How “green” was the Autumn Budget

Rachel Reeves is not only the first female Chancellor but also the first (self-styled) “green” Chancellor and it is therefore no surprise that delivering on the government’s mission to make Britain a clean energy superpower was one of the key themes of her Budget.

The question is, how green were the contents of the red Budget box and do the measures truly meet the “green” standard expected in today’s climate conscious world?

Energy efficiency in buildings

While standards are already in place to improve the energy efficiency of new and converted buildings, improving the performance of existing stock through energy efficiency upgrades and retrofit projects is key.

Warm homes

The investment of an initial £3.4bn over the next three years into the Warm Homes Plan to transform 350,000 homes (including a quarter of a million low-income and social homes) was welcome but arguably does not go far enough to achieve the energy efficiency improvements that are required in existing stock in the medium to longer term.

New homes

In an attempt to fix the housing crisis, the Chancellor also announced a housing package that will deliver up to 5,000 new affordable social homes with £500 million in new funding for the Affordable Homes Programme bringing total investment in housing supply to over £5 billion and supporting the delivery of 33,000 new homes through £128 million for housing projects across the country.

There was arguably the opportunity to meet the ambitious housing targets while at the same time future proofing new housing stock by building not only more homes but more low carbon homes (i.e. homes fitted with new energy efficient technologies such as smart meters, solar panels, EV charging capabilities and ground source heat pumps). This would have required the introduction of mandatory requirements and/or financial incentives around energy efficiency however the focus appears to have been primarily on funding commitments.

Non-domestic properties

The energy demands for heating, cooling and lighting mean that commercial and industrial buildings contribute significantly to greenhouse gas emissions and are some of the hardest assets to decarbonise. As a result, they represent one of the biggest challenges to reaching net-zero. As is the case in the domestic sector, measures in the Budget to address energy efficiency and decarbonisation in the non-domestic sector to include, amongst other things, financial incentives to promote sustainability, seem conspicuous by their absence and this again seems like a missed opportunity.

As of April 2023, all leased commercial properties are required to achieve a minimum EPC rating of E however the continuing uncertainty over the MEES trajectory combined with the lack of implementation mechanisms also remains an issue in the non-domestic market. The government needs to take decisive action in setting clear and achievable MEES standards and provide much needed clarity around the stages for transition. Furthermore, while the Budget acknowledged the crisis in local authority planning offices and referenced increased funding of officers to support the planning process, there was no reference to the role played by the local weights and measures teams in MEES enforcement.

There are however also market factors at play. Meeting regulatory requirements such as minimum EPC ratings is only the tip of the iceberg. As the UK Green Building Council notes “retrofits and energy efficiency improvement are no longer optional but essential”. This is the case not only from an environmental perspective but also from a commercial perspective in order to ensure properties meet the demands of their lenders, insurers, and local planning authorities.  This triumvirate are now the key drivers of the sustainability steps needed to maintain those assets in a competitive position in what is now an ESG and net zero carbon focussed market.

Electric vehicles

Transport is key to the government’s clean energy mission and the government has committed to phasing out new cars that rely solely on internal combustion engines by 2030 with the intention that by 2035 all new cars and vans sold in the UK will be zero emission.

To help drive the transition to electric vehicles (EVs) the government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars. The government is also maintaining EV incentives in the Company Car Tax regime and extending 100% First Year Allowances for zero emission cars and EV chargepoints for a further year. Measures also include investment in the EV manufacturing sector as well as expanded support for wind and solar projects and a commitment to increase EV charging infrastructure to assist with the roll out of EV charging points nationwide.

These tax benefits for those leasing or buying EVs will be welcome and will no doubt increase the transition to EVs helping the country reach its net zero targets, notwithstanding the challenge this poses for the electricity grid. For further discussion please read Driving into an electric future.

Net zero and clean energy

Growth for the UK’s clean energy industries was a core focus of the Budget (hence the “clean energy superpower” tagline) including:

• £3.9 billion of funding in 2025-26 for Carbon Capture, Usage and Storage Track-1 projects to decarbonise industry and support flexible power generation.
• Delivering on the first steps of the clean energy superpower mission, with £125 million in 2025-26 for Great British Energy.
• A focus on nuclear power playing an important role in helping the UK achieve energy security and clean power, while securing thousands of good, skilled jobs.
• Support for the first round of electrolytic hydrogen production contracts, harnessing renewable energy to decarbonise industry across the UK.

These measures, amongst others, are a clear indication of the government’s intention to drive investment into the UK’s clean energy industries.

Conclusion

The Chancellor outlined a number of key climate and clean energy announcements. These were underpinned by notable commitments for the energy sector to bring new jobs to Britain, drive growth and enhance sustainability recognising and seeking to capitalise on the opportunities that arise from the transition to net zero.

The bottom line is that there’s no doubting that the green Chancellor’s Budget has an underlying green tone. How green is of course sector and industry specific.

In terms of the built environment, making buildings and homes cleaner and cheaper to run is essential for meeting net zero and supporting energy security and resilience. It seems that the government have missed a trick in failing to combine significant funding commitments with mandatory or financially incentivised energy efficiency measures in both the domestic and non-domestic markets.  In particular, the government could have killed two birds with one stone by not only building more homes but also building more low carbon homes – meeting ambitious housing targets whilst also future proofing new housing stock.