarded to projects.

41. The UK is already at the forefront of 44. As set out in the August consultation,26 innovation across the hydrogen value chain, our Net Zero Hydrogen Fund (NZHF) will reducing technological barriers to production provide up to £240 million for government and end use cases. We recently launched co‑investment to support new low carbon a new £60 million Low Carbon Hydrogen hydrogen production out to 2025. The aim of Supply 2 Competition, which will develop the Fund is to support commercial deployment novel hydrogen supply solutions for a growing of new low carbon hydrogen production hydrogen economy.24 projects during the early 2020s, by helping to address barriers related to commercial

42. Low carbon hydrogen is not yet risk and high upfront costs relative to fossil competitive with traditional fuels as production fuel alternatives, unlocking private sector projects face additional costs compared to investment in projects. We intend to launch existing energy sources. Investors cannot the NZHF in early 2022. currently justify upfront capital investments without visibility or predictability of revenue 45. In August we also published a and returns. Lessons learnt from the success consultation27 on the proposed UK low carbon of UK offshore wind deployment suggests hydrogen standard which will define what is government intervention to address this meant by low carbon hydrogen, allowing us cost difference is a key requirement to bring to incentivise and support the right production forward hydrogen supply at scale. for supply across the energy system. It will establish a threshold for greenhouse gas emissions allowed in the production process for hydrogen to be considered low carbon and be eligible for support. 116 Chapter 3 – Reducing Emissions across the Economy

46. The RTFO has supported the supply 47. The UK Hydrogen Strategy sets out the of renewable hydrogen into transport since initial steps being undertaken to develop the 2018 and has been successful in launching hydrogen economy over the 2020s, to deliver small-scale renewable hydrogen supply. In our 2030 5 GW production capacity ambition July, the Department for Transport announced and position the hydrogen economy for further changes to the RTFO which could further ramp up needed to support CB6 and net encourage the uptake of renewable hydrogen zero. But we know there will be more to do in transport, including in rail and shipping. The beyond this. That is why we committed in the original consultation, published in March, also strategy to say more on the mix of production proposed to make evidencing the provision of technologies and supporting network and renewable electricity for hydrogen production storage infrastructure that could help meet easier through power purchase agreements future hydrogen demand following conclusion and recognising the importance of regional of our consultations and further work. Similarly, grids. The final decision on these changes will we set out our plans to develop appropriate be published shortly. regulatory and market frameworks to support an expanding hydrogen economy throughout the 2020s and beyond. We will publish a Hydrogen Sector Development Action plan in early 2022. 117 Net Zero Strategy: Build Back Greener Working together across the UK Examples of policy action by the Scottish Government, Welsh Government and Northern Ireland Executive UK Government is working across all Scotland levels of government and with Devolved Administrations to ensure consistent action to In December 2020, the Scottish Government reduce emissions across the fuel supply and published a Hydrogen Policy Statement which hydrogen sectors, and across the UK. sets a vision for Scotland to become a leading Hydrogen Nation with an ambition to generate Wales 5 GW of renewable and low-carbon hydrogen by 2030, committing to £100 million funding to In December 2020 the Welsh Government accelerate the hydrogen economy in Scotland commissioned a report on hydrogen that over the next five years. included baseline reporting on related activities and expertise, and a pathway for developing The Hydrogen Policy Statement has provided the sector.28 The proposed pathway contains the framework for the development of a ten objectives covering both supply and use Hydrogen Action Plan in 2021 which will of hydrogen, including the establishment of at provide further detail on the planned approach least one 10+ MW renewable production site and necessary actions to implement the policy and the deployment of 200 fuel cell buses. positions outlined in the Policy Statement. The Welsh Government consulted on the The Hydrogen Action Plan will be published pathway earlier this year and following analysis later this year. of the responses it will finalise a pathway for hydrogen development over the second Welsh The Scottish Government has led the way carbon budget period (2021-25). in supporting world-leading hydrogen demonstration projects in Scotland that are helping to determine the role of hydrogen in Scotland’s future energy system. This includes the provision of £7 million funded support towards the cost of a world first £28 million demonstration of an end-to-end 100% hydrogen energy system. The project will construct and operate a hydrogen heat network system in Fife able to service around 300 houses and will be of UK-wide significance to evidence the role that hydrogen can play in decarbonising heat, using the gas network. 118 Chapter 3 – Reducing Emissions across the Economy Northern Ireland A new Northern Ireland Energy Strategy is expected to be published by the end of 2021, with proposals on phasing out coal, solid fuels and heating oil alongside decarbonising our gas network, including the future injection of biomethane and potential hydrogen blending. Northern Ireland is uniquely positioned to become a leader in the hydrogen economy and secure these benefits locally. This is already gathering momentum, with NI Water trialling an innovative new hydrogen electrolyser at its wastewater treatment works – the first such project of its kind across the UK. Translink, the public transport service provider in Northern Ireland, is also introducing three new hydrogen buses to its fleet and is procuring a new hydrogen fuelling station for these and an anticipated 20 more under a new contract. The GenComm project, led by Belfast Metropolitan College, will trial hydrogen production via electrolysis for hydrogen buses. They are also engaged with a range of potential complementary projects to build on this momentum and contribute to the growth of an indigenous hydrogen economy in Northern Ireland. 119 Net Zero Strategy: Build Back Greener 3iii. Industry Stretching our ambition for net zero Our Key Commitments • Ambition to deliver 6 MtCO2 per year of industrial CCUS by 2030, and 9 MtCO2 per year by 2035. • Set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new industrial carbon capture and hydrogen business models. • Support the deployment of CCUS through the £1 billion CCS Infrastructure Fund. • Following Phase 1 of the Cluster Sequencing process, the Hynet and East Coast Clusters have been confirmed as Track 1 clusters. • Support the installation of energy efficiency and on-site decarbonisation measures through the £315 million Industrial Energy Transformation Fund (IETF) (£289 million for England, Wales and Northern Ireland, £26 million for Scotland). • Support the increased requirement for fuel switching to low carbon alternatives, with an ambition to replace around 50 TWh of fossil fuels per year by 2035. • In collaboration with the Steel Council we will consider the implications of the recommendation of the Climate Change Committee to set targets for ore-based steelmaking to reach near-zero emissions by 2035, and the business environment necessary to support the transition. • Develop several Resource and Energy Efficiency (REEE) measures with ambition of achieving the anticipated requirement of 11 MtCO2e worth of savings by 2035, including up to 3 MtCO2e of potential abatement in the Iron and Steel sector. • Incentivise cost-effective abatement in industry at the pace and scale required to deliver net zero, through the UK ETS by consulting (in partnership with the Devolved Administrations) on a net zero consistent cap. • Explore opportunities for faster decarbonisation of dispersed sites in the 2020s. 120 Chapter 3 – Reducing Emissions across the Economy Progress to date

1. The UK’s manufacturing and refining sector 6. We plan to have the world’s first net zero plays an essential role in society. It contributes industrial cluster by 2040, awarded grants £180 billion to the overall economy,29 directly from the £315 million Industrial Energy accounting for 8% of GDP30 and provides 2.5 Transformation Fund (IETF), announced million direct jobs across the country31 as well a £1 billion Carbon Capture and Storage as over 5 million across the value chain.32 Infrastructure Fund, and a £240 million Net Zero Hydrogen Fund. Additionally, as part

2. However, industry33 is also a major source of the Industrial Decarbonisation Challenge of CO2 emissions, producing 15% (78 (IDC), we recently announced £171 million MtCO2e)34 of the UK’s current total. Around of funding, matched by over £200 million half of industrial emissions are concentrated industry investment, for nine projects within in specific clusters – geographical areas with five clusters. large concentrations of industry.

7. Growing new industries in low carbon

3. Industry emissions have more than halved hydrogen alongside CCUS and renewable since 1990, due mainly to the changing energy will put our industrial ‘SuperPlaces’ at structure of the UK’s manufacturing sector, the forefront of technological development. improved energy efficiency, and a shift to Together this will develop resilient supply low carbon fuels. Despite this progress, the chains, support jobs, and position UK overall pace of reductions is slowing, and companies at the forefront of an exciting more action is needed to achieve our net zero growing global market, as well supporting commitments. industrial processes, industrial heat, power,

4. The Industrial Decarbonisation Strategy shipping and trucking to make the shift (IDS), published in March 2021, was the first to net zero. of its kind in a major economy. It sets out 8. Energy intensive industry in the UK has how industry can decarbonise in line with net been covered by a cap-and-trade policy since zero while transforming industrial regions by 2005. The UK government and Devolved attracting inward investment, future-proofing Administrations successfully launched the UK businesses, and securing the long-term Emissions Trading Scheme (UK ETS) on 1 viability of jobs. January 2021. The UK ETS cap, which sets

5. This followed previous work including the limit on emissions for sectors covered by the landmark Industrial Decarbonisation it, will be aligned with a net zero consistent and Energy Efficiency Roadmaps to 2050, trajectory by January 2023, or January 2024 published in 2015, which set out a series at the latest. In the coming months, we will be of pathways for emissions reductions for publishing a consultation on the level of the energy‑intensive sectors. cap and other elements of UK ETS evolution. 121 Net Zero Strategy: Build Back Greener

9. We recognise the importance of of our current carbon leakage mitigation addressing the risk of carbon leakage so policy of free allowances under the UK ETS. policy interventions do not lead to increased Government will continue to explore options emissions elsewhere, and to ensure that to mitigate carbon leakage, with emphasis UK industry has the confidence needed to on an international, multilateral effort to tackle fully decarbonise. The IDS and the Net Zero carbon leakage at source through global Review set out the potential options available action on industrial decarbonisation and to address this, including regulatory standards climate regulation, with continued monitoring and Carbon Border Adjustment Mechanisms of related global policy developments. (CBAMs), as well as the ongoing review Net zero transition and economic opportunities Our 2050 vision and how we 11. Based on our whole system modelling, get there by 2050, emissions associated with industry could need to drop by 87-96% compared to

10. To stay on track for net zero, industrial 2019, down to 3-10 MtCO2e. In the interim, to emissions will need to fall significantly, with meet our NDC and Carbon Budget 6 targets, residual emissions being compensated for we expect emissions could fall by 43-53% by Greenhouse Gas Removal methods. All by 2030 and 63-76% by 2035, compared to industrial sectors will need to act to meet this 2019 levels. These figures are based on an challenge and to ensure they are resilient to indicative industry pathway contributing to the climate changes that are already inevitable. To whole‑economy net zero and interim targets do this, we need to transform how industry (see figure 19 below). uses energy and makes products and rethink the type of industrial products consumers buy. 122 Chapter 3 – Reducing Emissions across the Economy Figure 19: Indicative industry emissions pathway to 2037 180 160 140 120 Emissions (MtCO2e) 100 80 60 Pre-IDS & NZS policies and proposals 40 2050 20 Range NZS delivery pathway 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis

12. The IDS sets out the policy foundations 13. Our Carbon Budget 6 delivery pathway to deliver net zero for industry, including aims to give long-term clarity to industry, going immediate actions in the 2020s. The initial further than the IDS in several areas: reduction target of around two thirds (67%) of industrial emissions by 2035 was informed • Going further and faster on fuel by sector-specific modelling developed in switching and carbon capture, conjunction with the CCC. Our new ambition utilisation and storage (CCUS). These of 63-76% is consistent with, and builds on, are critical for our overall pathway, requiring the pathways we set out in the IDS, but with, both infrastructure decisions and revenue amongst other things, increased levels of fuel support, via the IDHRS scheme. Modelling switching and iron and steel decarbonising in suggests fuel switching to low carbon the 2020s and early 2030s. alternatives could reach 50 Twh per year by 2035, along with an increase in capturing and storing industrial emissions, from 3 MtCO2 per year to 6 MtCO2 by 2030, and 9 MtCO2 per year by 2035. 123 Net Zero Strategy: Build Back Greener • Working towards more resource and 16. Many industrial sectors also have low energy efficiency savings. We anticipate profit margins, so their ability to invest in the need for regulatory, fiscal, and wider some decarbonisation technologies is limited measures targeted at industrial products and has been exacerbated by the pandemic. and supply chains to achieve 11 MtCO2e Short-to-medium term capital funding and worth of savings by 2035, including up to revenue support will therefore be required to 3 MtCO2e of potential abatement in the overcome these investment hurdles, reduce iron and steel sector, as estimated by the the risk of carbon leakage, and stimulate long Climate Change Committee. term private investment. • Realising the benefits of demand- 17. Decarbonising the industry sector will side measures and carbon pricing. regenerate communities and open up new An increasing carbon price will help to employment opportunities right around the incentivise action on decarbonisation by UK. Based on current estimates, policies and industry, whilst demand side measures, proposals to reduce emissions in the industry such as product labelling, regulatory sector could support up to 54,000 jobs in standards, and changes to public and 2030. This figure is driven by CCUS, which private procurement approaches, can could support up to 50,000 jobs in 203035, play a key role in helping the development split across industry, power, and the transport of the market, and mitigating the risk of and storage network.36 In addition, the carbon leakage. manufacture and installation of on-site energy efficiency and fuel switching measures to Seizing new opportunities achieve a net zero pathway for industry could

14. To achieve the level of emissions support up to 4,000 jobs in 2030. reductions in the industry sector indicated by

18. We have the opportunity to future‑proof our delivery pathway to 2037, we will need industrial sectors and take advantage of future additional public and private investment of low carbon markets. This will include creating at least £14 billion and significant operating resilient supply chains that ensure we exploit expenditure from the expected increase in our strengths and have diverse supply sources CCUS, hydrogen use and other fuel switching for critical goods, as well as supporting those technology. Energy and resource efficiency areas that could be vulnerable to global will also play a key role in offsetting some of shocks. The UK is already a world leader in these costs. new clean technology, as seen in our growing

15. Due to challenges faced by industry, such hydrogen and CCUS sectors, and we can as the level of capital investment required develop new markets for low carbon goods to commercially scale essential low carbon and support further innovation. As highlighted technologies, it will be important to drive the in the IDS, wider environmental and air quality decarbonisation of industry at a pace that impacts will be kept under consideration, in allows technology to develop and companies, line with evolving regulatory standards. large and small, to adapt their working practices, and retrain their workforces. 124 Chapter 3 – Reducing Emissions across the Economy

19. CCUS will be critical to achieving net gas sector will be able to make use of local zero, alongside low carbon alternatives such skills programmes such as Skills Bootcamps as low carbon hydrogen and electricity. or Free Courses for Jobs to support new These technologies offer a renewed era for emerging industries in renewables, CCUS, our industrial heartlands. Connecting locally, and low carbon hydrogen to help build for instance positioning hydrogen train trials SuperPlaces. As the demand pulls through near blue hydrogen clusters means we can these lower carbon technologies, the start to bring higher skilled, higher paid jobs costs fall. And these industrial clusters, our and expertise to cluster in these area. The potential ‘SuperPlaces’, will foster and lead engineers, fabricators, and geologists currently internationally on the development and roll out working in industrial clusters and the oil and of these technologies. Policies and proposals Fuel switching and carbon capture 22. The UK Hydrogen Strategy indicated that in 2030 consumption of low carbon Low carbon hydrogen hydrogen as an industry fuel could range from around 10 TWh per year if supply is limited to

20. Fuel switching to hydrogen is likely to clusters, and up to around 20 TWh per year be technically feasible for most industrial if pipelines are connected to some dispersed processes and our modelling indicates it is sites. While supply is likely to come mostly the least-cost option to decarbonise harder to from large scale cluster-based CCUS-enabled electrify sites, processes, and sectors. hydrogen production sites, there could also

21. The IDS sets out that a low regret level be industrial demand for low carbon hydrogen of deep decarbonisation infrastructure from electrolysis, which can be produced at should be installed in industrial clusters this a smaller scale on a more localised level. To decade. This will give industry the confidence stay on track for our Carbon Budget 6 delivery to invest in switching to low carbon fuels, pathway, hydrogen demand from industry such as hydrogen. Industrial users located in may need to increase up to 50 TWh by 2035. clusters are therefore expected to provide the This increase would be driven by a growing most significant new demand for hydrogen number of sites having access to low carbon by 2030, with the greatest potential from hydrogen, further technology development chemicals and iron and steel sectors. A to enable an expanding range of processes significant proportion of this demand could to switch to hydrogen, and a shift in the arise from a small number of sites acting as associated costs, such as the price of carbon, ‘pathfinders’, proving the viability of hydrogen to make hydrogen an increasingly competitive at a commercial scale and fostering the initial fuel option. market for low carbon hydrogen.

23. The UK Hydrogen Strategy also set out the actions we are taking to support industry to realise the potential of this new technology. It is critical that we demonstrate fuel switching to low carbon hydrogen on industrial sites during the 2020s so we will provide further support for research and innovation through the Net Zero Innovation Portfolio and initiatives led by the Industrial Decarbonisation Research and Innovation Centre (IDRIC). 125 Net Zero Strategy: Build Back Greener

24. Demand-side measures and carbon 26. Developed alongside hydrogen, CCUS pricing could help to drive demand for will be part of creating transformative hydrogen and will be supported by grant “SuperPlaces” in areas such The Humber funding, such as the £55 million Industrial and North East, North West, and Southern Fuel Switching Competition under our Net England as well as in Scotland and Wales. Our Zero Innovation Portfolio and the Phase 2 £1 billion CCS Infrastructure Fund will provide of the IETF, to support on-site fuel switches. industry with the certainty required to deploy Regulatory measures can also support CCUS at pace and at scale and will form part industry to switch to low carbon hydrogen, of a package of government support, which with the Hydrogen Strategy announcing calls will also include the Industrial Decarbonisation for evidence on hydrogen-ready industrial and Hydrogen Revenue Support (IDHRS) equipment and decarbonising existing high scheme and the £240 million Net Zero carbon hydrogen production. Alongside Hydrogen Fund supporting both CCS-enabled this, hydrogen production measures in the ‘blue’ and electrolytic ‘green’ hydrogen. fuel supply chapter of this strategy will bring forward low carbon hydrogen supply for use 27. Following the completion of Phase 1 of across the economy and help make hydrogen the Cluster Sequencing process, the Hynet a price competitive decarbonisation option to and East Coast Clusters have been confirmed encourage end users to switch. as track 1 clusters for the mid-2020s and will be taken forward into Track-1 negotiations. Carbon capture, usage and If the clusters represent value for money storage (CCUS) for the consumer and the taxpayer then subject to final decisions of Ministers, they

25. Carbon Capture, Usage & Storage will receive support under the government’s (CCUS) will be an exciting new industry to CCUS Programme. We are also announcing capture the carbon we continue to emit and the Scottish Cluster as a reserve cluster if a revitalise the birthplaces of the first Industrial back-up is needed; we will continue to engage Revolution. The Prime Minister’s Ten Point with this cluster as well as the track 1 clusters, Plan established a commitment to deploy throughout the next stage of the process. This CCUS in a minimum of two industrial clusters puts these places - Teesside, the Humber, by the mid-2020s, and four by 2030 at the Merseyside, North Wales and the North latest. Our aim is to use CCUS technology East of Scotland - among the potential early to capture and store 20-30MtCO2 per year SuperPlaces which will be transformed over by 2030, forming the foundations for future the next decade. investment and potential export opportunities. Developed alongside hydrogen, we can 28. We remain committed to helping all create these transformative ‘SuperPlaces’ in industrial clusters to decarbonise as we work areas such as the Humber, North East, North to reach net zero emissions by 2050, and we West and southern England, as well as in are clear that CCUS will continue to play a Scotland and Wales. key role in this process. Consequently, the government continues to be committed to Track-2 contributing capacity of 10Mt per year to help achieve our 2030 ambition. Deploying CCUS will be a significant undertaking, these are new major infrastructure projects for a new sector of the economy and carry with them significant risks to deliver by the mid‑2020s. 126 Chapter 3 – Reducing Emissions across the Economy Government will need to play a role in 31. The IDS set out the ambition to capture 3 providing long-term certainty to these projects MtCO2 per year by 2030. Our delivery pathway to manage these risks and bring forward the for Carbon Budget 6 requires an increased UK’s first CCUS clusters. ambition of 6 MtCO2 per year by 2030 and 9 MtCO2 per year by 2035. We envisage these

29. CCUS will be critical to achieving net emissions to be captured from industries in zero, alongside low carbon alternatives such clusters as well as from more dispersed sites, as low carbon hydrogen and electricity. where non-pipeline transport solutions such as These technologies offer a renewed era for the shipping of CO2 may be required. our industrial heartlands. Connecting locally, for instance positioning hydrogen train Revenue support for industrial carbon trials near blue hydrogen clusters means capture and hydrogen production we start to bring higher skilled, higher paid jobs and expertise to cluster in these areas. 32. CCUS and hydrogen deployment will The engineers, fabricators and geologists play a central role in our green industrial currently working in industrial clusters and the revolution and ensuring that the UK’s oil and gas sector will be able to make use of businesses are competitive in a net zero skills programmes such as Skills Bootcamps future. We have been working with industry and Free Courses for Jobs to support new to develop business models for industrial emerging industries in renewables, CCUS carbon capture and hydrogen production and low carbon hydrogen to help build to give investors the long-term revenue SuperPlaces. As the demand pulls through certainty they require. We are now setting up these lower carbon technologies, the costs the Industrial Decarbonisation and Hydrogen fall. And these industrial clusters, our potential Revenue Support (IDHRS) scheme to fund SuperPlaces, foster and lead internationally these business models and enable the first on the development and roll out of these commercial scale deployment of low carbon technologies. hydrogen and industrial carbon capture. This will unlock by 2030 up to £6bn private

30. Industrial CCUS is fundamental to sector capital, create thousands of jobs in decarbonising of industries such as chemicals, key levelling up regions, grow the UK supply oil refining, and cement. This is because chain and achieve cost reductions, and deliver options for decarbonising industry are limited carbon savings to allow us to stay on track for and fuel switching is sometimes only a partial our carbon budgets. solution. CCUS is not currently investable for most industrial sectors as deployment costs 33. The IDHRS scheme will initially commit are higher than the current carbon price can to providing up to £100 million to support support, and businesses are unable to pass initial electrolytic hydrogen projects, as set these through to consumers. Additionally, out in the Fuel Supply chapter. We will also businesses may face challenges raising capital be announcing a funding envelope in 2022 finance to invest in CCUS until it has been that will enable us to award the first contacts more widely deployed in the UK. Therefore, to industrial carbon capture facilities and an investable business model is needed, CCUS-enabled hydrogen production projects alongside clear commitments to provide from 2023 through the Cluster Sequencing certainty to industry. process, to deliver up to 3 MtCO2/yr of industrial carbon capture and up to 1GW of CCUS-enabled hydrogen by the mid-2020s. 127 Net Zero Strategy: Build Back Greener

34. Subject to costs falling, we are also higher temperature processes are currently committing to further allocation rounds for limited due to the low maturity of technologies. all types of eligible low carbon hydrogen We are currently assessing these barriers and production and industrial carbon capture from will set out initial steps that we will take to

2025. We will announce further allocation support the uptake of electrification by the end rounds in due course which will enable us of 2021. Some initial grant funding support to meet our 2030 deployment ambitions of will be available via Phase 2 of the IETF from 6MtCO2/year of industrial carbon capture, 5 Autumn 2021. We are also working with GW hydrogen production capacity, and four Ofgem, network operators, and stakeholders CCUS clusters, while continuing to grow the on the approach to delivering low carbon UK supply chain and achieve cost reductions. electricity networks with the capacity to meet Once established, this framework could increased demand from industry. also be used in the future for other critical decarbonisation technologies. Biomass

35. From 2025 at the latest, all revenue 38. Initial support for sustainable use of support for hydrogen production will be levy biomass fuel switching and BECCS is available funded, subject to consultation and legislation via Phase 2 of IETF. As set out in the IDS, being in place. Further details on this will be current evidence strongly suggests that given set out in 2022 through the Government’s limited sustainable biomass supply, we may response to the ongoing Hydrogen Business need to prioritise the use of biomass where Model consultation. This will include parallel it can be combined with carbon capture work to ensure fairness and affordability, such and storage (BECCS), resulting in negative as exemptions for energy intensive industries emissions. The Biomass Strategy, due to be at risk of carbon leakage. published in 2022 will review the amount of sustainable biomass available to the UK, how Electrification this could be best used across the economy, and establish a role for BECCS in reducing

36. Electrification has the potential to abate carbon emissions across the economy. between 5 MtCO2e and 12 MtCO2e of industry emissions per year by 2050. Electrification Industrial non-road mobile will play a more significant role (12 MtCO2e) if machinery (NRMM) hydrogen is unavailable in dispersed sites. This equates to an increase demand of electricity 39. NRMM covers a wide variety of machinery by 15-44 TWh. Additional electricity demand across the economy (e.g. diggers, combine is consistent under our delivery pathway for harvesters, generators, cranes), with total Carbon Budget 6, albeit the demand comes at emissions of around 12 MtCO2e per year. a faster pace due to the possible adoption of Industrial NRMM accounts for around 6 electrification in the iron and steel sector. MtCO2e,37 coming from construction, mining, and manufacturing, with the remaining

37. Electrification technologies for low emissions largely attributed to agriculture temperature processes are technologically (see Natural Resources chapter), and some mature and could be applied to less energy to buildings and transport. New technologies intensive sites today. However, industry have begun to penetrate markets for some faces barriers to adoption such as high NRMM uses, for example electrification electricity costs. We have seen the impact technologies, particularly for small, light of overreliance on gas pushing up prices for duty equipment. Government intervention is hardworking people but our plan to expand our domestic renewables will push down electricity wholesale prices. Applications for 128 Chapter 3 – Reducing Emissions across the Economy likely to be necessary to ensure low carbon 44. Steel accounts for 14% of industry technologies continue to be developed and emissions,39 with 95% of this coming from ensure uptake at the level needed to reach two blast furnace sites, Scunthorpe, and Port carbon budgets and net zero. Talbot.40 Decarbonising these sites and the wider steel sector through switching to Electric

40. The first stage in government support will Arc Furnace applying industrial carbon capture involve innovation funding to prepare key low technology to existing blast furnaces or in the carbon technologies for commercialisation. future using hydrogen-based DRI. The £40 million Red Diesel Replacement competition will provide grant funding to 45. The UK recognises the importance of develop and demonstrate low carbon coordinating international activity on steel alternatives to red diesel for the construction sector decarbonisation, to reduce the costs and mining and quarrying sectors, to help and risks of unilateral action. This includes these sectors to decarbonise. working with international partners to collaborate on measures to mitigate carbon

41. Further cross government work is required leakage, increase the effectiveness of R&D to develop policies to support the deployment spending, and create larger, international of technological solutions and required markets for low emission steel products. The infrastructure in specific sectors, including UK is taking a leading role in driving forward agriculture, transport and buildings. Relevant this activity, championing a number of key government departments will work together to initiatives in this area at COP26, and beyond. ensure a coherent approach. This includes the Clean Energy Ministerial’s Steel Industrial Deep Decarbonisation Initiative, which the UK co-leads with India. This focuses

42. UK steel plays a critical role in the on aligning approaches to data measurement, economy as a foundation industry supporting standards and procurement, to ensure there local economic growth and our levelling-up is a coordinated approach to market creation agenda. Steel employs around 32,500 people across borders. We are also supporting the and supports up to a further 40,000 jobs Net Zero Industry Mission, under Mission through its supply chains, providing high Innovation, which aims to foster deeper value employment in economically deprived collaboration on industry decarbonisation. areas.38 The IDS contains commitments to work with the newly constituted Steel Resource efficiency and energy Council to consider the implications of the efficiency (REEE) recommendation of the Climate Change

46. The Climate Change Committee estimate Committee to ‘set targets for ore-based that REEE measures could contribute 11 steelmaking to reach near-zero emissions MtCO2e of annual emissions reductions by by 2035’. Hydrogen-based steelmaking, 2035.41 Various policies exist to incentivise CCUS and electrification are some of the and regulate action on REEE, but we need technological approaches being considered as to ensure the right frameworks are in place part of this process. to end clear investment signals and drive

43. The Steel Council offers the forum for rapid action. government, industry, and trade unions to work in partnership on the shared objective of creating an achievable, long- term plan to support the sector’s transition to a competitive, sustainable, and low carbon future. 129 Net Zero Strategy: Build Back Greener Resource efficiency 50. Government aims to support action in the construction sector by improving

47. Resource efficiency and material reporting on embodied carbon in buildings substitution measures could save 9 MtCO2e and infrastructure with a view to exploring per annum in industry within the UK by a maximum level for new builds in the 2050.42 Resource efficiency measures future. We recognise there is potential to reduce emissions from industrial processes reduce embodied carbon by way of material by keeping products and materials in substitution where appropriate, such as in circulation for longer by way of reuse, repair, timber usage (see Natural Resources, Waste remanufacture and recycling as well as and F-gases chapter) and resource efficiency reducing material usage. These activities approaches, amongst others. We have also enable the retention of value, and in some supported the Green Construction Board cases the creation of new value for both the to produce a Routemap to Zero Avoidable producer and customer, at a much-reduced Waste, published in July 2021. environmental impact.

51. Government is identifying opportunities

48. The approach in driving the transition to a to reduce the substantial embodied carbon more resource efficient economy is set out for footprint of the automotive sector, beyond the England in the Government’s 2018 Resources reduction and then elimination of emissions at and Waste Strategy, to be supplemented the tailpipe. by a new Waste Prevention Programme, which outlines how we will maximise the 52. We are building on the successful value of our resources and minimise waste introduction this year of the first wave of right to increase the circularity of our economy. to repair measures for certain appliances and We will formalise joint working arrangements equipment. Alongside the review of Waste across government departments to from Electrical and Electronic Equipment promote collaboration on resource efficiency (WEEE), we will explore the use of labels that approaches, ensuring we are using all the inform consumers of durability, repairability and policy tools available in working towards recyclability. Other options under consideration shared emissions and environmental targets. include enhancing and extending producer responsibility schemes to incentivise sharing

49. The Climate Change Committee (CCC) and renting. balanced pathway estimates that 3 MtCO2e of potential savings per year could be driven 53. To realise the wider emissions saving by consumer-side measures by 2035. potential of resource efficiency measures Government aims to support this shift in the will require establishing frameworks which 2020s through policy measures that inform minimise virgin resource use and maximise consumers of the embodied carbon of recycled, reused, or remanufactured content. industrial goods and empower them to make We will continue to assess all, fiscal and choices that support more efficient use of non‑fiscal, policy options to meet these resources. Measures across different sectors objectives. will be explored, but opportunities have been

54. Knowledge can be a barrier preventing identified in the construction, automotive and the value in waste resources from being electronics sectors. realised, including the sharing of secondary resources across different industrial processes. We will support companies to identify these Industrial Symbiosis opportunities through facilitation of a cross sector network to boost take-up of circular economy initiatives. We will 130 Chapter 3 – Reducing Emissions across the Economy support inter-disciplinary approaches and to respond to these barriers. Building on strengthen the evidence base on resource behavioural insights approaches in other efficiency initiatives by collaborating with the areas of government policy, we are keen to UKRI funded National Interdisciplinary Circular explore how local networks – such as growth Economy Research (NICER) programme, and hubs, Local Enterprise Partnerships (LEPs), through the development of data systems to the local net zero hubs, and chambers of connect energy, waste, and water flows from commerce – can be used to drive energy- industrial sites. efficient behaviours amongst businesses. We will consider which levers could work Energy efficiency best to support, interconnect and scale-up

55. Energy efficiency measures in industry these networks. range from simple, bill-saving measures to 59. Funding for complex industrial retrofits complex retrofits of industrial equipment with with high payback periods will remain long payback periods and replacement cycles. available via the IETF Phase 2 from Autumn We intend to explore regulatory measures to 2021. These would be further supported by drive greater, earlier uptake of energy efficiency any future extension to the IETF, reflecting measures in line with Carbon Budget targets, the government’s manifesto commitment supported by a wider package of policies to to increase funding to £500 million to 2028. enable a smooth industry transition. We intend Work will be undertaken to ensure sustainable to consult on the development of a package financing measures are available long-term. of measures. Demand-side measures

56. The heterogeneity of manufacturing industry means that processes are very varied, 60. The IDS sets out our ambition to create so codifying them for regulation across the demand for low carbon products, growing whole sector may be challenging. We are the associated market and supporting currently exploring potential new regulatory industry to share the costs of decarbonisation options to address this challenge. This with consumers. includes consideration of whether Energy Management Systems can provide a tailored, 61. The IDS committed to exploring a range of technology-neutral approach, and we would policy options that can support this ambition seek to minimise burdens imposed by including improved transparency of embodied regulation, possibly by using digital tools. emissions data, product labelling, regulatory standards, and agreeing public and private

57. Energy intensive industry (EII) firms procurement approaches. The government are already covered by energy efficiency has committed to developing detailed policy regulations and many have adopted proposals in this area, beginning with a call efficiency measures. We are examining how for evidence on demand-side policy by Spring existing schemes can be enhanced (e.g. 2022. The call for evidence will investigate reforming Climate Change Agreements) and/ how we can define low carbon products and or expanded (e.g. to non-EIIs and SMEs). the emissions reporting that will be required to For non-EIIs and SMEs, we are reviewing support those definitions. It will also explore existing policies to ensure financial support is the design of demand-side policy levers, with accessible and minimum standards are clear. a view to the potential introduction of voluntary standards and labelling as early as 2025, and

58. For smaller businesses, behaviours regulatory standards being introduced in the (awareness, prioritisation, maintenance) are late 2020s. often a further barrier to improving energy efficiency and we are considering new policies 131 Net Zero Strategy: Build Back Greener

62. Across these approaches, the IDS 66. To achieve this, we intend to advance recognises the significant benefits which can work in the following main areas: be achieved through international cooperation, and the UK is leading the new Clean Energy • Accelerated decarbonisation across Ministerial Industrial Deep Decarbonisation dispersed sites: We will investigate the Initiative (IDDI), which aims to develop shared potential for securing earlier emissions approaches to embodied emissions reporting savings from segments of emissions and definitions for green steel and cement to where the technological pathway is more drive public and private procurement. straightforward, or where economies of scale can be developed. This could Dispersed sites include areas such as heat pumps for low temperature processes, and electrification

63. Dispersed sites43 account for of off-gas grid sites. approximately half of the UK’s industrial • Preparing sites for key infrastructure emissions44, and therefore form a major part decisions in the mid-2020s: For of industry’s pathway to net zero. These sites most sites, more clarity on optimal are highly diverse in terms of location, sectors, decarbonisation options depends on and industrial processes, ranging from key infrastructure decisions, such as energy-intensive processes such as clinker the future of hydrogen in the gas grid by production in cement to less energy-intensive

2026. We will work with stakeholders processes like pasteurisation in food and drink to ensure that these sites understand manufacturing. their decarbonisation options once these

64. The IDS indicated that emissions decisions have been made. This would reductions in the early 2020s would focus include funding for Mini-Cluster Industrial on energy efficiency. Deeper decarbonisation Decarbonisation Plans in the early 2020s, potential is expected to be reached in the to develop shared infrastructure and 2030s onwards, when uptake of low carbon intergrated decarbonisation solutions in technologies in dispersed sites is expected local areas. This would be supplemented to be rapid. by continued funding via Phase 2 of the IETF for site-level studies and

65. Whilst the broad trajectory on deployment.45 decarbonising dispersed sites remains valid, the more ambitious Carbon Budget 6 targets mean we will explore opportunities for faster decarbonisation in dispersed sites in the 2020s. Going further on dispersed sites in the 2020s could help industry avoid technological lock-in through offering decarbonisation opportunities to align with investment cycles; and spread the benefits of green technologies beyond the clusters, supporting the levelling up agenda. 132 Chapter 3 – Reducing Emissions across the Economy Working together across the UK Examples of policy action by the Scottish Government, Welsh Government, and Northern Ireland Executive Wales Scotland A collaboration between researchers at The Scottish Government has announced Swansea University and cement producer a major fund to decarbonise industry and Hanson UK has seen the installation of a manufacturing opening opportunities to new demonstration unit at the company’s develop negative emissions technologies Regen Ground Granulated Blast Furnace (NETs). The Scottish Industrial Energy Slag (GGBS) plant in Port Talbot. The Transformation Fund commits £34 million for demonstration unit replaces some of the projects at industrial sites for energy efficiency natural gas in the Regen process with green or deeper decarbonisation, including on hydrogen. The carbon footprint of Regen feasibility and conceptual studies into the GGBS is about one tenth of Portland cement role of NETs.This is supported by a £180 and it is used as a replacement for up to million Emerging Energy Technologies fund to 80% of the cement in concrete. The project support Hydrogen, CCS and NETs projects. is part of the £9.2 million Reducing Industrial Carbon Emissions (RICE) project which has The Scottish Government has also launched been part-funded by the European Regional the Grangemouth Future Industry Board in Development Fund through the Welsh recognition of the continued commitment to Government. Scotland’s largest industrial manufacturing cluster, now and in our net zero future. Supporting a just transition to net zero is at the heart of the Board’s work, designing the collaborative approach to planning for the transition of this core manufacturing region and harnessing the significant assets, technical and engineering,, skills, and significant opportunities presented by the cluster. 133 Net Zero Strategy: Build Back Greener Northern Ireland • Resource Efficiency Capital Grant: Available to eligible businesses, grants of Invest Northern Ireland delivers a suite of up to £50,000 to help with the purchase support, including specialist advice and of new resource efficient technologies that investment capital to enable Northern reduce the consumption of water, raw Irish businesses to become more efficient materials and waste produced leading to and resilient through green efficiencies. reduced carbon emissions. Support includes: • COVID-19 Energy Efficiency Capital • Technical Consultancy: Available to all Grant: Available to eligible businesses to businesses with an annual energy and build resilience through green efficiency, resource spend above £30,000, this grants of up to £80,000 are available support includes fully funded technical for the installation of energy efficiency audits, feasibility studies and advice equipment that offers cost and carbon to help businesses identify cost and savings through the reduction of energy carbon savings. consumption. • Resource Matching through Industrial Symbiosis: fully funded support that offers opportunities to convert redundant materials of one business into a resource for another business, utilising a circular economy approach to add value and to reduce costs and carbon for all parties. 134 Chapter 3 – Reducing Emissions across the Economy 3iv. Heat & Buildings Decarbonising the way we heat and power our buildings Our Key Commitments • Levelling up through supporting 175,000 green skilled jobs by 2030 and 240,000 by 2035 – resulting in £6 billion additional GVA by 2030 and with a focus on the areas that need investment most. • Making the transition to low carbon buildings affordable and achievable for all by: • Aiming to phase out the installation of new and replacement natural gas boilers by 2035 in line with the natural replacement cycle, and once costs of low carbon alternatives have come down, including any hydrogen-ready boilers in areas not converting to hydrogen, to ensure that all heating systems used in 2050 are compatible with net zero. • Making heat pumps as cheap to buy and run as a gas boiler by growing the heat pump market to support 600,000 installations per year by 2028 and expanding UK manufacturing – with the ambition of working with industry to reduce costs by at least 25-50% by 2025 and to parity with gas boilers by 2030 at the latest. • Supporting households in making this transition with a new £450 million Boiler Upgrade Scheme providing £5,000 capital grants and a new market-based incentive for heating system manufacturers, whilst investing £60 million in heat pump innovation – making them beautiful, smaller, easier to install. • Consulting on phasing out the dirtiest and most expensive fossil fuels first - new oil, coal and liquefied petroleum gas heating - and replace with low carbon alternatives in non-domestic buildings from 2024 and homes from 2026, following natural appliance replacement cycles. • Committing to action on addressing distortions in fuel prices to ensure that low carbon technologies are no more expensive to run than fossil fuel boilers. • Helping households and businesses reduce their energy bills while making buildings healthier and more comfortable benefiting from warmer, comfier, more valuable buildings through: • Upgrading fuel poor homes to EPC Band C by 2030 where reasonably practicable and providing additional funding to the Home Upgrade Grant and the Social Housing Decarbonisation Fund – investing £1.75 billion. 135 Net Zero Strategy: Build Back Greener • Consulting on phasing in higher minimum performance standards to ensure all homes meet EPC Band C by 2035, where cost-effective, practical and affordable. • Setting long-term regulatory standards to upgrade Privately Rented Homes to EPC C by 2028 and considering setting a long-term regulatory standard for Social Housing, subject to consultation. • Reducing the energy consumption in commercial and industrial buildings in England and Wales by 2030, using measures including regulations and a performance-based measurement scheme. • Investing a further £1.425 billion in the Public Sector Decarbonisation Scheme, with the aim of reducing direct emissions from public sector buildings by 75% by 2037. • Setting a minimum energy efficiency standard of EPC Band B by 2030 for privately rented commercial buildings in England and Wales. • Establishing large scale trials of hydrogen for heating to take decisions in 2026 on the role of hydrogen in decarbonising heating, and consult on the case for enabling or requiring hydrogen-ready boilers and broader heating system efficiencies. • Continuing to grow and decarbonise the UK Heat Network market through the £338 million Heat Network Transformation Programme of which at least £270m will go towards the Green Heat Network Fund, introducing sector regulation and new heat network zones by 2025. • Launching a new world-class policy framework for energy-related products to ensure products use less energy, reducing emissions and household bills. Progress to date

1. The UK has around 30 million buildings46 2. The package of measures presented and includes some of the oldest building stock here, and in our Heat and Buildings Strategy in Europe.47 In total, buildings are responsible (HBS) and associated consultations, delivers for around 17% of our national emissions.48 on commitments made in the Ten Point Plan Currently, 1.7 million fossil fuel heating systems for a Green Industrial Revolution and the are installed per year (gas, oil, and coal).49 The Energy White Paper. In the Ten Point Plan, vast majority of emissions from buildings result we committed to deliver greener buildings. from heating. Including indirect emissions (e.g. Since then, we have announced £60 million from electricity generation) emissions from to support decarbonisation of Social Housing heating buildings make up around 78% of all and have allocated over £1 billion from the buildings emissions and about 21% of all UK Public Sector Decarbonisation Scheme, in emissions.50 Overall, between 1990 and 2019, doing so, supporting up to 30,000 jobs. net UK greenhouse gas emissions from heat and buildings decreased by 17%. 136 Chapter 3 – Reducing Emissions across the Economy

3. Homes: The UK already has a strong performing tenure, with the greatest proportion track record improving energy performance, of homes below EPC band D.56 Improving the with 40% of our homes now above Energy energy performance of all homes and taking a Performance (EPC) Band C, up from just 9% ‘fabric first’ approach, by improving the energy in 2008. There are approximately 28 million efficiency will be key to ensuring the transition households in the UK,51 and 86% of homes to low carbon heating is cost effective.57 in England use natural gas boilers.52 Across the UK, 9% of the energy consumed to heat 4. Non-domestic buildings: There are homes is provided by other fossil fuels, such approximately 1.7 million non-domestic as oil and coal, generally in homes that do (commercial, industrial and public) properties not have access to the gas grid.53 In 2019, in England and Wales.58 Non-domestic approximately 15 million (60%) of homes in buildings account for around a quarter England had a lower energy performance, of UK building emissions.59 Commercial with ratings of EPC band D and below.54 The and industrial buildings over 1,000 m2 are largest proportion of homes in England are responsible for over half of the energy used by owner-occupied (64% in 2019), with a much commercial and industrial buildings (excluding smaller proportion being socially rented (17% process heat) but account for only 5% of the in 2019), or privately rented (19% in 2019).55 stock.60 Public sector buildings account for Owner-occupied homes are now the worst about 9% of building emissions.61 Net zero transition and economic opportunities

5. By 2050, buildings will need to be almost Seizing new opportunities completely decarbonised, by making use of a combination of technologies to minimise their 6. The decarbonisation trajectory of the sector carbon emissions and maximise their energy presents significant potential for investment performance. The scale of this challenge is and export opportunities for goods and significant, but we will take an approach that services. Deployment of energy efficiency goes with the grain of consumer behaviour measures and low carbon heating in domestic and maximises consumer choice, to ensure a and non-domestic buildings, in line with the smooth and gradual transition for households ambitions and outcomes in the Heat and and businesses. Much like the move to electric Buildings Strategy, will drive up to £6 billion vehicles, the move to low carbon options gross value added (GVA) per year by 2030.62 such as electric heat pumps will be a gradual 7. This will be investment not just in the transition from niche product to mainstream buildings themselves, but in the infrastructure consumer option. To ensure that we all benefit that supplies them. Government support will from cleaner, warmer and comfier buildings, stimulate this investment and will need to be will need to improve the energy efficiency focussed on growing key markets for low of our buildings and products, end the use carbon heat and supporting vulnerable and of fossil fuel heating systems and switch to low-income households, the social housing low carbon sources, and integrate the use of sector, and the public sector. smart technologies that give more control to consumers. 137 Net Zero Strategy: Build Back Greener

8. Decarbonising the heat and buildings • Improving health. COVID-19 has sector will regenerate communities and open highlighted the importance of good up new employment opportunities right ventilation in buildings. Improving the around the UK. Based on current estimates, energy performance of our buildings, policies and proposals to reduce emissions whilst ensuring good ventilation, will from buildings could support up to 100,000 ensure they are efficient and healthy jobs by the middle of the 2020s and up to environments. This can help avoid many 175,000 in 2030. Jobs will be supported physical illnesses, including heart and lung across a range of areas – from manufacturing conditions65. Reducing the number of fossil to services, and from installation to research fuel boilers will also significantly reduce and development. the various pollutants emitted, including nitrous oxides, which negatively impact

9. Decarbonising buildings will deliver a range human health. Improved thermal comfort of benefits: also leads to better health and wellbeing • Levelling up. Decarbonisation will support as well as reducing the likelihood of clean, local growth in every region of the condensation and mould. UK, while investing in equality of living • Increasing property value. Studies standards and job creation. Reducing indicate that more energy efficient heat and buildings emissions will require properties typically have a higher value installing energy efficiency measures and than less efficient ones. Evidence from a new heating systems, which rely on local study commissioned by BEIS indicated supply chains and businesses. that properties with an EPC C rating • Reducing energy bills and business were worth around 5% more than those operating costs. Inefficient homes are currently at EPC D rating, after controlling more expensive to run. The Energy for other factors such as property size and Efficiency Infrastructure Group estimate archetype.66 that upgrading all UK homes to EPC band C could provide annual energy cost Our 2050 vision and how savings of £7.5 billion.63 we get there • Tackling fuel poverty. In 2014, the 10. Our approach to this transition must be Government introduced a statutory fuel affordable and achievable for all and, following poverty target for England, to improve as successes in power and electric vehicles, we many fuel-poor homes as is reasonably will utilise long-term signals alongside early practicable to a minimum EPC rating of investments to bring down costs and improve band C by the end of 2030. Tangible, consumer offers: targeted support for more deprived areas can be achieved through action to upgrade • Investing in innovation. Continuing to poor-performing buildings, leading to work with industry to refine processes and warmer, healthier homes and lower energy technologies to deliver value-for-money bills. We recently published an updated and value for the UK economy – with an fuel poverty strategy for England.64 emphasis on making technology cheaper, easier to install and designed to appeal to consumers. We are investing in technology now, in trialling hydrogen ahead of strategic decisions on the role of hydrogen for heating in 2026; and £60 million in heat pump innovation – making them beautiful, smaller and easier to install. 138 Chapter 3 – Reducing Emissions across the Economy • Prioritising no or low regrets actions. • Taking a whole-sector and whole- Reducing bills through a fabric-first system approach. Considering the approach to improving building thermal heating system in the context of what is efficiency through, for example, insulation, most appropriate for the whole building to draught-proofing and increasing the energy minimise costs, as well as accounting for performance and capability of products local suitability, environmental impacts, and and appliances.67 air quality. • Growing supply chains and bringing 11. The benefits of more efficient, low down costs: Making heat pumps as carbon buildings for consumers are clear: cheap to buy and run as a gas boiler by smarter, better performing buildings, reduced growing the heat pump market to support energy bills and healthier, more comfortable 600,000 installations per year by 2028 and environments. Households and businesses expanding UK manufacturing – reducing will need to play their part in decarbonising costs by at least 25-50% by 2025 and to their buildings, but we need to ensure that the parity with gas boilers by 2030. To help costs of doing so fall fairly across society. achieve this we are announcing a new £450 million Boiler Upgrade Scheme – 12. Based on our whole-system modelling, offering households £5,000 grants when by 2050, emissions associated with heat and they install an air source heat pump. buildings could need to drop by 98-100% • Continuing to support those most in compared to 2019, down to 0-2 space need. Supporting the vulnerable through between digit and unit MtCO2e. In the interim, the transition to low carbon buildings to meet our NDC and CB6 targets, we expect and meeting our statutory fuel poverty emissions could fall by 25-37% by 2030 and target. We will continue to ensure financial 47-62% by 2035, compared to 2019 levels. support is available for those who need These figures are based on an indicative heat it most. We are investing a further £1.75 and buildings pathway contributing to the billion in funding for our Home Upgrade whole-economy net zero and interim targets Grant and Social Housing Decarbonisation (see figure 20 below). Fund schemes, which provide support for low-income households in installing energy efficiency and low carbon heating. • Balancing certainty and flexibility. Providing stability for investment through clear long-term signals that work with the grain of the market and minimise impact on consumers. For example, aiming to phase out the installation of new and replacement natural gas boilers by 2035, in line with the natural replacement cycle and only once costs of low carbon alternatives have come down. • Ensuring buildings are resilient to the impacts of climate change. Implementing measures to ensure homes and buildings are well ventilated and protected against rising temperatures. 139 Net Zero Strategy: Build Back Greener Figure 20: Indicative heat and buildings emissions pathway to 2037 140 120 100 Emissions (MtCO2e) Pre-NZS policies 80 60 NZS delivery 40 pathway 20 2050 Range 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis

13. We have developed three high-level 14. In all scenarios the following will illustrative scenarios to reflect different be important: technology mixes that would allow us to decarbonise heating of buildings, contributing • Improving the energy performance of towards meeting our Carbon Budget 6 buildings to keep buildings warm and target. We are committed to taking strategic comfortable, keep bills down, minimise decisions on the role of hydrogen for heating the impacts of transition on the energy in 2026, following trials, which will further system, and make switching to low carbon inform out pathway to 2050. Realising these heating easier. scenarios would be consistent with our • Phase out of heating appliances that trajectory to net zero in 2050. These are: a are only capable of burning fossil fuels, high hydrogen scenario, a high electrification consistent with our ambition to phase out scenario and a dual energy system scenario. the installation of new and replacement natural gas boilers by 2035, and phase out the installation of high-carbon fossil fuel boilers in properties not connected to the gas grid by 2026 (and 2024 for non- domestic buildings). 140 Chapter 3 – Reducing Emissions across the Economy • Heat pumps: these will be the best low 17. To ensure we drive this level of heat pump carbon heating option for some types deployment, further policy would be required of buildings, for example, if they are to phase out installation of new fossil fuel new buildings or off the gas grid. We heating faster. We could grow the heat pump have set a target of 600,000 heat pump market and transition consumers in stages, installations per year by 2028, from roughly while continuing to follow natural replacement 35,000 currently. We expect this to be cycles to work with the grain of consumer the minimum number of heat pumps that behaviour. For homes, we could focus initially need to be deployed each year after 2028 on key segments of the domestic building across any scenario, and all scenarios stock, for example based on tenure, property other than high hydrogen will require much age or fabric efficiency. higher deployment. Of the 600,000 heat pumps per year, we expect about 200,000 18. The increased deployment of heat pumps to be in new build properties. will be accompanied by investment in the infrastructure we need to meet increased • Heat networks: they use hot water in pipes electricity demand, including the generation to deliver heating (and in some cases cold of low carbon electricity and additional water for cooling) to many consumers from grid capacity. a centralised heat source. Heat networks could supply up to 20% of UK heat High hydrogen scenario demand by 2050, up from 3% of UK heat supply today.68 19. In this scenario, hydrogen has proven feasible and preferable as a solution for

15. To achieve the level of emissions heating most UK buildings, and decisions reductions in the heat and buildings sector taken in 2026 set the UK on a path to indicated by our delivery pathway to 2037, converting most of the national gas grid to we will need additional public and private hydrogen. We would expect to begin the investment of approximately £200 billion. transition by converting a pilot hydrogen town by the end of the decade and then accelerate High electrification scenario rollout. The conversion would likely start by

16. In this scenario, we assume there is no building out from existing hydrogen production significant use of hydrogen for heating in and use in industrial clusters, and roll-out buildings. This may be because hydrogen would involve switchover on an area-by-area is not proven to be feasible, cost-effective, basis in different locations. or preferable as a solution for low carbon 20. Due to the infrastructure and supply heating, or because its deployment has been chain requirements of a hydrogen conversion significantly delayed. In this scenario, we we estimate that in this scenario, we would would need to continue the rapid growth of convert around 4 million homes to using the heat pump market beyond 600,000 per low carbon hydrogen by 2035. New heating year in 2028 to up to 1.9 million per year from system installations should be low carbon or 2035, resulting in roughly 13 million homes hydrogen-ready, meaning ready for a planned using low carbon heating systems by 2035 – future conversion, from 2035. We estimate around 11 million with heat pumps and around that by 2035 roughly 13 million homes will 2 million using heat networks. have low carbon heating, comprising around 7 million with heat pumps, 4 million using hydrogen, and around 2 million homes using heat networks. 141 Net Zero Strategy: Build Back Greener Dual energy system scenarios • There is widespread consumer demand for hybrid systems that utilise a mix of

21. In this scenario, both hydrogen and energy sources. electrification prove feasible and preferable as heating solutions to large numbers of 22. It is too early to determine the policy consumers. This could arise in several forms: framework that might support this mixed transition. Any scenario in which hydrogen • All or most of the gas grid is converted is an available option for consumers will to low carbon hydrogen, but the costs require public policy decisions to enable and benefits of switching to hydrogen cost-effective and co-ordinated investment in versus installing a heat pump are viewed infrastructure and supply chains, and ensure differently by different consumers. This consumer choice and other public interests could result in a high switchover to both are protected. If the case for converting the hydrogen and heat pumps on the gas grid. network to hydrogen differs strongly from area • There is partial but still extensive to area, more of the preparation may need to conversion of the gas grid to hydrogen, take place at a regional or local level. based on differing geographical or built environment factors. This would require careful consideration of which parts of the grid would be converted and where responsibility for decisions about the costs and benefits of converting different areas should lie. 142 Chapter 3 – Reducing Emissions across the Economy Future scenarios - what factors we are going to consider in making decisions for mass decarbonisation of heating Over the 2020s, we will need to start taking such as solar PV, wind and electric vehicles. more decisive steps about which technologies Conversely, it is likely hydrogen appliances will and infrastructure should be rolled out, where cost approximately the same as natural gas and when, and accordingly, where we need appliances (around £3k). to target investment, skills, and other enabling actions. We aim to make decisions about Running costs the role of hydrogen in heating by 2026, and Heat pumps are significantly (2.5 – 3x) more commit to reviewing existing institutional efficient than gas boilers and may get even arrangements, as stated in our Heat and more efficient, therefore requiring much less Buildings Strategy, helping ensure that we energy to run. Currently, on average heating have an appropriate framework in place to a home with a heat pump costs more than facilitate decision making at all levels. with a gas boiler. This is, in part, due to policy Upfront costs and social costs charged on electricity bills. However, by addressing existing distortions The cost of installing a heat pump is currently between electricity and gas prices, we will significantly more expensive than gas boilers ensure heat pumps will be no more expensive and installation often requires additional to run than gas boilers. ancillary works, such as upgrading radiators. This can result in total installed costs of It is too early to properly estimate the running around £10,000 for the average home. costs of hydrogen heating. The cost of However, the cost of installing heat pumps producing hydrogen is currently higher than should fall significantly as the market scales fossil fuels. Though the future production up, and the Heat and Buildings Strategy has costs of hydrogen will not be the same as the set ambitions on reducing the installed cost ultimate cost to consumers, using hydrogen of heat pumps over this decade. We are for heating could cost more than natural also providing subsidy for first movers: through gas heating. There remains uncertainty on the Boiler Upgrade Scheme, which will provide other issues that will impact on hydrogen grants of £5,000 towards the cost of installing costs, such as, new and innovative means an air source heat pump and £6,000 for of production, the cost to store it, new and Ground Source Heat Pumps. We will look to innovative business models, and the cost help the market drive down the upfront costs, of any changes to the gas grid that may which leading market participants believe be required. can make heat pumps as cheap to buy and run as a gas boiler by 2030. This ambition reflects the opportunity for innovation and economies of scale across the value chain and has been seen in other technologies 143 Net Zero Strategy: Build Back Greener Consumer journey Heat pumps, unlike most traditional fossil fuel boilers, tend to work by providing an ambient temperature, rather than short blasts through very hot radiators. Evaluation and research have shown that the majority of consumers are happy with the performance of their systems, and smart controls help consumers with this change. Installing heat pumps at the same time as carrying out building energy efficiency and heating system improvements allows for a single intervention and could prove more efficient for many households or businesses. Hydrogen boilers will likely work in a similar way to gas boilers. Some adaptive measures might be needed to enable hydrogen, but requirements for this and associated costs are still uncertain and could vary significantly between different types of buildings. When switching over to hydrogen, the initial grid conversion process is likely to require streets or areas to be converted at the same time. It is expected that an engineer will need to have access to homes to do the changeover in a particular timeframe, and building residents are unlikely to have control over when this happens. 144 Chapter 3 – Reducing Emissions across the Economy Policies and proposals Decarbonising heat 25. We are investing £60 million in a ‘Heat Pump Ready’ Programme which will support

23. Much like the move to electric vehicles, the development of innovative solutions to the move to heat pumps will be a gradual improve deployment, tools and technologies transition from niche product to mainstream across the heat pump sector. These new consumer option. Our core commitment is opportunities will build on our previous Energy that we will aim to phase out the installation Innovation Programme activities, such as the of new and replacement natural gas boilers Electrification of Heat Demonstration Project. in homes and buildings by 2035 at the latest, once costs have come down. This would be 26. Heat networks. Under the £338 million in line with the natural replacement cycle, and Heat Network Transformation Programme, include hydrogen ready boilers in any areas we will launch the £270 million Green Heat not converting to hydrogen, to ensure all Network Fund to grow the market for low heating systems used in 2050 are compatible carbon heat networks. We will also pass with net zero. new legislation to regulate the sector for consumers, give heat networks the statutory

24. Accelerating heat pump deployment. powers they need to build, and regulate We will grow the UK heat pump market the carbon emissions of projects from the to support 600,000 installations per year early 2030s. We will also deliver new heat by 2028. As part of this, and working with networks zones in England by 2025 where industry to do so, we will aim for cost parity heat networks are the default solution for between heat pumps and gas boilers by 2030 decarbonising heating. Finally, we will work with significant cost reductions of at least with industry to increase the capacity and 25-50% by 2025. To achieve this, we will capability of the UK supply chain to support introduce a range of new policies to support the sector to reach its growth potential heat pump deployment, including a new £450 and look to improve performance of legacy million Boiler Upgrade Scheme over 2022/23 networks through the Heat Network to 2024/25 with grants of £5,000 for an air Efficiency Scheme. source heat pump. In addition, we will consult on phasing out the installation of new oil, coal, and LPG heating, and replace with low carbon alternatives such as heat pumps in off gas grid non-domestic buildings from 2024 and homes from 2026, and we will launch a new market-based incentive for heating system manufacturers, similar to that for CO2 in cars. Subject to strategic decisions on the pathways and market conditions, we would look to grow the heat pump market beyond 600,000 per year in 2028 and potentially up to 1.7 million a year by 2035, and we will consult on our proposed approach to doing this. 145 Net Zero Strategy: Build Back Greener

27. Hydrogen heating. We will work in at the latest, where cost-effective, practical, partnership with industry and other key and affordable. stakeholders to thoroughly assess the feasibility, safety, consumer experience and 31. New Buildings. We will introduce other costs and benefits, of hydrogen as an regulations from 2025 through the Future option for heating our homes and workplaces. Homes Standard to ensure all new homes We will support industry to develop and deliver in England are ready for net zero by having large scale trials of hydrogen for heating, a high standard of energy efficiency and low including a neighbourhood trial by 2023 and carbon heating installed as standard. This a village scale trial by 2025, and develop should mean that all new homes will be fitted proposals for a possible ‘hydrogen town’ with a low carbon heat source such as a heat before the end of the decade. We will develop pump or connected to a low carbon heat the evidence base and frameworks necessary network. To reinforce this, we will consult on to take strategic decisions on the role of whether it is appropriate to end new gas grid hydrogen in decarbonising heat in 2026. In connections, or whether to remove the duty to the shorter-term, we will work with the Health connect from the Gas Distribution Networks. and Safety Executive and industry partners As an interim measure to the Future Homes to enable up to 20% hydrogen blending in Standard, we plan to introduce an uplift in suitable areas of the GB gas networks subject standards, effective from June 2022, for to the success of testing and trials, and value England that would result in a 31% reduction for money assessment. in carbon emissions from new homes compared to current standards. We will also

28. Hydrogen-ready boilers and boiler respond to our consultation for the Future standards. We are aiming to consult shortly Buildings Standard for new non-domestic on the case for enabling or requiring new buildings. gas boilers to be readily convertible to use hydrogen (‘hydrogen-ready’) by 2026. We will 32. Domestic private rented sector. also use this consultation to test proposals We will build on our 2020 consultation on on the future of broader boiler and heating strengthening the Minimum Energy Efficiency system efficiency and explore the best ways to Standards to EPC band C by 2028 to set long reduce carbon emissions from our gas heating term minimum regulatory standards consistent systems over the next decade. with our net zero commitment for private rental sector. We are aiming to publish a response

29. Biomethane in the gas grid. We will to this consultation by the end of the year We deliver a new Green Gas Support Scheme have provided significant additional support (GGSS) to support the injection of biomethane to local authorities to ensure compliance and from anaerobic digestion (expected to enforcement of these regulations, building on deliver 2.8TWh of renewable heat per year in earlier compliance and enforcement pilots. 2030/31), and we will explore the development This includes providing £4.3m to 57 local of commercial-scale gasification and the authorities to support activity in these areas. replacement of the GGSS with a long-term We plan to scale up activity further in the biomethane support scheme. coming years. We have also set out proposals to strengthen the compliance and enforcement Improving buildings framework under our recent EPC Band C

30. Our core commitment is to reduce bills, consultation. This includes the introduction whilst improving comfort, health and home of a compliance and exemption database to value, through ensuring as many homes as support local authority enforcement of the possible to achieve EPC Band C by 2035 Regulation. 146 Chapter 3 – Reducing Emissions across the Economy

33. Owner occupied homes. We are also 37. Public Sector. We have committed to exploring opportunities to improve the energy halve direct emissions from public sector performance of owner-occupier homes. buildings by 2032, against 2017 levels, We have conducted a series of stakeholder and we aim to further reduce emissions workshops on the case for action, with over from public sector buildings by 75% by 50 representatives from the housing sector, 2037. To help achieve this, we will provide landlord representatives, retrofit supply chain, £1.425 billion additional funding for the Public NGOs, and consumer organisations. We Sector Decarbonisation Scheme (PSDS) plan to consult on options to upgrade homes over 2022/23 to 2024/25, and through our in the owner occupier sector. We will work Greening Government Commitments (GGCs) with owner-occupiers to help them improve which sets targets to reduce emissions from the liveability of their homes. The provision central government departments and arms- of green finance will be an important step in length bodies. We have also initiated the making this easier and more accessible. Public Sector Low Carbon Skills Fund which provides complementary funding alongside the

34. Social housing. We will provide £800 PSDS to enable public sector organisations million additional funding to the Social to acquire expert skills in order to unlock Housing Decarbonisation Fund (SHDF) over decarbonisation projects. 2022/23 to 2024/25, which will deliver energy performance improvements to social housing. 38. Non-domestic buildings. The Energy We will also consider setting a long-term White Paper set a minimum energy efficiency regulatory standard to improve social housing standard of EPC Band B by 2030 for to EPC Band C and consider levers required privately rented commercial buildings in to decarbonise the stock in line with net zero. England and Wales. Later this year we plan We will consult the sector before setting any to consult on regulating the non-domestic regulatory standard. owner-occupied building stock, and we are considering whether this should align with

35. Low Income/Fuel Poor Consumers. the private rented sector minimum energy We will ensure as many fuel-poor homes as efficiency standards. We will also respond reasonably practicable achieve a minimum to the 2021 consultation on introducing a energy efficiency rating of C by the end of performance-based policy framework in large

2030. To help achieve this, we will provide commercial and industrial buildings and pilot £950 million additional funding over 2022/23 the scheme in 2022. to 2024/25 for off-gas-grid properties through the Home Upgrade Grant (HUG) to provide 39. We will look to consult stakeholders on ongoing support for low-income households the Small Business Energy Efficiency Scheme living off the mains gas grid with energy (SBEES) later this year. The scheme will aim efficiency and low carbon heating upgrades. to remove barriers for SMEs in accessing We will also expand and extend the Energy energy efficiency measures, drive forward Company Obligation Scheme and the Warm better buildings performance and aid SMEs Homes Discount Scheme until 2026. in meeting regulatory standards. Finally, we have consulted on strengthening the

36. Net zero backstop for homes. We Energy Savings Opportunity Scheme (ESOS), will consider on an ultimate backstop date which is a mandatory energy assessment to ensure that all homes meet a net zero scheme for large businesses’ energy use and minimum energy performance standard before opportunities to improve energy efficiency. 2050, where cost effective, practical, and affordable. 147 Net Zero Strategy: Build Back Greener • Energy-related products. We have • Green finance. Catalysing the market published a policy framework setting out for Green Finance is a priority. We illustrative proposals for raising minimum are working with mortgage lenders to energy performance standards and support homeowners to improve the improving consumer information for a energy performance of their properties range of high potential products, including and will publish our response to our but not limited to space heating, cooking, lenders consultation in due course. taps and showers and lighting. We plan Government is also exploring the case for to consult on more concrete proposals a further green home finance innovation between 2022 and 2023 ahead of programme, focussed on supporting implementing measures from 2025. lenders to develop green finance products targeted at consumer types who will be Enabling actions impacted by future regulation, and which

40. There are a range of barriers to home the market is unlikely to develop on its energy performance improvements, which we own in the short term. BEIS has invited will also need to address to help people act: the UK Infrastructure Bank (UKIB) to help steer this work, and we will work further • Advice & information. Our existing with the UKIB to explore whether they Simple Energy Advice service has can play a wider role in scaling up green received over 1.5m users to date. We will home finance. enhance our digitally led service, and are considering options to support tailored 41. Rebalancing energy prices: Clean, retrofit advice in local areas. The aim is to cheap electricity is an everyday essential. We create a Government-led home energy have seen the impact of overreliance on gas advice journey, supported by tailored pushing up prices for hardworking people but local advice. This includes moving our our plan to expand our domestic renewables Simple Energy Advice service to GOV.UK, will push down electricity wholesale prices. which will improve user experience, and However, current pricing of electricity and gas supporting local advice provision. This will does not incentivise consumers to make green help households to improve the energy choices, such as switching from gas boilers performance of their homes, and move to electric heat pumps. We want to reduce towards net zero. electricity costs so we will also look at options to shift or rebalance energy levies (such as RO and FiTs) and obligations (such as ECO) away from electricity bills over this decade. This will include looking at options to expand carbon pricing and remove costs from electricity bills while ensuring that we continue to limit any impact on bills overall. We know that in the long run, green products are more efficient and cheaper, and we are putting fairness and affordability at the heart of our approach. We will launch a Fairness and Affordability Call for Evidence on these options for energy levies and obligations to help rebalance electricity and gas prices and to support green choices, with a view to taking decisions in 2022. 148 Chapter 3 – Reducing Emissions across the Economy

42. Developing a workforce pipeline with • We will also continue to work with Ofgem, the skills to meet the requirements of net distribution network operators, and other zero transition: local actors on the approach to planning the network in Great Britain and delivering • The increase in deployment of low carbon smart, secure, cost-effective solutions. heating systems over the coming decade This will include considering the potential will require a significant escalation in the for storage and hybrid technologies in number of trained, high-quality installers. combination with flexible tariffs. With this in mind, we have launched the independent Green Jobs Taskforce with key industry bodies to advise on how we can have the skilled workforce to deliver net zero and support people in high carbon sectors with the transition. • We will encourage current gas engineers, electricians, and those with transferrable skills in complementary sectors, to retrain and specialise in smarter, greener, and cleaner technologies. There are over 140,000 plumbers and heating and ventilation engineers in the UK. Approximately 90% of builders stated they would be willing to retrain to meet the demand for new roles and skills’ changes in the future.69 Attracting new entrants to the sector also provides a great opportunity to diversify the workforce. We will work with industry to support training and new routes of entry to help boost heat pump installer numbers and other areas of skills shortage to support the decarbonisation of homes. We will also work with industry and the low carbon projects supported through the Green Heat Network Fund to increase opportunities to gain skills in the heat networks sector. 149 Net Zero Strategy: Build Back Greener Working together across the UK Examples of policy action by the Scottish Government, Welsh Government and Northern Ireland Executive UK Government is working across all levels of government and with Devolved Administrations to ensure consistent action to reduce emissions across the heat and buildings sector, and across the UK. Wales Scotland The Optimised Retrofit Programme is testing The Scottish Government published its a new approach to decarbonising homes, Heat in Buildings Strategy on 7 October based on the recommendations of the Jofeh 2021. This sets out a vision and actions for Report.70 The programme is delivering fabric the decarbonisation of heat in homes and improvements, heating technology and buildings in line with Scotland’s statutory intelligent use of energy supplies to more climate targets. The Scottish Government will than 1,500 homes across Wales. Significant allocate at least £1.8 billion over the next five Welsh Government investment is supporting years to support the accelerated deployment social landlords to decarbonise 230,000 social of heat and energy efficiency measures in homes over the next decade, and the learning homes and buildings. This investment will from the programme will be used to help help to cut emissions, create jobs, strengthen decarbonise Wales’s 1.2 million private-rented supply chains, and tackle fuel poverty. The and owner-occupier homes. Scottish Government offers cashback grants to all homeowners as part of the Home Energy Scotland (HES) Loan Scheme, up to £6,000 for energy efficiency improvements and up to £7,500 for new renewable heating. It is also bringing forward the requirement for all homes to be upgraded to meet at least EPC C standards or equivalent by 2033 with the majority meeting this standard by 2030. Subject to devolved competence, the Scottish Government has committed to phasing out the need to install new or replacement fossil fuel boilers, in off gas areas from 2025 and in on gas areas from 2030, subject to technological developments and decisions by the UK Government in reserved areas. It is currently developing regulations which will require new buildings receiving a warrant from 2024 to use zero emissions heating and cooling. 150 Chapter 3 – Reducing Emissions across the Economy Northern Ireland There are several schemes currently available to support energy efficiency improvements A phased programme is planned to uplift and the installation of lower carbon heating, Northern Ireland’s building regulations, taking including the Boiler Replacement Scheme, developments in other administrations into Affordable Warmth, and the Northern Ireland account, to provide ultra-high energy efficient Sustainable Energy Programme (NISEP). A building fabric and services with low carbon new Northern Ireland Energy Strategy is heating standards for new buildings as soon expected to be published by the end of as is practicable and no later than 2026/27. 2021, which will provide further information Consideration may be given to earlier uptake on proposals to phase out coal and solid of requirements for low carbon heating fuels, along with fossil fuel home heating oil. solutions from 2022/23, if deemed feasible The Energy Strategy will also provide further following consultation with industry. information on proposals to decarbonise the natural gas network, including through future injection of biomethane and potential hydrogen blending. Further detail will also be provided on the transition to low carbon heating options, such as heat pumps, and future proposed support schemes, including energy efficiency and low carbon heating pilot schemes, which are intended to be launched in 2022/23. 151 Net Zero Strategy: Build Back Greener 3v. Transport Setting the pace for greener, better transport Our Key Commitments • End the sale of new petrol and diesel cars and vans from 2030; from 2035, all new cars and vans must be zero emission at the tailpipe. • Introduce a zero emission vehicle mandate setting targets for a percentage of manufacturers’ new car and van sales to be zero emission each year from 2024. • Take forward our pledge to end the sale of all new, non-zero emission road vehicles by 2040, from motorcycles to buses and HGVs, subject to consultation. • Ensure the UK’s charging infrastructure network is reliable, accessible, and meets the demands of all motorists. Later this year, we will publish an EV infrastructure strategy, setting out our vision for infrastructure rollout, and roles for the public and private sectors in achieving it. • Building on the £1.9 billion from Spending Review 2020, the Government has committed an additional £620 million to support the transition to electric vehicles. The funding will support the rollout of charging infrastructure, with a particular focus on local on-street residential charging, and targeted plug-in vehicle grants. • Build a globally competitive zero emission vehicle supply chain and ensure our automotive sector is at the forefront of the transition to net zero. • Lead by example with 25% of the government car fleet ultra low emission by December 2022 and all the government car and van fleet zero emission by 2027. • Take action to increase average road vehicle occupancy by 2030 and reduce the barriers to data sharing across the transport sector. • Maximise carbon savings from the use of low carbon fuels, including by increasing the main Renewable Transport Fuel Obligation (RTFO) target. • Increase the share of journeys taken by public transport, cycling and walking. • Support decarbonisation by investing more than £12 billion in local transport systems over the current Parliament. • Invest £2 billion in cycling and walking, building first hundreds, then thousands of miles of segregated cycle lane and more low-traffic neighbourhoods with the aim that half of all journeys in towns and cities will be cycled or walked by 2030. As announced in the Transport Decarbonisation Plan, we will create at least one zero emission transport city. 152 Chapter 3 – Reducing Emissions across the Economy • Invest £3 billion in the National Bus Strategy, creating integrated networks, more frequent services, and bus lanes to speed journeys, and support delivery of 4,000 new zero emission buses and the infrastructure needed to support them. • Electrify more railway lines as part of plans to deliver a net zero rail network by 2050, with the ambition to remove all diesel-only trains by 2040. • Plot a course to net zero for the UK domestic maritime sector, phase out the sale of new non-zero emission domestic shipping vessels and accelerate the development of zero emission technology and infrastructure in the UK. We will engage with industry to explore establishing a UK Shipping Office for Reducing Emissions (UK- SHORE) to transform the UK into a global leader in the design and manufacturing of clean maritime technology. • Become a leader in zero-emission flight, kick-starting commercialisation of UK sustainable aviation fuels (SAF), and developing a UK SAF mandate, to enable the delivery of 10% SAF by 2030, and we will be supporting UK industry with a £180m funding to support the development of SAF plants. Progress to date

1. Domestic transport has the largest share of 3. Removing tailpipe emissions from road UK greenhouse gas emissions of any sector transport is a clear priority and we must across the economy, at 23% in 2019. The continue the progress we have made to date. majority (55%) of these emissions are from We have expanded our commitments in this passenger cars, contributing 68 MtCO2e. area and will set ambitious but achievable This is followed by heavy goods vehicles and phase out dates for every type of road vehicle. light goods vehicles contributing 19 MtCO2e Alongside the Transport Decarbonisation Plan, (16%) and 19 MtCO2e (16%) respectively. we published the 2035 Delivery Plan outlining The remaining emissions in domestic the key timelines, milestones, and progress shipping, road transport, rail, and domestic towards the Ten Point Plan commitment to aviation contribute a combined further accelerate the shift to zero emission vehicles. 16 MtCO2e (13%).71

4. There are now over 600,000 plug-in electric

2. We must deliver a step change in the vehicles in the UK. In September 2021, more breadth and scale of our ambitions and, to than one in five new cars sold had a plug. this end, in July 2021 we published our world Additionally, more than 300 walking and leading Transport Decarbonisation Plan. This cycling schemes have been delivered since covered all areas of transport and set out an 2020. For public transport, our National Bus ambitious but deliverable pathway to reaching Strategy for England, published in March, sets net zero and delivering against carbon out a vision of a transformed bus industry budgets along the way. The pathway we have and a green bus revolution. Rail is already the set out is not about stopping people from greenest form of motorised transport, with doing things. Rather, it’s about doing the same almost 38% of the network electrified and things differently. We want to be a world leader significantly more to come as set out in the in green technologies, and encourage more Great British Railways White Paper in May. sustainable travel choices. 153 Net Zero Strategy: Build Back Greener Net zero transition and economic opportunities Our 2050 vision and how we 6. Based on our whole system modelling, get there by 2050, total transport emissions, including international aviation and shipping, could

5. Every place in the UK will have its own net need to drop by 76-86% compared to 2019, zero emission transport network before 2050, down to 23-40MtCO2e. In the interim, to meet serving the unique needs of its communities. our NDC and CB6 targets,72 we expect they Sustainability will be at the heart of levelling up. could fall by 22-33% by 2030 and 46-59% by People everywhere will feel the benefits – 2035, compared to 2019 levels. These figures villages, towns, cities, and countryside will are based on an indicative transport sector be cleaner, greener, healthier, and more pathway contributing to the whole-economy prosperous and pleasant environments in net zero and interim targets. Our potential which to live, work and enjoy. pathway also indicates residual emissions from domestic transport could need to fall by around 34-45% by 2030 and 65-76% by 2035, relative to 2019 levels (see figure 21). We anticipate that international aviation and shipping emissions could need to fall by up to 12% by 2035, relative to 2019 levels (see figure 22). Figure 21: Indicative domestic transport emissions pathway to 2037 160 140 120 Emissions (MtCO2e) 100 Pre-TDP & NZS policies and proposals 80 60 40 NZS delivery pathway 20 2050 Range 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis 154 Chapter 3 – Reducing Emissions across the Economy Figure 22: Indicative international aviation and shipping emissions pathway to 2037 60 Pre-TDP & NZS policies and proposals 50 NZS delivery pathway 40 Emissions (MtCO2e) 30 20 2050 Range 10 Short-term COVID - 19 Uncertainty 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis

7. Much of the change needed to deliver 8. Our Transport Decarbonisation Plan sets net zero for the transport sector is already out this ‘green print’ in detail. underway and makes sense even without the global imperative of climate change. • The technology transformation started Decarbonisation will deliver fundamentally in cars and vans will spread to all road better transport, for everyone, every day. It transport, from motorcycles to buses, will make it faster and more efficient, as well coaches and HGVs. Over time, the use as cleaner, and provide benefits including of zero emission vehicles will become increased reliability and better connectivity. even cleaner, as the use of renewable This is also a huge industrial opportunity, energy in the UK’s electricity mix continues a once in a generation chance to increase to increase. An extensive network of economic growth and future prosperity – using charging and refuelling infrastructure for all electricity, low carbon hydrogen, sustainable vehicles will enable the transition and meet low carbon fuels and pedal power – to invest growing demand. in new jobs across our country. 155 Net Zero Strategy: Build Back Greener • Low carbon fuels will continue to play a • UK aviation and shipping will achieve net crucial role in maximising carbon savings zero emissions by 2050. Ahead of that, from road vehicles during the transition, our domestic lead will act as a showcase whilst increasingly being required in to the world and bolster our call to action other transport modes such as aviation internationally, where cooperation and and maritime. This includes low carbon collaboration through the International hydrogen, which is likely to be fundamental Civil Aviation Organization (ICAO) and the to achieving net zero in heavy transport International Maritime Organization (IMO), applications and represents a major will continue to be vital to decarbonise industrial opportunity. these industries. • We cannot simply rely on the electrification • The Government has set CB6 to formally of road transport, or believe that zero include the UK’s share of international emission cars and lorries will solve all our aviation and shipping emissions, as problems. As we build back better from recommended by the CCC, which allows the pandemic, it will be essential to avoid these emissions to be accounted for a car-led recovery. Alongside road vehicle within CB6. decarbonisation, we must increase the • We will address aviation emissions through share of trips taken by public transport, new technology such as electric and cycling and walking. We want to make hydrogen aircraft, the commercialisation these modes the natural first choice for of sustainable aviation fuels, increasing all who can take them. As more journeys operational efficiencies, developing and are cycled or walked, and taken by public implementing market-based measures and transport, the carbon, air quality, noise and GHG removal methods, while influencing congestion benefits will be complemented consumers to make more sustainable by significant improvements in public choices when flying. health and wellbeing. • The UK will play an important role in • We will support and encourage modal shift developing zero emission maritime of freight from road to more sustainable technology, such as alternative fuel alternatives, such as rail, cargo bikes and powered vessels using ammonia or inland waterways. We will transform last methanol produced from low carbon mile deliveries, with zero emission HGVs hydrogen, or highly efficient batteries, and decarbonised deliveries made possible particularly where we can build on through the adoption of new delivery domestic expertise to capture early models, supported by accurate data and market share. digital innovations which drive greater efficiencies. • As we have stated in the Ten Point Plan and the Transport Decarbonisation Plan, • The rail network will be net zero we need to ensure that the taxation of emissions by 2050 through a sustained, motoring keeps pace with the change to long‑term programme of investment in rail electric vehicles to ensure that we can electrification, supported by deployment of continue to fund the first-class public battery and hydrogen-powered trains. services and infrastructure that people and families across the UK expect. 156 Chapter 3 – Reducing Emissions across the Economy Zero emission vehicles (ZEVs) The transition to zero emission cars and vans is leading the way in our effort to decarbonise transport. The car and van sector is easier to decarbonise compared to other sections of the economy, through the combination of a proven low carbon technology that has significant advantages over the existing high carbon technology it replaces, reducing costs and growing consumer demand. Strong progress is already being made towards our 2030/2035 phase out commitments: • Demand is rising: Industry figures show over 650,000 new plug-in cars registered in the UK since 2010, and over 1 in 7 cars sold so far in 2021 had a plug. • Range is increasing as costs are falling: There are 20 EV models that come with a range of over 200 miles compared to the early Nissan Leaf models that delivered 60 miles, and battery prices are little more than a tenth of what they were in 2010. • The charging infrastructure market is growing: There are now over 25,000 public chargepoints in the UK, which includes over 4,700 rapid devices according to industry sources. This is one of the largest networks of rapid chargers in Europe. Seizing new opportunities 10. To achieve the level of emissions reductions in the transport sector indicated

9. Across every form of transport, by our delivery pathway to 2037, we will need decarbonisation and growth will go hand additional public and private investment of in hand. The UK will play a leading role around £220 billion. in this modern-day industrial revolution, consolidating our position as a world leader 11. Decarbonising the transport sector will in green technology, science, and research. regenerate communities and open up new The imperative to decarbonise brings with employment opportunities right around the it a host of other benefits, including new UK. Based on current estimates, policies and business models, new modes, increasing proposals to reduce emissions in the sector levels of autonomy, far better integration, could support up to 22,000 jobs in 2024 and and a blurring of the distinction between up to 74,000 jobs in 2030. Development of traditional forms of transport, as well as road transport sector technologies as the public and private travel coming together economy transitions to net zero could support to offer greater choice and flexibility. We will up to 71,000 jobs in 2050. use research and development to build on the expertise of business and academia, maximising opportunities for growth, exports and hundreds of thousands of new high‑quality jobs. 157 Net Zero Strategy: Build Back Greener

12. We need a skilled workforce capable 13. Decarbonising transport will also help of developing, implementing and operating achieve other benefits: mobility solutions in a way that maximises the huge potential benefits they offer. The • It will improve health by removing a source government launched the Green Jobs of air pollution. There will still be particulate Taskforce, to advise the government, industry emissions associated with road, rail, tyre, and the skills sector on the action required and brake wear, and we are working to to deliver the jobs and skills required for the tackle those too, but the toxic by-products net zero transition. Our approach on green of burning hydrocarbon fuels will be jobs and skills is set out in the Green Jobs, eliminated from the roadside and rail; Skills and Industries chapter of the Net • Physical inactivity costs the NHS up to Zero Strategy. £1 billion per annum, with further indirect costs of £8.2 billion – active travel can reduce that; and • Over half the UK population is exposed to daytime noise levels above recommended limits. Zero emission vehicles – extremely quiet at low, urban speeds – will help address this. This will support levelling-up and help reinvent high streets as enjoyable places to live, work, visit and spend leisure time. Policies and proposals

14. As the Transport Decarbonisation Plan Cycling and walking and this Strategy are implemented, we will continue to consider the views of stakeholders 16. Cycling and walking can help us tackle from across the UK. We will engage closely some of the most challenging issues we face with Devolved Administrations, respecting as a society, not just climate change, but areas of devolved competency, as we work improving air quality, health and wellbeing, towards our shared goal of achieving net zero. addressing inequalities, and tackling We will also continue to collaborate with local congestion and noise pollution on our roads. authorities and other regional bodies to identify Increased levels of active travel can improve and support local solutions. everyday life for us all.

15. Depending on progress in the sector, at 17. We will deliver the Prime Minister’s bold some points additional targeted action maybe vision for cycling and walking, investing be required, such as steps to reduce use £2 billion over five years with the vision that of the most polluting cars and tackle urban half of all journeys in towns and cities will congestion, to enable these targets to be be cycled or walked by 2030. We will also met. We will regularly review progress against deliver thousands of miles of safe, continuous, our targets – publishing the next transport direct routes for cycling in towns and cities, decarbonisation plan within five years – and physically separated from pedestrians and continue to adapt and take further action if volume motor traffic along with more low traffic needed to decarbonise transport. neighbourhoods and school streets. 158 Chapter 3 – Reducing Emissions across the Economy

18. We will deliver a world class cycling and Railways walking network in England by 2040. This will include comprehensive cycling and walking 23. We will deliver a net zero rail network by networks in all large towns and cities, with 2050, with sustained carbon reductions in measures to enable cycling and walking, such rail along the way. Our ambition is to remove as cycle training for all children and adults all diesel-only trains (passenger and freight) that want it. We will enable behaviour change from the network by 2040. We will deploy new through targeted personal incentives, such low-carbon technologies on the network such as GP prescribing of active travel, existing tax as hydrogen and battery trains, where they reliefs, and rewards programmes. make operational and economic sense. We will incentivise the early take up of low carbon Buses and coaches traction by the rail freight industry.

19. We will deliver the National Bus Strategy’s 24. We will build extra capacity on our rail vision of a transformed bus industry and network to meet growing passenger and a green bus revolution. We will make freight demand and support significant shifts buses more frequent, more reliable, more from road and air to rail. This includes new comprehensive, easier to understand and high-speed lines, reopening lines closed under use, better co-ordinated and cheaper – to the Beeching cuts and significant improvement dramatically increase passenger numbers and to regional city public transport networks with reduce congestion and carbon emissions. the aim of making them as good as London’s.

20. We will support delivery of 4,000 new 25. We are working with industry to zero emission buses, either battery electric or modernise fares ticketing and retail and hydrogen, and the infrastructure needed to encourage a shift to rail and cleaner and support them. This will be the single largest greener transport journeys. Great British investment ever made in zero emission buses, Railways set out a transformation in how representing the replacement of nearly 12% of people will pay for their journeys, to encourage England’s local operator bus fleet. a shift to rail and cleaner, greener journeys. Greater provision of walking and cycling

21. We will deliver the first All-Electric Bus routes to and from stations, and supporting City. This will demonstrate what can be infrastructure, will be introduced to support achieved when there is a real commitment healthier greener journeys. Great British to move all buses in a place to electric zero Railways will encourage more rail freight by emission. Coventry has now been announced providing the right conditions for industry as the UK’s first all-electric bus city, with £50 growth, with better coordination, modern million to fund up to 300 electric buses and contracts, and new safeguards. charging infrastructure.

22. We are consulting on a phase out date for the sale of new non-zero emission buses and coaches. We have already begun consulting on an appropriate date to end the sale of new non-zero emission buses and on the appropriate supporting policy and regulatory framework. We will also consult on a phase out date for the sale or purchase of new non- zero emission coaches. 159 Net Zero Strategy: Build Back Greener Cars, vans, motorcycles, 30. We are building a globally competitive UK and scooters zero emission vehicle supply chain to ensure our automotive sector is at the forefront of

26. We will end the sale of new petrol and the transition to net zero. Since 2020, the diesel cars and vans by 2030. From 2035 all government has been actively supporting new cars and vans must be fully zero emission the transformation of the automotive at the tailpipe. Between 2030 and 2035, new supply chain to electrification through the cars and vans will only be able to be sold if Automotive Transformation Fund (ATF). We they offer significant zero emission capability. are allocating a further £350 million of our up to £1 billion ATF commitment to support

27. To provide certainty to consumers, the electrification of UK vehicles and their energy providers, the chargepoint industry, supply chains. We will also continue to invest vehicle manufacturers and supply chains in R&D through the Advanced Propulsion during this transition, we will introduce a zero Centre (APC) competition to ensure the UK emission vehicle mandate setting targets remains at the forefront of the development requiring a percentage of manufacturers’ new and industrialisation of zero emission vehicle car and van sales to be zero emission each technologies. year from 2024.

31. We will consult this year on a phase out

28. We will continue to regulate the tailpipe date of 2035, or earlier if a faster transition CO2 emissions of new non-zero emission cars appears feasible, for the sale of new non-zero and vans to limit their emissions until 100% of emission powered two and three wheelers new sales are zero emission. This framework (and other L category vehicles). could subsequently be applied to all forms of new road vehicles sold in the UK. 32. We will lead by example with 25% of the government car fleet ultra low emission by

29. Between 2030 and 2035, new cars and December 2022 and all the government car vans will only be able to be sold if they offer and van fleet zero emission by 2027. significant zero emission capability and we will provide further detail on the outcome of our 33. We will ensure the UK’s charging recent consultation on this shortly. We will then infrastructure network meets the demands of publish a further consultation in early 2022 on: its users. We have already announced £1.3 billion of investment to accelerate the rollout • The design of the ZEV mandate (including of charging infrastructure on motorways, uptake trajectories) and CO2 emissions on streets, in homes and workplaces. The regulation (as a backstop to ensure Government has committed an additional standards in the remainder of the fleet are £620 million of funding to support the maintained); and transition to electric vehicles. Further details • How and when targets will be set will be published in due course. Later this year, and enforced. we will publish an EV infrastructure strategy, setting out our vision for infrastructure rollout, and roles for the public and private sectors in achieving it. 160 Chapter 3 – Reducing Emissions across the Economy Smart Charging Amir is self-employed and uses a van for work. His work involves a lot of journeys locally, totalling around 250-300 miles per week. He usually plugs into charge every few evenings, with his vehicle fully charged by the morning. He has a chargepoint installed on his driveway so he can charge on his domestic energy tariff. The chargepoint is smart, which means it shifts charging to off-peak times, which saves Amir money. He has also signed up to a vehicle-to-grid scheme with his electricity supplier. By keeping his van plugged in during the week when he doesn’t need to use it, he’s able to sell energy back to the grid when demand is high. Maritime 37. We will extend the Renewable Transport Fuel Obligation to the maritime sector.

34. We will plot a course to net zero for the Following consultation earlier this year, we UK domestic maritime sector, with indicative will make renewable fuels of non-biological targets from 2030 and net zero as early as origin used in shipping eligible for incentives is feasible. We will establish, after public under the RTFO. consultation in 2022, an ambitious ‘Course to Zero’. Following consultation, we will establish 38. This year we will be consulting on the ambitious indicative targets and embed this appropriate steps to support and, if needed, course in our Clean Maritime Plan. mandate the uptake of shore power in the UK. We will consult in winter 2021 on how

35. We will consult on a potential phase-out government can support wider deployment date for the sale of new non-zero emission of shore power, including potential regulatory domestic vessels. Following the conclusion interventions, for both vessels and ports. of the current Clean Maritime Demonstration Competition and the Course to Zero 39. We are accelerating the development of consultation, we will consult in mid-2022 on zero emission technology and infrastructure the potential for accelerated decarbonisation in the UK. We have launched the £20 million through carefully designed, well signposted Clean Maritime Demonstration Competition measures to phase out the sale of new, non- (CMDC) to fund feasibility studies and zero emission domestic vessels. technology trials. We will engage with industry to explore establishing a UK Shipping Office

36. We are assessing how economic for Reducing Emissions (UK-SHORE) in instruments could be used to accelerate the cooperation with UKRI and Innovative UK. decarbonisation of the domestic maritime UK-SHORE aims to transform the UK into a sector. Building on Maritime 2050, the Clean global leader in the design and manufacturing Maritime Plan and our published research, we of clean maritime technology. will further investigate the use of economic instruments to drive decarbonisation. 161 Net Zero Strategy: Build Back Greener Aviation 43. We are currently reviewing the responses to the SAF mandate consultation. Ahead

40. Earlier this year we consulted on our Jet of a second consultation in 2022, we will Zero Strategy, which will set out the steps we continue to engage with industry to ensure our will take to reach net zero aviation emissions policy can support the delivery of any future by 2050. We have also consulted on a mandate ambitions. target for UK domestic aviation to reach net zero by 2040. Freight and logistics

41. We are supporting the development of 44. We recently consulted on phase out new and zero carbon UK aircraft technology dates for the sale of all new non-zero emission through the Aerospace Technology Institute HGVs - that is, on ending the sale of new non- (ATI) programme and fund zero emission zero emission HGVs by 2035, for vehicles 26 flight infrastructure R&D at UK airports. As tonnes and under, and 2040, for vehicles over part of the Jet Zero ambition, the Aerospace 26 tonnes, with the government’s response Technology Institute (ATI) provides R&D due to be published in due course. funding, matched by industry, to support the design and development of new aerospace 45. We will support and encourage modal technologies, with particular focus on shift of freight from road to more sustainable zero carbon technologies, that are most alternatives, such as rail, cargo bike and likely to grow the UK’s share in the global inland waterways. This will be supported by a market. We are also investing £3 million in package of policies including: 2021/22 through the Zero Emission Flight • Investing in the capacity and capability of Infrastructure competition to accelerate R&D the rail network for freight, including infill into infrastructure requirements at airports electrification schemes; and airfields to handle new forms of zero • The Mode Shift Revenue Support and emission aircraft. Waterborne Freight Grant Schemes;

42. We will accelerate the commercialisation • Introducing a rail freight growth target; and of UK sustainable aviation fuels (SAF). Our • ‘Last mile’ measures to support more ambition is to enable delivery of 10% SAF by sustainable freight in urban areas. 2030 and we will be supporting UK industry with a £180 million funding to support the development of SAF plants. This builds on our recently launched £15 million Green Fuels, Green Skies competition. We will also establish a SAF clearing house, the first of its kind announced in Europe, to enable the UK to certify new fuels. 162 Chapter 3 – Reducing Emissions across the Economy Delivering decarbonisation Maximising the benefits of through places sustainable low carbon fuels

46. We will support transport decarbonisation 49. As announced in July 2021, and subject by investing more than £12 billion in local to parliamentary approval, the RTFO main transport systems over the current Parliament. obligation will increase from 9.6% in 2021 to We will deliver this through existing funding 14.6% in 2032. This is estimated to achieve streams where decarbonisation sits alongside additional carbon savings of up to 20.8 other core government objectives. MtCO2e over this period. The ‘development fuels’ sub-target, which incentivises specific

47. We are driving decarbonisation and fuels of strategic importance, is already set transport improvements at a local level by to increase from 0.5% in 2021 to 2.8% by making quantifiable carbon reductions a 2032, and by 2023 we will review whether fundamental part of local transport planning there is scope to be more ambitious. We also and funding. Local Transport Plans (LTPs) – committed to additional measures to promote statutory requirements that set out holistic the uptake of low carbon fuels in the freight, place-based strategies for improving maritime and aviation sectors and we will work transport networks and proposed projects for with stakeholders to develop a longer-term investment – will need to set out how local low carbon fuel strategy for the deployment areas will deliver ambitious carbon reductions of low carbon fuels across different transport in line with carbon budgets and net zero. modes to 2050.

48. We will embed transport decarbonisation principles in spatial planning and across Hydrogen in a decarbonised transport policy making. Last year, the transport system government set out proposals for a new and 50. We expanded the RTFO to incentivise improved planning system, central to our the use of renewable hydrogen in maritime most important national challenges, including and rail in 2018. As set out clearly in the combating climate change and supporting recent Hydrogen Strategy and Transport sustainable growth. The National Model Decarbonisation Plan, hydrogen is likely to Design Code, published in July this year, play a significant role in transport applications, guides local planning authorities on measures particularly where energy density requirements they can include within their own design or refuelling times make it the most suitable codes to create environmentally responsive low carbon energy source. Our dedicated and sustainable places. The National Model hydrogen R&D funding and support is Design Code provides tools and guidance focussed on heavier applications, such as for local planning authorities to help ensure rail, maritime, aviation and heavy road freight, developments respond to the impacts of where hydrogen offers in-use advantages climate change, are energy efficient, embed and the largest global market potential. The circular economy principles and reduce government remains technology neutral carbon emissions. and acknowledges that there will be other transport applications where hydrogen may be well suited, including the potential for hydrogen to be utilised within combustion engines, where it can be shown to produce zero harmful emissions at the tailpipe. 163 Net Zero Strategy: Build Back Greener

51. We are investing £3 million in 2021 to 53. We will reduce the barriers to data establish the UK’s first multi-modal hydrogen sharing across the transport sector. Better transport hub in Tees Valley. The funding data can provide new policy and operational is kick-starting activity across the region, insights, drive new products and services supporting collaborative R&D pilot projects and ‘nudge’ people towards lower emission and pop-up trials that demonstrate hydrogen journeys. We recently published a new annual technology solutions across transport modes statistical release, drawing together various and forge new industry and academic data sources on transport’s environmental partnerships. impact. Data consumers can use these data, without restrictions on use or disclosure, Future transport – more choice, for journey planning applications, products better efficiency and services enabling users to plan green end‑to‑end journeys.

52. We will take action to increase average road vehicle occupancy by 2030. Increasing car occupancy from 1.55 to 1.7 could save nearly 3 Mt of carbon a year by 2030. We are building our evidence base to understand the barriers and potential policies to increase the uptake of shared mobility and will work with industry and local authorities to understand where further action can be taken. 164 Chapter 3 – Reducing Emissions across the Economy Working together across the UK Examples of policy action by the Scottish Government, Welsh Government and Northern Ireland Executive UK Government is working across all The commitment set out in the Climate levels of government and with Devolved Change Plan to reduce car kilometres by 20% Administrations to ensure consistent action to by 2030 demonstrates the level of ambition reduce emissions across the transport sector, in meeting Scotland’s statutory targets. To and across the UK. encourage modal shift to public transport the Scottish Government is investing over Wales £500 million in bus priority infrastructure and The Welsh Government’s vision is that by 2025 extending nationwide free bus travel to all all users of electric cars and vans are confident young people resident in Scotland under 22 that they can access electric vehicle charging years old from 31 January 2022. On active infrastructure when and where they need it.73 travel, the Scottish Government will support Its Electric Vehicle Charging Strategy identified transformational active travel projects with a need for 30,000-55,000 fast chargers and over £500 million of investment over 5 years up to 4,000 rapid chargers by 2030. The and has committed to ensuring that at least forthcoming EV Charging Action Plan will £320 million or 10% of all the transport capital include further details on the specific support budget is spent on supporting walking, cycling for the roll out of a comprehensive network. and wheeling by 2024-25. On public transport, Scotland’s rail services Scotland will be decarbonised by 2035, and the The transport measures in the updated 2018 Scottish Government is working with its Climate Change Plan contain action across all Bus Decarbonisation Taskforce to create modes. The Scottish Government will phase a pathway to zero emission buses. This is out the need for new petrol and diesel cars supported by its long-term investment of over and vans by 2030, and will work with public £500 million in bus priority infrastructure. bodies to lead the way to do this by 2025. It will also work with the freight industry to remove the need for new petrol and diesel heavy vehicles by 2035, supported by its work with Scottish Enterprise to establish a Zero Emission Heavy Duty Vehicle programme to remove the majority of fossil fuel buses in public transport by 2023. 165 Net Zero Strategy: Build Back Greener Northern Ireland In Northern Ireland, £74 million has been invested in the purchase of zero and low emission vehicles (hydrogen and electric) and associated infrastructure in the public transport sector. A £20 million Blue/Green infrastructure investment fund was launched in 2020/21 and has continued in 2021/22, which has supported a range of initiatives including active travel schemes across Northern Ireland. An Executive Energy Strategy is currently being developed which will include measures focusing on informing transport choices and behaviours, and establishing a sustainable transport hierarchy that will support changes in how we travel, reduce the distances travelled in private vehicles, and decarbonise transport. 166 Chapter 3 – Reducing Emissions across the Economy 3vi. Natural Resources, Waste & F-Gases Harnessing nature for net zero Our Key Commitments • 75% of farmers in England will be engaged in low carbon practices by 2030, rising to 85% by 2035. Government is introducing farming schemes, including the new environmental land management schemes, which will provide a powerful vehicle for achieving net zero, and goals of the 25 Year Environment Plan. • Increase investment in industry-led research and development into solutions to help deliver net zero in agriculture and horticulture, including through the Farming Innovation Programme. • Treble woodland creation rates by the end of this Parliament, reflecting England’s contribution to meeting the UK’s overall target of increasing planting rates to 30,000 hectares per year by the end of this Parliament and maintain new planting at least at this level from 2025 onwards. We will explore a long-term statutory tree target in England within the public consultation on Environment Bill targets. • We will boost the existing £640 million Nature for Climate Fund with a further £124 million of new money, ensuring total spend of more than £750 million by 2025 on peat restoration, woodland creation and management. This will enable more opportunities for farmers and landowners to support net zero through land use change. • Restore at least 35,000 hectares of peatlands in Englad by 2025, through the Nature for Climate Fund. Restore approximately 280,000 hectares of peat in England by 2050, including via funding from the new environmental land management schemes. • Mobilise private investment into tree planting, including through the Woodland Carbon Code, with the support of government’s Woodland Carbon Guarantee, and into peat restoration through implementing a package of reforms to the Peatland Code. • We will work with key stakeholders to develop a policy roadmap to increase the use of timber in construction in England, and will create a cross-government and industry working group tasked with identifying key actions to safely increase timber use and reduce embodied carbon. 167 Net Zero Strategy: Build Back Greener • To support our commitment to explore options for the near elimination of biodegradable municipal waste to landfill from 2028, we are bringing forward £295 million of capital funding which will allow local authorities in England to prepare to implement free separate food waste collections for all households from 2025. • Complete a review of the F-gas Regulation and assess whether we can go further than the current requirements and international commitments, including by looking at what additional reductions in F-gas use can be made to help the UK meet net zero by 2050. • Through the Environment Bill we will legislate for Local Nature Recovery Strategies – a new system of spatial strategies that will map proposals for improving or creating habitat for nature and wider environmental benefits, helping to deliver net zero objectives. • Biodiversity co-benefits and other environmental objectives are maximised alongside decarbonisation. Progress to date

1. This chapter covers natural resources 4. Emissions from agriculture, mainly including agriculture, forestry, and other land stemming from livestock, agricultural soils, use (AFOLU), (inclusive of peatlands and soils), and farm machinery, added up to 55 MtCO2e as well as resources, waste, wastewater, (11%) of UK emissions in 2019. Although and fluorinated gases (F-gases). In 2019, net rising by 1% from 2018 to 2019, agricultural UK greenhouse gas (GHG) emissions from emissions have fallen by 13% since 1990. these sectors, referred to as NRWF (natural The Agriculture Transition Plan (2020) sets resources, waste, and F-gases), reflected out how we will move away from the EU’s 103 MtCO2e or 20% of the UK total, having Common Agricultural Policy to use public decreased by 45% between 1990 and 2019.74 money to reward farmers and land managers for delivering environmentally sustainable

2. In the Ten Point Plan, we committed to outcomes in England.75 protecting our natural environment. Since then we have launched the floods investment 5. Forestry and woodlands currently act programme to better protect 336,000 as carbon sinks and, in 2019, captured properties from flooding. We also awarded about 4% of our emissions.76 Since 2010, 90 projects grants under round 2 of the 123,000 hectares of new woodland has been £80 million Green Recovery Challenge Fund planted across the UK, an area equivalent to (GRCF). In total, the GRCF is set to plant Bedfordshire. The England Tree Action Plan almost over 1 million trees. (2021) committed to increasing tree planting rates from 13,410 hectares across the UK Agriculture, forestry, and other land in 2020/21, to 30,000 hectares each year use (AFOLU) by the end of this Parliament. The plan is supported by £500 million of the Nature for

3. AFOLU were responsible for 63 MtCO2e Climate Fund. In 2020-21 we funded new (12%) of UK net GHG emissions in 2019, partnerships with Northumberland County having risen slightly in the last 2 years but Council, Trees 4 Cornwall, and England’s reduced by 24% since 1990. network of ten Community Forests. Two new 168 Chapter 3 – Reducing Emissions across the Economy community forests were launched, Plymouth reduction in biodegradable waste to landfill. and South Devon in June 2021 and North- The Resources and Waste Strategy (RWS), East, in July 2021. (2018) set out how we will transition to a more circular economy, and included key

6. Although peatlands are the UK’s largest reforms to enable us to manage our waste terrestrial carbon store, in a degraded more efficiently, reduce the amount of waste condition they represent a net source of we create as a society, and ensure we use emissions. In 2019, peatlands emitted 4% resources more efficiently.77 of UK net GHG emissions, having become degraded due to drainage for agricultural use, 8. F-gases (GHGs which can be used overgrazing and burning. We have rewetted in systems such as heat pumps and air around 100,000 hectares of peatland across conditioning units) accounted for 15 MtCO2e the UK and set out further plans for peatland (3%) of UK emissions in 2019, with 93% restoration and responsible management in of these coming from hydrofluorocarbons the England Peat Action Plan (May 2021). (HFCs). F-gas emissions have fallen by 10% since 1990.78 In 2017, the UK was one of Resources, waste, and F-gases the first countries to commit to cutting HFC

7. Waste management emissions consist consumption by 85% by 2036, ratifying of waste disposed to landfill sites, waste the Kigali Amendment to the UN Montreal incineration without energy recovery, and Protocol.79 We have cut HFC consumption the treatment of wastewater. In 2019, waste even faster than that, reducing levels placed management accounted for 25 MtCO2e on the market by 55% since 2015, through (5%) of UK emissions, a significant decrease quota limits.80 of 71% since 1990, largely driven by a Net zero transition and economic opportunities Our 2050 vision and how we 10. By 2050, emissions associated with get there the NRWF sectors could need to drop by 67-75% compared to 2019, down to 26-34

9. A systemic transformation across the MtCO2e. In the interim, to meet our NDC and UK economy, including NRWF sectors, is Carbon Budget 6 targets, they are expected required to achieve net zero by 2050. While to fall by 30‑40% by 2030 and 39-51% by we will significantly reduce emissions across 2035, compared to 2019 levels. These figures the NRWF sectors, some residual emissions are based on the indicative NWRF sectoral from agriculture, waste, and F-gases will pathway to help us reach net zero and interim remain. These will need to be compensated targets. Our potential pathway also indicates for by both nature-based and engineered residual emissions in AFOLU sectors could greenhouse gas removals (GGRs) as a last need to fall by 17-30% by 2030 and 24‑40% resort. On our journey to net zero, we will by 2035, relative to 2019 levels; waste and maximise opportunities to adapt to climate F-gas emissions could need to fall by 50‑57% change and the extreme weather it brings, by 2030 and by 62-69% by 2035, relative to and to maximise the co-benefits for other 2019 levels. environmental objectives. 169 Net Zero Strategy: Build Back Greener

11. We are working closely with Devolved forums, and allows us to think practically Administrations to deliver this ambition. This about how we deliver across the UK. We will includes frequent engagement at Ministerial also consider the interdependencies between and official levels through existing and new land use sectors and other goals. Figure 23: Indicative agriculture, forestry and other land use emissions pathway to 2037 90 80 70 Pre-NZS policies 60 Emissions (MtCO2e) 50 NZS delivery 40 pathway 30 2050 Range 20 10 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis 170 Chapter 3 – Reducing Emissions across the Economy Figure 24 Indicative waste and F-gas emissions pathway to 2037 120 100 80 Emissions (MtCO2e) 60 40 Pre-NZS policies 2050 20 Range NZS delivery pathway 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source: BEIS analysis Agriculture, forestry, and other land 13. We will support farmers to adopt low use (AFOLU) carbon farming practices, and increase the carbon stored on their farms, helping to

12. By 2050, we will have a resilient and improve business productivity and profitability prosperous countryside, where farmers and gains. Schemes that support environmental land managers are supported to reduce land management will help drive this change emissions and deliver a range of environmental and will also help compensate for residual outcomes. 75% of farmers in England will be emissions that are harder to reduce, such as engaged in low carbon practices by 2030, from livestock. The Farming Investment Fund rising to 85% by 2035. Emissions mitigation will offer funding for equipment, technology, in agriculture is complex and diverse, with no and infrastructure that improves farm silver bullets. It is difficult to establish a single productivity and benefits the environment. metric to track progress, but government We are also providing funding to help farmers monitors engagement with low carbon farming produce healthier animals, reduce GHG practices through our Farm Practice Survey. emissions and enhance welfare through We will continue to improve this metric in the Animal Health and Welfare Pathway. future years to address what we consider to Additionally, Defra will develop a Farming for be key limitations in the current approach. Net Zero resource, providing advice to farmers on good practice techniques to understand, manage and abate GHG emissions. 171 Net Zero Strategy: Build Back Greener

14. We also recognise the importance of Resources and waste, and F-gases other policy levers with potential climate benefits, for example Environmental Permitting 16. By 2050, we will have met the 25 Year for dairy and intensive beef herds which is Environment Plan (25YEP) commitments planned under the Clean Air Strategy. There to eliminate all avoidable waste, including is also an important role for emerging markets plastic, and to double resource productivity.81 in nature-based solutions. For example, the A circular economy will be part of everyday Woodland Carbon Code, which incorporates life: reusing, repairing, and remanufacturing robust standards and accreditation processes. goods will be standard practice. Goods will We will seek to establish a robust market be designed to last for longer and be more framework, with arrangements to ensure efficient. At end of life, the vast majority of additionality, transparency, and traceability products will be sent for recycling, with food, of carbon credits, so that regulators and the garden, and dry materials collected separately public can be confident that carbon savings and used as lower carbon inputs for new are verified and also guaranteed against products. Producer responsibility schemes future issues such as forest fires or disease. will be embedded across the economy. Any Additionally, we continue to consider the non-recyclable residual waste will be treated to impact that climate change will have on the enable the processing of waste into valuable suitability of our land for different uses, such outputs, such as energy. Where possible, as the impact of hotter, drier summers and these processes would include carbon capture warmer, wetter winters on agriculture, habitat and storage. (See the Power chapter for more creation and restoration, and forestry. on energy from waste.) Only where no such treatment is possible may landfill be permitted.

15. Biomass will also be an important component of our pathway to net zero. It 17. By 2050, current F-gas use will have been is likely that the UK will be producing more predominantly replaced by alternative gases domestic perennial energy crops (such as or technologies. HFC importers, equipment miscanthus and short rotation coppice) manufacturers and servicing technicians will and short rotation forestry than today, but have taken steps to reduce their use in favour the exact role is yet to be determined. The of alternatives, not only in line with the current Biomass Strategy, due in 2022, will look to phasedown, but also with further measures address this. The sustainability, and wider implemented following the F-gas Regulation environmental impact of growing and using review and future international changes. biomass, including on air quality, will be key factors in establishing its role. 172 Chapter 3 – Reducing Emissions across the Economy Other sectors as for carbon sequestration. We do not currently have the required data to include

18. Protecting, restoring, and sustainably these habitats in the UK GHG Inventory or to managing other natural resources such as accurately quantify their potential contribution soils or blue carbon habitats like saltmarsh to net zero but are doing further work to close and seagrass, can provide benefits for these evidence gaps. biodiversity and climate adaptation, as well Reducing emissions while balancing other climate and environmental objectives While reducing emissions, we must also adapt to the inevitable changes in our climate, ensuring that policies supporting net zero are resilient to current and future climate risks, and preventing locking in future vulnerabilities or maladaptation. The second National Adaptation Programme sets out how we are addressing, and will address, climate risks between 2018 and 2023 and further detail on adaptation is included in the Climate Science Annex of this strategy. Delivering net zero creates opportunities to benefit other environmental objectives too. For example, climate change and biodiversity loss are closely related, and policies to tackle climate change can help to improve biodiversity. Likewise, net zero policies can support further environmental goals, such as water quality, natural beauty, and the delivery of the 25YEP. For example, we will ensure afforestation across England and that the right species of tree is planted in the right place, benefitting flood management, soil health and biodiversity, while also sequestering carbon. In some cases, however, we know it will be important to manage potential misalignments: for example, ammonia emissions from digestate, a by-product from the process of anaerobic digestion, can negatively impact human health and cause biodiversity loss. We are working to mitigate ammonia emissions through the Green Gas Support Scheme, which will require participants to take additional steps to mitigate ammonia emissions, and by researching technologies that can help reduce the negative environmental impacts of digestate. The relationship between net zero and wider environmental objectives, including air quality, is set out in more detail in the Technical Annex. 173 Net Zero Strategy: Build Back Greener The UK has a limited amount of land and delivering net zero will require changes to the way this land is used, for example, for afforestation, biomass production, and peat restoration. Opportunities for land to be used for multiple purposes, such as agroforestry will help to make sure land use for decarbonisation purposes is balanced with other demands, such as housing development and food production. These changes are likely to have varying effects on wider environmental outcomes and may completely alter the character of some landscapes and rural livelihoods (see section below). Land use change must be designed in a systemic, geographically targeted way with appropriate local governance and delivery structures which consider the complex range of interacting social, economic, and demographic factors. To support this, government is developing a Net Zero Systems Tool which aims to allow key decision makers to gain new insights and understanding, by highlighting dependencies and trade-offs within the land use system, as well as by demonstrating the knock-on effects of proposed policies. In addition, through the Environment Bill, the Government is introducing Local Nature Recovery Strategies (LNRS), a spatial planning tool for nature, allowing local government and communities to identify priorities and opportunities for nature recovery and nature-based solutions across England. The Bill includes a specific duty on all public authorities to “have regard” to relevant LNRSs and the spatial information they provide will support the development of local plans and other land use change incentives. Delivery of priorities and opportunities identified in LNRS will be supported by a range of delivery mechanisms including our environmental land management schemes, and in particular, the Local Nature Recovery scheme. By 2028, Defra’s current plans are for total spend to be evenly split between farm-level, locally tailored, and landscape-scale investment within ELM Seizing new opportunities 21. Decarbonising the NRWF sectors will regenerate communities and open up new

19. Reducing emissions will create growth employment opportunities right around the and employment opportunities across UK. For example, an increase in afforestation NRWF sectors, and it is important that these across England could support up to 1,900 opportunities are evenly felt and realised by jobs in 2024 and up to 2,000 jobs in 2030. all. Achieving net zero will require innovation By investing in rural infrastructure and skills from businesses and landowners, investment development we will seek to ensure rural from government and the private sector, and communities and rural businesses, including changes in our choices as consumers. We the most disadvantaged, benefit from net want to create domestic and international zero. There will be significant opportunities demand for our low carbon, high welfare and for upskilling, reskilling, and starting new world-renowned produce, whilst supporting career paths, alongside expanding current international markets for sustainably sectors. For example, nature-based solutions produced commodities. create entry-level opportunities for people

20. To achieve the level of emissions just starting out, as well as requiring specialist reductions in the NRWF sector indicated by skills such as hydrology, ecology and forest our delivery pathway to 2037, we will need management. By delivering long-term policy additional public and private investment certainty, we will unlock the private investment of approximately £30 billion. Given the necessary to deliver these green jobs. importance of R&D to deliver our pathway, we are committing to spend £75 million on net zero related R&D across the NRWF sectors over the next three years. 174 Chapter 3 – Reducing Emissions across the Economy

22. Innovation will also be vital to delivering 23. Innovation is key to other NRWF net zero and maximising benefits for the UK. In sectors too. Industry is responding to the agriculture, farmers will be able to adopt new HFC phasedown by switching to alternative emission saving technologies, produce lower gases and technologies in areas such as carbon foods and steward the land in new refrigeration, air conditioning, and heat pumps, ways, such as through vertical farming. This and will continue to innovate in this area. will allow them to diversify income streams and The UK Research and Innovation’s National produce high quality, low carbon produce for Interdisciplinary Circular Economy Research domestic and international markets, boosting programme is looking at how to transition to the rural economy. Investment in agricultural a more circular economy. Producers will need innovation, through schemes like the Farming to move to more sustainable product design, Innovation Programme, will drive development and consumers, with support from the public of new precision technologies, explore the and private sectors, will need to shift to more potential of robotics and artificial intelligence, sustainable product choices and towards and take advantage of developments in reusing, repairing, remanufacturing, and breeding technologies, including the potential recycling products. of gene editing. This can also make our agricultural sector more resilient to the impacts of climate change and safeguard our food Policies and proposals security. We also know other technological solutions, such as those to reduce emissions from non-road mobile machinery in the Agriculture, forestry, and other land agricultural sector require further development. use (AFOLU) Cross government work is required to develop 24. We have begun the Agricultural Transition non-road mobile machinery policies to support Period and have moved away from the the deployment of technological solutions CAP. We are reducing and then stopping and required infrastructure in specific sectors, untargeted Direct Payments in England and including industry, transport, and buildings. moving to a system where public money Relevant government departments will work rewards farmers and land managers for together to ensure a coherent approach (see environmentally sustainable actions, including the Industry chapter). A significant market reducing emissions and expanding the share for innovations such as alternative carbon sequestration potential of our land. proteins will take time to materialise, but will We will introduce three environmental land align with consumer dietary trends, and the management schemes: the Sustainable UK already has a lively and growing domestic Farming Incentive (SFI), Local Nature Recovery market that could grow to become another (LNR) and Landscape Recovery (LR). The SFI great British food export that competes will be open to all farmers and will incentivise internationally. These and other novel methods low carbon practices, for example, soil and of food production could create significant nutrient management. LNR will fund actions opportunities to further promote high quality that support local nature recovery and British food internationally. deliver local environmental priorities. The LR scheme will fund long-term land use change projects such as large-scale tree planting, and peatland restoration projects. Net zero will be a key priority across the delivery of our environmental land management schemes. 175 Net Zero Strategy: Build Back Greener

25. Take up of these schemes will be Agriculture voluntary and will require a shift in the practices of landowners and farmers. We are 28. Government will support a range of working to ensure the schemes encourage measures to decarbonise the agriculture participation, including through appropriate sector specifically, including by providing payment rates, in line with the Payment further funding to support farmers to take Principles.82 Participants will still be able up low carbon practices and technologies. to benefit from private sector funding, for We will introduce a targeted set of financial delivering additional benefits. Advice and incentives to improve animal health and guidance will also be provided to support welfare and reduce emissions from animals, participants to adopt new practices. Tests including action to identify and eliminate and trials for the schemes began in 2020. bovine viral diarrhoea, with pilots starting The scheme will be rolled out in full by 2024.83 in late 2022 or early 2023. The Farming Government has committed to maintain Investment Fund will provide further grants to current levels of spending on the sector in farmers, enabling them to invest in equipment, England, based on 2019 levels, until 2024/5, technology and infrastructure that will improve amounting to an average of £2.4 billion a year. their profitability and benefit the environment. The scheme will be launched in 2021.

26. We are also supporting the acceleration From 2022, Government will also provide of private investment in nature through grants for new slurry stores, equipment, initiatives such as the Natural Environment and other interventions. The primary goal Investment Readiness Fund. These will test will be delivering reductions in nitrate and new models and build pipelines of investable ammonia pollutants from slurry, a key cause nature projects by providing technical of pollution on farms, but the grants will also assistance and capacity building support to reduce methane emissions and protect and create opportunities for private investment. restore habitats. Projects will capture the value of the carbon and other benefits provided by natural assets 29. We will increase investment in such as woodlands, peatlands wetlands industry-led research and development into and river catchments. They will create multi- productivity challenges, delivering net zero functional landscapes that deliver diverse and testing new technologies and methods. benefits, providing a return on investment and The Farming Innovation Programme will improving our understanding of how to attract open for applications in October 2021 with private investment. further competitions planned for 2022 and beyond. These will bring together interested

27. We will boost the existing £640 million farmers, scientists, and researchers to tackle Nature for Climate Fund with a further productivity and environmental challenges. We £124 million of new money, ensuring total will invest in supporting knowledge exchange spend of more than £750 million by 2025 so more farmers and growers have access to on peat restoration, woodland creation the latest findings from cutting-edge research and management. This will enable more that they can apply on their farms. opportunities for farmers and landowners to support net zero through land use change. 176 Chapter 3 – Reducing Emissions across the Economy

30. We will encourage and support increased 33. The Government’s upcoming Food agroforestry (trees and agriculture coexisting Strategy will support the delivery of net zero, on the same land) through our environmental nature recovery, and biodiversity commitments land management schemes from the early and will help to create a food system that 2020s, enabling agricultural land to sequester incentivises farmers to produce high quality, emissions while delivering other environmental high welfare food in the most sustainable way. benefits, such as air quality and biodiversity, Government is exploring options to reduce and providing alternative income streams for carbon emissions from food production, farmers from trees. support innovation in the food sector, incentivise land use change to sequester more

31. Government is working, and will continue carbon, and preserve natural resources. to work, in partnership with the sector to develop a new outcome-focused approach to 34. Government is also committed to regulation and enforcement which supports exploring the monitoring, reporting, and net zero. For example, ruminant livestock are verification of emissions in the agriculture the leading cause of farm emissions, but feed sector. This will enable us to understand where additives with methane inhibiting properties the greatest decarbonisation opportunities have the potential to reduce emissions, could be across the sector, considering all especially from housed cattle. Whilst this is an options. We will continue to review potential emerging technology, government is actively carbon pricing strategies for land use sectors, investigating the promising role these products including the potential role for voluntary or may have in delivering emissions savings in compliance carbon markets to support cost the mid-term, including by assessing whether effective decarbonisation for the sector. regulation could ensure maximised take up of such products. Peat

32. We will also consider how best to reduce 35. The England Peat Action Plan (EPAP) and better target the use of manufactured sets out the government’s long-term vision for fertiliser, including exploring the potential of managing, protecting, and restoring peatlands regulation in this area. In addition, we are so that they provide a wide range of benefits considering whether we need new legislative to wildlife, people and the planet. powers to improve soil management and 36. Tackling the drivers of peatland nutrient management. We will consider the degradation is essential. The EPAP commits recommendations of the Nutrient Management to ending the horticultural use of peat in the Expert Group, due to report in spring 2022, amateur sector by the end of this parliament on the optimal policy approaches to minimise and a consultation will be launched on emissions from fertiliser use. potential legislative measures (e.g. a sales ban) in 2021. Legislation to end managed burning on protected blanket bog that is 40 cm deep or more, unless covered by a license, has already been laid, protecting 40% of England’s blanket bog, and government is committed to reviewing the economic and environmental case for extending protections. 177 Net Zero Strategy: Build Back Greener

37. At least 35,000 ha of peatlands in England statutory tree target in England within the will be restored, by 2025, via the Nature for public consultation on Environment Bill targets. Climate Fund. From 2024, public funding We intent to spend over £500 million of the for peatland restoration will be available in Nature for Climate Fund on funding woodland England through the new environmental creation and management in England until land management schemes. To further 2025, beyond which the new environmental support peatland restoration, government land management schemes will provide the is implementing a range of policies that will main source of public funding. Whilst this mobilise private investment. The Natural rate of planting will lead to a relatively small Environment Investment Readiness Fund has emission savings in the short-medium term, been launched and a package of reforms it will play an increasingly important role as to the Peatland Code, including expanding time goes on, while also providing other it to cover more peatland types, will be environmental benefits. implemented in 2022. We will aim to restore approximately 280,000 ha of peatland in 40. Private finance for tree planting and England by 2050. management is being generated via the Woodland Carbon Code with the support of

38. Degraded lowland peat is responsible government’s Woodland Carbon Guarantee. for 86% of England’s peatland emissions. Government has also launched a new England Full restoration may not always be desirable, Woodland Creation Offer to fund woodland due to the lowlands’ agricultural value and creation in England and will establish new interactions with landscape scale water Woodland Creation Partnerships in key areas, level management regimes. Where it is not bringing together government, NGOs, and the possible to restore peatlands, we will support private sector to develop bespoke offers to new responsible management measures for encourage woodland creation. lowland peatlands.The Lowland Agriculture Peat Taskforce will provide recommendations 41. The government will review guidance on in summer 2022 on how to improve the the tax treatment of trees and woodlands, to condition of lowland farmed peatlands, both provide greater clarity to landowners on how to reduce emissions and support continued new and existing trees on their land affect tax profitable agriculture. From 2024, our Local liabilities. Further, government will regulate to Nature Recovery scheme will provide a key improve protections for existing woodlands funding stream for wetter modes of farming, and increase the number of woodlands under including paludiculture. To prevent delay, active management, improving resilience to our Farming Innovation Programme will be natural hazards. open to supporting applications for R&D in 42. Felled trees store carbon within them and paludiculture from the 20 October 2021, timber has the lowest embodied carbon of with more competitions to follow in 2022 any mainstream building materials. Guided and beyond. by market analysis, fire safety and structural considerations, key opportunities for the Forestry and woodlands safe growth of timber use will be in low-rise

39. We will treble woodland creation rates by buildings using traditional and certain modern the end of this Parliament, reflecting England’s methods of construction, and in a wide range contribution to meeting the UK’s overall target of commercial and non-residential settings. of increasing planting rates to 30,000 hectares We will promote the safe use of timber in per year by the end of this Parliament, and construction through several measures, maintain new planting at least at this level from including by: 2025 onwards. We will explore a long‑term 178 Chapter 3 – Reducing Emissions across the Economy • Providing financial support to develop Resources, waste and F-gases innovative timber products through the Forestry Innovation Fund; Resources and waste • Working with key construction 44. The Government’s Resources and Waste stakeholders, including the Green Strategy (RWS) set out the overall ambition Construction Board, Construction and direction of travel for the waste sector. Leadership Council, Home Builders It made a commitment to increase municipal Federation, and Federation of Master recycling rates to 65% and to ensure that Builders to develop a policy roadmap on no more than 10% of municipal waste is use of timber; landfilled by 2035. Biodegradable waste • Driving an increase in the use of certain sent to landfill today, however, slowly breaks modern methods of construction, some down anaerobically, emitting methane for forms of which can encourage use of many years afterwards. Faster action will sustainable materials such as timber; mean greater emissions savings. We will • Working with Homes England and delivery therefore explore policies to work towards the partners to explore ways to increase timber near elimination of biodegradable municipal use in the delivery of housing programmes; waste to landfill by 2028. To support this commitment, we are bringing forward £295 • Increasing public demand for sustainably million of capital funding which will allow local sourced timber through procurement authorities in England to prepare to implement policies; and free separate food waste collections for all • Encouraging research into barriers to households from 2025. uptake of timber, including looking at timber strength grades and the fire 45. To work towards these goals, we are resistance of engineered timber structures. delivering the reforms announced in the RWS. Consistent collections of household Biomass and business waste will be introduced via the Environment Bill. The powers will allow us to

43. Government will publish a Biomass require local authorities to separately collect Strategy in 2022 which we will set out a core set of materials for recycling, including the results of a review of the amount of paper and card, glass, metal, plastic, food sustainable biomass available to the UK waste and household garden waste. This will (including domestically grown perennial divert significant volumes of biodegradable energy crops and short-rotation forestry), waste from landfill and provide a high volume and how this resource could be best utilised of emissions savings. A deposit return scheme across the economy to help achieve net for drinks containers and extended producer zero. The strategy will set out the role which responsibility for packaging, placing the net Bioenergy with Carbon Capture & Storage costs of disposing of packaging on producers, (BECCS) can play in reducing carbon will also be introduced. These two measures emissions and how the technology could will increase the volume of materials being be deployed. It will also consider where and recycled and decrease our consumption how we can improve our existing biomass of virgin materials, thereby reducing the sustainability standards (already some of amount of waste sent to landfill and reducing the world’s most stringent) and examine the emissions from other sectors. relationship between biomass, including how it is used, and our wider environmental targets, including air quality. 179 Net Zero Strategy: Build Back Greener

46. Complementing these measures, the 48. Government is also committed to introduction of the plastic packaging tax eliminating food waste to landfill and delivering from April 2022 will encourage greater use the UN Sustainable Development Goal 12.3 to of recycled plastic in plastic packaging, halve food waste by 2030. The Environment instead of new (virgin) plastic. The tax will Bill will require all local authorities in England be charged at £200 per tonne and be paid to separately collect household food waste, by manufacturers and importers of plastic preventing it from being sent to landfill. This packaging that contains less than 30% will create carbon savings and support the recycled plastic. It is estimated that this will shift to a circular economy, as food waste is lead to an increase in the use of recycled instead turned into biogas and digestate (a plastic by 40% in 2022-23, equal to carbon soil improver) through anaerobic digestion. savings of nearly 200,000 tonnes of CO2 In addition, government will continue to work emissions. The government will also review with Waste and Resources Action Programme aspects of the Landfill Tax in England and (WRAP) and industry, and to support the Northern Ireland in due course, as announced Courtauld 2030 voluntary agreement with in Spring 2021. This will ensure the tax food and drink businesses, the Food Waste continues to support the government’s Reduction Roadmap, and the Target Measure ambitious environmental objectives. Act approach, as well as campaigns in the public and private sector to reduce food

47. Government is committed to moving waste, including the annual Food Waste to a more circular economy. This means Action Week. keeping built assets, products, and materials in use for longer, including through repair 49. Wastewater emissions will decrease and reuse, and making greater use of due to improved treatment processes and secondary materials, thus reducing waste expected data improvements. Water company arising. Recycling and material substitution, research and investment into reducing especially of carbon intensive materials process emissions from wastewater treatment such as steel, aluminium, and cement, are plants will result in reductions in municipal also an important part of our approach. process emissions via alternative treatment The draft Waste Prevention Programme processes such as anaerobic treatment, for England (WPP) (recently consulted on) membrane activated biofilm reactors, sets out the overall approach to improving alternative ammonia removal processes and resource efficiency across key sectors nature‑based solutions. Improvements in the and announced government’s intention to way companies, and government, report on consult on introducing extended producer industrial emissions, and the way they are responsibility in other areas, including textiles. calculated, are also likely to result in reductions The Industrial Decarbonisation Strategy, to the values on record. meanwhile, outlines our high-level ambition for resource efficiency measures across industry. At least one legislative target in the area of resource efficiency and waste reduction will be set under the Environment Bill. For further information on our plans for resource efficient manufacturing see the Industry chapter. 180 Chapter 3 – Reducing Emissions across the Economy F-gases 51. A review of the F-gas Regulation has commenced and is due to complete no

50. Government will continue to impose later than 2022. This will be used to assess the requirements of the F-gas Regulation, whether we can go further than the current which covers England, Wales and Scotland. requirements and international commitments, The regulation requires a range of measures including by looking at what additional to reduce emissions, including controls on reductions in F-gas use can be made to help gas placed on the market, product bans, the UK meet net zero by 2050. leak checks and mandatory certification for handlers of F-gases. These actions will help us to meet the Kigali Amendment target of reducing HFC consumption by 85% by 2036, as well as the F-gas Regulation’s target of a 79% reduction by 2030. 181 Net Zero Strategy: Build Back Greener Working together across the UK Examples of policy action by the Scottish Government, Welsh Government and Northern Ireland Executive UK Government is working across all Scotland levels of government and with Devolved Administrations to ensure consistent action The Scottish Government has set ambitious to reduce emissions across the Natural targets to restore 250,000 ha of peatland by Resources, Waste and F-Gases sectors, and 2030 and for 18,000 ha of new woodlands across the UK. to be created annually by 2024/25, with woodland cover increased from around Wales 19% to 21% of the total area of Scotland by 2032. Scottish Forestry and Forestry In November 2020, the Welsh Government and Land Scotland will work with investors, published its National Peatland Action carbon buyers, landowners, and market Programme to target peatland bodies most in intermediaries to increase private investment need of restoration, with the aim of delivering in new woodlands to increase the woodland 600-800 ha of restoration per year.84 It will carbon market by at least 50% by 2025. also safeguard those in good and recovering condition. Activity will be delivered by Natural I n its recent Programme for Government, the Resources Wales and partners across a range Scottish Government allocated an additional of land uses on both private and public land. £150 million for forestry and woodland creation: Scottish Forestry will use £100 When the Senedd first sat in 1999, Wales million of this to support new tree planting; recycled less than 5% of its municipal waste. and Forestry and Land Scotland will use In 2020, Wales highest ever recycling rate £30 million to expand Scotland’s national of over 65% put it third in the world, with forests and land, and £20 million to invest in 403,000 tonnes of CO2 avoided in 2019/20. modernising nursery facilities to increase tree This success is due to a truly collective production. effort by local authorities, communities and A new Scottish Agriculture Bill will be brought households, while the Welsh Government has forward in 2023 to replace the EU Common set targets and funded infrastructure. Food Agricultural Policy. Co-development and waste is collected from every household and co‑design with rural partners will be central recycling centres are evolving into modern to the development of future support eco-parks where businesses and enterprises structures and delivery. The Agriculture Reform capture the value in materials and keep Implementation Oversight Board (ARIOB) will resources in use. be asked to incorporate recommendations from farmer-led groups, into the work implementing policy reform. These groups were established to develop proposals to cut emissions across agriculture, support sustainable and high quality food production, and design a new support system. A preliminary package of funded measures will be agreed COP26, and the ARIOB will also consider responses to the public consultation launched in August on the same themes. 182 Chapter 3 – Reducing Emissions across the Economy Northern Ireland The Forests for our Future Programme aims to plant 18 million trees by 2030 to create 9,000 ha of new woodland. The programme will improve the resilience of Northern Ireland’s forests and woodlands and increase their contribution to a sustainable, healthy environment; increase the contribution of forests and woodlands to Northern Ireland’s sustainable and inclusive economic growth; and increase the use of Northern Ireland’s forest resources to enable more people to improve their health, wellbeing, and life chances. Legislative provisions to help to limit emissions from F-gases (which have a high greenhouse warming potential) and ozone depleting substances have also been brought into operation in Northern Ireland. 183 Net Zero Strategy: Build Back Greener 3vii. Greenhouse Gas Removals Balancing residual emissions to achieve net zero Our Key Commitments • Set the ambition of deploying at least 5 MtCO2/year of engineered removals by 2030, in line with CCC85 and National Infrastructure Commission assessments.86 • Deliver £100 million innovation funding for Direct Air Carbon Capture and Storage (DACCS) and other GGRs. • Develop markets and incentives for investment in greenhouse gas removal methods, by consulting on our preferred business models to incentivise early investment in GGRs, in 2022. • Working in partnership with the devolved administrations, we will aim to launch a call for evidence in the coming months exploring the role of the UK ETS as a potential long-term market for GGRs, as part of our upcoming consultation on the UK ETS. • Explore options for regulatory oversight to provide robust monitoring, reporting and verification (MRV) of GGRs, following the recommendations of the BEIS-led MRV Task & Finish Group involving experts from industry and academia. • Seek an amendment to the Climate Change Act to enable engineered removals to contribute to UK carbon budgets. Progress to date

1. The primary method of achieving net zero from the most difficult activities to reduce or is to take ambitious decarbonisation measures eliminate from within polluting sectors. This across society. However, we must also approach is supported by the Climate Change acknowledge that sectors such as industry, Committee,87 the Energy Systems Catapult,88 agriculture and aviation will be difficult to the National Infrastructure Commission and decarbonise completely by 2050. Greenhouse the National Grid ESO (the GB electricity gas removals (GGR) are therefore essential to system operator).89 compensate for the residual emissions arising 184 Chapter 3 – Reducing Emissions across the Economy

2. GGR is the name given to a group of 3. Following the sector classification methods that actively remove greenhouse adopted by the CCC and in this Strategy, this gases, predominantly CO2, from the chapter focuses on engineered removals. atmosphere, also commonly referred to as Nature‑based solutions, such as afforestation, Carbon Dioxide Removal (CDR) methods and are discussed in the Natural Resources, Waste Negative Emission Technologies (NETs). The and F-gases chapter. range of GGR approaches fall broadly into two categories: 4. The 2017 Clean Growth Strategy was the first time the UK government formally • Nature-based approaches: such addressed the need to deploy GGR methods. as afforestation, and soil carbon Since then, we have: sequestration. • Committed up to £100 million funding to • Engineering-based approaches: such as research and develop nascent GGR; Direct Air Carbon Capture and Storage (DACCS), Bioenergy with Carbon • Published a call for evidence on GGR in Capture and Storage (BECCS), wood December 2020; and in construction, biochar, and enhanced • Commissioned 4 studies to further our weathering (EW). evidence base on the potential for GGR deployment in the UK and understanding of possible policy incentives. 185 Net Zero Strategy: Build Back Greener Figure 25: Non-exhaustive illustration of the current portfolio of GGRs.90 Photosynthesis Chemistry Technology Soil carbon Bioenergy with Direct air Enhanced weathering Tree planting Biochar carbon capture & sequestration capture & Ocean category (SCS) (BC) storage (BECCS) (DACCS) alkalinisation (EW) Suspended Silicate Agricultural Agro-forestry Crop and forest residues amines rocks land Implementation Afforestation & Agricultural Dedicated crops Hydroxides Woodland practices options Livestock practices Dedicated crops (marginal) ATMOSPHERE Earth system LAND SEA BECCS and DACCS Above ground Minerals Marine sediment, Soil biomass calcifier and Storage medium bicarbonate ions 100s of meters below the surface Geological Reservoirs 186 Chapter 3 – Reducing Emissions across the Economy

5. In December 2020, BEIS and HM Treasury which government could consider to enable jointly launched a Call for Evidence on GGRs, their deployment. A Summary of Responses which invited views on the role of GGRs in to the Call for Evidence has been published reaching net zero and potential mechanisms alongside this Strategy. Net zero transition and opportunities for the sector Our 2050 vision and how robust approach to the Monitoring, Reporting we get there and Verification (MRV) of negative emissions is essential to the deployment of GGRs at scale.

6. We are clear that the purpose of Future markets in which negative emissions greenhouse gas removals is to balance the are traded, whether voluntary or otherwise, will residual emissions from sectors that are require careful regulation to ensure that capital unlikely to achieve full decarbonisation by is being invested into permanent, verifiable 2050, whilst not substituting for ambitious carbon removal. mitigation to achieve net zero. GGRs must not be pursued as a substitute for decisive action 8. Evidence around scale-up potential of across the economy to reduce emissions, engineered removal solutions in the UK is often referred to as mitigation deterrence.91 rapidly evolving, alongside innovation in the sector. This evidence92,93 suggests that the

7. There is also a need to ensure that next decade will be critical and several GGR GGRs result in a permanent net reduction in solutions, such as Direct Air Capture, will have atmospheric carbon. This is a complex task to be developed or scaled-up significantly which, at least in the near-term, may require during the late 2020s and early 2030s to case-by-case scrutiny of the carbon intensity contribute effectively to later carbon budgets of GGR supply chains and long-term indirect and our net zero target, as well as to build our emissions of GGR projects. Developing a evidence and experience in the sector. 187 Net Zero Strategy: Build Back Greener Figure 28: Indicative greenhouse gas removal (negative) emissions pathway to 2037 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 0 Pre-NZS policies -20 NZS delivery pathway Emissions (MtCO2e) -40 -60 -80 2050 Range -100 Source: BEIS analysis

9. Both nature-based and engineered 10. Based on the current evidence base and removal methods will be necessary. For projects in the pipeline, our analysis indicates engineered removals, a portfolio approach, that engineered removals would be expected supporting innovation, demonstration, to deploy from 0 MtCO2 today to at least and commercialisation of a wide range of 5 MtCO2 by 2030 and to around 23 MtCO2 removal solutions in the 2020s, is needed by 2035, with higher and lower deployment to ensure GGRs can contribute effectively possible depending on sector-specific and to meet our NDC and CB6 targets. The wider economy developments. government’s current suite of innovation programmes for DACCS and other GGRs will help ensure we continually target efficiency improvements, cost reductions and novel GGR technologies to inform our approach over the coming decades. 188 Chapter 3 – Reducing Emissions across the Economy

11. By 2030 we envisage significant Industry may also benefit from BECCS deployment of mature BECCS technologies applications in sectors such as cement. and commercial scale deployment of DACCS. When applicable in these areas, BECCS BECCS technologies will include retrofit can represent a cleaner form of energy applications in the power and industry sectors. production than fossil fuel counterparts, BECCS applications in the power sector could whilst also bringing the additional benefit be deployed by the late 2020s, and potentially of negative emissions. The early 2030s achieve ambitious contributions to our NDC could also see progress in deployment of target by 2030. Engineered removals are likely DACCS technologies, thanks to efforts in to be located within or near industrial clusters, demonstration and piloting during the 2020s benefitting from access to CO2 transport and through the support of our Direct Air Capture storage infrastructure, essential to support and other GGRs innovation competition. delivery of net-negative emissions.

13. By 2050, deployment of engineered

12. By the early 2030s the portfolio of GGRs removals at large scale, between 75 and deployed at scale will expand as technologies 81 MtCO2 per year, will be needed to help mature and demand from end-use sectors compensate residual emissions. This is increases. Beyond the contribution of expected to be equivalent to around 45-80% power BECCS to the electricity grid, of total emissions captured across the UK production of hydrogen, biogas/biomethane economy and will see predominantly the scale fuels with BECCS could also support the up of DACCS and BECCS with gasification decarbonisation of transport, industry and technologies. potentially power and heat in buildings. 189 Net Zero Strategy: Build Back Greener Greenhouse gas removals in the context of the wider net zero system There will be several complex interdependencies between GGR methods and the wider net zero system. Progress towards decarbonisation in other sectors will affect the extent to which GGR deployment will be required to hit our emissions targets. Conversely, GGRs have resource requirements that will impact other sectors. For example, deployment of engineered GGRs in the early years will likely be constrained by the availability of CO2 transport and storage injection capacity and any development of GGR business models will need to consider interactions with Industrial Carbon Capture and hydrogen business models, along with wider carbon pricing policy. We have committed to consider how the UK Emissions Trading Scheme could be expanded in future to provide a long-term support mechanism for GGRs. Biomass availability and supply Biomass policy is highly interdependent with GGR deployment. Sustainable biomass is a unique renewable organic material, and the future availability of sustainable biomass directly influences the scale GGRs such as BECCS and biochar can deploy to. Constraints on demand for perennial energy crops and solid recovered fuels, related mostly to technological and financial challenges, will need to be overcome via research and innovation to see significant increase in the take up of these biomass feedstocks. The upcoming Biomass Strategy (due to publish in 2022) will review the amount of sustainable biomass available to the UK and set out a framework for how this resource can be best utilised across the economy to help achieve our net zero target. The upcoming biomass policy statement gives an early indication of this framework, setting out the principles and policy aims for biomass up to 2050. The Strategy will also assess the UK’s current sustainability standards, to see where and how we can improve them even further. Any future BECCS project would be required to meet stringent sustainability requirements for the production and use of biomass, as will be set out in the Biomass Strategy. 190 Chapter 3 – Reducing Emissions across the Economy Using our land effectively Land use change will be required to accommodate GGRs, either directly through nature based GGRs such as afforestation or indirectly from increased production of woody biomass, such as perennial energy crops or short rotation forestry, to use for BECCS or other opportunities in the wider bioeconomy. What is best grown, where, in what quantity, and for what purpose, determines the feasibility of a GGR through land-use change. Feasibility therefore must consider, amongst others: alternative land use, feasible technological options for production, the net impact on GHG emissions, interactions with competing land demands for other strategic government objectives such as food security, nature conservation and housing, as well as social implications such as integration of GGRs into existing farm practice and environmental co‑benefits/risks. Further research is required into best practice for establishing GGRs in a productive and biodiverse landscape, and what levers may be required to establish such measures on land that is largely privately owned. Research projects through the UKRI SPF on GGRs and NERC GGR Research Programme will start to address these evidence gaps. GGR deployment will require alignment with HMGs schemes to reward environmental land management for example: Sustainable Farming Incentive (SFI), Local Nature Recovery (LNR) and Landscape Recovery Schemes. We will also need to consider interactions with private sector demands, such as through the domestic voluntary carbon market. Uncertain impacts from climate change such as impacts to national stocks of high‑grade farmland also demands consideration of what is both feasible now and on the way to 2050. Differences in spatial and temporal scales between removal technologies, such longer pay- back times for afforestation as opposed to short rotation forestry, create opportunities to maximise carbon removals to 2050 through a mix of land based GGRs. Managing environmental risks and benefits There are significant opportunities for maximising environmental co-benefits through nature based GGRs. For example, integrating perennial energy crops (e.g., short rotation coppice (SRC)) into existing farm systems can increase the abundance and diversity of flora and fauna at a field scale, though these benefits depend on factors such as historic cropping patterns and spatial distribution. At a landscape scale, afforestation can deliver co-benefits through natural flood management and urban cooling. However, benefits depend on sustainable forest management and choosing the right location and species of tree in the ecosystem. 191 Net Zero Strategy: Build Back Greener We must ensure that GGR technologies do not create new environmental risks. For instance, feedstock production for BECCS, biochar and wood in construction have potentially significant land requirements which if mismanaged could pose risks to biodiversity. The deployment of BECCS could also potentially impact local air quality and we must ensure that regulation and abatement on emissions other than CO2 develop to reflect this. It is also necessary to ensure resilience to the impact future climate change might have on the feasibility to deliver GGRs and wider environment objectives. CO2 Transport and Storage networks By the early 2030s, CO2 transport and storage infrastructure availability could potentially constrain GGR deployment, as the significant overall expansion of CCUS projects creates competition for access to the network. Seizing new opportunities 16. It will be crucial to ensure that future GGR policy maximises the economic and regional

14. The UK is well placed to take a leading development opportunities of developing role in GGR policy development and the low carbon economy in our industrial deployment. We have world-leading academic heartlands. Economic benefits include creating and industry expertise in relevant sectors, as new, highly skilled jobs in our industrial well as a rapidly developing carbon capture heartlands and safeguarding those existing usage and storage (CCUS) sector and access in adjacent sectors with the potential to be to large volumes of quality geological CO2 adversely affected by the transition to net zero, storage. Enabling GGR deployment will not as well as supply chains. only help us hit net zero but can support the UK’s ability to export skills and expertise to other nations with comparable ambitions for the sector.

15. To achieve the level of negative emissions indicated by our central delivery pathway to 2037 and keep us on track to deliver net zero, we will need additional public and private investment of around £20 billion. Scaling up the GGR sector will also regenerate communities and open up new employment opportunities right around the UK. 192 Chapter 3 – Reducing Emissions across the Economy Policies & proposals

17. Government has a clear role to play 20. GGR credits could function within an ETS in responsibly deploying GGRs, and is market through, for instance, allowing polluting committing to an ambition of deploying at sectors to meet their obligations through the least 5 MtCO2/year of engineered removals by procurement of negative emissions alongside

2030. To achieve this, we are taking ambitious conventional abatement options. In the Energy steps to enable commercial demonstration White Paper, the government committed to and deployment of engineered GGRs such exploring how the UK ETS could incentivise as Direct Air Capture. We are addressing the deployment of GGR technologies. We their financial and regulatory barriers, whilst aim to work with our Devolved Administration also working to build the evidence base and colleagues to launch a call for evidence in address continued uncertainty around how the coming months on the role the UK ETS GGRs can most effectively and sustainably could have as a potential long-term market be deployed and verified. Our role will for engineered or nature-based GGRs. This change over time, as GGRs become more may explore possible eligibility criteria for established, and the sector matures. participation in the UK ETS, different types of GGR market design, and timings for when Addressing financial barriers and GGRs could be added to the market. attracting investment

21. We recognise that a market for GGRs will

18. One of the fundamental barriers to GGR take time to establish and a phased approach deployment is the lack of an established is likely to be necessary. In the short-term, market or customer demand for engineered there may be a role for government in removals. GGR technologies are associated providing bespoke support for initial projects with high capital and operational costs, to de-risk investment decisions and provide making private investment unattractive in the revenue certainty for technology developers. absence of a stable revenue stream for the Yet we also recognise the potential for early provision of negative emissions. support instruments to integrate with market- based approaches, such as combining

19. The government’s vision is to establish contract mechanisms with inclusion of GGRs a liquid market for carbon removals, in in the UK ETS. which polluters have a strong policy or financial incentive to invest in GGRs to compensate for their remaining emissions. The UK Emissions Trading Scheme (ETS) is a possible market‑based solution for stimulating investment by GGRs – moving us towards a single, integrated compliance market for carbon, with negative emissions supporting liquidity as the ETS allowance cap falls over time. 193 Net Zero Strategy: Build Back Greener

22. To advance our ambition to stimulate Innovation the GGRs sector, we will consult on business models for engineered GGRs in Spring 25. The majority of GGR techniques are at a

2022. This will set out details of our preferred pre-commercial stage and require innovation mechanisms to incentivise early investment and demonstration support to be ready for and enable commercial demonstration of a commercial deployment. To address this GGR range of GGR technologies from the mid- technologies were included as one of ten to-late 2020s. The consultation will consider innovation priority areas announced in the Ten how GGR incentives interact with policies and Point Plan for a green industrial revolution.94 business models currently under development Together with UKRI, we are investing £100 for CCUS, hydrogen production, sustainable million in the research, development, and aviation fuels and other relevant sectors, along demonstration of greenhouse gas removals with wider carbon pricing policy. It will also across multiple programmes. This includes the consider how near-term policy incentives can DAC and other GGR innovation competition most effectively leverage private investment which will support the construction of pilot and enable a transition towards a market-led plants for a range of promising technologies framework as the sector matures. to help them achieve commercial realisation.95 The programme’s pilot projects could remove

23. Our proposals will be informed by a between 100 and 1,000 tonnes of CO2e per study currently being conducted for BEIS by year in 2025 and have the potential to scale Element Energy, as well as a recent study up to millions of tonnes by the 2030s. on commercial frameworks for first-of-a-kind Power BECCS projects which is published 26. Through the government’s Strategic alongside this document. Priorities Fund, UK Research and Innovation (UKRI) will invest £31.5 million in five land

24. Whilst seeking to capitalise on the based GGR demonstrator projects and a economic benefits of GGR development central hub. The hub will lead on coordination in the UK, we are also mindful of potential across the programme, as well as conducting disruption to existing markets and the effects cross-cutting research on the environmental, on consumers and businesses. The cost economic, social, ethical and governance of support for GGRs is likely to be shared implications of GGR approaches. between the public and private sector. We will seek to develop an appropriate balance of risk 27. The Biomass Feedstocks Innovation allocation over the short, medium, and long Programme aims to increase the production term. Potential policy frameworks to enable of sustainable domestic biomass by funding developing GGR solutions will require careful innovative ideas that barriers production. The consideration to guard against unintended sustainable, increased supply of biomass for effects. We will ensure that support for bioenergy conversion is a critical factor for the GGRs does not distort the development success of BECCS. and commercialisation of decarbonisation technologies in other sectors. 194 Chapter 3 – Reducing Emissions across the Economy

28. We are also publishing the outputs of 31. Alongside this document we have two BEIS commissioned research projects published a report summarising the work of designed to further our understanding and the group, including proposed principles to evidence base on GGR methods and their guide our MRV approach, initial suggestions deployment. An updated assessment of for how MRV protocols could operate, and greenhouse gas removal methods and their the future work required to advance the potential deployment in the UK provides a development of an MRV policy for negative comprehensive and up-to-date assessment emissions. The government will carefully of lifecycle costs, TRL and deployment consider the Group’s advice as we take potential to 2050. forward future work in this area. Monitoring, reporting and 32. Accounting for emissions associated verification of GGRs with international supply chains presents a challenge for GGR carbon accounting, and we

29. Once atmospheric carbon has been will engage with our international counterparts captured, the length of time it remains to ensure best practice is achieved. captured becomes crucial in verifying the Accounting for possible re-emissions, e.g., effectiveness of a GGR process. This applies of CO2 captured internationally but stored to both nature based and engineered solutions in the UK may be a particular challenge. We and is often referred to as the ‘permanence’ commit to collaborating with international or ‘durability’ of GGRs. Establishing robust partners to ensure alignment on any future Monitoring, Reporting and Verification (MRV) MRV framework. protocols is highly complex, particularly for some nature-based solutions. Legal and regulatory

30. In 2021, we established a GGR MRV 33. Currently the Climate Change Act 2008 Task and Finish Group, comprised of experts only recognises removals from Land Use, across government, industry, academia, and Land Use Change and Forestry (LULUCF) regulatory services. The role of the group as counting towards our carbon budgets, a was to provide advice and guidance on the definition which does not allow engineered development of a MRV policy approach for removals and some nature-based solutions GGRs. A recommendation made by the group to contribute. We propose to bring forward is the need for an independent audit function legislative amendments to address this. to be responsible for a monitoring, reporting

34. An MRV regime will be required to ensure and verification regime. This would ensure that that the amount and permanence of removals the amount and permanence of removals are are quantified, robustly and transparently, with quantified, robustly and transparently, which tolerable uncertainty. We will explore options will be essential to developing and supporting for establishing a regulatory function to provide a market for GGRs. this oversight, taking into consideration the advice of the MRV Task and Finish Group. 195 Net Zero Strategy: Build Back Greener Working together across the UK Example of policy action by Scottish Government UK Government is working across all The Scottish Government’s Climate Change levels of government and with Devolved Plan committed to a detailed feasibility study Administrations to ensure consistent of opportunities for developing negative action on Greenhouse Gas Removals, and emission technologies (NETs) in Scotland. This across the UK. will identify specific sites and applications of NETs, including developing work to support Scotland policy on Direct Air Capture and its role in Storegga and Carbon Engineering have our future energy system. The launch of a announced a partnership to develop £180 million Emerging Energy Technologies commercial Direct Air Capture (DAC) projects Fund to support Hydrogen, CCS, and NETs in the UK, potentially contributing to the projects has also been announced. removal of millions of tonnes of CO2 each year. One location being considered for their first proposed plant will sequester up to 1 mtpa, connected via pipeline to the Acorn Carbon Capture and Storage project at St Fergus. The proposed DAC facility would deliver permanent CO2 removal by capturing CO2 from the air then safely and permanently storing it deep below the seabed in an offshore geological storage site. The offshore Acorn CO2 storage site is aiming to be operational by the mid-2020s and the first DAC project could be operational within two years of the store opening. 196 Chapter 3 – Reducing Emissions across the Economy Endnotes 1 BEIS analysis (2021), ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national- statistics-1990-to-2019 2 ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https://www.gov.uk/ government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019 3 BEIS (2021) ‘Early phase out of unabated coal generation in Great Britain’ - https://www.gov. uk/government/consultations/early-phase-out-of-unabated-coal-generation-in-great-britain 4 BEIS (2020), ‘Energy White Paper: Powering our Net Zero Future’, https://www.gov.uk/ government/publications/energy-white-paper-powering-our-net-zero-future 5 BEIS analysis based on 2019 data from BEIS (2021), ‘Digest of UK Energy Statistics’, https://www.gov.uk/government/collections/digest-of-uk-energy-statistics-dukes#2021 6 BEIS (2021) ‘Decarbonisation readiness: call for evidence on the expansion of the 2009 Carbon Capture Readiness requirements’, https://www.gov.uk/government/consultations/ decarbonisation-readiness-call-for-evidence-on-the-expansion-of-the-2009-carbon-capture- readiness-requirements 7 CCC (2021) ‘Independent Assessment of UK Climate Risk June 2021’ – https://www.theccc. org.uk/publication/independent-assessment-of-uk-climate-risk/ 8 National Grid ESO (2020), ‘Annex 2 Final Cost-benefit Analysis Report from Phase 1 outputs of National Grid ESO’s Offshore Coordination Project’, https://www.nationalgrideso.com/ document/182936/download 9 BEIS (2021), ‘Smart Systems and Flexibility Plan 2021: Appendix I – Electricity system flexibility modelling’ https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/1003787/smart-systems-appendix-i-electricity-system-flexibility- modelling.pdf 10 BEIS (2021), ‘Smart metering statistics, quarterly update June 2021’, https://www.gov.uk/ government/collections/smart-meters-statistics 11 BEIS (2021) ‘Proposals for a Future System Operator role’ – https://www.gov.uk/government/ consultations/proposals-for-a-future-system-operator-role 12 BEIS (2021) ‘Energy code reform: governance framework’ – https://www.gov.uk/government/ consultations/energy-code-reform-governance-framework 13 BEIS (2021) ‘Capacity Market 2021: call for evidence on early action to align with net zero’ – https://www.gov.uk/government/consultations/capacity-market-2021-call-for-evidence-on- early-action-to-align-with-net-zero 14 BEIS (2021) ‘Energy retail market strategy for the 2020s’ – https://www.gov.uk/government/ publications/energy-retail-market-strategy-for-the-2020s 197 Net Zero Strategy: Build Back Greener 15 BEIS analysis based on 2019 data from BEIS (2021), ‘Digest of UK Energy Statistics’, https:// www.gov.uk/government/collections/digest-of-uk-energy-statistics-dukes#2021 16 BEIS (2021) ‘Longer Duration Energy Storage Demonstration (LODES) competition’ - https:// www.gov.uk/government/collections/longer-duration-energy-storage-demonstration-lodes- competition 17 Marginal emissions sources that fall outside these categories, but are accounted for in the sector’s emissions, include methane leakage from closed coal mines, nuclear fuel production and collieries. 18 For further detail on the current role of hydrogen, see chapter 1 of Analytical Annex to UK Hydrogen Strategy. BEIS (2021), ‘Hydrogen analytical annex’, https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/1011499/Hydrogen_ Analytical_Annex.pdf 19 DfT (2020), ‘Renewable Fuel Statistics 2019 Final Report’, https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/932933/renewable-fuel- statistics-2019-final-report.pdf 20 These hydrogen production capacity ranges capture uncertainty in hydrogen demand across all sectors that use hydrogen. BEIS (2021), ‘UK Hydrogen Strategy’, BEIS (2021), ‘Hydrogen analytical annex’, https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/1011499/Hydrogen_Analytical_Annex.pdf; BEIS (2021), ‘Hydrogen analytical annex’, https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/1011499/Hydrogen_Analytical_Annex.pdf. 21 Assuming plants operate at 95% load factor. In practice, plants may run at lower load factors, requiring even higher hydrogen production capacity to be installed. These are estimates of production capacity for two illustrative delivery pathways where demand is within the range presented in the Hydrogen Strategy, and only capture uncertainty around hydrogen demand for heat. 22 BEIS analysis on capital investment required to deliver production capacity. 23 BEIS analysis based on the Energy Innovation Needs Assessment (EINA) methodology with updated domestic and global scenarios; figures consider the direct jobs linked to hydrogen production, stationary CHP fuel cells and domestic distribution only. Vivid Economics (2019), ‘Hydrogen and fuel cells (EINA sub-theme)’, https://assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment_data/file/845658/energy-innovation-needs- assessment-hydrogen-fuel-cells.pdf 24 BEIS (2021), ‘Low Carbon Hydrogen Supply 2 Competition’, https://www.gov.uk/government/ publications/low-carbon-hydrogen-supply-2-competition 25 BEIS (2021), ‘Open Consultation: Design of a business model for low carbon hydrogen’, https://www.gov.uk/government/consultations/design-of-a-business-model-for-low-carbon- hydrogen 26 BEIS (2021), ‘Open Consultation: Design of a business model for low carbon hydrogen’, https://www.gov.uk/government/consultations/designing-the-net-zero-hydrogen-fund 198 Chapter 3 – Reducing Emissions across the Economy 27 BEIS (2021), ‘Open Consultation: Designing a UK low carbon hydrogen standard’, https:// www.gov.uk/government/consultations/designing-a-uk-low-carbon-hydrogen-standard 28 Welsh Government, Decarbonisation of Homes in Wales Advisory Group, https://gov.wales/ decarbonisation-homes-wales-advisory-group 29 ONS (2021), ‘Annual Business Survey’, https://www.ons.gov.uk/ businessindustryandtrade/business/businessservices/datasets/ uknonfinancialbusinesseconomyannualbusinesssurveysectionsas 30 ONS , ‘Gross Domestic Product (GDP), https://www.ons.gov.uk/economy/ grossdomesticproductgdp 31 ONS (2021), ‘Annual Business Survey’, https://www.ons.gov.uk/ businessindustryandtrade/business/businessservices/datasets/ uknonfinancialbusinesseconomyannualbusinesssurveysectionsas 32 UK in a Changing Europe (2020), ‘Manufacturing and Brexit’, https://ukandeu.ac.uk/research- papers/manufacturing-and-brexit/ 33 The definition of manufacturing and refining used above is similar but not identical to the definition of industry used here, this is due to a different taxonomy being used (SIC codes and IPCC codes respectively). 34 BEIS (2021), ‘Final UK greenhouse gas emission national statistics: 1990 to 2019’, https:// www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics- 1990-to-2019 Industry sector emissions include emissions from industrial processes, manufacturing, and production, including fuel combustion and product uses in industrial buildings, as well as emissions from refineries and construction machinery. This definition of industry is broader than the definition used in the Industrial Decarbonisation Strategy and the Hydrogen Strategy, which excluded the non-road mobile machinery and construction sectors. 35 Government analysis suggests up to 5,000 CCUS jobs could be supported in 2025 across industry, power, and transport and storage network. 36 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 37 National Atmospheric Emissions Inventory (2021), ‘Greenhouse Gas emissions reports’, https://naei.beis.gov.uk/reports/reports?section_id=3 38 Employment figures sourced from ONS (2018), ‘Industry (2, 3 and 5 – digit SIC) – Business Register and Employment Survey (BRES): Table 2’, https://www.ons.gov.uk/ employmentandlabourmarket/peopleinwork/employmentandemployeetypes/datasets/ industry235digitsicbusinessregisterandemploymentsurveybrestable2 Indirect jobs estimates based on ONS (2019), ‘Type I UK employment multipliers and effects, reference year 2015’, https://www.ons.gov.uk/economy/nationalaccounts/supplyandusetables/ adhocs/009746typeiukemploymentmultipliersandeffectsreferenceyear2015 39 National Atmospheric Emissions Inventory (2021), ‘Greenhouse Gas emissions reports’, https://naei.beis.gov.uk/reports/reports?section_id=3 199 Net Zero Strategy: Build Back Greener 40 BEIS analysis (2021), ‘Net Zero Industry Pathway (N-ZIP) model’, https://www.theccc.org.uk/ wp-content/uploads/2020/12/N-ZIP-Model.xlsb 41 The figures were derived by the CCC based on research from 2018 (Scott, et al., 2018). This research acknowledges that there are a range of possible scenarios that differ greatly in resource efficiency savings. The CCC’s balanced pathway assume savings consistent with the high scenario. Empirical evidence on the likelihood of these scenarios is limited. The balanced pathway also includes estimated savings from industrial buildings, which are covered in the Heat & Buildings chapter. 42 CCC (2020), ‘Sixth Carbon Budget’, https://www.theccc.org.uk/publication/sixth-carbon- budget/ 43 Defined by the IDS as sites outside a 25km radius from the 6 main industrial clusters (Grangemouth, Teesside, Humberside, Merseyside, South Wales and Southampton) 44 National Atmospheric Emissions Inventory, ‘Emissions from NAEI large point sources’, https:// naei.beis.gov.uk/data/map-large-source 45 Locations outside of the 6 main clusters where co-location of industrial units could yield integrated solutions 46 ONS (2020), ‘Households projections for England’, Table 401, https://www.ons.gov.uk/ peoplepopulationandcommunity/populationandmigration/populationprojections/datasets/ householdprojectionsforengland ; BEIS (2020) ‘Non-domestic National Energy Efficiency Data- Framework’ based on 2018 data, https://www.gov.uk/government/statistics/non-domestic- national-energy-efficiency-data-framework-nd-need-2020 47 Buildings Research Establishment (2020), ‘The Housing Stock of the United Kingdom’, https:// files.bregroup.com/bretrust/The-Housing-Stock-of-the-United-Kingdom_Report_BRE-Trust.pdf 48 This figure includes only emissions from direct energy use in buildings. Including emissions from producing the energy used, the figure is 26%. BEIS Analysis, BEIS (2021), ‘Final UK greenhouse gas emissions national statistics: 1990 to 2019’, https://www.gov.uk/government/ statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019; ONS (2021), ‘Energy Consumption in the UK’, https://www.gov.uk/government/statistics/energy- consumption-in-the-uk-2020. This figure includes not only emissions from direct energy use in buildings but also emissions from producing the energy used. 49 Building Services Research and Information Association (BSRIA) (2020), Domestic boilers market analysis – United Kingdom, 2020, https://www.bsria.com/uk/ 50 These figures are on an indirect basis, i.e. include emissions from producing the energy used. On a direct basis, the equivalent figures are 99% and 17%. BEIS Analysis, BEIS (2021), ‘Final UK greenhouse gas emissions national statistics: 1990 to 2019’, https://www.gov.uk/ government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019; ONS (2021), ‘Energy Consumption in the UK’, https://www.gov.uk/government/statistics/ energy-consumption-in-the-uk-2020. 51 ONS (2020), ‘Households projections for England’, https://www.ons.gov.uk/ peoplepopulationandcommunity/populationandmigration/populationprojections/datasets/ householdprojectionsforengland, Table 401 200 Chapter 3 – Reducing Emissions across the Economy 52 MHCLG (2020), ‘English Housing Survey 2019 to 2020’, https://www.gov.uk/government/ statistics/english-housing-survey-2019-to-2020-headline-report, Annex table 2.2. 53 BEIS (2020), ‘Energy Consumption in the UK 2020’, https://www.gov.uk/government/statistics/ energy-consumption-in-the-uk-2020 54 MHCLG (2020), ‘English Housing Survey 2019 to 2020’, https://www.gov.uk/government/ statistics/english-housing-survey-2019-to-2020-headline-report, Annex table 2.8 55 MHCLG (2020), ‘English Housing Survey 2019 to 2020’, https://www.gov.uk/government/ statistics/english-housing-survey-2019-to-2020-headline-report 56 MHCLG (2020), ‘English Housing Survey 2019 to 2020’, https://www.gov.uk/government/ statistics/english-housing-survey-2019-to-2020-headline-report, Annex table 2.8 57 ‘Fabric first’ means installing measures that upgrade the building fabric (e.g. walls/lofts) before making changes to the heating system. 58 BEIS (2020), ‘Non-domestic National Energy Efficiency Data-Framework’, https://www.gov.uk/ government/statistics/non-domestic-national-energy-efficiency-data-framework-nd-need-2020 59 BEIS analysis, this figure excludes industrial buildings. BEIS (2020), ‘Final UK greenhouse gas emissions national statistics: 1990 to 2018’, https://www.gov.uk/government/statistics/final-uk- greenhouse-gas-emissions-national-statistics-1990-to-2018, Table 19 60 BEIS (2016), ‘Building Energy Efficiency Survey‘, https://www.gov.uk/government/publications/ building-energy-efficiency-survey-bees 61 BEIS (2020), ‘Final 2018 UK greenhouse gas emissions national statistics: 1990 to 2018’, https://www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national- statistics-1990-to-2018 62 BEIS analysis based on the Energy Innovation Needs Assessment (Vivid Economics, 2019) 63 IEEG (2020) ‘Rebuilding for resilience - energy efficiency’s offer for a net zero compatible stimulus and recovery’, https://www.theeeig.co.uk/news/starstarnew-reportstarstar-rebuilding- for-resilience-energy-efficiency-s-offer-for-a-net-zero-compatible-stimulus-and-recovery/. Derived from Jan Rosenow and others (2018). Assumes EPC band C by 2030 with cost savings at 2020 prices. 64 BEIS (2021), ‘Sustainable warmth: protecting vulnerable households in England’, https://www. gov.uk/government/publications/sustainable-warmth-protecting-vulnerable-households-in- england 65 Curl and Kearns (2017) ‘Housing improvements, fuel payment difficulties and mental health in deprived communities’, International Journal of Housing Policy, https://www.tandfonline.com/ doi/full/10.1080/14616718.2016.1248526. 66 University of Cambridge (2017), ‘Do House Prices and Rents in the Private Rented Sector Reflect Energy Efficiency Levels’ https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/910853/beis-cambridge-house-price-report.pdf 201 Net Zero Strategy: Build Back Greener 67 No or low-regrets’ means actions that are cost-effective now and will continue to prove beneficial in future. For example, installing energy efficiency measures reduce consumer bills now, while making buildings warmer and comfier, but have the added benefit of making future installations of low carbon heating more cost effective. 68 BEIS (2021), ‘Opportunity areas for district heating networks in the UK: Second National Comprehensive Assessment’, https://www.gov.uk/government/publications/opportunity-areas- for-district-heating-networks-in-the-uk-second-national-comprehensive-assessment 69 CITB (2021), ‘Building Skills for Net Zero’ https://www.citb.co.uk/media/kkpkwc42/building_ skills_net_zero_full_report.pdf 70 Decarbonisation of Homes in Wales Advisory Group, Welsh Government, https://gov.wales/ decarbonisation-homes-wales-advisory-group 71 International aviation and shipping emissions are not included in domestic transport as they are reported separately. 72 International Aviation and Shipping emissions are not included in the UK’s 68% NDC target and are included in carbon budgets from CB6. 73 Welsh Government (2021), ‘Electric vehicle charging strategy for Wales’, https://gov.wales/ electric-vehicle-charging-strategy-wales 74 BEIS analysis of 1990-2019 UK GHG emissions statistics. BEIS (2021), ‘Final UK greenhouse gas emissions national statistics 1990 to 2019’, https://www.gov.uk/government/statistics/ final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019. 75 Defra (2020), ‘Agricultural Transition Plan 2021 to 2024’, https://www.gov.uk/government/ publications/agricultural-transition-plan-2021-to-2024 76 BEIS (2021), ‘Final UK greenhouse gas emissions national statistics 1990 to 2019’, https:// www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics- 1990-to-2019 77 Defra (2018), ‘Resources and waster strategy for England’, https://www.gov.uk/government/ statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019 78 BEIS (2021), ‘Final UK greenhouse gas emissions national statistics’, https://www.gov.uk/ government/statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019 79 Defra (2017), ‘UK ratifies new agreement to tackle global warming’, https://www.gov.uk/ government/news/uk-ratifies-new-agreement-to-tackle-global-warming 80 The Ozone-Depleting Substances and Fluorinated Greenhouse Gases (Amendment etc.) (EU Exit) Regulations 2019. Available at: https://www.legislation.gov.uk/ ukdsi/2019/9780111177136. 81 Defra (2018), ’25 Year Environment Plan’, https://www.gov.uk/government/publications/25- year-environment-plan 202 Chapter 3 – Reducing Emissions across the Economy 82 Defra (2021), ‘Environmental land management schemes: payment principles’, https://www. gov.uk/government/publications/environmental-land-management-schemes-payment- principles/environmental-land-management-schemes-payment-principles https://www.gov. uk/government/publications/environmental-land-management-schemes-payment-principles/ environmental-land-management-schemes-payment-principles#:~:text=We%20will%20 set%20payment%20rates,a%20wide%20range%20of%20activities. 83 Defra (2021), ‘Sustainable Farming Incentive: Defra’s plans for piloting and launching the scheme’, https://www.gov.uk/government/publications/sustainable-farming-incentive-scheme- pilot-launch-overview/sustainable-farming-incentive-defras-plans-for-piloting-and-launching- the-scheme 84 Cynfoeth Naturiol Cymru Natural Resources Wales (2020), ‘National Peatland Action Programme, 2020-2025’, https://cdn.cyfoethnaturiol.cymru/media/692545/national-peatlands- action-programme.pdf 85 CCC (2021), ‘2021 Progress Report to Parliament’, https://www.theccc.org.uk/wp-content/ uploads/2021/06/Progress-in-reducing-emissions-2021-Report-to-Parliament.pdf 86 National Infrastructure Commission (2021), ‘Engineered greenhouse gas removals’, https://nic. org.uk/app/uploads/NIC-July-2021-Engineered-Greenhouse-Gas-Removals-UPDATED.pdf 87 CCC (2020), ‘The Sixth Carbon Budget: Greenhouse gas removals’, https://www.theccc.org. uk/wp-content/uploads/2020/12/Sector-summary-GHG-removals.pdf 88 Energy Systems Catapult (2020), ‘Innovating to Net Zero: UK Net Zero Report’, https:// es.catapult.org.uk/reports/innovating-to-net-zero/ 89 National Grid (2020), ‘Future Energy Scenarios’, https://www.nationalgrideso.com/ document/173821/download 90 Minx et al (2018), ‘Environmental Research Letters’, IPO, Volume 13, Number 6 91 McLaren, D (2020), ‘Quantifying the potential scale of mitigation deterrence from greenhouse has removal techniques’, Climatic Change, 162, 2411-2428, https://link.springer.com/ article/10.1007/s10584-020-02732-3 92 CCC (2020), ‘Sixth Carbon Budget’, https://www.theccc.org.uk/publication/sixth-carbon- budget/ 93 BEIS (2021), ‘Greenhouse Gas Removal Methods Technology Assessment Report’, https:// www.gov.uk/government/publications/greenhouse-gas-removal-methods-technology- assessment-report 94 BEIS (2020), ‘The Ten Point Plan for a Green Industrial Revolution’, https://www.gov.uk/ government/publications/the-ten-point-plan-for-a-green-industrial-revolution 95 BEIS (2021), ‘Projects selected for Phase 1 of the Direct air capture and greenhouse gas removal programme’, https://www.gov.uk/government/publications/direct-air-capture-and- other-greenhouse-gas-removal-technologies-competition/projects-selected-for-phase-1-of- the-direct-air-capture-and-greenhouse-gas-removal-programme 203 Net Zero Strategy: Build Back Greener Supporting the Transition across the Economy 4 Chapter 205 Net Zero Strategy: Build Back Greener 4i. Innovation for net zero Harnessing UK strengths in R&D to reach net zero Our Key Commitments • Increase government investment in R&D to £22 billion; increase total R&D investment to 2.4% of GDP by 2027. • Publish the UK’s first Net Zero Research & Innovation Framework to set out the key research and innovation challenges for the next 5-10 years; and a future update to demonstrate how the government is delivering against these. • Deliver a Government programme of innovation to enable decarbonisation – funding of at least £1.5bn during next spending review period expanding a portfolio of cross government net zero innovation to fund BEIS-led programmes on power, buildings and industry; DfT-led programmes across transport; and DEFRA led programmes on natural resources, waste and F-gases, to target priorities aligned with the Net Zero Research & Innovation Framework. This spending includes new programmes set out in this Strategy such as £60m Heat Pump Ready programme. • Take a leadership role in Mission Innovation 2.0, a global initiative working to accelerate clean energy innovation.1 206 Chapter 4 – Supporting the Transition across the Economy The challenge

1. Innovation is central to our approach will also support businesses to grow and to delivering net zero. It will require a step solutions to be delivered at scale. Research, change in the rate of new technologies and development, and innovation are needed processes being developed and deployed into to allow government, industry and business the market and being adopted by businesses to make decisions about what new and consumers. Continued investment in technologies and systems are promising. cutting-edge research, development, and To respond, government must enable the demonstration, will be integral to achieving efficient scaling of technologies, systems, this transformation and to the UK leading and business models to pull them through to the world in areas of existing and potential commercialisation for 2050 - and beyond. competitive advantage. This investment Our goal

2. Our goal is for the UK to be a global leader 4. In the Prime Minister’s Ten Point Plan for in the technologies, processes, services, and a Green Industrial Revolution,2 we restated business models needed to decarbonise our our commitment to raise total private and economies, protect our environment, and public R&D investment to 2.4% of GDP by adapt to a changing climate. We will support 2027 – enabling the next phase of green our world class innovators, entrepreneurs, innovation to help bring down the cost of the and financial institutions to develop and net zero transition, nurture the development deploy the key technologies of the future. of better products and business models, This will need to take place alongside other and understand consumer choices. We cross-cutting policies, regulatory changes, have started delivering on this with funding and commitments. announced for programmes across the portfolio including renewables, energy

3. By supporting innovation, we could unlock storage and flexibility, and hydrogen.3 This is the potential for 300,000 jobs in exports and contributing to levelling up across all regions domestic industry through new commercial of the UK whilst helping us to achieve our opportunities across low carbon sectors. net zero target. 207 Net Zero Strategy: Build Back Greener The role of innovation

5. Innovation can significantly reduce costs 7. The Prime Minister’s Ten Point Plan for of the technologies, processes, and systems a Green Industrial Revolution, our Plan for needed to reach net zero. This goes beyond Growth and our new Innovation Strategy just developing technologies. It also means bring together ambitious policies and exploring new business models, approaches significant public investment to achieve net to financing, the regulatory environment and zero, whilst seeking to mobilise substantial how consumers respond. Taking a whole private investment. These commitments will systems approach to innovation will be integral position the UK to take advantage of export to maintaining and developing the UK’s opportunities in global markets presented by global leadership in areas where we have, or these low carbon technologies and services. can develop, an international comparative advantage or unique capability. We must harness the UK’s international reputation to attract inward investment and anchor existing and emerging supply chains in the UK. International collaboration will also be critical to ensure that clean technologies become cheaper and more readily available.

6. Innovation is a process which occurs within an ecosystem of interacting actors, technologies, and institutions. This requires technologies, systems or processes to progress through multiple phases of development – from basic research, through to commercialisation and diffusion. However, innovation does not flow neatly in one direction from one phase to the next; it is unpredictable and serendipitous, involving constant cycles of learning, testing, refining, and discovery. At each phase of the innovation process there are different market failures and barriers, requiring distinct interventions. In the early stages, there are often minimal incentives for private actors to invest in innovation and direct funding policies can help ‘push’ technologies towards demonstration and early commercialisation. In the later stages, the importance of attracting private finance grows. Market incentive policies support the development of markets and leverage private finance to ‘pull’ technologies towards deployment and diffusion. 208 Chapter 4 – Supporting the Transition across the Economy Case study: Glass Futures with Encirc pilot project Through government’s 2016-21 Energy Innovation Programme, BEIS funded Encirc (a glass container manufacturer) and Glass Futures (an industry research and technology organisation) to lead a trial project based in Derrylin, Northern Ireland to help determine the most effective approach to using low carbon fuels in manufacturing in the glass sector. This revolutionary project has proven that new bottles can be made from 100% recycled glass by using energy only from burning low carbon biofuels. It is thought that this world-first initiative will set a global standard and make way for an industry-wide reduction in carbon emissions in the glass sector. When made from waste organic materials, biofuels are a renewable and much more sustainable fuel source than those traditionally used by the glass sector and can reduce the carbon footprint of each bottle by up to 90%. By using up to 100% recycled glass to create new bottles, the trial has further minimised the lifetime impact of these new products. Supporting innovation for net zero

8. Achieving net zero will require profound this will be research to understand consumer changes to the UK economy. It will mean acceptability and behaviour, and to create increasing our low carbon electricity supply, economic incentives will also be required for making the transition to low carbon buildings, lasting change. decarbonising transport, building a hydrogen economy, decarbonising industry, rolling-out 10. We’re publishing the Net Zero Research carbon capture and storage, transforming & Innovation Framework which sets out the the way land and marine spaces are used, critical net zero research and innovation improving agricultural management, adopting challenges across the UK that require better waste management, and deploying development over the next 5-10 years, and technologies to remove greenhouse gases presents timelines of short, medium, and from the atmosphere. This should include longer-term priorities. The framework will help innovation to mitigate any environmental to align current and future government funding impacts from new technologies on our around agreed priorities and to crowd-in effort pathway to net zero. and investment from the private sector and research communities by providing a clear

9. In each of these sectors, known signal on our areas of focus. technologies, business models, services and approaches will need to be demonstrated and then deployed at scale, while novel technologies need R&D support now to determine whether they can be affordable and viable options in the longer-term. Underpinning 209 Net Zero Strategy: Build Back Greener Government R&D Support deliver emissions savings across the natural resources, waste and F-gases sectors, we

11. Government investment in research are also committing to spend £75 million on drives progress on our goals, from the physics net zero related R&D in these sectors over the underpinning battery technology to the next three years. mathematics underlying climate modelling. In November 2020, we committed to 14. We will prioritise innovations where increasing investment in core UK Research there is a strong case for UK Government and Innovation (UKRI) and National Academy investment, while leveraging additional funding funded research by more than £1 billion by the from industry. It will also support the UK in April 2024 (the 2023/24 Financial Year). UKRI maintaining its leadership in the development investment in research, innovation, and skills of technologies such as nuclear reactors creates the conditions for the UK to address and fusion energy,4 which are expected to the complex and interrelated challenges of complement renewable sources in the future. achieving net zero by 2050. With high levels of innovation alongside ambitious policy support in technologies,

12. Beyond early-stage research, investment the UK’s low carbon sectors with the in new technologies is essential for bringing largest potential could unlock £60 billion of them closer to commercialisation. We will GVA in the UK.5 expand our cross government portfolio of net zero innovation support, delivering 15. The Industrial Strategy Challenge at least £1.5 billion during the next Fund (ISCF),6 delivered by UKRI and its spending review period. This will accelerate partners, drives UK growth and productivity the commercialisation of low carbon by directing innovation across sectors and technologies, systems, and business models disciplines behind government’s strategic across the economy. priorities. ISCF has to date allocated £824 million to eight challenges aligned to the

13. The Transport Decarbonisation Plan 2017 Industrial Strategy Clean Growth Grand committed to implementing a range of Challenge. Examples include the Transforming innovation programmes to support the Food Production Challenge; the Faraday decarbonisation of transport, with successful Battery Challenge; the Driving the Electric projects for zero emission road freight trials Revolution Challenge. and hydrogen transport pilots recently announced. Building on the success of our 16. The government’s Innovation Strategy £20 million zero emission road freight trials, we sets out our plans for a refreshed Innovation will expand these to trial three zero emission Missions programme to build on UK HGVs technologies at scale on UK roads to leadership in mission-driven innovation and determine their operational benefits, as well as bring government together with industry, their infrastructure needs. The accompanying civil society, and academia to respond Jet Zero: our strategy for net zero aviation directly to major challenges confronting proposes a suite of policies to reduce the UK. As referenced in the International aviation emissions, including accelerating the chapter, Missions can play an important development of sustainable aviation fuels and role in stimulating and leveraging innovation supporting the development of zero emission for tackling complex problems while flight. The Agricultural Transition Plan set out simultaneously promoting growth and the commitment to boost innovation and help improved business outcomes and restoring farmers and growers increase productivity, the UK’s place as a science superpower. sustainability, and resilience to a changing climate. Given the importance of R&D to 210 Chapter 4 – Supporting the Transition across the Economy

17. It is a strategic focus of our National 18. It is essential that we track cross- Space Strategy to utilise space technology government activity and ensure that innovation in the fight against climate change. Satellites funding is strategically aligned to deliver the provide an extraordinary insight into our government’s net zero ambition. This will be climate and environment and enable us supported by the Net Zero Innovation Board to understand and monitor how climate (NZIB), chaired by the UK Government’s Chief change is impacting the Earth. We will Scientific Advisor. strive to remain at the forefront of Earth Observation (EO) technology and know-how. 19. Alongside our policies that specifically This supports our ambition to be a global support our net zero objectives, there will science and technology superpower and to be continued significant public investment in lead the world in tackling climate change and R&D to support all sectors. This includes the biodiversity loss. creation of a new institution – the Advanced Research and Invention Agency (ARIA) – to fund high-risk, high-reward research. ARIA’s leadership will have full scope to determine the areas in which it will invest. Case study: Hy4Heat Programme and Hydrogen Fuelled Appliances The Hy4Heat programme was launched by BEIS in 2017 to explore the use of hydrogen gas for heating by seeking to demonstrate technical feasibility and safety. It aims to define quality and technical standards, and to develop domestic and commercial hydrogen appliances. The programme, with up to £25 million funded by BEIS, is supporting the innovation journey of a range of domestic hydrogen appliances and meters including world-first hydrogen- ready boilers, cookers, and fires. These hydrogen appliances and meters are being installed at a hydrogen home facility, developed in partnership with Northern Gas Networks (NGN) and Cadent. This will enable industry and members of the public to see how these appliances work in a home setting. These properties will be the first UK houses to demonstrate the use of hydrogen appliances in a real-world setting. 211 Net Zero Strategy: Build Back Greener Policy and regulatory frameworks 22. In Build Back Better: our plan for growth, and the Innovation Strategy, we set out our

20. As set out in the Ten Point Plan and aim to unlock the potential of the £2.2 trillion Energy White Paper, we will continue held in UK pension schemes by addressing to develop a policy environment and barriers to long-term investment. The regulatory framework which incentivises government has established the Productive further deployment of new technologies, Finance Working Group, which published its services, and business models. The UK’s roadmap for increasing productive finance Electricity Market Reform is an example investment in September 2021,7 and is of how government can drive significant progressing policy development through cost reductions in low carbon technology. several Department for Work and Pensions Furthermore, while supporting the deployment consultations. These workstreams explore of offshore wind through the Contracts for ways to make it easier for schemes to invest in Difference scheme, costs have reduced by alternative assets, including equity investment >50% in the last decade. This provides a in innovative firms; creating the conditions for clear example of policy ‘pull’ whereby open capital to flow into the UK’s most promising competition worked to drive cost reductions firms will help ensure that finance is available through deployment and innovation. As for the innovation required to meet our net noted throughout the strategy, government zero goals and improve outcomes for UK will work with industry, businesses and savers. Government will continue to engage consumers to consider the removal of closely with pension funds and the investment regulatory barriers which may be hindering our industry to understand the scope for transition to net zero. industry‑led initiatives that take advantage of innovation investment opportunities. Encouraging private sector investment 23. We will also provide the right conditions to attract private investment in R&D and

21. To deliver net zero, it is essential that innovation, including through tax and public investment catalyses significant flows of regulatory frameworks as well as policy signals private investment into innovative companies from government. At Spring Budget 2021, and activities. This means creating the right the Government announced a review of R&D conditions for all businesses to innovate and tax reliefs with the publication of a wide- giving them the confidence to do so. The right ranging consultation. The review will ensure conditions will often involve de‑risking capital that the reliefs are up-to-date, competitive in the forms of grants (allowing freedom to and well-targeted. innovate) and concessionary capital (allowing businesses to commercialise and scale their operations). Providing the private sector with clarity on government R&D priorities can also help to build the confidence to invest in innovative companies and activities. As outlined, our Net Zero Research & Innovation Framework sets out a structure for this and a future update will demonstrate how the government is delivering against this Framework. 212 Chapter 4 – Supporting the Transition across the Economy Case study: Energy Entrepreneur’s Fund (EEF) Since 2012, the UK government’s Energy several achievements including supporting the Entrepreneurs Fund (EEF) has awarded displacement of over 21 million kilograms of £72 million worth of grants, supported 156 CO2 per year and it will also help to lower the projects, and leveraged more than £500 Levelised Cost of Energy (LCOE) with a 30% million in private investment – a figure that reduction in comparison to other FOW designs is still growing. The EEF supplies innovation and comparable offshore fixed installations. grants for SMEs and start-up companies to AEP’s research and testing has also reduced back the development and demonstration of the operating costs including low-cost disruptive technologies whilst also supporting deployment and reduced dependency on our decarbonisation targets. specialist vessels. A new company has been formed – Axis Energy TLB Ltd. – which Axis Energy Projects (AEP) was funded with will enable the commercialisation of the over £200,000 with £40,000 of match-funding technology, having secured trademarks and from the private sector. AEP tested floating patents around the world. A recent report offshore wind (FOW) technology in Edinburgh, from the Offshore Renewable Energy Catapult Scotland simulating how FOW can be resistant (OREC) predicts that the UK FOW industry to 100-year storm events in water depths of could support up to 17,000 jobs by 2050 65 – 100 metres. The project has increased and generate a gross value added (GVA) technology readiness levels from 3 (research) of £33.6 billion. to 6/7 (deployment). The programme has had 213 Net Zero Strategy: Build Back Greener Wider support International collaboration and

24. Non-financial support in the form of leadership engagement with businesses is also key to 26. Building on our approach domestically, the development and deployment of new we are committed to continued active technologies, systems, policies and business membership of Mission Innovation as the models to achieve net zero. This includes, primary forum to strengthen international for example, support provided through cooperation on clean energy innovation which UKRI, its Knowledge Transfer Network, and is essential for our long-term climate and other bodies like the Catapult network and energy goals. An ambitious second phase of Intellectual Property Office. It also includes Mission Innovation is a priority for government. UKRI’s digital platform pilot programme, which We will provide global leadership and commit will be used to bring net zero businesses to co-leading missions to build a renewable- together with investors for deal flow and powered future and deliver low cost, low to make information on companies more carbon hydrogen. accessible to investors. The Innovation Strategy set out how we will build on this 27. Elsewhere, UK participation in Horizon important support and provide advice, Europe, the world’s largest collaborative networking opportunities, skills development, research programme worth around €95 and testing facilities. This includes a new billion over the next decade, will help us online Innovation hub from Innovate UK, which reach our net zero goals. With a minimum will make it easier for businesses to navigate of 35% of funding earmarked for climate the government’s funding offer, and expansion change projects, this collaboration with other of the Innovate EDGE service which helps world leaders in net zero research will drive firms to enhance their investment readiness. further progress. More detail on our approach to green jobs and 28. Further detail on government’s plans for skills is set out in the Green jobs, skills, and international collaboration and leadership, industries chapter. including Mission Innovation, can be found in

25. The Innovation Strategy also set out the International leadership and collaboration our ambition for government departments chapter of the strategy. to procure more innovative solutions. Departments will produce clear policy problem statements that describe the priority outcomes that they want to solve or achieve. Alongside this, every major project8 should publish an outcome statement. Both measures will improve demand-signalling from departments, allowing them to procure innovation to accelerate the UK’s transition to net zero. This will help us to leverage public procurement as a tool that drives greener and more resilient outcomes across public services. 214 Chapter 4 – Supporting the Transition across the Economy Case study: Horizon 2020 • Secure, Clean and Efficient Societal Challenge - Between 2014 and 2020, around €5.9 billion was allocated through Horizon 2020, to support non-nuclear research through the Secure, Clean and Efficient Energy Societal Challenge. This aimed to support transition to a sustainable and competitive system focused on efficiency, low carbon technologies and smart cities. • Nova Innovation - Nova is an Edinburgh- based tidal energy device and project developer based in Edinburgh and Shetland. Nova was awarded a total of €32.9 million in funding from Horizon 2020, including €20 million funding from Societal Challenge for Secure, Clean and Efficient Energy for their projects investigating tidal energy. The project allowed Nova to access infrastructure that is not available in the UK, for example testing facilities in the Netherlands, and provided networking opportunities that led to Nova working with major multinational companies to create bespoke components. 215 Net Zero Strategy: Build Back Greener 4ii. Green Investment Leading the world in green finance Our Key Commitments • Use the UK Infrastructure Bank (UKIB) to crowd in private finance, support more than £40 billion of investment, and pull through low carbon technologies and sectors to maturity and scale. • Continue to issue green gilts following the success of the UK’s debut sovereign green bond in September 2021, which aims to raise a minimum of £15 billion this financial year. Issue a National Savings & Investment Green Retail Savings Product. • Support the British Business Bank’s new objective to incorporate net zero and wider environmental, social and governance strategy across all activity, as well as the updated FCA and Bank of England’s remit reflecting the importance of environmental sustainability and the transition towards net zero. • Introducing new Sustainability Disclosures Requirements through Greening Finance: A Roadmap to Sustainable Investing, including through: – Becoming the first G20 country to make disclosures aligned to the Taskforce for Climate-Related Financial Disclosures (TCFD) mandatory across the UK economy. – Developing a UK Green Taxonomy and creating the Green Technical Advisory Group to advise on greenwashing and how to implement the taxonomy in a UK context. • We published our roadmap setting out our approach to sustainability disclosures ahead of COP26. This includes a commitment to publish a second iteration of the Green Finance Strategy for the UK which will outline the pathway to net zero for finance in the UK. • We will work with external partners and data providers to better track private investment into the net zero economy going forward. 216 Chapter 4 – Supporting the Transition across the Economy The challenge

1. Both public and private investment will 2. Our 2019 Green Finance Strategy be crucial for any path to net zero. While demonstrated how the strategic use of public we expect most investment to come from funds, long-term policy frameworks, and the private sector, market failures mean signalling can leverage private investment into the private sector alone will not deliver the technologies and infrastructure that will be emissions reductions and innovation at needed to deliver net zero. Each technology the pace required. and sector will present its own challenges, and long-term government support for a large pipeline of projects will be needed. Our goal

3. We will work with the private sector to 5. This will mean supporting the full funding deliver a world-leading net zero financial cycle, from emerging technologies through system, ready to seize the opportunities of to infrastructure and project finance, to net zero. Climate-related financial risk will be deliver the economic transition. Each green embedded into our regulatory frameworks to technology and infrastructure will require help guide capital flows to green investments. different types of financial support depending on its maturity, as shown in figure 28. We

4. We estimate that additional capital must engage all types of capital, from early- investment must grow from present levels stage grant and angel investment through to to an average of £50-60bn per year through institutional finance like pension fund investors. the late 2020s and 2030s. Most of this investment will come from the private sector, 6. The UK is a world leading financial providing new opportunities for businesses hub, with access to global capital pools, and investors. outstanding professional services, and a robust legal and regulatory framework. As such, the UK financial services industry is poised to enable private capital to flow into our net zero investment needs. 217 Net Zero Strategy: Build Back Greener Figure 27 - Public Finance Interventions across the different stages of commercialisation9 Research and Commercial Build Proven commercial Capital markets development prototype and scale proposition ready Start-ups/Corporate R&D Scale up & Growth Scale nce depende Financial in More government support Less government support Supporting framework Financing Green Green skills Greening the financial system NZ aligned regulation Sovereign Green Bond UK Green Taxonomy

7. Public funds will be used strategically to 8. Providing the suitable conditions for support new technologies, as well as emerging regulatory and early-stage innovation is a sectors, as they move from the innovation significant part of our Net Zero Strategy, but stage through to commercialisation and we must also mobilise the wider financial deployment. Early-stage R&D is supported sector to meet the upfront investment by various government grants. Later-stage challenge. This means stimulating new ways organisations can reach commercialisation of providing information to markets on green and benefit from investment through the Clean investment and exposure to climate related Growth Venture Capital (VC) Fund or support financial risk, and providing the investment from the British Business Bank (BBB). These conditions to mobilise private capital into a stages of support are essential for scaling the portfolio of net zero financing. necessary technologies and supporting the growth of businesses aligned to meeting our net zero ambitions. 218 Chapter 4 – Supporting the Transition across the Economy

9. We are driving more disclosure and 11. This builds on the growing voluntary transparency in the markets on climate risks commitments from financial institutions to a and opportunities through the introduction of net zero transition that are already pivoting Sustainability Disclosure Requirements, as financial flows towards net zero in the run‑up outlined in Greening Finance: A Roadmap to to COP26.10 For example, the Glasgow Sustainable Investing. These bring together Financial Alliance for Net Zero (GFANZ), and streamline UK sustainability reporting which was launched as part of the COP26 requirements, including reporting aligned with Presidency, brings together many of the the Taskforce for Climate-Related Financial world’s biggest banks, asset owners, asset Disclosures (TCFD) recommendations and UK managers, insurers and service providers that Green Taxonomy disclosures. are credibly committed to achieving net zero emissions. Using the UN’s Race to Zero as the

10. Targeted public intervention via the British entry criteria, the gold standard for net zero Business Bank (BBB), UK Export Finance commitments, GFANZ has raised, deepened, and the UK Infrastructure Bank (UKIB) will pull and broadened the global financial sector’s through investment from the private sector. For net zero ambitions. GFANZ has launched as instance, British Patient Capital, a commercial ambitious body of technical work to support subsidiary of the BBB, is contributing to the net zero aligned investment and accelerate the transition to net zero through its existing transition to a net zero financial system and investment strategy: 9% of its underlying global economy. investment portfolio is in clean growth, sustainability, and mobility companies. 12. We will publish an update to the Green Finance Strategy in 2022 which will include a net zero transition pathway for the UK financial sector. This will set out how this crucial sector will transition to net zero as a whole. 219 Net Zero Strategy: Build Back Greener Financing green

13. The scale of the net zero challenge and 14. The pathways set out in this strategy persistent market failures mean that public demonstrate that, whilst each sector requires sector intervention is needed to shape and its own policy framework, there are cross- accelerate the flow of private capital. The cutting interventions required to support the right policy signals can act as a catalyst for transition to net zero. We will replicate the private sector investment, as shown by by £90 success of offshore wind and take actions billion of new investment in renewable energy to secure access to finance across the since 2012, in part facilitated by the Electricity economy, ensuring that all sectors are able to Market Reforms (EMR).11 By bringing down access private investment going forward. For the cost of capital through strong policy example, the Industrial Decarbonisation and frameworks, we will reduce the financing costs Hydrogen Revenue Support (IDHRS) scheme of reaching net zero, delivering a better deal (see paragraph 19), will unlock private sector for the taxpayer. capital for industrial carbon capture and hydrogen production projects by providing long-term certainty to investors, de-risking revenue streams in these sectors. Figure 28 - Low carbon sectors commercial maturity and associated capital requirements12 Research and Commercial Build Proven commercial Capital markets development prototype and scale proposition ready Start-ups/R&D Scale up & Growth Scale Low Carbon Long-term Electrification Offshore Hydrogen energy storage of transport wind Advanced CC&S Nuclear Sector Energy Efficiency financial Retrofits independence Financial risk / ture based cost of capital lutions Revenue Net Zero Clean support: Innovation Growth UK Infra business Portfolio Fund Bank models More Government Financing Less Government Financing VC investment funds Institutional investors Corporate ventures e.g . LGIM, HSBC, Grants Crowdfunding Private Equity, Infrastructure Funds & Banks pension funds, etc VCT/(S)EIS funds Supporting framework Financing Green Green skills Greening the financial system NZ aligned regulation Sovereign UK Green Green Bond Taxonomy 220 Chapter 4 – Supporting the Transition across the Economy

15. Through the net zero innovation portfolio, 18. Going beyond SME finance to larger scale funding is provided for low carbon technology infrastructure finance, there are significant innovation. As these technologies, and pools of private finance ready to deploy into sectors, commercialise, they can benefit from UK projects but there can be a mismatch further investment readiness support to help between market appetite and the risk profile of them access repayable private finance. For projects. Infrastructure investment is vulnerable example, the Natural Environment Investment to market failure, as it is often complex, large, Readiness Fund (NEIRF),13 launched by Defra novel and long‑term. Launched in June 2021, and the Environment Agency in 2021, will build the new UK Infrastructure Bank can play a the portfolio of potential investments for net pivotal role in this space, crowding in private zero investors in nature. sector investment in important areas and helping to kick start new sectors. Across the

16. Some of these technologies may also Bank’s full mandate (also covering regional avail of venture capital to allow them to scale growth), it has £12 billion of equity and debt rapidly. Government has shown its support capital and will be able to deploy £10 billion of for this necessary innovation underpinning government guarantees. We expect the Bank its clean growth objectives with a £20 million to use this to crowd in private investment as cornerstone investment in the venture capital a cornerstone investor or guarantor to enable Clean Growth Fund14. This Fund aims to more than £40 billion of investment in the accelerate the deployment of innovative clean areas most prone to market failure, and to technologies that reduce greenhouse gas help deliver its dual policy focus of tackling emissions, alongside catalysing the UK clean climate change and supporting regional and growth venture capital market and leveraging local economic growth. Furthermore, the private sector funding into early‑stage clean Bank will play a pivotal role in catalysing the tech start-ups. For example, the fund led a role of local government in the transition, by £4.7 million investment round into Piclo (the financing strategic infrastructure projects led independent energy trading marketplace) with by local authorities, and providing advice and co‑investment from Mott MacDonald Ventures. expertise in order to strengthen the pipeline of

17. The BBB is a government-owned investable projects. economic development bank with a mission to 19. Industries will need to be supported in drive sustainable growth and prosperity across their transition away from high carbon emitting the UK, and to enable the transition to a net operations. For example, the IDHRS scheme zero economy, by improving access to finance will provide a revenue mechanism to enable for smaller businesses. UK Government has deployment of industrial carbon capture and worked with the BBB on their new mission hydrogen production. UK Export Finance and objective to support the UK’s transition (UKEF)’s Transition Export Development to a net zero economy and incorporate Guarantees (TEDG), launched in 2020, will environmental, social and governance issues ensure that businesses, including those in the across of its activities. The new net zero supply chain, are supported at all stages of objective will support firms looking to move their transition journey. This product can be towards net zero, helping the UK reduce its used by a company for working capital, capital energy consumption and mitigate the impacts expenditure or R&D needs, provided they have of climate change. a credible transition plan. The first TEDG was announced in August with UKEF providing an 80% guarantee on the £430 million commercial loan to Wood Plc. This support from UKEF will help Wood to continue to capitalise on opportunities linked to clean 221 Net Zero Strategy: Build Back Greener energy, hydrogen and decarbonisation. 22. Furthermore, the government is Furthermore, this instrument will support the supporting the development of a Taskforce export of low carbon technology from the on Nature-Related Financial Disclosures UK as evidenced by this guarantee which will (TNFD). This will provide a framework for support Wood to take advantage of green corporate and financial institutions to report trade opportunities. and act on evolving nature-related risks to support a shift in global financial flows away

20. The UK financial system is also taking a from nature-negative outcomes and toward global leadership role transition financing and nature-positive outcomes. This market-led, sustainable finance more widely. An example global initiative will build, consult on, and test, of transition finance leadership is the London its framework over the next 2 years and will be Stock Exchange Group (LSEG) which was the designed to complement the TCFD by building first exchange globally to launch a dedicated on its 4-pillar approach and drawing on its Transition Bond Segment. This distinct lessons learnt. transition label is the application of globally recognised standards, enhancing visibility 23. These interventions are important to and providing assurance to issuers and driving the desired ‘nature-positive’ future. investors. We have seen the financial sector As set out in the Prime Minister’s Ten Point in the UK take the lead in net zero transition Plan, we hope that the UK will also become (for example, through the Glasgow Financial a leader in high-quality voluntary carbon Alliance for Net Zero15) as well as leading markets (VCMs). For these private markets to financial innovation (such as Green Home scale successfully in support of net zero, their Finance Innovation fund). integrity and use as an addition (rather than alternative) to rapid decarbonisation will be

21. The Chancellor, in his Mansion House critical. The government is closely following speech16 in July 2021, set out how the the important work of various sector-led government will ensure that the financial initiatives including: the Taskforce for Scaling system in the UK plays a major role in the Voluntary Carbon Markets (TSVCM); the delivery of the UK’s net zero target and Voluntary Carbon Markets Integrity Initiative ambition for a ‘nature positive’ future. This will UK VCM Forum; and, the Financing UK Nature build on the investment principles outlined Recovery coalition. in the 25 Year Environment Plan including ‘do no significant harm’ to the environment 24. The UK Government issued its inaugural with investment, and implement a series of green gilt on 21 September 2021. This was programmes aimed at building the portfolio a landmark transaction for sterling markets of investable assets across the UK. This will and the UK. At £10 billion, it was the largest involve providing grant programmes like the sovereign green bond issuance to date and Natural Environment Investment Readiness attracted the largest ever order book for a Fund (NEIRF) to help nature-based projects sovereign green bond. The inaugural green become investment ready, but also providing gilt also achieved the largest “greenium” for capital through public-private impact funds any debut sovereign green bond to date, such as the Big Nature Impact Fund to demonstrating good value for money for leverage in private finance. In addition to the taxpayer (a “greenium” refers to more investing in climate and environmental favourable pricing achieved by the issuer solutions, government is also committed of a green bond compared to that for a to ensuring sufficient private capital is hypothetical, equivalent conventional bond). available for investment into adaptation and The UK will then be following up with a second resilience measures. issuance in mid-to-late October, as the UK looks to build out a green yield curve. This 222 Chapter 4 – Supporting the Transition across the Economy followed the successful publication of the UK 26. We are also committed to tracking Government Green Financing Framework on finance flows, to complement how we 30 June 2021, which outlines how proceeds measure carbon. Hence, we will be working raised from the green gilts will help tackle with external partners and data providers climate change, biodiversity loss and other to better track private investment into the environmental challenges. net zero economy going forward. This will enable the UK to robustly, and regularly,

25. NS&I will issue its retail Green Savings assess the alignment of the UK’s financial Bonds later in 2021. These bonds will be flows with net zero. the first standalone retail product to be tied to a sovereign’s green bond framework 27. The UK launched the Green Finance and will allow all UK savers to contribute Education Charter in our 2019 Green to the fight against climate change and the Finance Strategy,17 reflecting the need for government’s other environmental objectives. UK and global financial services industries It gives UK savers the opportunity to take to develop the capabilities of their workforce part in this collective effort to tackle climate in green finance principles and practice. change by contributing to public spending Since then, twelve leading professional on green, whilst increasing awareness bodies representing over 1 million finance in the government’s green initiatives. professionals have signed up to the Charter, This series of wholesale and retail green hosted by the Green Finance Institute. To financing issuances demonstrate the UK’s further build UK capacity, capability and commitment to sustainable finance ahead of climate leadership, we will look to expand COP 26 in November. Charter membership to universities and others, and work with the Institute for Apprenticeships and Technical Education (IfATE). We will also seek to internationalise the Charter by encouraging similar development overseas. 223 Net Zero Strategy: Build Back Greener Case study: The Green Finance Institute model The Green Finance Institute (GFI) was • In September 2020, the CEEB launched established in 2019 with funding from HMG the Green Home Finance Principles, and the City of London Corporation, though it in collaboration with the Loan Markets operates independently of government and is Association, to embed transparency commercially focused. and consistency into the green home finance market. Today, the Principles have Sitting at the nexus between the public and supported 11 financial institutions with private sectors, the GFI provides critical combined mortgage balances of +£480 guidance to government and the financial billion to launch, or commit to launch, sector and delivers programmes which green lending products that minimise the mobilise investment and lending towards real risk of greenwashing. economy outcomes. Through the application of the GFI’s rigorously designed financing • The Coalition for the Decarbonisation of solutions, they have already identified and Road Transport (CRDT) was established co-designed effective interventions that have in May 2021 to unlock financial barriers to deployed capital towards a net zero, carbon the decarbonisation of road transport and resilient economy. enabling infrastructure. • The GFI played a key role in the Dasgupta The GFI primarily operates by convening Review and is also working on a series and leading coalitions of global experts of potentially transformative funding that focus on different sectors and seek mechanisms to support the UK’s 25-year to identify scalable financial solutions that Environment Plan alongside Defra and the accelerate sector-specific transitions to a Environment Agency. low carbon future. • The GFI was appointed Chair and There are several coalitions and initiatives that convener of the Green Technical the GFI now operate: Advisory Group (GTAG), tasked with providing independent expert advice • The Coalition for the Energy Efficiency to government on how to implement a of Buildings (CEEB) is the GFI’s flagship taxonomy in the UK. programme, set up in 2019 to develop the market for financing a net-zero climate- • The GFI is also hosting the Executive resilient built environment. Today, the CEEB Secretariat for the Taskforce on Nature- has over 300 members and accounts for related Disclosures and launching an 70% of the UK mortgage market. This initiative this November to unlock the work is now expanding into Europe. barriers to channel private finance towards nature in the UK. • In partnership with the City of London Corporation, the GFI will host a Green Horizon Summit at COP26, which will focus on mobilising capital in the transition to net zero. 224 Chapter 4 – Supporting the Transition across the Economy Greening finance

28. Financing the technologies required for 31. Alongside measures to implement our transition to net zero is only part of the mandatory disclosures aligned with the TCFD solution. The transition represents both a recommendations for companies and LLPs: risk and an opportunity for the real economy and the financial system that supports it. It • The Financial Conduct Authority has is therefore vital that climate-related financial already introduced a listing rule for risks and impacts are factored into investment premium listed companies which decisions and reflected in the cost of finance commenced on 1 January 2021. This for different technologies and companies. To requires companies to include a statement achieve this, we will harness the international in their annual financial report which reputation of the UK’s leading financial sector sets out whether their disclosures are to encourage private investment to support consistent with the recommendations low carbon innovation and manage climate- of the TCFD, and to explain why if they related financial risk. have not done so. • Government introduced regulations, in

29. As the Chancellor outlined in his Mansion force from 1 October 2021, to require House speech,18 the government intends pension schemes with £5 billion or more to introduce economy-wide Sustainability in assets to report line with the TCFD’s Disclosure Requirements covering the whole recommendations. By October 2022, economy. This will include requirements to over 80% of members of occupational report on businesses and investment products pension schemes – and more than 70% impact on the climate and environment, as of assets under management – will be in well as the risks and opportunities these schemes reporting in line with the TCFD impacts pose to business. Our approach is recommendations. detailed in Greening Finance: A Roadmap to Sustainable Investing. 32. Our stated objective is to increase the quantity and quality of climate-related financial

30. The UK has already established itself as disclosures in a proportionate manner. This a world leader on green finance regulation, is to ensure market participants have better becoming the first G20 country to make information to adequately understand climate- disclosures aligned with the Task Force on related financial risks and opportunities to Climate-related Financial Disclosures (TCFD) support the transition to net zero. recommendations fully mandatory across the economy by 2025. As part of the roadmap 33. In November 2020, the Chancellor to delivery, BEIS consulted earlier in the announced that the government is year on mandatory climate-related financial implementing a UK Green Taxonomy. disclosures by publicly quoted companies, This will clearly set out the criteria which large private companies and the largest specific economic activities must meet to Limited Liability Partnerships (LLPs) from the be considered environmentally sustainable. 6th April 2022. Following widespread support The first two Technical Screening Criteria for the proposals, we will shortly be setting out (TSC) on climate change mitigation and regulations to bring this into force, including a adaptation will be made by the end of 2022. requirement for scenario analysis - a powerful To support the development of the TSCs, we tool to support companies in their assessment have since announced the appointment of a of climate-related risks and opportunities. Green Technical Advisory Group (GTAG) in June 2021. Made up a of range of financial 225 Net Zero Strategy: Build Back Greener and business stakeholders, taxonomy and 34. Key to delivering enhanced disclosure data experts, and subject matter experts, on climate change is the availability of data and chaired by the Green Finance Institute, financial institutions can use. The UK Centre this will provide independent, non-binding for Greening Finance and Investment (CGFI) advice to the government on developing and is a national centre established to accelerate implementing a Green Taxonomy in the UK the adoption and use of climate and context. For example, we have established environmental data and analytics by financial an Energy Working Group as part of the institutions internationally. CGFI will equip GTAG to provide advice on key technologies financial institutions with the tools and capacity such as hydrogen and carbon capture and required to effectively allocate capital to meet storage. Taken together, these enhanced net zero ambitions and ensure global UK Sustainability Disclosure Requirements will leadership in green finance and green finance support companies to communicate clear data and analytics. and credible low carbon transition plans needed by investors. 226 Chapter 4 – Supporting the Transition across the Economy Case study: Providing a net zero- aligned regulatory environment In March 2021, the Chancellor outlined his • In November 2020, the UK joint regulator recommendation to regulators that they and government TCFD Taskforce, of should “have regard to the government’s which the Bank is a member, published an commitment to achieve a net zero economy interim report and roadmap for mandatory by 2050”. There has already been significant TCFD-aligned disclosure requirements work by the Bank of England and the Financial across the economy by 2025. Conduct Authority. • The Bank has also sought to lead by example and in 2021 became the first The Bank of England central bank to publish a climate-related The Bank’s approach to climate change is to financial disclosure which included play a leading role, through its policies and analysis of financial asset portfolios held operations, in ensuring the financial system, for monetary policy purposes. The Bank the macroeconomy, and the Bank of England also committed to reduce the emissions itself, are resilient to the risks from climate from its physical operations to net-zero by change and supportive of the transition to a 2050 at the latest. net zero emissions economy. The Financial Conduct Recent actions to deliver this include: Authority (FCA) • In April 2019, the Bank published a The FCA’s work on climate change and comprehensive set of supervisory sustainable finance aims to make sure expectations for how banks and insurers market participants can manage the risks, should enhance their approaches to impacts and opportunities from moving to a managing the financial risks from climate more sustainable economy and can capture change. This was followed up in July 2020 opportunities from the net zero transition. Key with a Dear CEO letter, which included developments in 2021 include: additional guidance and set a deadline for firms to embed fully these expectations by • Introducing a TCFD-aligned Listing Rule the end of 2021. for premium-listed commercial companies, and consulting on new proposals to • In June 2021 the Bank launched its extend the application of the rule to Climate Biennial Exploratory Scenario issuers of standard listed equity shares, (CBES) exercise to assess the resilience of and to implement new disclosure rules individual banks, insurers, and the wider for asset managers, life insurers, and UK financial system to three different FCA-regulated pension providers with climate scenarios. These scenarios a focus on the information needs of are based on those published by the clients and customers; international central banks and supervisors Network for Greening the Financial • Co-chairing work on climate-related System (NGFS), of which the Bank is a and sustainability disclosures at the founding member and where it chairs International Organisation of Securities the workstream developing the NGFS Commissions and the Financial climate scenarios. Stability Board; 227 Net Zero Strategy: Build Back Greener • Issuing a supervisory letter to the chairs of Authorised Fund Managers, including a set of guiding principles to help clarify the FCA’s expectations for the design, delivery and disclosure of retail responsible and sustainable funds – both as applications are submitted for authorisation and on an ongoing basis; • Launching a comprehensive innovation work programme on sustainability, including the announcement that the next cohort of the Digital Sandbox Pilot will focus on sustainability and climate change; the FCA has begun work with the City of London Corporation and industry to support the development of solutions to ESG data and disclosures issues via a digital testing environment, and is aiming for this environment to go live in Q1 2022; and, • Alongside the other financial regulators, publishing an inaugural Climate Adaptation Report (CAR) setting out the actions the FCA and financial services industry are taking to adapt to the challenges of climate change; the CAR will include a chapter on net zero which will explore net zero commitments, targets, tools and challenges. 228 4iii. Green Jobs, Skills, and Industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Our Key Commitments • Publish sector and supply chain development plans for key low carbon sectors and work with business to encourage investment in green skills and industries in the UK. • Publish a UK Critical Minerals strategy, setting out our approach to securing technology-critical minerals and metals. • Support the development of a skilled, competitive supply chain for key green industries in the UK. • Reform the skills system so that training providers, employers and learners are incentivised and equipped to play their part in delivering the transition to net zero – including by legislating for skills required for jobs that support action on climate change and other environmental goals to be considered in the development of new local skills improvement plans. • Deliver a Lifetime Skills Guarantee and grow key post-16 training programmes (such as apprenticeships, Skills Bootcamps and T levels) in line with the needs of employers in the green economy, helping individuals get the training they need for a job in the green economy, either at the start of their careers or when retraining or upskilling once already in the workforce. • Introduce a sustainability and climate change strategy for education and children’s services which will include a focus on equipping children and young people with the knowledge and skills they need to contribute to the green economy. Net Zero Strategy: Build Back Greener The Challenge

1. The national and global shift towards 3. We will need tens of thousands of net zero provides a once in a generation engineers to build and maintain new offshore opportunity to level up the country, create new wind farms off the coasts of northern green jobs, and put the UK at the forefront of England and Scotland, construct nuclear growing global markets in green technologies. power stations in the South of England, Delivering on this promise, whilst meeting our and manufacture electric vehicles in the ambitious climate and environmental targets, Midlands; skilled builders and trades people will be in a large part dependent on having to retrofit homes and buildings across the a sufficiently skilled workforce and robust, country; and conservation and biodiversity competitive supply chains in the UK. professionals to deliver nature-based solutions to climate change.

2. Recent developments have thrown into sharp relief the inherent vulnerabilities 4. Alongside a broader shift to digitisation associated with complex global supply and automation, we can expect the transition chains and shocks to the global economic to net zero to be one of the dominant system. The transition to net zero will change labour market trends in the next 30 years: the nature of the UK’s critical supply chains. approximately 6.3 million jobs in the UK, about Our aim is to help ensure that supply chains one in five, are likely to be affected by the critical for the transition to net zero are secure, transition to a green economy, with workers ensuring that we have access to the materials, experiencing either an increase or decrease in minerals, and chemicals that our growing the demand for their skills.19 green economy will need. Our approach is that there is no “one size fits all” model for building resilience in individual supply chains: often a combination of levers may be the best solution to address a vulnerability. 230 Chapter 4 – Supporting the Transition across the Economy Our Goals

5. The government’s ambition is to: – Reforming the skills system to make it more responsive to the • Support up to 440,000 jobs across net needs of employers, so that training zero industries in 2030, contributing providers, employers, and workers are towards a broader pivot to a greener incentivised and equipped to support economy which could support 2 million the transition to net zero; jobs in green sectors or by greening existing sectors by: – Ramping up support for workers in the high carbon economy to – Working with business to grow transition to green jobs; green industries, supply chains and – Working with business to ensure skills in the UK, and ensure our people from all backgrounds can resilience to international changes in access the opportunities in the supply chains; and, green economy, including through – Using our net zero policy and funding career advice; and, to promote the growth of green skills – Providing children and young people and the green economy. with the high-quality education and • Enable workers, industries, and places training they need to work in a future to transition to a net zero economy by green career, through improving 2050, and support industry to develop teacher training and development the skilled workforce to deliver a green in STEM and other key subjects, industrial revolution by: and expanding post-16 training programmes in line with the needs of the green economy. 231 Net Zero Strategy: Build Back Greener The Green Jobs Taskforce To better understand how the UK could grasp opportunities of the Green Industrial Revolution, the Department of Business, Energy and Industrial Strategy and the Department of Education launched the Green Jobs Taskforce in November 2020. The Taskforce provided an independent assessment of the potential skills and labour market impacts of the net zero transition, including how we can ensure green jobs are open to all and support workers to transition to the green economy. The independent Taskforce, which included representatives from industry, trade unions, the skills sector and community organisations, took a broad view of green jobs, as “employment in an activity that directly contributes to, or indirectly supports, the achievement of the UK’s net zero emissions target and other environmental goals, such as nature restoration and mitigation against climate risks.” Its report, published in July 2021, included 15 recommendations for government, industry and the skills sector, which focused on three themes across the “life cycle” of green jobs: driving investment in net zero to support good quality green jobs in the UK; building pathways into good green careers; and supporting workers in the high carbon economy to transition. The ideas generated through the Taskforce and its engagement with industry have informed the development of this Strategy. 232 Chapter 4 – Supporting the Transition across the Economy Working with business to grow green UK industries and resilient supply chains

6. The investment needed for the transition 8. We also recognise that the starting to net zero will primarily be delivered by the position when building resilience in critical private sector. As such, our first priority is supply chains should be to take a market- to provide businesses, investors, workers, first approach. The UK prospers under and skills providers with policy certainty to an open economy and openness itself unlock investment, ensuring we support green confers resilience. We will leverage the UK’s industries to develop in the UK. competitive strengths across the supply chain, while deploying those levers available to the

7. In line with Build Back Better: Our Plan for Government – including UK Export Finance Growth, we are taking action across a range and the new Office for Investment – to ensure of low carbon industries with the greatest that we exploit our strengths, while supporting economic potential and competitive strength. those areas that could be vulnerable In doing so, we will support the growth of UK to global shocks. supply chains and create new opportunities for UK businesses and level up the country. We are acting to build green industries such as offshore wind in North East England and in Scotland, carbon capture and hydrogen production in our industrial heartlands, electric vehicles manufacture in the midlands and Northeast of England, and the restoration and protection of nature in rural areas. 233 Net Zero Strategy: Build Back Greener Case studies: Driving investment into green supply chains in the UK The Prime Minister’s Ten Point Plan, and our a package of measures including the Net subsequent sectoral strategies, put in place Zero Hydrogen Fund (NZHF). The NZHF will a range of funding and policy initiatives to kickstart the hydrogen economy in the early enable green industries and supply chains to 2020s by supporting projects with upfront develop in the UK, supporting our ambition to costs, stimulating private sector investment, deliver on green jobs: and developing the pipeline of projects needed to deliver hydrogen production Building the Offshore Wind at scale by 2030. Supply Chain Transforming automotive Announced as part of the Ten Point Plan, the manufacturing UK’s offshore wind manufacturing industry has already seen almost £1.5 billion of investment The UK is already capitalising on opportunities unlocked by the £160 million Offshore Wind from the global shift to electric vehicles, as Manufacturing Investment Support scheme, demonstrated by recent investments made which aims to further develop the UK’s by Stellantis in Ellesmere Port, and Nissan offshore wind capabilities. The investments and Envision AESC in Sunderland. Allocating have seen a significant boost over the summer a further £350 million of our up to £1 billion with up to 3,600 jobs supported across the Automotive Transformation Fund (ATF) to Humber region. This continues to lay the support the electrification of UK vehicles and groundwork to deliver 40 GW of energy from their supply chains. This will help ensure offshore wind by 2030 and for UK businesses the UK maximises the benefits from the and workers to take full advantage of the transition to a zero emission vehicle future booming offshore market in the UK and and support tens of thousands of high-quality internationally, support up to 60,000 jobs in green jobs across the UK. Government the industry and its supply chain, and help and industry have also jointly committed eliminate the UK’s contribution to carbon around £1 billion through the Advanced emissions by 2050.20 Propulsion Centre for collaborative research and development in the next generation of We are preparing for the next wave of low carbon vehicle technologies. A further deployment around the UK, with world £318 million of government funding has been leading 1 GW deployment targets for provided to put the UK at the forefront of the innovative floating offshore wind turbines. design, development, and manufacturing of The government has set up a floating electric batteries through the Faraday Battery offshore wind demonstration programme Challenge and nearly £80 million to Driving to support development of state-of-the-art the Electric Revolution to accelerate growth technologies and products in the floating in the supply chain for power electronics, offshore wind industry. machines and drives. Net Zero Hydrogen Fund Government has set an ambition to deploy 5 GWs of low carbon hydrogen production capacity in the UK by 2030, supported by 234 Chapter 4 – Supporting the Transition across the Economy Driving investment and jobs in the natural environment Government’s Green Recovery Challenge Fund is supporting over 150 projects across England that are tackling climate change, restoring nature, and supporting 2,500 green jobs. The Nature for Climate Fund is also contributing to net zero and creating and supporting green jobs by funding new woodland creation and peatland restoration. In addition, the £9 million Natural Environment Investment Readiness Fund is stimulating a pipeline of nature projects that can attract private sector investment. 235 Net Zero Strategy: Build Back Greener

9. We are working in partnership with our 11. The development of resilient, efficient, world-class sectors to enable them to take and competitive supply chains will be a part in the transition, for example through the collaborative strategic endeavour. To support North Sea Transition Deal, which committed this, in May 2021 we published the CCUS to focusing on supporting the transformation Supply Chain Roadmap, which sets out how of the oil and gas supply chain to service government and industry can work together the low carbon energy sector. Building to harness a strong UK supply chain, and on this, we have established the Energy we have committed to publish a hydrogen Supply Chain Taskforce (UKESC) as a joint sector development action plan in 2022, enterprise between industry and government which will outline how the government will to guide policy making and maximise the support companies to secure supply chain jobs and business opportunities from the opportunities, skills and jobs in the sector. transition in the UK. The UKESC cover all We will build on this by working with industry energy sectors and regions of the UK and, to publish further sector and supply chain building on work already underway, it will development plans for those low carbon map the energy project pipeline and identify sectors where the UK has the potential higher value segments of the supply chain to to capture an economic advantage. This prioritise in the UK. will include ensuring we are resilient to international changes in supply caused by

10. The Integrated Review Security, Defence, external shocks, including climate-related Development and Foreign Policy committed disruption, spikes in global demand, rising to ‘a resilient UK able to withstand and commodity costs, or artificial constraints proactively tackle the challenges of today on supply. For example, we will need to and the future’, including a specific focus on ensure we have access to a diverse range supply chain resilience, committing to ‘using of sources of chemicals, given they feed all our economic tools and our independent into 95% of our manufacturing base. As we trade policy to create economic growth that move forward, where possible, government is distributed more equitably across the UK will provide more visibility around planned and to diversify our supply chains in critical deployment cycles to increase the opportunity goods’. Similarly, the Plan for Growth outlines for suppliers to invest in long-term production, the importance of international markets to infrastructure, and training. ensuring diverse supply sources for the goods and services we need, improving the resilience of our supply chains and benefitting prosperity. 236 Chapter 4 – Supporting the Transition across the Economy Deep Dive - Critical Minerals, Supply Chains and Net Zero The transition to Net Zero means new supply • Ensuring the UK has a reliable supply of chains are becoming critical to the UK’s critical minerals and metals; energy production. Critical minerals are • Establishing an enabling environment for metals and non-metals that are vital for a growing the sector in the UK; defined economic activity and for the well- being of the country, yet whose supply may • Showing leadership through working be at risk owing to geological distribution, bilaterally and multilaterally to support lack of substitutes and/or other factors. work on international standards to extend Such minerals provide materials essential and strengthen the circular economy in for components in many of today’s rapidly technology-critical minerals; growing clean energy technologies – from off- • Ensuring our work to build critical mineral shore wind turbines to electric vehicles. The supply chain resilience supports our World Bank suggests that the production of international development priorities; minerals such as graphite, lithium and cobalt, • Using our R&D resource to build a better could increase by nearly 500% by 2050 to understanding of markets and prices to meet the growing demand.21 help mitigate the impact of supply shocks The government is committed to working and demand spikes, and to enable better with industry and with international partners foresight and early intervention; and, to safeguard these supply chains and our • Work with UK industry (including future economic resilience. We are actively SMEs) to consider how private and supporting the adoption of transparent, ethical public sectors can better share risks and responsible mining practices, reflecting to promote investment and drive environmental, social and governance (ESG) innovation at all levels. considerations, and are participating in the We will support the engagement of the UK’s development of global standards through the mining sector in new and existing markets, British Standards Institution. facilitating investment and collaboration in We will establish an Expert Committee on extraction and processing opportunities. We Critical Minerals to provide independent advice will also champion free and open global trade to government on the scope and content of including through Free Trade Agreements to a critical minerals strategy and will publish support this ambition and will explore use of an updated list of these minerals to guide Freeports to support opportunities for the UK investment decisions. We will establish a to develop as a critical minerals processing Critical Minerals Intelligence Centre to provide hub supplying Europe and beyond. robust, dynamic analysis on stocks and flows to guide our decision-making. Going forward, the government will publish a UK Critical Minerals strategy in 2022, setting out our approach to securing the technology- critical minerals and metals aimed at: 237 Net Zero Strategy: Build Back Greener Supporting workers, industries, and places to transition and develop the skills needed to deliver net zero

12. There are urgent and emerging skills 14. The impact of the transition on the labour challenges across the green economy which market will not be evenly spread across the we will need to address over the short and UK, reflecting the geographical distribution long term if we are to meet our ambitions of where existing industries will need to for a Green Industrial Revolution. We aim adapt and others new ones will flourish.29 to quadruple our offshore wind capacity However, there are opportunities for workers to 40 GW, with the growth in this sector in transitioning sectors, such as oil and gas, supporting up to 60,000 jobs in 2030.22 In to utilise their specialist skills in key important the construction and heating sectors, up green sectors, sectors such as hydrogen and to 230,000 skilled trades people could be CCUS with these two sectors expected to required in 2030 to deliver the retrofitting of grow from the middle part of this decade. houses23 and to meet our ambition of installing 600,000 heat pumps a year by 2028, we will need to rapidly increase the number of qualified installers from around 3,000 to 35,000 within the next 7 years.24 As the automotive manufacturing sector transforms to producing electric vehicles, as many as 50,000 workers in the UK’s automotive manufacturing sector could need reskilling by 2025.25 In forestry and its supporting sectors, industry estimates point to projected labour demand of approximately 2,000 jobs over the next five years.26

13. As well as specialists in these sectors, employers will also need workers with wider cross-cutting skills to deliver net zero, including digital and data skills, project management, communications and change management. 27 There will also be increased need to work in a multidisciplinary way due to the way work will change in some sectors such as whole house retrofitting will need knowledge of multiple technologies.28 238 Chapter 4 – Supporting the Transition across the Economy Working with industry and key partners to support good green jobs and skills

15. Industry and government will need 18. We want to see continuous improvement to take action to ensure the UK has the in the quality of jobs in the UK, both in the skilled workforce to deliver net zero and that creation of new high-quality jobs which workers, industries and places are supported support Government priorities such as net on the transition. This will be particularly zero, and through in-work progression. We will important given the pace and scale of the continue to drive this agenda forward through change, and the specific challenges faced the Employment Bill, which will support our by smaller companies in some sectors and ambition to make the UK the best place in the supply chains. To drive this forward we have world to work and grow a business, and the announced a cross-cutting delivery group cross-cutting delivery group will consider how to include representatives from industry, the government and industry can work together to skills sector and other key stakeholders to ensure green jobs are good jobs. support the development and delivery of the Government’s plans for green jobs and 19. While skills policy is a devolved skills. We will set out further details of the matter, the Government also welcomes membership and mandate of the cross-cutting close engagement with the devolved delivery group later this year. administrations, Mayoral Combined Authorities and the Greater London Authority, on this

16. To support this work, and monitor our agenda, to ensure everyone across the UK progress, it is vital that we continue to develop has access to green skills and jobs. the evidence on how net zero will impact jobs and skills. The Office for National Statistics will seek to refine our understanding and measurement of the green economy as the UK transitions to net zero, including looking at such issues as quality of work and diversity within the green economy.

17. Join up between local bodies, employers and local communities will be key to ensuring an effective transition. Building on the measures set out in the Local Climate Action chapter, and our skills system reforms, we will assess how local areas are working to support workers and communities with the net zero transition across England. 239 Net Zero Strategy: Build Back Greener Working together across the UK Examples of policy action by the Scottish Scotland Government, Welsh Government and Northern Ireland Executive The Scottish Government has set out a package of measures to create good, Northern Ireland Executive green jobs, reskill those that need it and provide a career platform for the next The forthcoming Green Growth Strategy, will generation. It includes: be a multi-decade strategy to balance climate, environment and the economy. It means a • a £100 million Green Jobs Fund to help move from a high to a low greenhouse gas businesses create new, green jobs. emissions economy to improve people’s Related funding will make focused quality of life through green jobs and a investments in machinery and equipment clean environment. and research and development in five priority sectors: energy transition; Innovation is key to the disruptive transition transport; manufacturing; construction; required. ‘10X Economy’ sets out the vision agriculture and land use; for the 2020s as a decade of innovation bringing opportunity and growth. The focus • a £25 million National Transition Training on innovation is reinforced in the Energy Fund with a focus on: Policy Options paper also strongly advocating – The provision of green skills; innovation. New skills will be critical to allow innovation to flourish into delivery. The Skills – A Young Person’s Guarantee for Strategy consultation recognises that a 16-24 year olds; transformational change in skills is required to – The use of public procurement to build take advantage of Northern Ireland’s scale, yet low carbon supply chains. addressing the challenges in the skills sector. The Climate Emergency Skills Action Plan To take one example, the decarbonisation of (CESAP) sets out a clear direction for the gas infrastructure will involve the development change of Scotland’s skills system, and of new supply chains for production of signals the role that businesses, communities biomethane from anaerobic digestion plants and individuals across Scotland will play in and development of hydrogen production achieving this. technologies, which will support green jobs The CESAP focuses on immediate action and new skills in these sectors. as well as the longer-term systemic change that needs to take place by 2045. It is being driven by senior representatives of central and local government and its agencies, skills providers, industry and independent experts, and is chaired by Professor Dave Reay of Edinburgh University. The Scottish Government’s Green Jobs Workforce Academy was launched in August

2021. The Academy will make it easier for people from a wide range of backgrounds to launch a green career, and to access 240 Chapter 4 – Supporting the Transition across the Economy appropriate training. The Academy will support delivery of a skills guarantee for workers in carbon-intensive sectors. Wales Since its launch in 2010 the £30+ million BEACON, a collaboration led by Aberystwyth University, working with Bangor and Swansea Universities and the University of South Wales, has built up a strong skill base in the bio business sector by providing collaborative R&D support for Welsh businesses30. BEACON has worked successfully with hundreds of companies, enabling them to develop and trial ideas on an industrial scale, and to get their products and services closer to market. Products include bio plastics, food additives, building materials and fuel. 241 Net Zero Strategy: Build Back Greener Reforming the skills system 23. Second, our £65 million Development Fund pilots in 2021-2022 will support work

20. We are driving forward reforms to put to identify employers’ skills needs, design employers at the heart of the skills system and provision to respond, and build the capacity ensure colleges are responsive to the needs of local further education providers to deliver. of local economies. As demand for green skills Where local areas identify a skills need, for continue to grow across the UK, employers in example increasing the number of trained the green economy must prioritise investment retrofitters, providers could use this funding in the retraining and upskilling of their to purchase equipment, train their staff, bring workforce, and actively take the opportunity in industry expertise to provide training, or to engage with education providers to shape deliver new provision. The majority of the local provision. 18 pilots announced in July 2021 include a

21. Central to our strategic reforms are the project focused on green skills, covering areas plans set out in the Skills for Jobs White including decarbonisation, renewable energy, Paper, which will enable local employers to set and electric vehicles. out their green skills needs to drive provision in 24. Alongside this. we want people to get local colleges. The programme is made up of the advanced technical and higher technical two parts: local skills improvement plans and skills they need to get good jobs. Colleges’ the Development Fund. place at the centre of their local communities

22. First, the Trailblazers for local skills and economies means that they are key to improvement plans, led by employer unlocking opportunities across the country representative bodies will identify and and to building back better. We are, therefore, articulate unmet and future local skills needs reforming the adult skills funding and and work with further education providers accountability system for further education to adapt their technical training offer so that colleges and other training providers in a way it becomes more responsive to employers’ that will help improve our skills provision. needs. Through the Skills and Post-16 We are consulting on a range of proposals Education Bill, we are legislating to put the to make sure colleges are better supported employer leadership of these plans on a to focus on helping their students into good statutory footing and ensure they have regard jobs; reduce the complexity of funding so to skills needed to help deliver on our net zero that colleges can focus on their core role of target, adaptation to climate change, and education and training; and define clearer other environmental goals. roles and responsibilities for the key players in the system. This means that, for the first time, we will be able to reflect the value that relevant courses deliver to the taxpayer in the funding rate colleges receive for putting on courses. This will encourage providers to put on courses in subjects where there is strong demand from employers. We will hold colleges to account for delivering good outcomes, and are consulting on proposals to introduce new Accountability Agreements setting out national priorities against which we expect colleges to deliver, for example enabling students to access opportunities in the green economy. 242 Chapter 4 – Supporting the Transition across the Economy

25. Supporting the transition through the Ramping up support for workers in skills system will require teachers in the high carbon sectors to transition to further education sector to have a strong green jobs understanding of sustainability. To deliver this, we have worked with employers to develop 26. Over 80% of the workforce of 2030 is a refreshed apprenticeship standard for already in work today31, as such meeting further education teaching (Level 5 Learning our ambitious targets for climate action in and Skills Teacher), which came into effect the next decade, and reaching net zero by in September 2021. For the first time, all 2050, will require government and industry further education teachers training via an to work together to ensure workers in high- apprenticeship will be required to integrate carbon sectors can retrain and upskill as sustainability into their teaching, including they move into jobs in the green economy. through modelling sustainable practices and Much of this will take place in industry (see promoting sustainable development principles the case study below) and we will support in relation to their subject specialism. Early this through our targeted programmes for estimates from the Trailblazer Group suggest industries and workers. around 1,500 teachers each year could train using this apprenticeship standard. This standard will soon be incorporated into all future further education teaching qualifications, so that all teachers across all subject areas will be able to embed and promote sustainability in their teaching. Case study: Industry action on reskilling for the transition Centrica Centrica have announced plans to hire 3,500 Smart Energy Apprentices by 2030, with the first 1,000 apprentices recruited by the end of 2022. Apprentices joining Centrica receive technical skills training and knowledge for the job at the company’s academies in Dartford, Hamilton, Leicester, and Thatcham. Many have taken up the opportunity to upskill at Centrica to become domestic electrical installers, with skills in Electric Vehicle charging point installation, or to achieve gas boiler service and repair capability. Upskilling training for domestic electrical installers lasts 20 weeks and is offered after Smart Energy Engineers have finished their apprenticeship. The gas boiler service and repair programme also takes place after completing the Smart Energy Apprenticeships, and is split over two years. Every year, Centrica’s academies train and assess 5,000 engineers to keep all British Gas engineers compliant with their specific roles’ regulatory and industry requirements. 243 Net Zero Strategy: Build Back Greener

27. In key sectors, we will ramp up our qualifications linked to green sectors such support to develop UK supply chains and as Agriculture, Building and Construction, enable workers to access green jobs. This Engineering, Environmental Conservation, will include working with industry on a Heat Horticulture and Forestry and Science. An Network Skills Programme to increase the estimated 11 million adults over the age of 24 capacity and capability of the UK supply chain in England are eligible for the Free Courses for to support the sector to reach its growth Jobs offer. We will continue working closely potential. Our Public Sector Low Carbon Skills with employers to understand where the offer Fund will enable public sector organisations could be extended further to enable more to acquire expert skills in order to unlock adults to access qualifications to give them decarbonisation projects. Alongside this, we skills needed for the net zero transition. will work with industry to support training and new routes of entry to help boost heat 29. This will be underpinned by the Lifelong pump installer numbers and other areas of Loan Entitlement (LLE) from 2025, which will skills shortage to support the decarbonisation provide individuals with a loan entitlement of buildings. We will also support the equivalent to up to four years of post-18 development of new green skills for hydrogen, education to use over their lifetime. As part CCUS and industrial decarbonisation to of the pathway towards the LLE, we will ensure the UK workforce is ready to deploy trial short course provision at Levels 4-6 to low carbon technologies. Our funding for the support in-work adults to upskill and retrain, Aberdeen Energy Transition Zone will position enabling learners to flexibly build towards a the region as an exemplar for low carbon full qualification in subjects crucial for net zero development, supporting the transition of including STEM and digital innovation. existing oil and gas skills to renewable energy 30. Through the NSF we are also delivering sectors. We also will continue to support the an Emerging Skills Project in electrification and forestry sector to improve its training and battery technology, which commenced in June career services. 2021.Alongside this, our NSF funded In-Work

28. Through the Lifetime Skills Guarantee, Skills Pilot, launched in September 2021, will we are supporting workers to gain the skills seek to respond to immediate skills shortages they need to transition to the green economy, required for net zero, stimulate demand for including through targeted support for short course provision at levels 4-5 across retraining. As part of this, through the National STEM sectors, and boost worker’s career Skills Fund (NSF) investment we are delivering and progression opportunities in key green Skills Bootcamps, which are short, flexible sectors, such as electrification in the auto courses covering digital, technical and green industry and low carbon engineering. skills. Green Skills Bootcamps are available in areas such as housing retrofit, solar, nuclear energy and vehicle electrification. Overall, we expect there will be approximately 16,000 Skills Bootcamp places available across the country in financial year 2021-22. We will undertake robust evaluation of this exciting training model to explore potential future plans. In addition, our Free Courses for Jobs offer has, since April 2021, been supporting adults that do not have a qualification at Level 332 or higher to access over 400 Level 3 courses for free. The offer currently includes 244 Chapter 4 – Supporting the Transition across the Economy

31. Given the pace and the scale of the 34. Alongside this, we will continue to work transformation, we are considering how with green employers to raise awareness government can work more closely with of the opportunities in the green economy sectors in the future to support them in the through an integrated careers information, green transition, and identifying where we can advice and guidance offer through schools, adapt and enhance our support for people colleges, universities, and employers to raise at risk of redundancy to support a transition awareness of different career pathways in low to green jobs. This builds upon our existing carbon sectors. work coach interventions and targeted provision including Sector-based Work 35. To further break down perceived barriers Academy Programmes (SWAPs), traineeships, to working in the energy sector, boost diversity apprenticeships and other skills provision and increase STEM skills, our Build Back which are ensuring jobseekers can develop Better campaigns will seek to inspire people the right skills to move into green jobs. from all walks of life to work in the green economy, and raise awareness of green Working with business to support education, training, and careers. people from all backgrounds to have a 36. The UK’s joint presidency of COP26 green career brings a unique opportunity to showcase green careers to a new generation of children

32. We support the Green Jobs Taskforce’s and young people. We are capitalising on recommendation that industry should prioritise this by working with industry to launch the ensuring that people from all backgrounds Faces of The Energy Transition campaign can work in green jobs, building on existing to showcase the inspiring people, projects good practice and capitalising on the unique and organisations working to achieve the opportunity of young people’s interest in clean energy transition, and supporting green climate change and the environment. A careers events at COP26 in Glasgow. more diverse workforce will aid the transition by expanding the talent pool, encouraging Building a foundation for future new ways of thinking, enhancing innovation, green careers and boosting profitability and productivity across the economy.33 37. Schools and colleges will play a vital role delivering high-quality education and training

33. To drive this important work forward we to equip young people with the knowledge will continue to encourage industry to ensure and skills required for the green economy. This there is equal opportunity for all to work in will help to grow the pipeline of skilled workers the green economy, building on our support needed to help deliver the net zero transition. for industry initiatives such as the POWERful Women campaign and commitment under 38. The science, geography and citizenship the ‘Equal by 30 Campaign’ to close the programmes in the National Curriculum at pay gap, improve female representation in both primary (KS1-2) and secondary (KS3-4) senior roles and opportunity for women in cover key content which supports knowledge the global clean energy sector by 2030. and understanding of sustainability and Through the cross-cutting delivery group we climate change. An environmental science will explore what actions can be taken across A Level was introduced in 2017. Equipping industry to improve diversity in the green students with secure knowledge and skills in economy, including improving data collection STEM and other key subjects will be critical and transparency. in supporting them to progress to skilled jobs in the green economy. We are, therefore, supporting teachers to deliver high-quality 245 Net Zero Strategy: Build Back Greener teaching in these subjects by creating a 41. To ensure this system reflects the needs world-class teacher development system that of the green economy, the Institute for builds from initial teacher training through to Apprenticeships and Technical Education early career support, specialisation and onto (IfATE) has convened a Green Apprenticeships school leadership. Our vision is that a golden Advisory Panel (GAAP) to work with thread of training, support and professional employers to align apprenticeships to net development - informed by high-quality zero objectives. Work is underway to map evidence - will run through each phase of existing apprenticeship standards against a teacher’s career. We are also funding green occupations and identify opportunities several initiatives to support subject-specific to create new standards in areas including professional development in STEM subjects retrofit, agri-tech and renewable energy across all key stages. We are working with and the GAAP has endorsed existing Oak National Academy to give teachers apprenticeships which support green career access to high-quality curriculum resources to pathways. We have already seen positive support their teaching, including in subjects engagement in the energy sector with over that cover sustainability and climate change. 1,000 apprenticeship starts in Wind Turbine We are also working with industry, through Maintenance and Operations Engineering programmes such as Tomorrow’s Engineers Technician standards in 2019/20. The GAAP Code, to showcase the diversity of roles will build on this list into 2022, in line with the and people that make up the STEM sector, Ten Point Plan and the findings of the Green encouraging more young people from different Jobs Taskforce. The work of the GAAP will backgrounds to choose a career in the sector. also support other key post-16 programmes that are underpinned by the same standards

39. We will build on this by bringing as apprenticeships (such as T levels and forward a strategy which will set out how higher technical qualifications) to align with the our children’s services, education and skills needs of the green economy. systems will support the UK to meet its net zero target, become more resilient to climate 42. In 2021, we introduced the first change and improve biodiversity. This will occupational traineeships, in collaboration include a focus on ensuring excellence in with sector bodies, to provide a clear, planned education for a changing world, which will transition to an apprenticeship at Level 2-3 prepare children and young people with the for young people aged 16-24. Going forward, knowledge and skills they need to contribute we will consider the potential to develop and to the green economy. introduce other occupational traineeships, including in priority and green sectors

40. At post-16 level, we will continue to to ensure that young people secure the build on our apprenticeship reforms, set out jobs of the future. in the Skills for Jobs White Paper, to align the majority of post-16 technical education 43. We are continuing to roll out T Levels that and training with employer-led standards by support green careers, providing high quality

2030. A strengthened system of employer-led technical qualifications as an alternative to A standards, underpinning apprenticeships, Levels which are underpinned by the same T-levels and new higher technical qualifications employer-led approach as apprenticeships. will ensure employers, including in low carbon The building services engineering for sectors, have a central role in designing and construction T Level, launched in September developing qualifications and training. 2021, will cover housing retrofit and heat pump installation. From September 2022, new T Levels will be available in Engineering, Manufacturing, Processing and Control, with 246 Chapter 4 – Supporting the Transition across the Economy Agriculture, Land Management and Production Next steps available by September 2023. IfATE is exploring the suitability of potential future T 46. The policies set out in this chapter Levels and occupational specialisms, focusing represent a first step in addressing the on areas to support green skills. challenges identified by the Green Jobs Taskforce. We will progress further work

44. IfATE has introduced an approval process through the cross-cutting delivery group, for Higher Technical Qualifications (HTQs) at maintaining the momentum generated by the Levels 4 and 5. HTQs will be rolled out for Taskforce to drive action across the green teaching from September 2022, covering skills agenda. Working alongside industry, eleven occupational routes - including we will continue to build the evidence on the qualifications in digital, construction and skills gaps which could hamper the net zero engineering – coming on stream up to 2025. transition if left unaddressed, assess how far Future roll-out will continue supporting the existing interventions are on course to address development of skills for the transition to net those skills gaps, and where appropriate zero as a key government priority. The goal is identify further opportunities to flex key to grow the number of learners undertaking skills programmes to support green sectors high-quality level 4 and 5 qualifications to and occupations. meet skills needs at this level. Earlier this year, we launched an £18 million higher technical education provider growth fund to allow investment in new equipment that will support providers to expand technical studies, and boost local employer links. Our growth fund is supporting 15 universities and 87 FE colleges to teach HTQs from next year.

45. Finally, our network of Institutes of Technology (IoTs) across England are utilising their state-of-the-art facilities to offer training in green skills. This includes the East London IoT which offers training in green and zero carbon energy production, and the Greater Birmingham and Solihull IoT which focuses on sustainable engineering. The network is supporting increased participation from under- represented groups, including women, helping to grow the pipeline of individuals with STEM skills needed for green jobs. We are investing £120 million in the second wave of IoTs, to be up and running by 2022. 247 Net Zero Strategy: Build Back Greener 4iv. Embedding Net Zero in Government Climate considerations underpinning policy across Government Our Key Commitments • Require the government to reflect environmental issues in national policy making through consideration of five environmental principles. • Ensure that decisions taken on government spending are informed by their impact on meeting net zero. • New measures to reduce emissions from Government’s £292 billion procurement spending – and ensure suppliers have plans for achieving net zero on major qualifying public contracts. • Continue to fund the Public Sector Decarbonisation Scheme at £475 million per year to drive ambitious emissions reductions in schools, hospitals, and other public buildings, whilst taking further action on skills, reporting, and targets. • Publish an annual progress update against a set of key indicators for achieving our climate goals. • Expand climate change training to ensure the Civil Service has the skills and people it needs to deliver net zero. The challenge

1. Net zero is a complex and transformative undertaking for the UK. The way the government operates must rise to meet this challenge. This means reducing the public sector’s own carbon footprint – but also changing how we are organised and how we take decisions. Building on our recent historic progress, we are now going further to ensure the whole government meets the challenge of net zero. 248 Chapter 4 – Supporting the Transition across the Economy Our goal

2. Since setting the net zero target, a huge 3. These efforts put climate change at the effort has taken place across government heart of our decision-making and have led to ensure we are set up in the right way to the ambitious announcements set out to deliver on our climate ambitions. We in recent years: the Prime Minister’s Ten have gone further than ever before to put Point Plan for a Green Industrial Revolution, the climate at the heart of our decision- dedicated strategies for key sectors of the making. This includes: economy, and this Net Zero Strategy; and set us up to deliver on those commitments. • Establishing two Cabinet Committees dedicated to climate change; 4. Our goal is to go even further to embed net • Announcing as part of the Integrated zero across government activity. This will mean Review of Security, Defence, Development that government takes net zero into account and Foreign Policy that tackling when taking decisions, public sector buildings climate change and biodiversity loss will emit less carbon, our procurement will be the Government‘s number one decisions will lead to greener supply chains, international priority; and civil servants across government will have the skills they need to deliver this mission. • Using the Environment Bill to require the government to reflect environmental 5. To do this we must understand the considerations in national policy interactions between climate change and making through consideration of five other UK priorities. The measures set out in environmental principles; this chapter are crucial for ensuring that the • Taking new approaches to embed net zero UK takes a whole system approach to tackling in spending decisions; climate change: • Establishing the No.10 Delivery Unit to • Multiple forums – including Cabinet ensure the government maintains a sharp Committees – that bring together different focus on delivering the country’s key perspectives on net zero and its interaction priorities. One of the four priorities for this with other priorities; Unit is the delivery of net zero; and, • Delivering climate skills and training across • Setting out in collaboration with key net the Civil Service – not just to civil servants zero delivery departments, a high level working directly on climate issues; strategy for delivering on the UK’s net • Close working relationships with zero commitments through the BEIS local government and the Devolved Outcome Delivery Plan 2021-2022. This Administrations; and, plan identified key programmes critical to delivery and set out an evaluation plan to • Embedding net zero in a wider range of monitor and assess progress. decision-making levers. 249 Net Zero Strategy: Build Back Greener Net zero in government decision-making

6. In the last two years the Government has Consistency of approach made commitments to strengthen governance across the UK around net zero. Two Cabinet committees were established in 2020 to rationalise climate 8. To reach net zero we must take a UK- governance and put net zero at the heart of wide approach. The UK Government and the government decision-making. This is driven Devolved Administrations are committed to by the Prime Minister, who chairs the Climate working together to deliver coordinated policy Action Strategy Committee (CAS). This action to meet respective emissions reduction Committee considers matters relating to the targets across the UK. Combined, Scotland, delivery of the UK’s domestic and international Wales and Northern Ireland produced 22% climate strategy. In addition, the Climate of UK emissions in 2019,34 and accounted Action Implementation Committee (CAI) which for 16% of the UK’s population, 13% of is chaired by the COP President Designate. It economic activity35 and nearly half of the UK’s considers the delivery of COP 26, net zero and land area (46%).36 Powers and policies to building the UK’s resilience to climate impacts. deliver ambitious emissions reductions in the These committees’ ability to scrutinise Devolved Administrations Scotland, Wales and progress and take whole system decisions Northern Ireland are partly reserved to the UK will be strengthened by the new measures Government and partly devolved. described in this chapter.

9. The UK Government and the Devolved

7. These committees are supported by Administrations have established governance well-established and robust governance at arrangements to ensure a joined-up and official level. This includes a cross-government collaborative approach to climate change. Director General group that was established At the bimonthly Net Zero, Energy and in 2019 to ensure a whole-of-government Climate Change Inter-Ministerial Group, UK approach to climate policy, with oversight Government ministers meet with Devolved at the most senior levels. Chaired by the Administration counterparts to discuss BEIS Director General for Net Zero and emerging policies that will contribute to International, this group brings together delivery of net zero targets across the UK, officials from across government, creating such as delivering a UK-wide Emissions a whole system perspective, to support the Trading Scheme, and the level of the sixth delivery of significant climate announcements, carbon budget which was set in law in including those contained in this Strategy. June 2021. The Group is supported by the official-level Net Zero Nations Board on alternate months. 250 Chapter 4 – Supporting the Transition across the Economy Embedding net zero in 12. The duty to consider these principles government decisions should be applied in the early stages of policy development and considered throughout.

10. Climate change is a major issue for In doing so, the extent to which a policy all governments in the 21st century. Our will contribute to climate change should mission to reduce emissions, seize economic be considered alongside other impacts of opportunities, and adapt to extreme weather the policy on the environment. Net zero will events will affect many more of the decisions therefore be facilitated by the principles where that the Government takes than it would have they are applied to relevant decisions. done in previous decades. To that end, it is essential that we put in place new levers to 13. The integration principle will create ensure that all the Government’s decisions a prompt for policy makers to embed adequately take climate change into account. environmental protection in policy making, This Strategy sets out key measures we will triggering consideration of the government’s take to ensure a climate-focus on key future priorities for environmental protection (such as decisions made by the government. net zero) and whether these priorities can be supported through the new policy. The polluter

11. We are using the Environment Bill pays and prevention principles could also to require the government to reflect help to contribute to net zero targets, through environmental issues such as climate encouraging policies that reduce carbon change in national policy-making through emissions and prevent adverse impacts on consideration of five environmental principles: climate where possible. These principles will ensure the environment is at the heart of • The integration principle is the principle policymaking across government. which states that policy-makers should look for opportunities to embed 14. Ensuring spending decisions contribute environmental protection in other to net zero is a major priority for HM Treasury. fields of policy that have impacts on The Green Book already mandates the the environment. consideration of climate and environmental • The prevention principle means that impacts in spending. It has been updated government policy should aim to prevent, so that policies must be developed and reduce or mitigate harm. assessed against how well they deliver on the Government’s long-term policy aims • The rectification at source principle such as net zero. means that if damage to the environment cannot be prevented it should be 15. Spending reviews are critical moments tackled at its origin. for the Government to look strategically at • The polluter pays principle is the principle the country’s priorities and make spending that those who cause pollution or damage decisions based on these. At Spending to the environment should be responsible Review 2020 (SR20), guidance required for mitigation or compensation. departments to state the greenhouse gas emissions of bids, and their impact on meeting • The precautionary principle states that Carbon Budgets and net zero. Allocations where there are threats of serious or to departments were informed by this irreversible environmental damage, information, and £12 billion was committed a lack of scientific certainty shall not to green measures. We have reviewed the be used as a reason for postponing learning from this exercise to further embed cost-effective measures to prevent climate change in spending decisions in the environmental degradation. next spending review and in the long term. 251 Net Zero Strategy: Build Back Greener

16. In September 2021, the Government Supporting UK businesses published updated guidance on how impacts on greenhouse gas emissions should be 20. We are considering net zero through our measured in policy decisions. As a result, support to business too across government departments must place a significantly higher activity. Innovate UK is the UK’s Innovation value on emissions in determining policy, as Agency, it drives productivity and economic the values now fully reflect the UK’s increased growth by supporting UK businesses to ambitions on climate. This complements wider commercialise new ideas and address the big considerations on natural capital impacts in societal challenges facing the UK today. policy decisions – and represents a significant 21. As the UK moves to a net zero economy, step forward in incorporating environmental Innovate UK is supporting businesses to impacts into policy development. exploit new ideas, develop supply chains, and

17. As set out in the Green Investment thrive in growing global markets. Last year chapter, we have also taken steps to ensure Innovate UK committed to spend £276 million net zero is embedded in government funding with UK businesses to tackle net zero. and regulation of the financial system. Arm’s- Net zero in the work of regulators length bodies, such as the British Business Bank, have adopted net zero as a core 22. Many of the UK’s regulators will play a objective. This will expand the flow of finance role in facilitating delivery of the infrastructure, to those innovative firms that will help us technologies and activities that will deliver reduce our energy consumption and mitigate the net zero transition. Several examples are the impacts of climate change. set out in the sector focused chapters in this strategy. The government is also considering

18. This builds on important announcements whether and how the functions of those in the 2021 Budget, particularly the new regulators most important to the transition can UK Infrastructure Bank that will use its £22 be strengthened. billion of financial capacity to crowd-in private investment to support economic growth, 23. For example, to provide strategic accelerate our progress to net zero, and help guidance to Ofgem on the government’s level up the UK. One of the Bank’s objectives energy policy, the Energy White Paper is to help the UK transition to net zero committed the government to consulting emissions by 2050. on an energy sector strategy and policy statement (SPS) for Ofgem during 2021. The

19. We will make sure that the reformed SPS will set out the strategic priorities and planning system supports our efforts to policy outcomes of the government’s energy combat climate change and help bring policy, with net zero as the driving theme. greenhouse gas emissions to net zero by This will impose a legal obligation on Ofgem

2050. For example, as part of our programme to have regard to the strategic priorities and of planning reform we intend to review the policy outcomes when exercising its regulatory National Planning Policy Framework to make functions. To provide clear legal accountability, sure it contributes to climate change mitigation Ofgem will be required to report on how it and adaptation as fully as possible. intends to implement the SPS at the outset, and then report annually on its performance and its plans for the coming year. 252 Chapter 4 – Supporting the Transition across the Economy

24. The Competition and Markets Authority achieving net zero, promoting coherence, and (CMA) is reviewing how the UK can better supporting a transparent strategic framework; use the tools available under competition and and the exploring of the merits of a cross- consumer law to achieve net zero and our sector-strategic Policy Statement to provide sustainability goals. The CMA will provide this clarity on government’s overarching strategic advice in early 2022. This follows recent CMA vision for the regulated sectors. work on misleading environmental claims, its market study into electric vehicles and its 26. In addition, the Government has recently publication of information to businesses on consulted on proposals for reforming the UK’s sustainability agreements. regulatory framework. When the consultation response is published, it will include the

25. The National Infrastructure Strategy Government’s decisions on how regulators committed to taking a long-term approach to can be encouraged to consider themes investment for the benefit of both investors such as competition, innovation and net zero and consumers, responding to the findings in their regulatory activities. For example, of the National Infrastructure Commission’s the consultation sought views on whether report on the future of economic regulation regulators might be granted more flexibility in key infrastructure. The government also by government to choose how they intervene committed to publishing an overarching in their sectors, to allow more agile, smarter policy paper in 2021. The policy paper will regulation. The Government would like to set out next steps on key issues including: see a consistent approach taken across the the consideration of duties in the round to various regulated sectors and will set out more ensure they reflect new challenges such as thinking on this in due course. Demonstrating progress towards net zero Increasing transparency of progress 29. It is critical for public and industry confidence that the UK has a clear plan

27. Every year the government for achieving net zero – and that we are comprehensively reports the UK’s historic transparent about how this plan progresses emissions since 1990 and publishes and changes over time. The Journey to Net projections of future emissions.37 The UK’s Zero chapter of this Strategy report set out ‘Energy and Emissions Projections’ is a world- a delivery pathway: an indicative trajectory leading approach to projecting the UK’s annual of emissions reductions based on potential emissions, by sector, according to United in each sector of the economy, which Nations Framework Convention on Climate keeps us on track to meet the sixth carbon Change guidelines. budget ending in 2037. Sector chapters set

28. We are now going further to clearly out policies and proposals in line with this demonstrate the tangible milestones that the indicative pathway to ensure we are on track UK will have to reach to achieve net zero, and for net zero. While it is impossible to predict to communicate and invite scrutiny on this every path to net zero, this pathway sets out progress to the public. the decisive action we know is needed and acts as the best plan we have to measure progress against. 253 Net Zero Strategy: Build Back Greener

30. We are therefore committing to provide • Commentary on contextual changes that a public update every year on progress might affect the exact pathway to meeting in the previous year against the delivery decarbonisation commitments; and, pathway to net zero set out in this Strategy. • A summary of key areas of progress made This will include: against this pathway the policies and • An update on progress against the targets proposals in this strategy. and ambitions set out in this Strategy (see Table A), building on this list over time to incorporate additional Government targets and wider non-Government indicators of progress; The following targets and ambitions will form part of the Government’s annual update on progress towards net zero: Power By 2035 all our electricity will come from low carbon sources subject to security of supply. 40GW of offshore wind by 2030, including 1GW floating wind. Industry Ambition to deliver 6 MtCO2 per year of industrial CCUS by 2030, and 9 MtCO2 by 2035. Fuel supply and hydrogen 5GW of low carbon hydrogen production capacity by 2030. Achieve a final decision on whether to enable blending up to 20% hydrogen by volume into the Great Britain gas network by 2023, subject to successful completion of safety trials. The offshore oil and gas sector to have an absolute reduction in production emissions of 10% by 2025, 25% by 2027, and 50% by 2030 on the pathway to net zero by 2050.38 Heat and buildings Aim to reduce direct emissions from public sector buildings by 75% by 2037 compared to 2017. Achieve a minimum market capacity of 600,000 heat pumps per year by 2028. As many homes to reach EPC Band C as possible by 2035, where practical, cost effective, and affordable. As many fuel poor homes as reasonably practicable to Band C by 2030. 254 Chapter 4 – Supporting the Transition across the Economy Transport Double cycling from 2013 to 2025.39 Increase walking activity by 2025.40 Deliver 4,000 new zero emission buses and the infrastructure needed to support them. 25% of the government car fleet ultra low emission by December 2022 and 100% of the government car and van fleet zero emission by 2027. 100% of new cars and vans sold are zero emission by 2035. 100% of new HGV sold are zero emission. 100% of new buses/coaches sold are zero emission. Maximise GHG savings from low carbon fuel use in transport by increasing the Renewable Transport Fuel Obligation main obligation from 9.6% in 2021 to 14.6% in 2032. Natural resources, waste, and Restore at least 35,000 ha of peatlands in England by 2025 and F-gases approximately 280,000 hectares of peat in England by 2050. Increase tree planting rates from 13,660 hectares across the UK in 2020 to 30,000 hectares each year by the end of this Parliament. Deliver the UN Sustainable Development Goal 12.3 to halve food waste by 2030. Explore policies to work towards the near elimination of biodegradable municipal waste to landfill by 2028. Meet the Kigali Amendment target of reducing HFC consumption by 85% by 2036, as well as the F-gas Regulation’s target of a 79% reduction by 2030. Greenhouse gas removals At least 5 MtCO2/yr of engineered removals by 2030.

31. We will publish an updated of common issues and inter-dependencies Net Zero Strategy when we set the across all programmes delivering net zero. next Carbon Budget. This will enable them to make informed, timely decisions to enable us to stay on track to Strengthening delivery oversight of meeting net zero. net zero projects and programmes

33. This complements work led by the

32. Significant recent steps have been taken Infrastructure and Projects Authority (IPA). to oversee the delivery of key projects and The IPA is the government’s centre of programmes that will contribute to net zero. expertise for infrastructure and major projects, This year, the Prime Minister established the supporting the successful delivery of all types No. 10 Delivery Unit to ensure the government of major projects. The IPA sits at the heart of maintains a sharp focus on delivering the government, reporting to the Cabinet Office country’s key priorities. One of the four and HM Treasury. The Project Outcome Profile priorities for this Unit is the delivery of net zero. Tool launched in July 2021, ensures that BEIS in parallel has developed a new model projects and programmes are clearly linked for monitoring net zero delivery and reporting to government priorities (such as net zero) on programme and project-level risks – from the outset and support their delivery. Its ensuring decision makers get early visibility assurance toolkit has recently been updated 255 Net Zero Strategy: Build Back Greener to include key tests and key questions on Infrastructure Performance: Roadmap to the environment, climate adaptation, and 2030, it is driving the use of whole life carbon net zero, in the Government’s gateway reporting to reduce embodied carbon in the process. Through the IPA’s Transforming built environment. Government leading by example Decarbonising the public sector 38. Building on the success of the Public Sector Decarbonisation Scheme, we will

34. Government and the wider public sector continue and extend the scheme to ensure will lead by example during the transition to that public sector bodies have access to net zero. As well as ensuring that net zero finance to continue decarbonising their is reflected in our structures and practices, estates , investing a further £1425 million over we will continue to take ambitious action to 2022/23 to 2024/25. reduce public sector emissions, showing leadership to the wider economy, and making High standards with transparency a direct contribution to reaching net zero.

39. Public sector organisations should

35. Direct emissions from public sector be taking steps to achieve net zero now buildings account for around 2% of total UK should report their progress so they can be emissions, and the public sector has reduced held accountable and as publicly funded its emissions by around 40% since 1990.41 organisations. Government departments and their arm’s length bodies already set

36. We intend to act in three areas to and report against targets to reduce their ensure we are on track to achieve net zero: greenhouse gas emissions in Greening investment, transparency, and capacity and Government Commitments. The updated capability, and in doing so will aim to reduce Greening Government Commitments direct emissions from public sector buildings framework for 2021-25 will ensure the public by 75% against a 2017 baseline, by the end of estate continues to reduce its environmental Carbon Budget 6. footprint, align with commitments in our 25 Investment Year Environment Plan and be consistent with a trajectory to achieving net zero greenhouse

37. Reducing direct emissions from public gas emissions by 2050. sector buildings requires investment in measures to reduce fossil fuel use, including 40. All public sector bodies should now the installation of low carbon heating be monitoring their energy use and have and complementary energy efficiency targets to reduce emissions, particularly, to improvements, and the installation of low reduce the direct emissions for which they carbon electricity systems such as rooftop are responsible. To ensure we are on track solar PV. The Public Sector Decarbonisation to reach net zero, emissions from the public Scheme is providing over £1 billion in grants sector should be reported and monitored on a over 2020/21 and 2021/22 for public sector consistent and coherent basis. We will provide bodies to fund heat decarbonisation and guidance to make clear the government’s energy efficiency measures. expectations in this regard. 256 Chapter 4 – Supporting the Transition across the Economy

41. We will also legislate to enable us 45. The National Procurement Policy to require the reporting of public sector Statement (NPPS), published in June emissions on a consistent and coherent 2021, sets out clear principles that basis if this is not done on a voluntary basis, contracting authorities should be following and, if insufficient progress is made on organisationally. Tackling climate change reducing emissions in the public sector, to and achieving net zero is one of the key require that all public sector organisations considerations established – this should then are working toward and reporting against be woven through individual procurements a legally-binding target to reduce their (for qualifying procurements). greenhouse gas emissions.

46. The Procurement Policy Note on Taking Capacity and capability account of carbon reduction plans in the procurement of major government contracts

42. Reducing emissions requires specialist comes into effect from Autumn 2021. This skills and expertise, as well as funding. Action will impact over £50 billion of procurement at an unprecedented scale is required to spend. For qualifying contracts, it requires reduce emissions from public sector estates suppliers who are bidding on central in line with net zero, and organisations need government contracts (over £5 million p/a the right skills and structures to deliver on this. in value) to commit to achieving net zero by We will continue to work with partners across 2050 and to detail their organisation’s UK government and the wider public sector to greenhouse gas emissions via the publication understand these needs, and provide the of a Carbon Reduction Plan. Failure to do support needed to address them. so may mean exclusion at supplier selection stage. Government will continue to take action Delivering net zero through public to reduce emissions, and this policy is an procurement important step in ensuring our supply chain is

43. The Government is determined to sharing this ambition and taking similar steps leverage public procurement to help achieve to reduce their emissions. net zero. We will use our buying power to 47. The Social Value Model requires drive decarbonisation and to create the policy government to expressly evaluate tools and training to enable public procurers to environmental, social and economic grasp this opportunity. benefits, with these factors comprising a

44. Clearly establishing the strategic minimum of 10% of the evaluation score for importance of net zero at project design stage, qualifying procurements.42 as described above, will mean that it is easier 48. Throughout the development of these to draw through this ‘golden thread’ when policy measures, government has been reaching procurement stage. The government working with departments, suppliers and has recently announced three distinct new industry bodies to raise awareness of how policies that can all help public procurers fully environmental considerations can be brought embed net zero into their work. These all kick into the commercial process, and to build in at different stages of the commercial cycle, capability in understanding and assessing complementing each other in terms of their suppliers’ commitments. Several thousand scope and their reach. buyers across government have completed Social Value training to develop the skills required to embed environmental policy outcomes and improve the sustainability of government contracts. We will continue to 257 Net Zero Strategy: Build Back Greener support the adoption and implementation 51. Our ambition is necessarily high – we are of environmental policy measures to deliver changing the expectations on ourselves when the best commercial and environmental it comes to utilising £292 billion of annual impact for the UK. procurement spend. In doing so we are also sending a clear signal to the market: data on

49. These measures provide a platform for carbon impact, and immediate ambition to even stronger action. We have embarked reduce it, will be increasingly important in how upon a programme of major domestic we choose to do business with you. procurement reform. This will enable us to use flexibilities provided by our departure from Showing leadership on domestic and the EU to give even greater consideration international standards to environmental factors in our decision making. One specific example is the proposal 52. The BSI, in its role as the UK’s national to break the subject matter of contract link standards body, works across the sectors so that a company’s wider environmental and topics that will be critical in achieving net proposals for the project can be factored into zero, including greenhouse gas management, procurement decisions. energy transition, biodiversity and sustainable finance. This work is helping the UK to take

50. Domestically we also want to make it a global leadership role in net zero and easier for procurers to balance carbon against influence change on a global scale. To this cost. We want to underpin our net zero target effect BSI and the International Organization and COP26 ambitions by developing tools to Standardization have developed the London help us decarbonise the government’s supply Declaration – a commitment to actively chains and stimulate innovation and growth in consider climate change in the development the UK’s green economy. This work also takes and revision of all international standards and into account the Climate Change Committee’s to facilitate the involvement of civil society and (CCC) call for credible, quantifiable pathways those most vulnerable to climate change. for sectoral decarbonisation. We will also explore the possibility of establishing a new 53. Through BSI’s international reach, the single unit for all sustainable procurement UK will be able to help stakeholders reach policy within government to strengthen consensus in international climate change performance, coordination, and oversight. standards and lead change globally in support of net zero. Ensuring the right skills and talent in government

54. The government has established the servants need to lead the UK’s future efforts to Government Skills and Curriculum Unit decarbonise (see infographic below). (GSCU) to oversee the delivery of better training, knowledge and networks that the 56. We are expanding the curriculum for civil over 440,000 people working in the Civil servants to include specific training on climate Service will need today and in the future. change. We are also establishing climate specific training within the Civil Service Fast

55. Net zero will continue to be a priority Stream curriculum. for the government until 2050 and beyond. To that end, BEIS and GCSU are reviewing 57. We have also embedded climate the skills, training and networks that civil considerations in the Policy Profession Standards, the competency framework that supports professional development for all civil 258 Chapter 4 – Supporting the Transition across the Economy servants developing policy. For the first time, 58. We are establishing a new climate focus this makes explicit that good policymaking within the Civil Service Fast Stream Generalist requires an awareness of the potential for all Scheme, which will focus on providing relevant policy areas to contribute or undermine our skills and opportunities to some of the future climate goals. leaders of the Civil Service. Ambition for climate capabilities across Government Technical specialists: • Specialist and world-leading expertise in commercial, project delivery, climate science, law, and innovation. All leaders in Government: • Can challenge established truths about the interaction between climate and other policy priorities • Can communicate the whole system interactions between climate and all policy activity. Everyone working on climate change: • Advanced understanding of UK and international climate policy framework • Able to understand, foresee, and manage the interaction between climate and other policy goals Essential capabilities for every Civil Servant, this will vary by profession, e.g. everyone developing policy: • Understands the potential of policy areas to support or undermine UK climate objectives (for example net zero by 2050) • Understands where to seek further advice on these interactions 259 Net Zero Strategy: Build Back Greener 4v. Local Climate Action Supporting decarbonisation and regeneration in our local areas and communities Key Commitments • Set clearer expectations on how central and local government interact in the delivery of net zero. • Build on existing engagement with local actors by establishing a Local Net Zero Forum to bring together national and local government senior officials on a regular basis to discuss policy and delivery options on net zero. • Continue the Local Net Zero Programme to support all local areas with their capability and capacity to meet net zero. This includes provisions to: • Continue the Local Net Zero Hubs (previously known as the local energy hubs) to support all areas of England to reach net zero, including those lacking capacity and capability, or those facing unique challenges. • Promote best practice and support local authorities to develop net zero projects that can attract commercial investment. • Increase knowledge sharing to demonstrate and share successful net zero system solutions. 260 Chapter 4 – Supporting the Transition across the Economy The challenge

1. Devolved and local government play an essential role in meeting national net zero ambitions. Across the UK many places have already made great strides towards our net zero future, having set their own targets and strategies for meeting local net zero goals. Taking a place-based approach to net zero is also vital to ensuring that the opportunities from the transition support the government’s levelling up agenda.

2. The combination of devolved, local, and regional authorities’ legal powers, assets,

4. Despite the excellent work already access to targeted funding, local knowledge, underway, we understand that there remain and relationships with stakeholders enables significant barriers to maximising place- them to drive local progress towards net based delivery on net zero. We know that zero. Not only does local government drive some places are moving faster than others action directly, but it also plays a key role in and that places and communities will face communicating with, and inspiring action different challenges when meeting net zero by, local businesses, communities, and civil commitments and adapting to climate change. society. Of all UK emissions, 82% are within the scope of influence of local authorities.43 5. There are significant regional variations in the level of emissions (see Figure 29 below)

3. Local leaders are well placed to engage and some of the hardest hit local economies with all parts of their communities and to that face multiple development and growth understand local policy, political, social, and challenges are proportionally home to a economic nuances relevant to climate action. greater number of lower skilled workers. Many The government currently works with the Core of these areas are also where high-carbon Cities Group, for instance, which undertakes a industries are located. range of activities to promote climate change adaptation, raise awareness and foster leadership in cities. Local government decides how best to serve communities and is best placed to integrate activity on the ground so that action on climate change also delivers wider benefits – for fuel poor households, for the local economy, for the environment and biodiversity, as well as the provision of green jobs and skills. 261 Net Zero Strategy: Build Back Greener Figure 29: Net emissions of carbon dioxide per capita by Local Authority (tonnes CO2e per capita) in 2019 Source: ONS

6. We also recognise that certain types flooding, rises in sea level, and accelerated of communities, such as rural and coastal coastal erosion which will have the potential communities, face significant and unique to affect public services and infrastructure. challenges. For example, the increased age However different types of localities may also of rural housing makes it both more difficult have opportunities available to them that do and expensive to introduce energy efficiency not exist everywhere. For instance, coastal measures and rural communities also have communities may be able to utilise tidal greater reliance on cars. Similarly coastal energy or industrial scale water source heat communities face significant challenges as pumps, and rural areas may have access to they may be vulnerable to more frequent sustainable biomass. 262 Chapter 4 – Supporting the Transition across the Economy

7. There are currently no net zero statutory 8. Central and local government will need targets on local authorities or communities to work closely together to deliver net zero in the UK, and we do not believe that a new and our interim carbon budgets. Government general statutory requirement is needed. analysis suggests that over 30% of the This is because of the existing level of local emissions reductions needed across all commitment with the sector, and because sectors to deliver on our Carbon Budget 6 it is difficult to create a uniform requirement target, as set out in this strategy, rely on local that reflects the diversity of barriers and authority involvement to some degree.44 opportunities local places experience. However, we do understand that there is a real need to ensure local leaders across the board are supported by enhancing the capacity and capability of local areas to deliver net zero, coordinating engagement with local authorities, and clarifying expectations at a national level to accelerate local progress towards net zero. Our goal

9. The government will continue to set UK- 11. Community empowerment, engagement, wide priorities for meeting carbon budgets and action can play a role in supporting and for assessing how each sector will help the UK’s transition to net zero and enable meet those budgets. Local government has communities to access the benefits that it a key role in integrating delivery at a local and brings, from greener jobs to improved health. regional level to deliver more cost-effective Communities are especially well placed to routes to net zero and derive local co-benefits help raise awareness and engage people in that embed climate action in the heart of local adopting net zero behaviours. For example, places and services. By taking this approach, community ownership of renewables and we can achieve even more for net zero and other assets, often in partnership with other for the economy locally and nationally; we organisations, can be an important driver of recognise that a one-size-fits-all approach will reducing local emissions. It can also enable not work. We want to build strong partnership people to learn more about climate change working between central, devolved, and local and build sustainable behaviours. government, increase the co-ordination and better support all levels of government to 12. We will continue to provide support for utilise the influences available to them. public and private investment opportunities in local places that will enable the local delivery

10. We want to continue to empower our of emissions savings across the sectors. In local leaders to take the actions which the sector chapters we have shown the range will lead to the biggest gains in emissions of programmes from building retrofit, heating, reduction, including the potential opportunities electric vehicle charging and many others in building back greener and meeting our where funding will go to local government to ambitions to level up the country. While the deliver action in their communities. COVID-19 pandemic has severely impacted our communities, it has also reshaped how we think about place, community, and our natural and built environment. 263 Net Zero Strategy: Build Back Greener Enabling local areas to deliver net zero

13. To support all local government build on many of the existing ways of working in developing and delivering their net together to provide more consistency and zero delivery plans, we need to act in clarity over roles and responsibilities between three key areas: national and local government. a. Setting clearer expectations for local 15. We will do this by establishing a Local Net places, clarifying how the partnership Zero Forum to ensure that there is direct input with local government should work, from local leaders. Chaired by BEIS, the Forum and considering how action at national, will be cross departmental and bring together regional, local, and community levels fits national and local government senior officials together to tackle the emission and climate on a regular basis to discuss policy and risk challenges we face, and the wider delivery options on net zero. The forum will benefits the transition brings. build on our current engagement mechanisms b. Providing resources for local places to through the representative bodies such as deliver stronger contributions to national the Local Government Association (LGA), net zero targets, across dedicated funding Association for Public Service Excellence streams for net zero and non-ringfenced (APSE), Core Cities and the Association of funding, noting the number of broader Directors of Environment, Economy, Planning priorities on which local government & Transport (ADEPT). The creation of the needs to deliver. Forum also draws on the recommendations for a policy framework put forward by member c. Building capacity and capability at the network UK100. The Forum will support the local level to support ambition and share establishment of clearer delivery roles for local best practice, while also providing support government and provide a single engagement in areas that may not have made as much route into HM Government in a coordinated progress to date. and coherent way.

14. To act effectively across these areas, 16. On adaptation, local actors will be and for local government to translate national supported through increased Environment goals into local action, we will build on our Bill powers to take effective action, reduced existing engagement to improve the way local financial burdens from waste management and national government collaborate on net and stronger abilities to improve health and zero. The Department for Business, Energy social outcomes for local citizens. and Industrial Strategy (BEIS) will take overall responsibility for improving coordination with 17. Achieving our aims requires local government and other local actors on national decision makers to have the the effective design and delivery of local net right knowledge and awareness to zero policies, as part of the Department’s understand the local impacts of decisions. overall responsibility and wider leadership on BEIS will work with other departments and delivering net zero. Other departments will stakeholders to demonstrate successful net continue to lead on their specific policy areas zero system solutions by creating a network of such as Department for Transport on the experience that amalgamates learning through decarbonisation of transport. We intend to case studies and non-spatial planning tools. 264 Chapter 4 – Supporting the Transition across the Economy

18. We have already developed a Carbon 20. An important part of the funding Literacy toolkit for the delivery of Carbon landscape is the diverse range of grant Literacy training for local authorities. This funding schemes provided by HM training has been made available to all local Government to support local delivery. authority staff and aims to increase awareness The recent National Audit Office (NAO) and ability to reduce emissions across all the review into local government and net zero policies and programmes local government identified 22 dedicated grant schemes work on. BEIS has created a sector course for net zero work from central to local and places like Manchester and Sheffield are government. We recognise that longer term among the early adopters who have trained and more co-ordinated funding streams can staff and councillors. enhance innovation and investment, reduce bureaucracy, and encourage more efficient Funding and integrated decision making. We will

19. Funding for local climate action comes explore how we could simplify and consolidate from a combination of the Local Government funds which target net zero initiatives at Finance Settlement, other government the local level where this provides the best grants and support schemes, borrowing, approach to tackling climate change. Building and private finance. Collectively, this means on the vision in the Prime Minister’s Ten Point there is a range of funding available for local Plan, we also will work across departments authorities to act on climate change. Some to explore how we can give certainty to have chosen to explore community bonds investment in longer-term programmes and crowdfunding. A third of local authorities supported by regeneration initiatives. say their climate change plans will be cost- 21. In addition to the above, the UK neutral by incorporating goals into existing Infrastructure Bank (UKIB) will lend to local service area strategies, drawing on the funding authorities for strategic and high value projects available for those services. and invest in projects alongside the private sector, crowding in private sector capital. It has twin objectives of helping to tackle climate change, particularly meeting the UK’s net zero emissions targets and helping to support regional and local economic growth across the UK. The UKIB will offer loans to local authorities for high value and strategic projects of at least £5 million. To complement this investment activity, over time, the UKIB will develop an expert advisory service to help local authorities develop and finance projects. The UKIB will build partnerships across the UK including with government departments, government sponsored bodies, local authorities and relevant representative organisations to foster collaboration and drive value for money. As it engages with the market, the UKIB will continue to learn and adapt, which will ensure that its loans to local authorities are as effective as possible. 265 Net Zero Strategy: Build Back Greener

22. The UKIB is currently operating in an 26. Better engagement and information interim form, as it expands its capability sharing across organisations can enable better and capacity. It will continue to refine the forward-planning and a more coordinated Local Authority Lending Function over approach. BEIS has work underway with the coming months. Ofgem to develop a better understanding of the opportunities and challenges presented

23. The Department for Business, Energy and by local area energy mapping and planning Industrial Strategy will continue to work with (LAEMP) and are considering the most partners and the finance sector to develop appropriate policy options to take forward. new finance and business models to support This work could help to bring together key local delivery. These business models will look local stakeholders to explore the impact of to develop aggregated projects and portfolios decarbonisation choices across sectors and of projects building up scale and spreading how different technology options may impact delivery risk more effectively for investors. on local energy networks. Sectoral priorities at a local level 27. The Government has committed up to

24. We understand that for local areas to £102.5 million of funding through the Industrial deliver net zero they will need specific support Strategy Challenge Fund to Prospering from to plan and identify priorities across different the Energy Revolution. This is an innovation sectors of the economy. programme which develops smart local energy systems to provide investable, scalable local Local energy business models and finance mechanisms using integrated approaches to deliver cleaner,

25. Decarbonisation of our buildings, cheaper energy services. The programme is transport systems and energy system will supporting three places to demonstrate the require significant action at a regional and local use of this framework today and a further ten level. Generation and storage are becoming places to develop detailed plans and business increasingly decentralised, with solar and cases to deliver whole place decarbonisation. batteries being deployed in buildings, vehicles, and local communities. Heat and transport 28. The programme is designed to work decarbonisation in particular needs to be across a range of different areas including, delivered in a way that meets local needs and big urban conglomerations, cities, towns, with the involvement of local decision makers. industrial regions, regeneration projects and Decarbonisation will require strong co- rural communities. Each of these face different ordination across electricity, heat, hydrogen, challenges and opportunities in reaching net transport, and buildings. That means local zero and the programme seeks to identify actors can be strong drivers of change, the economic as well as the social and enabling coordinated non-spatial planning and environmental benefits of delivering integrated engagement with markets, and supporting Smart Local Energy Systems, not just for the cleaner, cheaper and more efficient energy place but also nationally. whilst providing a significant contribution towards local economic strategy. 266 Chapter 4 – Supporting the Transition across the Economy

29. The government also provides funding efficiency measures. Under Phase 1 of the to deliver programmes that support scheme, over £500 million was awarded to decarbonisation through the Local Net Zero local authorities. Programme (previously known as the Local Energy Programme), which is supporting 31. National planning policies already Local Enterprise Partnerships (LEPs), local recognise the importance of sustainable authorities, and communities in England to development and make clear that reducing play a leading role in decarbonisation and carbon emissions should be considered in clean growth. Almost £22 million has been planning and decision making. The National invested in the Local Energy programme to Model Design Code provides tools and date, including funding for the creation and guidance for local planning authorities to help continuing support of 5 Local Net Zero Hubs. ensure developments respond to the impacts The Hubs promote best practice and support of climate change, are energy efficient, local authorities to develop net zero projects embed circular economy principles, and that can attract commercial investment. The reduce carbon emissions. The government Hubs are currently supporting local authorities is considering how the planning system can to develop projects with a potential capital further support our commitment to reaching value of over £2 billion and have identified net zero. We will make sure that the reformed further possible projects that take the potential planning system supports our efforts to capital value of the pipeline to over £3 billion. combat climate change and help bring greenhouse gas emissions to net zero by Heat and buildings 2050. For example, as part of our programme of planning reform we intend to review the

30. Local Authorities have been, and will National Planning Policy Framework to make continue to be, key delivery partners when it sure it contributes to climate change mitigation comes to improving the housing and building and adaptation as fully as possible. stock across the country, especially through integrating activity on energy efficiency, Local transport heating and retrofit. This has been recognised in recent years through their delivery of Green 32. To decarbonise the transport sector, in Home Grants, Home Upgrade Grant, and July, the government published its Transport heat networks. As demonstrated in previous Decarbonisation Plan, which sets out the chapters (Heat and Buildings), local delivery commitments and the actions needed to of these schemes has been integral in decarbonise the entire UK transport system. reducing carbon emissions and supporting One of the six strategic priorities of the plan local economies. For example, over 200 local is developing solutions that consider the authorities have taken part in phase 1 of the needs of different locations, highlighting the Green Home Grants Local Authority Delivery importance of tackling emissions at a local Scheme (LAD) which is focussed on low- level to ensure that every place in the UK has income households in homes that most need its own net zero transport network by 2050, energy efficiency upgrades. Phases 1 and 2 serving the unique needs of its communities. of the Local Authority Delivery schemes aim to support around 50,000 households who will benefit from energy efficiency upgrades, making it easier and cheaper to heat their homes. Government has also delivered the Public Sector Decarbonisation scheme which provides grants for public sector bodies to fund heat decarbonisation and energy 267 Net Zero Strategy: Build Back Greener

33. To support this, we will reform the way 35. The Environment Bill is also creating a local transport infrastructure is funded to drive new system of spatial strategies called Local decarbonisation at a local level, engaging Nature Recovery Strategies to target action for local areas about their investment priorities nature and to drive the use of nature-based in the round, and making quantifiable carbon solutions to tackle environmental challenges reductions a fundamental part of local like climate change. It is expected that transport planning. Later this year we will also there will be approximately 50 Local Nature publish a Local Authority Toolkit to help local Recovery Strategies covering the whole authorities reduce emissions from transport. It of England with no gaps and no overlaps. will provide local authorities with guidance and Preparation of each Strategy will be locally information to help them build business cases, led and collaborative, with local government develop innovative policies, secure funding, taking a critical role. This will provide local and deliver measures on the ground. government with a new tool through which they can work with local partners to identify Local green infrastructure and the where effort to create or restore habitat would environment have greatest benefit for climate mitigation, whilst also having positive benefits for nature

34. Government will launch a new National and the wider environment. Between 2021 Framework of Green Infrastructure Standards and 2027, we will be doubling our overall in 2022. This will support local areas and investment in flooding and coastal erosion regions to deliver well-designed green to £5.2 billion. infrastructure where it is most needed to deliver multiple benefits. These networks 36. In addition, £200 million will be invested of green and blue spaces and other in the Innovative Flood and Coastal Resilience natural features, including trees, provide Innovation Programme. This will help over an opportunity to benefit local economies 25 local areas over six years to take forward and bring about long-term improvements in wider innovative actions that improve their people’s health and wellbeing. At the same resilience to flooding and coastal erosion. time, it can help us to mitigate and adapt The Environment Agency is also working with to climate change, through capturing and coastal authorities on a £1 million refresh of storing carbon, shading and cooling, and Shoreline Management Plans. reducing flooding. 268 Chapter 4 – Supporting the Transition across the Economy A universal offer to harness opportunities across the UK

37. We are committed to supporting all local approach to tackling net zero in the round, areas and communities, ensuring that none covering all net zero issues. The programme are left behind and creating net zero solutions will continue to help places make faster which work for all of them. As we are reducing progress towards net zero, improve cost- emissions across the economy, we must effectiveness, and significantly increase the also ensure that the transition to net zero economic benefits of the green industrial is a fair one. revolution by attracting commercial investment and supporting green jobs.

38. As outlined above, BEIS has been successfully running the Local Programme 39. The programme will focus on all areas of (previously known as the Local Energy England, including those lacking capacity and Programme) to support all local areas capability, or those facing unique challenges, capability and capacity to meet net zero and such as rural and coastal communities. The government has committed to continuing the programme will ensure that all local areas can Programme. The programme has developed engage on issues relating to net zero. over time and now takes a place-based Case study: Investing in industrial heartlands The government has invested £95 million for two new offshore wind ports to be constructed in the Humber region and Teesside, boosting the UK’s world- leading industry, and creating thousands of new jobs in the North. Able Marine Energy Park, on the South Bank of the River Humber, will receive up to £75 million government investment, and Teesworks Offshore Manufacturing Centre, on the River Tees, will benefit from up to £20 million. Construction will begin later this year to upgrade the two ports with new infrastructure - helping to revitalise these historic industrial heartlands. Together these new ports will have the capacity to house up to 7 manufacturers to support the development of the next-generation offshore wind projects, boosting the UK’s offshore wind manufacturing base while directly creating up to 3,600 new green jobs.

40. The Government has embedded a net and strengthen these criteria if necessary. zero principle in initiatives which target different We will take the same approach with other types of places, such as the Levelling Up new schemes and priority places such as Fund, the Towns Fund, and the Community Freeports. Investment into places through the Renewal Fund. This is to ensure that all funded UK Shared Prosperity Fund should also align schemes have considered how to align with with the government’s net zero objectives. our net zero ambitions. We will continue to monitor the impacts of these schemes 269 Net Zero Strategy: Build Back Greener

41. This year we are working with local 42. In England, the government works businesses on the future role of Local closely with local government, and Defra Enterprise Partnerships (LEPs), ensuring hosts the Local Adaptation Advisory Panel local businesses continue to have clear (LAAP), a forum for dialogue on climate representation and support in their area to change adaptation between local authorities, drive the green recovery from the COVID-19 central government, and delivery bodies. pandemic. LEPs have played a significant This supported the production of a guide on role in providing advice and incentives for adaptation for local government, published businesses to reach net zero. As part of the in 2019 by the Association of Directors LEP review, we are committed to ensuring of Environment, Economy, Planning and a strong local business voice is retained, Transport (ADEPT). particularly to support businesses to transition to net zero. Case study: the Green Recovery Challenge Fund The government’s £80 million Green Recovery Challenge Fund is kickstarting over 150 nature projects across England. For example, the Wildfowl and Wetlands Trust was awarded £1.58 million to create and restore 130 hectares of nature-rich wetland habitat along the Somerset coast. This habitat will help increase flood resilience, improve soil, water quality, and help absorb carbon, increasing the robustness of the county’s coastline overall. The GRCF is also support green jobs and is currently on track to support up to 2,000 jobs by the end of 2021, rising to up to 2,500 by the time all projects are completed in March 2023. Working with local communities 44. Some very ambitious campaigns on food, recycling, water, and other areas critical

43. To ensure that all parts of the UK benefit to climate action, have been launched and from the transition to net zero we also want run by pioneering local communities and local communities to take bold action that activists. Community projects can also act as supports the transition. Local communities a catalyst for raising public awareness and benefit from strong relationships and ties to promoting green choices. their areas and their local authorities; these can be key to reducing emissions across 45. Community groups can bring together the economy and making sure people people, finance, and ideas to have a real stay engaged in the process. Where local impact on the behaviours, infrastructure, and authorities and communities work together attitudes locally. Community cohesion and effectively, we have already seen significant grassroots initiatives are also central to locally improvements in both delivery and in wider based resilience to climate change risks, such public engagement. as flooding and heatwaves. 270 Chapter 4 – Supporting the Transition across the Economy

46. Government understands the important in Northeast Derbyshire developed a Town role that communities have in the transition Investment Plan setting out their low carbon to net zero. Through the introduction of energy ambitions. Government also works UK-wide growth funding schemes, such as with community groups, both geographic the Community Renewal Fund, the Levelling and communities of interest, such as sports Up Fund, and the Towns Fund, Government clubs, faith groups, and youth groups, is enabling local areas to tackle net zero on key behaviour change strategies and goals in ways that best suit their needs. For communications. example, under the Towns Fund, Clay Cross Case study: Clay Cross Clay Cross, in Northeast Derbyshire, was one of the 101 Towns invited to develop a Town Investment Plan. The plan, submitted to Government in October 2020, set out their ambition to establish the town as an exemplar at the forefront of the low carbon revolution. This involved working with established local businesses, including the key local employer Worcester Bosch, to deliver innovation in clean energy and showing the potential to deliver a net zero economy. By 2030 they hope to be able to show significant reductions in the overall levels of emissions by ensuring clean growth principles underpin investment. These ambitions will be realised through a cohort of projects which include the development of a low carbon energy strategy for the town, a low carbon energy demonstrator project linked to the rebuilding of the local leisure centre, low carbon workspace and housing proposals, and a skills and enterprise training centre, which will have an emphasis on providing energy industry related skills. Community Energy 48. Government has provided support to community energy projects through the Rural

47. Community Energy is an example of how Community Energy Fund (RCEF), a £10 million communities can come together to reach local fund to supporting community-run projects in and national net zero targets. Community England that benefit the energy transition to Energy England’s 2021 State of the Sector net zero. The fund has provided development Report outlined that there are 424 community stage grants to projects focusing on a variety energy organisations working across the of technologies including solar, wind, low UK to deliver a net zero future and with the carbon heating and electric vehicle charging. appropriate support, they estimate that the Communities have predominantly financed community energy sector could contribute their schemes commercially through share up to 5,270 MW, power 2.2 million homes, offers and borrowing. support 8,700 jobs and add £1.8 billion to the economy each year.45 271 Net Zero Strategy: Build Back Greener

49. The Government has also supported Community Energy England to develop and maintain their knowledge sharing role which includes peer mentoring. This resource can help communities develop their own schemes across heat and power generation, transport, energy efficiency, and also wider approaches to net zero. Case Study: Cuckmere Community Solar – a world first Cuckmere Community Solar has an ambition to power the rail network in East Sussex with solar energy – a world first. Working in collaboration with Riding Sunbeams, an innovator focused on decarbonising rail networks, the organisation aims to establish a template for similar projects. Cuckmere Community Solar plans to build a new 4 MW solar farm at Berwick, East Sussex. This will enable the local community to benefit from a higher income from renewable energy generation, and for the rail network to benefit from cheaper, low carbon power. The Rural Community Energy Fund has provided grant funding for the development stage of the project which includes the cost of studies, land agreements, investigation of the connection point, and legal work. The project has also recently received capital funding support from the South East Local Enterprise Partnership‘s £85 million share of the government’s Getting Building Fund, which aims to help economic recovery.

50. Ofgem also supports community 51. To build on our existing actions, we intend energy projects and following a consultation to continue to work closely with Community process has announced that from February Energy England and will reintroduce the 2022 it plans to welcome applications from Community Energy Contact Group. Since community interest groups, co-operative 2017, this group has been merged in a wider societies, and community benefit societies to Local Energy Contact Group, but given the the Industry Voluntary Redress Scheme. This scale and pace of work being taken forward, will allow groups to apply for funds to deliver and with the development of the Local Net energy related projects that support energy Zero Forum, we believe that it makes sense consumers in vulnerable situations, support to strengthen our engagement with the decarbonisation, and will benefit people in community sector further by reintroducing England, Scotland, and Wales. a dedicated forum for community groups to engage across Government. 272 Chapter 4 – Supporting the Transition across the Economy 4vi. Empowering the Public and Business to Make Green Choices Moving towards a net zero society together Our Key Commitments • Explore how to improve and enhance public facing climate content and advice on gov.uk. We will also enhance our digitally-led Simple Energy Advice (SEA) service to provide homeowners with personal, tailored advice on improving and decarbonising their homes, including tailored retrofit advice in local areas, and links to local, accredited, trusted installers. • Continue supporting UK businesses to meet their net zero commitments, including exploring a government-led advice service that consolidates and simplifies advice and other support on net zero. • Increase awareness of net zero and empower businesses and the public to make green choices, by building on government communications and engagement, and exploring providing environmental impact labelling of products, goods, and services. • Make green choices affordable and easy by working with businesses and industry to set strong regulatory signals and collaborating to reduce costs and provide better quality, longer lasting and lower environmental impact products, and services. 273 Net Zero Strategy: Build Back Greener The challenge Our Goal

1. Together we are moving towards a net 2. Our goal is to make the act of choosing zero society, led by technological innovation. green significantly easier, clearer and cheaper. We will see transformations to our economy, We recognise that the best way to do this society, and the way we live and work: new is to go with the grain of existing behaviour low carbon technologies, infrastructure and trends and by working closely with and job opportunities; cleaner air, greener partners like Local Authorities, voluntary sector spaces and reduced flooding; and changes organisations, social enterprise regulators, and to everyday life such as in the way we travel, businesses, who all play an important role in heat our homes and save our money. To reach how we use and choose different services. net zero, everyone will need to play their part. We know that public concern about climate change is high – with 80% in the UK either concerned or very concerned.46 We also know that people and businesses recognise that change must happen – 80% of respondents in a recent survey believe the way we live our lives will need to change to address climate change.47 Equally, however we know that the public is unsure of what net zero will mean in practice, what steps they can take, or they face barriers that stop them from acting.48 This chapter sets out how government will support individuals and businesses to make green choices – an act of choosing the more, or most, sustainable option from a range of possibilities, such as using an electric vehicle instead of a petrol or diesel vehicle when it is time to change your family car, replacing an old gas boiler with a heat pump, or switching to innovative green financial products. 274 Chapter 4 – Supporting the Transition across the Economy The role of green choices in meeting net zero

3. There are numerous individual actions – • Everyday business and consumer some one-off and some we take regularly choices, such as choosing green financial – that people can take to contribute to our products like the recently launched NS&I pathway to net zero. These individual actions Green Savings Bond, or seeking more combine to create wider systemic change responsibly invested pension schemes. required to meet net zero. New analysis on green choices,49 has helped us to identify 4. We want to better understand the choices and behaviours that impact on net behavioural factors that need to be considered zero, broadly falling into three categories: in the policies required to meet net zero. The Government Chief Scientific Adviser • Adopting new low carbon and Government Office for Science will be technologies, such as switching to zero producing a scenario-based foresight report emission vehicles. to understand the system wide implications of • Using energy, technologies, or services these factors, to be published in 2022. more efficiently, such as using smart meter-enabled ‘time of use’ tariffs which reward consumers financially for using energy at off-peak times, or when there is excess clean energy available. 275 Net Zero Strategy: Build Back Greener Our approach for supporting green choices

5. We know that people want to play their a. Communicate a vision of a net zero 2050, part in achieving net zero. Our approach for build a sense of collective action, improve how government will empower everyone to understanding of the role different actors make green choices is underpinned by six play in reaching net zero, and how and principles.50 Although they were developed when choices can be made; with the public in mind, many of them equally b. Ensure there is trusted advice and apply to green choices taken by businesses, support for people and businesses to particularly medium or small enterprises. The make green choices; principles reflects wider public engagement from across the country and Parliament. c. Mobilise a range of actors and stakeholders to increase and amplify their

6. Public engagement, including through communication and action on net zero and communications campaigns such as Together green choices; and for Our Planet, plays a significant role in d. Give people opportunities to participate in driving green choices. We will deliver public and shape our plans for reaching net zero, engagement on net zero to: thereby improving policy design, buy-in and uptake of policies. 276 Chapter 4 – Supporting the Transition across the Economy Principles underpinning green public and business choices Principle 1: Minimise the ‘ask’ by Principle 2: Make the green choice sending clear regulatory signals the easiest

7. By targeting measures at an industry level, 9. By addressing all the major, practical rather than at the individual consumer, we barriers to individual behaviours we can make can make green choices much simpler for the it easier for people to make green choices. We consumer. This will also help grow a stronger will ensure that we take a consumer‑centred market for low carbon goods and give approach to net zero policy design, removing businesses clear, early signals. For example, frictions and minimising disruptions to the 2030 phase out date for petrol and diesel people’s lives. cars and vans sends a signal to industry and will improve the availability and quality of zero 10. In our Transport Decarbonisation Plan, we emission vehicles on the market. Similarly, have committed to better integrating transport as set out in the Heat and Buildings Strategy modes, with more bus routes serving railway there are a range of policies we will introduce stations and improved integration of cycling that will bolster the low carbon heating market, and walking networks, so that opting to creating new opportunities for business, and make a green travel choice is easier. This better choice for the consumer. is in addition to delivering interventions to enable more people to walk and cycle for

8. We are taking action to ensure that short journeys such as a national e-cycle products are more sustainable, both in relation support programme. Our vision is that half of to their energy efficiency during use and all journeys in towns and cities will be cycled use of materials over their lifetime (resource or walked by 2030. We are also committed to efficiency) through developing proposals for increasing road vehicle occupancy. This will new regulatory product standards and better help decarbonise and decongest our roads. consumer information. We are exploring We will publish guidance for local authorities updating and expanding ‘Ecodesign’ product on support for shared car ownership and regulation which sets minimum requirements shared occupancy schemes and services and to phase out the least energy and resource are continuing to build our evidence base to efficient products from the market. understand the barriers and potential policies to increase the uptake of shared mobility.

11. We are committed to removing inconvenience and increasing availability of green choices. Following the commitments made in our Resources and Waste Strategy, the Environment Bill will introduce powers that will allow us to require separate food waste collections in all local authorities in England, which will help people to reduce emissions from food waste with ease. 277 Net Zero Strategy: Build Back Greener Principle 3: Make the green choice Principle 4: Empower people affordable and businesses to make their

12. We are already seeing the upfront cost of own choice. green choices, such as electric vehicles, drop. 15. Consumer preference can shape We are looking across all sectors to see how producers’ decisions, but sometimes we can continue this trend and make green consumers and businesses lack clear choices more affordable. information to make informed choices. As announced by the chancellor in his Mansion

13. Through the Smart Export Guarantee House speech in July 2021, we will work with (SEG) energy suppliers are moving to the Financial Conduct Authority to introduce a increasingly innovative tariffs which support sustainable investment label - a quality stamp electric vehicle deployment while continuing - so that consumers and retail investors can to enable households to access a market-led clearly compare the impacts and sustainability route for exporting and receiving payment for of their investments for the first time. their unused electricity. As committed to in our Heat and Buildings Strategy, the Boiler We plan to help empower people to make Upgrade Scheme will provide grants to help informed choices about the goods and households transition to low carbon heating. products they buy and services they use by We are also supporting motorists through exploring how we better label these with their plug-in vehicle grants, which provide support emission intensity and environmental impact. towards the upfront purchase of eligible cars, We are also exploring the use of product vans, motorcycles, and trucks. labelling to show the durability, repairability and recyclability of products, as well as

14. We are supporting the public to both save their environmental footprint with a view to and contribute towards public spending that stimulating demand for better quality items. helps the UK reduce its emissions through We continue to explore the evidence base for the NS&I Green Savings Bond. The Green environmental labelling within food production Finance Institute and Abundance Investment, and disposal, including the most accurate supported by UK100, Local Partnerships methodologies to monitor and verify the and Innovate UK, have also launched a carbon emissions, and environmental impact, national campaign to help local authorities of food items. issue a type of municipal finance investment – Local Climate Bonds. For citizens, the Local 16. Our Transport Decarbonisation Plan Climate Bond provides a low-risk and fixed outlines how we will explore the feasibility of return investment, and a way to mobilise a travel reward scheme that uses peer-driven their savings to help tackle the climate motivation and encourages individuals to change in their area. switch to, or continue to use, sustainable modes of travel.

17. We are providing tailored advice and support to homeowners on what they can do to improve their homes. Our Simple Energy Advice service has already had over 1.5 million users, providing homeowners with personal, tailored advice for improving and decarbonising their homes and links to local, accredited, trusted installers. Homeowners can also find out about government schemes 278 Chapter 4 – Supporting the Transition across the Economy for which they may be eligible. We will 19. We know that technologies can also enhance the digitally led service and are improve public understanding of energy use considering options to support tailored retrofit and energy efficiency. In-Home Displays for advice in local areas, supported by tailored smart meters give accurate information about local advice. This includes moving our Simple energy consumption to help households Energy Advice service to gov.uk, which will easily understand how to use less energy and improve user experience, and supporting local save money on their bills. Building on this, advice provision. the Smart Energy Savings initiative is trialling how innovative products and services can use

18. We are also reviewing other existing digital smart meter data to provide consumers with information and advice services related to advice on how to manage their energy use. At net zero and exploring how to improve wider the end of June 2021, there were 25.2 million existing public-facing net zero content and smart and advanced meters in homes and advice on gov.uk small businesses across Great Britain.51 279 Net Zero Strategy: Build Back Greener Principle 5: Motivate & build public 22. The Devolved Administrations have a acceptability for major changes range of initiatives aimed at engaging and motivating the public around net zero and

20. Achieving our net zero target must be climate action: a shared endeavour. It is therefore vital that we listen to the publics views on how to a. The Scottish Government launched a draft reach net zero. We already regularly invite the Public Engagement Strategy for Climate public to shape policies on net zero through Change in December 2020, and the final consultations and deliberative dialogues. Since report of Scotland’s Climate Assembly was 2019, we have run, funded, or are still running laid in Scottish Parliament in June 2021. deliberative dialogues on a range of net b. The Welsh Government Engagement zero issues, such as green choices, homes, Approach for Low Carbon Delivery Plan 2 heating, transport decarbonisation, green was published in June 2021, encouraging savings, hydrogen, food, Carbon Capture Use collective action on climate change and Storage (CCUS) and Advanced Nuclear through four Calls to Action. Technologies (ANT). c. In March 2021, the Northern Ireland

21. To ensure that the transition to net zero Executive unveiled a new digital climate is fair and affordable, and does not negatively action campaign, delivered by MyNI in the impact disadvantaged groups, we are run up to the COP26 conference. It aims committed to assessing the impact of our net to raise climate awareness, encourage zero policies. We consult on policy changes change, enable action, and exemplify and we will continue to make it easier for climate leadership. people and businesses, including those who Principle 6: Present a clear vision are most marginalised, to feed into key policy decisions on net zero. of how we will get to net zero and what the role of people and business will be 280 Chapter 4 – Supporting the Transition across the Economy The role of business in delivering net zero Businesses have significant power to drive To underline the importance of this area, change towards achieving our domestic the Prime Minister appointed a net zero net zero goal. Our approach to supporting Business Champion, Andrew Griffith MP, to businesses to deliver this change will need to spearhead business engagement nationwide be differentiated by business size and sector, in the year to COP26. Already over half of as these factors will influence the ease with the FTSE100 companies have committed which a net zero target and other relevant to Science-Based Targets by joining the actions can be adopted. We have seen global Race to Zero campaign. Alongside significant numbers of companies signing up engaging large corporates, the Net Zero to science based targets alongside sector- Business Champion has led a campaign specific ambition being put forward already. targeting small and micro businesses across For example, Water UK has launched the the UK. Over 1,900 have joined the Race to world’s first sector-wide plan to deliver net Zero to date by visiting the Business Climate zero carbon emissions by 2030. Hub, developed in partnership with a global business coalition led by the International We know that businesses account for 18% of Chambers of commerce. Companies, UK territorial emissions and so encouraging particularly large businesses, once they them to take action to reduce their emissions have joined the Race to Zero, should work is important.52 But just as vital is the role with others to drive breakthroughs in their businesses are playing in designing the sectors, regions, and support SMEs in ground-breaking new technologies, world their value chains to take action. We’re leading products and innovative approaches encouraging Business Representative that we need to develop the low carbon Organisations (BROs) to become Race to economy and enable others to reach net Zero Accelerators by recruiting members into zero. Collaboration across sectors and value the Race to Zero. To be recognised officially chains will enable us to innovate faster, as an Accelerator, businesses must recruit at create stronger incentives for investment and least 20% of members not already in Race drive down costs for low carbon alternatives to Zero by COP26. through the global mechanisms laid out in the Paris Agreement. Many businesses across the UK have said they want to tackle climate change, but that they don’t know where to start53. Through the small business campaign, government has taken an important step towards making net zero relevant to SMEs by helping them access the support they need. Beyond COP26 we will continue to support UK businesses to meet their net zero commitments, including exploring a government-led digital advice service that consolidates and simplifies advice, funding, and other support on net zero. 281 Net Zero Strategy: Build Back Greener For larger businesses, we want to ensure businesses are aware of their energy and carbon use so they can take action towards reaching net zero. Climate risks must be assessed and disclosed through the Task Force on Climate-related Finance Disclosures (TCFD). This is complemented by Streamlined Energy and Carbon Reporting, which requires energy and emissions reporting in all UK large businesses to improve awareness of energy costs. We also require large businesses and their corporate groups to carry out a broader assessment of their energy use from buildings, transport and industrial processes every 4 years under the Energy Savings Opportunity Scheme (ESOS), which is designed to identify practicable and cost-effective energy saving opportunities. In the future building users and decision makers will be able to compare the performance of their buildings to other similar buildings using a performance-based energy rating to support targeted investments. Government will work in partnership not just with businesses themselves, BROs, sector- based trade associations, business groups in the Devolved Administrations and local and regional organisations to translate the pathways within this strategy into business specific plans to reach net zero. 282 Chapter 4 – Supporting the Transition across the Economy

23. Supporting people to make green choices ‘One Step Greener’ Ambassadors come from will be a collective effort between government, all walks of life in their pursuit of a greener businesses, voluntary sector, social enterprise future and demonstrate how going one and community groups, local authorities, green step can culminate in a large collective media organisations and others. However, we impact in helping to make the UK a more know that others look to Government to set sustainable place. the narrative on how we should get to net zero and what people’s role will be. 25. We will build on the success of Together for Our Planet, through which the UK business

24. We will build on government community is demonstrating global leadership communications and engagement on net in efforts to combat climate change, with over zero to increase awareness of how we plan to 1,900 SMEs signed up to reach net zero by deliver the net zero target in the UK. Building 2050. Up and down the country, local high on the momentum of COP26, the Together street shops are proudly displaying their for our Planet campaign is showcasing how climate leadership by sharing their net zero people across the UK are going “One Step journey on social media. Examples include Greener” to tackle climate change - from the Caribe Coffee, a family run coffee business engineers working on the offshore wind farms in Northumbria, John Sankey, a sustainable now powering our homes and businesses, furniture maker in Derbyshire, and SilverHare, to local initiatives encouraging children and a jewellery maker in West Cornwall. In doing parents to walk to school. The campaign so, they are acting as changemakers in demonstrates that taking a single step can their local communities. The focus of the have a positive impact on the environment, campaign in the run-up to COP26 has using the inspiring stories of 26 One Step been on encouraging business to make net Greener Ambassadors who are playing their zero pledges. After COP26, we commit to part for the planet - be it by walking to work, continuing to support businesses to meet repairing their clothes, or reducing their food their commitments whilst developing their waste - to encourage others to join them. The climate resilience. 283 Net Zero Strategy: Build Back Greener 4vii. International Leadership and Collaboration Accelerating the global transition to a resilient net zero future Our Key Commitments • Increase global climate action through our push for global net zero, including our COP26 Presidency objective to keep 1.5˚C within reach. As part of this, strengthen international collaboration in key sectors including by working with others to accelerate the innovation and deployment of clean technology and continue to convene the Zero Emission Vehicle Transition Council, the Energy Transition Council, the FACT dialogue, and other flagship initiatives that will be announced at COP26. • Deliver against net zero on a trajectory in line with the Paris Agreement, decreasing UK emissions by at least 68% by 2030 as set out in our Nationally Determined Contribution,54 78% by 2035 compared to 1990 levels in line with our Sixth Carbon Budget. • Double our International Climate Finance to at least £11.6 billion between 2021 and 2025 to support net zero support adaptation and build resilience internationally. Within this, invest at least £3 billion in solutions that protect and restore nature, and £200 million at a minimum to help countries access technical exprtise to limit emissions and build back greener. • Drive international innovation in key low carbon technologies through Mission Innovation, including co-leading the Green Powered Future and Clean Hydrogen Missions. • Lead by example internationally on inclusive climate policies, Action for Climate Empowerment and support for the UNFCCC Gender Action Plan. • Set out a clear vision and priorities to guide UK international climate and nature action in the coming decade through a 2030 Strategic Framework, and publish a refreshed Export Strategy outlining HMG support for exporters in the low carbon economy. 284 Chapter 4 – Supporting the Transition across the Economy The challenge

1. Meeting our shared objective of avoiding 2. UK emissions account for about 1% of dangerous climate change requires a the global total.56 To accelerate progress dramatic, global acceleration of progress towards a resilient net zero future, we need to towards net zero CO2 emissions by mid- play a prominent role in promoting collective century and net zero greenhouse gas global action, working together to ensure emissions (GHG) by around 2070.55 Over the transition is quicker, cheaper, and easier 2020-21 there has been considerable for all building on a strong foundation of progress, with all G7 countries, over half of domestic action. the G20, and around 75% of global emissions now covered by net zero targets. However, 3. The transition to net zero must be the world is still not on track to reach the supported by a joined-up approach to halting Paris Agreement temperature goal, which biodiversity loss. The two are inextricably aims to limit global warming to well below linked: the greatest drivers of biodiversity 2°C and pursue efforts to limit warming to loss, land use change and agriculture are 1.5°C, compared to pre-industrial levels. also responsible for approximately one fifth More must be done to turn these targets into of global GHG emissions. Simultaneously, immediate action. climate change itself is a direct driver of biodiversity loss, and terrestrial and marine ecosystems act as carbon sinks for human- driven CO2 emissions.57 Our goal

4. As set out in the Integrated Review of and we can create level playing fields. This Security, Defence, Development and Foreign international collaboration will make the Policy (the Integrated Review), tackling climate transition to net zero cheaper, faster, and change and biodiversity loss is the number more accessible for all countries. This is not a one international priority for the UK for the matter of shouldering a burden between us, coming decade.58 but of sharing an opportunity. It will support the UK’s own transition and stimulate UK

5. As the world recovers from the COVID-19 jobs and prosperity.59 Over the past decade pandemic our actions must be aligned with alone, we have seen over an 80% drop the Paris Agreement to ensure a fair and in the costs of clean energy technologies inclusive ransition to net zero. This includes thanks to technology innovation, learning- enhancing adaptive capacity, strengthening by-doing, and greater deployment at scale resilience, and reducing vulnerability to domestically and globally.60 climate change.

7. Collaboration across borders and

6. The international emissions reductions society is a key aim for our COP26 and G7 required to keep 1.5 degrees warming within Presidencies. Beyond these, we will continue reach are only achievable if the international to advocate for enhanced international community works together. And by working collaboration, and coordinate action across together, we can create stronger incentives science, innovation, finance, and trade. for investment, we can innovate faster, we can achieve economies of scale more quickly 285 Net Zero Strategy: Build Back Greener Delivering our Paris Agreement commitments Mitigation International Climate Finance (ICF)

8. Parties to the Paris Agreement shall 10. The UK’s ICF helps over 100 developing communicate ambitious short-term targets countries mitigate and adapt to the impacts to reduce greenhouse gas (GHG) emissions of climate change. This includes supporting through Nationally Determined Contributions countries’ resilience to the damaging effects (NDCs) and should strive to underpin these of climate change, accelerating the clean targets with credible pathways set out in Long energy transition, supporting low carbon Term Strategies (LTSs). infrastructure, and investing in climate change solutions that protect and restore nature

9. The UK’s NDC commits us to reducing our and biodiversity. economy-wide GHG emissions by at least 68% by 2030, compared to 1990 levels.61 This 11. The UK has committed to doubling strategy sets out the UK’s plans to deliver on our ICF to at least £11.6 billion between the NDC and reach net zero by 2050 and will 2021‑2025, including at least £3 billion for be submitted to the UNFCCC as our revised nature and biodiversity.62 This forms part of an LTS under the Paris Agreement. ambition by developed countries to mobilise $100 billion in climate finance annually. We have also committed to aligning all UK Official Development Assistance (ODA) with the Paris Agreement and ensuring that all new UK bilateral aid spending does no harm to nature. This delivers on our Integrated Review objective of investing in a nature- positive economy. 2021 cumulative UK ICF Achieved results (2011-2021, last year’s in brackets) 88 million 41 million 180 million people supported to cope with people improved access people avoided or reduced tonnes the effects of climate change to clean energy of greenhouse gas emissions (66 million) (33 million) (31 million) 2,400 MW £5.2 billion £3.3 billion capacity of clean public finance mobilised private finance mobilised energy installed for climate change for climate change (2,000 MW) (£4.1 billion) (£2.2 billion) Source: BEIS analysis (2021) 286 Chapter 4 – Supporting the Transition across the Economy

12. UK ICF is stimulating a shift in private attaché network embedded in UK Embassies finance mobilisation for climate action from and High Commissions. UK Partnering for the billions to the trillions. Between 2011 Accelerated Climate Transitions (UK PACT) is and 2021, UK ICF mobilised £3.3 billion of supporting developing countries with potential private finance for climate change purposes in for high emissions reductions to build the developing countries.63 We target investment knowledge and expertise required to both in dveloping economies with the highest develop and implement the ambitious plans potential to accelerate the global transition to needed to limit emissions and realise the net zero, ensuring that everyone can share the opportunities of clean growth. opportunities of clean growth sooner.

14. For all new and existing International

13. We support the work of key multilateral Climate Finance programmes, we will ask funds and have significant bilateral delivery and monitoring partners to include programming drawing on UK experience analysis of the impacts of programmes on and expertise, enabled by the diplomatic certain groups of people to manage any work of our climate, energy and environment negative impacts.64 Case study: UK-Colombia Partnership for Sustainable Growth Through our Partnership for Sustainable Growth, the UK is working with Colombia to help drive real world emissions reductions and global climate ambition. The partnership and UK programmes are supporting Colombia to reduce deforestation, accelerate the energy transition, and conserve biodiversity. For example, UK technical assistance helped deliver Colombia’s first renewable energy auction in 2020 – which will increase solar and wind capacity in the country from 50 MW to nearly 2,500 MW – as well as the development of the country’s strategic planning for a low carbon energy sector through skill-shares with UK experts. Our strong climate partnership has also supported increased ambition in line with the goals of the Paris Agreement and a net-zero future, with Colombia committing in 2020 to cut 51% of greenhouse gas emissions by 2030, compared to a projected scenario. 287 Net Zero Strategy: Build Back Greener

15. Climate change disproportionately affects in an inclusive way. This is the first time the world’s poorest and can exacerbate donor countries will have set out how they economic and social disparities. However, will support this transition, including through local communities and indigenous knowledge financial flows for quality local jobs in the most systems can also play a key role in solutions. vulnerable communities.

16. As part of our incoming COP26 17. Low carbon transitions should be fair Presidency, the UK has developed a and affordable and not negatively impact framework that aims to guide investment disadvantaged groups.65 We are committed towards a global net zero transition that also to monitoring the impacts of our climate and supports the UN’s Sustainable Development clean energy policies, and any disparities Goals. The framework will indicate how which arise, to assess the need for targeted support for developing countries and support for disproportionately impacted emerging economies can accelerate climate groups, in line with the UNFCCC Gender ambition and enable a global green recovery Action Plan and domestic law. Influencing global action COP26 Presidency • Cash: developed countries to make good on their promise to mobilise at least

18. The four goals of our COP26 Presidency $100 billion in climate finance per year are: (1) mitigation to secure global net through to 2025. zero by mid-century to keep 1.5°C within • Cars: to accelerate the shift to zero reach; (2) adapting to protect communities emission vehicles (ZEVs), pushing for and natural habitats; (3) mobilising finance all new car sales in leading markets to and (4) collaboration: working together to be ZEV by 2035. deliver, finalising the Paris Rulebook and accelerate action to tackle the climate crisis 20. Our COP26 Presidency has defined five through collaboration between governments, areas vital to a zero-carbon future: energy businesses, and civil society. transitions, clean transport, nature-based solutions, adaptation and resilience, and, tying

19. There will also be a renewed focus it all together, finance. We are working with on accelerating near-term action in the those affected by climate change and with top priority areas of coal phase out, zero- wider civil society to harness innovation and emission vehicles, climate finance and halting commitment in these areas and will continue deforestation. We will ask countries to sign up this work throughout our COP26 Presidency to initiatives under each goal: year up to November 2022. • Coal: to push for an immediate end to new unabated coal power and international coal financing, and the scaling up of low carbon power to rapidly move away from existing coal. • Trees: to halt natural forest loss by 2030 and restoring millions of hectares of degraded landscapes and forestlands. This is alongside improving governance and increasing forest finance. 288 Chapter 4 – Supporting the Transition across the Economy Case study: 2020 Climate Ambition Summit A major milestone ahead of COP26 was the 2020 Climate Ambition Summit, co-convened by the UK, UN, and France, in partnership with Chile and Italy. This landmark event demonstrated how we can help drive collective ambition by combining major domestic commitments with diplomatic engagement, working closely with multilateral organisations and international partners. Achievements included more ambitious Nationally Determined Contributions (NDCs) from 45 leaders. We also saw 24 countries announce new commitments, plans or strategies to reach net zero, and a UK announcement on ending direct government support the for fossil fuel energy sector overseas. When the UK was confirmed as host of COP26, less than 30% of global GDP was signed up to net zero or carbon neutrality commitments. Again, thanks in part to UK leadership, that figure is now over 80% - and rising. We will continue to encourage all countries to set targets to get to net zero by 2050, and more ambitious 2030 emissions reduction targets to get us there. We are also encouraging countries to publish Adaptation Communications or National Adaptation Plans. We will use COP26 and our Presidency year to turn these commitments into action to make the next ten years the decade of delivery. 289 Net Zero Strategy: Build Back Greener G7 Presidency and G20 23. As part of our G7 Presidency, the UK hosted several follow-up workshops including

21. Under our 2021 G7 Presidency, members on Net Zero Sectors and the Industrial committed to becoming ‘a net zero G7 Decarbonisation Agenda (IDA). G7 members by 2050 at the latest’; ensuring a green supported the idea of using the IDA to unlock recovery from COVID-19 that is sustainable, market potential through high-level G7 resilient, and inclusive; phasing out new government coordination and collaboration direct government support for international on ambitious industrial decarbonisation fossil fuel energy, and pursuing commitments initiatives. Driving international cooperation on to support those most vulnerable to the decarbonisation will help to diffuse ‘first mover’ impacts of climate change and environmental risks and address carbon leakage risks at the degradation. These have helped to lay the outset. The IDA is due to be integrated into the foundation for COP26. rotating G7 Presidency with Germany taking

22. As inclusivity was at the heart of the ownership in 2022. During the rest of our G7 UK’s G7 Presidency, these commitments are Presidency, we will work with our partners to underpinned by pledges to support affected consider how best to coordinate efforts on workers and sectors so that no person, group, the pricing of carbon to mitigate emissions, or geographic region is left behind. and to explore international solutions to prevent carbon leakage, helping us deliver the transformational change required by the Paris Agreement. 290 Chapter 4 – Supporting the Transition across the Economy Key G7 climate commitments • Submitting net zero-aligned NDCs to 2030 • Decarbonising hard-to-abate sectors, and LTSs to 2050 ahead of COP26; including through a new UK-US-led • Reaffirming the collective developed Industrial Decarbonisation Agenda; country goal to jointly mobilise $100 billion • Launching a new partnership to modernise per year through to 2025; development finance tools to build back • Increasing adaptation finance, including better for the world, including for resilient a commitment to submit adaptation infrastructure and technologies to address communications ahead of COP26; the impacts of climate change; • Accelerating the transition away from • Pledging cooperation on the risk of carbon unabated coal capacity and to an leakage and to aligning trading practices overwhelmingly decarbonised power with the Paris Agreement; and system in the 2030s; • Recognising the potential of carbon • Ending new direct government support for pricing to foster emission reductions, unabated international thermal coal power while ensuring environmental and social generation by the end of 2021, alongside considerations are accounted for. phasing out new direct government support for international fossil fuel energy as soon as possible; • Increasing the pace of the global decarbonisation of the road transport sector throughout the 2020s and beyond; 291 Net Zero Strategy: Build Back Greener

24. The G20 includes both developed and and to urge each other to develop long developing nations. Its members are jointly term strategies in line with keeping the responsible for approximately 80% of global 1.5°C temperature goal within reach. The emissions66 and more than 80% of global UK will advocate for further action from the GDP67: it must play a leading role in global G20 to meet the commitments of the Paris efforts to tackle climate change. In July Agreement. The Leaders’ Summit in Rome 2021, UK Climate and Energy Ministers met in October, on the eve of COP26, will be a with their G20 counterparts in Naples to crucial moment to build consensus for urgent agree to accelerate action in the 2020s, to and ambitious action on climate change and submit ambitious 2030 targets by COP26, the clean energy transition. Facilitating a global transition

25. The global move to a green and net zero 27. Collaborative action also sends clearer economy will require accelerated transitions market signals to businesses and consumers across all major emitting sectors – including about the global direction of travel. This power, transport, buildings, industry and confidence in a credible global net zero agriculture, forests and land-use. All countries, pathway is especially important for the including the UK, can benefit from greater harder to abate sectors, such as heavy collaboration to help achieve their net zero industry, where we know that the pace of targets more quickly and more cheaply. emissions reduction will progress more slowly up to 2030. However, action is needed

26. Across the global economy, different in these sectors now to lay the significant sectors are experiencing the transition at groundwork required to set the path for future different speeds (see infographic below for emission reductions. one interpretation of the progress by sector). International collaboration focused at the 28. We will therefore continue to work with sector level can accelerate action towards our countries to accelerate sectoral technologies global goals, which is why it is a key focus at COP26 and beyond – including continuing for the UK. This includes delivering faster to convene the Zero Emission Vehicle innovation through coordinating on research, Transition Council, the FACT Dialogue, and the development, and demonstration of clean Energy Transition Council – as well as working technologies, as well as faster deployment with partners to set a common vision for the of technologies, by coordinating on policy, next decade of clean technology innovation finance, and trade measures to create new and deployment at COP26. demand, economies of scale, and supply chains for clean technologies. 292 Chapter 4 – Supporting the Transition across the Economy Figure 30: The sectoral S-curve EMERGENCE DIFFUSION RECONFIGURATION Low or zero emission technology market share Coordinated Coordinated Coordinated standards and development and policies to expand incentives - to ensure change testing of new deployment - to throughout the whole sector technologies - to increase economies accelerate learning of scale and improve performance 1 2 3 4 Power 10 9 8 7 6 5 Cars Buildings Trucks Time or cumulative production Agriculture & Land Use Aviation Shipping Steel Cement Source: Victor, D.G., Geels, F.W. and Sharpe, S., 2019 Accelerating the Low Carbon Plastics Transition: The Case for Stronger, More Targeted and Coordinated International Action 293 Net Zero Strategy: Build Back Greener Case study: COP26 Energy Transition Campaign Our COP26 Energy Transition Campaign will help accelerate the global transition from coal to renewables, enabling the energy sector to achieve net zero. The UK is working through the Powering Past Coal Alliance (PPCA) and the Energy Transition Council (ETC) up to, and beyond, COP26. This will strengthen the coalition of countries, sub-national governments, and businesses phasing out unabated coal power and reduce international coal finance. Solar and wind power are now cheaper than new coal and gas power plants in two-thirds of the world.68 The Energy Campaign will bring together countries, development banks, investors and civil society to strengthen low carbon power investment and assistance so that it is viable for every country. The UK has also worked with the IEA to launch a COP26 Product Efficiency Call to Action, to double the efficiency of four key products (air conditioners, refrigerators, industrial motors, and lighting) by 2030. These four products combined currently account for more than a third of global electricity consumption. Global action to improve product efficiency will lead to a significant reduction in the energy sector’s carbon emissions. The UK driving inclusive 30. The UK remains committed to climate action strengthening the evidence base and understanding of differentiated impacts of

29. We will drive forward our commitment climate change on men and women, the role under the ‘Equal by 30 Campaign’ to of women as agents of change and on equal work towards equal pay, leadership, and opportunities for women. We continue to opportunities for women in the global clean support amongst other things, increasing the energy sector by 2030, and champion proportion of women and girls in decision- increased gender representation across the making and leadership positions, supporting UK’s international organisations. their access to finance, education, building their resilience to climate change, and improving data on gender and inclusion. 294 Chapter 4 – Supporting the Transition across the Economy Science and innovation 32. The UK will continue to use its world‑leading position in climate-related

31. Science and innovation are essential science and innovation to build global to achieve global climate goals. The UK multidisciplinary networks and facilitate will continue to work closely with countries knowledge exchange to support effective to drive innovation, research, and aligned global climate action through initiatives policy to ensure that clean technologies such as Mission Innovation, the Adaptation become cheaper and more readily available. Research Alliance, and the Visions for a The UK will also continue to promote the Net‑Zero Future project. vital role of the Intergovernmental Panel on Climate Change (IPCC) and other scientific research, ensuring the best available science is accessible and understood by all, enabling informed decision-making across the world. Case study: Mission Innovation The UK has played a leading role in Mission Innovation (MI) since it launched at COP21 as the primary intergovernmental forum focused on clean energy innovation essential to achieving net zero. We have more than doubled our MI baseline clean energy innovation spend over the past five years, exceeding our MI commitment. The second phase of Mission Innovation (MI 2.0) was launched in June 2021, bringing together countries responsible for more than 90% of global R&D clean energy investment and committed to a decade of action and investment in innovation for clean energy solutions. Commitments included developing National Innovation Pathways describing enhanced ambition to pioneer clean energy technologies and sectors. The UK is co-leading two of the three Missions. Launched as part of MI 2.0, The Green Powered Future Mission is bringing together governments and businesses to enable the transition to variable renewable power. The Clean Hydrogen Mission aims to make clean hydrogen cost competitive. The UK is also participating in the Zero-Emission Shipping Mission which aims for ships capable of running on zero-emission fuels to comprise at least 5% of the global deep sea fleet by 2030. 295 Net Zero Strategy: Build Back Greener Trade 35. While there are significant opportunities for UK trade to support our climate and

33. The whole system shift that will be nature ambitions as we transition to net required for the UK to reach net zero will zero, it is important we ensure that our also mean changes to how and what we policy interventions support global emissions trade. Taking a leading role in the global shift reductions. The UK is at the forefront to net zero presents a significant economic of measuring and publishing statistics opportunity for the UK. Estimates suggest of emissions generated overseas in the the UK’s low carbon economy could deliver production of goods and services consumed up to £170 billion of export sales of goods by UK residents. We recognise there is much and services by 2030.69 The UK will seek more to do on consumption emissions globally to improve market access for green goods which is why we are urging and supporting and services through our trade policy, our other countries to raise ambition on climate growing array of free trade agreements (FTAs) change, including on effectively pricing and our seat at the World Trade Organization carbon, as well as considering this issue as we (WTO). For example, when we exited the EU, negotiate new FTAs. we unilaterally removed tariffs on over 100 additional products used in renewable energy 36. Decisions on the liberalisation of partners generation, energy efficiency, carbon capture, goods must account for their environmental and the circular economy as part of the UK’s and climate impact. Where there is evidence Global Tariff.70 that liberalisation could lead to significant carbon leakage the case for maintaining

34. We will seek to reaffirm our commitment tariffs or pursuing conditional market access, to the Paris Agreement in all UK through clauses on standards or eco/carbon trade agreements and will ensure that they intensity, should be carefully considered. preserve our regulatory autonomy to pursue our climate targets including our Carbon 37. We will publish a refreshed Export Budgets, enhanced 2030 NDC and 2050 net Strategy by the end of 2021. The Strategy zero commitment. We will use our multilateral will help deliver jobs and growth and fora to galvanise international partners to maximise export opportunities for green adopt climate-ambitious trade policy, and UK technologies and innovation. It will also to promote global trade rules that are aligned support our transition to net zero, enabling to net zero and the Paris Agreement, for the UK to take advantage of the window to example through the WTO committees and boost UK competitiveness in key low carbon the new Trade and Environmental technologies, services and systems. The Sustainability Structured Discussions. Strategy will also help developing countries mitigate and adapt to climate change and nature loss by reducing trade barriers to help them benefit from the green transition.

38. UK Export Finance is also expanding its suite of green products and published the UK Export Finance Climate Change Strategy in September 2021. The UK is also one of the founding signatories of the Export Finance for Future initiative, a coalition of countries which endorsed a statement of principles to better integrate climate in export finance. 296 Chapter 4 – Supporting the Transition across the Economy Finance put in place the conditions for a sustainable recovery and climate action, creating the

39. At COP26 the UK is working to right investment environments and aligning achieve the finance goal, agreed in Article national budgets and planning processes with 2.1.c of the Paris Agreement, to make the goals of the Paris Agreement and 2030 finance flows consistent with a pathway Sustainable Development Agenda. towards low greenhouse gas emissions and climate‑resilient development. The UK 41. However, international public finance Presidency published our Priorities for Public alone will never be enough to achieve the Finance earlier in 2021, and Priorities for trillions of investment needed and put the Private Finance in 2020.71 world on a sustainable footing; the private sector will be key. Achieving net zero and

40. Following COP26, the UK will continue our finance goals requires changes from the to strive for greater ambition on finance. whole economy – we need every company, Achieving the global transition requires bank, insurer, and investor to adjust their renewed action from all stakeholders to business models, develop credible plans for support the needs of developing countries. the transition and implement them. From the global to the local level, we need to UK global climate action beyond COP26

42. Beyond our COP26 and G7 Presidencies, It will also establish a common vision and clear and the commitments outlined in this chapter, priorities to guide UK international climate the UK will continue championing the fight and nature action over the next decade. The against climate change and biodiversity UK will continue to play a leadership role in loss internationally and at home in the delivering the change needed by capitalising decade to come. on our areas of strengths including diplomacy, finance, science, technology and innovation,

43. The UK COP26 Presidency will formally trade, and domestic leadership. begin at the Summit in November 2021 and run until COP27 in November 2022. 45. On top of the 2030 Strategic Throughout our Presidency year, we will build Framework, we will aim to mobilise greater on the outcomes from COP26 and the COP26 finance for nature, tackle the key drivers campaigns, including further strengthening the of biodiversity loss, and deliver against the architecture for collaboration in key sectors, targets contained in the post-2020 Global and work with international partners to keep Biodiversity Framework. the 1.5°C temperature goal alive. This entails continuing to advocate for our four Presidency 46. The upcoming International Climate goals with a focus on progress against our Finance Strategy will set out how we will use agreed targets in critical sectors and building our £11.6 billion ICF to deliver transformational the conditions for further ambition and a programmes in support of mitigation and successful Global Stocktake in 2023. adaptation action in developing countries across the four themes of clean energy,

44. Building on our COP26 Presidency, we nature, resilience, and infrastructure. are developing a 2030 Strategic Framework due to be published in 2022. The Framework will provide a coordinated approach to deliver against the climate and biodiversity commitments set out in the Integrated Review. 297 Net Zero Strategy: Build Back Greener Endnotes 1 Mission Innovation is a global initiative of 24 countries, including the UK and the European Commission, working to accelerate clean energy innovation. It was established in 2015. 2 BEIS (2020), ‘The Ten Point Plan for a Green Industrial Revolution’, https://www.gov.uk/ government/publications/the-ten-point-plan-for-a-green-industrial-revolution 3 This includes legacy funding from government’s previous £505 million Energy Innovation Programme. 4 We recently published a Fusion Strategy and a Fusion Regulation Green Paper, recognising that fusion could be the ultimate clean power solution, representing a low carbon, safe, continuous and effectively unlimited source of energy. BEIS (2021), ‘Towards fusion energy: the UK government’s fusion strategy’, https://www.gov.uk/government/consultations/towards- fusion-energy-proposals-for-a-regulatory-framework; BEIS (2021), ‘Towards fusion energy: proposals for a regulatory framework’ https://www.gov.uk/government/consultations/towards- fusion-energy-proposals-for-a-regulatory-framework. 5 BEIS analysis based on the methodology used in the Energy Innovation Needs Assessments. BEIS (2019), ‘Energy Innovation Needs Assessments’. 6 The Industrial Strategy Challenge Fund (ISCF) aims to bring together our world-leading research base with Britain’s best businesses to address the biggest challenges society faces, including clean growth. The fund, which is part of government’s £4.7 billion investment in R&D over 4 years is delivered by UK Research and Innovation (UKRI) and its partners. 7 Bank of England (2021), ‘A roadmap for increasing productive finance investment’, https:// www.bankofengland.co.uk/report/2021/a-roadmap-for-increasing-productive-finance- investment 8 Major projects are defined as those which: require spending over and above departmental expenditure limits; require primary legislation; and are innovative or contentious. More information can be found at https://www.gov.uk/government/groups/major-projects-authority 9 This diagram is not an entirely accurate representation of the stages of development at which these institutions and funds intervene and it is simplification of the varied programmes and impacts they have on different sectors, businesses and technologies. However, it demonstrates roughly where these government interventions have greatest impact and have a key role to play in delivering economy-wide net zero solutions. 10 Mark Carney and the COP26 Private Finance Hub – in partnership with the UNFCCC Climate Actions Champions and the Race to Zero campaign and the COP26 Presidency- have launched a coalition that combines existing and new net zero finance initiatives into a wider strategic forum: The Glasgow Financial Alliance for Net Zero (GFANZ). GFANZ aims to raise ambition in the financial sector by allowing firms to demonstrate collective commitment to net zero. 11 BloombergNEF (2021), Database accessed 12/10/2021 298 Chapter 4 – Supporting the Transition across the Economy 12 This diagram is only an approximation of the maturity of different sectors to illustrate potential public sector interventions. 13 Defra, Environment Agency, Natural England (2021), ‘Innovative nature projects awarded funding to drive private investment’, https://www.gov.uk/government/news/innovative-nature- projects-awarded-funding-to-drive-private-investment 14 BEIS (2020), ‘Government launches new £40m Clean Growth Fund to supercharge green start-ups’, [Press release] https://www.gov.uk/government/news/government-launches-new- 40-million-clean-growth-fund-to-supercharge-green-start-ups 15 Chaired by Mark Carney, is bringing together over 160 firms from the leading net zero initiatives across the financial system to accelerate the transition to net zero emissions by 2050 at the latest. 16 Chancellor sets out how UK financial services can create prosperity at home and project values abroad in first Mansion House speech: https://www.gov.uk/government/news/chancellor-sets- out-how-uk-financial-services-can-create-prosperity-at-home-and-project-values-abroad-in- first-mansion-house-speech 17 BEIS (2019), ‘Green Finance Strategy’, https://www.gov.uk/government/publications/green- finance-strategy 18 Chancellor sets out how UK financial services can create prosperity at home and project values abroad in first Mansion House speech: https://www.gov.uk/government/news/chancellor-sets- out-how-uk-financial-services-can-create-prosperity-at-home-and-project-values-abroad-in- first-mansion-house-speech 19 LSE Grantham Institute (2021), ‘Green economy: how the transition to net-zero could affect UK jobs across the country’, https://www.lse.ac.uk/granthaminstitute/news/green-economy-how- the-transition-to-net-zero-could-affect-uk-jobs-across-the-country/ 20 BEIS (2021), ‘Wind of change for the Humber region’, [Press release] https://www.gov.uk/ government/news/wind-of-change-for-the-humber-region 21 The World Bank, Climate-Smart Mining: Minerals for Climate Action, https://www.worldbank. org/en/topic/extractiveindustries/brief/climate-smart-mining-minerals-for-climate-action 22 BEIS (2020), ‘The Ten Point Plan for a Green Industrial Revolution’, https://www.gov.uk/ government/publications/the-ten-point-plan-for-a-green-industrial-revolution 23 CITB (2021), ‘Building Skills for Net Zero’, https://www.citb.co.uk/about-citb/construction- industry-research-reports/search-our-construction-industry-research-reports/building-skills-for- net-zero/ 24 Heat Pump Association (2020), ‘Building the Installer Base for Net Zero Heating’, https://www. heatpumps.org.uk/wp-content/uploads/2020/06/Building-the-Installer-Base-for-Net-Zero- Heating_02.06.pdf 25 BEIS (2021), ‘Green Jobs Taskforce Report’, https://www.gov.uk/government/publications/ green-jobs-taskforce-report] 26 Forestry Skills Forum (2021) ‘Forestry Workforce Research’, https://www.confor.org.uk/ media/2678188/forestry-workforce-research-final-report-august-2021.pdf 299 Net Zero Strategy: Build Back Greener 27 BEIS (2021), ‘Green Jobs Taskforce report’, https://www.gov.uk/government/publications/ green-jobs-taskforce-report 28 BEIS (2021), ‘Green Jobs Taskforce report’, https://www.gov.uk/government/publications/ green-jobs-taskforce-report 29 BEIS (2021), ‘Green Jobs Taskforce report’, https://www.gov.uk/government/publications/ green-jobs-taskforce-report 30 Building back better and greener, BEACON, https://beaconwales.org/ 31 Industrial Strategy Council (2019), ‘UK Skills Mismatch 2030 – research paper’, https:// industrialstrategycouncil.org/uk-skills-mismatch-2030-research-paper 32 What Qualification Levels Mean, GOV.UK, https://www.gov.uk/what-different-qualification- levels-mean/list-of-qualification-levels 33 BEIS (2021), ‘Green Jobs Taskforce report’, https://www.gov.uk/government/publications/ green-jobs-taskforce-report 34 BEIS Analysis; NAEI (2021), ‘Greenhouse Gas Inventories for England, Scotland, Wales & Northern Ireland: 1990-2019’, “https://eur02.safelinks.protection.outlook. com/?url=https%3A%2F%2Fuk-air.defra.gov.uk%2Freports%2Fcat09%2F2106240841_ DA_GHGI_1990-2019_Final_Issue1.2.xlsx&data=04%7C01%7CCarys.Parkinson%40beis. gov.uk%7C3fcede07e99f45792dde08d98d882921%7Ccbac700502c143ebb497e6492d1 b2dd8%7C0%7C0%7C637696438200726854%7CUnknown%7CTWFpbGZsb3d8eyJWI- joiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sda- ta=OjdCXYKW2%2FON40TzziyLmu6qxINXUeWV90NZOL60vyI%3D&reserved=0” https:// uk-air.defra.gov.uk/reports/cat09/2106240841_DA_GHGI_1990-2019_Final_Issue1.2.xlsx 35 ONS (2021), ‘Regional gross domestic product: all ITL regions’, 1998 - 2019, “https:// eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.ons.gov.uk%2Fecon- omy%2Fgrossdomesticproductgdp%2Fdatasets%2Fregionalgrossdomesticproductallnut- slevelregions&data=04%7C01%7CCarys.Parkinson%40beis.gov.uk%7C3fcede07e99f- 45792dde08d98d882921%7Ccbac700502c143ebb497e6492d1b2dd8%7C0%7C0% 7C637696438200746767%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJ- QIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=xonO3pzT%2FBi81uXG- 8jQcG75pJSRS1Z5oSpyvzCLkDtE%3D&reserved=0” https://www.ons.gov.uk/economy/gross- domesticproductgdp/datasets/regionalgrossdomesticproductallnutslevelregions 36 CCC (2020), ‘Sixth Carbon Budget’, https://www.theccc.org.uk/publication/sixth-carbon- budget/ 37 BEIS (2021), Final UK greenhouse gas emissions national statistics. BEIS (2020), Updated energy and emissions projections: 2019. 38 Compared to 2018 baseline. 39 Where cycling activity is measured as the estimated total number of cycle stages made each year, from 0.8 billion stages in 2013 to 1.6 billion stages in 2025. 40 Where walking activity is measured as the total number of walking stages per person per year, to 300 stages per person per year in 2025 300 Chapter 4 – Supporting the Transition across the Economy 41 Collection Final UK Greenhouse gas emissions national statistics, BEIS, https://www.gov.uk/ government/collections/final-uk-greenhouse-gas-emissions-national-statistics 42 Government Commercial Function, ‘Guide to using the Social Value Model’. 3 December 2020. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/940827/Guide-to-using-the-Social-Value-Model-Edn-1.1-3-Dec-20.pdf 43 This analysis excludes the LULUCF sector, which is a net sink of emissions in most local authorities, however the proportion is not sensitive to this approach. 44 Provisional assessment of policies and proposals. Savings cover only aspects of the policy package where it has been possible to determine the likely local authority role. 45 Community Energy England (2021), ‘Community Energy State of the Sector 2021’, https://communityenergyengland.org/pages/state-of-the-sector 46 BEIS Public Attitudes Tracker: Wave 37 – Key Findings’, https://www.gov.uk/government/ statistics/beis-public-attitudes-tracker-wave-37 47 BEIS Research Report Number: 2021/034, ‘Climate change and net zero: public awareness and perceptions’, Annex 1: data tables, https://www.gov.uk/government/publications/climate- change-and-net-zero-public-awareness-and-perceptions 48 BEIS (2021), ‘Net zero public dialogue’, https://www.gov.uk/government/publications/net-zero- public-dialogue 49 Net Zero Societal Change Analysis Project, Energy Systems Catapult Research, June 2021 50 This draws on work commissioned by BEIS from the Behavioural Insights Team ‘Net zero: principles for successful behaviour change initiatives’, The Behavioural Insights Team. BIT conducted a rapid evidence review of relevant literature, compiled a total of 87 policy case studies from OECD countries and consulted with 10 experts from a range of behavioural and social sciences. 51 Smart metering statistics, Quarterly update June 2021, https://www.gov.uk/government/ collections/smart-meters-statistics 52 ONS, Provisional UK greenhouse gas emissions national statistics 2020: https://www.gov.uk/ government/statistics/provisional-uk-greenhouse-gas-emissions-national-statistics-2020 53 BEIS W11 Kantar Attitudes Tracker, Jan 2021 (Question: % agree that as a business we have a responsibility to reduce our carbon emissions to tackle climate change) 54 The 68% excludes International Aviation and Shipping 55 IPCC (2018), ‘Special Report on Global Warming of 1.5C’, https://www.ipcc.ch/sr15/ 56 PBL Netherlands Environmental Assessment Agency (2020), ‘Trends in global CO2 and total greenhouse gas emissions’, https://www.pbl.nl/en/trends-in-global-co2-emissions 57 PBL Netherlands Environmental Assessment Agency (2020), ‘Trends in global CO2 and total greenhouse gas emissions’, https://www.pbl.nl/en/trends-in-global-co2-emissions 301 Net Zero Strategy: Build Back Greener 58 Cabinet Office (2021), ‘Global Britain in a Competitive Age: the Integrated Review of Security, Defence, Development and Foreign Policy’, https://www.gov.uk/government/publications/ global-britain-in-a-competitive-age-the-integrated-review-of-security-defence-development- and-foreign-policy 59 IEA (2021), ‘Global Energy Related CO2 emissions in the net zero pathway and Low International Cooperation Case, 2010-2090’, https://www.iea.org/data-and-statistics/ charts/global-energy-related-co2-emissions-in-the-net-zero-pathway-and-low-international- cooperation-case-2010-2090 60 Rocky Mountain Institution (2019), ‘Seven Challenges for Energy Transformation’, https://rmi. org/seven-challenges-report/ 61 BEIS (2020), ‘The UK’s Nationally Determined Contribution under the Paris Agreement’, https://www.gov.uk/government/publications/the-uks-nationally-determined-contribution- communication-to-the-unfccc. The 68% excludes International Aviation and Shipping. 62 Prime Minister’s Office, 10 Downing Street (2021), ‘Prime Minister commits £3bn UK climate finance to supporting nature’ [Press release], https://www.gov.uk/government/news/prime- minister-commits-3bn-uk-climate-finance-to-supporting-nature 63 FCDO (2021), ‘UK Climate Finance results 2021’, [Corporate report] https://www.gov.uk/ government/publications/uk-climate-finance-results-2021 64 BEIS (2021), ‘BEIS Equality Objectives’, [Corporate report], https://www.gov.uk/government/ publications/beis-equality-objectives 65 BEIS (2021), ‘BEIS Equality Objectives’, [Corporate report], https://www.gov.uk/government/ publications/beis-equality-objectives 66 UN Environnent Programme (2020), ‘Emissions Gap Report 2020’, https://www.unep.org/ interactive/emissions-gap-report/2020/ 67 UN Environment Programme (2020), ‘Emissions Gap Report 2020’, https://www.unep.org/ interactive/emissions-gap-report/2020/ 68 International Renewable Energy Agency (2021), ‘Majority of New Renewables Undercut Cheapest Fossil Fuel on Cost’, [Press release], https://www.irena.org/newsroom/ pressreleases/2021/Jun/Majority-of-New-Renewables-Undercut-Cheapest-Fossil-Fuel-on-Cost 69 CCC (2017), ‘UK business opportunities of moving to a low-carbon economy’, HYPERLINK “http://www.theccc.org.uk/publication/uk-energy-prices-and-bills-2017-report-supporting- research/” www.theccc.org.uk/publication/uk-energy-prices-and-bills-2017-report-supporting- research/ 70 DIT (2020), ‘UK Global Tariff backs UK businesses and consumers’, https://www.gov.uk/ government/news/uk-global-tariff-backs-uk-businesses-and-consumers 71 Mark Carney, UN Special Envoy for Climate Action and Finance and the Prime Minister’s Finance Adviser for COP26 (2021), ‘Priorities for Private Finance for COP26’, https://ukcop26. org/wp-content/uploads/2020/11/COP26-Private-Finance-Hub-Strategy_Nov-2020v4.1.pdf 302 Chapter 4 – Supporting the Transition across the Economy 303 Net Zero Strategy: Build Back Greener Technical Annex 305 Net Zero Strategy: Build Back Greener Technical Annex UK carbon budgets and international emissions targets Climate Change Act Legislated carbon budgets

1. Parliament passed the Climate Change 5. Six carbon budgets have been set to date, Act1 (the Act) in 2008, establishing the UK’s covering 2008 to 2037. The sixth carbon 2050 target and the supporting framework budget, the first to be decided under the UK’s of carbon budgets. The Act also established new net zero target, was set in June 2021. the Committee on Climate Change, now The UK has already met, and overachieved, the Climate Change Committee (CCC), an its first (2008-2012) and second (2013-2017) independent statutory body, to advise the carbon budgets, and is on track to meet its Government and the Devolved Administrations current third (2018‑2022) carbon budget.4 on setting and meeting carbon budgets. The CCC advises on the level of each budget, the 6. To show how we will meet our climate respective contributions that different sectors targets, including legislated carbon budgets up could make and the extent to which carbon to and including the sixth carbon budget, the budgets could be met through the use of Net Zero Strategy contains both an indicative permitted “flexibilities” (such as surpluses from delivery pathway and illustrative 2050 net zero previous carbon budgets or the purchase of scenarios. The pathway, which stretches to good quality international carbon credits). the end of the Sixth Carbon Budget period in 2037, provides an indicative trajectory of

2. Under the Act, the UK was legally required emissions reductions which we aim to achieve to reduce greenhouse gas emissions by at through the Strategy and through delivery of least 80 per cent by 2050 on 1990 levels. the policies and proposals outlined. It therefore In 2019, on advice of the CCC2, the UK indicates the timescales over which we expect committed to reaching net zero emissions by those policies and proposals to take effect to 2050 and consequently the target reduction in deliver our targets. The pathway is designed the Act was increased to at least 100%. to be broadly consistent with all three of the illustrative 2050 scenarios set out in the

3. To keep the UK on a pathway to achieving Journey to Net Zero chapter of the Net Zero the 2050 target, the Government is obliged to Strategy. There is uncertainty associated with set legally binding, five-year caps on emissions our decarbonisation pathway through to 2037 – carbon budgets – twelve years in advance and the 2050 scenarios – the exact path we and then to publish a report setting out take to meet our climate targets is likely to policies and proposals for meeting that budget differ and must respond flexibly to changes and those budgets previously set. that arise over time.

4. The Net Zero Strategy is the means by which we satisfy the requirements of the Act in relation to policies and proposals for meeting the current carbon budgets.3 306 Technical Annex International emissions targets 9. The UK will therefore need to overachieve on the fifth carbon budget to meet its

7. The 2015 Paris Agreement5 under the UN international climate targets and stay on track established the goal of keeping the global for the sixth carbon budget. Accordingly, the mean temperature rise to well below 2°C, policies and proposals, delivery pathway, whilst pursuing efforts to limit the rise to under deployment assumptions and any other 1.5°C. Under the Kigali amendment to the analysis presented in the Net Zero Strategy Montreal Protocol, the UK has also committed for the fifth carbon budget period are to reducing F-gas emissions by 85% on 2011- consistent with the action required to meet the 2013 levels by 2036. UK’s 2030 NDC.

8. Under the Paris Agreement, the UK 10. The Net Zero Strategy also constitutes the announced its Nationally Determined UK’s updated Long-Term Low Greenhouse Contribution (NDC) in December 2020, which Gas Emission Development Strategy for the commits the UK to reduce net greenhouse purposes of the Paris Agreement. gas (GHG) emissions by at least 68% by 2030 compared to 1990 reference year levels.6 This represents an increase of ambition on the fifth carbon budget, which covers the years 2028-2032. Accounting for UK emissions The UK greenhouse gas inventory 12. The net carbon account also includes the UK’s net purchases/sales of international

11. The UK’s performance against its 2050 carbon units, if any. Carbon units include target and carbon budgets is assessed allowances issued under cap-and-trade through the UK’s net carbon account,7 systems, and international carbon credits measured in tonnes of carbon dioxide issued under international schemes. While the equivalent (tCO2e). The net carbon account UK intends to meet its climate targets for each comprises GHG emissions from the UK net of carbon budgets 3 to 6 through reducing of emissions which are captured and stored emissions domestically and the proposals from land use, land-use change and forestry and policies set out in this Strategy have (LULUCF). The UK greenhouse gas inventory8 been prepared on that basis, it reserves the is the basis for calculating the UK’s domestic right to use such voluntary cooperation under greenhouse gas emissions. Performance Article 6 of the Paris Agreement. This could against a carbon budget is assessed against occur through linking the UK ETS to another the earliest GHG inventory that covers the emissions trading system, or through the whole of the carbon budget period, which is use of international emissions reductions or published two years after the carbon budget removals units. period in question ends. For example, the sixth carbon budget will be assessed in 2039 based on the 1990-2037 GHG inventory. 307 Net Zero Strategy: Build Back Greener

13. The net carbon account for each International aviation and shipping budget is calculated according to rules set in Carbon Accounting Regulations.9 The 16. The sixth carbon budget is the first that accounting regulations that apply to each of will include international aviation and shipping the carbon budgets may not be in place until (IAS) emissions. Previous budgets have not after the carbon budget periods are over, so included IAS emissions but were set such assumptions are required on what accounting that headroom for IAS emissions was left. We rules will apply. Some key assumptions are have used bunker fuel sales to calculate IAS outlined in the remainder of this section. emissions for the sixth carbon budget. Under this method, IAS emissions are estimated from

14. The international science behind the amount of refuelling from bunkers at UK measuring emissions is continually evolving airports and ports, whether by UK or non-UK and the assumptions made here do not operators, for onward international journeys. preclude future decisions on emissions accounting at both the domestic and Global warming potentials international level. If future accounting

17. Emissions of each greenhouse gas decisions turn out to differ from the (carbon dioxide, methane, nitrous oxide, assumptions made here, this would not fluorinated gases) are expressed in terms of automatically lead to a change in the budget carbon dioxide equivalent (CO2e), recognising levels. The Climate Change Act allows the different global warming potentials (GWP) for legislated carbon budget levels to be of the different gases. amended if the government believes that, since the budget level was originally set, there 18. The UK greenhouse gas inventory have been significant changes affecting the currently uses 100-year GWPs published basis on which the previous decision was in the IPCC’s Fourth Assessment Report made. Where such changes happen but no (AR4).12 However, it was agreed by the reset occurs, significant policy changes may international community that GHG emissions be needed to meet the carbon budget. would be reported under the Paris Agreement transparency framework using an updated Peatland emissions set of 100-year GWPs from the IPCC’s Fifth

15. Emissions from peatlands were only Assessment Report (AR5).13, 14 Two sets partially captured in the UK GHG inventory of values for 100-year AR5 GWPs were when the first five carbon budgets were published (with and without climate-carbon set. A major revision to the inventory was feedbacks, which reflect more indirect effects implemented in February 2021 for the 1990- of GHG emissions on the climate system 2019 inventory10 to represent these emissions - included in their methodologies) and it is with methodologies consistent with the IPCC not yet clear which will be used. Therefore, Wetlands Supplement11, which will count to ensure that carbon budgets can still be towards all current and future carbon budgets. met under either methodology, emissions All analysis in this document includes peatland pathways in the main body of the Net Zero emissions in line with the updated inventory. Strategy are based on the higher AR5 GWPs This revision increased estimated emissions in with feedback methodology (consistent with 2019 by approximately 16 MtCO2e relative to the approach taken in setting the sixth carbon the methods used in the previous inventory. budget). However, this does not preclude any future decisions on which methodology will be used, and emissions pathways based on AR5 GWPs without feedback are also presented in this technical annex. 308 Technical Annex

19. The use of AR5 GWPs without feedback The UK Emissions Trading results in a lower CO2-equivalent value for UK Scheme (ETS) GHG emissions compared to AR5 GWPs with feedback, meaning that less abatement would 21. Calculations of carbon emissions by be required to meet the same carbon budget. HMG historically followed a net accounting As a result, it may appear that the policies framework16 that constructed the total and proposals in this strategy overachieve carbon budget as a sum of two individual on our carbon budgets when based on AR5 components: i) emissions covered by the EU GWPs without feedback. However, these Emissions Trading System (ETS), known as provide additional headroom with which traded sector emissions (around one third of the Government could seek to manage all UK emissions); and ii) emissions outside uncertainty in emissions projections. We would the EU ETS known as non-traded sector review the cost effectiveness of maintaining emissions. When the UK was part of the EU this headroom as the necessary policies and ETS, the UK share of EU ETS allowances was proposals are implemented. Conversely, since used to calculate traded sector emissions, the 2030 NDC is a percentage-based target and emissions in the non-traded sector were and the base year to which that percentage measured as actually emitted. The sum of relates comprises disproportionately high these was the net carbon account. non‑CO2 emissions, slightly more abatement

22. Now that the UK is no longer participating is actually required to meet the NDC under the in the EU ETS, UK operators are not trading lower AR5 GWPs without feedback compared emissions allowances with operators outside to AR5 GWPs with feedback. the UK. The new UK ETS came into operation

20. The Working Group I Contribution to the on 1 January 2021, and it is only currently IPCC’s Sixth Assessment Report (AR6)15 was necessary to count emissions within the published in August 2021, which included UK territory towards carbon budgets. We updated estimates of 100-year AR6 GWPs. assume that all years from 2021 onwards will However, it is not yet certain if or when these be accounted on this basis. If the UK ETS will be used for GHG emissions reporting were later linked with another ETS it may be under the UNFCCC or Paris Agreement. UK decided that an adjustment needs to be made GHG emissions based on AR6 GWPs would to account for any trading of allowances.17 be closer to UK emissions based on AR5 GWPs without feedback than based on AR5 The UK’s 2030 Nationally Determined GWPs with feedback. Contribution

23. Accounting for the UK’s nationally determined contribution is different from that for carbon budgets. In particular, the NDC is a fixed percentage-based target. This means that any changes to the inventory in the baseline year will change the level of effort required to meet the NDC, while the carbon budgets are fixed targets in MtCO2e. Accounting for UK climate targets

24. The above assumptions are summarised in Table 1, alongside the coverage and level of the UK’s climate targets. 309 Net Zero Strategy: Build Back Greener Table 1: Accounting basis of UK climate targets Carbon Carbon Carbon Carbon Budget 3 Budget 4 Budget 5 NDC Budget 6 Years 2018-2022 2023-2027 2028-2032 2030 2033-2037 MtCO2e limit 2,544 1,950 1,725 % based target 965 (annual (509) (390) (345) (estimated (193) equivalent) 262-275*) Accounting Traded/ non- Territorial UK Territorial UK Territorial UK Territorial UK basis traded split for emissions emissions emissions emissions 2018-2020 Territorial for 2021-22 International Excluded Excluded Excluded Excluded Included Aviation and Shipping (IAS) Base year 859.6 859.6 859.6 TBC*** 883.3**** (1990)** emissions (859.6) Percentage 41% 55% 60% 68% 78% reduction on 1990 (implied for carbon budgets)***** *The range of emissions required to meet the NDC reflects uncertainty over whether AR5 with or without feedback GWPs are used. Uncertainty over baseline emissions in the 1990-2030 GHG inventory means the actual limit may lie outside this range. **Base year emissions are calculated as emissions of CO2, N2O and CH4 in 1990, and fluorinated gases in 1995. ***The baseline for the NDC will be determined by the GHG inventory 1990-2030, meaning that the abatement required to meet the NDC is dependent on future estimates of baseline emissions. Our estimate of that abatement is based on the UK 1990-2019 GHG inventory. ****The baseline for the sixth carbon budget includes 23.7 MtCO2e for IAS, based on bunker fuel sales. *****Estimates of historic UK GHG emissions are revised annually to incorporate methodological improvements, updated data and changes to international guidelines. The percentage reductions implied by CB levels are therefore subject to change. 310 Technical Annex Baseline emissions projections 26. In some sectors, adjustments to the EEP 2019 reference case,19 published in

25. While the GHG inventory is the source October 2020, have been made to reflect for historical emissions data, a combination developments in the evidence base since of sector modelling and the BEIS Energy publication and to tailor it to ensure it is and Emissions Projections (EEP)18 are used suitable as a baseline for the Net Zero to project future emissions. This section Strategy. The adjusted EEP, referred to as sets out the assumptions about the baseline the “baseline”, incorporates the Office for used for the purpose of this analysis. These Budget Responsibility’s (OBR) central forecast projections determine baseline emissions of economic growth available in July 2020.20 for the indicative delivery pathway, based on The baseline also includes some planned policies implemented, adopted, or planned methodological improvements and corrections as of August 2019, and thus the further brought forward from the forthcoming EEP total emissions savings required to meet 2020, but no updates to policies beyond the carbon budgets. The baseline does those included in EEP 2019. Table 2 provides not include policies announced in the Ten details of these changes, and Figure 1 Point Plan, Energy White Paper, Transport compares the differences across the series. Decarbonisation Plan, or the Industrial The uncertainty range is explained further in Decarbonisation Strategy. paragraphs 45-48.21 Figure 1: Net Zero Strategy baseline compared to EEP 201922 550 500 450 MtCO2e 400 350 300 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Uncertainty (NZS) Adjusted EEP19 NZS Baseline (incl. IAS) 311 Net Zero Strategy: Build Back Greener

27. In accordance with the accounting rules with accounting assumptions for the represented in Table 1, all baselines are relevant carbon budget. adjusted where relevant to be consistent Table 2: Differences between Net Zero Strategy baseline and EEP 2019 reference case Impact on total Change between EEP 2019 and Net Zero CB6 emissions, Sector Strategy baseline 2033-37 (MtCO2e) All Update of economic growth projections to the latest available OBR -42 forecasts as of July 2020. All Conversion of GHGs to CO2e using Global Warming Potentials from +75 AR5 with feedback compared to AR4 in EEP 2019. Buildings Improvement of energy demand projections for domestic buildings. -35 EEP 2019 did not fully account for technology improvements in new build dwellings beyond those directly attributable to Building Regulations. Buildings, Improvement to the methodology for alignment with UK Greenhouse Negligible net impact. Industry and Gas Inventory estimates for mobile machinery and other oil Agriculture emissions. This results in lower emissions in agriculture and buildings, and higher emissions in industry. Buildings Inclusion of estimates of short-term behaviour change in 2020 on Impact limited to 2020- energy demand in public buildings. 2021. Buildings Inclusion of estimates of short-term behaviour change in 2020 on Impact limited to 2020- energy demand in domestic buildings. 2021. Industry Improvement of energy demand projection methodology for +38 chemicals and construction industry subsectors. Industry Alignment of projections of emissions from refineries with the Net -22 Zero Industrial Pathways model to reflect the impact of UK and global decarbonisation under a net zero consistent world scenario. Fuel supply Alignment of projections for offshore oil and gas with projections from -42 the Oil and Gas Authority (OGA). Power Power sector evidence base has been updated to latest data -9 available. This includes a revision to Energy from Waste (EfW) emissions where EEP2019 underestimated these due to an error in the percentage of EfW that is renewable. In addition, some policies included in EEP2019 have been removed as these are considered to be pre-Energy White Paper, in particular further Nuclear beyond HPC, and building one Gas CCS plant. Offshore Wind capacity is 15 GW higher in 2035 than in EEP2019 as further CfD auctions and planning means more capacity is on track to be built. There is also more large solar capacity building due to lower costs for this technology in up to date evidence. 312 Technical Annex Impact on total Change between EEP 2019 and Net Zero CB6 emissions, Sector Strategy baseline 2033-37 (MtCO2e) Transport Inclusion of estimates of short-term behaviour change in 2020 in Impact limited to road transport and domestic aviation. 2020-2021. Transport Correction of a calibration error in EEP 2019 which led to an +14 underestimation of the amount of oil in the historic fuel mix for transport. Transport Closer alignment of national navigation and fishing emissions +<5 estimates with research commissioned by the Department for Transport. International Inclusion of estimates of short-term behaviour change in 2020 on Impact limited to 2020- Aviation and international aviation. 2021. Shipping International Closer alignment of international shipping estimates with research +7 Aviation and commissioned by the Department for Transport. Shipping

28. There is ongoing uncertainty over how Sector definitions the COVID-19 pandemic will affect emissions in the long term. In 2020, emissions fell,23 29. The precise definition of the sectors used but it is not yet clear what the effect will be by the Net Zero Strategy, marked against on future emissions. We have assumed that IPCC categories, is published separately to there is no long-term behavioural change due this document.25 A summary of the coverage to the pandemic. However, as stated above, of each sector is shown in Table 3. Where the baseline is adjusted for the reduction sector chapters cover more than one of these in economic growth and the short-term sectors, the below table shows which sectors behaviour changes occurring due to the are covered by which chapter. COVID-19 pandemic. 24 313 Net Zero Strategy: Build Back Greener Table 3: Net Zero Strategy sector definitions Sector NZS Sector chapter Sector definition Power Power Emissions from power stations (Major Power Producers only), including those generating energy from waste. Fuel Supply Fuel Supply and Emissions from the extraction, processing, and production of fuels Hydrogen (chiefly oil, coal, gas and hydrogen). Industry Industry Emissions from industrial processes, manufacturing, and production, including fuel combustion and product use in industrial buildings, as well as emissions from refineries and construction machinery. Includes emissions from non-Major Power Producers auto-generation and Combined Heat and Power. Heat and Heat and Emissions from public, commercial, and residential buildings, including Buildings Buildings domestic product use such as garden machinery and composting. Domestic Transport Emissions from all forms of road and rail transport, domestic aviation and Transport domestic shipping (including fishing vessels). International Emissions from fuel used in international aviation and international Aviation and shipping, as measured by UK bunker fuel. Shipping Agriculture Natural Covers emissions from livestock, crop soils and agricultural machinery. Resources, Waste Forestry and and F- Gases Emissions and removals from land use change, forestry, peatlands and Other Land Use other carbon stock change from land use (e.g. in the biomass pool). Resources and Emissions from the treatment and disposal of solid and liquid waste and Waste landfill, including emissions from incineration not used to generate energy (e.g. incineration of chemical waste). Fluorinated Fluorinated gas emissions, primarily from refrigeration, air‑conditioning, Gases (F-gases) heat pumps, aerosols, and high voltage switchgear. Greenhouse Greenhouse Gas Negative emissions from engineered removal technologies, including Gas Removals Removals direct air and bio-energy carbon capture and storage. 314 Technical Annex Illustrative 2050 net zero scenarios

30. The Net Zero Strategy explores three Overview of the methodology used possible net zero scenarios in 2050 in chapter to develop the 2050 scenarios 2, building on the pathways developed for the sixth carbon budget Impact Assessment. 33. The net zero scenario modelling primarily These have been deliberately selected to uses the UK TIMES Model (UKTM), a least- illustrate a wide range of outcomes for the cost, optimisation model covering all UK economy that are possible by 2050. However, emissions (including land use) and the UK different outcomes within this range or beyond energy system over the period 2010 to 2060.27 this range are also possible. The model includes assumptions about technology costs, availability, performance,

31. This analysis has primarily two objectives: and build rates.28 It also includes assumptions a. First, to examine three different scenarios for future fossil fuel prices and energy services of economy-wide decarbonisation to demand by end-use sector. These inputs are understand the range of possible long- pre-determined for each model run and do term outcomes and therefore inform the not vary with deployment. Based on the input short-term delivery pathways. Through assumptions, the model identifies the least- previous modelling and research, BEIS cost way of meeting a given GHG reduction has identified three areas of technology trajectory while also meeting assumed and resource uncertainty likely to have a end-use demand for energy services. substantial impact on the 2050 energy Further information on the methodology and system.26 The scenarios have been assumptions used in the UK TIMES model developed in consultation with internal can be found in Annex A.2 of the sixth carbon experts to illustrate feasible avenues to budget impact assessment.29 achieving net zero emissions based on: 34. An extensive exercise has been • The relative role of electrification and undertaken to ensure UKTM is aligned with hydrogen in fuel switching; the latest evidence base and assumptions used across government. Where this was not • The role of land-use and bioenergy to possible, off-model adjustments have been produce negative emissions; and made to the net zero scenarios. • The role of further innovations to address the hardest to abate sectors 35. A particular advantage of UKTM is of the economy. that it identifies the least-cost technology pathway for a given set of assumptions, b. Second, it confirms that all three scenarios taking account of interactions across energy are consistent with the policies and supply and end-use sectors over time. The proposals set out in the Strategy to meet model is therefore useful for identifying which the sixth carbon budget. technologies could be essential or important in the long run for achieving a low cost,

32. This section explains the methodology net zero consistent energy system. It also that was used for this analysis and helps identify the appropriate sequencing of summarises the differences between the abatement opportunities. three scenarios. It also shows illustrative sectoral emissions in 2050 and accompanying deployment characteristics. 315 Net Zero Strategy: Build Back Greener

36. However, there are a number of limitations 37. The three scenarios are to the modelling: summarised below: • The model does not directly take • High electrification: explores the impact account of uncertainty of any kind over of using widespread electrification to future technology costs and availability. support transport, heating, and industry Uncertainty is only displayed through decarbonisation coupled with deep the range of outputs given by the decarbonisation of electricity supply. different scenarios. • High resource: explores the impact • Technology cost reductions over of using low-carbon hydrogen more time are based on fixed assumptions extensively, particularly for decarbonising and do not directly account for cost buildings and heavy vehicles. It assumes reductions through widescale deployment higher levels of tree-planting are in the model. i.e. costs are not a achievable, increasing the ‘negative function of deployment. emissions’ available from land-use sinks. • No additional barriers beside cost and • High innovation: explores a world in technical build rates are considered, which successful innovations, such as no potential industrial benefits from synthetic fuels and zero emission aircraft, developing and deploying new low-carbon enable lower residual emissions to be technologies are considered. Modelling reached sooner in aviation. Higher capture does not consider any upside or downside rates – above baseline assumptions – risks to the economy arising from increase the impact of carbon capture the transition. technologies, particularly higher • Behavioural or other practical deployment of direct air capture. considerations that might make certain pathways more or less expensive to achieve are not accounted for (other than where they are reflected in costs or build rates). • The model varies in detail by sector. In some areas only high-level representations are provided and the model is not spatially disaggregated. 316 Technical Annex

38. The scenarios were constructed in the 39. Other assumptions were kept the same UKTM by varying input assumptions for: across the scenarios. For instance, projections of final demand for end-use sectors are • The extent to which technologies can consistent with those used in the central be rolled out. For example, in the high 2037 delivery pathway and are the same electrification scenario 100% of buildings for each of the modelled 2050 scenarios. are set to be heated by electricity in 2050, Technology and resource cost assumptions, whereas in the high resource scenario heat including fossil fuel prices, are also the same pump deployment is constrained and this across each scenario. Sensitivity analysis figure drops to 40%. conducted as part of the sixth carbon budget • Availability of resources and technologies. Impact Assessment showed that the impact For example, in the high resource scenario, of economic growth and fossil fuel prices on we assume 50kha afforestation per annum the technology mix in 2050 is relatively small, by 2050 (compared to 30kha in the other therefore these effects were not considered scenarios). Higher efficiency capture further.30 Finally, sector emissions to 2037 technologies are only available in the high were aligned to those in the delivery pathway innovation scenarios (for example CCUS described in the Strategy. For further key capture rates of 99% compared to 95% in assumptions by sector see the evidence base most cases in the other scenarios). section of this annex. • For sectors such as industry and aviation, 40. Table 4 shows the level of emissions in where the UKTM does not represent the 2050 implied by each of the three illustrative full range of known abatement options, scenarios. All scenarios meet net zero in 2050, supplementary adjustments to emissions, with removals technologies compensating for energy demand, and key deployment any residual emissions. requirements have been made. These have been taken into account in the optimisation of other sectors via the specification of the emission targets. 317 Net Zero Strategy: Build Back Greener Table 4: Illustrative total territorial emissions under the different scenarios 2050 illustrative emissions (MtCO2e) 2019 emissions High High Sectors (MtCO2e) electrification High resource innovation Power 58 3 2 1 Industry 78 3 3 10 Fuel Supply 26 0 5 8 Heat and Buildings 88 0 0 2 Domestic 122 3 4 5 Transport International 45 35 35 21 Aviation and Shipping Agriculture and 63 20 14 21 LULUCF Waste and F-gases 40 12 13 13 Greenhouse Gas 0 -75 -76 -81 Removals Total emissions 520 0 0 0

41. Given the long-term scientific uncertainty Characteristics of the 2050 scenarios and to err on the side of caution, the analysis above assumes AR5 with feedback GWPs. 42. To illustrate the assumptions On the basis of AR5 without feedback GWPs underpinning the 2050 scenarios, Table 5 the scenarios would reach c.-9 MtCO2e in shows deployment characteristics for each 2050 as a result of primarily lower emissions sector. These are illustrative of the levels of from methane. This uncertainty represents less deployment required for each of the three than 2% of the overall abatement requirement. scenarios. Not all technology deployment Because of this, detailed sensitivity analysis required to meet net zero is represented. on GWPs has not been carried out for the purposes of this strategy. However, lower GWPs could allow less reliance on removals in 2050 thereby lowering the requirements for sustainable biomass, or alternatively slightly higher end-use sector emissions. 318 Technical Annex Table 5: Illustrative characteristics in 2050 2050 illustrative Sector Deployment assumptions Unit 2019 range Power Electricity generation TWh 320 610-690 Low carbon GB generation as a percentage of % 56% 99-100% total projected generation Industry Low carbon fuel switching* TWh 110 190-210 Resource and energy efficiency savings MtCO2e 0 13 Industry demand for industrial CCUS (not MtCO2e 0 6-9 including BECCS) Fuel Supply Low carbon hydrogen production TWh 0 240-500 Steam methane reformation with CCS (as a % 0 0-75% percentage of total hydrogen generation) Electrolysis as a percentage of total hydrogen % 0 15-75% generation Biomass gassification with CCS as a percentage % 0 0-20% of total hydrogen generation Heat and Cumulative heat pumps installed domestically Million 0.2 12-28 Buildings installations Cumulative homes converted to 100% hydrogen Million 0 0-14 homes Demand reduction as a result of energy efficiency % 0 15-20% measures Low carbon fuels* consumption as a percentage % 62% 90-100% of total fuel consumption in commercial buildings Heat supplied via heat networks TWh 14 70 Biomethane injected into gird TWh 3 0-20 Agriculture Total area of peatland under restoration kha n/a 380 and LULUCF Yearly area of afforestation UK kha 13.6 30-50 Yearly area of perennial energy crop and short kha 0 53 rotation forestry planted Farmers engaging with low carbon farming % 60% 100% practices as a percentage of total farmers Waste and Level of HFC consumption relative to a 2015 % 63% 15% F-gases baseline level 319 Net Zero Strategy: Build Back Greener 2050 illustrative Sector Deployment assumptions Unit 2019 range Greenhouse BECCS (all technologies) MtCO2e 0 52-58 Gas Removals DACCS MtCO2e 0 18-29 Transport ZEVs as a percentage of total car fleet % 0.3% 96-97% and IAS ZEVs as a percentage of total van fleet % 0.2% 88-90% ZEVs as a percentage of total HGV fleet % 0% 95-97% ZEVs as a percentage of total bus and coach % 0.3% 91-95% fleet Low carbon fuels* use in road transport as a % 5% 30-60% percentage of total fuel use (in litres) SAF use in domestic and international aviation as % 0% 5-30% a percentage of total fuel use (in tonnes) Low carbon fuels use in domestic and % 0% 97% international shipping as a percentage of total fuel use (in TWh) Overall GDP carbon intensity tCO2e/ 194 0 GDP £m2020 GDP energy intensity MWh/ 700 270-310 GDP £m2020 *The table includes several deployment assumptions covering relevant low carbon fuels in different sectors. The low carbon fuels included are the following: electricity, biofuels, solid biomass, hydrogen, ammonia, and methanol. All these deployment assumptions include electricity and hydrogen both in the numerator and denominator, with the exception of low carbon fuels used in road transport (from which electricity and hydrogen are completely excluded). 320 Technical Annex Meeting the carbon budgets

43. This section sets out historic performance 44. The UK has overperformed on its carbon against carbon budgets and future budgets so far, by 37 Mt CO2e for the first performance implied by the delivery pathway, carbon budget and 384 Mt CO2e for the including emissions broken down by sector second carbon budget. Table 6 shows the for each future carbon budget. Deployment current baseline projections for future carbon assumptions that illustrate some of the budgets (reflecting policies as of August real-world changes required to meet carbon 2019),31 and also the overall pathway for budgets are also presented. emissions as set out in the Net Zero Strategy. Table 6: Projected emissions implied by pathway against current and future carbon budgets CB3 CB4 CB5 CB6 (incl. IAS) Years covered 2018-2022 2023-2027 2028-2032 2033-2037 Baseline 2,499 2,052 1,889 2,029 Budget limit 2,544 1,950 1,725 965 NZS emissions 2,499 1,854 1,312 962 pathway Performance -45 -96 -413 -3 against carbon budget Uncertainty over future emissions trends (such as GDP, and population size), uncertainty in the impacts of certain existing

45. Table 7 shows an indicative annual range policies on emissions and uncertainty in the over the sixth carbon budget period.32 The current evidence base on emissions (such as lower and upper ranges are based on Monte land use emissions). It also uses regression Carlo analysis of the EEP, conducted in 2018 residuals to account for structural modelling and assessed to represent the best evidence uncertainty in the EEP. The analysis does of the uncertainty in the projections for the not capture uncertainty in the policies and sixth carbon budget period.33 The analysis proposals brought forward under the Strategy. reflects a 95% confidence interval around the baseline to reflect uncertainty in future macro 321 Net Zero Strategy: Build Back Greener

46. Due to accounting changes, further 47. The pathway is highly ambitious meaning emissions have recently come in scope of the there are downside risks to the estimated sixth carbon budget period. The Monte Carlo policy savings (for example, delays to delivery), analysis has therefore been augmented to as well as upside risks (for example, no include these emissions. The range around long-run behavioural impacts are assumed historical emissions for international aviation as a result of the COVID-19 pandemic). and shipping is estimated based on statistical Government will monitor progress against volatility in historical emissions. Emissions the pathway as set out in the Embedding net added following the adoption of the Wetlands zero in Government chapter, and will prepare Supplement assume the uncertainty is further proposals and policies to enable the proportional to the overall uncertainty in the carbon budgets to be met as necessary. LULUCF sector.34 Table 7: Provisional indicative range of the carbon account over the sixth carbon budget 2033 2034 2035 2036 2037 Upper 279 265 240 226 207 Central 232 215 190 171 153 Lower 193 177 150 131 112

48. Emissions across the period prior to the 50. Whilst the ranges below represent our sixth carbon budget are also uncertain: the current assessment of the right trajectory Government will provide further analysis in to meet our carbon budgets, developments future Energy and Emissions Projections. in climate science, accounting regulations, baseline emissions, technological progress Sectoral emissions over the and/or policy impacts may alter the expected carbon budgets impact of policies set out in the strategy, or the optimal distribution of policy effort across

49. Table 8 shows an indicative emissions sectors. Future climate strategies will update pathway, broken down by sector across the this sectoral emissions pathway where fourth, fifth and sixth carbon budgets. The necessary using the latest evidence. fifth carbon budget figures are aligned with the UK’s NDC, and 2030 values have been used for this column. To reflect uncertainty from macroeconomic trends and in underlying baseline emissions, emissions for each sector are shown as a range. These ranges are calibrated to the uncertainty range set out in the economy wide EEP Monte Carlo analysis.35 322 Technical Annex Table 8: Sectoral emissions across the carbon budgets: MtCO2e per year (using AR5 with feedback GWPs) Current CB4 NDC CB6 Sector (2019) (average 2023-27) (2030) (average 2033-37) Agriculture and LULUCF 63 51 to 57 44 to 52 38 to 48 Buildings 88 73 to 82 55 to 66 34 to 47 Domestic Transport 122 100 to 111 67 to 80 29 to 43 Fuel Supply 26 18 to 20 14 to 16 10 to 12 Industry 78 58 to 65 36 to 45 19 to 29 Power 58 28 to 31 14 to 17 9 to 11 Waste and F-gases 40 24 to 27 17 to 20 12 to 15 Greenhouse Gas 0 0 to 0 -12 to -1 -33 to -11 Removals Intl Aviation and 45 (42 to 46) (44 to 50) 39 to 46 Shipping* Total (incl. IAS) 520 192 Total (excl. IAS) 476 371 262 *Figures in parentheses indicate that IAS is not counted towards that target

51. As set out above, there is some uncertainty which set of Global Warming Potentials the UK will adopt. We have therefore also translated these pathways using alternative AR5 without feedback GWPs, assuming it were optimal in cost- and non‑cost terms to implement the same set of policies and proposals modelled in the AR5 with feedback pathways. 323 Net Zero Strategy: Build Back Greener Table 9: Sectoral emissions across the carbon budgets: MtCO2e per year (using AR5 without feedback GWPs) Current CB4 NDC CB6 Sector (2019) (average 2023-27) (average 2030) (average 2033-37) Agriculture and LULUCF 54 43 to 48 37 to 44 31 to 39 Buildings 88 73 to 82 55 to 66 34 to 47 Domestic Transport 122 100 to 111 67 to 80 29 to 43 Fuel Supply 25 18 to 20 13 to 16 10 to 11 Industry 78 58 to 65 36 to 45 19 to 29 Power 58 28 to 31 14 to 17 9 to 11 Waste and F-gases 34 21 to 23 14 to 17 10 to 13 Greenhouse Gas 0 -1 to 0 -12 to -1 -33 to -11 Removals Intl Aviation and 44 (42 to 46) (44 to 50) 39 to 46 Shipping* Total incl. IAS 503 182 Total excl. IAS 458 359 251 * Figures in parentheses indicate that IAS is not counted towards that target36 Illustrative deployment assumptions values differ between the electrification and to meet the carbon budgets hydrogen pathways set out in the strategy for the heat and buildings sector. In some cases,

52. To illustrate some of the deployment these assumptions represent early-stage assumptions underpinning the emissions assessments based on maximum technical pathway, Table 10 below shows real-world potential. Given ongoing uncertainties, the deployment assumptions for each sector. Not policy mix that will meet carbon budgets, and all of the policies and proposals underlying related deployment assumptions, are subject the delivery pathway are represented by to change; these are illustrative and should not these assumptions. Ranges indicate where be interpreted as government targets. 324 Technical Annex Table 10: Deployment assumptions underpinning pathway Deployment Sector assumptions Unit 2019 2025 2030 2035 Power Electricity generation TWh 320 315 370 460*-510 Low carbon GB generation % 29%- 38%- 62%- 99% as a percentage of total 33%* 42%* 69%* projected generation required in 2035 Industry Low carbon fuel switchinga TWh 110 115 125 157 Resource and energy MtCO2e 0 1 10 11 efficiency savings Industry demand for MtCO2e 0 2 5 7 Industrial CCUS (not including BECCS)b Fuel Supply Low carbon hydrogen TWh 0 10** 40 80-140* production Electrical power demand % 0% 0% 31% 43% from offshore oil and gas installations as a percentage of their total power demand Heat and Cumulative heat pumps Million 0.2 1.1 4*- 4.3 6.9* - Buildings installed domestically installations 11.3 Cumulative homes Million 0 0 0-0.2* 0-4* converted to 100% homes hydrogen for heat Yearly homes treated by new Million 0 0.5 1 0.5 domestic energy efficiency homes measures Low carbon fuelsa % 62% 63% 67% 78%- consumption as a 81%* percentage of total fuel consumption in commercial buildings (excluding heat networks) Yearly heat supplied via heat TWh 14 16 22 29 networks Yearly biomethane injected TWh 3 8 12 12 into the grid 325 Net Zero Strategy: Build Back Greener Deployment Sector assumptions Unit 2019 2025 2030 2035 Agriculture Yearly area of peatland Ha 2,000- 7,000 10,290 10,290 and LULUCF under restoration in England 5,000*** Yearly area of afforestation in Ha 13,600 30,000 40,000 50,000 the UK Yearly area of perennial Ha 0 7,440 21,275 26,350 energy crop and short rotation forestry planted Farmers engaging with low % 60% 70% 75% 85% carbon farming practices as a percentage of total farmers Waste and Level of HFC consumption % 63% 31% 21% 15% F-gases relative to a 2015 baseline level Greenhouse BECCS and DACCS MtCO2e 0 0 6 23 Gas Removals Domestic ZEVs as a percentage of % 0.3% 6% 24% 53% transport total car fleet ZEVs as a percentage of % 0.2% 2% 14% 40% total van fleet ZEVs as a percentage of % 0% 0% 9% 37% total HGV fleet ZEVs as a percentage of % 0.3% 9% 25% 48% total bus and coach fleet Single track kilometres Km 0 350 650 650 electrified per year Low carbon fuelsa use % 5% 7% 8% 8% in road transport as a percentage of total fuel use (in litres) Journeys in towns and cities % 42% 46% 50% 55% that are cycled and walk as a percentage of total journeys in towns and cities SAF use in domestic aviation % 0% 1% 3% 6% as a percentage of total fuel use (in tonnes) Low carbon fuels usea in % 0% 0% 1% 42% domestic shipping as a percentage of total fuel use (in TWh) 326 Technical Annex Deployment Sector assumptions Unit 2019 2025 2030 2035 International SAF use in international % 0% 1% 3% 6% Aviation and aviation as a percentage of Shipping (IAS) total fuel use (in tonnes) Low carbon fuels*** use in % 0% 0% 1% 28% international shipping as a percentage of total fuel use (in TWh) Overall GDP carbon intensity tCO2e/ 194 144 93 62 GDP £m2020 GDP energy intensity MWh/ 700 600 480 380-400* GDP £m2020 * Reflects deployment in hydrogen pathway. ** Figure reflects hydrogen demand in the mid-2020s (rather than 2025 specifically). *** The 2019 range for peat reflects different estimates of peat restoration in England, including both public and externally funded work. a The table includes several deployment assumptions covering relevant low carbon fuels in different sectors. The low-carbon fuels included are the following: electricity, biofuels, solid biomass, hydrogen, ammonia and methanol. All of these deployment assumptions include electricity and hydrogen both in the numerator and denominator, with the exception of low-carbon fuels used in road transport (from which electricity and hydrogen are completely excluded). b Industrial carbon capture deployment starts in the mid-2020s, reaching a total of 6Mt in 2030 and 9Mt in 2035 including carbon capture from biomass use. Costs and economic impacts of the transition Costs of the transition average annual values over the carbon budget periods. The costs of the delivery pathway

53. Table 11 shows the additional investment remain highly uncertain and will depend costs for the indicative delivery pathway in on factors such as technology costs and each of the future carbon budgets relative to a fuel prices. Ranges, where given, represent baseline of existing policies. These represent the implication of higher or lower demand in-year capital expenditure requirements, from end-use sectors consistent with the excluding financing costs, and do not cover electrification and hydrogen scenarios. operational costs or savings, or policy costs. Costs are expressed in real 2020 prices as 327 Net Zero Strategy: Build Back Greener Table 11: Estimates of additional investment requirements for Net Zero Strategy pathway (£bn pa, undiscounted, 2020 prices) Carbon Budget Carbon Budget Carbon Budget Carbon Budget 3 (average 4 (average 5 (average 6 (average Sector 2020-2022) 2023-2027) 2028-2032) 2033-2037) Power* 1 7-8 11-22 12-23 Fuel Supply 0.3 2.0 1.3-2.3 0.6-1.9 Industry 0.0 0.9 1.1 0.9 Heat and 2 12 12 14 Buildings** Transport 2 8 17 18 Natural 0.6 1.2 1.7 2.6 Resources, Waste, and F-Gases37 Greenhouse Gas 0.0 0.7 1.6 1.7 Removals CCUS (T&S 0.0 0.6 1.2-1.4 0.8-1.0 Infrastructure) Total 5-6 32-33 48-59 52-61 *Figures exclude additional Transmission and Distribution Network investment requirements. **Costs represent a scenario where heat is predominantly decarbonised via electrification through heat pumps.

54. Table 11 excludes operating costs to avoid double counting (e.g. where CAPEX in an energy supply sector is OPEX in an end- use sector). Over the same period, we could see additional resource savings of around £180 billion as a result of our reduced use of oil/petroleum products and natural gas. This has been calculated by multiplying the change in energy demand (relative to the baseline) by the corresponding long-run variable cost of energy supply (LRVCs) from The Green Book. This is based on the central price and the savings could be higher or lower, depending on how future prices evolve. 328 Technical Annex Other economic and fiscal -4.6% for late action. These changes are small considerations when set against expected growth of over 50% in real GDP to 2050 compared to today’s Economic considerations levels. Further information on the economic impacts of the transition to net zero are set out

55. There are many economic impacts of in the HMT Net Zero Review.41 the transition to net zero to consider. As shown above, there are significant capital Competitiveness investment requirements, and although the exact requirements are uncertain it is clear 58. The transition to net zero can stimulate that patterns of investment will have to innovation that increases domestic change. New jobs will also be created, and competitiveness and global comparative these jobs may require different skills and advantage for some UK industries, providing education. Consumption and production potential export opportunities. Updated behaviours will shift towards greener choices, internal analysis based on the Energy and different places and sectors in the UK Innovation Needs Assessment estimates that could face different economic opportunities just over half of the £60 billion GVA potential and challenges. from sectoral decarbonisation in 2050 comes from export related opportunities.42

56. Previous cost benefit analysis of the However, there will also be risks to sectors sixth carbon budget showed that there are and industries susceptible to competitiveness significant co-benefits to the transition to net impacts, particularly those that are trade- zero.38 As well as the benefits from reduced exposed and/or carbon intensive. Where UK greenhouse gas emissions, improvements to firms lose market share to international firms air quality were valued at £35 billion to 2050, with lower environmental standards, there is a fuel savings at £123 billion and other benefits risk of carbon leakage. There is little empirical to natural capital at £5 billion. The net present evidence of this occurring in the UK to date, value of meeting the sixth carbon budget but risks could increase as further policy and net zero target, compared to no further is implemented. action, was estimated as a net benefit of £266 billion.39 This calculation does not include 59. Historically, the UK’s approach to many other potential co-benefits, such as mitigating competitiveness impacts and reduced noise pollution from cars, improved carbon leakage risk has been through issuing health from walking and cycling and warmer free allowances under the EU ETS.43 This homes from energy efficiency measures, nor approach has been carried over to the UK indirect costs from macroeconomic impacts. ETS, and possible changes to free allowances are currently under review.44 BEIS also

57. In terms of the macroeconomic impact of provides compensation to certain energy the transition to net zero, the Office for Budget intensive industries for the indirect emission Responsibility (OBR) finds that the costs of cost due to the UK ETS and some sectors failing to get climate change under control, receive a reduction in energy consumption which relies on global effort, would be much tax via Climate Change Agreements. The larger than those of bringing emissions down eventual impact of decarbonisation on firms at to net zero.40 In terms of transition costs, risk will depend on future policy development, the OBR has presented scenarios in which particularly relating to the UK ETS. the level of UK GDP changes relative to the baseline by between -4.6% and +1.6% by 2050, with a central estimate of -1.4% for early action on climate change compared to 329 Net Zero Strategy: Build Back Greener

60. The magnitude of competitiveness 62. HMT’s Net Zero Review45 and the OBR’s effects in international markets is dependent recent fiscal risks report46 provide a more on global climate ambition as well as detailed overview of the channels through domestic policy. If other countries, particularly which the net zero transition can impact the the UK’s trading partners, increase their UK’s fiscal position, and the factors which industrial decarbonisation ambition in line will determine the overall magnitude of this with the UK’s, and face similar transition impact. While noting uncertainties, the OBR impacts, then competitiveness effects will concluded that there could be significant fiscal be smaller. Similarly, where the UK’s path to benefits from transitioning to net zero sooner net zero creates export opportunities for UK rather than later. However, governments public businesses, the size of these will depend on spending will be dependent on the economic, the actions of the rest of the world. High global fiscal and decarbonisation context of the time. climate ambition will result in a large market for decarbonisation technologies and services Jobs but may also result in more global competition 63. The policies and sectoral ambitions in those markets. across the Net Zero Strategy are estimated Fiscal considerations to support up to 190,000 jobs in low carbon and green sectors by the middle of the 2020s,

61. The overall fiscal impacts of the transition and up to 440,000 by 2030. The breakdown to net zero will depend on many as yet of jobs by chapter is as follows. Information unknown factors, including the financing on the methodology used to calculate these mechanisms used to fund the policies and numbers can be found in the evidence base proposals set out in the Net Zero Strategy, section of this annex. and the macroeconomic impacts of the transition, for example through changes in GDP growth or inflation. There are some known fiscal impacts, such as the erosion of direct tax receipts like fuel duty that depend on carbon intensive activity, and increased tax receipts from other policies, such as revenue from the UK ETS. 330 Technical Annex Table 12: Estimate of jobs supported in Net Zero Strategy pathways, by sector and date Sector Jobs supported by 2024/5 Jobs supported in 2030 Power 59,000 120,000 Fuel Supply N/A 10,000 Industry 5,000 54,000 Heat and buildings 100,000 175,000 Transport 22,000 74,000 Natural resources, waste and 2,000 2,000 F-gases (forestry only) Greenhouse Gas Removals N/A N/A Total 190,000 440,000

64. The Ten Point Plan for a Green industrial 65. Government has also set out its Revolution47 published in November 2019 ambition to pivot towards a green economy set out plans to support up to 250,000 supporting up to 2 million green jobs by jobs by 2030, which was based on specific 2030. This is a wider ambition which includes sectors included within the Ten Point Plan. areas of economic activity not included in The figures in this Net Zero Strategy include the Net Zero Strategy but which support areas not covered by the Ten Point Plan, such other environmental goals, such as climate as solar and onshore wind. In several cases, adaptation and the circular economy. most notably around Heat and Buildings and Transport, figures have been updated since the Ten Point Plan was announced. Wider impacts of the transition to net zero

66. Section 10 of the Climate Change Act lists various factors that must be taken into consideration by all decisions relating to carbon budgets, while Section 13 requires that the policies and proposals set out in the Net Zero Strategy as a whole contribute to sustainable development. These factors have been taken into account in relation to proposals and policies that will enable the UK to meet its carbon budgets, as set out throughout this annex and in the main body of the Strategy. 331 Net Zero Strategy: Build Back Greener Table 13: Summary of wider considerations Consideration in Factor Net Zero Strategy Conclusions Scientific knowledge See Climate Science The scientific case for strong action on climate change Annex remains definitive. Technology See Journey to Net Zero, The latest evidence on relevant climate technologies sector chapters, Technical has been used for all analysis across the strategy. Annex Economic See Technical Annex, Why There are many economic and competitiveness Net Zero, Green Jobs, impacts of the transition, some of which are positive Skills, and Industries, and some negative. We make no overall conclusion. Investment, Innovation, Green Choices and Local Climate Action chapters Fiscal See Technical Annex The full fiscal impact of the transition is not yet known and will depend on varied policy decisions and economic outcomes. Sustainable See Reducing Emissions There are both positive and negative natural capital development across the Economy impacts associated with emissions reduction policies chapters, Technical Annex, but the overall contribution to sustainable development Embedding Net Zero is likely positive. Other aspects of sustainable chapter development are addressed in the economic, fiscal and social sections. Energy policy See Journey to Net Zero Delivering our carbon budgets has the potential to and Power chapters, and reduce demand for gas, coal, oil and transport fuels Technical Annex which could improve security of supply by diversifying away from primarily imported fossil fuels. Other measures will mean increases in electrification and the simultaneous deep decarbonisation of electricity supply, which carries security of supply risks. Estimations of the future energy and carbon intensity of the economy are presented in Table 10 of the Technical Annex. Social See Technical Annex, Price and bill impacts will depend on electricity market Green Choices, and developments and consumption patterns. Policies that Buildings chapters improve energy efficiency of homes will reduce bills and benefit fuel poor households. IAS See Technical Annex, IAS emissions will be included from the sixth carbon Transport chapter budget onwards and will use the bunker fuel sales method to calculate emissions. Projected IAS emissions are set out in Table 8. International and See International climate The UK has world leading ambition on climate change European leadership and Why Net and is committed to advancing global climate action. Zero chapters The UK has now left the EU and is no longer bound by EU climate policies. 332 Technical Annex Consideration in Factor Net Zero Strategy Conclusions Devolved See sector chapters and The NZS pathway analysis includes modelling of the circumstances Technical Annex scope to reduce emissions in each nation, considering their differing circumstances. These assumptions are broadly in line with the CCC’s distributions of abatement by nation. Key assumptions are outlined in the evidence base section below.

67. The following section considers two of 70. In line with HM Treasury Green Book, a these impacts in more detail: sustainable natural capital perspective is taken to analyse development, which is considered through these implications, whereby the impact of analysis of the effects of policies and policies and proposals on the natural assets proposals on natural capital; and social on which the economy depends is assessed.48 considerations, including the potential impacts It is not yet possible to provide a complete on energy bills and fuel poverty. assessment of the delivery implications of policies and proposals, as many are still Sustainable development and subject to designs and implementations upon natural capital which the impacts are dependent. The extent that the natural capital impacts are mitigated

68. Sustainable development concerns the will be dependent on the options considered stability and prosperity of society, and its in policy specific delivery analysis. capacity to provide for future generations. Sustainable development also incorporates 71. To assess the potential natural capital social, economic, and environmental impacts of a policy, a series of screening dimensions of sustainability. The Act requires questions are used.49 Following this, the main carbon budget proposals and policies benefits and risks associated with net zero as a whole to contribute to sustainable policies are listed for different natural capital development. The main outcomes of the stocks. This is an indicative assessment of the policies and proposals in this Strategy natural capital impacts due to the limitations will have a positive impact on the UK’s described above. As such, the large majority contribution to the global Sustainable of measures in this strategy require further Development Goals, in particular goal 7, natural capital assessment. All policies will be targeting affordable and clean energy, and assessed for natural capital benefits and risks goal 13, targeting climate action. in their impact assessments and business cases according to Green Book guidance.

69. In this section, we assess the This includes considering the implications sustainability implications of the net of policies for natural assets and any zero transition in terms of its impact on associated effects on wider economic welfare. the continuation and improvement of More information on the natural capital environmental functions, and stability and approach can be found in the Green Book renewal of natural assets. This is most relevant supplementary guidance and the Enabling a to the Sustainable Development Goals 6, 14 Natural Capital Approach guidance.50 and 15, which target protection of water and life on land and marine habitats. 333 Net Zero Strategy: Build Back Greener

72. Delivery of net zero policies and proposals 74. The policies and proposals taken together will need to consider the UK’s other legally within the Net Zero Strategy are expected to binding environmental commitments (for have a significant net benefit to natural capital example, new legally binding targets stemming and thus sustainable development. Moving from the Environment Bill), and any trade-offs away from i) fossil fuels towards a greater against these acknowledged and mitigated share of renewable energy, ii) petrol and diesel through careful planning policies and cars towards green alternatives such as actions can be designed that deliver multiple electric vehicles iii) gas boilers to lower carbon outcomes in support of the UK’s net zero heating sources and iv) high carbon land and 25 Year Environment Plan ambitions. uses towards afforestation and other land- For instance, the planting of broadleaf trees based carbon dioxide removals, are just a few and restoration of peatland or grassland examples that will provide significant benefits. can deliver carbon sequestration as well as environmental benefits including improved 75. However, some negative impacts to biodiversity and water quality, if done in the some natural capital stocks are likely to arise right way. Conversely, certain interventions from realising climate targets; impacts will such as planting of maize for biomass or likely be specific and localised. For example, food may risk soil health and water quality. the development of BECCS technology It will be important to assess the wider could lead to a rise in PM2.5 released in impacts of proposed net zero actions and these areas. The direction of impact from seek synergies with environmental ambitions the significant land use change required to wherever possible, so that the twin challenges meet net zero will depend on how and where of biodiversity loss and climate change are this change is enacted, with a systemic and tackled in an efficient way. spatial approach more likely to deliver on net zero while providing natural capital benefits.

73. The independent Natural Capital Further in-depth exploration of the natural Committee defined natural capital as ‘those capital impacts of specific policies and policy elements of the natural environment which mixes will need to be undertaken through provide valuable goods and services to the normal channels of Impact Assessments people’.51 Nature underpins the UK’s economy and Business Cases, to ensure trade-offs are and society: the energy, food, and water we managed and impacts mitigated. consume; the air we breathe; our access to green space; and biodiversity, which is 76. Air Quality: As climate change and air crucial in underpinning all our ecosystem and pollution have many of the same contributing abiotic services, and in maintaining ecological emission sources, the decarbonisation of the function.52 Nature is a major economic sector UK economy offers major opportunities to in its own right – as a productive asset it significantly reduce air pollution and therefore provides market and non-market services of improve human health and reduce the impact £25 billion each year.53 of some air pollutants on ecosystems. This is primarily driven through the reduction of petrol and diesel cars towards green alternatives, as well as the continual shift away from fossil fuels in heat and power generation. However, some policies and proposals could result in significant negative air quality impacts at both regional and local scales, for example emissions of fine particulate matter from biomass combustion, ammonia from the use of anaerobic digestion, and NOx emissions 334 Technical Annex from hydrogen combustion in domestic 78. Biodiversity: In the long-term, net or industrial settings. These are likely to zero policies, for example, afforestation impact our ability to reach statutory national and peatland restoration, can be positive emissions ceilings, increase exposure to for biodiversity, preservation, connectivity, harmful pollutants and cause some uneven resilience and reducing ecological stress health burdens. Furthermore, the impacts of caused by climate change. However, air pollution can also impact the delivery of net biodiversity and habitats are spatially explicit, zero. For example, all of England’s forests and meaning locations and extent of future peatlands continue to be damaged by harmful policies must seek to minimise any negative emissions – particularly ammonia – which impacts, including displacement, air and impact their ability to provide the ecosystem noise pollution, and habitat loss, for example services required to meet net zero, including through housing or industry development. carbon sequestration and flood mitigation. This could be minimised through further Historic pollution loading across all habitats work on net gain principles which would may also need to be ameliorated to maximise seek to leave the environment in a better the potential of restoring them to meet the position. Other risks include ensuring land biodiversity targets in the Environment Bill. use changes (i.e. afforestation, biomass Further work will be undertaken to assess this feedstocks, settlement expansion) do not lead and provide advice on tailoring our pathway to biodiversity loss. Mitigating actions and to minimise these impacts. Continuous trade-offs will be considered when designing improvements in emission requirements and policies for reaching climate targets, including innovation in abatement technologies will also for low carbon technologies, greenhouse gas be necessary to deliver a pathway to net zero removals, marine policies, land management, that maximises environmental benefits. and agricultural intensification.

77. Recreation: Achieving climate targets 79. Floods: Global temperature rise is could have positive impacts for recreation leading to increased precipitation levels and the provision of landscape amenity, within the UK. There are a number of nature- with a transition to a low carbon economy based solutions such as the creation of new providing spaces to enjoy nature. This will woodlands, planting of biomass crops such primarily be driven by new woodland creation as willow, increased levels of upland peatland for recreation and forestry more widely (where restoration, and strategically located natural access permitted), woodland management flood management measures which can have and restoring peatlands. Green transport positive impacts on flood risk management. will also provide the opportunity to regularly For example, increased upland water storage access green spaces, parks and woodlands. improves the capacity of the UK’s waterbodies Some policies may cause landscape issues for to prevent floods downstream. This will have example, solar and onshore wind generation. varied benefits through reducing damages from floods to property, agricultural land and health, and reduced carbon emissions from floods. Conversely, rewetting lowland peatlands may reduce the water storage capacity of those landscapes with possible impacts on local flood risk. 335 Net Zero Strategy: Build Back Greener

80. Water availability and quality: Whilst 82. Rare metals: Materials are finite. Some many policies have positive impacts on low carbon technologies are dependent on water availability and quality, for example critical raw materials, many of which are through upland peatland restoration and rare, found in unique locations and in high strategic planting of trees, some low carbon demand globally, for example cobalt, lithium technologies are water-intensive and large- and nickel. Many of these rare metals are scale implementation could result in pressures sourced internationally and extraction of them on water demand. For example, nuclear power may place pressure on the natural capital and hydrogen production require high levels stock in the country of origin. There are risks of water input for cooling and electrolysis, associated with overreliance on specific respectively and certain biomass crops (for technologies where raw material scarcity use in BECCS) have high water demand. This may grow and geopolitics may determine is set against a backdrop of increasing global access, for example, rare earth elements water scarcity in a changing climate. The UK such as neodymium for use in magnets. is no exception, with increasing likelihood These risks will be assessed in relevant policy of warmer, drier summers. Therefore, water delivery analysis. demand both regionally and nationally should be considered at a systems level, to ensure 83. Land Use: Land is finite. Meeting climate sustainable demand. targets will require significant and competing demands from land, for example, for food,

81. Raw materials: Resource efficiency shelter, goods and service production, policies will have a net benefit to pressures ecosystem services and greenhouse gas on raw material availability, reducing raw abatement. This will result in large changes material demand and consumption. Reduced to land use and management. The pathway resource extraction and processing will in the Net Zero Strategy is reliant on land use also benefit other natural capital assets. For change linked to tree planting, peat restoration example, 90% of global biodiversity loss and growing perennial energy crops or short and water stress is caused by resource rotation forestry for use as biomass. This extraction and processing.54 Moving towards change will impact on the extent and condition a circular economy, where priority is placed of natural capital assets and the ecosystem on extending the lifetime and lifecycle of a services they provide. The direction of impact product through sharing, reusing, repairing, (positive or negative) and its magnitude will redesign and recycling, is likely to have a depend on how and where land conversion positive impact on a number of natural capital happens. A systemic and spatial approach stocks, primarily water quality and availability, to land use, that considers net zero, socio- air quality and reducing pressures on land use. environmental objectives, and various socio- economic factors such as population and economic growth, is necessary to enact land use changes that delivers net zero as well as environmental outcomes in line with the 25 Year Environment Plan. Such an approach enables trade-offs to be managed among different objectives while facilitating win-win outcomes- for instance with flood protection and recreation. 336 Technical Annex Social considerations 88. Patterns of energy consumption will also change. Most households and businesses are

84. Over the last decade there have been likely to increase their use of electricity, but changes in the underlying costs of energy bills, reduce gas and petrol/diesel consumption, which have been mitigated through energy as they shift to low carbon forms of transport efficiency measures, helping consumers and heating (such as electric vehicles to use less energy. Electricity prices have and heat pumps). It is essential to ensure trended upwards due to rising network costs that price incentives are fair and help and support for low carbon infrastructure support this transition away from relying on and vulnerable households. Gas prices have fossil fuel prices. fluctuated due to international wholesale gas prices, which in recent months have been 89. It will remain the case that households particularly volatile. and businesses who install energy saving measures will reap significant savings.

85. Government energy saving schemes have been targeted towards low-income or 90. As we progress towards net zero, the vulnerable households, and the retail energy Government is committed to ensuring the price cap has helped protect those customers costs of decarbonising the energy system on default energy tariffs. Steps have also are fair and affordable for all energy users. been taken to protect industries most We are considering both the benefits and the exposed to the UK’s relatively higher industrial costs of different pathways holistically across electricity prices. the economy and will work with industry and consumers to keep costs down.

86. The policies set out in the Net Zero Strategy will help insulate consumers from 91. The impact of decarbonisation on the over-reliance on fossil fuels which they progress in tackling fuel poverty will be face today, and help to shield households, determined by changes in electricity and business, and the wider economy from the fuel prices, and higher energy efficiency in destabilising effects of this reliance. the housing stock. In particular, policies to improve energy efficiency in homes - such as

87. How electricity and gas bills will change the Social Housing Decarbonisation Fund, on the path to net zero depends on factors Home Upgrade Grant, Energy Company such as technology costs, patterns of Obligation and proposals on Minimum Energy consumer energy use and the government’s Efficiency Standards - will help to improve gradual approach to rebalancing where the building performance for the homes of social and policy costs fall. The nature of those in or at risk of fuel poverty. The Warm costs in a smart, clean energy system will be Homes Discount will support fuel poor homes different. The largest part of the electricity bill through reduced bill costs. Fuel poverty is a is currently the cost to energy suppliers from devolved matter. In England we are committed buying power. This cost has traditionally been to our target for fuel poor households, as far determined by the underlying price of gas or as reasonably practicable, to be living in a coal, but this is changing. Gas will continue home rated EPC Band C or better by 2030. to play a role in setting the electricity price for Scotland, Wales and Northern Ireland have some years to come but, over time, will do so their own fuel poverty targets and are also less frequently, as more and more low carbon working to improve the energy efficiency of generation (such as wind and solar) connect their building stock. to the electricity system - consistent with the commitment to a fully decarbonised power system by 2035. This will help put downward pressured on wholesale electricity prices. 337 Net Zero Strategy: Build Back Greener Evidence base Sectoral evidence Power BEIS’ Dynamic Dispatch Model (DDM) has been used to generate technically feasible pathways that are consistent with achieving the NDC in 2030, the sixth carbon budget in 2033-37 and net zero in 2050.55 This model was developed by BEIS and is used for all power sector analysis within the department. This includes the Modelling 2050 – Electricity System Analysis report that was published with the Energy White Paper and the Energy and Emissions projections.56 It was also used for the power sector analysis in the CCC’s Sixth Carbon Budget report although the CCC used their own assumptions and off-model adjustments for this.57 Assumptions for the Northern Ireland power sector demand and emission pathway are based on the CCC’s Sixth Carbon Budget advice. The DDM relies on many exogenous assumptions and inputs, and results can be sensitive to changes in these assumptions. This includes using electricity demand from UKTM and other sectors analysis and evidence on different technologies costs and characteristics from BEIS’ generation costs report.58 Both full pathway runs and single year analysis is used to underpin the strategy set out in the power sector chapter. Distribution Network outcomes are modelled in the Distributions Networks Model (DNM). The DNM conducts electricity power flow analysis across 10 representative regional networks to estimate future distribution network constraints (thermal violations and voltage imbalances). The results of the constraint analysis are then fed into a separate investment model to calculate reinforcement costs up to 2050. Investment costs for power plant generation capacity and flexible assets are calculated from the DDM based on technological costs assumptions. Transmission and Distribution Network costs have been calculated separately. The costs for networks provided are in Allowed Revenues terms. Allowed Revenue estimates are the costs that network operators will be allowed to recover annually – as decided by Ofgem as part of their RIIO price control process. These are therefore the network costs that will be passed through each year. They do not represent the total value of investment in assets. The 2050 illustrative scenarios represent the power sector at a less granular level than DDM. Supplementary adjustments and results were validated by DDM but should not be read as predictive of the optimal technology mix in 2050. For a detailed assessment of potential scenarios for the 2050 electricity system please consult the Modelling 2050: electricity system analysis published alongside the Energy White Paper.59 The high electrification scenario assumes no hydrogen availability for power to illustrate an alternative power sector trajectory. 338 Technical Annex Fuel Supply and Hydrogen Hydrogen: The hydrogen demand needed to meet the sixth carbon budget in industry, power, buildings and transport was estimated as set out in the evidence base sections for those sectors. The hydrogen production capacity needed to meet this demand has been calculated assuming hydrogen production plants run at a 95% load factor. Evidence on hydrogen supply and demand has also been drawn from the Hydrogen Strategy: further detail can be found in the Hydrogen Strategy analytical annex.60, 61 Estimates of hydrogen production costs are based on the evidence set out in the hydrogen production cost report.62 Upstream Oil and Gas: The pathway for upstream oil and gas was developed using the OGA’s projected abatement from offshore electrification and flaring. Estimates of potential abatement from offshore electrification (scope 1 emissions only) were developed using the best available data provided to the OGA by industry as of August 2021, and assumes that there will be a mixture of some installations being partially electrified and some being fully electrified (the list of these installations was provided by industry). Fully electrified installations were estimated, in line with industry representatives’ assessment, to have 70% of power demand provided by electrification, while partially electrified ones have 43%. Additionally, it is assumed that project phasing is one year and that electrification of the installation would not affect previously reported economic cessation of production dates. The estimate of GHG emissions abatement via flaring reduction from offshore oil and gas infrastructure was developed assuming that zero routine flaring will be in place across all UKCS assets in 2030. Routine flaring is assumed to be broadly consistent with category 1 flaring (now defined by the OGA as category A flaring). Future expected flare volumes were calculated by subtracting the routine element of flaring from total anticipated flaring per facility after 2030, with data taken from the UK Stewardship Survey. Flared gas values, in both mass and volume units, have been converted to CO2 emissions using emission factors observed in published datasets (e.g. EEMS).63 Capex assumptions for Upstream Oil and Gas abatement measures have been sourced from the CCC’s Sixth Carbon Budget advice. The overall cost profile has been calculated by BEIS and is aligned to the deployment trajectory underpinning the sector’s illustrative emissions pathway. This is an early analysis with significant uncertainties. Through discussion with the OGA BEIS is confident that these estimates are in the right order of magnitude, however actual costs might end up being higher. Hydrogen and other fuel supply assumptions for 2050 are aligned with those used in the Sixth Carbon Budget Impact Assessment. The level of curtailment available for electrolysis was taken directly from the power sector modelling. 339 Net Zero Strategy: Build Back Greener Industry A model of the UK industrial sector called Net Zero Industrial Pathways (NZIP) has been used to generate a technically feasible pathway to achieve a net zero industry sector by

2050. The model was developed by Element Energy for BEIS and the Climate Change Committee (CCC)64 and was used to underpin the manufacturing and construction sector analysis in the CCC’s Sixth Carbon Budget report65 and the Government’s Industrial Decarbonisation Strategy (IDS),66 published in March 2021. The industry pathway required to reach net zero is based on the IDS National Networks scenario but achieves a faster trajectory through earlier decarbonisation of the Iron and Steel sector and increased CCS ambition by 2030. The model calculates the least cost pathway for a range of technologies, assessed on their capital and operating costs, along with cost reductions over time due to technology learning, and a number of key constraints impacting their deployment (e.g. technology readiness level, hydrogen and CO2 transport and storage availability, supply chain capacity). The 2050 scenario analysis includes supplementary adjustments to align the UKTM emissions, energy demands and CCS requirements with the evidence base in NZIP IDS 2050 scenarios. In the high electrification and high resource scenarios these align with the National Networks scenario, whilst the high innovation scenario is more representative of the Cluster Networks scenario. Heat and Buildings Both heat and buildings scenarios are developed to be consistent with completely decarbonising buildings by 2050 to meet a net zero target. With the assumption that a typical heating appliance has a lifetime of 15 years, this implies that no new fossil fuel heating systems can be installed after 2035. The high electrification scenario assumes that hydrogen is not available as an option for heating buildings, so the level of heat pump deployment grows from its current level of around 35,000 in 2020 to be able to meet the turnover of fossil fuel systems in 2035. In scenarios involving hydrogen, heat pump deployment meets the common ambition of 600,000 heat pumps by 2028, and further growth is dependent on the level of hydrogen deployment to generate the same level of carbon savings between scenarios. Installation of energy efficiency measures and deployment of low carbon heat networks is assumed to be same in all scenarios. Domestic Energy Efficiency: The domestic energy efficiency modelling was carried out using the National Household Model.67 This model estimates the impact of installing different measures in different properties by applying the Standard Assessment Procedure68 to a representative sample of the housing stock based on the English Housing Survey.69 Further adjustments are made to modelled savings to account for factors such as the real-life performance of measures and people heating their homes to a more comfortable temperature when their energy bills are reduced. Cost data for different measures comes from a variety of published sources, as well as some internal data.70, 71, 72 The deployment profile for measures was estimated based on current and planned policies and proposals. 340 Technical Annex Non-Domestic Buildings - Commercial and public: The sixth carbon budget pathway for commercial and public sector buildings was created using BEIS Non-Domestic Buildings Model (NDBM). This models the deployment of low carbon heating and energy efficiency measures in non-domestic buildings. The NDBM uses building stock characteristics and potential energy efficiency information from the Building Energy Efficiency Survey (BEES) dataset.73 Data on energy consumption and emissions come from the Digest of UK Energy Statistics, Energy and Emissions Projections, and ECUK.74, 75, 76 The model has been supplemented with updated information on off-gas grid buildings from the Non- domestic National Energy Efficiency Data-Framework (ND-NEED); and updated cost and efficiency assumptions for Heating Ventilation and Cooling (HVAC) technologies in non- domestic buildings.77 Modelling assumptions for public sector buildings have been further refined through monitoring the on-going rollout of phase 1 and 2 of the Public Sector Decarbonisation Scheme. Products Policy: For products policies, as well as the sources listed above, additional data is taken from the ONS, consultation with trade associations and research provided by external contractors to develop the evidence base. The average energy consumption of products in the pathway are compared to the market average to calculate energy savings, taking into account product lifetime, usage and different technology types. Costs associated with products price increases, staff labour and training and installation costs are also taken into account, as well as interaction with EU and international trade and product regulations. Domestic Heat Pumps: Deployment of domestic heat pumps is based on simple analysis of the residential stock, segmenting homes by heating fuel, and considering natural replacement cycles. The trajectory of heat pumps is based on estimates of deployment from current and planned policies, supply chain growth required to meet phasing out of new fossil fuel heating systems, and use of the natural replacement cycle to remove all fossil fuel heating in homes by 2050. Assumptions on appliance costs and performance, and on potential supply chain growth, are based on published research.78, 79, 80 Assumptions on the current building stock and heat demand are from the NHM and domestic NEED.81, 82 Assumptions on new build homes are based on DHLUC’s 2019 FHS Consultation stage Impact Assessment - these were produced externally by consultants and an independent consortium.83 These are for appraisal purposes only, and are not an official forecast of housing supply. Hydrogen: Deployment of hydrogen for heat in buildings up to the sixth carbon budget has been modelled using a spatial analysis approach considering the metered gas demand from residential, commercial and public buildings within an expanding radius around potential industrial cluster sites producing hydrogen. Spatial gas demand has been derived from NEED data and assumptions on rollout rate have been taken from the CCC’s residential heat decarbonisation scenarios from their Sixth Carbon Budget advice.84, 85, 86 Additional assumptions on overall demand for scaling are from DUKES.87 341 Net Zero Strategy: Build Back Greener Heat Networks: Deployment of heat networks has been derived from the expected impact of capital support and regulation, informed by the heat network opportunity areas.88 The analysis appraises the impact of low-carbon heat network policies, and on fuel demand relative to a predominately gas-fired counterfactual, to estimate carbon savings. The costs technical assumption come from a AECOM report, but a number of assumptions have been updated since using learning from the Heat Network Investment Projects (HNIP).89, 90 Biomethane: Plant deployment scenarios are based on a combination of historic deployment under the Renewable Heat Incentive (RHI), and commercial intelligence. Heat generated is estimated from plant deployment scenarios and using estimates for biomethane injection as proportion of capacity.91 The internal BEIS Biomass Heat Pathways Tool provides assumptions on biogeneration emissions, feedstock costs, capex and opex costs.92 These capex and opex costs have also been verified against cost information collected through market intelligence, the Non-Domestic RHI Evaluation, and a review of AD plant costs commissioned by BEIS and awarded to the National Non-Food Crops Centre (NNFCC). Rothamsted Research has provided assumptions on upstream carbon savings, linked to diverting feedstocks from counterfactual uses to AD, and ammonia impacts.93 Downstream carbon savings, linked to the displacement of natural gas with biomethane, are estimated using emissions factors provided in the HMT Green Book supplementary guidance.94 Fertiliser savings are valued using the average of fertiliser prices published by the Agriculture and Horticulture Development Board across multiple years.95 Full methodology and assumptions can be found in the final stage impact assessment for the Green Gas Support Scheme.96 The 2050 UKTM scenarios represent the housing stock at a less granular level but have been calibrated to the sectoral evidence base. The high electrification scenario assumes no availability of hydrogen for heating, the high resource scenario limits the deployment of electric heating, whilst the high innovation scenario is left to optimise outcomes. Transport Domestic Transport: The pathway for domestic transport covers road transport, rail, domestic shipping and domestic aviation. The Net Zero Strategy pathway for road transport, rail and domestic aviation was developed using projections from the recently published Transport Decarbonisation Plan (TDP).97 These projections were produced using a range of models and analysis, including the National Transport Model (road transport), Traction Decarbonisation Network Strategy (rail), and the Aviation model, adjusted for decarbonising transport measures.98 The forecasts presented in the TDP considered a number of scenarios. The Net Zero Strategy pathway for road transport, rail and domestic aviation assumes an ambitious policy package within the range of policy outcomes explored in the TDP. These emissions savings are applied to a central demand scenario. The Net Zero Strategy pathway for domestic shipping is based on research commissioned by the Department for Transport (DfT) – see below for further details. 342 Technical Annex International Aviation and Shipping: The Net Zero Strategy pathway for international aviation was developed using projections from the TDP and the Jet Zero Consultation.99 This uses the same Aviation model and assumptions as used for the domestic aviation projections. The DfT’s Aviation model is an established suite of interrelated components used to produce forecasts for aviation demand at the national level, and the associated passenger numbers, aircrafts and CO2 emissions from flights departing from UK airports.100 Three abatement measures are considered within the modelling; system efficiencies, sustainable aviation fuels (SAF), and zero emission aircraft. As with the Net Zero Strategy pathway for domestic shipping, the pathway for international shipping is based on research commissioned by the Department for Transport (DfT).101 For both pathways, the estimates from this research have been adjusted to align them with the latest UK greenhouse gas emissions national statistics.102 Therefore, the pathways for domestic shipping and international shipping are consistent with the definitions of domestic shipping and international shipping used in these national statistics.103 Given the emerging nature of zero emission shipping fuels, the NZS pathways for domestic shipping and international shipping should be interpreted as a possible scenario for meeting the government’s commitment to achieving net zero in maritime rather than estimates of the impact of specific policies. The illustrative 2050 scenarios rely on the same evidence base for transport as the Sixth Carbon Budget Impact Assessment with the exception of the high innovation scenarios, where modelling updates on aviation to reflect DfT’s Jet Zero consultation high ambition scenario, and the scenarios for shipping which have been aligned with the NZS pathways described above. To support the sustainable fuel production requirements additional assumptions have been taken from the Advanced Gasification Technology review.104 Natural Resources and Waste Agriculture: The agriculture emissions trajectory is based on estimates of maximum technical GHG mitigation potential (MTP) for each technology from the Clean Growth through Sustainable Intensification (CGSI) Project and building upon previous work by the CCC. MTP quantifies the impact if all farms which could technically adopt a measure do so, whilst considering any current uptake to avoid double counting.105 MTP was derived from expert review of published literature and modelling to scale experimental data to national level. These estimates have been independently peer reviewed. CGSI used the MTP values to derive the trajectory based on ambitious but feasible deployment rates. The trajectory was informed by academic, industry and policy experts to reflect barriers, technology readiness and R&D lead in times. Additional stretch options were modelled through Defra analysis using CGSI and CCC data, generally through adjustments to implementation rates. Additional modelling addressing agricultural mobile machinery aligned to CCC analysis in its Sixth Carbon Budget Report. England only data was scaled to a UK basis using the relative emission share between England and the Devolved Administrations as an estimator of Devolved Administration potential, pending publication of the Devolved Administrations pathways. 343 Net Zero Strategy: Build Back Greener The UKTM modelling for the 2050 scenarios uses the same evidence base as the agriculture emissions trajectory. A set of crop and livestock measures are characterised by their cost and maximum technical potential to reduce emissions, and these assumptions are the same across the three scenarios. Biomass: The biomass analysis is an indicative technical assessment of potential carbon abatement assuming optimal species/site/climate matching and a relatively simplistic approach to modelling carbon removals. Five biomass crop categories were modelled, deployed in fixed proportions: exotic SRF (14%); conifer SRF (23%); broadleaf SRF (poplar, aspen) (12%); SRC willow (27%); miscanthus (25%). A high-level analysis of land availability has been undertaken, indicating that the Net Zero Strategy pathway deployment profile is feasible. To calculate carbon stocks, a simple linear approach to yield modelling has been adopted which could overestimate initial growth and thus abatement. For all crops, appropriate biomass expansion coefficients were applied to account for branches and/or roots, as appropriate. All biomass was converted to carbon, assuming carbon comprises 50% of biomass. Emissions savings are modelled as the time-averaged increase in biomass carbon stocks resulting from planting of the crop, assuming the land use change is permanent. In addition, the 2050 scenarios assume a maximum technical potential of 53 kha domestic bioenergy crop planting rate by 2050. Bioresource import assumptions in 2050 do not exceed current levels of imports. Forestry: Emissions/removals are estimated using output from Forest Research’s CSORT model, an off-line version of Carbine, the greenhouse gas accounting model used to calculate the forestry contribution to the UK LULUCF GHG inventory.106, 107 Three indicative woodland types are represented in the model: productive conifer, productive broadleaf, and unmanaged. The modelled abatement is for England only and adjusted to a UK basis to be broadly aligned to the CCC share of afforestation by country in the “Balanced Net Zero pathway” scenario.108 Linear expansion of deployment is assumed between 2025 and 2035. Non-market benefits are calculated using various research, compatible with the Enabling a Natural Capital Approach services data book.109 The 2050 scenarios vary the maximum afforestation/tree planting rate assumptions between 30 kha (in the high electrification/innovation scenario) and 50 kha pa (in the high resource scenario). 344 Technical Annex Peatland: The peatland trajectory covers restoration as well as technical potential modelling covering abatement from responsible management and the ending of peat extraction. Emissions savings from peatland restoration are based on upland, lowland cropland and lowland grassland emissions factors, which are applied to the peatland restoration deployment profile, delivered via the Nature for Climate Fund and Blended finance up to 2050.110 The technical potential modelling covering responsible management measures (management activity that does not seek to re-establish peat habitats, but which significantly reduces the impact of using peatland for its current purpose) assumes abatement to be 1/3 of respective cropland/grassland restoration abatement. Biodiversity and water quality benefits are monetized using central values, whilst upfront restoration costs are estimated using 2017 Defra grant scheme data.111, 112 The peatland modelling from Defra is England only, including an early stage assessment of how emissions factors from wasted peat may be revised in future inventories. Abatement potential in DAs is assumed to be in line with CCC analysis. Peatland assumptions are the same across the three 2050 scenarios and there are two separate evidence bases – one that covers England, and one that covers Scotland. Both evidence bases consist of a set of restoration measures characterised by cost and maximum technical potential to reduce emissions. Assumptions for England come from Defra but for Scotland, data comes from the Scottish TIMES model and are uplifted to account for Wales and Northern Ireland. Resources and Waste: For municipal wastewater, water companies use the Carbon Accounting Workbook developed by UK Water Industry Research to estimate operational GHG emissions across the industry. The workbook has been in place since 2004 and is updated annually to reflect the needs of the industry, including changes in carbon accounting practices with updated emission factors to align with the latest UK and international data. There are no internal models for private or industrial emissions and there are still significant gaps in our understanding of the magnitude and main sources of these. The Water UK Routemap to 2030 sets out industry plans to achieve net zero by 2030.113 This routemap has been used as the basis for Defra to develop net zero consistent policies, for example, using assumptions from industry on cost and feasibility of policy deployment. For landfill emissions estimation, the Landfill Environmental and Financial (LEAF) model has been used. This was developed by Resource and Waste Solutions, and more detail can be found in their report.114 This is a high-level and strategic model of non-hazardous waste flows in England. LEAF allows the different scenarios to be described numerically and their effects on landfill emissions and costs of landfill to be calculated. The model considers the impacts of changes on landfill gas, leachate and void space consumption. The model is England only, but to provide an indication of Devolved Administration potential, emission savings are scaled to a UK level using relative emissions shares between England and the Devolved Administrations. It is assumed that there is a linear increase in diversion from landfill after 2021. 345 Net Zero Strategy: Build Back Greener F-Gases: The Net Zero Strategy pathway for F-gas Emissions was estimated primarily using the UK-Level HFC Outlook Model developed by Gluckman Consulting. Non-HFC F-gas emissions are estimated using the BEIS Energy and Emissions Projections. The level of ambition for metered dose inhalers is derived from the ambition within the NHS report ‘Delivering a ‘Net Zero’ National Health Service’.115 Costs were developed using the CCC report ‘Assessment of the potential to reduce UK F-gas emissions beyond the ambition of the F-gas Regulation and Kigali Amendment’.116 Uplift of HFC GWPs to AR5 with Carbon Cycle Feedback values was taken from BEIS Methodology. Assumptions on maximum technical potential for resources, waste, and F-gases in the 2050 scenarios are aligned with the sectoral evidence base for the pathway analysis. Greenhouse Gas Removals The engineered removals include the following technologies: Power Bionenergy with Carbon Capture and Storage (Power BECCS), Industry BECCS, Direct Air Carbon Capture and Storage (DACCS), and BECCS applications based on advanced gasification technologies (Hydrogen generation with waste, Hydrogen generation with biomass, Biofuels, Biogas, and Biomethane generation with CCS). Other engineered removals solutions, such as enhanced weathering, carbon-negative cements, ocean carbon sequestration and biochar have not been included in the modelling at this stage given the underlying uncertainty and need for further development. The pathway was developed through a combination of bottom-up sectoral modelling, as well as UKTM whole-system modelling. The pathway analysis (including build rates, energy demand, and costs) relied on assumptions from published sources on BECCS and DACCS, alongside a benchmarking study commissioned by BEIS.117, 118, 119, 120, 121 The study presented evidence based on an original review of the published literature, feedback received through the GGR Call for Evidence and additional stakeholder engagement.122 An investment lead-in time of four years is assumed for power BECCS, and five years for hydrogen BECCS and DACCS. Costs for power BECCS and hydrogen BECCS represent both the cost of generation (electricity/hydrogen) and of CO2 removal. Power and hydrogen generation with BECCS are assumed to operate at baseload. DACCS is assumed to rely on low carbon energy inputs. UKTM modelling for the 2050 scenarios uses the same technology assumptions as the pathway analysis where possible. In addition to the benchmarking study, assumptions on maximum technical potential and technology performance have been sourced from the sectoral models such as NZIP and from the Advanced Gasification Technology review. 346 Technical Annex Supporting the transition across the economy Green Jobs, Skills and Industries Skills evidence presented in the Net Zero Strategy is largely drawn from the work carried out by the Green Jobs Taskforce and found in the published Green Jobs Taskforce report.123 The joint BEIS and DfE Ministerially led independent Taskforce included representatives from across business, trade unions and the skills/education sector and it was supported by a secretariat comprised of civil servants from BEIS and the DfE. The secretariat facilitated the drawing together of its evidence review and supported the Green Jobs Taskforce reviewing over 200 reports published by industry, academia, and government to form a robust evidence base upon which to build recommendations. The Annex published alongside the Green Jobs Taskforce brings together a wide range of information about how certain sectors, occupations, skills requirements and qualification levels (L)1 will change as the UK transitions to a net zero economy gathered by the secretariat. Green Investment Research referenced in the Green Investment chapter is drawn from external sources. This includes the Climate Change Committee’s The Road to Net Zero Finance, which was a report prepared by the Advisory Group on Finance to critically assess the UK financial systems ability to deliver net zero.124 This report provides an estimate for the total amount of capital investment needed in technologies to achieve net zero and therefore does not deliver a full picture of investment needs given the exclusion of operational costs. Innovation for Net Zero The published Energy Innovation Needs Assessments (EINAs) are the main source of evidence base underlying the innovation chapter.125 It is a whole system analysis used in understanding the sectors and innovations of highest potential benefit to the UK energy system. The analysis is based on cost optimisation modelling carried with the Energy System Modelling Environment (ESME), and extensive engagement with industry to shape input assumptions and guide technical specifications. The EINAs are split into twelve reports, each covering a group of similar technologies and exploring their potential impacts and current barriers to their innovation and deployment. Overall, the EINAs aid understanding of where innovation can help achieve the largest energy system cost reductions and business opportunities when on a net zero trajectory. GVA figures used in this publication have been updated internally by BEIS using the same EINA methodology to reflect increased net zero ambition, as original EINA publications were on the basis of the previous 80% greenhouse gas reduction target. 347 Net Zero Strategy: Build Back Greener Local Climate Action Analysis of local based decarbonisation policies is based on the Local Net Zero Model. The model takes assumptions from the ELENA programme, an EU fund which leverages public money for local based decarbonisation projects.126 These assumptions include the expected level of private funding leveraged, energy savings of projects and additionality. The model estimates the public costs, private costs, carbon savings and energy savings of expected projects resulting from the programme. Empowering the Public and Businesses to Make Green Choices Much of the research contributing towards this chapter was part of BEIS’ Net Zero Societal Change Research Programme 2020-21. Components of the research programme that have fed into this chapter include: ‘Climate change and net zero: public awareness and perceptions’ (an online survey of circa 7,000 members of the UK public on public perceptions of climate change and net zero); ‘Net zero public dialogue’ (online workshops with the public exploring their understanding and perceptions of net zero); ‘Net Zero Societal Change Analysis Project’ (analysis carried out by Energy Systems Catapult exploring the potential impact of different societal changes in reaching net zero); and a research note entitled ‘Net zero public engagement and participation’.127, 128, 129, 130 Within the chapter, the ‘Principles underpinning green public and business choices’ section is drawn from ‘Net zero: principles for successful behaviour change initiatives’, a report BEIS commissioned from the Behavioural Insights Team.131 The chapter also uses findings from BEIS’ Public Attitudes Tracker surveys regarding people’s concern about climate change.132 Cross-cutting assumptions Fuel prices: Fossil fuel price assumptions are based on the BEIS Fossil Fuel Prices Assumptions 2020, with the exception of UKTIMES analysis which uses the BEIS Fossil Fuel Prices Assumptions 2016.133 Carbon values: Carbon values apply a monetary value to emissions in policy appraisal and are based on a target-consistent approach. The latest 2021 HMG carbon values are consistent with the UK’s national and international climate commitments and represent an increase on previous values.134 Where cost benefit analysis of the sixth carbon budget from the Impact Assessment is quoted, the 2018 carbon values were used. These are consistent with the previous 80% emissions reduction target. To compensate for subsequent increased climate ambition, the high rather than central 2018 carbon values were used in the cost benefit analysis.135 348 Technical Annex Economic growth and demography: The baseline for economic growth used for all analysis is consistent with the July 2020 OBR long term projections of economic growth.136 When calculating the GDP carbon intensity and GDP energy intensity deployment assumptions, projections from the March 2021 Economic and fiscal outlook were used, for both short and long-term GDP forecasts.137 Air quality: Where air quality impacts have been quantified, they have been monetised in line with the national values of the most recent air quality damage costs.138 Discount rates: Discount rates are used in line with Green Book guidance.139 For appraisal periods up to 2050 the discount rate is 3.5%. A 2% cumulative annual health uplift is applied to air quality benefits prior to discounting, effectively reducing the discount rate to 1.5%. Estimating jobs: The estimate of jobs delivered since the Ten Point Plan announcement is based on internal HMG analysis of employment impacts across a range of policies and programmes within the 10 Points of the Plan. The method for estimating the number of jobs supported by Net Zero Strategy policies and proposals in 2025 and 2030 is as follows. This varies by sector and in some cases by the period of analysis. Power: Analysis aggregates projected employment across Power Networks, Offshore wind, Onshore wind, Solar, and Storage and demand side flexibility, all based on BEIS analysis using the EINA methodology and the technology deployment levels implied by the indicative delivery pathway (see Table 11). The 2030 figure also includes 10,000 jobs (peak employment) from the construction of a large nuclear plant. These estimates are based on the number employed directly in the power sector technologies, with the exception of offshore wind, which also includes indirect (supply chain) jobs based on a multiplier of 1 direct job to 1 indirect job. Fuel supply: The 2025 analysis is an estimate of potential employment by that year in a UK industry in Sustainable Aviation Fuels (SAF) (based on DfT analysis). The 2030 figure is an aggregation of anticipated employment by that year in SAF (based on DfT analysis), along with an estimate of potential employment in a UK hydrogen economy as set out in the Hydrogen Strategy.140 This is based on BEIS analysis of an updated model from the Energy Innovation Needs Assessment. Industry: Analysis relates to estimated employment in the UK in Carbon Capture Utilisation and Storage (CCUS), calculated using the Energy Innovation Needs Assessments approach and pro-rated for 2025 based on the anticipated trajectory for the level of carbon captured through CCUS over the decade. These are high-level estimates and actual outturn of employment will depend on several factors, although the jobs estimate is considered broadly consistent with stated government policy for the development of the technology. These estimates cover both power CCUS and CCUS for industrial purposes, but are included in the Industry chapter as the estimates do not directly overlap with any estimates included in the Power chapter. 349 Net Zero Strategy: Build Back Greener Heat and Buildings: Analysis aggregates anticipated employment impacts from the decarbonisation of heating (calculated using an update of the Energy Innovation Needs Assessments applied to the deployment levels set out in Table 11) and total public and private spending on energy efficiency measures (based on BEIS analysis using a jobs/ capex multiplier). These estimates are based on broad assumptions of the policy mix driving carbon savings from domestic buildings over the 2020s. As some of these policies are still not confirmed, there is large uncertainty over the exact timing and job numbers supported by them. Transport: Both numbers are based on an aggregation of anticipated employment impacts from the Automotive Transformation Fund and the Advanced Propulsion Centre, along with anticipated levels of employment in active travel (cycling and walking), and rail decarbonisation. The active travel and rail decarbonisation estimates are based on DfT analysis of what policy ambitions for active travel and rail decarbonisation are likely to imply for employment in their respective sectors in these years. Natural Resources, Waste and F-gases: These numbers relate exclusively to direct employment in the UK forestry sector and are based on Defra analysis. These estimates exclude indirect jobs, such as those supported in tourism, the wider forestry supply chain or local farming. Employment in forestry will be supported by policies such as the Nature for Climate Fund. This number does not include potential employment in other areas covered in the chapter such as peat restoration, sustainable agriculture or waste recycling. Public and private investment estimates Public investment figures in the strategy refer to sums of government spend committed to a relevant Budgets and Spending Reviews, unless otherwise stated. Private investment estimates are derived through analysis of how much private sector spend is likely to be leveraged from this public spend. Further public and private investment will be delivered as proposals are developed into firm policies. Analysis of the potential GVA generated by decarbonisation has been conducted for a subset of sectors: power, renewables, heat and buildings, industry, CCUS, hydrogen, smart systems and road transport. The analysis follows the methodology developed by Vivid Economics for the Energy Innovation Needs Assessment in 2019.141 Where possible, it uses whole energy systems modelling to estimate domestic economic opportunities from achieving net zero in the UK in 2050 and, while export opportunities rely on a global scenario limiting global warming to two degrees Celsius above pre-industrial levels. 350 Technical Annex Endnotes 1 UK Legislation (2008), ‘Climate Change Act 2008’, https://www.legislation.gov.uk/ ukpga/2008/27/contents 2 CCC (2019), ‘Net Zero – The UK’s contribution to stopping global warming’, https://www. theccc.org.uk/publication/net-zero-the-uks-contribution-to-stopping-global-warming/ 3 See in particular sections 13, 14 and 15 of the Act. 4 BEIS (2021), ‘2019 UK greenhouse gas emissions: final figures - statistical release’, https:// assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/957887/2019_Final_greenhouse_gas_emissions_statistical_release.pdf 5 UNFCCC (2015), ‘Paris Agreement’, https://unfccc.int/sites/default/files/english_paris_ agreement.pdf 6 Excluding international aviation and shipping emissions. 7 BEIS (2021), ‘Annual statements of emissions’, https://www.gov.uk/government/collections/ annual-statements-of-emissions 8 BEIS (2021), UK Greenhouse Gas Inventory, 1990-2019, https://uk-air.defra.gov.uk/reports/ cat09/2105061125_ukghgi-90-19_Main_Issue_1.pdf 9 UK Legislation (2021), ‘The Carbon Accounting (Provision for 2019) Regulations 2021’, https://www.legislation.gov.uk/uksi/2021/189/made?view=plain 10 BEIS (2021), ‘UK Greenhouse Gas Inventory’, 1990-2019, https://www.gov.uk/government/ statistics/final-uk-greenhouse-gas-emissions-national-statistics-1990-to-2019 11 IPCC (2013), ‘Supplement to the 2006 IPCC Guidelines for National Greenhouse Gas Inventories: Wetlands’, https://www.ipcc.ch/site/assets/uploads/2018/03/Wetlands_ Supplement_Entire_Report.pdf 12 IPCC (2007), ‘Assessment Report 4’ WGI Chapter 2, table 2.14, https://www.ipcc.ch/ publications_and_data/ar4/wg1/en/ch2s2-10-2.html 13 IPCC (2013), ‘Assessment Report 5’ WGI Chapter 8, table 8.A.1 and 8.SM.16, https://www. ipcc.ch/report/ar5/syr/ 14 UNFCCC (2018), ‘Modalities, procedures and guidelines’, Annex II, Metrics https://ledslac.org/wp-content/uploads/2020/09/e.-Decision-18-cma.1.pdf 15 IPCC (2021), ‘Assessment report 6’ WGI table 7.15, https://www.ipcc.ch/report/ar6/wg1/ 16 UK Legislation (2016), ‘Carbon Budget Order 2016 impact assessment’, https://www.legislation.gov.uk/en/ukdsi/2016/9780111147825/impacts 17 The UK may also purchase international credits to contribute to its carbon budgets. We assume that no such credits are purchased for the purposes of this analysis. 351 Net Zero Strategy: Build Back Greener 18 BEIS (2020), ‘Updated energy and emissions projections: 2019’, 2020, https://www.gov.uk/ government/publications/updated-energy-and-emissions-projections-2019 19 BEIS (2020), ‘Updated energy and emissions projections: 2019’, Annex A: Greenhouse gas emissions by source, 2020, https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/931200/Annex-A-greenhouse-gas-emissions-by- source__EEP2019_.ods 20 OBR (2020), ‘Fiscal sustainability report’, Chapter 2, July 2020, https://obr.uk/download/fiscal- sustainability-report-july-2020/ 21 Figure 1 shows EEP 2019 which for comparability has been adjusted for accounting changes, namely including Wetlands brought in under the 2019 inventory (c.15 mt per year) and converting the projections into AR5 with Feedback 22 EEP19 has been adjusted for accounting changes, namely including Wetlands brought in under the 2019 inventory, including IAS emissions, and converting the projections into AR5 with feedback. 23 BEIS (2021), ‘2020 UK greenhouse gas emissions’, provisional figures, 2021, https:// assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/ file/972583/2020_Provisional_emissions_statistics_report.pdf 24 OBR (2020), ‘Fiscal sustainability report, July 2020’, https://obr.uk/download/fiscal- sustainability-report-july-2020/ 25 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 26 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 27 UCL, ‘UK TIMES’, https://www.ucl.ac.uk/energy-models/models/uk-times 28 The model takes account of the direct cost of purchasing, installing, running and maintaining the abatement technologies. The cost of purchasing and installing includes assumed capital costs and the cost of borrowing to pay for the capital. Running costs include the cost of energy supplies, both domestic and any imports. 29 UK Legislation (2021), ‘Carbon Budget Order 2021 impact assessment’, https://www. legislation.gov.uk/ukia/2021/18/pdfs/ukia_20210018_en.pdf 30 UK Legislation (2021), ‘Carbon Budget Order 2021 impact assessment’, https://www. legislation.gov.uk/ukia/2021/18/pdfs/ukia_20210018_en.pdf 31 BEIS (2020), ‘Updated energy and emissions projections: 2019’ Annex D: Policy savings in the projections (revised December 2020), https://assets.publishing.service.gov.uk/government/ uploads/system/uploads/attachment_data/file/947604/Annex-D-policy-savings_revised_ Dec2020__EEP2019_.ods 32 This range is provisional. The Secretary of State will lay before Parliament a report setting out a finalised indicative annual range as soon as is reasonably practicable. 352 Technical Annex 33 BEIS (2019), ‘Updated energy and emissions projections 2018’, Chapter 6 Uncertainty in emissions projections, 2019, https://assets.publishing.service.gov.uk/government/ uploads/system/uploads/attachment_data/file/794590/updated-energy-and-emissions- projections-2018.pdf 34 IAS emissions increase the width of the range by 7.1mt on average over CB6, and the additional LULUCF emissions increase the width by 11.8 mt. Both ranges are symmetrical. 35 Whilst sectors are characterised by different sources and magnitudes of uncertainty, we have made the simplifying assumption that uncertainty in 2020 is +3.7%/-3.5% in each sector, broadly in line with the economy wide average. The proportional up-/down-lift applied to produce the rage increases by +0.35%/-0.17% in each subsequent year, again in line with the economy wide average. 36 AR5 without feedback modelling undertaken for Agriculture, F-gases, Fuel Supply, LULUCF and Waste. Heat & Buildings, International Aviation and Shipping, Industry, Power, Removals and Transport all contain very small amounts of non-CO2 gases and pathways are assumed invariant to GWP. 37 For the Natural Resources, Waste and F-gases sector, illustrative costs for Forestry, Peat and Wastewater in the Devolved Nations have been included by assuming they are line with those set out in CCC estimates. BEIS Analysis, CCC 6th Carbon Budget Report https://www.theccc. org.uk/publication/sixth-carbon-budget/ 38 UK Legislation (2021), ‘Carbon Budget Order 2021 impact assessment’, https://www. legislation.gov.uk/ukia/2021/18/pdfs/ukia_20210018_en.pdf 39 This figure was based on outdated 2018 carbon values, with the ‘high’ series used to compensated for anticipated increases in new carbon values: https://www.gov.uk/government/ publications/updated-short-term-traded-carbon-values-used-for-uk-policy-appraisal-2018 40 OBR (2021), ‘Fiscal risks report’, https://obr.uk/frr/fiscal-risks-report-july-2021/ 41 HMT (2021), ‘Net Zero Review’ 42 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 43 European Commission Free allocation of allowances in the EU ETS, https://ec.europa.eu/clima/ policies/ets/allowances_en 44 BEIS, Free allocation of allowances in the UK ETS, https://www.gov.uk/government/ publications/participating-in-the-uk-ets/participating-in-the-uk-ets#free-allocation 45 HMT (2021), ‘Net Zero Review’ 46 OBR (2021), ‘Fiscal risks report, July 2021’, Chapter 3, https://obr.uk/download/fiscal-risks- report-july-2021/ 47 BEIS , Prime Minister’s office, 10 Downing Street, The Rt Hon Alok Sharma MP & The Rt Hon Boris Johnson MP (2020), ‘The Ten Point Plan for a Green Industrial Revolution’, https://www. gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution 353 Net Zero Strategy: Build Back Greener 48 Natural Capital Committee (2020), ‘The Green Book guidance: embedding natural capital into public policy appraisal – November 2020 Update, 2020’, https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/937652/ncc-green-book- advice.pdf 49 HMT (2013), ‘The Green Book: appraisal and evaluation of central government’, paragraph 6.50, https://www.gov.uk/government/publications/the-green-book-appraisal-and-evaluation- in-central-governent 50 Defra (2021), ‘Enabling a Natural Capital Approach (ENCA)’, https://www.gov.uk/guidance/ enabling-a-natural-capital-approach-enca 51 See https://www.gov.uk/government/groups/natural-capital-committee The Natural Capital Committee is an independent advisory body, set up in 2012. It provides advice to the government on the state of England’s natural capital; our natural assets include forests, rivers, land, minerals and ocean 52 Cambridge Conservation Initiative, ‘Natural Capital Coalition’ (2016), https:// naturalcapitalcoalition.org/wp-content/uploads/2016/07/CCI-Natural-Capital-Paper-July-2016- low-res.pdf 53 ONS (2020), ‘UK natural capital accounts 2020’, https://www.ons.gov.uk/economy/ environmentalaccounts/datasets/uknaturalcapitalaccounts2020 54 International Resource Panel (2020), ‘Global Resources Outlook 2019: Natural Resources for the Future We Want’, https://www.resourcepanel.org/reports/global-resources-outlook 55 For further background on the DDM, please see https://www.gov.uk/government/publications/ dynamic-dispatch-model-ddm 56 BEIS (2020), ‘Modelling 2050: electricity system analysis, 2020’, https://www.gov.uk/ government/publications/modelling-2050-electricity-system-analysis 57 CCC (2020), ‘The Sixth Carbon Budget: Electricity generation’, https://www.theccc.org.uk/wp- content/uploads/2020/12/Sector-summary-Electricity-generation.pdf 58 BEIS (2020), Electricity Generation Costs, 2020, https://www.gov.uk/government/publications/ beis-electricity-generation-costs-2020 59 BEIS (2020), ‘Modelling 2050: electricity system analysis’, https://www.gov.uk/government/ publications/modelling-2050-electricity-system-analysis 60 BEIS (2021), ‘UK Hydrogen Strategy, 2021’, https://www.gov.uk/government/publications/uk- hydrogen-strategy 61 BEIS (2021), ‘Hydrogen analytical annex, 2021’, https://assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment_data/file/1011499/Hydrogen_Analytical_ Annex.pdf 62 BEIS (2021), Hydrogen analytical annex, 2021, https://assets.publishing.service.gov.uk/ government/uploads/system/uploads/attachment_data/file/1011499/Hydrogen_Analytical_ Annex.pdf 354 Technical Annex 63 BEIS (2019), ‘Oil and gas: Environmental and Emissions Monitoring System database’, https:// www.gov.uk/guidance/oil-and-gas-eems-database 64 Element Energy (2020), ‘Deep-Decarbonisation Pathways for UK Industry, Element Energy, 2020’, https://www.theccc.org.uk/publication/deep-decarbonisation-pathways-for-uk-industry- element-energy/ 65 CCC (2020), ‘Sixth Carbon Budget report’, https://www.theccc.org.uk/publication/sixth- carbon-budget/ 66 BEIS (2021), ‘Industrial decarbonisation strategy’, https://www.gov.uk/government/ publications/industrial-decarbonisation-strategy 67 BEIS (2017), ‘National Household Model, 2017’, https://data.gov.uk/dataset/957eadbe-43b6- 4d8d-b931-8594cb346ecd/national-household-model 68 BRE Group (2012), ‘Standard Assessment Procedure’, https://www.bregroup.com/sap/ standard-assessment-procedure-sap-2012/ 69 MHCLG (2021), ‘English Housing Survey’: https://www.gov.uk/government/collections/english- housing-survey 70 BEIS (2017), ‘Domestic cost assumptions – what does it cost to retrofit homes’: https://www. gov.uk/government/publications/domestic-cost-assumptions-what-does-it-cost-to-retrofit- homes 71 (BEIS 2019), ‘Determining the costs of insulating non-standard cavity walls and lofts’: https:// www.gov.uk/government/publications/determining-the-costs-of-insulating-non-standard- cavity-walls-and-lofts 72 BEIS (2016),’Building Energy Efficiency Survey’, https://www.gov.uk/government/publications/ building-energy-efficiency-survey-bees 73 BEIS (2016), ‘Building Energy Efficiency Survey’, https://www.gov.uk/government/publications/ building-energy-efficiency-survey-bees 74 BEIS (2021), ‘Digest of UK Energy Statistics’, https://www.gov.uk/government/collections/ digest-of-uk-energy-statistics-dukes 75 BEIS (2020), ‘Energy and Emissions Projections’, https://www.gov.uk/government/collections/ energy-and-emissions-projections 76 BEIS (2020), ‘Energy Consumption in the UK’, https://www.gov.uk/government/statistics/ energy-consumption-in-the-uk 77 BEIS (2021),’Non-domestic National Energy Efficiency Data Framework’, https://www.gov.uk/ government/statistics/non-domestic-national-energy-efficiency-data-framework-nd-need-2020 78 BEIS (2020), ‘Cost of installing heating measures in domestic properties’, https://www.gov.uk/ government/publications/cost-of-installing-heating-measures-in-domestic-properties 79 BEIS (2017), ‘Detailed analysis of data from heat pumps installed via the Renewable Heat Premium Payment Scheme (RHPP)’, https://www.gov.uk/government/publications/detailed- analysis-of-data-from-heat-pumps-installed-via-the-renewable-heat-premium-payment- scheme-rhpp 355 Net Zero Strategy: Build Back Greener 80 BEIS (2020), ‘Heat pump manufacturing supply chain research project’, https://www.gov.uk/ government/publications/heat-pump-manufacturing-supply-chain-research-project 81 BEIS (2017), ‘National Household Model’, https://data.gov.uk/dataset/957eadbe-43b6-4d8d- b931-8594cb346ecd/national-household-model 82 BEIS (2021), ‘National Energy Efficiency Data-Framework (NEED)’, https://www.gov.uk/ government/collections/national-energy-efficiency-data-need-framework 83 MHCLG (2019), ‘The Future Homes Standard consultation impact assessment’, https://www. gov.uk/government/publications/the-future-homes-standard-consultation-impact-assessment 84 BEIS (2021), ‘National Energy Efficiency Data-Framework (NEED)’, https://www.gov.uk/ government/collections/national-energy-efficiency-data-need-framework 85 BEIS (2021), ‘Non-domestic National Energy Efficiency Data-Framework (ND-NEED)’, https:// www.gov.uk/government/collections/non-domestic-national-energy-efficiency-data-framework- nd-need 86 Element Energy (2021), ‘Development of trajectories for residential heat decarbonisation to inform the Sixth Carbon Budget (Element Energy)’, https://www.theccc.org.uk/publication/ development-of-trajectories-for-residential-heat-decarbonisation-to-inform-the-sixth-carbon- budget-element-energy/ 87 BEIS (2021), ‘Digest of UK Energy Statistics (DUKES)’, https://www.gov.uk/government/ collections/digest-of-uk-energy-statistics-dukes 88 BEIS (2021), ‘Opportunity areas for district heating networks in the UK: second National Comprehensive Assessment, 2021’, https://www.gov.uk/government/publications/opportunity- areas-for-district-heating-networks-in-the-uk-second-national-comprehensive-assessment 89 BEIS (2015), ‘Assessment of the Costs, Performance and Characteristics of UK Heat Networks, 2015’, https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/424254/heat_networks.pdf 90 BEIS (2019), ‘Heat Networks Investment Project (HNIP) pilot scheme, 2019’, https://www.gov. uk/government/publications/heat-networks-investment-project-hnip 91 This model is based on historic RHI data. 92 Assumptions for this model drawn from Bioenergy Heat Pathways to 2050 Rapid Evidence Assessment, Ecofys & E4Tech (for BEIS) 2018, unpublished. 93 These are consistent with those used to compile the 1990-2019 National Atmospheric Emissions Inventory (NAEI). 94 BEIS (2021), ‘Green Book supplementary guidance: valuation of energy use and greenhouse gas emissions for appraisal’, https://www.gov.uk/government/publications/valuation-of-energy- use-and-greenhouse-gas-emissions-for-appraisal 95 AHDB (2021), ‘Great Britain fertiliser prices’, https://ahdb.org.uk/GB-fertiliser-prices 96 BEIS (2020), ‘Future support for low carbon heat, 2021’, https://www.gov.uk/government/ consultations/future-support-for-low-carbon-heat 356 Technical Annex 97 DFT (2021), ‘Decarbonising transport: a better, greener Britain’, https://assets.publishing. service.gov.uk/government/uploads/system/uploads/attachment_data/file/1009448/ decarbonising-transport-a-better-greener-britain.pdf 98 DFT (2020), ‘Transport appraisal and modelling tools’, https://www.gov.uk/government/ collections/transport-appraisal-and-modelling-tools 99 DfT (2020), ‘Jet Zero consultation: Evidence and analysis’, https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/1002163/jet-zero- consultation-evidence-and-analysis.pdf 100 DfT (2017), ‘UK Aviation Forecasts’, https://assets.publishing.service.gov.uk/government/ uploads/system/uploads/attachment_data/file/878705/uk-aviation-forecasts-2017.pdf 101 UMAS, E4Tech, Frontier Economics, CE Delft (2019), ‘Reducing the Maritime Sector’s Contribution to Climate Change and Air Pollution. Scenario Analysis: Take-up of Emissions Reduction Options and their Impacts on Emissions and Costs. A Report for the Department for Transport’ https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/816018/scenario-analysis-take-up-of-emissions-reduction-options-impacts-on- emissions-costs.pdf 102 BEIS (2021), ‘Final UK greenhouse gas emissions national statistics 1990 to 2019’, https:// www.gov.uk/government/statistics/final-uk-greenhouse-gas-emissions-national-statistics- 1990-to-2019 103 For example, the estimates of the greenhouse gas emissions from international shipping represent estimates of the greenhouse gas emissions from fuel sold in the UK for use in international shipping. 104 BEIS (2021), ‘Advanced Gasification Technologies Review and Benchmarking: summary report’, https://www.gov.uk/government/publications/advanced-gasification-technologies- review-and-benchmarking 105 Defra (2021), ‘Delivering Clean Growth Througfh Sustainable Intensification Project’. To be published in 2021. 106 Morison et al. (2012), ‘Understanding the carbon and greenhouse gas balance of forests in Britain’, https://www.forestresearch.gov.uk/research/understanding-the-carbon-and- greenhouse-gas-balance-of-forests-in-britain/. 107 Matthews, Broadmeadow (2009), ‘The potential of UK forestry to contribute to government’s emissions reduction commitments’, https://www.cabdirect.org/cabdirect/ abstract/20103082977 108 CCC (2020),’Sixth carbon budget: Agriculture & land use, land-use change & forestry (LULUCF)’, https://www.theccc.org.uk/wp-content/uploads/2020/12/Sector-summary- Agriculture-land-use-land-use-change-forestry.pdf 109 Defra (2021), ‘ENCA services databook’, https://www.gov.uk/guidance/enabling-a-natural- capital-approach-enca#enca-services-databook 110 Evans et al. (2017), ‘Implementation of an Emissions Inventory for UK Peatlands’, https://uk-air. defra.gov.uk/library/reports?report_id=980 357 Net Zero Strategy: Build Back Greener 111 Christie et al. (2011), ‘An economic assessment of the ecosystem service benefits derived from the SSSI biodiversity conservation policy in England and Wales’, https://www.sciencedirect. com/science/article/pii/S2212041612000095 112 Morris, Camino (2011), ‘Economic Assessment of Freshwater, Wetland and Floodplain (FWF) Ecosystem Services’, http://uknea.unep-wcmc.org/LinkClick. aspx?fileticket=lVLEq%2BxAI%2BQ%3D&tabid 113 Water UK (2020), ‘Net Zero 2030 Routemap’, https://www.water.org.uk/routemap2030/ 114 Resources and Waste Solutions (2019), ‘Financial Costs of Current and Future Landfill Operations’, http://sciencesearch.defra.gov.uk/Default. aspx?Menu=Menu&Module=More&Location=None&Completed=0&ProjectID=20309 115 NHS England (2020), ‘Delivery a Net Zero National Health Service’, https://www.england.nhs. uk/greenernhs/wp-content/uploads/sites/51/2020/10/delivering-a-net-zero-national-health- service.pdf 116 Ricardo and Gluckman Consulting (2019), ‘Assessment of potential to reduce UK F-gas emissions’, https://www.theccc.org.uk/publication/assessment-of-potential-to-reduce-uk-f- gas-emissions-ricardo-and-gluckman-consulting/ 117 Gas Turbine World (2015), GTW 2014-2015 Handbook, Volume 31, https://gasturbineworld. com/shop/annual-handbook/2014-15-handbook-volume-31/ 118 Ricardo (2019), ‘Analysing the potential of bioenergy with carbon capture in the UK to 2050’, https://www.gov.uk/government/publications/the-potential-of-bioenergy-with-carbon-capture 119 BEIS & Wood Plc (2018), ‘Assessing the Cost Reduction Potential and Competitiveness of Novel (Next Generation) UK Carbon Capture Technology, Benchmarking State-of-the-art and Next Generation Technologies, Revision 4A’, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_ data/file/864688/BEIS_Final_Benchmarks_Report_Rev_4A.pdf 120 NAS (2018), ‘Negative Emission Technologies and Reliable Sequestration: A Research Agenda’, https://www.nap.edu/catalog/25259/negative-emissions-technologies-and-reliable- sequestration-a-research-agenda 121 Element Energy and UK Centre for Ecology & Hydrology (2021), ‘Greenhouse Gas Removal Methods and Their Potential UK Deployment’, https://www.gov.uk/government/publications/ greenhouse-gas-removal-methods-technology-assessment-report 122 BEIS (2020), ‘Greenhouse gas removals: call for evidence’, https://www.gov.uk/government/ consultations/greenhouse-gas-removals-call-for-evidence 123 Green Jobs Taskforce (2021), ‘Report to the Government, Industry and Skills Sectors’, https:// www.gov.uk/government/publications/green-jobs-taskforce-report 124 CCC (2020), ‘The Road to Net-Zero Finance’, https://www.theccc.org.uk/publication/the-road- to-net-zero-finance-sixth-carbon-budget-advisory-group/ 125 BEIS (2019), ‘Energy Innovation Needs Assessment’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 358 Technical Annex 126 European Investment Bank (2021), ‘ELENA – Completed Project Factsheets’, https://www.eib. org/en/products/advising/elena/completed-projects/index.htm 127 BEIS (2021), ‘Climate change and net zero: public awareness and perceptions’, https:// www.gov.uk/government/publications/climate-change-and-net-zero-public-awareness-and- perceptions 128 BEIS (2021), ‘Net zero public dialogue’, https://www.gov.uk/government/publications/net-zero- public-dialogue 129 BEIS, Defra (2021), ‘Net Zero Societal Change Analysis Project’, https://www.gov.uk/ government/publications/net-zero-societal-change-analysis-project 130 BEIS (2021), ‘Net zero public engagement and participation’, https://www.gov.uk/government/ publications/net-zero-public-engagement-and-participation 131 Behavioural Insights Team (2021), ‘Net zero: principles for successful behaviour change initiatives’, https://www.gov.uk/government/publications/net-zero-principles-for-successful- behaviour-change-initiatives 132 BEIS (2021), ‘BEIS Public Attitudes Tracker’, https://www.gov.uk/government/collections/ public-attitudes-tracking-survey 133 BEIS (2020), ‘Fossil fuel price assumptions’, https://www.gov.uk/government/collections/fossil- fuel-price-assumptions 134 BEIS (2021), ‘Green Book supplementary guidance: valuation of energy use and greenhouse gas emissions for appraisal’, https://www.gov.uk/government/publications/valuation-of-energy- use-and-greenhouse-gas-emissions-for-appraisal 135 BEIS (2018), ‘Update to traded carbon values: 2018’, https://www.gov.uk/government/ collections/carbon-valuation--2#update-to-traded-carbon-values:-2018 136 OBR (2020), ‘Fiscal sustainability report – July 2020’, https://obr.uk/fsr/fiscal-sustainability- report-july-2020/ 137 OBR (2021), ‘Economic and fiscal outlook report – March 2021’, https://obr.uk/efo/economic- and-fiscal-outlook-march-2021/ 138 Defra (2021), ‘Air quality appraisal: damage cost guidance’, https://www.gov.uk/government/ publications/assess-the-impact-of-air-quality 139 HMT (2013), ‘Green Book supplementary guidance: discounting’, https://www.gov.uk/ government/publications/green-book-supplementary-guidance-discounting 140 BEIS (2021), ‘UK Hydrogen Strategy’, https://www.gov.uk/government/publications/uk- hydrogen-strategy 141 BEIS (2019), ‘Energy Innovation Needs Assessments’, https://www.gov.uk/government/ publications/energy-innovation-needs-assessments 359 Net Zero Strategy: Build Back Greener Climate Science Annex 361 Net Zero Strategy: Build Back Greener Climate Science Annex Why we must act Science is clear that the world is warming, There is still uncertainty over the that this is occurring because of human responsiveness of global temperatures to activity, and that left unchecked, continued GHG emissions; the Intergovernmental Panel warming would be deeply harmful, not just to on Climate Change (IPCC) estimate that a the natural world, but also to human security doubling of pre-industrial CO2 levels would and wellbeing. Global average temperatures result in warming in a range of 2.5°C – 4°C.12 have already risen by around 1.1°C1 and 2020 The higher that temperatures rise, the greater concluded the earth’s warmest 10-year period the risk of seeing dangerous low-likelihood, on record.2 Without action to reduce the level high-impact outcomes. These could include of greenhouse gas (GHG) emissions emitted abrupt responses and tipping points such as globally down to net zero, climate change is dieback of the Amazon Rainforest, melting of set to continue with increasing temperatures the polar ice sheets, and the collapse of key across the world.3 ocean currents controlling global weather, which cannot be ruled out.13, 14 To avoid these We are already seeing the impacts of climate risks, strong and decisive action is needed change across all parts of the world, with to reduce GHG emissions. Limiting further many types of extreme weather becoming warming decreases the likelihood of more more frequent and more intense – causing severe and potentially irreversible impacts on droughts, wildfires and flooding.4 The North people and ecosystems. Action would also American heatwave in June 2021, which provide other co-benefits, such as limiting the broke temperature records by over 4°C and rate of ocean acidification and improving air reached 49.6°C in Canada, would have been quality. Every additional fraction of a degree of virtually impossible without climate change.5 global warming counts – with every 0.5°C of The melting of glaciers and ice sheets is warming there are clearly discernible increases accelerating, with sea levels currently rising at in the intensity of and frequency of impacts.15 3.7mm annually.6 In the UK we can see a trend This is why we should aim to reduce global towards warmer and wetter winters, along emissions to net zero as quickly as is with hotter summers.7 practically possible.16 These changes are damaging the land and oceans that support human society and the natural environment. As a result, many species are being driven closer to extinction,8 food supplies are being disrupted,9 and the health and livelihood of people across the world are being affected.10 Climate change disproportionally affects poor and disadvantaged people, with rural, coastal, and indigenous communities facing greater risks from impacts such as rising sea levels, drought, and food shortages.11 362 Climate Science Annex Global temperature goals and emissions pathways Rapid and deep cuts to emissions are It is worth noting that these assessments essential to avoid the most dangerous use different assumptions regarding both the impacts of climate change.17 Greenhouse extent to which countries will meet their NDCs gas concentrations and global temperatures and, crucially, the actions that will be taken by will continue to rise until we reduce GHG countries to reduce their emissions after 2030. emissions to net zero.18 In 2015 the Paris The latter will be a key determinant of whether Agreement was signed, where 196 parties the world will meet the long-term global committed to hold “the increase in the temperature goal. global average temperature to well below two degrees above pre-industrial levels and The Climate Action Tracker (CAT)19 estimates to pursue efforts to limit the temperature that if there were a continuation of the increase to 1.5°C above pre-industrial levels, currently implemented global policies these recognising that this would significantly reduce set us on course for a global average the risks and impacts of climate change”. The temperature rise of 2.1°C to 3.9°C by the Agreement recognised that, to achieve this end of the century. But if currently pledged goal, global emissions of greenhouse gases ambitions (i.e. those not yet implemented would need to peak as soon as possible, into tangible policies) are implemented this reduce rapidly thereafter, and reach a net zero range decreases to 1.9°C to 3.0°C, with a level in the second half of this century. mid-range estimate of 2.4°C. These estimates are also consistent with projections in the UN As part of the Paris Agreement, countries also Environment Programme’s 2020 Emissions committed to reduce or limit their greenhouse Gap Report.20 Whilst these assessments gas emissions. These commitments are show that current NDCs can have a significant contained in their Nationally Determined impact on projected temperature rises, Contributions (NDCs). A number of studies greater action is still needed if we are to have assessed how close these commitments limit global temperature increases to well bring us to staying below two degrees. below two degrees. Adaptation in the UK Responding to the complexity of climate To prepare for these eventualities, the UK is change demands a multifaceted approach. already considering climate risks and what Regardless of global success in reducing actions will be required through its five- GHG emissions, some future temperature yearly policy cycle of a Climate Change Risk rises are already locked in by historical Assessment followed by a National Adaptation emissions up to the present day. Even the Programme (NAP). The Government’s Third most optimistic, ambitious emission reduction Climate Change Risk Assessment will be scenarios suggest approximately 0.5°C of published in January 2022 and will outline further warming by mid-century compared to Government views on the key risks and the present day.21 Furthermore, future global opportunities the UK will face from climate emissions pathways are highly uncertain, so it change. The Climate Change Committee’s is essential that the UK’s adaptive capacity is 2021 Independent Assessment of UK Climate rapidly developed to prepare for, and bolster our resilience to, the inevitable near-term and potential future impacts of climate change. 363 Net Zero Strategy: Build Back Greener Risk identified eight risk areas that will require • Risks to people and the economy from the most urgent attention in the next two climate-related failure of the power system years.22 These are applicable even if global • Risks to human health, wellbeing and warming is limited to 1.5°C. productivity from increased exposure to • Risks to the viability and diversity of heat in homes and other buildings terrestrial and freshwater habitats and • Multiple risks to the UK from climate species from multiple hazards change impacts overseas • Risks to soil health from increased The NAP is a cross-department collaboration, flooding and drought bringing together government’s policies • Risks to natural carbon stores and on managing climate risks in one place. sequestration from multiple hazards The second NAP sets out how we will leading to increased emissions address climate risks for the period 2018 to • Risks to crops, livestock and commercial 2023, including risks to terrestrial, coastal, trees from multiple hazards marine, and freshwater ecosystems, soils and biodiversity; and flooding and coastal • Risks to supply of food, good and vital change risks to communities, businesses services due to climate-related collapse of and infrastructure. supply chains and distribution networks Future developments in climate science In recent years the debate and focus of • What current weather and climate scientific research has shifted from whether risks and impacts are expected climate change is happening and/or is being globally and in the UK? caused by human activity, to the range of • What are the future risks and impacts from the expected impacts and the level of action weather and climate that we need to avoid required to address climate change through or need to adapt to? a combination of adaptation and mitigation. We need to better understand the nature, • What are the carbon budget and magnitude and rate of climate change. mitigation scenarios that will avoid the Preparing for unavoidable changes to the most dangerous impacts of global climate will require more local analysis and climate change? more information on how global warming • What impacts and opportunities from relates to local-scale changes in weather mitigation and adaptation actions are and climate extremes. Further research is needed to proceed towards a resilient and also needed around stronger mitigation net zero future? actions to inform climate policy that can get The UK has also recently committed us to net zero. £1.2 billion of funding to develop a new Our knowledge has increased significantly but state-of-the-art supercomputer for the Met many key research priorities remain, including Office. This will help ensure government, deepening our understanding around the industry and communities are better prepared four questions Government posed to the Met for the impacts from a changing climate Office this year.23 through increased amounts of data. Examples include the provision of very detailed localised climate information to improve city planning and public transport infrastructure. 364 Climate Science Annex Climate science continues to rapidly improve and develop. This year saw the publication of the Working Group I (WGI) contribution to the IPCC’s Sixth Assessment Report (AR6). The report addresses the most up-to-date physical understanding of the climate system and climate change, bringing together the latest advances in climate science. WGII and WGIII contributions to AR6 will be published in 2022 and respectively cover the impacts of climate change on people and nature, and the options for reducing GHG emissions and removing GHG from the atmosphere. The main conclusions of WGI are a reinforcement of the consensus on climate science: that there is absolutely no doubt that human activities have warmed the planet and are causing widespread and rapid changes to the climate. Without immediate and drastic action, the impacts will be more severe and frequent. It shows that we are already feeling the effects of climate change and know that some changes to the planet are already irreversible on timescales of centuries to millennia. However, with immediate, concerted action to reduce emissions now, the worst impacts can still be averted. Technologies to remove CO2 directly from the atmosphere or ocean can also help, but to adhere to the temperature goal of the Paris Agreement ambitious action on emission reductions is still required, and is needed today. 365 Net Zero Strategy: Build Back Greener Endnotes 1 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph A.1.2, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 2 Met Office (2021), ‘2020 ends earth’s warmest 10 years on record’, https://www.metoffice.gov. uk/about-us/press-office/news/weather-and-climate/2021/2020-ends-earths-warmest-10- years-on-record 3 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph D.1.1, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 4 PCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph A.3.2 and A.3.5, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 5 Philip, S. Y. et al (2021), ‘Rapid attribution analysis of the extraordinary heatwave on the Pacific Coast of the US and Canada’, https://www.ecodebate.com.br/wp-content/ uploads/2021/07/20210707-rapid-attribution-analysis-of-the-extraordinary-heatwave-on-the- pacific-coast-of-the-us-and-canada-june-2021.pdf 6 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph A.4.3 and A.1.7, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 7 Kendon, M. et al (2021), ‘State of the UK Climate 2020’, https://rmets.onlinelibrary.wiley.com/ doi/10.1002/joc.7285 8 PCC (2019), Special Report on Climate Change and Land, Section 2.2.4, Chapter 2, Food Security, Land-Climate interactions, https://www.ipcc.ch/srccl/ 9 IPCC (2019), Special Report on Climate Change and Land, Chapter 5 Executive Summary, https://www.ipcc.ch/srccl/ 10 IPCC (2019), Special Report on Climate Change and Land, Chapter 5 Executive Summary, https://www.ipcc.ch/srccl/ 11 IPCC (2018), IPCC Special Report on Global Warming of 1.5°C, Chapter 3 Section 3.5.2.3 and Paragraph B5.1 Summary for Policymakers, https://www.ipcc.ch/sr15/ 12 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph A.4.4 Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 13 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph C.3.2, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 366 Climate Science Annex 14 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Box TS.9, Technical Summary, https://www.ipcc. ch/report/ar6/wg1/#TS 15 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph B.2.2, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 16 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph D.1, Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 17 Lowe, J. et al (2019), ‘Links between emissions pathways and time lags in Earth’s climate system’, https://www.theccc.org.uk/wp-content/uploads/2019/07/Briefing-note-on-time-lags- in-the-climate-system-Met-Office.pdf 18 PCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Paragraph B.1 and D.1 Summary for Policymakers, https://www.ipcc.ch/report/ar6/wg1/#SPM 19 Climate Action Tracker (2021), ‘Warming Projections Global Update May 2021’, https:// climateactiontracker.org/documents/853/CAT_2021-05-04_Briefing_Global-Update_Climate- Summit-Momentum.pdf 20 UNEP (2020), ‘Emissions Gap Report 2020’, https://www.unep.org/emissions-gap- report-2020 21 IPCC (2021), ‘Working Group I Contribution to the IPCC 6th Assessment Report, Climate Change 2021: The Physical Science Basis’, Box TS.1 and Table 1, Technical Summary, https:// www.ipcc.ch/report/ar6/wg1/#TS 22 CCC (2021), ‘Independent Assessment of UK Climate Risk’, Executive Summary, https://www. theccc.org.uk/publication/independent-assessment-of-uk-climate-risk/ 23 Met Office Hadley Centre Climate Programme, https://www.metoffice.gov.uk/weather/climate/ met-office-hadley-centre/climate-programme/index 367 E02678428 978-1-5286-2938-6