UK budget risks slowing the energy transition

Thursday, 16 March 2023

(Bloomberg) — Green campaigners say the UK’s?new budget missed an opportunity to supercharge the country’s clean energy transition at a time when it desperately needs to decarbonise its electricity and heating infrastructure.

Chancellor Jeremy Hunt on Wednesday announced?￡20 billion ($24 billion) in funding for carbon capture and storage, as well as support for small modular nuclear reactors and corporate energy efficiency schemes. But the head of Britain’s?treasury did not mention any new funding for renewable energy, despite hailing the country’s role as a world leader in offshore wind. His budget also left out any new subsidies for home insulation, which is one way consumers can help reduce energy consumption.?

Environmental and business groups say the government should have used this moment to step up its commitment to renewable energy, as the UK needs to further reduce its reliance on fossil fuels and risks?missing its own climate targets if it fails to.

“Today’s budget does not create the framework needed to mobilize investment and turn the UK into a clean energy superpower,” Ana Musat, executive director of policy and engagement at industry group RenewableUK, said in a statement. “It will not enable the renewable energy industry to build vital new projects much faster or grow supply chains.”

Some campaigners even questioned whether support for early-stage technologies like carbon capture and small modular reactors?will slow the UK’s transition towards cleaner energy. “Backing expensive technologies like carbon capture, and storage and a new nuclear programme, while still blocking cheap onshore wind in England and failing to properly insulate the UK’s energy-leaking homes, will leave the UK hooked on high energy costs,” Mike Childs, head of policy at Friends of the Earth, said in an email.

Greenpeace’s UK political campaigner, Ami McCarthy, said the budget’s offerings are “pathetic compared to the green growth investments being made in the US, EU and China.”

The UK is under pressure to respond to the US’s Inflation Reduction Act, which offers tax credits to accelerate the rollout of domestic low-carbon energy sources and consumer products. The government is planning to unveil its own set of policies by the end of March to back sectors such as electric car production. The UK must also announce an update to its net zero strategy by the end of this month, after losing a court case brought by climate charities.

The country’s legally binding targets require a 78% reduction in greenhouse gas emissions by 2035 compared with 1990 levels, and net-zero emissions by 2050. Current emissions levels are 49% below 1990, according to an analysis by Carbon Brief. Improvements so far have been heavily based on the phase-out of coal, which is now almost completely eliminated from the energy mix.

“This budget hasn’t come close to delivering on our legally binding climate and nature goals,” said Kate Norgrove, WWF’s executive director of advocacy and campaigns.

Among other noteworthy measures announced in the chancellor’s budget is a plan for the reclassification of nuclear energy as “environmentally sustainable.” The?effort —?aimed at attracting?more private investment — is?“a step in the right direction towards a more sustainable UK energy market,”?energy analyst?Cornwall Insight said in a statement.?Companies are also set to be able to write off investment in machinery on their corporate tax bill for the next three years, one potential boon for the renewable energy sector.

“This will boost investment in renewables, such as offshore wind and solar, increasing energy security while making us more competitive when other countries are pouring significant funding into supporting clean energy and renewable technologies,” said Sam Richards, a former government adviser and campaign director of the group Britain Remade.