Wildfires in the southern Mediterranean have brought climate change to the top of the news agenda again.  Closer to home, the European Space Agency (ESA) report that some of the most intense marine heat increases on Earth have developed in seas around the UK and Ireland, with water temperatures as much as 3 to 4C above the average in some areas, including off north-west Ireland.

 

As the earth heats up so too has the race to deliver Net Zero and capitalise on the benefits of Green Growth but is the UK lagging behind?

 

The latest Climate Change Committee Report to Parliament was scathing on the UK’s progress:

 

“The UK has lost its clear global leadership position on climate action. We are no longer COP President; no longer a member of the EU negotiating bloc. Our response to the recent fossil fuel price crisis did not embrace the rapid steps that could have been taken to reduce energy demand and grow renewable generation.”

 

The Climate Change Committee was particularly critical of the government’s continued failure to develop clear policies and strategies to deliver the stretching 2030 commitments in the UK’s Nationally Determined Contribution (NDC) made at COP26. Continued delays in policy development and implementation mean that the NDC’s achievement will be increasingly difficult.

 

Whilst the UK was one of the first nations to enact Net Zero targets into law, there remains a lack of urgency over delivery of Net Zero targets.

 

As the UK’s Net Zero implementation polices have faltered, other countries have combined decarbonisation strategies with industrial policy such as the United States Inflation Reduction Act, the EU’s emerging Net Zero Industry Act (NZIA) and Japan’s Green Transformation programme. Such policies secure green supply chains and scale domestic manufacturing for the net zero transition.

 

The United States Inflation Reduction Act provides both Production and Investment Tax Credits for a range of clean technologies, imposing labour and domestic content requirements to get full subsidy benefits, and in some cases, regionally targeted subsidies. One of the key features of this policy is its immediacy and ease of access that now makes the US market particularly attractive for green investment. The nature of the US tax system provides certainty that the measures will persist for at least 10 years.

 

The emerging NZIA is a key part of the European Green Deal Industrial Plan (and is seen as a response to the United Sates Inflation Reduction Act). It aims to ensure that at least 40 percent of the EU’s demand for clean tech is made domestically by 2030 reducing reliance on third countries such as China. The NZIA marks a step -change to previous EU policies which primarily focused on emissions and environmental damage reduction.  The NZIA aims to increase manufacturing share in key, “strategic” green technologies. Among the technologies designated as “strategic” are solar photovoltaic, onshore and offshore wind, battery and storage, heat pumps and geothermal energy, electrolysers and fuel cells, biomethane, carbon capture and storage and grid technologies.  However, as presently drafted, there is some ambiguity as to the role of nuclear.

 

The NZIA sets out commitments to match equivalent subsidies available elsewhere to avoid offshoring of industry, (a stark relaxation in the EU’s strict state aid rules), coupled with a simplified regulatory framework to accelerate production of select green products, defined specific technology targets to send demand signals, and new industry partnerships for reskilling.

 

CBI analysis confirms that the green growth prizes within the UK’s reach offer a potential £37 – 57bn boost to GDP in 2030.  The CBI’s Going for Green Report makes a number of key recommendations and underscores the need for Net zero to become embedded across the architecture of government and designated as a key consideration when devising tax and regulatory policy.  Going for Green calls for a clear and stable policy environment to build business confidence.

 

There is a clear consensus from both environmental and business interests that  the UK needs policy certainty, financial incentives and focus on delivery to help the UK meet its Net Zero commitments and make the most of the green growth opportunities.

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.