Why the UK needs a Net Zero Investment Plan
The government’s failure to produce a detailed Net Zero Investment Plan sends the wrong signal to investors and companies, writes E3G’s Nick Mabey
The government is due to publish an updated Green Finance Strategy tomorrow as part of its ‘Green Day’ of announcements, designed to set out the framework for making the City of London the green finance capital of the world.
It is a transformation that will be vital to support the UK’s net zero transition, given the bulk the bulk of the finance required to reach net zero will have to come from the private sector. The economic prize on offer, if the government gets on track to net zero, is valued by McKinsey at £1tr a year by 2030.
Chris Skidmore hailed the net zero transition as “the economic opportunity of the century”. But a major problem remains: The government has not yet developed a detailed net zero investment plan for the UK.
The new Green Finance Strategy is expected to set out next steps for Sustainability Disclosure Requirements and the UK’s green taxonomy, plans for boosting international finance for net zero and how government will support companies in developing net zero transition plans.
A growing number of leading UK companies are already developing net zero transition plans. Their frustration with the government’s failure to produce an its own Net Zero Investment Plan of its own is growing. Without that plan, confidence is lacking — and delivery is inhibited.
A Net Zero Investment Plan would establish the investment needed to reach net zero in the UK. It would identify the investment already in place and the investment gaps on a sector-by-sector basis. It would then set out the combination of policies, regulations, tax incentives and public investment needed to get the UK a competitive place in the race to net zero. It would need to be updated every year.
UK financial institutions with trillions in assets under management are calling for a UK-wide Net Zero Investment Plan, and companies are also calling for the government to put in place a mechanism for independent tracking of green financial flows. As with other economic management priorities, capital markets will need to see ongoing monitoring, by a credible and independent organisation, to check whether the UK is on track to meet its climate investment targets.
Time is running out.
The world is not only on the brink of climate catastrophe, as the UN Secretary-General continues to point out, but as recent decisions in both Brussels and Washington have made clear, the race to command the heights of the green economy has begun.
The Russian invasion of Ukraine focused political attention on the need to bolster energy security and bring down energy bills.
Less political attention has been paid to the Inflation Reduction Act, passed last year by the U.S. Congress. This initiated $369bn of subsidies to become the dominant force in the energy transition.
It has also locked Britain into a green energy race for a place in the global energy markets of the future. Getting to net zero as fast as possible may be as important for our economy as it is for our climate.
The European Commission has just announced a Net Zero Industry Act in response to the American push for green industry leadership. It will unlock large subsidies in the EU for net zero energy technologies and sweep away regulatory barriers standing in the way of a green industrial revolution.
The British government has so far been implementing its net zero strategy at a leisurely pace — risking the country falling behind in the race to prosper from the energy transition. Meanwhile, both America and Europe are pulling ahead.
This is something the Chancellor missed in his recent Budget, which did little more than reheat existing net zero spending pledges. The government is now under growing domestic pressure to pick up speed. It lost a High Court case last year when its Net Zero Strategy was judged to be unlawful because it had failed to set out the greenhouse gas savings of its policies.
The judgement instructed the government to correct this situation by the end of March this year. This led to government commissioning Chris Skidmore’s Net Zero Review which, after broad consultation with businesses and other stakeholders, set out 129 recommendations that ministers could adopt to get back on track.
With the government expected to also respond to both the Skidmore review and the High Court judgement, it will take more than another torrent of green words and high hopes if Britain is to find a place in the race.
Nick Mabey is founder director of E3G
