Clean Growth Strategy – the low carbon highlights

The Clean Growth Strategy (CGS) has finally been unveiled this week. This article summarises the highlights and key points for all those involved with the low carbon sector.

13/10/2017

The Secretary of State for Business, Energy and Industrial Strategy (BEIS), Greg Clark, unveiled the CGS on 12 October 2017. He announced that the low carbon economy has the potential to grow by 11 per cent per year between 2015 and 2030; four times faster than the projected growth of the economy as a whole.

According to the Minister for Climate Change and Industry, Claire Perry, the UK is a world leader in cutting emissions while growing the economy. Provisional statistics from BEIS indicate that UK emissions in 2016 were 42 per cent lower than in 1990 and 6 per cent below those in 2015. At the same time, the UK's GDP increased by 67 per cent.

This indicates that the UK has reduced emissions faster than any other G7 nation whilst leading the group in terms of national income growth. The government argues that this is evidence that reducing emissions can be done in parallel with a growing economy.

To continue the trend, the government has set out more than £2.5 billion of public investment in low carbon innovation from 2015 to 2021. In addition, the National Productivity Investment Fund will provide £4.7 billion with an extra £2 billion a year by 2020-21.

The CGS lays out the strategy for this investment and in particular how to continue clean growth.

What is clean growth?

Clean growth means growing our national income while cutting greenhouse gas emissions. Achieving clean growth, while ensuring an affordable energy supply for businesses and consumers, is at the heart of the UK’s Industrial Strategy.

The approach to clean growth

The CGS has two guiding objectives:

  1. to meet domestic commitments at the lowest possible net cost to UK taxpayers, consumers and businesses; and
  2. to maximise the social and economic benefits for the UK from this transition.

Highlights for the low carbon economy

The CGS includes a vision for 2050 via three pathways: Electricity; Hydrogen; and, Emissions removal. For example the first pathway envisages UK electricity generation increasing to c.650 TWh and all cars and van being electric.

In the shorter-term, some proposals which our clients working in the low carbon economy should be aware of include:

  • Providing up to £557 million for further Pot 2 Contract for Difference auctions, (next one planned for spring 2019).
  • Investing up to £100 million in carbon capture usage and storage (CCUS) and establishing a new CCUS Council, to support the deployment of CCUS at scale.
  • Investing in low carbon heating by reforming the Renewable Heat Incentive, spending £4.5 billion to support innovative low carbon heat technologies in homes and businesses between 2016 and 2021.
  • Building and extending heat networks across the country, underpinned with public funding (allocated in the Spending Review 2015) out to 2021.
  • Investing £177 million to further reduce the cost of renewables, including innovation in offshore wind turbine blade technology and foundations.

Fiscal responsibility/warning

Opinion is divided on whether the CGS has the teeth to ensure that the UK meets the emissions target of 80% by 2050. The government certainly makes it clear where it's spending is aimed:

…the UK will need to nurture low carbon technologies, processes and systems that are as cheap as possible.

The CGS continues the fiscal warning:

In order to meet the fourth and fifth carbon budgets (covering the periods 2023-2027 and 2028-2032) we will need to drive a significant acceleration in the pace of decarbonisation and in this Strategy we have set out stretching domestic policies that keep us on track to meet our carbon budgets. However, we are prepared to use the flexibilities available to us to meet carbon budgets, subject to the requirements set out in the Climate Change Act, if this presents better value for UK taxpayers, businesses and domestic consumers.

Key policies and proposals

There are 50 proposals in total listed, many of which are aspirational by nature. In addition to the ones noted above, we have highlighted a number which have tangible investment proposals and which we feel will be most pertinent to Bevan Brittan's clients both in the low carbon economy and beyond.

Please get in touch if you would like to discuss how any of these opportunities could benefit your organisation.

Policy 1: Accelerating Clean Growth through Green Finance

  • Establishing a Green Finance Taskforce to recommend public and private investment opportunities.
  • Investing up to £20 million to support grass-roots clean technology.

Policy 2: Improving Business and Industry Efficiency to improve 25% UK Emissions

  • Publishing joint industrial decarbonisation and energy efficiency action plans with seven of the most energy intensive industrial sectors.
  • Phasing out the installation of high carbon forms of fossil fuel heating in new and existing businesses (and homes) off the gas grid during the 2020s, starting with new build.
  • Supporting the recycling of heat produced in industrial processes, to reduce business energy bills and benefit local communities.
  • Investing c.£162 million in research and innovation in Energy, Resource and Process efficiency, including up to £20 million to encourage switching to lower carbon fuels.
  • Investing £14 million through the Energy Entrepreneurs Fund.

Policy 3: Improving homes to improve on 13% UK Emissions

  • Supporting c.£3.6 billion of investment to upgrade around a million homes through the Energy Company Obligation (ECO), and extending support for home energy efficiency improvements until 2028 at the current level of ECO funding.
  • Upgrading poor homes Energy Performance Certificate (EPC) Band C by 2030.
  • Offering all households the opportunity to have a smart meter to help them save energy by the end of 2020.
  • Building and extending heat networks across the country, underpinned with public funding (allocated in the Spending Review 2015) out to 2021.
  • Investing in low carbon heating by reforming the Renewable Heat Incentive, spending £4.5 billion to support innovative low carbon heat technologies in homes and businesses between 2016 and 2021.
  • Investing c.£184 million, including two new £10 million innovation programmes to develop new energy efficiency and heating technologies to enable lower cost low carbon homes.

Policy 4: Accelerating the Shift to Low Carbon Transport to improve on transport's 24% emissions

  • Ending the sale of new conventional petrol and diesel cars and vans by 2040.
  • Spending £1 billion supporting the take-up of ultra-low emission vehicles (ULEV), including helping consumers to overcome the upfront cost of an electric car.
  • Investing £80 million, alongside £15 million from Highways England, to support charging infrastructure deployment.
  • Taking new powers under the Automated and Electric Vehicles Bill, allowing the Government to set requirements for the provision of charging points.
  • Providing £50 million for the Plug-in Taxi programme, which gives taxi drivers up to £7,500 off the purchase price of a new ULEV taxi, alongside £14 million to support 10 local areas to deliver dedicated charge points for taxis.
  • Providing £100 million for a national programme of support for retrofitting and new low emission buses in England and Wales.
  • Invest £1.2 billion to make cycling and walking the natural choice for shorter journeys.
  • Establishing the Centre for Connected and Autonomous Vehicles and investment of over £250 million, matched by industry.
  • Investing c.£841 million in low carbon transport technology and fuels including investment of up to £246 million in the Faraday Challenge.

Policy 5: Delivering Clean, Smart, Flexible Power to improve on 21% of UK Emissions

  • Publishing a draft bill to require Ofgem to impose a cap on standard variable and default tariffs across the whole market.
  • Phasing out the use of unabated coal to produce electricity by 2025.
  • Delivering new nuclear power through Hinkley Point C and progress discussions with developers to secure a competitive price for future projects in the pipeline.
  • Investing £265 million in smart systems to reduce the cost of electricity storage, advance innovative demand response technologies and develop new ways of balancing the grid.
  • Investing £460 million in nuclear to support work in areas including future nuclear fuels, new nuclear manufacturing techniques, recycling and reprocessing, and advanced reactor design.

Policy 6: Enhancing the Benefits and Value of Our Natural Resources to improve on 15% of UK Emissions

  • Establish a new network of forests in England including new woodland on farmland, and fund larger-scale woodland and forest creation, in support of our commitment to plant 11 million trees, and increase the amount of UK timber used in construction.
  • Supporting peatland through a £10 million capital grant scheme for peat restoration.
  • Invest £99 million in innovative technology and research for agri-tech, land use, greenhouse gas removal technologies, waste and resource efficiency.

Policy 7: Leading in the Public Sector to improve on 2% of UK Emissions

  • Providing £255 million of funding for energy efficiency improvements in England and help public bodies access sources of funding Government Leadership in Driving Clean Growth

 

If you would like further information on this topic, please contact Nadeem Arshad, Partner or Maxim Laithwaite, Solicitor.

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