The UK government has unveiled a number of measures with the overall purpose of reaching net zero by 2050 and meeting the UK’s climate targets.
On 30 March 2023, on what has been called the UK’s “green day”, the UK government announced a series of policies and proposals that it hopes will form the backbone of its strategy to drive investment into green energy with a view to achieving energy security and meeting the target of net zero greenhouse gas emissions by 2050.
The broad suite of measures cover a wide variety of key policy issues, and signifies the government’s view that achieving its net zero goal will require input from across the financial sector and real economy. The proposals included in the green announcements are as follows:
- Powering Up Britain: Bringing together an Energy Security Plan and Net Zero Growth Plan, which seeks to ensure the UK can achieve its net zero goal whilst improving the security and affordability of its energy supply.
- Green Finance Strategy: Seeking to align financial flows in the UK with the government’s ambition of creating a Net Zero Financial Centre.
- Nature Markets Framework: Identifying proposals on developing a market for nature within the UK.
- International Climate Finance Strategy: Identifying the ambitions and policies of the government on the provision of climate finance globally.
- UK 2030 Strategic Framework for Climate and Nature: Setting the direction for the UK’s approach to international action on nature and climate to 2030.
While all of these initiatives may impact the UK’s future policy direction, this blog post focuses in particular on the Powering Up Britain Strategy and the Green Finance Strategy, which contain some of the most significant proposals.
Powering Up Britain
The government has outlined its plans to leverage significant private investment to achieve the UK’s energy security and its net zero objectives. The “Powering Up Britain” plan includes an Energy Security Plan and the Net Zero Growth Plan. Alongside those plans, responses to the recommendations have also been published in the UK’s Independent Review of Net Zero from January 2023.
These announcements build on prior government announcements, in particular, the Net Zero Strategy and British Energy Security Strategy, and acknowledge that further actions will still be required to achieve the government’s goals.
Some of the key developments include the following:
- Carbon Capture, Utilisation, and Storage (CCUS) initiatives — Alongside the previous announcement that the government would provide up to £20 billion of funding for early development of CCUS, the government has announced: (i) a shortlist of initial projects to be included in the government’s “Track-1” CCUS clusters; (ii) a commitment to launch a process to enable expansion of Track-1 clusters; and (iii) the launch of “Track-2” of the CCUS cluster sequencing program.
- Hydrogen proposals — Alongside an updated Hydrogen Investor Road Map, successful applications of the first competition window for the £240 million Net Zero Hydrogen Fund were confirmed and a shortlist of projects for the first electrolytic hydrogen product allocation round have been announced.
- Nuclear development — The government reconfirmed its commitment to nuclear energy with the launch of Great British Nuclear, a publicly funded body to drive delivery of new nuclear projects in the UK. A competitive process to select the best Small Modular Reactor technology has also been announced.
- Great British Insulation Scheme — Plans were announced for the Great British Insultation Scheme, delivering £1 billion in additional investment by March 2026 in energy efficient upgrades.
- Shorter term resilience — Less green in nature, these include the establishment of a Future System Operator to coordinate system resilience across gas and power networks and a planned update in the autumn on the need for increased gas storage.
Green Finance Strategy
The Green Finance Strategy is an update to the government’s existing 2019 Green Finance Strategy. The revised Green Finance Strategy has the stated objectives of providing greater private investment in the green economy, increased financial stability against key climate risks, and aligning global financial flows with climate and nature benefits.
A number of specific policies, both new and previously announced (but in many cases with updated timelines), are included in the Green Finance Strategy. Some of the more notable announcements include:
- Consulting on transition plan requirements for large UK companies — A number of large UK-listed companies are required to disclose transition plans on a “comply or explain” basis. The Green Finance Strategy includes a commitment to consult on introducing requirements for large UK private companies to also disclose such plans (to the extent they have them), also on a comply-or-explain basis. Such an initiative would be supported by the UK Transition Plan Taskforce, which is developing best practices for companies and investors seeking to disclose transition plans.
- A call for evidence on Scope 3 greenhouse gas emissions — The government commits under the Green Finance Strategy to update its Environmental Reporting Guidelines to include more guidance on collecting and reporting data on Scope 3 emissions.
- Continuing to support the work of the International Sustainability Standards Board (ISSB) as part of corporate disclosure requirements — The UK has previously committed to implement the standards being developed by the ISSB into its domestic ESG disclosure framework. The Green Finance Strategy furthers that commitment, noting that a framework to assess the ISSB standards for their suitability for adoption will be set up as soon as the ISSB standards are published (anticipated to be June 2023).
- Restating the commitment to releasing the UK Taxonomy — The UK Taxonomy was originally due to be published in December 2022, setting out a classification system of economic activities as “green” or otherwise, but has faced delays. The Green Finance Strategy confirms that a consultation on the UK Taxonomy will take place in Autumn 2023, and that nuclear power will, in some form, be included as an eligible green activity.
- Consulting on regulation of ESG ratings providers — The consultation will seek views on how regulation could help to ensure better outcomes for ESG ratings and the consumers/investors that utilise them.
The overall impact of the green day announcements remains to be seen, with many of the policies at this stage providing limited detail on specifics, instead committing the government to consult on possible future measures. However, many stakeholders will welcome the clarity on the UK’s current policy position, with the announcements, at the very least, identifying the government’s investment and policymaking priorities.
Latham & Watkins will continue to monitor developments in this area.