In the run-up to the 26th United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties, COP26, the Government published its Net Zero Strategy: Build Back Greener (the NZS), which is designed to deliver the Prime Minister's Ten Point Plan for a Green Industrial Revolution. The NZS aims to show how the UK can meet its commitment to reduce greenhouse gas emissions to net zero within thirty years and, in doing so, play its part in the international effort to keep average global temperature increases to 1.5 degrees Celsius above pre-industrial levels; thereby reducing the devastating effects of climate change.
This article answers some key questions about the NZS and highlights areas to consider in your business planning to stay in line with regulatory change, support the national action plan on climate change, and harness opportunities in the green economy.
What does the NZS cover?
The NZS is long at more than 350 pages, but it's comprehensive. It makes the case for net zero and describes how the following sectors will play their part:
- Fuel supply and hydrogen
- Heat and buildings
- Natural resources, water and F-gases
- Greenhouse gas removal
In addition to setting long-term policy aspirations for projects and infrastructure, the NZS sets out how the Government proposes to support the transition to the new green economy by: promoting innovation; securing green investment; creating green jobs, skills and industries; embedding net zero in government; encouraging local climate action; empowering the public and businesses to make green choices; and developing international leadership and collaboration.
How big is the task ahead?
The UK has made substantial progress in cutting carbon but all sectors still have a lot of work to do. Since 1990, the UK has cut its carbon dioxide emissions by nearly half, meaning that it has at least as much to do in the next 30 years as it has achieved already. The Government hopes that the NZS will be the policy framework that enables these cuts to be achieved.
Notes to the above graphic:
- In the figure above, the solid blue line shows the cuts to date, with the broken blue line showing the previous 80% cuts target.
- The broken red line shows a straight line to net zero by 2050.
- The solid green line shows the cuts needed to hit 78% cuts by 2035 (announced earlier this year); with the broken line showing the likely path thereafter.
Which sectors have made the deepest cuts to date?
Since 1990, the power sector has been the standout sector in terms of carbon cuts, achieved in no small part by decommissioning coal-fired power plants, deploying offshore wind at scale, as well solar pv. On 30 October 2021, the UK's electricity needs were met principally by wind (29.7%), natural gas fired-power stations (23%), nuclear (19.5%), solar (10.8%), imports from the Netherlands, Norway, France and Belgium (9.6%), and biomass (5.4%).
The significant efforts by the transport sector (particularly road transport) to reduce tailpipe emissions are largely masked by the growth in vehicle numbers and therefore the net cuts in carbon cuts are lower than might be expected. Business and industry have also made notable contributions to carbon reductions.
What CO2 cuts have to be made between now and 2050?
Every business in every sector has a role to play in decarbonising. The chart below shows current carbon emissions on a sector-by-sector basis, and therefore highlights the emissions each sector must cut before 2050.
The transport sector is likely to make rapid progress given the UK Government's policy of banning the sale of petrol and diesel-fuelled cars by 2030. The other standout sector is residential – and we are already seeing policy moves in this area, for example in relation to renewable heat. The greatest challenge is retrofitting existing homes in the coming years.
So what policies are highlighted by the NZS?
Time to re-focus your business strategy?
Following the close of the global climate change conference COP26 we expect there to be a real shift in momentum across nations and businesses to accelerate how they are responding to climate change. The announcement of the NZS in the UK is therefore timely and provides guidance for businesses in terms of how planned regulatory and policy changes in their sector will likely impact their operations.
The ambitions are high, and so is the level of investment planned according to NZS, with transport, power and heat and buildings expected to need the biggest injection of cash. However, whichever sector you operate in, there are clearly opportunities to re-align your business strategy now and help shape the green economy. Planned changes will naturally influence consumer behaviour and create a growing demand to buy green and make greener choices in day-to-day life. Those companies that act early and seek out the opportunities to harness this growth area will make the greatest gains.
The first step is understanding what the above changes will mean for your sector and your business; what is your current 'green' position (how do you impact the environment in terms of consumption of resources as well as the environmental footprint made); how will you be affected by climate change in light of the predictions made; what information do you currently share with stakeholders (and also how should this change or be expanded upon); and what role could your business play in supporting the national action plan around climate change and, ultimately, improving the planet.
Our team of legal experts in Environmental, Social and Governance (ESG) support clients in responding to the issues raised by these important questions. Comprising lawyers from a range of disciplines, they are fully engaged in developments in this area and working with businesses from a wide range of sectors to advise on their approach to ESG matters.
To discuss any of the issues raised in this article and in the NZS specifically, please get in touch with either your relationship contact here at Gowling WLG or partner Ben Stansfield from our ESG team.