Net Zero & Autumn Budget 2021 - Hot Take

The budget speech itself barely referenced net zero, with two mentions in the hour-long speech. When the chancellor did use those words it was couched in the context of an innovation strategy. Despite that, BEIS as the Whitehall department leading the net zero push has done well in the SR21.?

This is not surprising as HMT has already outlined its fiscal approach in the "plan for growth" earlier in the year - and this was structured around "innovation, infrastructure and skills". HMT likes to keep out of policy making were possible, preferring spending departments to push specific narratives. ?

That said, there were also headline grabbing announcements that run against the COP26 narrative regarding Air Passenger Duty and Fuel duty, yet the Chancellor made no mention of the future plan to replace the funding generated by these taxes as carbon budgets get harder to meet and the number of petrol and diesel cars significantly reduces. While this is not a pressing issue for HMT this year - it could also be a case of deferring bad news? More detail in my pre-budget linkedIn article.

In part due to the aforementioned lack of multiyear spending settlements, the detail regarding where HMG will put money behind Net Zero is a mix of new announcements and re-heated ones, some of which have been trailed since the manifesto in 2019 (see list below).

Elsewhere, Net Zero will do well from the new ￡1.4bn global Britain investment fund and the sole deal from the new UK infrastructure bank (investment in port infrastructure to support offshore wind). Plus one specific tax benefit for renewables projects (including storage and heat networks) used to decarbonise non-domestic buildings – namely business rate exemption for related plant and machinery. There was nothing new on carbon tax from the Treasury, with the Carbon Price Support held at ￡18 per tonne of carbon emitted.

?Below is a summary of all the spending review announcements relating to Net Zero:

• ?￡3.9bn for energy efficiency improvements and clean heat installation in buildings (trailed previously)
• ￡1.7 billion to enable a final investment decision for a large-scale nuclear project *new*
• ￡1bn for Carbon Capture (trailed previously)
• ￡240mn for Net Zero Hydrogen Fund and (trailed previously)
• ￡140 million to create the Industrial Decarbonisation and Hydrogen Revenue Support scheme to establish hydrogen producers and CCUS for heavy industry (trailed previously)
• ￡1.5bn for cross cutting innovation (trailed previously)
• ￡230m for offshore wind as part of the Global Britain investment fund, *new*
• ￡380m from levies to support OSW CfD payments (trailed previously)
• ￡180m for SAF *new*
• ￡355m for zero emission buses (trailed previously)
• ￡620m for public charging and EV grants, adding to ￡1.9bn given last year *new*
• ￡817m in capital support for the electrification of UK vehicles and their supply chains *new*
• ￡450 million to grow the heat pump market in England and Wales *New?*
• ￡338 million to encourage private investment in heat networks (trailed previously)

Most of these have been referenced in the past and are therefore not a surprise - but will be met cause for celebration amongst the relevant industries and indeed the policy makers who until today have not had clarity that their work will see the light of day. Amongst the list above, the GW scale nuclear "direct" funding (in addition to a subsidy for energy produced via a CfD and the new RAB framework) and and a doubling of support for Sustainable Aviation Fuel development were the biggest surprises.

Do get in touch?if you would like to learn about how Grant Thornton can help you navigate the policy and politics of the emerging Net Zero landscape.