Government likely to miss net zero targets without ‘urgent action’

A critical gap in government’s energy policy means the UK will likely miss net zero targets without ‘urgent action’, finds a report from the House of Lords Industry and Regulators Committee.

The Committee concluded that the government is likely to miss its targets for reducing emissions to net zero by 2050 because of a failure to put in place credible plans which are needed to encourage essential investment by consumers and businesses.

In the report, the Committee said there is insufficient policy detail to incentivise the £50bn a year of investment that will be required to transform our energy system, concluding that the targets have not been matched by the policies and clarity over financial incentives necessary to unlock the investment needed to fund new energy technologies for industrial and domestic use.

The Committee calls for the urgent establishment of a Transformation Taskforce within government, reporting to the Prime Minister and housed within the Cabinet Office.

This taskforce would work across government departments, including the Treasury, to set out a clear roadmap for the development and implementation of energy policies, and act as a coordinator and monitor of progress.

The report also demands that the government act urgently to explain how the transition to net zero will be funded. It calls on the government to consider the full range of funding options for energy investment, including reviewing its opposition to the use of government borrowing.

The Committee states that expecting the costs of net zero to be met exclusively by energy users through bills is ‘regressive’ and would place a ‘severe burden’ on many consumers.

Lord Hollick, Chair of the Committee, commented: ‘The Government has set ambitious targets for net zero including a carbon-free power system by 2035; however there is no point planning a carbon-free energy future if you haven’t got a clue how you will get there or how it will be paid for.

‘We now need urgent action from the Government to answer outstanding questions on issues such as how they will incentivise households to replace gas boilers with heat pumps – and what plans there are for the 6 million homes where heat pumps may be unsuitable – what funding mechanisms will be established to encourage investment in small modular nuclear reactors and how the upgrade of our infrastructure to allow the use of hydrogen for heating will be funded. These are basic questions that need to be answered before we will get the investment we need to get to net zero.

‘The amounts that can realistically be raised via surcharges on energy bills is not enough. Bills are regressive as the poor pay more of their income on energy costs; it is also unfair to the current generation as we are asking current billpayers to cover the huge costs of something that is designed to mainly benefit future generations. The Government should look again at using greater public borrowing to fund what are huge and long-term infrastructure costs. That would give investors confidence to invest in new technologies and ensure the public aren’t hit immediately with higher bills at a time that many are already struggling with fuel poverty.

‘While money is a key challenge it isn’t the only one. We need better co-ordination across Government and a real drive and focus to deliver net zero. This requires tackling highly sensitive, political decisions that affect all consumers and taxpayers.. That is why we are calling for a new Energy Transformation Taskforce within government that will report directly to the Prime Minster and take the lead in setting and co-ordinating net zero strategy and policy across government.’

Other recommendations in the report include reviewing the responsibilities and role of Ofgem to ensure it is not creating barriers to a net zero energy system, maintaining the security of energy supply as a priority alongside responding to climate change, and opting for government borrowing as a fairer way to meet the costs of net zero from an intergenerational perspective than requiring costs to be met by upfront charges.

Photo by Karsten Würth