Has the new government’s flurry of climate announcements put the UK back on track for Net Zero?

Welcome back to the Net Zero Roundup from the Carbon Trust’s Net Zero Intelligence Unit. ?

This month, after the world’s hottest day since records began, we look at how the new UK government is picking up the pace in addressing the climate crisis and what else it needs to focus on to put the UK back on track for Net Zero.

We also provide our usual quick intelligence on key Net Zero developments and share a parting thought on the Net Zero transition in action.

??Policy: South Africa’s Climate Change Act is a significant step forward for Net Zero governance

?? Business: Offset credits remain out of scope for meeting Net Zero targets for now, as SBTi weighs up options for the Scope 3 challenge

?? Finance: Pressure falls on Net Zero Asset Managers Initiative to uphold consistency in members’ targets

?? Parting thought: Will France take home the gold medal for the most sustainable Olympics in recent history?

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Under the spotlight

The new UK government has re-energised climate action, but must now hone in on systemic barriers and emissions beyond the power sector

After a landslide election victory on 4 July, the UK’s Labour government wasted no time in announcing new plans and programs to tackle the climate crisis. The sense of urgency is encouraging, but will these plans bring the country closer to its Net Zero target?

Three priorities for delivering clean power by 2030

One of the new government’s five core missions is a staggeringly ambitious aim to deliver a decarbonised power system by 2030, five years earlier than the previous administration’s target. They are off to a good start, but moving forward three steps will be essential:

1. Equip the new delivery body with the resources and influence it needs

Leading the charge to deliver clean power by 2030 is ‘Mission Control’, a new function working across government and with external experts, spearheaded by the Carbon Trust’s former CEO, Chris Stark. This could lead to significant progress; speaking to the Net Zero Intelligence Unit last year, the former Chief Scientific Advisor to the UK government and now the Science Minister, Sir Patrick Vallance, emphasised that Britain should treat its clean power goal in the same way it approached the Covid-19 vaccine challenge. This, too, involved a central unit bringing experts and practitioners together in pursuit of a goal they weren’t sure was possible. To replicate the success of the Vaccine Taskforce, Mission Control will require sufficient budget, staffing, and the ability to influence key stakeholders. Mission Control will also need to coordinate regional and local stakeholders to ensure that renewable energy projects are commissioned in a timely manner, as well as oversee the digitalisation of both gas and electricity networks.

2. Ensure Great British Energy works with the private offshore wind industry, not against it

The new Government has acted fast to boost power production from wind. Within the first few days in office, Ed Miliband, the Energy Security and Net Zero Secretary eased planning rules for onshore wind projects, lifting a nine-year de-facto ban, created a new onshore wind taskforce, and confirmed a 50% budget increase for the next round of renewable energy auctions. This could help to avoid a repeat of 2023’s auction in which no bids were received from offshore wind developers due to low subsidy support.

The Government’s most eye-catching intervention on clean energy to date has been the launch of Great British Energy as a publicly-owned energy company with five key functions, including investing in, developing and building supply chains for offshore wind alongside local power planning. Using public investment to derisk innovative technologies like floating wind and build the manufacturing capacity for a domestic supply chain will be impactful. Equally, the decision to use Great British Energy to support local power planning picks up a recommendation from the Energy Research Accelerator’s Policy Commission. However, more government involvement in developing offshore wind farms will need to be carefully managed so as not to negatively disrupt the market. If Great British Energy intends to compete directly with private offshore wind developers, its recently announced partnership with The Crown Estate, the seabed leaseholder, would give it an unfair advantage that could be off-putting for other developers.

3.?Secure investment and accountability for grid expansion

The private sector is already very successfully carrying out early stages of offshore wind development in the UK, including identifying suitable seabed areas, designing windfarms and raising capital. The stumbling blocks which the government is uniquely placed to address are grid connection, consenting timelines and the supply chain. The UK needs to build over five times as many high-voltage transmission lines by 2030 as have been built in the last thirty years, and the Carbon Trust’s offshore wind advisory work has revealed that grid connection woes are already preventing international developers from investing in the UK.

Although grid expansion is not within Great British Energy’s remit, expanding and modernising the grid is a critical area for government intervention. Mission Control sets out to work with the National Grid, the energy regulator OFGEM and energy companies to speed up grid connections. However, within current regulatory frameworks, these entities lack the authority and mandate to undertake a large-scale infrastructure build out, and are instead incentivised to minimise costs and maximise efficiency of the current system. The National Grid, in its new role as National Energy Systems Operator, needs to be empowered to invest in the grid and be held accountable for doing so.

The new government needs a plan to quadruple emissions reductions outside the power sector

Although power is responsible for a large chunk of UK emissions, reaching Net Zero requires a whole economy transformation. In January, the Climate Change Committee (CCC) highlighted that the rate of emissions reductions outside the electricity sector would need to quadruple for the UK to meet its 2030 targets. Just last month, the CCC reiterated the need for urgent government attention in other high-emitting sectors, notably transport, heating, buildings and agriculture.

The new government has got off to a good start by reversing some of the previous administration’s policy rollbacks, reinstating the 2030 ban on new petrol and diesel vehicles and requirements for landlords to increase energy efficiency (although by 2030 rather than 2028 as originally advised). However, the government has been less forthcoming about plans to address the CCC’s other priority actions for the rest of 2024, particularly in relation to decarbonising agriculture, transport and buildings. Urgent steps are needed to ramp up tree planting and restore peatlands, address planning barriers for electric vehicle charging infrastructure and heat pumps installations, and to electrify industrial heat.

To spur action in all sectors, as well as help the government meet its energy goals, the government should heed the advice of the UK’s Independent Review of Net Zero and the Carbon Trust, through the Energy Research Accelerator, by setting up a Net Zero Delivery Unit. This Unit should sit at the top of government, provide central coordination across departments and have the power to prevent policies that would hinder the transition to Net Zero. It should also have the power to hold departments, as well as key stakeholders like Great British Energy and the National Grid, to account for delivering on Net Zero.

Beyond action at the sector level, the overarching narrative on decarbonisation has certainly changed. The new government’s bold, ambitious messaging should give industry renewed confidence to invest and take action, just as the world was beginning to lose faith in the UK’s commitment to climate leadership. However, to cement this confidence and tackle the enormous challenge ahead, a targeted focus on systemic barriers and non-electricity emissions will be vital.

Quick intelligence

Policy: South Africa’s Climate Change Act is a significant step forward for Net Zero governance

On 23 July, South Africa’s long-awaited Climate Change Act was signed into law, two years after it was first introduced to parliament. Setting out a plan to mitigate and adapt to climate change, the new law requires the government to mandate carbon budgets for high-emitting companies, decarbonisation targets for key sectors and adaptation strategies for every municipality based on an assessment of climate risks. For the first time, government departments will be legally required to work together on climate, as well as ensure the country’s response to climate change is properly financed.

The news marked an 11th hour win for Net Zero; despite already being passed by both houses of Parliament, policymakers would have needed to start from scratch had the Bill not been signed by the President before the end of the current parliamentary term. However, there is plenty of work still to be done. To realise its potential, the Climate Change Act must be supported by a detailed energy plan which prioritises sustainable, reliable, affordable, clean energy for all. Electricity planning must also be aligned with the Presidential Climate Commission’s Just Transition Framework, to capture employment opportunities and ensure economic inclusion for those reliant on coal.

Business: Offset credits remain out of scope for meeting Net Zero targets, for now, as SBTi weighs up options for grappling with the Scope 3 challenge

The Science Based Targets initiative (SBTi) continues to rule out the use of offset credits for meeting emissions reduction targets, after concluding that "various types of carbon credits are ineffective in delivering their intended mitigation outcomes."

The SBTi published a series of documents outlining its assessment of the effectiveness of offset credits for meeting emissions reduction targets, as well as potential options for changing the approach to Scope 3 targets to help enable more businesses commit to Net Zero. The synthesis review on Environmental Attribute Certificates, which looks only at emissions reduction or avoidance credits (often known as offset credits), found limited evidence that these credits deliver their intended mitigation outcomes. The SBTi has therefore postponed any decision on allowing the use of these credits for meeting emissions reduction targets to 2025, when a second version of its Corporate Net Zero Standard will be released.

SBTi's investigation follows research which found that many businesses are struggling to set and meet Scope 3 targets under the current Corporate Net Zero Standard rules. Our own research identified Scope 3 as one of the biggest barriers businesses face on the Net Zero journey, with survey respondents citing cost, alignment with growth plans and the lack of a clear footprinting methodology as key drivers of Scope 3 complexity.

A statement from the SBTi board in April indicated that Environmental Attribute Certificates would be allowed for the purposes of Scope 3, but SBTi is now considering alternative options for making Scope 3 less of a barrier for businesses. The first option is a prioritisation process for determining the most material Scope 3 emissions, and the use of 'alignment targets' for areas such as procurement and revenue generation to help tackle these. Secondly, the SBTi is considering introducing an assessment of influence of over certain emissions, to help determine the appropriate interventions a business should use.

Once agreed, the recommended approaches will be available to businesses in the revised Corporate Net Zero Standard next year. The significance of the Scope 3 question from a carbon perspective, and the SBTi's response to it, points to the need to define a clear way forward for Scope 3 decarbonisation as soon as possible.

Finance: Pressure falls on Net Zero Asset Managers Initiative to uphold consistency in members’ climate targets

A growing proportion of signatories to the Net Zero Asset Managers Initiative (NZAM) are using their own bespoke methodologies to set emissions reduction targets rather than following one of the three NZAM-endorsed approaches.

There could be a benefit to NZAM’s flexibility; several other Net Zero financial alliances chose to relax their requirements to prevent a mass exodus of members. NZAM’s less black and white approach – allowing organisations to join even if they don’t yet have all the data needed to set targets in the standard ways – could be the reason behind its growing membership.

However, it could also compromise progress towards Net Zero. In the worst-case scenario, multiple inconsistent methodologies render it impossible to compare targets, and overly lenient methodologies lead to a lack of ambitious targets, or companies overstating progress.

To heighten its impact and credibility, NZAM must place parameters around acceptable approaches and explain how it assesses bespoke methodologies. Targets should encourage asset owners to use their power of influence to drive economy-wide decarbonisation, encouraging portfolio companies to decarbonise rather than simply divesting from high-emitting activities. Any robust methodologies should reflect this.

From the Net Zero Intelligence Unit

Catch up on the latest publications from the Net Zero Intelligence Unit:

??We discussed what the South African elections mean for climate policy, with the Carbon Trust’s Co-Head of Africa, Jarredine Morris. Read a transcript of the conversation here:

??? The UK’s freshly appointed Science Minister Sir Patrick Vallance, has said that the UK should treat its clean power goal like it approached the Covid-19 vaccine challenge. Listen to him discuss this topic on our podcast:

??To stay up to date with news and events from the Carbon Trust more broadly, click here to sign up to the Carbon Trust’s email newsletter. ??

Parting thought

Will Paris 2024 take home the gold medal for the most sustainable Olympics in recent history?

Among the many ambitious feats attempted in Paris this Summer was an effort to halve the carbon footprint of the 2024 Summer Olympics compared to the London 2012 and Rio 2016 games. Organisers of Paris 2024 deployed a range of strategies to maximise resource efficiency and stay within a carbon budget of 1.75m tonnes of CO2e. These included swapping diesel generators for grid-connected renewable energy, renting sporting equipment, serving locally sourced and plant-based food and reusing venues and materials wherever possible.

A month before the games, plans appeared to be on-track, according to the organisers’ own estimates. However, due to extreme heat in the French capital, plans to cool the Olympic village using a geothermal water-cooling system instead of air conditioning were abandoned, and the last-minute shipment of 2,500 air conditioning units is a stark reminder of the importance of sustainable cooling and the need to develop cost-effective low-carbon solutions

As global temperatures rise, so will demand for cooling. Without investing in cleaner solutions, our need for cooling risks heating the planet further. To scale the solutions we need, such as passive cooling and ultra-low global warming potential refrigerants, all governments should sign up to the Kigali Amendment to reduce the use of hydrofluorocarbons for cooling. Financial institutions can help cooling manufacturers grow and innovate by providing funds for green bonds. Paris 2024 made a credible effort, but tackling climate change is a team event.

Thanks for reading. This edition of the Net Zero Roundup was written by Chloe St George and Nina Foster. To ensure you don’t miss out on future monthly Net Zero Roundups, click subscribe.