UK must go further and faster on net-zero: government review – S&P Global
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The UK must accelerate its efforts to achieve net-zero climate emissions if it is to realize the economic benefits of the energy transition, a government-commissioned review has found.
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The Net-Zero Review, commissioned in September by then-Business Secretary Jacob Rees-Mogg and published Jan. 13, sought to ensure the UK’s legally-binding 2050 net-zero target was “pro-growth and pro-business.”
The Mission Zero report, led by former energy minister Chris Skidmore, found “the UK must go further and faster to realize economic benefits” of net-zero, and sets out key recommendations across the energy sector and beyond.
“Climate commitments and net zero targets remain just words on a page without a clear, consistent, and stable transition plan,” Skidmore said in the report. “We must deliver greater certainty, consistency, and clarity across net-zero policy making, with a stability of approach that requires long-term planning.”
In particular, the report highlights action to be taken on carbon capture, utilization and storage (CCUS), renewables, hydrogen, nuclear, transport, oil and gas, carbon markets and the circular economy.
On accelerating renewables, the report recommends setting up a task force and deployment plans in 2023 for solar capacity to reach up to 70 GW by 2035 and onshore wind to reach the deployment needed for a net-zero power grid by that date.
It also urges reform to planning for solar and wind developments, where they are supported locally.
The government should implement reforms to achieve the UK’s nuclear baseload requirement, including setting up Great British Nuclear in early 2023, with the government and GBN to set out a roadmap later in the year for reaching a final investment decision in the next parliament, the review found. The government should also deliver its siting strategy by 2024.
The report said the carbon market authority should develop a pathway to 2040 for the UK Emissions Trading Scheme by 2024, addressing future design and operation of the ETS, a timeline for expanding coverage to the rest of the UK economy, including maritime and waste, and mitigation of the risk of carbon leakage as a result.
Platts, part of S&P Global Commodity Insights, assessed UK ETS allowances at GBP67.25/mt CO2 ($81.93/mt) on Jan. 12, down from a peak of over GBP98.00/mt in August.
The report also calls for the inclusion of greenhouse gas removals to incentivize early investment in new technologies and nature-based solutions.
In hydrogen, the government should develop and implement a 10-year delivery roadmap by the end of 2023 for scaling up production.
The government “should deliver hydrogen business models as soon as legislation allows and confirm the long-term funding envelope available for hydrogen revenue support, to incentivize timely investment,” the report said.
The report calls for the government to act quickly in 2023 to “re-envisage and implement a clear CCUS roadmap, showing the plan beyond 2030” and take a “pragmatic approach” to selecting clusters to allow the most advanced to progress more quickly.
The government has so far given backing to two CCUS industrial clusters in the northwest and northeast of England: HyNet and the East Coast Cluster.
The report calls for an offshore industries integrated strategy by the end of 2024, pushing for the electrification of oil and gas infrastructure and accelerating the end of routine flaring by 2025, from 2030 previously.
In addition, it urges the development of a cross-sector infrastructure strategy by 2025 for electricity, hydrogen, CO2 and other liquids and gases.
For homes, the government should legislate for the Future Homes Standard, including a clause for no new homes to be built with a gas boiler from 2025, the review said. Heat pumps should become a widespread technology in the UK within 10 years, it said, calling for the end to new and replacement gas boilers by 2033 at the latest.
The report recommended reviewing decarbonization investment incentives, including via the tax system and capital allowances.
There are also measures to boost the circular economy, and on delivering a zero-emissions vehicle mandate from 2024.
The review said the UK’s comparative advantage over other advanced economies in areas such as offshore wind, CCUS and green finance could help the country capitalize on global energy transition export opportunities.
The report noted the boost to energy transition markets that came from the US Inflation Reduction Act, passed in 2022.
“2022 marked a watershed moment for global investment in net-zero — not least from the US’ Inflation Reduction Act, with its commitment of placing clean technologies at the heart of future economic strategy,” Skidmore said in the report.
Delaying action by 10 years could increase UK debt by 23% of GDP by 2050, doubling the fiscal cost of achieving net-zero and missing opportunities in economies of scale, the report said.
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