The Budget Announcement and the UK net zero target
The budget announcement was delivered yesterday by Rishi Sunak, and here in the energy sector we queried whether some bold action around climate change was going to be taken. As we look forward to COP26 in Glasgow next week, expectations have been low that the Chancellor was going to have much more to offer on the climate agenda.
The Treasury’s spending promises were largely stuffed into last week’s net zero strategy. This included around £26bn of commitments, including £14bn of new money in areas such as green technology and flood defences as well as measures for building retrofits including the much publicised £5,000 grants for households to replace their gas boilers.
Mixed messaging ahead of COP26
But the government needs to be taking every opportunity to put some clear actions and policies behind its multiple net zero strategies and targets, which so far are generally considered to be laudably ambitious but lacking in substance and detail in too many areas. And on a global stage, our government is being increasingly called out over its “mixed messaging”, the clearest example being the new Cumbrian coalmine.
At such a critical time, with COP26 only days away, it’s therefore ‘inconvenient’, putting it mildly, to see two of our principal green taxes getting ‘cut’, namely fuel duty and air passenger duty.
That’s not an easy message for the world to hear next week, despite all the government rhetoric in this budget about investing in innovation and R&D and the UK as a ‘science superpower’.
Faced with some admittedly difficult short term challenges, the Chancellor clearly judges that consumers are already getting hit in the pocket by high fuel prices, both at the pump but also at home. The energy sector continues to be rocked by the surge in gas prices which are having such a traumatic effect on the country’s retail energy suppliers. They are faced with a domestic price cap sitting way below the cost of supply, and industrial users unprotected by the cap are in many cases unhedged and exposed to massively increased energy costs.
Hard decisions needed to tackle climate change
The cut in air passenger duty is aimed at domestic flights, and is no doubt aimed at improving the fortunes of our airlines and getting people moving again, against the backdrop of the levelling up agenda. But is it really right to be encouraging me to be taking the plane from Birmingham to Glasgow next week, rather than using the train?
In isolation and out of context, these decisions are understandable, and there is as always a balancing act to perform. However, this tension between ‘doing the right thing’, and cost, is one that is going to be played out around the world in coming months and years, as governments grapple with the unpalatable truth that taking real action to combat climate change requires hard decisions, in many cases involving increased costs and inconvenience for consumers and tax payers. And the UK has an opportunity to help ram home that message next week.
At the end of the day, there is an even bigger cost – and not just financial, but human – to adapting to unmitigated climate change, and this is a case that needs to be made much more loudly and frequently.
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Andrew is a specialist energy regulatory and contracts lawyer, who works with a range of utility and developer clients and funders to help them manage regulatory and legal risk in a fast moving and complex environment. Andrew is also currently our elected Senior Partner.