Budget 2020: chancellor claims government ‘is raising its ambition to decarbonise the economy’

“Reducing carbon emissions and enhancing the environment are major government priorities,” according to Chancellor Rishi Sunak MP, who told MPs in his Budget statement that government wanted toCreate the high-skill high-wage low-carbon jobs of the future”. He wanted to, “Raise productivity and lift quality of life as we lower emissions.”

In Budget 2020 documents HM Treasury said that in preparation for COP26 “the government is raising its ambition to decarbonise the economy.” But Sunak only had limited measures to announce in his budget speech, although they touch on some of the big issues – low-emission vehicles, CCS and heat decarbonisation, as well as tree planting. Many issues, such as household energy efficiency, will have to wait for the National Infrastructure Strategy, promised this spring – and described in budget documents as a “once in a generation transformation”. A UK Shared Prosperity Fund was announced to replace – and at least match – EU structural funds and £10M is being set aside this year to design and deliver Net Zero policies.

On power generation, HM Treasury said offshore wind, onshore wind and solar are “likely to be the UK’s primary source of electricity in the future”, although we will also need “reliable low-carbon power” from technologies such as nuclear, gas with CCS and hydrogen.

Describing carbon capture and storage (CCS) as “precisely the kind of exciting technology where Britain can lead”, Sunak announced a CCS Infrastructure Fund to establish CCS in at least two UK sites, one by the mid-2020s, a second by 2030. The government will also “support the construction” of a privately financed CCS power plant “by using consumer subsidies”.

CCS will be aimed at industrial clusters and Sunak also signalled higher taxes on polluting industry. Noting that the Climate Change Levy currently places green levies on electricity, which is decarbonising, he promised to freeze the levy on electricity in 2022/23 and 2023/24, meanwhile raising it on gas, in a measure expected to bring in £130M to HM Treasury in 2022/23, rising to £260M in 2023/24 and £270M in 2024/25, although extending Climate Agreements and opening them to new entrants will soften that blow by £190M/yr in 2023/24 and 2024/25.

On heat, a Green Gas Levy will support production and injection of biomethane, while the RHI will be extended to March 2022. Heat network support is extended to 2022, beyond which HM Treasury promised £270M in “new funding” for a new Green Heat Networks Scheme, to connect new and existing heat networks to sources of green heat.

A Low Carbon Heat Support Scheme will be focused on heat pumps and biomass boilers, with funding of £100M. However, there was little to address the UK’s domestic energy efficiency failings other than a promise to announce plans to improve the standards of new-build homes “in due course”.

On research and development the chancellor highlighted the UK’s history as a source of innovation and promised to double investment in R&D to £22 billion/year, calling it the highest percentage of GDP in last 40 years, although it was not clear how it would compare with Horizon R&D funding that the UK would previously have received from Brussels. Funding next year will be up by 15%. Detailed allocations are expected in a spending review due for completion in July, but will include £900 million on fusion, space and EV and £800 for a ‘blue skies’ research organisation, modelled on the US’s ARPA, for high-risk high-reward research.

Sunak promised to “at least double” energy innovation funding.

On electric vehicles the chancellor claimed comprehensive tax and incentives reform, with £500M over five years for new rapid charging hubs – including a Rapid Charging Fund to help defray the cost of grid connections. He promised to extend the plug-in car grant to 2022/23 and add vans, taxis and motorcycles to the vehicles covered, with funding of £129.5M.

Meanwhile, OLEV will carry out a review of EV charging infrastructure.


Further reading

Budget 2020: the industry responds

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