The Clean Growth Strategy

The Clean Growth Strategy has finally been published, but was it worth the wait?

The long-awaited Clean Growth Strategy has finally been published – the Government’s plan outlining how it will meet its legal commitment under the Climate Change Act 2008 to reduce UK greenhouse gas emissions by at least 80% by 2050. Although the fifth Carbon Budget for 2029-32 was approved last year, the vote to leave the European Union and snap general election delayed the strategy’s publication. So, was it worth the wait?

As seems par for the course with any Government policy document these days, it contains a lot of spin. There is much talk of how the UK is a world-leader in climate change and clean growth, and it’s right. Clean growth (growing national income, while cutting greenhouse gas emissions) can be achieved and the UK has made strong progress. UK GDP has grown by 67% since 1990, whilst emissions have fallen by 42%.

Lowering emissions, however, doesn’t mean scaling back growth – it is quite the opposite. The low carbon economy could grow 11% per year between 2015 and 2030 – four times faster than the projected growth of the economy as a whole. In fact, clean growth is at the heart of the government’s Industrial Strategy and will have an impact on every sector of the economy.

The plan covers a wide variety of sustainability and climate change topics, and we will be delving deeper into the impact of the Clean Growth Strategy on a range of different sectors in the weeks and months ahead, but some key themes emerging were the focus on green finance, energy efficiency, transport, and substantial investments in research and innovation.

In green finance, to meet the carbon reduction targets set out, the government needs private sector investment. In response to this, it was announced that a green finance taskforce, comprised of senior representatives from the finance industry and government, will be set up to develop ambitious policy proposals. It highlights that the government recognises the need to work hand-in-hand with the private sector to implement funding and investment.

Energy efficiency has also been earmarked as a key theme, for both homes and businesses, and it will be the public sector that leads the way. In transport, it will rely on a near complete switch to electric vehicles to bring down emissions.

A notable part of the strategy was its commitment to substantial investment in research and innovation. A significant £2.5Bn will be invested in total, split between transport, power, cross-sector, smart systems, homes, business and industry, and land use and waste. Transport, however, will get the biggest slice of investment with 33% of the total figure going towards it.

But there are some things that the Clean Growth Plan does not mention, that we hoped it would. There is nothing on solar PV or onshore wind, despite them being extremely successful low-carbon technologies. There are also no commitments on tidal power and little mention of the relative roles of nuclear energy and renewable energy in providing baseload power generation, other than to reiterate the commitment to nuclear power through Hinkley Point C, and to make sure there’s a “competitive price for future projects in the pipeline”.

Most disappointingly, there are no substantial policy commitments on carbon capture, use and storage (CCUS), just some woolly wording around demonstrating international leadership by collaborating with global partners and investing up to £100M in CCUS and industrial innovation.

It outlines that the government will work in partnership with industry through a new CCUS Council, to “put us on a path to meet our ambition of having the option of deploying CCUS at scale in the UK”, but it provides little comfort for the CCUS industry, when the second CCUS competition was scrapped after costing £100M with a £1Bn prize.

Even if the government implements all the policies and proposals in the Clean Growth Plan, it will still fall short of the fifth Carbon Budget by 9.7%, and may have to carry forward some surplus from earlier budgets to meet its legal obligations.

What the Clean Growth Plan does give us is a clear indication of the direction of travel, even though some of the detail is still to be worked out. It sets out a possible pathway to 2032, which includes a target to reduce emissions from business and public sector by 30% through energy efficiency improvements, and a 14% reduction in industrial energy carbon content by switching to cleaner fuels.

It also points towards reducing emissions from homes by 19%, and a fall in household energy use by 9% through low-carbon heating and energy efficiency improvements. Reiterating the focus on electric vehicles, it targets a 29% drop in emissions from transport.

The strategy also looks beyond 2032, pointing towards three possible pathways to 2050: electrification, hydrogen and emissions removal (the use of biomass plus CCUS). For 2050 targets to be met, the reality is likely to be a combination of them all.

The pathways to 2032 and 2050 have many steps in common, perhaps providing a possible indication of where government support will be directed. These include making homes and commercial buildings more energy efficient, a shift to low carbon heat sources, continuing to decarbonise electricity, more electric vehicles, and improving industry efficiency with a transition to clean fuels.

If the 165-page Clean Growth Plan wasn’t enough food for thought, BEIS on the same day released several consultations, responses and calls for evidence on ending unabated coal generation by 2025, decarbonising the public sector, the design of a new £18M industrial heat recovery programme, and the reform of the Green Deal framework, amongst others.

Looking ahead, there are further policy papers mentioned in the Clean Growth Plan that are worth looking out for. These include a 25-year Environment Plan, a long-term strategy for the UK’s transition to zero road vehicle emissions, and the Industrial Strategy White Paper.

Given the amount of time it has taken for the Government to release the Clean Growth Strategy, it is disappointing that there is little in the way of firm policy and a lot of things left to be consulted on in the future.

Yet it is an opportunity for the UK to pin its hopes of economic growth after Brexit on the low-carbon economy. Industry must ensure it is involved in all aspects of policy development in the future, and we will set out what this could mean for a range of sectors in the months ahead.

Article submitted by Richard Goodfellow, Partner and Head of Energy and Utilities at Addleshaw Goddard

 

 

 

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