The report lays down policies aimed at fostering carbon neutrality in the UK by 2050 and supporting Paris Agreement pledges.

By Paul A. Davies and Michael D. Green

On 9 December 2020, the UK Climate Change Committee (the Committee) published its 6th Carbon Budget (the Budget), as required under the Climate Change Act. The Budget provides ministers with advice on the volume of greenhouse gases the UK can emit during the period 2033-2037 and also contains policies designed to place the UK on track to achieving carbon neutrality by 2050.

The Budget comes in the context of the UK bolstering its climate ambitions ahead of hosting the COP26 in Glasgow next year, as the Prime Minister has recently committed to cutting emissions by at least 68% from 1990 levels by 2030. The Government also published a ten-point plan aimed at boosting the green economy.

Key Takeaways and Targets

The Budget emphasises the need for the UK to decarbonise faster. The Budget recommends that the UK set a reduction in greenhouse gas emissions of 78% by 2035 compared to 1990 values, equivalent to a 63% reduction from 2019. This target would not take into consideration offsets from trading schemes, but would consider emissions from aviation and shipping. The Committee describes this as “a world-leading commitment, placing the UK decisively on the path to Net Zero by 2050 at the latest, with a trajectory that is consistent with the Paris Agreement” and notes that the new target is “ambitious, realistic and affordable”.

The Committee stated that the UK’s pathway to reducing emissions requires action across four key areas:

  • Reducing demand for carbon-intensive activities. Implementing changes that reduce demand for carbon-intensive activities but also improving efficiency in the use of energy and resources.
  • Take-up of low-carbon solutions. Encouraging people and businesses to adopt low-carbon solutions, as high-carbon options are phased out.
  • Expansion of low-carbon energy supplies. Producing low-carbon electricity and scaling up low-carbon hydrogen.
  • Land (and removals). Restoring UK’s land and transforming the way it is used, while supporting UK farmers.

Sector Priorities

The Budget acknowledges that each economic sector faces a unique set of challenges, but concludes that certain sectors have progressed too slowly: transport, industry, buildings, and agriculture. The Budget, however, places great emphasis on the need to ensure a fair transition for all parts of the economy. The Budget builds on the Committee’s June Progress Report and makes a number of sector recommendations, as follows:

  • Surface transport. The government should build on its commitment to phase out petrol and diesel cars and vans and also ban diesel-heavy goods vehicles no later than 2040. The UK should also invest in a recharging and refuelling infrastructure.
  • Industry. Policy must address both the demand-side and supply-side for low-carbon products. At the same time, the development of longer-term policies, such as border carbon tariffs on carbon standards, should begin immediately.
  • Buildings. The Government should commit to phasing-out fossil heating, scale up supply chains for heat pumps, and develop the option of hydrogen for heat. More action should be taken on energy efficiency, especially in relation to insulating buildings. Gas boilers should not be sold beyond 2033.
  • Electricity generation. Policy should support the coordination of connections from offshore windfarms into the onshore network and generally strengthen the UK’s power grid. The market should also accelerate the accommodation of increasing shares of variable power. Electricity to be zero carbon by 2035.
  • Low-carbon hydrogen. The Government’s Hydrogen Strategy, due to be published in spring 2021, should clearly set out a vision for hydrogen’s role in meeting Net Zero.
  • Agriculture and land. Policy design must consider the challenges posed by wider environmental priorities, including for biodiversity, harvesting potential synergies and avoiding unnecessary trade-offs. By 2035, 460,000 hectares of new mixed woodland are to be planted to remove CO2. Woodland to rise from 13% of UK land today to 15% by 2035 and 18% by 2050. Peatlands to be widely restored.
  • Aviation and shipping. The UK should drive international processes in terms of developing CO2 removal strategies, sustainable fuels, and more efficient crafts.
  • Waste and F-gases. A ban on landfilling biodegradable waste by 2025, with recycling increasing to 70% by 2030. F-gas regulations will need to extend to all sources.

Next Steps

“The Government must then set the Sixth Carbon Budget in law by the end of June 2021”, as the Budget notes. This should be followed, in due course, by a set of policies and proposals aimed at helping the UK meet the new targets. However, the Committee recommends that the government take both steps in the first half of 2021.

The Committee is expected to report on the government’s implementation of the strategies in its next annual Progress Report, in June 2021. Latham & Watkins will continue to monitor developments in this area.

This post was written with the assistance of Sabina Aionesei in the London office of Latham & Watkins.