Hayden Morgan of Pinsent Masons, who advises organisations on meeting sustainability goals and managing risk, was commenting after the UK government pledged to tie the country’s pursuit of ‘net zero’ targets to a lowering of energy bills. New policy to achieve those twin objectives was trailed in its response (92-page / 649KB PDF) to a report issued by the independent Climate Change Committee (CCC) and in its carbon budget and growth delivery plan (CBGDP) (238-page / 1.74MB PDF).
The UK government has a legal obligation, under the Climate Change Act 2008, to deliver a net zero economy by 2050. Under the Act, the government is further required to set five-yearly carbon ‘budgets’ that align with the net zero goal. After each budget is approved by parliament, the government must set out the proposals and policies it has or will develop for meeting that and future carbon budgets. The CBGDP represents the government’s latest attempt to meet that reporting obligation: earlier versions of the report were ruled unlawful.
The CCC, which advises the government on setting its carbon budgets, faces a statutory duty to report on the UK’s progress towards the net zero target and on delivery against the carbon budgets.
In June, the CCC called on the government to put “making electricity cheaper” top of its net zero agenda priority list. This is because, it said, “the UK’s electricity-to-gas price ratio remains too high” to incentivise homeowners and businesses to take up low-carbon options for heating buildings. It called on the government to remove “policy costs from electricity” to incentivise the switch to “efficient electric technologies”. For example, it said “the UK’s electricity-to-gas price ratio remains too high to ensure the underlying cost-savings of heat pumps’ greater efficiency are captured by households”.
The government has now confirmed it will act on this.
“The UK has a particularly high ratio of residential electricity price to gas price compared to many countries in Europe,” the government said. “Our electricity price does not reflect the cheaper wholesale price of clean energy. This means low carbon technologies can be more expensive to run than fossil-fuel powered alternatives.”
“Over this parliament the government will be working relentlessly to translate the much cheaper wholesale costs of clean power into lower bills for consumers. This will be core to every decision we make. We will set out our plans in due course,” it said.
Further measures “to reduce costs and make electrification an economically rational choice for a wider range of businesses and organisations” will also be consulted on, it said.
Morgan said: “Whilst the UK has had a leading role in developing policies leading to green investment and associated deployment in energy generation, with green electricity generation among the highest in the world, per capita, this is not yet reflected in the price of energy and erodes the UK’s climate leadership credentials. With the application of the appropriate fiscal and policy levers set out in these plans, there is optimism that the UK will continue to demonstrate the case for economic growth, whilst de-carbonising electricity, and building climate resilient infrastructure.”
In the CBGDP, the government highlighted how the UK has “already met, and overachieved” against the first three carbon budgets that were set, which covered the period from 2008 to 2022. It said the UK is “on track to meet the fourth”, which applies to the period for 2023 to 2027. The UK’s fifth and sixth carbon budgets have already been set. The government is due to outline the seventh carbon budget by June 2026. It will cover the period from 2038 to 2042.
Siobhan Cross of Pinsent Masons said that a major focus of the CBGDP is on decarbonisation of UK real estate. She has written a separate article analysing the measures the government has outlined in this regard.