More details promised on sector-specific net zero roadmaps to stimulate investment in sustainable infrastructure.
The UK government has acknowledged the need for greater policy clarity to enable the flow of investment into key sectors to deliver sustainable infrastructure and transition to net zero.
Speaking at City & Financial Global’s UK Sustainable Infrastructure Summit, Treasury Minister Baroness Penn said the government is committed to publishing net zero roadmaps for individual sectors to outline its “envisioned delivery path”. This will include details on the required mix of renewable energy sources across key industries to clarify the investment opportunities for the private sector.
“The UK has ambitious targets to deliver net zero by 2050, and decarbonisation will require building physical and digital infrastructure across the economy, with [carbon capture, usage and storage] CCUS and hydrogen strategically important in the industry, as well as heat pumps in our homes and electric vehicles and charging points on our roads,” she told onlookers.
“We have a strong track record of delivery, which we can build on, having decarbonised faster than any G7 economies since 1990. Last year, we saw the biggest increase in the installation of offshore wind capacity ever, and electric car sales continue to increase rapidly.”
However, she noted that the success of such plans will be determined by the levels of investment the government must mobilise, noting that the international environment for green investment is becoming “more competitive”, as other countries begin to put their transition plans into action.
US President Joe Biden’s Inflation Reduction Act – which will provide around US$386 billion in energy and climate spending over the next 10 years – has put the country on the path to almost halving its carbon emissions by 2030. In response, the EU launched its Green Deal Industrial Plan, a series of strategies and initiatives aimed at accelerating access to investment and financing for cleantech and raw materials to support its transition to net zero.
“We need to decarbonise, and we need the government to provide the frameworks and business models to ensure our green industries are investable in the long term,” said Penn, who is also Co-Chair of the Transition Plan Taskforce.
“We must provide clarity and consistency in policy decisions to ensure that businesses can take informed decisions about what the future looks like and establish a positive environment for investment and innovation.”
The UK government updated its Green Finance Strategy in March, which serves as a roadmap for sustainable investment and a path towards the creation of net zero-aligned financial centre. The strategy focuses on three areas: ensuring transparency across the economy, supporting the development of market pools, and ensuring the necessary transmission channels to shift and scale up the financing of the transition to net zero.
“In our Green Finance Strategy, we set out the vital role the financial sector will play in channelling investment into the real economy to support the transition,” said Penn.
Last week, the UK’s Climate Change Committee recently described government efforts to scale up climate action as “worryingly slow”. Earlier this week, the Green Finance Institute published 25 policy recommendations aimed addressing the UK’s vulnerability to the physical impacts of climate change, as part of a report which identified “significant gaps” in policy that were slowing the flow of adaptation finance.
Last year, the EU finalised its green taxonomy, with the UK delaying publishing its own until later this year. Penn said that the government will be consulting on the UK’s Green Taxonomy in the autumn, adding that it is committed to taking a “science-based and science-led” approach to green classification.
“We also want it to be usable and useful, with a focus on making it as interoperable as possible,” she said, noting that there are many different taxonomies in the ecosystem, with none of them fully aligned with each other.
“While we may not achieve full international alignment, we will ensure that our taxonomy is science-based. The consultation in the autumn will provide more details and guidance.”
Also speaking at the event, John Flint, Chief Executive of the UK Infrastructure Bank, laid out the institution’s key priorities for 2023 and beyond.
“We have been given five priority sectors: clean energy, digital, waste, water, and transport,” he said.
“Clean energy is expected to dominate our portfolio in the future due to its wide-ranging scope.”
The UK Infrastructure Bank has announced 17 transactions so far, including a £500 million fund with NextEnergy Capital that aims to double the amount of subsidy-free solar power in the UK.
In September, the bank will provide more information about how it plans to invest its £22 billion budget, sharing sector-specific details, along with its view of financing requirements and potential challenges.
Flint said that he is concerned about the “risk appetite” within the private sector.
“The scale of the challenge is vast, and the conversation is still stuck on the notion of financing and making a lot of money,” he said. “We have to decommission a high-carbon-intensive industrial economy and build a new one – the public sector alone cannot pay for that.
“I am concerned that the private sector still expects direct satisfaction or meeting their return requirements, and while I understand their rationality within their own constraints, if we don’t find a way to meet in the middle more frequently, we will run out of £22 billion long before reaching net zero.”