Will the green shoots of recovery be green at all?

2020 was set to be a pivotal year for global climate action, with the UK firmly at the heart of it as host of the UN Climate Change Conference (COP26). The Covid-19 pandemic has created a new and unexpected context for these efforts, throwing the future of environmental policy into question.

As focus turns to recovery, this note looks at the outlook for climate change policy in the UK and the implications for business.

Policies emerging around the green recovery

Earlier this month, the PM set out his much-hyped plan for rebuilding the economy following the pandemic. With a slogan of “build, build, build”, he signaled investments in infrastructure and skills, including accelerating “shovel-ready” projects.

Chancellor Rishi Sunak subsequently presented his summer economic update, focusing on protecting, supporting, and creating jobs. In contrast to the PM’s “New Deal”, the Chancellor’s “Plan for Jobs” had more clear and tangible implications for environmental policy.

Taken together, the Government’s plan reaffirmed that, while climate change is certainly on the political agenda, it is principally there on economic rather than environmental merit. Retraining and offsetting job losses (a key Treasury focus for recovery) means building up ‘green’ industries – which is where the environment has the most political resonance.

So, what does the Government’s recovery plan say about the future of the green economy:

• Energy efficiency – one of the headline green initiatives from the Chancellor’s package was a £2bn Green Homes Grant, which will allow homeowners to apply for vouchers of up to £5,000 for energy-saving home improvements. He also promised £1bn of investment for upgrading public buildings, and an additional £50m of funding for the social housing sector. The measures will aim to make 650,000 homes more energy efficient, save households up to £300 on their bills per year, cut a megaton of carbon emissions, and, crucially, support the creation of 140,000 green jobs. Upgrading the UK’s buildings has long been heralded as one of the quickest ways to cut emissions, so the move has been welcomed by climate experts.
• Infrastructure – the PM has faced criticism from green groups for allocating £100m to road building programmes – seen as essentially “locking in” future carbon emissions. However, the PM also confirmed that the long-awaited National Infrastructure Strategy will be published in the Autumn. This strategy should offer further clarity around how the Government sees core economic infrastructure, including energy networks, road and rail, and waste, as supporting the transition to net zero.
• Research and innovation –the PM’s speech emphasised the role of innovation in building a low carbon future. He said the UK will produce the world’s first zero-emission long haul passenger aircraft, and that £100m is being put towards research and development of carbon capture technologies. Green groups have criticised the PM for focusing on style over substance, and for kicking other important (but perhaps duller) initiatives into the long grass.

The pandemic has also resulted in delays to key strategies and reviews being worked on within government, many of which are central to the UK’s ability to meet its net zero commitment. But while the timings have changed, there is no indication of the direction of travel being abandoned altogether:

• Net Zero Review – originally due before the end of 2020, the Treasury will publish its interim review into how the costs of this transition should be funded and distributed in the Autumn, followed by the final review in the Spring. Once finalised, it will be a major filter in terms of Treasury decision making on expenditure and policy.
• Comprehensive Spending Review (CSR) – a key moment in the political calendar, the CSR sets out budgets for each department for the next three years, allowing them to plan with certainty. The review will outline how funds will be used to support the transition to a low carbon economy. Originally due to be set out in July, it has been delayed until the Autumn to allow the Treasury to focus on the coronavirus response.
• Energy – Business Secretary Alok Sharma confirmed this month that the Government will publish its long-awaited Energy White Paper in the Autumn, alongside the Heat Strategy and Buildings Strategy. The White Paper is expected to set out a blueprint for the sector’s role in the transition to a low carbon economy, a key element of meeting the UK’s net zero target.
• Waste – the Environment Bill, which includes provisions for extending producer responsibility on packaging, has faced delays due to parliamentary time being focused on coronavirus-related legislation. Meanwhile, we have also seen policymakers delay the implementation of key waste policies – including a ban on plastic straws and Scotland’s Deposit Return Scheme – in recognition of the pressures placed on business by the pandemic.

Green groups have criticised the Government’s recovery plan as unambitious and inadequate compared to the measures announced in Europe. On the specifics, the energy efficiency package has been cautiously welcomed by some as a sign that the Government is willing to put forward capital investment that helps the UK on its path to net zero – provided it is also supportive of wider priorities on economic growth and jobs. But the jury is still out and looking ahead, green campaigners will be watching closely to see if the Government translates its warm words into action during the remainder of the year, including at the Autumn Budget, and within key publications such as the National Infrastructure Strategy and Net Zero Review.

The effects of UK-EU trade negotiations

The issue of environmental commitments has emerged as one of several sticking points in ongoing UK-EU trade talks, with both sides at odds over including the Paris Agreement target in a future deal. The EU wants to see the target included, while the UK argues it shouldn’t have to make such legal commitments in exchange for preferential access to the European market. The disagreement reflects fundamental differences in the negotiating positions of the two sides, with the UK focused on protecting its regulatory independence and the EU on maintaining the integrity of the single market. And with no legal obligation on the UK to maintain current standards if no trade deal is agreed, environmental campaigners have continued to voice concerns that the UK could renege on other EU directives – for example, on industrial and transport emissions – in order to pursue trade deals with other countries, such as the US.

It is also worth noting the role of the devolved administrations. The UK Government has recently set out plans to create a single UK internal market, with “mutual recognition” across all four nations. While many policy areas will be repatriated from the EU to the devolved administrations, the proposed rules would in effect require them to accept English products – even if they are produced to lower standards. This therefore leaves open the possibility of regulatory discrepancies in environmental policy within the UK internal market, which businesses operating across borders will have to navigate.

More broadly, the UK has played a central role in the EU’s efforts to date on climate change, decarbonising faster than any other member state and setting an example through its world-leading net zero legislation. Brexit will end the UK’s influence over future EU climate policy, potentially handing greater prominence and power to less ambitious members of the bloc. While this is a key concern raised by climate experts, the ambitious nature of the recently announced EU Green Deal suggests these concerns may well be overblown.

So, while the Government has repeatedly pledged not to “dilute” environmental standards after the UK has left the EU, it remains to be seen what material impact Brexit will have on national and global efforts to combat climate change. Next year’s COP26 will be a key test for how prepared the UK is to lead on this issue – or whether it will fall back in line and allow the EU to lead on the international stage.