UK Net Zero Strategy: Understanding the Impact on Key Sectors | Latham & Watkins LLP


The strategy sets out plans to cut emissions from key sectors of the UK economy to ensure the UK remains on track to achieve net zero by 2050.

On October 19, 2021, the UK government released its climate change strategy, ‘Net Zero Strategy: Build Back Greener’ (the Strategy), which outlines plans to support the UK economy’s transition to a greener future and more sustainable. On October 31, the UK will host the 2021 United Nations Climate Change Conference, COP26, in Glasgow.

Last year, Prime Minister Boris Johnson presented a 10-point plan for a ‘green industrial revolution’, which laid the groundwork for a green economic recovery from the impact of COVID-19. The strategy builds on this approach to align the UK with its carbon budget and nationally determined contribution to the Paris Agreement, both of which aim to reduce greenhouse gas (GHG) emissions by the scale of the economy by at least 68% by 2030 and 78% by 2035., from 1990 levels. In addition, the strategy details the UK’s vision for a carbon-free economy by 2050.

Net zero goal

The UK was the first major economy to create a legally binding target to reduce GHG emissions to net zero by 2050. However, the government recognizes that emissions will not fall to zero. absolute zero by 2050, because sectors such as industry, agriculture and aviation are difficult to decarbonise completely. The Strategy therefore emphasizes the importance of eliminating GHGs through projects such as tree planting and carbon capture and use and storage (CCUS) technology. Such projects will make it possible to offset residual emissions from sectors that are difficult to decarbonise.

Key sectors

The strategy outlines a decarbonisation path to net zero for key sectors of the UK economy (including illustrative scenarios), sets out the government’s plans to reduce emissions in these sectors to meet its targets, and introduces specific policies and proposals to reduce emissions for these sectors. The sectors are:

  1. Transport: The strategy promises a transformation for UK cities with greener, faster and more efficient transport. The government has pledged to put in place a Zero Emission Vehicle (ZEV) mandate, which will ensure more zero emission vehicles on UK roads. The government will increase the share of trips made by public transport, cycling and walking by electrifying more rail lines, investing £ 3bn in bus services and investing £ 2bn in the bike. A further £ 620million will be invested for subsidies and targeted infrastructure for vehicles, particularly local residential street charging points. In addition, the government plans to keep its commitment to end the sale of new gasoline and diesel cars and vans starting in 2030. In addition, starting in 2035, all new cars and vans must be zero emissions at all times. exhaust pipe level. The government is also working to launch the commercialization of sustainable aviation fuel (SAF) – made from materials such as daily household waste, industry flue gases, carbon captured from the atmosphere and l excess electricity – which would produce more than 70% less. carbon emissions than traditional jet fuel on a life cycle basis if achieved. The government’s ambition is to enable the delivery of 10% of SAF by 2030. As such, the government will support UK industry with funding of £ 180million to boost the development of SAF factories.
  2. Fuel and hydrogen supply: The government recognizes that many sectors require low-carbon energy, including those where electrification is not a viable option, making the supply of cleaner fuels essential to achieve net zero. The government has put in place a £ 140million Industrial and Hydrogen Revenue Support (IDHRS) program to fund new models for capturing industrial hydrogen and carbon, closing the cost gap industrial energies of gas and hydrogen and helping green hydrogen projects get started. As part of its key commitment, the government will help regulate the oil and gas sector, including through the revised Oil and Gas Authority (OGA) strategy, which enables the OGA to assess the plans of oil and gas. operators to reduce their emission levels from net zero. test and establish a climate compatibility checkpoint for future licenses on the UK continental shelf.
  3. Industry: The government will seek to decarbonize industry in line with its net zero goals, while simultaneously transforming industrial hearts by attracting foreign investment, ensuring the sustainability of businesses and securing well-paid and highly skilled jobs. The government will do this by supporting the shift to cleaner fuels and helping to improve resource and energy efficiency through fair carbon pricing. As part of the strategy, the government will develop new industries in low carbon hydrogen alongside four CCUS clusters. accelerate decarbonisation in “clusters”, which represent around half of the UK’s industrial emissions. A key government policy will be to ensure the sustainability of the industrial sectors and the communities they employ through the government’s £ 315million Industrial Energy Transformation Fund. In addition, the government will provide incentives for cost-effective reduction in the industry through the UK Emissions Trading Scheme (UK ETS) by consulting on a consistent net cap of zero for the UK ETS.
  4. Power: The government aims to completely decarbonise the UK’s electricity system by 2035, subject to security of supply. The government anticipates that the power system will consist of renewables and nuclear power plants, and will be supported by flexibility, including storage, gas with CCUS and hydrogen. The government will invest £ 120million in the development of nuclear projects through the Future Nuclear Enabling Fund, retaining options for future technologies, including small modular reactors.
  5. Heat and buildings: Heating homes and workspaces accounts for almost a third of all carbon emissions in the UK. The government will seek to improve the energy efficiency of housing and non-household goods by committing £ 3.9bn of new funding for the decarbonization of heat and buildings, including the new boiler upgrade program in £ 450 million over three years. The Strategy establishes that by 2035 all new heaters installed in homes and workplaces will be low-carbon technologies, such as electric pumps or hydrogen boilers. The Strategy also establishes that by 2025 no new gas boilers will be sold. The government will decide in 2026 on the role of hydrogen heating.
  6. Natural resources, waste and fluorinated gases: The strategy aims to restore the UK countryside by reducing emissions, sequestering carbon and building resilience to climate change. At the same time, the government will seek to promote the implementation of a range of low-carbon agricultural practices that can help increase productivity and enable more efficient use of land, for example through agroforestry. The strategy commits an additional £ 124million to bolster the existing Nature for Climate Fund to restore around 280,000 hectares of peat moss in England by 2050 and triple forest creation in England, and to meet commitments to create at least 30,000 hectares of forest per year across the UK by the end of this parliamentary session. Additionally, to explore options for the virtual elimination of biodegradable municipal waste to landfills from 2028, the government is proposing additional funding of £ 295million that will help local authorities in England prepare to implement separate free food waste collections for all households. from 2025.
  7. Greenhouse Gas Elimination (GGR): GGR plays an essential role in balancing residual emissions from sectors that are difficult to decarbonise. The strategy recognizes that short-term government intervention will support early commercial deployment of GGR and pledged £ 100million investment in GGR innovation, which could enable further deployment of GGR and Benefit from private investment and demand for transferable engineering expertise from the UK’s oil and gas industry. The government will explore regulatory oversight options to provide robust GGR Monitoring, Reporting and Verification (MRV), in line with the recommendations of the MRV Working and Finishing Group led by the Ministry of Business, Energy and the Industrial Strategy (BEIS).

Support the transition through transversal actions

The government will invest an additional £ 500m in net zero innovation projects to develop green technologies, bringing total funding for UK net zero research and innovation to at least £ 1.5bn sterling. The government will support ideas and technologies to decarbonize homes, industries, land and electricity, and take a local net zero approach, ensuring that local areas have the capacity and capacity for net zero delivery. The strategy highlights the introduction of a new sustainability disclosure regime, including mandatory climate-related financial disclosures and a green taxonomy in the UK (for more information see the blog post by Latham UK government publishes sustainable investment roadmap). The government also commits to publishing an annual progress update against a set of key indicators to achieve its climate goals.

Heat and buildings

The government has also announced a Heating and Buildings Strategy, which details the main priority areas of net zero research and innovation for the UK over the next five to ten years. The strategy details decarbonization plans for the UK’s 30 million homes and workplaces and includes the announcement of £ 3.9 billion in new funding for the decarbonization of heat and buildings, including including the three year boiler upgrade program mentioned above.

Moving forward

The government will submit the Strategy to the United Nations Framework Convention on Climate Change as the UK’s second long-term low-GHG development strategy under the Paris Agreement.

Latham & Watkins will continue to monitor developments in this area.

This article was written with the assistance of Trivali Anand of the London office of Latham & Watkins.

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