The team that prepared this report and its This was led by Chris Stark, Mike Thompson and David Joffe and included Tom Andrew, Owen Bellamy, Marili Boufounou, Peter Budden, Cloe Cole, Eoin Devane, Ellie Davies, Aaron Goater, Neil Grant, Rachel Hay, Mike Hemsley, Robbie Herring, Jenny Hill, Jaya Jassi, Ewa Kmietowicz, Harry Lightfoot Brown, Jake Langmead-Jones, Bianca de Farias Letti, Cheryl Mackenzie, Richard Millar, Chloe Nemo, Jacadi Nicholas, Simon Rayner, Vivian Scott, Alexandra Scudo, Richard Taylor, Indra Thillainathan, Emma Vause, Other members of the Secretariat who contributed to this Jo Barrett, Kathryn Brown, Victoria de la Cruz, Tom Dooks, Brendan Freeman, Suzanna Hinson, Gemma Holmes, Miriam Kennedy, Cara Labuschagne, James Lees, Charles Odunuga, Penny Seera, David Style, and Sean Taylor. Organisations and individuals that carried out research for the Aurora Energy Research, John Barrett (University of Leeds), Cambridge Econometrics, Centre for Ecology & Hydrology, Element Energy, Energy Systems Catapult, Energy UK, Alice Garvey and Peter Taylor (University of Leeds), Dr Clair Gough (University of Manchester), the Met Office Hadley Centre, Louise Marix- Evans, Kate Scott (University of Manchester), Scottish Rural College, techUK, Terri Wills, University College London, Dr Nem Vaughan (University of East Anglia), and Our special advisor on Pete Betts. Our three expert Advisory Groups and industry policy steering Policy Advisory Professor Cameron Hepburn (Chair), Tera Allas (McKinsey), Laura Cozzi (IEA), Michael Liebreich (Liebreich Associates), Professor Jim Skea (Just Transition Commission), Professor Lorraine Whitmarsh (Cardiff University), Giles Wilkes (Institute for Government) and Baroness Bryony Worthington (House of Lords). ce Advisory Professor Nick Robins (Chair), Roberta Pierfederici (LSE), Andy Howard (Schroders), Dr Ben Caldecott (Oxford University), Daniel Klier (HSBC), Ingrid Holmes (Federated Hermes), Dr Rhian-Mari Thomas (Green Finance Institute), Rishi Madlani (RBS) and Dr Steve Waygood (Aviva). Health Advisory Professor Sir Michael Marmot (Chair), Alice Munro (Public Health Specialty Registrar), Dr Tammy Boyce (The King’s Fund), Professor Sir Andy Haines and Professor Paul Wilkinson (London School of Hygiene and Tropical Medicine), Dr Ian Hamilton (UCL Energy Institute), Professor Susan Jebb (Oxford University), Dr Nick Watts (Lancet Countdown on Climate Change), Dr Adrian Davis (UWE and Edinburgh Napier), Professor Helen ApSimon (Imperial College London) and Sonia Roschnik (NHS Sustainable Development Unit). Industry Policy Steering Frank Aaskov (Make UK), Chris Bataille (IDDRI), Debbie Baker (CF Fertilisers), Tanisha Beebee (CBI), Roz Bullied (Green Alliance), Diana Casey and Richard Leese (Mineral Products Association), Paul Davies (CCUS Advisory Group Chair), Steve Freeman and David Morgan (Confederation of Industries), Alasdair Graham (Energy Transitions Commission), Peter Levi and Christophe McGlade (International Energy Agency), Mercedes Maroto-Valer (IDRIC), Harry Thorne (Oil and Gas UK), Richard Twinn (UK Green Building Council),

Adam Whitmore (Bellona), Paul Williams (SMMT-OHEEG Chair), Tomas Wyns and Gauri Khandekar (Institute for European Studies). All group members appeared in their personal capacities. Our design and digital Anoushka Rodda and Pali Palavathanan (TEMPLO) and Mat Burhouse (Slingshot). A wide range of stakeholders and organisations who participated in workshops, engaged with us, submitted evidence or met with the Committee bilaterally. I am pleased to present the Climate Change Committee’s recommendations for the UK’s Sixth Carbon Budget which will run from 2033 to 2037. This report builds on the advice we gave last year, which led to Net Zero becoming law throughout the Whereas then we painted a detailed picture of the UK in 2050, now, we describe the path to Net Zero. We explore the changes that the UK will see on that journey and detail the steps that must be taken to ensure we stick to our essential This is the most comprehensive advice we have ever produced. It is a blueprint for a fully decarbonised UK. A rich depiction of the choices before us in reaching the goal of net-zero greenhouse gases by 2050 at the latest. Our recommended pathway requires a 78% reduction in UK territorial emissions between 1990 and 2035. In effect, it brings forward the UK’s previous 80% target by nearly 15 years. There is no clearer indication of the increased ambition implied by the Net Zero target than this. Our pathway meets the Paris Agreement stipulation of ‘highest possible ambition’. It is challenging but also hugely advantageous, creating new industrial opportunities and ensuring wider gains for the nation’s Some of our most important work is on the costs of the transition. Low carbon investment must scale up to £50 billion each year to deliver Net Zero, supporting the UK’s economic recovery over the next decade. This investment generates substantial fuel savings, as cleaner, more-efficient technologies replace their fossil- fuelled predecessors. In time, these savings cancel out the investment costs entirely – a vital new insight that means our central estimate for costs is now below 1% of GDP throughout the next 30 years. The pace of our recommended emissions path tells an important story about what must follow and what has gone before. We don’t reach Net Zero simply by wishing it. There must be a process and a sequence by which we reach the goal. Progress is more gradual in the early years as we make up for lost ground. Scaling up new policy development, ramping up new supply chains for low-carbon goods, addressing sectors that have progressed too transport, industry, buildings, agriculture. A critical moment arrives in the early 2030s, as sales of most high- carbon goods are phased out altogether. UK emissions fall sharply over the 2030s, before levelling off in the 2040s, as we clear the final hurdles to Net Zero. The implication of this path is the utmost focus is required from government over the next ten years. If policy is not scaled up across every sector; if business is not encouraged to invest; if the people of the UK are not engaged in this challenge - the UK will not deliver Net Zero by 2050. The 2020s must be the decisive decade of progress and action. Yet, that progress will be impossible if it is not just. Fairness in the transition to Net Zero is an essential constituent for its success.
In aggregate, the costs are low - but that must not hide the need to distribute the costs and the benefits fairly. Our recommended path heralds a major transition in the economy and jobs. There will be new low-carbon employment opportunities, but there will also be high-carbon

These impacts can be highly concentrated in some regions of the UK. We must prepare now for those changes. It is the government’s role to ensure we have the training and the skills that those changes require. National, regional, and local investment in low carbon industries is now an economic and social priority. Combatting climate change provides us with the means of levelling up as an essential part of our economic revival. In this endeavour, we will not be alone. The club of nations that has committed to Net Zero has grown significantly since our report last year. These new pledges, including those of China and the EU, South Korea and Japan, as well as the expected pledge from the US, offer mutual advancement. These are our markets of the future and, as low-carbon technologies and strategies develop around the world, we can be more assured of the global response to climate change and the widespread transitions that are underway in energy, transport, and industry. These will also mean that the reduction in our territorial emissions will be mirrored in the reduction of the carbon footprint of our imported goods and services. The signs point to a propitious moment for global climate ambition in Glasgow next year. But our international leadership, in the Presidency of COP26 and of the G7, must begin at home. Our influence in the wider world rests ultimately on strong For this we look to the framework provided by the UK’s Climate Change Act, which has governed the work of the Committee in producing this report. The basis of the British approach to tackling climate change is contained in the mix of responsibilities that the Act lays out so clearly. An independent body, the Climate Change Committee, advises on targets and delivery and measures progress. The long-term emissions goal is determined by the UK’s international obligations, themselves reflecting the scientific imperatives. Interim targets, expressed in the carbon budgets, are set in line with that long-term goal, stimulating short-term action. But the responsibility of meeting these carbon budgets – of actually delivering on the advice and the commitments – rests with Government. This Report gives the Government and Parliament the route map to meeting those This is the governance system that has served the UK well since 2008 and this Sixth Carbon Budget is its most complete expression. It is the product of an immense effort from my Committee and the talented team that supports it. I commend the advice strongly to Ministers and I urge the Government to legislate for the Sixth Carbon Budget as soon as possible. That would constitute the strongest statement of our ambition to tackle climate change. It is a decisive moment for global Britain. Chair of the Climate Change Committee

7 Sixth Carbon Budget – The path to Net Zero The Rt. Hon John Gummer, Lord Deben, Lord Deben was the UK’s longest -serving Secretary of State for the Environment (1993 to 1997). He has held several other high-level ministerial posts, including Secretary of State for Agricult ure, Fisheries and Food (1989 to 1993). Lord Deben also runs San croft, a corporate responsibility consultancy working with blue -chip companies around the world on environmental, social and ethical issues. Baroness Brown of Cambridge DBE FRS Baroness Brown of Cambridge DBE FREng FRS (Julia King) is an engineer, with a career spanning senior engineering and leadership roles in industry and academia. She currently serves as Chair of the CCC’s Adaptation Committee; non -executive director of the Offshore Renewable Energy Catapult; and Chair of the Keith Bell is a co-Director of the UK Energy Research Centre (UKERC), a Chartered Engineer and a Fellow of the Royal Society of Edinburgh. He has been at the University of Strathclyde since 2005, was appointed to the Scottish Power Chair in Smart Grids in 2013 and has been involved in energy system research in collaboration with many academic and industrial partners. Nick Chater is Pr ofessor of Behavioural Science at Warwick Business School. He has particular interests in the cognitive and social foundations of rationality, and applying behavioural insights to public policy and business. Nick is Co -founder and Director of Decision Technology Ltd, a research consultancy. Piers Forster is Director of the Priestley International Centre for Climate and Professor of Physical Climate Change at the University of Leeds. He has played a significant role authoring Intergovernmental Panel on Climate Change (IPCC) reports, and has a coordinating lead author role for the IPCC’s sixth assessment report. Rebecca Heaton is responsible for Drax Group’s efforts to mitigate climate c hange, ensuring that sound science underpins climate change polices and business strategy. She is also responsible for developing sustainability and climate change research programmes. Rebecca has a 20-year global career working at the interface between business, science and policy . Paul Johnson is Director of the Institute for Fiscal Studies and a visiting professor at University College London (UCL). He is widely published on the economics of public policy, and he co-wrote the ‘Mirrlees review’ of tax system design. He was previously Chi ef Economist at the Department for Professor Corinne Le Quéré CBE FRS Corinne Le Quéré is Royal Society Research Professor of Climate Change Science at the Uni versity of East Anglia (UEA), where she conducts research on the interactions between climate change and the carbon cycle. Corinne is currently the Chair of the French Haut Conseil

9 Sixth Carbon Budget – The path to Net Zero Chapter 1 – Introduction and key messages 35 2. Context – uncertain and urgent times 40 3. COP26 and international leadership 42 4.
Using scenarios to identify a balanced path to Net Zero 43 Chapter 2 – The UK path to Net Zero 57 1. The Balanced Pathway to Net Zero for the UK 60 2. Alternative pathways to Net Zero by 2050 77 3. Can the UK achieve Net Zero significantly before 2050? 87 Chapter 3 – Sector pathways to Net Zero 93 3. Manufacturing and construction 125 6. Agriculture and land use, land-use change and forestry 163 11. Greenhouse gas removals 197 1. Opportunities to reduce emissions 208 2. Pathways for Scottish, Welsh and Northern Irish emissions 216 3. Implications for targets 228 4. Costs and benefits in Scotland, Wales and Northern Ireland 231 5. Recommendations for policy 233 Chapter 4 – Scotland, Wales and Northern Ireland’s contribution to Net Zero

Chapter 5 - Investment, costs and benefits of the Sixth Carbon Budget 237 1. Background to assessing economic implications 241 2. Capital investment and operational savings 243 3. Annualised resource costs during the transition 254 5. Co-impacts along the path to Net Zero 271 Chapter 6 – A just transition to the Sixth Carbon Budget and Net Zero 278 3. Fuel poverty, energy bills and other household costs 295 Part 3: International and scientific circumstances Chapter 7 – The Sixth Carbon Budget as a contribution to the Paris Agre ement 313 flecting the Paris Agreement in our scenarios 317 2. Is the Balanced Pathway a fair and ambitious contribution? 322 3. Supporting global efforts to reduce emissions 333 4. Reducing the UK’s carbon footprint 344 Chapter 8 – Scientific context for setting the UK’s Sixth Carbon Budget 351 fundamentals of the physical science basis remain strong 355 2. Updated understanding of the climate system 359 3. Global CO2 budgets as a guide for mitigation pathways 367 4. Minimising the UK’s future contribution to climate change 372 5. The need to adapt to a changing climate 377 Chapter 9 – The shape of the emissions path to Net Zero 384 livering on the Paris Agreement 389 2. Supporting the recovery and maintaining momentum 391 3. Making progress in every sector in the 2020s 394 4. Why the recommendation does not require faster progress 408 Chapter 10 – Recommendations on the Sixth Carbon Budget 412 Sixth Carbon Budget level and emissions accounting 416 2. Nationally Determined Contribution for 2030 428 3. Increasing effort during existing carbon budgets 430 4. Traded-sector emissions and UK emission trading system cap 436 5. Next A Net Zero plan and monitoring of progress 440 Part 2: Impacts of the Sixth Carbon Budget

11 Sixth Carbon Budget – The path to Net Zero

13 Sixth Carbon Budget – The path to Net Zero We recommend that the UK sets a Sixth Carbon Budget to require a reduction in UK greenhouse gas emissions of 78% by 2035 relative to 1990, a 63% reduction from 2019. This will be a world-leading commitment, placing the UK decisively on the path to Net Zero by 2050 at the latest, with a trajectory that is consistent with the Paris Agreement. It should be accompanied by a similarly ambitious 2030 pledge, to reduce emissions by at least 68% from 1990, as part of the UK’s nationally determined contribution (NDC) to the UN process. * Our recommended budget would achieve well over half of the required emissions the required increase in global ambition, especially ahead of the UK hosting the next UN climate talks (i.e. COP26 in Glasgow). It can feasibly be achieved at low overall cost and would bring multiple benefits and opportunities for the UK. • A leading offer from the UK. While many countries have followed the UK in adopting Net Zero as a long-term emissions target, global ambition to 2030 remains far short of what is required. As President of the next UN climate talks (and of the G7) in 2021, the UK is in a position to influence others, but to do so must itself adopt an ambitious 2030 goal. Reducing emissions early matters as it is global cumulative emissions that drive climate outcomes. • A feasible path for the UK. Meeting the budget requires average annual reductions in UK emissions of 21 MtCO2e, similar to those achieved since 2012 (19 MtCO2e). The analysis in this report shows this is clearly feasible, provided effective policies are introduced across the economy without delay. We estimate net costs of meeting the budget to be low, equivalent • Benefits for the UK. Legislating our recommended budget would send a clear signal that the UK is open for low-carbon investment. This will help to encourage private investment at low cost at a time when it is needed to support the UK’s economic recovery from the COVID-19 health crisis. It could also help the UK secure competitive positions in growing global markets for low-carbon goods and services. The required changes would also deliver significant positive impacts for people in the UK in terms of health, well-being and the environment. Meeting our recommended budget will require a major nationwide investment programme, led by Government, but largely funded and delivered by private companies and individuals. Low-carbon markets and supply chains must scale up so that almost all new purchases and investments are in zero-carbon solutions by 2030 or soon after. Investments should be made resilient to the expected impacts of climate change. Reduced operating costs in later years will pay back on the More than ever before, future emissions reductions will require people to be actively involved. This need not entail sacrifices. Many people can make low- carbon choices, about how they travel, how they heat their homes, what they buy and what they eat. The experience of the UK Climate Assembly shows that if people understand what is needed and why, if they have options and can be involved in decision-making processes, they will support the transition to Net Zero.
* Our budget recommendation (-78%) includes emissions from international aviation and shipping, but UN convention is to report these separately, so they are not included in our recommended NDC (at least 68%). On an equivalent basis (i.e. including international aviation and shipping), the 2030 NDC would be a 64% reduction relative to 1990. should set the UK emissions lim it

Fairness is also fundamental to public support and must be embedded throughout policy. Only a transition that is perceived as fair, and where people, places and communities are well-supported, will succeed. UK Government policy, including on skills and jobs, must join up with local, regional and devolved policy on the just transition. Vulnerable people must be protected from the costs of the transition. Recent UK emissions reductions have come from the transition away from coal- fired power, which is almost complete. Future reductions must come from transport, industry, buildings and agriculture, as well as phasing out gas-fired power. There are positive lessons from power sector decarbonisation but each of these sectors raises different policy challenges. Policies must provide a clear direction to millions of people and businesses in the UK, shifting incentives to favour low-carbon options and tackling barriers to action. The Government has recognised the need for significant policy strengthening and is developing plans in all areas of UK emissions. Now plans must translate to action and Government must organise for the major delivery challenge of Net Zero. A slower path for emissions reduction, and a looser Sixth Carbon Budget, would put the 2050 Net Zero target at risk and reduce the scope for learning-by-doing. New economic opportunities would be missed and the UK’s role as President of the UN climate talks would be undermined. BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis Emissions shown include emissions from international aviation and shipping (IAS) and on an AR5 basis, including peatlands. Adjustments for IAS emissions to carbon budgets 1-3 based on historical IAS emissions data; adjustments to carbon budgets 4-5 based on IAS emissions under the Balanced Net Zero Pathway. commit the UK to the transition to Net Zero emissions in 2050. should cover all sources of UK The Sixth Carbon Budget Headroom for IAS emissions Past carbon budgets Active legislated carbon budgets Historical emissions The Balanced Net Zero Pathway

15 Sixth Carbon Budget – The path to Net Zero Box 1 and Box 2 set out the Committee’s recommendations. The rest of this summary is set out in five 1. Why the Sixth Carbon Budget is right for the climate 2. Why the Sixth Carbon Budget is right for the UK 3. How the Sixth Carbon Budget can be met CCC recommendations on the UK’s Sixth Carbon Budget • Budget level. The Sixth Carbon Budget (i.e. the legal limit for UK net emissions of greenhouse gases over the years 2033 -37) should be set at 965 MtCO 2e, implying a 78% reduction from 1990 to 2035. • Budget scope. The budget should cover all greenhouse gas emissions, including those from international aviation and shipping, and removals of CO2 from the atmosphere (e.g. through afforestation or engineered removals such as bioenergy with carbon capture and storage). The Committee does not consi der the previous approach of allowing ‘headroom’ for international aviation and shipping emission s to be sufficient given the importance of these emissions and the risk of their different treatment in UK legislation being seen as unfair by other sectors. • Domestic action. Performance against the budget should be judged based on actual UK emissions (net of removals), without recourse to international carbon units (often referred to as ‘credits’). The Government could choose to use credits to go beyond the bud get as a greater international contribution. Emissions trading can be a useful policy lever to re duce actual UK emissions (net of removals) as required to meet the • Net Zero Strategy. We recommend that the Government legislates our recom mended Sixth Carbon Budget as soon as possible and sets out its Net Zero plans and policies in the first half of 2021 (many of which have been under development since 2019) to deliver in full against the budget. The expected impact of policies, including t hose in early planning, should be clearly quantified and in sum be enough to meet the • Existing carbon budgets. Emissions will have to fall more quickly than required by the existing carbon budgets (i.e. the fourth and fifth, coveri ng 2023 -27 and 2028-32). It is for the Government to decide whether the existing budgets should b e amended to bring them in line with the Net Zero 2050 target, however, the Committee does not consider it necessary to reset these in law. Forthcoming revisio ns to the UK’s emissions inventory will make existing carbon budgets more challenging. Once the N DC and Sixth Carbon Budget are set on the path to Net Zero, those will provide a clear target for UK emissions reduction over the coming decade. reduce emissions across the UK

CCC recommendations on the UK’s Nationally Determined Contribution for 2030 The UK will host the next UN climate talks – the 26th Conference of the Parties (COP26) – in Glasgow in November 2021. The period leading up to these talks is vital for increasing global ambition. To support that process the UK must adopt a world leading NDC that reflects best practice under the Paris Agreem ent. • Ambition on reducing emissions. The UK should submit an NDC based on the path to the Sixth Carbon Budget, requiring at least a 68% reduction in territorial emissions from 1990 to 2030 (excluding emissions fr om international aviation and shipping, IA S, in line with UN convention), to be delivered through domestic action, with additional actions to reduce the UK’s contribution to IAS emissions.
– This is a clear progression from the UK’s existing it s expected effort share of the EU’s NDC ( -53%), the existing Fifth Carbon Budget (-57%), and the expected reduction in actual emissions under the Fifth Carbon – It would be world leading compared to existing NDCs, and amongst the front-runners for proposals for increased ambition. For example, if the EU adopts its proposed 55% reduction for 2030, our proposed NDC would be towards the top of the range that we estimate for the UK’s possible effort share had it still been a Member State. – It would align with the published path ways from the Intergovernmental Panel on Climate Change (IPCC) for a 1.5°C goal. UK emissions would fall by 54% from 2010 to 2030, compared to the 45% that the IPCC identifies for – It is equivalent to a 6 4% reduction including IAS emi ssions, the basis of our recommended Sixth Carbon Budget. • International aviation and shipping. While these emissions are treated separately by the UN, they must be addressed if the temperature goal of the Paris Agreement is to be met. The UK’s NDC should i nclude clear commitments to act on emissions from international aviation and shipping, including both long -term and interim targets. • Adaptation. Even if the Paris goals are delivered in full and global temperature rise is limited to 1.5°C, there will be further impacts from climate change beyond those already occurring today. If the Paris goals are missed, the global and UK impacts will become much more severe. The UK needs to increase its ambition on climate change adaptation, as it is not prepared even for the 1.5 -2°C world. The UK’s NDC should signal how national adaptation plans will be strengthened, as well as highlighting how the UK is suppor ting climate adaptation overseas. • International collaboration. The UK has been a s trong contributor to international climate finance, recently doubling its commitment to £11.6 billion in aggregate over 2021/22-2025/26. The UK’s NDC should highlight this co mmitment, along with other UK contributions to technology development and capacity building. 1. Why the Sixth Carbon Budget is right for the climate Current NDCs submitted under the Paris Agreement are predicted to lead to global average temperatures rising around 3°C by 2100 compared to pre-industrial levels, with risks of even more severe climate outcomes. The 2015 Paris Agreement aims to limit warming to well below 2°C and to pursue efforts to limit it to 1.5°C. China, the EU, Japan and South Korea have all announced Net Zero emissions targets for 2050 or soon after (2060 in the case of China). * The existing EU ambition is for a 40% reduction by 2030 relative to 1990; an increase to 55% is being considered. The fifth budget goal of -57% refers to the net carbon account, which adjusts for emissions trading in the EU Emissions Global ambition is increasing, is vital to help unlock greater

17 Sixth Carbon Budget – The path to Net Zero The US is expected to join that list in 2021. Together, Net Zero commitments by Parties to the Paris Agreement cover nearly 50% of global CO2 emissions and 50% of global GDP (around 60% and 75% with the US). Further commitments by businesses and cities/states demonstrate underlying support that will amplify and facilitate the national efforts. However, existing 2030 commitments globally do not yet match the long-term targets and still fall far short of what is needed to meet Paris Agreement targets. As host of COP26, the UK should send a clear signal that it is contributing fully to the Paris Agreement by setting a world-leading 2030 ambition and taking strong action now to move decisively onto the path to its long-term Net Zero ambition. How the Sixth Carbon Budget supports global climate action Our recommended Sixth Carbon Budget and UK NDC reflect the goals and requirements of the Paris Agreement, recognising the UK’s responsibility as a richer developed nation and its respective • Our recommended pathway has been explicitly designed to reflect the UK’s ‘highest possible ambition’ within the UK’s particular capabilities, as required by the Paris Agreement. • It would reduce the UK’s annual per capita emissions by 2035 to under 3 tCO2e per person, in line with global pathways consistent with meeting the • The actions required to meet the budget and NDC (including full decarbonisation of the power sector, full switchover to electric vehicle sales and installation of low-carbon heating, and roll-out of carbon capture and storage) would go beyond those required from the world on average historical emissions. The timing of these actions would align to that required • Comparable action from other developed countries, with developing countries following slightly later (i.e. where they generally adopt low-carbon measures later, achieve lower percentage reductions to 2030 and reach Net Zero emissions after 2050) would limit warming well below 2°C. We set out such a ‘leadership-driven’ global pathway in this report. • We have highlighted where policies and actions have important crossovers with the need to adapt to climate change, which is also included as a key part of the long-term response to climate change in the Paris Agreement. To limit warming below 1.5°C, modelling generally suggests that all regions will need to follow paths close to those currently being considered in developed countries. Developed countries will need to play a significant role in supporting those efforts. If additional action to reduce emissions domestically beyond our recommended budget proves possible, then the UK should take that action in further support of the 1.5°C ambition. consistent with the Paris Agreement CCC analysis. Huppmann, D, et.al. (2018) A new scenario resource for integrated 1.50C research. Nature Climate Change, 8 (12), 1027; Olivier, J. & Peters, J. (2019) Trends in global CO2 and total greenhouse gas emissions. Aggregation of greenhouse gas emissions is done using the global warming potential metric at time horizon of 100 years.
Values from the IPCC 5th Assessment report (with climate-carbon feedbacks) are used. Minimum and maximum ranges are used across the global emissions scenario categories used by the IPCC Special Report on Global Warming of 1.50C. These figures do not include the uncertain impact of COVID-19 on 2020 emissions. 1990 2000 2010 2020 2030 2040 2050 2060 >50 %1.5°C - Range >66% 2°C - Range >50% 1.5°C - Median >66% 2°C - Median Historical - World Historical - UK Balanced Net Zero Pathway - UK 1990 2000 2010 2020 2030 2040 2050 2060 >50 %1.5°C - Range >66% 2°C - Range >50% 1.5°C - Median >66% 2°C - Median Historical - World Historical - UK Balanced Net Zero Pathway - UK All GHG emissions (basis of the UK's targets)

19 Sixth Carbon Budget – The path to Net Zero Comparison of the UK decarbonisation actions with global average pathways Coal % of electricity generation – 2030 0% (by 2024) 8%1 13%1 Low-carbon % of generation – 20301 87% 72%1 67%1 Electric Vehicles % of car fleet – 2030 43% 20 - 40%2 13%3 Electric Vehicles % of car sales – 2030 97% 52%3 40%3 Average heat pump installation rate – 2030 (heat pumps/thousand people/yr) Low-carbon hydrogen production – 2030 (kg / CCS per capita – 2030 (tCO2/person/yr) 0.32 0.251 0.11 Engineered removals – 2030 (tCO2/person/yr) 0.07 0.041 0.011 CCC analysis; 1 Huppmann, D. et al. (2018) A new scenario resource for integrated 1.5°C research. Nature Climate Change, 8 (12), 1027; 2 Climate Action Tracker Initiative (2020) Paris Agreement Compatible Sectoral Benchmarks; 3 IEA (2020) World Energy Outlook 2020. The UK Government has now committed to a full phase-out of petrol and diesel cars by 2030. Electric car fleet figures here include plug-in hybrids. For Europe as a whole, analysis from Climate Action Tracker suggests a benchmark for EV fleets reaching 40-55%. Median figures are used for the IPCC- SR1.5 pathways, with a wide range around these medians across the scenario ensemble. CCS is often used extensively within IPCC-SR1.5 pathways, to greater extents than in other global pathways (e.g. those from the IEA). Global 1.5°C pathways have ~50% probability of limiting global warming to 1.5°C and ‘well below 2°C’ pathways have at least 66% probability of limiting to 2°C. The UK’s broader carbon footprint Territorial emissions (i.e. those arising from UK sources, plus its contribution to international aviation and shipping) remain the right basis for the UK’s carbon budgets and Net Zero target. However, the UK must also reduce its consumption emissions (i.e. the broader impact of UK consumption including emissions embedded in imported goods and services), which are around 50% higher than our territorial emissions. If UK territorial emissions are reduced to Net Zero and UK trading partners reduce their emissions in line with the Paris Agreement, then we estimate that UK consumption emissions would be around 90% below 1990 levels in The Committee will continue to scrutinise progress on consumption emissions alongside territorial emissions and advise on policies that reduce both. We will monitor consumption emissions against a Paris-aligned trajectory in our future annual Progress Reports to Parliament. UK industries should face a level playing field under the UK’s ambitious targets. Reducing emissions in the UK must not be at the expense of exporting jobs and emissions overseas. • A level playing field should be easier to sustain now that around 50% of the UK’s imported emissions are from territories due to be covered by Net Zero targets. Together with the UK’s target, this means Net Zero targets for mid- century cover around 75% of UK consumption emissions. • Policy has a key role to play, including Exchequer support for low-carbon solutions in trade-exposed industries at risk of lost competitiveness, production standards (i.e. regulating for both UK production and imports to meet tightening emissions standards) and border carbon tariffs1 (for which work should start now by developing better metrics of carbon-intensity and building an international consensus on their role). These should be considered in new trade agreements. Our recommended budget is designed to be met by reducing UK sources of emissions, not by displacing them to other markets. Some of the actions involved (e.g. resource efficiency and more generally reduced reliance on imported fossil fuels) will bring additional reductions in the UK’s imported emissions. 2. Why the Sixth Carbon Budget is right for the UK The economic context for the Sixth Carbon Budget When the Committee recommended the UK’s Net Zero target for 2050, we demonstrated that any negative economic impact was likely to be small and the overall impact could turn out to be positive. Our analysis of the full pathway to Net Zero for this report reinforces that finding. An ambitious budget is preferable to an unambitious one, given the range of risks and costs from unchecked climate change, and in some cases could even cut costs (e.g. with an earlier switch to The economic and social context for climate action has changed in important ways since the UK set its Net Zero 2050 • The COVID-19 pandemic and measures taken in response to it have sharply changed the economic backdrop in the UK and globally. In the UK, 750,000 payroll jobs have been lost (with millions more supported by the Jobs Retention Scheme), GDP has fallen (e.g. by 9% from August 2019 to August 2020) and business investment has dropped by around a quarter despite record low interest rates. These effects imply considerable spare capacity in the economy and therefore that increasing investment could support the • The new Net Zero commitments by countries and businesses clearly demonstrate momentum building towards more climate action. This should drive down low-carbon technology costs that themselves can enable further commitments to action. These commitments are a demonstration that future markets lie with low-carbon products. Business models that are not compatible with a Net Zero future are increasingly risky. • Costs of key low-carbon technologies have continued to fall.
For example, the contracted price for electricity generated by offshore wind fell again in the latest auction round by around a third compared to the previous auction two years earlier. These cost reductions are driven by scale manufacturing, investor confidence and ‘learning-by-doing’ during deployment within an effective low-risk policy framework. These effects can be replicated in other areas of the economy, as markets scale up globally and the costs of low-carbon technologies continue to fall. This background favours a decisive transition for the UK, quickly switching resources away from high-carbon activity and into low-carbon investments with lower operating costs than high-carbon alternatives. This is reflected in our proposed pathway, which transitions as rapidly as possible within constraints of stock turnover, supply chain capacity and time required to design effective policy. The Balanced Pathway to deliver our recommended Sixth Carbon Budget involves a large sustained increase in investment, adding around £50 billion annually by 2030 (compared to current economy-wide investment of nearly £400 billion). The largest increases are for low-carbon power capacity, retrofit of buildings and the added costs of batteries and infrastructure for electric vehicles. This required increase in investment can, and should, be delivered largely by the private sector. It is well within the range of historical changes in UK total investment. technologies continue to fall. 21 Sixth Carbon Budget – The path to Net Zero The sectoral increases have broadly been seen before, for example, in the transport sector as car-buyers shifted towards larger cars, in the power sector as renewable investment increased in the last decade, and in the housing sector as spending on refurbishments increased. It can be financed at low cost if policies are constructed to give long-term clarity to consumers and confidence to investors. investment cost in later years. As a result, our estimate of the annualised resource cost (which measures the net additional cost each year to deliver the same services with lower emissions) has fallen to less than 1% of GDP through to 2050. This is a reduction since our 2019 estimate for the Net Zero 2050 target, reflecting our more detailed modelling and the falling costs of low-carbon technologies. This added resource cost will not necessarily reduce GDP by an equivalent amount, particularly given the spare capacity following the pandemic. Modelling commissioned for this report suggests that the level of UK GDP would be around 2% higher than it would have been by 2035 as resources are redirected from fossil fuel costs savings in the balanced pathway Costs of electricity are included in the energy supply sector, whereas costs of other low-carbon fuels such as hydrogen and bioenergy are included in sectors that use these fuels. ‘M&C’ is manufacturing and construction. ‘Other’ category includes aviation, shipping, land-use, land-use change and forestry, agriculture, removals, waste and F-gases. CAPEX refers to additional annual capital investment. OPEX refers to savings due to operational cost 2020 2025 2030 2035 2040 2045 2050 Surface transport OPEX Buildings OPEX Electricity supply OPEX M&C / Fuel supply OPEX Other OPEX Surface transport CAPEX Buildings CAPEX Electricity supply CAPEX Networks CAPEX M&C / Fuel supply CAPEX

While costs are small overall, they could be large for particular people, sectors or areas. The risk of localised impacts should be a key focus for the Government. Our proposed pathway will require new jobs to be filled, as the need for other jobs is reduced. With the right policies in place, our proposed pathway can be delivered without adding further costs to energy bills and with limited impacts on the public finances. Significant positive impacts on health and the environment are • Jobs and the Just Transition. Our pathway involves considerable opportunities for job creation. For example, the programme to retrofit buildings alone would require over 200,000 extra full-time workers in that sector from 2030 through to 2050.2 An important challenge for Government is to identify where jobs may be lost (for example in oil and gas extraction and refining) and to support workers to transition to being a part of the new low-carbon workforce (e.g. in carbon capture and storage), whether within companies undergoing their own transitions or beyond. • Energy bills. A national investment programme is needed to decarbonise the UK’s homes fully, at an average investment of less than £10,000 per home, over the next 30 years.3 This can be achieved with practical policy design and some Exchequer funding. The plan can be implemented without large increases in consumers’ energy bills, especially as the savings from low-cost renewables begin to be reflected in consumer bills. Indeed, policy can be designed to ensure that vulnerable customers benefit from lower energy bills, given the lower operating costs resulting from improvements in energy efficiency of homes and heating systems. Motorists stand to see significant cuts in the costs of driving as they shift to electric • Public finances. Given a small overall economic impact, and the expectation for the private sector to finance most of the transition, the overall impact on public finances should be limited. However, the Government will need to find a way to replace lost revenues from road fuel duty and vehicle excise duties, for example by shifting to a road charging regime. Carbon taxes are an important part of the policy toolkit and could raise revenues during the Net Zero transition. The priorities we identify in this report for Exchequer support imply around a doubling in annual public funding to £9-12 billion by 2030, depending on policy choices. • Health and environment. There is a host of health and environmental benefits attached to the Net Zero transition. More walking and cycling and less carbon-intensive diets can improve health, as can cleaner air and better insulated homes (e.g.
the annual cost to the NHS of poor-quality housing in England alone has been estimated at over £1 billion).4 Restoration of peatlands and planting of woodlands can improve access to green space and, done well, can provide new income streams for farmers, improve the natural environment, support biodiversity and improve adaptation to the impacts of climate change. The required investment programme can provide a significant economic boost in the coming years and support the UK’s economic recovery. These benefits may well persist into the longer-term and could grow if new zero-carbon technologies continue to develop rapidly and provide spill-overs to other sectors. 23 Sixth Carbon Budget – The path to Net Zero At worst the size of the economy would be similar to that expected without climate action, but with valuable co-benefits. Negative impacts can be avoided with effective policy, which must be decisive and provide confidence to investors. Why the budget is right for Scotland, Wales & Northern Ireland Scotland, Wales and Northern Ireland together cover a fifth of UK emissions. They have an integral role to play in delivering the UK’s Sixth Carbon Budget on the path to Net Zero. For Scotland and Wales, this will be achieved under long-term targets passed in Holyrood and the Senedd Cymru. Northern Ireland is considering introducing its own climate legislation. The challenges and solutions to tackling greenhouse gas emissions are broadly similar across the UK. The respective contributions made by each part of the UK will depend, at least in part, on the relative importance within their economies of particular types of emitting activity (e.g. agriculture, industry) and opportunities for removing CO2 from the atmosphere through natural or engineered solutions. UK climate targets cannot be met without strong policy action across Scotland, Wales and Northern Ireland, tailored for national, regional and local • While some important policy levers are held in Westminster, powers are fully or partially devolved in most key areas, including encouraging shifts to walking, cycling and public transport; providing electric vehicle charging points; improvements to the efficiency and comfort of the building stock and heating in homes off the gas grid; agriculture and land use; waste; carbon trading; and public provision of education and training. Northern Ireland also has wider devolved powers over energy networks. • The frameworks in Wales and Scotland are ahead of the rest of the UK in emphasising the importance of the potential health and environment benefits, and the need for a just transition. Wales’ Wellbeing of Future Generations Act and Scotland’s Just Transition Commission will be • Even where the main policy levers are held by the UK Government, Scotland, Wales and Northern Ireland can take action through complementary measures at the devolved level (e.g. provision of additional incentives, public engagement, and supporting policies such as We will shortly publish two joint reports reflecting on progress towards meeting Wales’s existing climate targets and giving new recommendations on the level of Wales’s Third Carbon Budget (2026-2030) and other emissions reduction targets In parallel with this advice, the Committee has written to the Scottish Government and the Northern Ireland Executive to give further advice on meeting and setting

3. How the Sixth Carbon Budget can be met UK territorial emissions in 2019 were 522 MtCO2e, 41% below 1990 levels. * UK GDP grew by over 75% over the same period. Emissions primarily result from the burning of fossil fuels (mostly oil and gas) to run vehicles, heat buildings, produce electricity and in industry and agriculture. Further emissions arise from industrial and agricultural processes, changes in land use, waste disposal and leakage from Net Zero requires a transformation across these areas. No single solution or single sector can meet the budget alone; action is required across all areas and all sectors, without delay. The 2020s are the crucial with effective action starting now, by 2030 the UK will be firmly on track to Net Zero. A large part of meeting Net Zero is a technological and investment challenge. But it also requires a fundamental response from as consumers, workers, homeowners, tenants and landlords, motorists, farmers, citizens and families. Government should lead that response and will have most success where its proposals are seen to be fair and where people have been involved in developing the proposed solutions. The UK Climate Assembly provided useful insights on the priorities of a representative cross-section of the UK population. These priorities are Scenarios for the path to Net Zero At the core of our advice for this report are multiple scenarios exploring the actions required in each area and every year in order to reduce UK emissions to Net Zero by 2050 at the latest. The detailed scenarios explore uncertainties, particularly over how far people will change their behaviours, how quickly technology will develop and the balance between options where credible alternatives exist. All the scenarios are ambitious while bounded by realistic assumptions over the speed at which low-carbon technologies can be developed and rolled out, allowing time for supply chains, markets and infrastructure to scale up. They are self-consistent and recognise other priorities – for example, our energy analysis maintains security of supply, our housing analysis considers the need for flood protection and to avoid over-heating, our land analysis supports the natural Based on the insights of these scenarios, we have developed a Balanced Pathway as the basis for our recommended Sixth Carbon Budget and the UK’s NDC. The Balanced Pathway makes moderate assumptions on behavioural change and innovation and takes actions in the coming decade to develop multiple options for later roll-out (e.g. use of hydrogen and/or electrification for heavy goods vehicles and buildings). While it is not a prescriptive path that must be followed exactly, it provides a good indication of what should be done over the coming * Throughout this report our figures for UK emissions include those from international aviation and shipping (45 MtCO2e in 2019).
We also incorporate expected changes to the UK emissions accounts to reflect higher estimates for emissions from peatlands and higher global warming potentials (GWP) proposed by the IPCC (and agreed at the UNFCCC) for non-CO2 greenhouse gases. As a result, our estimate for UK emissions in 2019 is a further 42 MtCO2e higher than in the UK’s official inventory. Box 2.1 in Chapter 2 sets out more details on these issues. Zero, which forms the basis of

25 Sixth Carbon Budget – The path to Net Zero Meeting the Sixth Carbon Budget requires action across four key areas in line with • Reducing demand for carbon-intensive activities. – Reduced demand. Around 10% of the emissions saving in our Balanced Pathway in 2035 comes from changes that reduce demand for carbon-intensive activity. Particularly important in our scenarios are an accelerated shift in diets away from meat and dairy products, reductions in waste, slower growth in flights and reductions in travel demand. While changes are needed, these can happen over time and overall can be positive for health and well-being. – Improved efficiency. A further 5% comes from improving efficiency, in use of energy and resources, especially by better insulation of buildings, improving vehicle efficiency and improving efficiency in • Take-up of low-carbon solutions. Over half the emissions saving is from people and businesses adopting low-carbon solutions as high-carbon and all boiler replacements in homes and other buildings must be low- we expect largely electric. By 2040 all new heavy goods vehicles should be low-carbon. Industry must either adopt technologies that use electricity or hydrogen instead of fossil fuels or install carbon capture and • Expansion of low-carbon energy supplies. – Low-carbon electricity. Low-carbon electricity can now be produced more cheaply than high-carbon electricity in the UK and globally. – In our Balanced Pathway the low-carbon share increases from 50% now to 100% by 2035, cutting UK emissions by 18% compared to our baseline. New demands from transport, buildings and industry (moderated by improving energy efficiency) mean electricity demand rises 50% to 2035, doubling or even trebling by 2050. The largest contribution is from offshore wind, reaching the Government’s goal of 40 GW in 2030, on a path to 65-125 GW by 2050. – Low-carbon hydrogen scales up to 90 TWh by 2035 (i.e. nearly a third of the size of the current power sector), produced using electricity or from natural gas or biomass with carbon capture and storage. It is used in areas less suited to electrification, particularly shipping and parts of industry, and is vital in providing flexibility to deal with intermittency in the power system. It may also have a material longer- term role in buildings and other transport, such as heavy goods • Land (and removals). A transformation is needed in the UK’s land while supporting UK farmers. By 2035 our scenarios involve planting of 440,000 hectares of mixed woodland to remove CO2 from the atmosphere as they grow, with a further 260,000 hectares of agricultural land shifting to bioenergy production (including short rotation forestry). This would see UK woodland cover growing from 13% now to 15% by 2035. Peatlands must be restored widely and managed sustainably. Low-carbon farming practices must be adopted widely, while raising farm productivity. The largest contribution is from

Alongside the nature-based removals, by 2035 the UK should be using bioenergy (largely grown in the UK) with CCS to deliver engineered 2025-2035. Before 2025, newer markets (e.g. for electric vehicles and low-carbon heating) are still scaling up from low levels, so potential for large-scale roll-out and therefore rapid emissions reductions is more limited. Beyond 2035 some opportunities have been exhausted, so progress slows down (e.g. the power sector reaches zero emissions by 2035). BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. ‘Other low -carbon technology’ includes use of bioenergy and waste treatment measures. ‘Producing low - carbon electricity’ requires the use of CCS in electricity generation. Emissions fall fastest over 2025- 2010 2015 2020 2025 2030 2035 2040 2045 2050 Low-carbon electrification Low-carbon hydrogen and other low-carbon technology Low-carbon CO₂ capture from fossil fuels and industry Offset emissions using land and greenhouse gas removals

27 Sixth Carbon Budget – The path to Net Zero

Phase-out dates of high-carbon activities under the Balanced Pathway Technology/behaviour Phase out date (sales) Backstop date (operation) 2032 (including plug-in hybrids) 2050 2030-33 (in commercial properties) Oil boilers 2028 (in residential homes) 2025-26 (in commercial properties) Gas power generation (unabated) 2030 (no new build of unabated gas plants) N/A 2025 ban on all municipal & From today, new plants and extensions should be built with CCS or CCS ready LULUCF = Land use, land-use change and forestry at different rates, reflecting the Surface transport Electricity supply Manufacturing & construction Buildings F-gases LULUCF (sources and sinks)

29 Sixth Carbon Budget – The path to Net Zero Delivering the actions required in the 2020s to meet the Sixth Carbon Budget requires policies to be strengthened now. Matching strong ambition with action is vital for the UK’s credibility, with business and with the international community. Action in early years underpins the transition by developing options and driving learning-by-doing in key technologies. It keeps open the possibility that if faster progress proves possible it can be taken, in further support of the global 1.5°C goal. A vital challenge is to ensure that the transition is fair, and perceived to be fair. That was a key theme from the recent UK Climate Assembly, and it is clear that engaging and involving the public in the transition and in policy design will be vital. The Treasury Net Zero Review must identify fair ways to share the costs and benefits of the transition and the Government must develop effective plans for a just transition while embedding the principle of fairness throughout policy. Plans should recognise interactions with other transformations, such as digitalisation.
Place and skills will be key dimensions to consider, so it is vital that UK Government policy joins up well with local, regional and devolved policy on the just transition. We identify priorities for every sector of the economy, building on our detailed recommendations in our June Progress Report. • Surface transport (22% of 2019 emissions).5 A comprehensive policy package will be needed to deliver on the Government’s new commitment to phase out new sales of petrol and diesel cars and vans by 2030, including ensuring that plug-in hybrids play no more than a niche role by then. A further commitment should be made to phase out sales of diesel heavy goods vehicles no later than 2040, supported by large-scale trials in the near term. Recharging and refuelling infrastructure will need to develop to meet the range of emerging needs. Effective demand-side policy is also essential – we identify significant opportunities, and advantages, to reducing travel demand, but this will not happen without firm policies. • Industry (20%). For the manufacturing, construction and fuel supply industries, the Government must move from the current piecemeal approach to a comprehensive transition support framework. Taxpayer funding will be key in early years to ensure industries stay internationally competitive while reducing emissions. The development of longer-term policies, such as border carbon tariffs or carbon standards, should begin immediately, for example through development of improved measurement of carbon-intensity. Policy must tackle both the demand-side and supply- side for low-carbon products and ensure relevant infrastructure is available. • Buildings (17%). Government must produce a robust and ambitious Heat and Buildings strategy which sets the direction for the next decade, with clear signals on the phase-out of fossil heating, rebalancing of policy costs between electricity and gas, commitments to funding and delivery plans which include regional and local actors. Our Balanced Pathway is underpinned by clear timetables for standards to make all buildings energy efficient and ultimately low-carbon. The other priorities are rapidly to scale up supply chains for heat pumps and heat networks and to develop the option of hydrogen for heat. Proper enforcement of standards, including avoiding overheating risks, and an effective approach to skills are essential. • Electricity generation (10%). Low-risk instruments like the auctions of renewable contracts should continue to support the scale-up of low- carbon generating capacity. Policy should address barriers to the major scale-up required, for example by supporting the coordination of connections from offshore windfarms into the onshore network and greatly Only a just transition will be

strengthening the UK’s power grid. Following on from the 2024 coal phase- out, gas-fired power without CCS should be phased out by 2035. Work to improve markets for the provision of flexibility must accelerate to accommodate the increasing shares of variable power. • Low-carbon hydrogen. The Government’s Hydrogen Strategy is due to be published in spring 2021. It will need to set out a vision for hydrogen’s role in meeting Net Zero in the longer term, together with the actions, regulations and incentives across end-use applications and hydrogen supply to develop hydrogen’s role over the next decade. • Agriculture (10%) and land (net source of 2%). We set out detailed recommendations on policy for land and agriculture in January 2020. These must be implemented in a way that is fair to farmers. The priorities a strengthened regulatory baseline to ensure low-regret measures are adopted; incentive schemes such as auctioned contracts to drive afforestation; and enabling measures to address issues such as skills, supply chains and barriers for tenant farmers. Policy design must account for the challenges of the changing climate and reflect wider environmental priorities, including for biodiversity, to harness potential synergies and avoid unnecessary trade-offs. Policies are also needed to cut food waste and encourage a reduction in consumption of meat and dairy. • Aviation (7%) and shipping (3%). The UK will need strategies to reduce its emissions from aviation and shipping to Net Zero. It should help drive international processes (through ICAO and the IMO)6 to strengthen ambition in line with Net Zero. Policy should also provide early-stage development support for engineered CO2 removals, sustainable fuels and more efficient, including electrified, craft. Steps should be taken to limit aviation growth in line with our scenarios. • Waste (6%) and F-gases (3%). Waste policy should include a ban on landfilling biodegradable waste by 2025, with recycling increasing to 70% by 2030. More policies are needed through the chain from manufacturing to the consumer to reduce the amount of waste. All energy-from-waste plants should fit CCS by 2050. F-gas regulations already require reduction of some F-gas sources; plans will need to extend to all sources. • CO2 removal. A full strategy is needed for CO2 removal, covering both nature-based and engineered options. It should cover initial development and demonstration, governance arrangements to ensure sustainability and that removals are permanent, and possible routes to market development to support the scale-up required from the late 2020s. Net Zero and the Sixth Carbon Budget present a major coordination and delivery challenge. The Government must organise itself and its agencies to meet that challenge. The two Cabinet Committees for Climate Action – the Strategy Committee chaired by the Prime Minister and the Implementation Committee chaired by the BEIS7 Secretary of State – are an important element of that, but stronger governance and coordination will be needed, with delivery processes reaching out across all levels and localities of Government, across borders, and across UK businesses and people. The Committee will continue to offer its support to developing the Government’s policy programme, and those of Scotland, Wales and Northern Ireland, and will scrutinise proposals carefully and transparently. The Committee has set out detailed views on the policy priorities in a separate Policy report published at all levels to meet the major

31 Sixth Carbon Budget – The path to Net Zero In the days following this advice, the Government must communicate its NDC to the UN. That should be a world-leading commitment, in line with the Committee’s advice.
Ambitious goals on reducing emissions should be accompanied by a promise also to increase action on adaptation, which is a key theme of the Paris Agreement and an increasingly urgent priority given the continued changes in the climate that can be expected even if the Paris Agreement goals are met. The Government must then set the Sixth Carbon Budget in law by the end of June 2021. This must be followed, as soon as is practicable, by a set of policies and proposals that demonstrably would meet the budget. We recommend that both these steps are taken without delay, in the first half of 2021. Such prompt action would demonstrate the UK’s climate credentials as President of COP26 and would give confidence to businesses looking to invest and make their own Net Zero transitions. It is necessary given the scale and speed of change We expect to report on the Government’s strategies in our next annual Progress _______________________________________________________________________________ This report represents an extensive programme of analysis, consultation and consideration by the Committee and its staff, building on the extensive evidence published last year for our Net Zero advice. This our public Call for Evidence; 10 new research projects; three expert advisory groups on health, finance and policy for Net Zero; policy roundtables on heating buildings, electricity market design and phase-out of unabated gas, digitalisation, greenhouse gas removals and low-carbon industry; detailed datasets and deep dives into the roles of local authorities and businesses. The outputs of our work are published on our website ( and explained in the five parts (10 chapters) of this report and its accompanying Policy report and Methodology report.9 • Part 1: The path to Net Zero sets out the scenarios that underpin our advice and that demonstrate how the Sixth Carbon Budget can be overall (Chapter 2), sector by sector (Chapter 3) and for Scotland, Wales and • Part 2: Impacts of the Sixth Carbon Budget sets out (in Chapter 5) our estimates of the costs, investments and potential economic impact of the budget, and (in Chapter 6) the need for a just transition, including implications for jobs, competitiveness, energy bills and the public finances. • Part 3: International Circumstances and Climate Science sets out how our recommendations represent a fair and ambitious contribution to the Paris Agreement, including consideration of the UK’s broader contribution to tackling climate change beyond UK territorial emissions, including the UK’s overseas consumption emissions (Chapter 7). Chapter 8 sets out the relevant climate science that underpins our advice. • Part 4: Recommendations sets out why our recommended pathway reduces emissions more quickly before 2035 than after 2035 (Chapter 9) and our full recommendations relating to the Sixth Carbon Budget (Chapter

33 Sixth Carbon Budget – The path to Net Zero

1 Border carbon tariffs impose a carbon tax at the border on imported products based on their embedded emissions, or carbon footprint. By matching the border carbon tariff to domestic carbon taxes imposed in the UK, a level playing field can be provided. 2 CITB (2020) Building Skills for Net Zero (draft report). 3 See Chapter 3 of this report. 4 Nicol S. et al. (2015), The cost of poor housing to the NHS. 5 Quoted emissions percentages refer to those used in this report, with adjustments from the UK’s official inventory to reflect upcoming changes for peatland emissions and Global Warming Potential (GWP) estimates. They are as a proportion of a total that includes international aviation and shipping. For some sectors (agriculture, land use, waste, F-gases, aviation and shipping) the latest available estimates are used, from 2018. Energy-from-waste emissions are reported within the waste sector. 6 The International Civil Aviation Organisation and the International Maritime Organisation. 7 BEIS = The Department for Business, Energy and Industrial Strategy. 8 CCC (2020) Policies for Net Zero and the Sixth Carbon Budget. 9 CCC (2020) The Sixth Carbon Budget – Methodology Report. 35 Sixth Carbon Budget – The path to Net Zero 2. Context – uncertain and urgent times 40 3. COP26 and international leadership 42 4. Using scenarios to identify a balanced path to Net Zero 43

37 Sixth Carbon Budget – The path to Net Zero The Sixth Carbon Budget sets the limit on allowed UK territorial greenhouse gas emissions over the period 2033 to 2037. It is our duty under the Climate Change Act to advise on it by the end of 2020, following which it must be legislated by the Our advice on the Sixth Carbon Budget builds on our Net Zero advice from May • This is the first carbon budget to be set on the path to the UK’s Net Zero target for 2050, which was placed in law in summer 2019. Whereas the Net Zero advice focused on the end point, this advice looks at the whole pathway and effectively provides the trajectory for emissions over the coming three decades on the way to Net Zero. • We have gone beyond the ‘proof of concept’ Further Ambition scenario presented in our Net Zero advice, to look at different ways of achieving Net Zero. We present five Net Zero scenarios, which explore how developments in behavioural and societal change and in technology may affect the path This advice comes at a critical juncture – the opportunity is there for the UK to provide international leadership in the run up to COP26, while also driving a resilient recovery through the low-carbon investments that will get us on track to Net Zero. We introduce our advice in five 2. Context – uncertain and urgent times 3. COP26 and international leadership 4. Our approach – using scenarios to identify a balanced path to Net Zero 5. Requirements of the Climate Change Act This advice effectively sets the

Chapter 1: Introduction and key m essages 38 In May 2019, the Committee recommended that the UK increase ambition under the Climate Change Act to require greenhouse gas emissions to reach Net Zero by 2050.
The Net Zero target requires deep reductions in all sources of emissions, with any remaining sources offset by removals of CO2 from the atmosphere (e.g. by afforestation). Net emissions, after accounting for removals, must be reduced by at The Government accepted this advice and legislated in June 2019 to make Net Zero 2050 a legal requirement. When advising on the target, the Committee was clear that increasing ambition under the legislated targets had to be accompanied by a step-change in climate policy to get on track towards meeting Net Zero. • Net Zero is a different challenge from the previous 2050 target for at least an 80% reduction in emissions – all UK emissions must be tackled, without reliance on offsets from elsewhere. It is not sufficient to simply reduce emissions – where zero-carbon options exist these must be deployed (for example, in homes and in manufacturing). • The public need to be involved – over half the emissions reductions we identified to reach Net Zero actively involve people, whether by choosing to purchase low-carbon technologies like electric cars, or by making different choices, for example on their travel and diets. • Delivering Net Zero will involve costs and benefits, employment and fiscal effects, and reinvention for many businesses. It must be a central influence over our recovery from the COVID-19 economic crisis. Investment for Net Zero is a solid basis for economic renewal. We have begun to see the consultations, policies and strategies that show that the Government is taking the Net Zero policy challenge seriously. This advice explores a range of ways to achieve Net Zero by 2050. In advising on the Sixth Carbon Budget, the Committee has focused in particular on what they mean for the shape of the emissions trajectory and how they perform against the criteria set out by the Climate Change Act (see section 5). We have developed scenarios that cut emissions rapidly as demanded by the climate science, but also ones that provide clarity for businesses to support investment, that contribute to future-proofed good-quality jobs while smoothing the transition for current high-carbon industries, that unlock health and well-being benefits, and that support a positive position for the UK in the world. Our recommended ‘Balanced Net Zero Pathway’ is the basis of our advice on the level of the Sixth Carbon Budget. It reduces emissions by 2035 to 78% below 1990 levels, including the UK’s share of international aviation and international shipping when emissions had already fallen around 40% since 1990. This Balanced Net Zero Pathway is set out in Chapters 2 and 3. It was built on multiple lines of evidence, and takes into account what is feasible over time and what is necessary to get on track to Net Zero by 2050. 39 Sixth Carbon Budget – The path to Net Zero We assess it to be a fair pathway that is compatible with global efforts to limit the rise in global average temperature to well below 2°C and to pursue efforts to limit warming to 1.5°C. It would reduce per-capita emissions in the UK by 2035 to the global average level from the median of the IPCC’s pathways for limiting warming to 1.5°C with a 50% probability. The first five carbon budgets are already legislated to 2032, the end of the Fifth Carbon Budget period. However, this advice looks at the full path for emissions to Net Zero by 2050 at the latest. BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis Emissions shown include emissions from international aviation and shipping (IAS) and on an AR5 basis, including peatlands. Adjustments for IAS emissions to carbon budgets 1-3 based on historical IAS emissions data; adjustments to carbon budgets 4-5 based on IAS emissions under the Balanced Net Zero Pathway. All emissions data presented in this report account for forthcoming changes to the UK Greenhouse Gas Inventory for Global Warming Potentials (GWPs) and for peatlands. These changes have not been precisely determined yet, so we assume changes at the higher end of the currently estimated range. All values reported use GWPs from the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5) with carbon-cycle feedbacks and we assume accounting for all peatland emissions adds around 21 MtCO2e/year to the current UK inventory (Box 2.1). These changes will be implemented within the next five This advice resets the path for stronger reduction in emissions The Sixth Carbon Budget Headroom for IAS emissions Past carbon budgets Active legislated carbon budgets Historical emissions The Balanced Net Zero Pathway

Chapter 1: Introduction and key m essages 40 2. Context – uncertain and urgent times The Climate Change Act requires the Committee to advise by the end of 2020 on the level of the Sixth Carbon Budget. It is crucial to set that budget now to get the UK on track as soon as possible towards meeting its statutory Net Zero target by 2050 and meeting our commitments under the Paris Agreement. That is particularly important this year, as the UK will host the next UN climate talks (the 26th Conference of the COP26) in Glasgow in November 2021. Our advice on the Sixth Carbon Budget and the path to Net Zero comes at a time of heightened uncertainty due to the impacts of COVID-19, but with widespread public support for climate action and a major opportunity for low-carbon investment to be at the heart of the recovery and support UK leadership • The COVID-19 context. The pandemic is a public health crisis with tragic consequences for many. It brings uncertainty for the future, but also shows how rapidly things can change when necessary and highlights the role of investment in driving economic recovery. The period ahead is therefore an opportunity to make rapid progress. – The steps that the UK takes to rebuild from the COVID-19 pandemic and its economic damage can also accelerate the transition to low- carbon activities and improve our climate resilience.
Climate investments can support the economic recovery and secure good jobs for the long term, while taking advantage of low interest rates. – The pandemic has also demonstrated how quickly social change can occur, and the role of Government in driving that change. As we set out in this advice, social and behavioural change can make a very important contribution to meeting Net Zero. – Setting a carbon budget during the COVID-19 pandemic brings with it the risk that the projections we have used for the level and nature of economic activity in the UK are significantly out of line with the reality that emerges as we recover from its impacts. Due to major uncertainty over how the recovery will play out, our analysis has assumed no lasting impact to the UK’s level of economic (and potentially emitting) activity – this means that if anything, we understate the rate at which emissions could fall over the next decade and a half. • The Brexit context. As we establish a new trading relationship with the EU and leave the EU Emissions Trading System (EU ETS) and other mechanisms, it makes sense to move to setting and judging our carbon budgets on the basis of actual UK emissions in all sectors. Clarity and confidence will be valued, and well-designed climate policy should provide investment opportunities across a range of sectors (Box 1.1). Nonetheless, coherence with the wider trading system of the EU ETS is important. The policy context. Following the legislation of the Net Zero target in 2019, the Government has rightly been accelerating the development of strategy and policy. We welcome the Prime Minister’s Ten Point Plan for a Green Industrial Revolution. It remains urgent to align the policy framework with the raised ambition under Net Zero, and for a Net Zero strategy to be published prior to COP26. Our recommended budget requires a policy framework that enables investment and delivery to be ramped up with

41 Sixth Carbon Budget – The path to Net Zero • The climate context. During 2020, we have continued to see the impacts of climate change that are already here, both in the UK and globally. Atmospheric CO2 concentrations are at record levels, and compound risks are building. As the UK prepares to host COP26, ambition is growing internationally, with a wave of Net Zero targets now being set, and updated Nationally Determined Contributions (NDCs) for 2030 are expected as we approach COP26. • The social context. There is widespread public support for action to tackle climate change, although without enough clarity so far over the steps that are needed to do so. The Climate Assembly has given us a valuable insight into the public’s preferences over how we meet Net Zero. The impact of Brexit on the UK’s climate objectives The UK’s departure from the European Union will hav e implications for the UK’s environmental and decarbonisation policy. Key implications • Leaving the EU’s Emissions Trading S ystem (EU ETS). Current Government proposals are to replicate this schem e, with a smaller UK ETS, with a view to linking to the EU ETS. A carbon tax has also been proposed. • Product standards set at an EU level have been an important driver of energy efficiency, and emissions reductions in lights, appliances and vehicles . • Leaving the Common Agricultural Policy (CAP) , which pro vides direct income support for farmers, as well as payments for environmental services. The UK’s replacement scheme, Environmental Land Management (ELM), aims to transition to rewarding farmers more for p ublic goods including mitigating and adapting to cl imate change. • The Office for Environmental Protection replaces the role of the European Commission in enforcing environmental regulations. Once established, in 2021, its role will also As we noted in 2016, in areas where EU mecha nisms are working effectively – such as product standards, which reduce emissions and save consumers money, or targets for waste reduction - the UK should aim to replicate them at UK level. Some areas, such as leaving the Common Agricultural Policy, presen t an opportunity to better tar get public funds towards environmental goals. CCC (2016) Meeting Carbon Budgets – Implications of Brexit for UK climate policy

Chapter 1: Introduction and key m essages 42 3. COP26 and international leadership In November 2021, less than a year after the publication of this report, the UK will host in Glasgow the next round of UN climate the 26th Conference of the Parties (‘COP26’). COP26 represents an important milestone in the UN process, with parties to the Paris Agreement expected to update and increase their commitments on tackling climate change. The process of increasing commitments has already begun, with several major economies setting new goals to reach Net Zero emissions around mid-century. Commitments from China, the EU, Japan and South Korea cover nearly half of global emissions. The further commitment expected by the US would extend However, to meet the goals of the Paris Agreement, emissions must not only reach Net Zero, they must do so rapidly, with deep reductions to 2030. That puts a particular focus on the next decade and the UK’s commitments as host of COP. The UK will have to submit its ambition to 2030 in its own nationally-determined contribution (NDC) to the UN process, due by the end of 2020. We make recommendations on the UK’s NDC in this report, based on the same Balanced Pathway used for our recommendations on the Sixth Carbon Budget. The UK’s choices over the NDC and the Sixth Carbon Budget will affect its credibility as a climate leader, and will set an important context for commitments by other countries. To support the large increase required in global ambition, particularly in the period to 2030, the UK’s new commitments must be suitably ambitious and aligned to the goals of the Paris Agreement.
We reflect that need in this report, in part by ensuring that our scenarios reflect the UK’s highest possible ambition, as required by Article 4 of the Paris Agreement. We also consider, in Chapter 7, the various other elements of the Paris Agreement besides the UK’s direct reductions in emissions. For example, Chapter 7 covers the UK’s consumption emissions, the role of climate finance and trade agreements. Delivering a positive outcome from the COP26 climate talks is key to the world’s efforts to tackle climate change and to protecting the UK from the worst impacts of climate change. It will be underpinned by a clear and rapid acceptance of the advice in this report, and by decisively strengthening policy to deliver our recommended Sixth Carbon Budget and NDC on the path to Net Zero. 43 Sixth Carbon Budget – The path to Net Zero 4. Using scenarios to identify a balanced path to Net Zero We have developed scenarios for this report to explore a range of ways to achieve Net Zero by 2050 at the latest, and used those exploratory scenarios to identify a ‘Balanced Pathway’ towards Net Zero that keeps in play a range of ways of getting there based on central assumptions. Our scenarios demonstrate that there are multiple ways to meet the Net Zero 2050 target and many routes to our recommended Sixth Carbon Budget. While our Balanced Pathway is the basis for our recommended budget it is not intended to be prescriptive. Rather it is illustrative of what a broadly sensible path based on moderate assumptions would look like. A little more or a little less may be achieved in any area, or alternative low-carbon options could be used, but the overall level of ambition and delivery must match. This section sets out that approach in three a) The value of using scenarios to set a path to Net Zero b) Our ‘exploratory’ scenarios to reach Net Zero c) A Balanced Net Zero Pathway a) The value of using scenarios to set a path to Net Zero A key design feature of the Climate Change Act is that legislation of the budget level leaves free a choice about how this is to be delivered. It is the responsibility of Government then to determine how the budget will be met. In our 2019 advice on setting the Net Zero target, we presented a single (‘Further Ambition’) scenario for 2050 (Box 1.2) – this acted as a ‘proof of concept’, providing confidence that Net Zero can be achieved at reasonable cost without relying on major breakthroughs in technologies and behaviours. In this year’s advice, we have developed three exploratory scenarios that reach Net Zero emissions by 2050 in quite different ways, illustrating the range of pathways that are currently available. We also present a further, highly optimistic, scenario that enables Net Zero to be achieved prior to 2050. This allows exploration of a range of approaches over the next three decades. We use these scenarios to guide judgements on the achievable and sensible pace of decarbonisation in the face of uncertainty, and to understand how less success in one area can be compensated for elsewhere. The scenarios are also useful for monitoring progress subsequently (see section 5 of Chapter 10). The Committee’s 2019 Further Ambition scenario In determining our 2019 advice on whether the UK could reach Net Zero emissions by 2050, we developed a Further Ambition scenario as a snapshot of sources and sinks of emissions reductions could be achieved, compared to emissions in 1990, but noted that multiple options were available for achi eving the last 4% of emissions reductions, including additional engineered removals, further innovation and further behaviour change. Our scenarios explore different

Chapter 1: Introduction and key m essages 44 For the purposes of costing the scenario we assumed the remaining 4% of emissions reductions were delivered via emission s removals at £300/tCO 2, making them one of the most expensive emissions reduction options in our scenarios. This year’s analysis includes our recommended pathway to meet the Sixth Carbon Budget, the ‘Balanced Pathway’. Key differences between this and l ast year’s Further • Behaviour change plays a larger role our new scenarios . For example, the Balanced Pathway includes a 35% reduction from today’s levels of meat consumption, up from 20% in the Further Ambition scenario. • Lower residual emissions in several sectors, such as aviation, manufacturing and construction, buildings and electri city and hydrogen production, due to more ambitious assumptions on technology costs and innovation. • Lower use of fossil fuels , particularly for power and hydrogen production. This sees gas demand fall by around 75% (compared to just 30% in last year’s ana lysis). This is largely replaced by increased offshore wind which is used to produce electricity and • Higher levels of peatland restoration and tree -planting increase land use sinks. Overall, this means that less engineered removals a re required, reducing the overall cost of the scenarios (see Chapter 5). Ambition scenario and Balanced Pathway CCC analysis based on CCC (2019) Net Zero, and the Sixth Carbon Budget. 45 Sixth Carbon Budget – The path to Net Zero b) Our exploratory scenarios to reach Net Zero Our 2019 Further Ambition scenario made relatively conservative assumptions on the extent of cost reductions as a result of innovation, and on societal and behavioural change. Making conservative assumptions was appropriate in the context of setting the target, as it was important to ensure a legally binding target could be met. But in the context of achieving Net Zero, and setting a pathway to match, we must consider how success can be maximised on these fronts. Greater contributions from societal/behavioural change and from innovation would reduce the challenges in achieving Net Zero emissions by 2050, by reducing emitting activities (e.g. flying, livestock farming) and making emissions reduction cheaper and/or easier.
The Government should therefore ensure that policy frameworks are designed in a way that encourages both behavioural change and innovation to contribute strongly to decarbonisation. However, even with well-designed policies, it remains uncertain how large a contribution each will make. Our scenarios therefore reflect potential ranges for their contributions, together with the sets of choices (e.g. on HGVs and low-carbon heat) that are necessary in this decade. • Societal and behavioural change across all scenarios illustrates how choices by people and businesses can affect emissions. In many cases • Innovation. The costs and efficiencies of low-carbon technologies varies in our scenarios, according to the latest available evidence and projections • Choices are also prevalent in our scenarios, where the clearest low-carbon option is not currently evident. For example, in some scenarios hydrogen takes the place of electrification in HGVs and in some home heating. Similarly, our scenarios also try to reflect preferences, such as a preference for nature-based removals over engineered removals in the Widespread Engagement scenario, or the use of synthetic fuels in aviation instead of only offsetting aviation emissions via emission removals. As a general principle, consistent with the preferences expressed in the Climate Assembly,1 our pathways prioritise emissions reductions where known solutions exist and thereby minimise the use of greenhouse gas removals. This will tend to lead to lower overall cumulative UK emissions and limit risks of over-reliance on being able to deploy removals sustainably at scale. We initially constructed three ‘exploratory’ scenarios that reach Net Zero by 2050, one of which is similar to Further Ambition while the other two are more optimistic either on developments regarding behavioural change or improvements in reflect choices on the way to Net Zero, they primarily reflect greater or lesser degrees of success on key policy priorities on the path to Net Zero – engagement of the public and businesses, and • In the Headwinds scenario, we have assumed that policies only manage to bring forward societal/behavioural change and innovation at the lesser end of the scale, similar to levels assumed in our 2019 Further Ambition scenario. People change their behaviour and new technologies develop, but we do not see widespread behavioural shifts or innovations that significantly reduce the cost of green technologies ahead of our current projections. This scenario is more reliant on the use of large hydrogen and carbon capture and storage (CCS) infrastructure to achieve Net Zero target, we erred on the side of solutions where they exist and

Chapter 1: Introduction and key m essages 46 • In the Widespread Engagement scenario, we assume higher levels of societal and behavioural changes. People and businesses are willing to make more changes to their behaviour. This reduces demand for the most high-carbon activities and increases the uptake of some climate mitigation measures. Assumptions on cost reductions are similar to Headwinds. • In the Widespread Innovation scenario, we assume greater success in reducing costs of low-carbon technologies. This allows more widespread electrification, a more resource- and energy-efficient economy, and more cost-effective technologies to remove CO2 from the atmosphere. Assumed societal/behavioural changes are similar to Headwinds. We then constructed the ‘Balanced Net Zero Pathway’, as a further scenario that reaches Net Zero by 2050. It was designed to drive progress through the 2020s, while creating options in a way that seeks to keep the exploratory scenarios open (see subsection (c) below). We also constructed a further exploratory scenario (‘Tailwinds’) that assumes considerable success on both innovation and societal / behavioural change and goes beyond the Balanced Pathway to achieve Net While these scenarios are designed to have self-consistent narratives, there is some potential to ‘mix and match’ strategies or compensate for under-delivery in one area with greater delivery elsewhere based on another scenario. Our sectoral analysis takes a ‘bottom-up’ approach which allows a detailed assessment of the options that are most relevant to each source of emissions within each sector. The methodology used for each sectoral analysis is described in the accompanying Methodology Report.2 Our scenarios allow for both the impacts of climate change (e.g. rising global temperatures reduce UK heating demand) and the need to adapt to those impacts (e.g. we include shading and ventilation measures alongside insulation). This is particularly important for the buildings and land use sectors. 47 Sixth Carbon Budget – The path to Net Zero In the process of developing five scenarios for the UK, we have produced a total of each of the sectoral scenarios represents a coherent picture at the economy-wide level (Box 1.3), including what happens to infrastructure and operation of the constructed from 70 individual scenarios for action across every sector of the economy Each individual line represents the path for new abatement in a sector between 2020 (effectively zero) and by 2050 where all sectors reach a level of abatement that is consistent with the UK getting to Net Zero. Not all sectors will get to zero emissions. Abatement in the fuel supply sector is greater in the 2030s than by 2050. Developing self-consistent scenarios for each sector of the economy In developing the scenarios, we have made efforts to ensure they are self -consistent: • The residual emissions in each sector have been aggrega ted to obtain the level of total UK emissions, ensuring that the decarbonisation of energy c arriers that are used in multiple sectors (e.g. electricity, hydrogen, bioenergy) is accounted for once and • Aggregated energy demand across all sectors is a key input to our analysis of the production, transportati on and consumption of low -carbon electricity, hydrogen, fossil * These sectoral pathways are disaggregated further into 280 pathways for Scotland, Wales, Northern Ireland and the

Chapter 1: Introduction and key m essages 48 • We have considered the overall use of biomass so that it does not exceed limits that we judge could be sustainably sourced and available to the UK in the next 30 years.
• We have considered the sha red use of infrastructure across sectors, includ ing specific areas of the gas grid and the co -location of industrial carbon capture and storage with hydrogen production and bioenergy with carbon capture and storage (BECCS). • CO2 capture requirements are ag gregated across all sectors to investigate the s cale of storage required for the UK. • We have drawn on findings from our extensive use of energy system models to date and incorporated them into this analysis. • Each sectoral s cenario uses a shared set of as sumptions about the future, including economic and demographic factors such as the growth rate of the economy, population growth and energy prices. * Shown for residential users. Larger users are assumed to receive a discount on the wholesale electricity price. Summary of key differences in the economy -wide scenarios 365m in 2050 365m in 2050 245m in 2050 438m in 2050 245m in 2050 Hydrogen grid conversion trials in 2020s. Large-scale conversions start from 2030 around industrial clusters and radiate out at 10 km/yr. Most buildings within radius convert to After 2035 no further buildings convert – further radial expansion beyond 2035 only applies to parts of grid to supply some

49 Sixth Carbon Budget – The path to Net Zero c) A Balanced Net Zero Pathway The multiple scenarios we present in this advice provide an illustration of the various ways that we can pursue emissions reductions on a path to Net Zero. However, the implied flexibility on how to deliver it does not mean the near-term path is unclear. Many steps can be taken with confidence in the next decade and should begin immediately. Our ‘Balanced Net Zero Pathway’ is informed by the range of solutions across the ‘exploratory’ scenarios, that would put the UK on track to Net Zero and would meet the recommended carbon budget. This • Represents a sensible strategy to underpin policy on over the coming years, based on known technologies and behaviours, with potential to be adapted as we learn more about the most effective ways to cut emissions • Takes a whole-system approach to decarbonisation, reflecting the range of opportunities across behaviour, efficiency, land, low-carbon energy supply and end-use technologies, and how these potentially interact. • Develops key options for decarbonisation in the 2030s and 2040s, with action in the 2020s, accepting that some things will not work but that it is necessary to try things out to find the best options and develop effective • Includes some measures that are not cost-effective when considering only emissions reductions, where they support other objectives (e.g. some higher-cost improvements to energy efficiency of homes, due to benefits to fuel poverty, health and employment). • Is designed to be delivered in a way that works for people – reflects their priorities and choices, and aligns very well to the preferences expressed by the Climate Assembly,3 which was called by six Select Committees of the House of Commons to understand public views on how the UK should • Works in the real world and at the local level, providing good quality jobs, and benefits to health and wellbeing. • Allows time for societal choices to contribute and the necessary scale-up of supply chains, skills, business models and infrastructure during the 2020s. • Puts the UK on track to Net Zero, and supports the required global path for decarbonisation (see Chapter 7) by reflecting the highest possible ambition on emissions reduction as a necessary contribution the Paris Agreement. The Balanced Net Zero Pathway is plausible based on our assessment. An alternative strategy that delivers the same emissions reductions in different ways, with less in one area compensated by more elsewhere, would also meet the recommended budget. Our wider set of scenarios illustrate different pathways that could help to achieve the budget and get on track to meeting Net Zero (see subsection b) above). However, there is a series of actions that need to be taken now, irrespective of the choices that we make later, and a continuing programme to be fulfilled if those later choices are to remain open. More generally, the need to act on climate change and to reach Net Zero emissions is now widely Many UK businesses have set their own Net Zero goals and stand ready to transition to the new technologies, behaviours and business models required. In that context, the most positive economic strategy is to proceed with ‘highest possible ambition’, as required by the Paris Agreement. Chapter 1: Introduction and key m essages 50 A bold strategy to get the UK on the path to Net Zero is required, with immediate action based on available solutions and active development of new ones, while accepting that we can’t know how every aspect of the transition will play out. But that need not imply locking in every aspect of the transition – there is clear benefit to an adaptable strategy that can be adjusted as we learn more about the most effective ways to cut emissions. How the CCC’s scenarios compare to the recommendations of the Climate Assembly Sector Climate Assembly recommendations Range in CCC scenarios Transport • A ban on the sale of new petrol, diesel and hybrid • A reduction in the amount we use cars by an • 2030-2035 switchover date for EVs. • Up to 5-11% of car -km switch to alternative modes of t ransport. Buildings • At least 80% of assembly members ‘strongly agreed’ or ‘agreed’ that each of hydrogen (83%), heat pumps (80%), and heat networks (80%) should be part of how the UK gets to net zero. • Supportive of energy slight preference for upgrading each home all in o ne go (56%), compared to upgrading each home g radually • Scenarios are led by electrification via heat pumps or hybrid heat pumps. Hydrogen features in Headwinds • All scenarios include district heating.
• Energy efficiency in over half of • Members were highly supportive of wind and solar • Only 40% of assembly members agreed that bioenergy should be used to produce electricity (even if producing negative emissions). • Support was lower for nucle ar (34%) and fossil fuels with carbon captu re and storage (22%). • Wind and solar provide 75 -90% of • Some bioenergy is used to produce electricity, transitioning to BECCS. • Nuclear and power generation with CCS provid e 10-25% of electricity. Aviation • Assembly members would like to see a solution to air travel emissions that allows people to continue to fly. • But not without limits, promoting an acceptable balance between achieving the net zero target, impacts on lifestyles, reliance on new technol ogies, and investment in alternatives. • Flying ranges between a 15% fall and 50% increase on pre -COVID-19 levels, matching popular Climate Assembly • Low-carbon fuels in all scenarios, providing 20-95% of fuel by 2050. • A change in diet to reduce meat and dairy consumption by between 20% and 40%. • Highly supportive of nature -based removals, seen as ‘natural’ and having significant co -benefits (99% in favour of afforestation, 80 -85% peatland restorat ion and wood in construction, but lower (60%) for • 20-50% reduction in all meat and dairy • High ambition on tree -planting (30 -70 restoration. Enhanced soil not • Some focus on m ore biodiversity in the • Members were less supportive of DACCS and BECCS (40%) with significant concern over the permanence of CO2 storage and that they are treated as a ‘magic solution’ which doesn’t get to the crux of the • BECCS included at scale (4 5-95 MtCO2/year by 2050) in all scenarios. DACCS included at 0 -15 MtCO2/year. CCC analysis based on Climate Assembly UK (2020) The path to net zero. The Climate Assembly did not consider emissions reductions associated with manufacturing and construction, fossil fuel supply, shipping or F-

51 Sixth Carbon Budget – The path to Net Zero 5. Our approach to advice on the Sixth Carbon Budget This report is based on an extensive programme of analysis, consultation and consideration by the Committee and its staff, building on the evidence published last year for our Net Zero advice. That programme has addressed the requirements set out for the Committee in the Climate Change Act. It aims to set a platform to support the UK Government in taking confident decisions on the budget and the actions required to deliver it. Doing so can fulfil the UK’s commitments on climate change, support investment and job creation by businesses in the UK, deliver on priorities of UK citizens and support the UK’s positive The outputs of the work, including our public Call for Evidence, several new research projects, three expert advisory groups, detailed datasets and deep dives into the roles of local authorities and businesses, are published on our website ( and explained in the four parts of this report and its accompanying Methodology and Policy Reports. a) The requirements of the Climate Change Act The Climate Change Act requires the Committee to provide advice on the Sixth Carbon Budget by the end of 2020. The Government is then required to legislate the carbon budget by the end of June 2021, and to produce proposals and policies to meet it ‘as soon as is reasonably practicable’ thereafter. The carbon budget must be set with a view to meeting the 2050 target, which is now set in legislation as an emissions reduction of ‘at least 100%’ (i.e. Net Zero). In recommending carbon budgets, the Committee is required by the Act to take into account a range of considerations. These are designed to ensure that action to tackle climate change contributes fully to the global effort, while supporting other Government objectives. Below we outline these considerations, and where within the report they are • Scientific knowledge about climate change. We set out in Chapter 8 the updated state of knowledge on the science of climate change, which remains similar to that when providing the advice on Net Zero. Considerations relating to cumulative emissions inform our assessment for the appropriate shape of the emissions path on the way to Net Zero • Technology relevant to climate change. Our scenarios, set out in Part 1 of the report (i.e. Chapters 2 and 3), take into account the potential roles, costs and interactions between the various technologies that can help to reduce emissions. One of these, the Balanced Net Zero Pathway provides the basis for our recommended level for the carbon budget. • Economic circumstances, and in particular the likely impact of the decision on the economy and the competitiveness of particular sectors of the economy. Quantitative and qualitative assessments of the economic transition through the Sixth Carbon Budget on the path to Net Zero are set out in Part 2 of the report (i.e. Chapters 5 and 6). Competitiveness is addressed both within our scenario design and specifically in Chapter 6. Chapter 1: Introduction and key m essages 52 • Fiscal circumstances, and in particular the likely impact of the decision on taxation, public spending and public borrowing. Part 2 addresses the costs and investment requirements of the transition, and what choices over how to fund decarbonisation might mean for the Government’s fiscal position. • Social circumstances, and in particular the likely impact of the decision on fuel poverty. We consider a range of social circumstances in Part 2 of the advice, including fuel poverty, impact on employment and health co- benefits. Our scenarios (Part 1) include some measures that are not cost- effective when only considering emissions reductions, where they support • Energy policy, and in particular the likely impact of the decision on energy supplies and the carbon and energy intensity of the economy. By design, our scenarios set out in Part 1 of the report maintain security of electricity supply at similar levels to those required today.
Chapter 2 sets out the impact of the recommended budget for emissions and energy consumption, including the reduced dependence on imported oil and gas. • Differences in circumstances between England, Wales, Scotland and Northern Ireland under our scenarios are set out in Chapter 4, as well as what our UK-wide pathways mean for emissions in each part of the UK. • Circumstances at European and international level. We consider the role of the UK in the global effort to tackle climate change in Chapter 7, including the UK’s commitments under the Paris Agreement and the benefits of UK leadership in the run up to COP26 in Glasgow in November 2021. • The estimated amount of reportable emissions from international aviation and international shipping for the budgetary period or periods in question. Emissions from these sectors under our scenarios are set out in Chapter 3, while considerations on how these affect the recommendation on the Sixth Carbon Budget are set out in Chapter 10. As well as the recommended level of the Sixth Carbon Budget, the Act also requires this advice to • Whether and how emissions from international aviation and international shipping can be formally included in the carbon budgets; • The role of international emissions credits (known as ‘carbon units’ under • The opportunities for emissions reduction in particular sectors; and • The balance of emissions in the sectors that have been covered to-date by the EU ETS as against those outside. All of these matters are addressed in our recommendations in Chapter 10. 53 Sixth Carbon Budget – The path to Net Zero Supporting evidence and publications In support of the advice in this report, we have also produced • A Methodology Report, setting out the evidence and methodology behind the scenarios presented in Part 1 of this report.4 • A Policy Report, setting out the changes to policy that could drive the changes necessary particularly over the 2020s.5 • A dataset for the Sixth Carbon Budget scenarios, which sets out more details and data on the pathways than can be included in this report. We are also publishing a set of other documents alongside these reports (Box 1.3). In December 2019, we published a call for evidence on the Sixth Carbon Budget, which ran until February 2020. We received 177 responses, and published each of these, together with a summary document, in July 2020. We have also undertaken New evidence and new CCC re search In our work for the Sixth Carbon Budget we engaged with a range of experts to ensure that our analysis reflects up -to-date evidence wherever possible, building on the evidence we produced alongside our Net Zero report in 2019. In addition to the Ca ll for Evidence (Box 1.4) new evidence and research collected for this report • Three Expert Advisory Group reports the health co-benefits of the actions in our Sixth Carbon Budget scenarios, financing the investm ent required in our scenarios and how cross-cutting policy interventions can accelerate a transition to Net Zero. • Research and engagement with the UK’s business community , culminating in a series of briefing notes on enabling business to take a full role in Net Zero. • An in-depth report on how local and regional Government can deliver the UK’s Net • Consultancy reports on the UK’s international climate influence, heat in buildings, energy efficiency in buildings, deep decarbonisation in industr y, industry policy, heavy goods vehicles, agricultural abatement, land use modelling, low -carbon hydrogen • Expert roundtable discussions on electricity market design, phase -out of unabated gas-fired generation, industrial decarb onisation policy, digitalisati on, emissions removals, arable yield improvements and policy for buildings decarbonisation, including a published summary of the removals discussion. New evidence is summarised in Boxes in this report and the accompanying Poli cy and Methodology reports, wi th significant further detail available in the published materials on the Committee’s Sixth Carbon Budget webpage. present the rich analysis that

Chapter 1: Introduction and key m essages 54 for the Sixth Carbon Budget advice Call for evidence and wider engagement The Committee launched a Call for Evidence to inform its advice on the Sixth Carbon Budget and Welsh inter im targets which ran between 5 December 2019 and 5 February 2020. The Call for Evidence included 37 questions on five A. Climate science and international circumstances B. The path to the 2050 target D. Wales, Scotland and Northern Ireland The Call for E vidence received 177 responses from across business and industry, NGOs, responses to the Call for Evidence in July 2020. The summary, includ ing a list of respondents and link s to responses in full, is available on the Committee’s website. Several common themes emerged from the Call for evidence. In • The importance of equity-based approaches in determ ining the UK’s share of remaining global carbon budgets , though some respondents did not feel that remaining cumulative global budgets were relevant, but that the UK’s long -term Net Zero target and cost -effectiveness should instead be the main factors take n into account in determining UK carbon budgets. 55 Sixth Carbon Budget – The path to Net Zero • Strengthened international commitments should be reflected in a more stringent Sixth Carbon Budget and nationally defined contribution (NDC) for the period out to 2030. This could include revisiting the lev el of the Fourth and Fifth Car bon Budgets, for which • The role of individual behaviour change is important, but Government has a role in guiding people to make the right choices. • Many respondents highlighted the need to develop a robust approach to addressin g consumption emissions (e.g. by adopting explicit consumption emissions targets, technology-adjusted consumption -based accounting, border carbon adjustments) to avoid emissions offshoring and better reflect the UK's impact on global emissions.
• Many respondents noted a range of c ross-cutting delivery challenges , such as public engagement, the need for local action and a need for a Just Transition, including suggestions on how these can be overcome . • This Call for Evidence inclu ded for the first time a large number of sector -specific questions (20 in total). The evidence submitted in response to questions in this section was considered by the CCC’s sector teams and reflected in our Sixth Carbon Budget scenarios, as well as our ad vice on policy and progress in each sector. The Call for Evidence was an important part of the Committee’s engagement programme, but not the only one. We also held a large number of roundtable discussions and bilateral meetings, including with groups that did not respond to the Call fo r ‘Business and industry’ includes consultancies and industry / trade bodies. ‘Other’ includes public and CCC (2020) Sixth Carbon Budget and Welsh emissions targets – Call for Evidence Summary

Chapter 1: Introduction and key m essages 56 1 Climate Assembly UK (2020) The path to Net Zero 2 CCC (2020) The Sixth Carbon Budget – Methodology Report 4 CCC (2020) The Sixth Carbon Budget – Methodology Report 5 CCC (2020) Policies for the Sixth Carbon Budget and Net Zero 6 CCC (2020) Sixth Carbon Budget and Welsh Emissions Targets Call for Evidence Summary. 57 Sixth Carbon Budget – The path to Net Zero 1. The Balanced Pathway to Net Zero for the UK 60 2. Alternative pathways to Net Zero by 2050 77 3. Can the UK achieve Net Zero significantly before 2050? 87

59 Sixth Carbon Budget – The path to Net Zero Introduction and key messag es The value of carbon budgets is in guiding action to reduce emissions on the path to the UK’s long-term Net Zero target. This chapter sets out how our recommended Sixth Carbon Budget (requiring a 78% reduction from 1990 to 2035, a 63% reduction relative to 2019) can be met on the pathway to Net Zero, based on the detailed bottom-up scenarios that the • The UK’s emissions fell by around 40% (365 MtCO2e) in the last three decades. In the next three decades, emissions must fall by 100% (522 MtCO2e) to achieve the Net Zero goal. • The Balanced Net Zero Pathway – the basis for our Sixth Carbon Budget recommendation – represents a decisive transition to Net Zero with over 60% of the necessary reduction to Net Zero achieved in the coming 15 • This will require systematic changes in consumer and business behaviours, our energy system, carbon capture and storage and how our land is used. • Success is contingent on taking actions in the 2020s across every sector of • There is flexibility to meet Net Zero in different ways depending on societal changes and technologies. Some sectors face key decision points in the • Our Tailwinds scenario gets to Net Zero in 2042 but it is a highly optimistic scenario, stretching feasibility in a wide range of areas and going beyond the current evidence in others. Chapter 3 provides more detail sector by sector while Chapter 4 sets out pathways for Scotland, Wales and Northern Ireland. Costs and impacts of the scenarios are set out in Chapters 5 and 6. Chapter 9 explains why this is the right pace of action to be on track to Net Zero and meet our commitments under the Paris Agreement. The accompanying Policy Report sets out the policy priorities to deliver the actions required to meet the recommended carbon budget. This Chapter is set out in three 1. The Balanced Pathway to Net Zero for the UK 2. Alternative pathways to Net Zero by 2050 3. Can the UK achieve Net Zero significantly before 2050? Chapter 2: The UK path to Net Zero 60 1. The Balanced Pathway to Net Zero for the UK This section sets out the actions the Committee has assessed as being required in the 2020s to get on track to Net Zero and to meet our recommended Sixth Carbon Budget. It is set out in five a) The scale of the Net Zero challenge b) Emissions in the Balanced Net Zero Pathway c) Actions in the 2020s and beyond e) Energy, carbon capture and storage, and land use requirements a) The scale of the Net Zero challenge The majority of emissions in 2018 – the most recent year for which there is an accurate estimate of emissions for all sectors – were associated with the combustion of fossil fuels in the ‘energy system’: electricity production, transport, UK greenhouse gas emissions in 2019 were 522 MtCO2e. * By 2050 the UK’s net emissions must fall by 100% from current levels to achieve Net Zero, with any residual emissions offset by actions that remove CO2 from the atmosphere. Emissions have fallen by 40% in the last three decades, with the most rapid progress • In the last three decades, UK GHG emissions have fallen at an average rate • Outside of the electricity supply sector, emissions have fallen at an average rate of just 7 MtCO2e per year. • Progress has been quicker in recent years, primarily led by the UK’s transition from coal-fired power generation towards low-carbon generation. Since 2012, UK emissions have fallen on average by 19 MtCO2e per year. In the last five years emissions have fallen by 16 MtCO2e on average. Emissions must fall more quickly to meet the Sixth Carbon Budget (by around 21 MtCO2e per year). However, the power sector can no longer be relied upon to deliver the majority of these reductions; progress must extend to all sectors of the * Including emissio ns from international aviation and shipping and accounting for upcoming changes to the inventory regarding peatlands and global warming potentials of greenhouse gases (Box 2.1). two-fifths in the last thirty years.
Emissions m ust fall by 100% in

61 Sixth Carbon Budget – The path to Net Zero BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Provisional emissions data for 2019 is not available for all sectors and for non-CO2 emissions. Chapter 2: The UK path to Net Zero 62 The UK is already meeting some of our energy and economic needs with low- carbon technologies, but these are not yet deployed at the scale that is consistent • Emissions from electricity production have fallen by 74% since 1990 – and 65% in the last decade – as coal-fired power stations have closed, electricity demand has fallen, and renewable generation capacity has increased. Half of UK electricity generation in 2019 was from low-carbon sources, including renewables and nuclear. • In other sectors, 99% of all miles driven on UK roads are in vehicles with petrol and diesel engines, all commercial flights are powered by fossil fuels, less than 5% of the energy used for heating homes and buildings is from low-carbon sources, and only around 25% of industrial energy demand is met by electricity or hydrogen. Outside of energy use sectors, current levels of tree planting and peatland restoration are well below the required rate for Net Zero, emissions from agriculture have not fallen in the last decade, and large volumes of biodegradable waste are in all sectors and at a faster rate than the last BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Net Zero emissions in 2050 will require any residual emissions to be offset by the UK land use sink and Manufacturing, construction & fuel supply

63 Sixth Carbon Budget – The path to Net Zero b) Emissions in the Balanced Net Zero Pathway 2.3), including the UK’s share of emissions from international aviation and shipping (IAS), and including the higher range of anticipated changes to the UK greenhouse gas inventory (Box 2.1). The Balanced Pathway represents a decisive transition to Net Zero, with over 60% of the necessary reduction to Net Zero achieved in the coming 15 years and the fastest rate of decarbonisation occurring in the early 2030s. The date for Net Zero would be earlier on other measurement bases that exclude IAS emissions and/or are for CO2 rather than the full range of greenhouse gases* BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. The fall in 2020 is largely due to COVID-19 impacts on aviation and shipping. * Although all of the greenhouse gases (GHGs) contribute to warming temperatures, peak temperature change is determined by when emissions of long-lived GHGs reach Net Zero (assuming that short-lived GHG emissions are not rising). Of the long-lived GHGs, CO2 contributes most to warming and therefore the date of Net Zero CO2 is closely linke d with when the contribution to rising temperatures ends. Outturn Baseline Balanced Net Zero Pathway

Chapter 2: The UK path to Net Zero 64 When the Balanced Net Zero Pathway reaches Net Zero emissions on different bases ‘High-high’ inventory changes ‘Low-low’ inventory changes Including IAS, all greenhouse gases 2050 2048 Excluding IAS, all greenhouse gases 2047 2045 Including IAS, CO 2 only 2044 2043 Excluding IAS, CO 2 only 2041 2041 High-high’ refers to AR5 GWPs with climate-carbon feedbacks and a higher estimate of emissions from peatlands. ‘Low-low’ refers to AR5 GWPs without climate -carbon feedbacks and a lower estimate of emissions from peatlands. Forthcoming changes to the UK greenhouse gas inventory Future changes to the emissions inventory include the addition of emissions from peatland and revision of the Global Warming Potentials (GWPs) us ed to aggregate greenhouse • Peatland (expected to be included in the UK inventory by 2022). 1 The current inventory only captures around 1.3 MtCO 2e of emissions from peatlands, but all sources of peatland emissions will be included in the inve ntory in the near – The ‘high’ range of emissions from peatland would add around 21 MtCO 2e to the inventory in 2018, and would also increase the 1990 baseline by 21 MtCO2e. This is the basis upon which targets in this report are – The ‘low’ range of emissions from pea tland could add around 17 MtCO 2e to the inventory, and would also increase the 1990 baseline by 17 MtCO 2e. • Global Warming Potentials (expected to be updated in the UK inventory by 2024). These are used to aggregate different g reenhouse gases together into a common metric, showing their equivalence to carbon dioxide. At COP24 in December 2018 the international community decided to standardise reporti ng under the Paris Agreement transparency framework using the GWP 100 metric.2 The values to be used are those from the IPCC Fifth Assessment Report (AR5). There are two methodologies, and it is not yet clear which will be used. Both are different from the values used in the current emissions inventory and will lead to an increase i n the estimate of UK – The ‘high’ estimate of GWPs include climate -carbon feedbacks. Under this methodology, the size of the existing inventory would increase by around 19 MtCO2e while the 1990 baseline would increase by nearly 47 MtCO 2e. This is almost entirely due to a 36% inc rease in the estimated global warming impact of methane (CH 4) emissions. This is the basis upon which targets in – The ‘low’ GWPs do not include climate -carbon feedbacks, and would lead to a smaller increase in the size of the UK emissions inventory. The estimate of the existing inventory would increase by around 5 MtCO 2e while the 1990 baseline would increase by 10 MtCO 2e. Under this methodology CH 4 methane emissions have a 12% higher warming impa ct than the current estimate, whi le the warming impact of N 2O emissions is 11% lower. The two changes overlap because peatlands are a source of both CH 4 and N2O emissions.
The range for the total combined impact of the peatland and GWP changes is around an ad ditional 27-70 MtCO2e in 1990 and 23-42 MtCO2e in 2019 compared to the get to Net Zero slightly earlier if

65 Sixth Carbon Budget – The path to Net Zero Emissions under the Balanced Pathway fall at different rates in different sectors (Figures 2.4 and 2.5), depending on the maturity of decarbonisation options and the policy framework, as well as sector-specific • Emissions under the Balanced Pathway fall most rapidly in the electricity supply sector. Mature decarbonisation options already exist for replacing fossil fired generation with renewables, combined with a well-developed policy approach that provides long-term certainty to the sector. • Other sectors, including buildings and transport, build up to peak rates of decarbonisation during the 2030s. Markets and supply chains for low- carbon technologies such as heat pumps and electric vehicles develop in the 2020s, reaching the peak replacement rate of high-carbon capital • Emissions from manufacturing and construction and fuel supply also start to fall faster from the late 2020s as industry switches to low-carbon production, enabled by electrification and new hydrogen and carbon capture and • Emissions from agriculture and aviation do not reach zero emissions and need to be offset by removals from the forestry carbon sink – which grows steadily over time with tree planting – and greenhouse gas removals which are deployed at scale starting in the 2020s. LULUCF = Land-use, land-use change and forestry. sectors see the fastest rate of Surface transport Electricity supply Manufacturing & construction Buildings F-gases LULUCF (sources and sinks)

Chapter 2: The UK path to Net Zero 66 balanced Net Zero pathway compared to Aviation and shipping pathways are lower in 2020 due to COVID-19. LULUCF = Land-use, land-use change c) Actions in the 2020s and beyond There are thirty years until 2050, the latest date by which the UK must reach Net Zero emissions. Policy is required now to meet that deadline. Technologies in the energy system frequently last for 15-20 years, and planning and consenting developments can have lead-times of five to ten years. Similarly, in order to maximise the role that natural carbon storage can play in contributing to Net Zero, investment in afforestation and peatland restoration must begin immediately to ensure the benefits contribute towards the Net Zero target. A key Net Zero challenge for the next ten years is to scale up investment so that almost all new investments and long-lived purchases are zero-carbon by the early 2030s at the latest. Policies (many of which are under active development) to deliver that scale-up must be fully implemented as soon as possible to work with asset replacement lifetimes, with a full and credible plan for these policies outlined well in advance of COP26 in November 2021. Our Sixth Carbon Budget recommendation reflects that need by assuming progress in reducing emissions and creating options for the subsequent period Manufacturing & construction Buildings Electricity supply Agriculture & LULUCF

67 Sixth Carbon Budget – The path to Net Zero All our scenarios reflect strong contributions from a set of key technologies and • Reducing demand for carbon-intensive activities. – Reduced demand. Around 10% of the emissions saving in our Balanced Pathway in 2035 comes from changes that reduce demand for carbon-intensive activity. Particularly important in our scenarios are an accelerated shift in diets away from meat and dairy products, reductions in waste, slower growth in flights and reductions in travel demand. While changes are needed, these can happen over time and overall can be positive for health and well-being. – Improved efficiency. A further 5% comes from improving efficiency, in use of energy and resources, especially by better insulation of buildings, improving vehicle efficiency and improving efficiency in • Take-up of low-carbon solutions. Over half the emissions saving is from people and businesses adopting low-carbon solutions as high-carbon and all boiler replacements in homes and other buildings must be low- carbon – we expect largely electric. By 2040 all new heavy goods vehicles should be low-carbon. Industry must either adopt technologies that use electricity or hydrogen instead of fossil fuels, or install carbon capture and • Expansion of low-carbon energy supplies. – Low-carbon electricity. Low-carbon electricity can now be produced more cheaply than high-carbon electricity in the UK and globally. In our Balanced Pathway the low-carbon share increases from 50% now to 100% by 2035, cutting UK emissions by 18% compared to our baseline. New demands from transport, buildings and industry (moderated by improving energy efficiency) mean electricity demand rises 50% to 2035, doubling or even trebling by 2050. The largest contribution is from offshore wind, reaching the Government’s goal of 40 GW in 2030, on a path to 65-125 GW by 2050. – Low-carbon hydrogen production scales up to 90 TWh by 2035 (i.e. nearly a third of the size of the current power sector), produced using electricity or from natural gas or biomass with carbon capture and storage. It is used in areas less suited to electrification, particularly shipping and parts of industry, and is vital in providing flexibility to deal with intermittency in the power system. It may also have a material longer-term role in buildings and other transport, such as heavy goods • Land and removals. A transformation is needed in the UK’s land while supporting UK farmers. By 2035 our scenarios involve planting of 440,000 hectares of mixed woodland to remove CO2 from the atmosphere as they grow, with a further 260,000 hectares of agricultural land shifting to bioenergy production (including short rotation forestry). This would see UK woodland cover growing from 13% now to 15% by 2035. Peatlands must be restored widely and managed sustainably. Low-carbon farming practices must be adopted widely, while raising farm productivity. Alongside the nature-based removals, by 2035 the UK should be using bioenergy (largely grown in the UK) with CCS to deliver engineered removals of CO2 at scale.
The largest contribution is from

Chapter 2: The UK path to Net Zero 68

69 Sixth Carbon Budget – The path to Net Zero BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. ‘Other low -carbon technology’ includes use of bioenergy and waste treatment measures. ‘Producing low- carbon energy’ requires the use of carbon capture and storage (CCS) in electricity generation. 2010 2015 2020 2025 2030 2035 2040 2045 2050 Low-carbon electrification Low-carbon hydrogen and other low-carbon technology Low-carbon CO₂ capture from fossil fuels and industry Offset emissions using land and greenhouse gas removals

Chapter 2: The UK path to Net Zero 70 The role of individuals in achieving the Sixth Carbon Budge t To date, much of the success in reducing UK emissions has been invisible to the public. Government policy has enabled emissions reductions to proceed in a way that has not required mass engagement, by reducing the 'supply ' of emissions into the economy. For example, low-carbon power now provides over 50% of the UK's electricity supply, with no change to the service that electricity provides. Reaching Net Zero will require more involvement from people in engaging with the e missions reductions required, an d reducing or adapting demand for energy -intensive • Over 40% of the abatement in our scenarios to 20 35 involves at least some degree of change from consumers (e.g. driving an electric car, or installing a heat pump instead • Over 15% of the abatement measures in our scenarios require consumer choices – both to reduce demand and improve efficiency. Shifting quickly towards healthier diets, reducing growth in aviation demand and choosing products that last longer and therefore improve resource efficiency are all key. In the Widespread Engagement scenario this is even higher, at 19%. There are many reasons to think that these changes, and potentially much larger changes, are feasible given suitable policy leadership. Alon gside this advice, we have published a note by Committee member Professor Nick Chater on the behavioural principles underpinning this view. 3 It will not be possible to get close to meeting a Net Zero target without engagi ng with people or by pursuing an approach that focuses only on supply -side changes. The recent Climate Assembly - which saw a representative sample of the UK’s population deliberate over how to achieve Net Zero - noted the importance of involving people in decision- making, not just persua ding them to change, as part of a national conversation on the options available for achieving Net Zero and how these options should be pursued. changes in the Balanced Net Zero Pathway

71 Sixth Carbon Budget – The path to Net Zero The dynamics of each sector, and the principle of minimising early scrappage, point to common timings on the phase-out of high-carbon assets on the path to • Boiler lifetimes of 15 years imply a phase-out date for the installation of fossil fuel boilers in advance of 2035, in order for uptake of low-carbon heat to be sufficient to decarbonise buildings by 2050. Our Balanced Pathway sees sales of oil boilers phased out by 2028, and gas boilers by 2033 in residential homes, with the exception of hydrogen-ready gas boilers in areas where the gas grid is set to convert to low-carbon hydrogen. • Sales of new fossil fuel cars, vans and motorbikes are phased out by 2032 in • Building on the phase-out of coal-fired power generation by 2024, no new unabated gas plants should be built after 2030, and the burning of unabated natural gas for electricity generation should be phased out entirely by 2035. Any gas plant built before 2030 should be made ready for a switch to CCS or hydrogen (i.e. this should be both technically feasible and the plant should be located in a part of the country that will be served by the necessary infrastructure). • Emissions from the UK’s growing fleet of energy-from-waste plants will need to be captured in order for energy-from-waste to be sufficiently low-carbon by 2050. Waste should be minimised, and any new plants should be built Phase-out dates of high-carbon activities under the Balanced Pathway Technology/behaviour Phase-out date (new sales) Backstop date (operation) 2032 (including plug-in hybrids) 2050 2030-33 (in commercial properties) Oil boilers 2028 (in residential homes) 2025-26 (in commercial properties) Gas power generation (unabated) 2030 (no new build of unabated gas plants HGVs 2040 (<1% of sales by 2 040) Beyond 2050 N/A 2025 ban on all municipal & From today, new plants and extensions should be built with CCS or CCS ready new high -carbon assets should

Chapter 2: The UK path to Net Zero 72 e) Energy, carbon capture and storage and land use requirements In our Balanced Net Zero Pathway, the economy becomes much more energy efficient as a whole, with total energy demand falling by around 33% in end-use The energy system moves almost entirely from the existing, high-carbon fuel • Fossil fuels largely phased out. Demand falls significantly to 2050 for oil (- 85%) and natural gas (-70%) as the energy system makes the transition to Net Zero. Petroleum use is mainly restricted to the aviation sector, while natural gas use is limited to combustion with CCS for power generation and industrial processes and phased out of use in buildings. Opportunities for high-efficiency electrification (e.g. moving to EVs and heat pumps that are three times the efficiency of conventional vehicles and boilers) mean that demand for oil and gas falls more rapidly than the increase in electricity • Low-carbon electricity becomes the dominant energy vector for the UK, with output increasing to more than double current levels by 2050. This rapid expansion in low-carbon electricity is used to transform other sectors. • Hydrogen. From the 2030s onwards a hydrogen economy develops from virtually zero use in the energy system today, to a scale that is comparable to existing electricity use by 2050.
• Bioenergy and waste use is expected to grow modestly by 30% to 2050 efficient uses, including with carbon capture and storage (BECCS) which uses 85% of bioenergy supplies by 2050. There may be a fall in total bioenergy use to 2030 if unabated uses decline before BECCS applications At the same time, carbon capture and storage (CCS) is used to avoid further emissions from industry, alongside a role in permanent removal of CO2 from the • CCS is applied to the manufacturing & construction sector at scale in the 2030s, and continues to remove CO2 at similar levels out to 2050. • By 2050, around 60% of the carbon captured in the UK is in the greenhouse gas removals sector, primarily through the combustion of biomass for electricity generation, with a further 20% used for the production of hydrogen and 10% used with gas in the power sector. The UK’s land also has a crucial role to play with shifts in land use from today • Around one-third of agricultural land is freed up through reduced output and more efficient farming practices. • In total, 25% of the UK land area is forested or used for agro-forestry and energy crop production by 2050 - compared to around 15% today. • Harmful peat extraction is ended, and by 2050 nearly 80% of the UK’s peatlands are restored to their natural state. 73 Sixth Carbon Budget – The path to Net Zero 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 2020 2025 2030 2035 2040 2045 2050 Manufacturing & construction Buildings Surface transport Electricity supply

Chapter 2: The UK path to Net Zero 74 and 2050 in the Balanced Net Zero Pathway These values are TWh/yr HHV, given the starting ‘primary’ bioenergy & waste resources (prior to conversion into forms for delivery to end use sectors), i.e. solid biomass, liquid biofuels, biogas and solid wastes. These values include the fossil fraction of waste. Supply difference in 2035 will likely mean fewer biomass imports are used than are available. Minor differences in 2050 due to energy from waste approximations. industrial heat, buildings and road vehicles, to use with CCS

75 Sixth Carbon Budget – The path to Net Zero Manufacturing & construction Other fuel supply Hydrogen production Electricity supply

Chapter 2: The UK path to Net Zero 76 Balanced Net Zero Pathway in 2050 Centre for Ecology and Hydrology (2020) and CCC analysis. Forestry area includes small woodland areas (less than 0.5 ha or less than 20m in width) which are assumed to stay at current area. These areas are not accounted for in the Forestry Commission stats of forest coverage. transformation in how our land Land use in 2019 Land use in 2050

77 Sixth Carbon Budget – The path to Net Zero 2. Alternative pathways to Net Zero by 2050 This section addresses the implications of different pathways to Net Zero on the level of the Sixth Carbon Budget. This section presents results for all of our exploratory scenarios, but primarily focuses on the Headwinds, Widespread Engagement, Widespread Innovation scenarios. The Tailwinds scenario and the potential to achieve Net Zero before 2050 are discussed in Section 3. This section is a) Different emissions pathways for reaching Net Zero b) Contributions of different decarbonisation options d) The impacts of uncertainties on meeting the budget

Chapter 2: The UK path to Net Zero 78 a) Different emissions pathways for rea ching Net Zero Our exploratory scenarios have different balances of measures to reduce emissions extents with differing timings, so the resultant emissions pathways deviate close together in the 2020s and by 2035, the middle of the Sixth Carbon Budget • Total emissions across the Sixth Carbon Budget period (2033-2037) in the Headwinds, Widespread Engagement, and Widespread Innovation scenarios are all broadly comparable to the level of the Balanced Pathway, ranging from 12% higher to 9% lower than the Balanced Pathway. • The Tailwinds scenario diverges the most from the Balanced Pathway during the budget period, with emissions 36% lower than the Balanced Pathway over the course of the budget period. and exploratory scenarios for the UK BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. The fall in 2020 is largely due to COVID-19 impacts on aviation and shipping. There is flexibility to meet Net Headwinds Widespread Engagement Widespread Innovation Tailwinds

79 Sixth Carbon Budget – The path to Net Zero Each scenario shows similar dynamics to the Balanced Pathway in terms of sectoral rates of reduction, albeit in some cases on the pathway to different levels of sectoral emissions in 2050. The level of remaining emissions in 2050 is most sensitive to activity in the aviation and agriculture sectors, which must then be offset by removals in the land use, land-use change and forestry (LULUCF) and greenhouse gas removals sectors • In the Headwinds scenario, in which residual emissions are highest due to lower overall levels of behaviour change and innovation, the Net Zero target is most dependent on engineered removals. • In the Widespread Engagement scenario and Widespread Innovation scenarios where residual emissions from aviation, agriculture and all other sectors are lower than in Headwinds, a lower level of removals and forestry sinks are needed to achieve the Net Zero goal. • The Tailwinds scenario reaches net-negative emissions of more than −100 MtCO2e by 2050, with a high level of removals and very low residual emissions across the economy.
We have assessed the potential for the actions identified in the Tailwinds scenario to reach Net Zero by 2050 with The emissions trajectories show Manufacturing & construction Fuel supply Electricity supply Non-residential buildings Residential buildings Shipping

Chapter 2: The UK path to Net Zero 80 sensitive to the balance of action across aviation, agriculture, LULUCF and greenhouse gas removals b) Contributions of different decarbonisation options The ‘Balanced Net Zero Pathway’ has a relatively balanced mix of contributions from demand-side action, electrification, hydrogen, and natural and engineered greenhouse gas removals (GGRs). The exploratory scenarios deliver Net Zero with different mixes of these measures. To some extent, this affects the timings of their emissions • Headwinds. The greater reliance of the Headwinds scenario on use of hydrogen and carbon capture and storage (including for hydrogen production) means that some of the emissions reductions in this scenario happen less quickly than the other exploratory scenarios. • Widespread Engagement involves greater societal shifts in behaviour, including a reduction in consumption of all meat and dairy of 50% by 2050 compared to today’s levels, a reduction in flying of 10% compared to pre- COVID levels, and up to one third of all car journeys being replaced by walking, cycling or public transport. Similarly, increased resource efficiency and energy efficiency measures in homes are also prevalent in this The scenarios for emissions in 2050 are most sensitive to the aviation, agriculture, land use All other sectors Greenhouse gas removals

81 Sixth Carbon Budget – The path to Net Zero • Widespread Innovation sees the costs of low-carbon technologies fall further than other scenarios, and technology efficiencies improve. New technologies also play a larger role, such as Direct Air Carbon Capture and Storage (DACCS), high temperature heat pumps, autonomous vehicles The choices within these exploratory scenarios have significant impacts on the UK energy system, CCS requirements and land use (Figures 2.14, 2.15, 2.16). ‘Greenhouse gas removals’ is aggregation of all UK negative emissions and is not entirely separate to the other sectors listed. It includes the combustion of biogenic waste and biomass with CCS in other sectors. Manufacturing & construction Other fuel supply Hydrogen production Electricity supply

Chapter 2: The UK path to Net Zero 82 Manufacturing & construction Buildings Surface transport Electricity supply

83 Sixth Carbon Budget – The path to Net Zero Centre for Ecology and Hydrology (2020) and CCC analysis. SRF = Short Rotation Forestry. Forestry area includes small woodland areas (less than 0.5 ha or less than 20 m in width) which are assumed to stay at current area. These areas are not accounted for in the Forestry Commission While many choices can be made now over the broad shape of the transition, there remain some decision points for Government in the coming • Electrification and hydrogen for buildings. Hydrogen has the potential to replace fossil fuels in areas where electrification may reach limits of feasibility and cost-effectiveness, including a partial role for heat in buildings. Gas distribution networks will not be able to continue to provide natural gas on a widespread basis by 2050 - they will either need to be decommissioned or, if feasible, repurposed to hydrogen. Decisions will be required from the mid-2020s on the balance between electrification and hydrogen in decarbonising heating, and the implications for gas networks. • HGVs should be decarbonised, although it is not yet clear whether through hydrogen or electrification or a combination of the two. Given lead-times for infrastructure and the time needed to turn over vehicle stocks, decisions will be needed from the Government in the second half of the 2020s on how HGVs will be decarbonised, with commercial-scale trial deployments of technologies (including electrification and hydrogen) needed prior to this. Technological progress is likely to be driven globally and coordination will be required with connected markets in Ireland and mainland Europe. Until those decisions are taken it is prudent for the UK to keep Additional land released Settlements and other Energy crops & SRF Agro-forestry & hedgerows Rough grazing Temporary grassland

Chapter 2: The UK path to Net Zero 84 Until those decisions are made, the UK can keep as many options open as possible by supporting pilot programmes and accelerating deployment of ‘low-regret’ options (such as heat pumps in homes off the gas grid). d) The impacts of uncertainties on meeting the budget Beyond the factors considered within the scenarios, there is a range of conceivable uncertainties, where our assumptions generally err on the side of caution (i.e. if our assumptions are wrong it would tend to make the recommended budget easier to meet). Uncertainties include the performance of the economy and forthcoming changes to the methodology for estimating • Level of GDP. Future performance of the economy – and hence the level of economic activity that could cause emissions – is always uncertain to some degree. At the moment, the uncertainty is much greater than usual, relating to how the economy will recover after the COVID-19 pandemic. Our analysis has assumed that there is no lasting impact on GDP, an assumption at the optimistic end of the July scenarios from the Office for Budget Responsibility (OBR). This compares to the OBR’s ‘Downside’ scenario for a lasting 6% hit to GDP (Box 2.3). While the pattern of emissions impacts under such a scenario is uncertain, a uniform 6% reduction in all emitting activity relative to the Balanced Net Zero Pathway would lead to emissions being 11 MtCO2e lower in 2035, or 57 MtCO2e across the five-year • Sustained behaviour changes post-COVID. While 2020 has seen some large changes in patterns of behaviour due to the COVID-19 pandemic and associated restrictions, it is unclear the extent to which these changes will – In the Widespread Engagement scenario, we have explored the impacts of some sustained societal and behavioural changes (e.g. a sustained reduction in business aviation demand, due to greater familiarity with videoconferencing). This does not represent the full range of possible societal changes that result from the pandemic.
– Given the lack of clear evidence on how much behaviour may change and for how long, in the Balanced Pathway we have assumed that behaviour patterns return to how they were before the pandemic. Sustained changes of some of the kinds seen during 2020 (e.g. increased working from home, more walking and cycling) would tend to reduce overall emissions and also have positive co-impacts for • Changes to the UK Greenhouse Gas Inventory. – There will be changes to how UK emissions are estimated, owing to increasing the scope of the emissions inventory to count all emissions from wetlands and also because of changes in estimates from the IPCC for the global warming potentials of methane and other non- CO2 gases (see Box 2.1). These changes are expected to be made before 2025 and, in each case, there is a range of possible impacts depending on the precise methodology chosen. We have included those extra emissions at the upper end of current estimates. This means there is a possibility that estimated emissions may end up being around 15 MtCO2e lower than we have assumed in our analysis. Should this transpire, the Sixth Carbon Budget would have an effective 75 MtCO2e of headroom across the five-year budget period. budget easier or more difficult changes in the near future, we not assume las ting behavioural

85 Sixth Carbon Budget – The path to Net Zero – Bunker fuel sales are the currently agreed basis by which countries report international shipping emissions to the UN. Were an alternative methodology agreed, this would likely lead to an increase in the UK's international shipping emissions (for example, the activity basis used for the IMO's 4th GHG study could double UK international shipping emissions to around 16 MtCO2e). – Estimates of UK emissions will continue to change in the future as international understanding of the science improves and the IPCC issues new guidance on reporting. These changes could potentially shift the UK inventory in either direction. to outperform the Balanced Net Zero Pathway in CCC analysis based on BEIS (2020) Energy and Emissions Projections 2019, OBR (2020) Economic and Fiscal Emissions impact of COVID-19 based on a 6% reduction in emissions in 2035. Unknown future inventory changes include further changes to global warming potentials and other IPCC guidance that reflects future scientific understanding of climate science. We previously estimated the uncertainty in the UK inventory as +3%. M&C = manufacturing & construction. BECCS = bioenergy with carbon capture and storage. If the more back-ended Headwinds scenario is followed in some sectors, or there are relatively short delays in decarbonising some sectors, this can potentially be compensated for by faster reductions in other sectors (e.g. more behaviour change and/or innovation in the other exploratory scenarios). It would also be possible to import more sustainable bioenergy on a temporary basis (since our Balanced Pathway does not use all available sustainable supply in 2035), to bring earlier deployment of BECCS, before transitioning to UK-grown -60 -50 -40 -30 -20 -10 0 +10 +20 +30

Chapter 2: The UK path to Net Zero 86 We have attempted to quantify the impacts of some known uncertainties, but there is clearly a range of unforeseen future outcomes that cannot currently be quantified, whether wider mega-trends (e.g. digitalisation, AI, robotics), large-scale disasters (e.g. another pandemic or climate-related catastrophes) or unforeseen breakthroughs in reducing emissions. Overall, these uncertainties point towards emissions being potentially lower than we have estimated for a given set of policy actions. While the set of actions within the Balanced Net Zero Pathway is very stretching, the level of the Sixth Carbon Budget that we are recommending could therefore potentially be met even with some limited delays in delivery. OBR medium-term scenarios published in July 2020 In July 2020, the Office for Budget Responsibility (OBR) published three exploratory scenarios for the UK economy and public finances over the medium term. • The OBR Central scen ario assumes some economic scarring resulting in a 3% reduction in GDP by 2025 compared to the pre -pandemic forecast. • The range of the lasting economic impact of the pandemic in the OBR scenarios is The assumption in our anal ysis is most comparable to the V -shaped recovery shown in the ‘Upside’ scenario, under which GDP returns quickly to the level projected in March 2020. The ‘Downside’ scenario, under which GDP in 2025 is 6% below the level consistent with our analysis, wou ld allow considerable headroom in the budget where economic activity is still coupled to greenhouse gas emissions. OBR (2020) Fiscal sustainability report July 2020 uncertain factors make it more

87 Sixth Carbon Budget – The path to Net Zero 3. Can the UK achieve Net Zero significantly before 2050? As well as using our exploratory scenarios to explore a range of ways to achieve Net Zero by around 2050, we also combined the more optimistic assumptions on societal/behavioural change and on innovation to produce the ‘Tailwinds’ scenario, which aims to achieve Net Zero as early as possible. Tailwinds is a highly optimistic scenario, stretching feasibility in a wide range of areas and going beyond the current evidence in others. Even then, this scenario We consider it unlikely that the Tailwinds scenario could be delivered across the It requires that policy works first time, with full effect and in all cases to drive cost reductions and changes to behaviour, and that a range of uncertain technologies turn out at the better end of the range of expectations. These • Diet change. A 50% reduction in meat and dairy consumption – which is at the highest range of our modelled scenarios – and a corresponding reduction in emissions from agriculture while releasing additional land for • Aviation demand and efficiency. A 15% reduction on 2018 passenger levels as well as rapid improvements in efficiency and widespread use of biofuel and carbon-neutral synthetic jet fuel by 2050. • Very low-cost renewable electricity.
A further halving of the costs of offshore wind and other renewables to £23/MWh by 2050. • Major improvements to energy- and resource-efficiency across all – The fastest uptake of energy efficiency measures in buildings to the full economic potential, in combination with higher efficiency heat – All HGVs adopt efficiency measures (compared to an 80% uptake in • Rapid uptake of new technologies including a 2030 switchover date for electric vehicles; widespread acceptance of heat pumps in buildings, with innovative solutions for less-suited homes; production and public • Energy networks and industrial clusters. Rapid roll-out of CCS and hydrogen infrastructure at industrial sites, as well as upgrade of electricity grids to cope with widespread electrification. • Land use. Very high rates of tree-planting (70,000 hectares per year) and other land-based measures by 2050. • Engineered removals. The Tailwinds scenario contains the highest level of engineered removals in any of our scenarios. Bioenergy with carbon capture and storage scales up more quickly, a large increase in sustainable biomass imports is assumed, and DACCS is available at commercial scale The Tailwinds scenario is highly everything to go right first time. Chapter 2: The UK path to Net Zero 88 While Tailwinds outperforms our Balanced Pathway in almost every sector markets, supply chains and infrastructure and then replace the stock of high- carbon assets as they come to the ends of their lives. This reflects genuine limits to what can feasibly be achieved sustainably, while minimising the risks associated with going too fast (see Chapter 9, section 4). The Tailwinds scenario represents the furthest that even a highly optimistic set of assumptions can go, without resorting to widespread early scrappage or imposing strict limits on individual behaviours. 2035 and 2050 for the Balanced Net Zero Pathway LULUCF = land use, land-use change and forestry While faster emissions reductions could conceivably be achieved by including such things, they would be inconsistent with the conclusions of the Climate for the transition to Net Zero. The technical feasibility of some of the technological and behavioural developments assumed in the Tailwinds scenario is uncertain, even with good policy in place. The scenario raises the question of whether Net Zero could be achieved before 2050, to which we do not yet have a clear answer. There are genuine limits to the The Tailwinds scenario shows a possible scenario for getting to Net Zero before 2050, but this is Manufacturing & construction Fuel supply Electricity supply Non-residential buildings Residential buildings Shipping

89 Sixth Carbon Budget – The path to Net Zero Given these considerations, we continue to recommend Net Zero by 2050 at the latest as the appropriate goal for the UK. Should it become evident later in the 2020s that we are in a position to be able to take a path closer to that outlined in Tailwinds, it may be appropriate to revisit the date of Net Zero. This would require • Progress in deployment. It is critical that progress is made in the first half of the 2020s on reducing emissions across a wide range of areas, in line with – or ideally ahead of – our Balanced Net Zero Pathway. • Behaviours. Policies for the 2020s must be designed to encourage the sorts of societal and behaviour changes that would reduce emissions while also providing co-benefits in some cases (e.g. to health). These include reduced demand for flying and healthier diets that contain significantly less meat and dairy, as well as uptake of unfamiliar technologies such as heat pumps. Should it turn out that people are willing to embrace these changes, faster progress may be possible to reduce emissions. • Learning by doing. Should the major cost reductions seen in the last decade for solar, wind and batteries be repeated in those or other areas over the next decade (e.g. in electrolysis, greenhouse gas removals, plus further reductions in costs of zero-carbon electricity), emissions could fall more quickly. Such cost reductions will require learning-by-doing through deployment in the 2020s, supported where necessary by appropriate infrastructure (e.g. CO2 infrastructure for greenhouse gas removals). • Strategic decisions. The Government will need to make decisions on how we will decarbonise heating and the future of gas networks in the mid- 2020s, and on heavy goods vehicles (HGVs) shortly thereafter, even under the Balanced Pathway. There is no scope for this to slip, especially if accelerated progress is intended. • Breakthroughs. There is also potential scope for more speculative breakthroughs that are not even included in the Tailwinds scenarios (e.g. cheap and effective feed additives to reduce agricultural methane • New scientific evidence – for example on the relative warming potential of methane or the rate at which UK peatlands emit greenhouse gases – could affect the date at which Net Zero could be achieved. Until then the priority must be to put in place strong policies to drive changes across the board and react to new developments. Chapter 2: The UK path to Net Zero 90 Is it possible to reach Net Zero by 2050 with zero CCS? All of the pathways explored in our Sixth Carbon Budget advice see the use of carbon capture and storage (C CS) as a critical and cost -effective means of meeting the UK’s This exploratory ‘what -if’ sensitivity analysis takes a snapsh ot of emissions in the Tailwinds scenario in 2050 only, and illustrates what could happen if the use of CCS was minimised across the economy. This sensitivity was not costed or explored prior to 2050, and so is not a recommended pathway – particularly as e xclusion of CCS is likely to significantly increase cumulative emissions over the period to 2050. Right -hand stack has no use of CCS or Direct Air Capture in any sectors, except for 10 MtCO2/yr of CCS across energy from waste plants and some parts of refining and manufacturing.
Also uses 60 TWh/yr of biomass freed up for biofuels production, and 50 TWh/yr of hydrogen freed up to displace / avoid fossil gas use. The Tailwinds scenario, which reaches Net Zero by 2042 in our analysis, is the most reach Net Zero by adjusting the Tailwinds scenario to lim it CCS. However, the minimisation of CCS results in Net Zero being achieved around eight years later, in 2050, with no potential left to go faster in one sector if another sector under -delivers. This sensitivity has particularly acute impacts on the overal l level of GHG removals that can be achieved, as well as impacts on energy supply, waste and energy -intensive • CCS-based removals would no longer be possible . Only natural removals (i.e. tree & energy crop planting and peatland restoration) and wood in construction can offset remaining residual emissions in 2050. 91 Sixth Carbon Budget – The path to Net Zero • The best use of bioenergy would change. Given that bioenergy cannot be used with CCS, bioenergy will achieve lower GHG sa vings. However, 60 TWh/year of biomass would now be available that would otherwise have been used to fuel CO 2 capture equipment on CCS plant. This biomass could instead be converted int o biofuels, eliminating residual petroleum emissions in aviation and ot her parts of the economy. • Gas-based power and hydrogen production, without CCS, would no longer be consistent with Net Zero . However, most of the hydrogen in the Tailwinds scenario is produced via renewable electricity, so this could be manageable under th is scenario. Additionally, excluding Direct Air Capture frees up 50 TWh/year of low -carbon hydrogen, displacing fossil gas use in power and avoiding the use of fossil gas in • Parts of manufacturing and refining, and energy from waste pl ants, would still need to use CCS in order to decarbonise, as no other viable low -carbon alternatives are available. This would require 10 MtCO 2/year to be captured and stored by 2050. Furthermore, the reliance only on natural removals to offset remaining positive emissions (e.g. in agriculture) means that staying at Net Zero after 2050 would require ever - increasing natural carbon stocks (e.g. in forests and peatlands), requiring a slow ly bu t ever-increasing area of the UK to be devoted to sequestration. Overall, this supports our message that CCS is essential to achieving Net Zero, at lowest cost, in the UK. The importance of CCS globally further underscores the urgency of progressing CCS plans in the UK. Net Zero. A sensitivity analysis shows that getting to Net Zero the highly uncertain Tailwinds

Chapter 2: The UK path to Net Zero 92 1 Evans et al. (2019) Implementation of an Emissions Inventory for UK Peatlands. 2 Myhre, G., D. Shindell, F.-M. Bréon, W. Collins, J. Fuglestvedt, J. Huang, D. Koch, J.-F. Lamarque, D. Lee, B. Mendoza, T. Nakajima, A. Robock, G. Stephens, T. Takemura and H. Zhang, 2013: Anthropogenic and Natural Radiative Forcing. Climate Change 2013: The Physical Science Basis. Contribution of Working Group I to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex and P.M. Midgley (eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA. 3 CCC (2020) Net Zero after Behavioural Principles for Building Back Better. 93 Sixth Carbon Budget – The path to Net Zero 3. Manufacturing and construction 125 6. Agriculture and land use, land-use change and forestry 163 11. Greenhouse gas removals 197

95 Sixth Carbon Budget – The path to Net Zero Achieving the Net Zero target requires all sectors of the economy to contribute, including international aviation and shipping. This chapter presents the scenarios shown in Chapter 2 at a sectoral level and discusses the different options that are available within each sector on the transition to Net Zero. We also discuss the impacts of the choices made in each sector on investment requirements, cost savings and the wider co-impacts on society. The economy- wide impacts, costs and benefits of each scenario are then assessed in more detail Policy recommendations, and additional detail behind the analysis for each sector is provided in the accompanying Policy and Methodology Reports. Our key messages in this Chapter • Delivering Net Zero GHGs by 2050 will require all sectors to contribute. • Each area of the economy must make substantial changes in the next decade to get on the path to Net Zero emissions for the whole of the UK. The transition must not be delayed. • All sectors have multiple options to achieve a level of emissions reduction that is consistent with Net Zero by 2050. • Most sectors can achieve near-zero greenhouse gas emissions by 2050 in different ways. For many sectors, the shape of the overall emissions trajectory that is required is similar even where very different options are deployed (for example the relative uptake of electrification compared to the use of low-carbon hydrogen in manufacturing). • The scenarios for the agriculture, land use, aviation and greenhouse gas removals sectors have the most variation in emissions by 2050. The choices made in these sectors have greatest impact on the UK’s residual greenhouse gas emissions in 2050 and the scale and type of negative emissions that are required to offset them. • Different sector pathways bring different costs, benefits and impacts. The choices made in each sector have wide-ranging impacts, including costs, cost savings and co-impacts on society. Policymakers should look to maximise the positive co-impacts of decarbonising each sector. The analysis underpinning our key messages is set out for each of the following 3. Manufacturing & construction 6. Agriculture and land use, land-use change and forestry (LULUCF)

Chapter 3: Sector pathways to Net Zero 96 Surface transport GHG emissions were 113 MtCO2e in 2019, comprising 22% of total UK GHG emissions. This could fall to 32 MtCO2e by 2035 in our Balanced Net Zero Pathway.
Delivering this transition will require take-up of low-carbon technologies, low-carbon fuels and efficiency improvements for petrol and diesel vehicles and behaviour change to reduce travel demand and shift journeys onto lower-carbon Achieving this reduction will require significant investment in technology and infrastructure but these will be more than offset by savings in operational expenditure, delivering an estimated net benefit to consumers of £8 billion per year Our assessment is based on detailed modelling, literature review and stakeholder engagement. We commissioned Element Energy to assess trajectories for uptake of The rest of this section is set out in three a) The Balanced Net Zero Pathway for surface transport b) Alternative routes to delivering abatement in the mid-2030s c) Impacts of the costs, benefits and co-impacts on society a) The Balanced Net Zero Pathway for surface transport In our Balanced Pathway, options to reduce emissions, including take-up of zero- emission technologies and reduction in travel demand, combine to reduce surface transport emissions by around 70% to 32 MtCO2e by 2035 and to Surface transport is currently

97 Sixth Carbon Budget – The path to Net Zero Balanced Net Zero Pathway for the surface BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. The Balanced Pathway covers low-cost, low-regret options as well as more 3.1.a). The key elements of this • Reduction in car travel. Our demand scenarios are based on modelling by the UK Centre for Research into Energy Demand Solutions (CREDS), along with other literature and evidence across UK cities and in other countries. Compared to baseline growth, we assume that approximately 9% of car miles can be reduced (e.g. through increased home-working) or shifted to lower-carbon modes (such as walking, cycling and public transport) by 2035, increasing to 17% by 2050. The opportunities presented to lock-in positive behaviours seen during the COVID-19 pandemic and societal and technological changes to reduce demand (e.g. shared mobility and focus on broadband rather than road-building) are key enablers. • Cars and vans. A high take-up of electric vehicles (EVs), resulting in the end of sales of new conventional cars, vans and plug-in hybrids (PHEVs) by 2032 at the latest. From 2030, regulatory approval to drive fossil fuel cars, vans and motorbikes should be limited to 2050 so that remaining fossil fuel vehicles are removed from the fleet at that point. High take-up of EVs will require significant roll-out of charge Sales of new petrol and diesel cars and vans, including plug- in hybrids, sho uld end by 2032

Chapter 3: Sector pathways to Net Zero 98 – The number of battery-electric vehicles (BEVs) will need to scale up rapidly in the 2020s from 5% of new sales today, reaching 100% by 2032 at the latest. By 2035, we estimate that there could be around 28 million EVs on the road*, comprising 25 million BEVs and 3 million PHEVs. – Analysis shows that BEVs have considerably lower lifecycle emissions than petrol and diesel cars, but that PHEVs are only marginally better – Charge points for electric vehicles will also need to be scaled up rapidly in the 2020s to support the phase-out of new petrol and diesel cars and vans by the early 2030s. These will comprise a mix of private chargers at homes and workplaces and public on-street charge points for those without off-street parking, around towns and cities for top-up charging and on the strategic road network for longer-distance inter- urban charging. The most cost-effective mix is expected to focus supporting charging infrastructure in the CCC analysis. 2020 figures based on DfT, OLEV, SMMT and Zap-Map statistics. Includes all small, medium and large cars and all publicly accessible charge points in the Balanced Net Zero * This is based on car ownership forecasts from the Department of Transport’s National Transport Model, which anticipate growth in line with population and GDP. If rates of car ownership fall, then the total number of electric million fully electric cars on UK rolled out during the 2020s and private car-parking and inter- charging during long journeys. 99 Sixth Carbon Budget – The path to Net Zero • Heavy goods vehicles. There is currently considerable uncertainty over the most cost-effective and feasible decarbonisation option for heavy goods vehicles (HGVs), and Government will need to fund large-scale trials of different technologies to gain a better understanding of options and for the market to develop. We commissioned Element Energy to assess trajectories and costs for the roll-out of zero-emission HGVs to 2050.1 Based on this evidence, our Balanced Pathway assumes that the roll-out of zero-emission HGVs accelerates to reach nearly 100% of sales by 2040. Decisions on the UK approach to HGVs must also integrate with the decarbonisation strategies in mainland Europe. The scenario will – Zero-emission vehicles (ZEVs) to make up 96% of new sales of HGVs, buses and coaches by 2035 and almost 100% by 2040. – There to be around 170,000 zero-emission HGVs and coaches (approximately 33% of the fleet) in operation by 2035, rising to 67% of – Public infrastructure to support this, which is likely to require over 300 ultra-rapid public charge points and 100 hydrogen refuelling stations by 2035, increasing to around 650 and 250 respectively by 2040. These are in addition to depot charge points and refuelling facilities. Emissions reductions in the Balanced Pathway are also delivered through improved efficiency of conventional vehicles, logistics improvements and decarbonisation of • Efficiency improvements. New petrol and diesel cars, vans and HGVs continue to be fitted with cost-effective technologies and design improvements to improve fuel efficiency, leading to reductions in CO2 intensity of 12% (cars and vans) and 21% (HGVs) for new models by 2030. Biofuels are used in surface transport, with E10 petrol introduced from 2021. Biofuels are phased out from cars and vans by 2040 and in HGVs by 2050 as they are best used in other sectors. • Shifts in van usage.
Van travel is the fastest growing sector, with total van miles increasing by 70% since 2000.2 Around a quarter of this can be explained by the growth in internet sales and the associated parcel delivery sector. We assume that 3% of van miles can be reduced by 2035 through measures such as last-mile deliveries by portering/e-cargo bikes, micro-consolidation centres in urban areas, reduction in delivery failures, use of experienced driver and routing technologies and encouragement of • HGV logistics. There is potential for HGV logistics measures to reduce miles driven by lorries, through measures such as expanded use of consolidation centres, extended delivery windows, higher loading and reduced empty- running. Our Balanced Pathway, drawn from a study by the Centre for Sustainable Road Freight3, assumes a reduction in total HGV miles of around 10% by 2035 through these measures. • Buses. Take-up of low-carbon buses and infrastructure is already occurring across the UK. The Confederation of Passenger Transport (the trade body for bus and coach operators) has set a target for all new buses to be ultra- low or zero-emission by 2025. Our Balanced Pathway assumes that all sales of new buses are zero-carbon (largely hydrogen or BEV) by 2035. hydrogen fuel-cell trucks, and

Chapter 3: Sector pathways to Net Zero 100 • Rail. Government has set an ambition to phase out diesel trains by 2040, while the Rail Industry Decarbonisation Taskforce (supported by the Rail Safety and Standards Board) published pathways to decarbonise rail in 2019. Our Balanced Pathway assumes the Government ambition is achieved for passenger rail, with almost half of the network electrified where this is cost-effective and a mix of hydrogen, battery-electric and electric hybrid trains replacing existing diesel trains where it is not. Several key freight corridors are also electrified. These measures combine to reduce emissions from rail by around 55% by 2035. Summary of key assumptions used for the Balanced Net Zero Pathway in 2035 Balanced Net Zero Pathway – assumptions in 2035 • Total car miles fall by 9% by 2035 relative to the baseline. This is driven by modal shift from cars to walking, cycling (including e -bikes) or public transport, an increase in average car occupancy and a reduction in travel from factors such as increased working from • For vans, demand is reduced by 3 % through measures such as increased use of urban consolidation centres and e -cargo bikes. • Factors such as improved logistics lead to 10% lower total HGV miles, relative to baseline Efficiency • The average real-world CO 2 intensity of new conventional cars and vans needs to improve by around 12% relative to today’s levels, before these are phased out in the • Efficiency of new HGVs increases by up to 21% through measures such as improved aerodynamics and lighter -weight construction. Most existing HGVs realise efficiency savings of 13-22% due to measures including retrofitting aerodynamic improvements • 47% of the UK’s railways are electrified by 2035, and diesel engines are 18% more • Sales of new petrol and diesel cars a nd van s (including PHEVs) are phased out by 2032 at the latest. BEVs make up 64% of all cars and 68% of all vans on the road. • Zero-emission HGVs comprise 96% of all sales and 99% o f bus and coach sales are zero - emission. Diesel vehicles still comprise 67% of the HGV fleet. • All diesel trains have been removed from operations on category A passenger routes. These are mostly replaced by electric trains, with increasing numbers of batte ry-electric trains. Electric and diesel -electric trains make up 44% of the f reight fleet. b) Alternative routes to delivering abatement in the mid -2030s There are alternative technical or behavioural approaches that could deliver emissions reductions. These are represented in our exploratory scenarios, which consider how emissions can be reduced across a variety of consumer and

101 Sixth Carbon Budget – The path to Net Zero BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Baseline emissions begin slightly higher than the latest outturn data – this is because our scenario modelling is calibrated against DfT’s National Transport Model, which uses a base year of 2017. These scenarios demonstrate that options remain to go further in some areas as technology choices and the extent of possible behaviour change become • Greater reductions in travel demand through a higher shift to lower-carbon travel modes, ride-sharing solutions or societal shifts would mean that fewer electric cars and vans would be needed, with corresponding savings on EV capital costs and in charging investment and running costs. – Our most ambitious scenario for car demand results in a reduction in miles driven of 34% by 2050 relative to baseline demand. This is achieved through greater ambition on modal shift to active travel and public transport, a higher level of car-sharing and higher behavioural change through measures such as working from home and a reduction in business trips through greater use of technology. – Across our scenarios, the assumed demand reductions are partially offset by rebound effects due to the fuel cost savings from EVs, which are much cheaper to run than fossil fuel vehicles. through significant investment

Chapter 3: Sector pathways to Net Zero 102 • There are also risks that travel demand could be higher than in our Balanced Pathway. We have modelled this in the Widespread Innovation scenario, where the introduction of connected and autonomous vehicles (CAVs) is assumed to lead to higher travel demand through improved mobility options and better utilisation of road space. In this scenario, overall car demand is 5% higher than in the baseline by 2050. • An earlier switchover date for ending petrol and diesel cars sales could be possible and deliver cost reduction and emissions benefits. – Our analysis suggests that new electric cars and vans are likely to be cost-saving from a social perspective during the 2020s, with upfront cost-parity reached by 2030.
On this basis, the cumulative costs of passenger cars and vans are likely to be lower if the end of sales is – A 2032 phase-out is expected to deliver almost 90 MtCO2e lower cumulative emissions and £6 billion additional cost-savings across the period from 2020-2050, compared to continuing to allow conventional vehicles to be sold until 2035. Moving the phase-out date forward to 2030 could deliver even larger cost savings and a small amount of dates for new petrol and diesel cars and vans Comparison between the annual cost to society (cost of vehicles, infrastructure, fuel and maintenance) of the EV transition under three phase-out dates for new petrol and diesel car and van sales (including PHEVs): i) 2030; ii) 2032 (as in our Balanced Net Zero Pathway); and iii) 2035. earlier in the 2030s is expected deliver increased cost savings. 103 Sixth Carbon Budget – The path to Net Zero • Our scenarios consider the impact of various phase-out dates for new petrol and diesel 2032 in the Balanced Pathway; 2035 in evidence suggest that raw materials and supply chains can scale up to support a phase-out of all new petrol and diesel cars and vans by 2032 (see Methodology Report), and there is a clear economic and climate case to deliver it by then at the latest. • Our scenarios all assume that PHEVs are phased out at the same time as conventional fossil fuel vehicles. If this does not occur and PHEVs are instead allowed to be sold for longer, there is a risk that this could lead to greater uptake of PHEVs and undermine the switchover to fully zero- emission options. Real-world emissions from PHEVs are often only marginally lower than emissions from conventional vehicles. Includes all new sales of small, medium and large cars – note that EV uptake in the Tailwinds scenario is aligned to the Widespread Innovation scenario. • Our Balanced Pathway for HGVs assumes the most cost-effective technologies are taken up, resulting in a mix of hydrogen and battery- electric vehicles using ultra-rapid chargers. Our exploratory scenarios consider HGV costs and take-up under alternative technological

Chapter 3: Sector pathways to Net Zero 104 – In each exploratory scenario there is focus on one main zero-carbon in Headwinds, hydrogen refuelling stations are the only publicly available refuelling option; Widespread Engagement focuses on battery-electric with ultra-rapid public chargers; and Widespread Innovation assumes an electric road system (ERS) with both BEV and hydrogen vehicles recharging at depots. – Each of battery-electric, hydrogen and ERS could play a role in decarbonising the HGV sector. Small rigid trucks are likely to predominantly adopt BEVs, while hydrogen or ERS could be valuable for heavier vehicles with longer range requirements. By 2050, BEVs with ultra-rapid public chargers are likely to become the cost-optimal – Whichever technologies emerge, there needs to be significant HGV infrastructure investment in the 2020s and 2030s. This will give confidence to fleet operators that they will be able to refuel as part of their daily operations. The total investment requirement (including the cost of infrastructure and new vehicles, and comprising both public and private investment) is estimated to be £35-65 billion across the period 2020-2050, which is expected to be partly offset by operational Element Energy analysis for the CCC (2020). Assumes that sufficient financial support is available to make zero-emission options cost-competitive versus option for HGVs is likely to be Battery-electric HGVs are likely to be cost-optimal eventually,

105 Sixth Carbon Budget – The path to Net Zero Summary of key differences between our scenarios for the surface transport sector c) Impacts of the costs, benefits and co -impacts on Delivering the Balanced Pathway results in a cost saving to the economy of £8 billion in 2035 compared with a theoretical counterfactual without any action on 3.1.g). Most measures in the Balanced Pathway are cost-effective. • Average lifetime abatement costs for the key surface transport sectors are * These figures are before rebound effects, which will increase demand as EV uptake grows, due to lower fuel costs. The transition to zero-emission vehicles will lead to an overall annual saving of £8 billion in

Chapter 3: Sector pathways to Net Zero 106 Abatement costs for key surface transport sectors in 2035 (£/tCO 2e) Marginal abatement costs for a new measure • Significant investment in vehicles and charging infrastructure starting from now and rising to £12 billion per year in 2035 will be required. Investment costs continue to rise to 2050 as zero-emission technology and infrastructure is rolled out. This includes both public investment (including on deployment of public charging infrastructure) and private expenditure (such as for • As EVs are much more efficient than conventional vehicles, these will be offset by lower operational expenditure from around 2030, with annual operating cost savings of around £20 billion in 2035. operational cost savings in the Balanced Net above the horizontal axis represent additional capital expenditure (infrastructure and the purchase of new vehicles), while segments below the horizontal axis represent operational cost savings (reduced consumption, efficiency improvements and fuel / maintenance cost savings). decarbonising transport will be £12 billion in 2035. This includes

107 Sixth Carbon Budget – The path to Net Zero By 2025 we estimate that a new battery-electric car will be cost-saving compared with a petrol or diesel car over the lifetime of the vehicle, even when including costs of developing charging infrastructure and upgrading power networks to deal with increased demand for electricity and taking account of the need to replace • A typical BEV car today is around 35% more expensive to purchase than a comparable conventional car. By 2030, we expect these upfront costs to reach parity, and by 2035 a typical BEV would offer a small upfront cost • Over the lifetime of the vehicle, the total societal cost of fuel for a typical conventional car is around £2,900. By comparison, the cost of electricity is lower at around £2,200.
If fuel duty is included, the cost saving to a private owner is around £6,700 (around £500 per annum) in cash terms. • BEVs have fewer moving parts, so also typically have lower maintenance costs than conventional vehicles. This can save the owner up to £170 per • The cost of installing a home charger is expected to fall by around 25% by and conventional vehicles in 2030 Societal costs are discounted at the social discount rate of 3.5% and represent net costs to society over the lifetime of the vehicle (i.e. excluding taxes and duties). Private costs are discounted at a private discount rate of 7.5% and include all taxes and duties. Battery costs are falling rapidly. By 2030, a battery-electric car owning an electric car will be for a petrol or diesel vehicle. Chapter 3: Sector pathways to Net Zero 108 In addition to significant emissions reductions and operating cost savings, many of the measures we outline have wider benefits to • Reduced demand for car travel and improved delivery logistics will lead to lower levels of congestion and better air quality, particularly in urban areas. • Switching to active forms of travel, such as walking and cycling, should offer health and wellbeing benefits. • Widespread uptake of zero-emission vehicles will deliver improvements in air quality (particularly in NO2 and CO2) and noise reduction. uptake will bring significant co-

109 Sixth Carbon Budget – The path to Net Zero Direct buildings emissions were 87 MtCO2e in 2019. Progress in delivering emissions reductions has broadly flatlined since 2015, when comparing on a temperature Our pathways to 2050 aim to reduce emissions in buildings to zero by 2050 at the latest, based on the findings of our Net Zero report. They also aim to ensure buildings of the future are comfortable, healthy spaces to be year-round, which are resilient to overheating and other climate risks. Our Balanced Net Zero Pathway reflects four priorities over the coming decade or • Deliver on the Government’s energy efficiency plans to upgrade all buildings to EPC C over the next 10-15 years. • Scale up the market for heat pumps as a critical technology for decarbonising space heating, while maintaining quality. • Expand the rollout of low-carbon heat networks in heat dense areas like cities, using anchor loads such as hospitals and schools. Prepare to shift away from using fossil fuel Combined Heat and Power (CHP) as a supply- source towards low-carbon and waste heat by preference from the mid- • Prepare for a potential role for hydrogen in heat through a set of trials building on the current innovation programme. This programme requires a major ramp-up from what is happening today in supply chains for insulation, heat pumps and heat networks. Our detailed analysis demonstrates that this is • We commissioned Element Energy to undertake bottom-up modelling of heat decarbonisation for existing homes. Alongside modelling undertaken in house, the assessment indicates that delivering net zero emissions in • This assessment is underpinned by the latest available evidence on the cost and performance of measures, and on deployment constraints, informed by a literature review and through evidence gathering from expert • The installation rates for insulation measures such as lofts and cavity walls are within the range previously achieved under the supplier obligations in the early 2010s. Solid wall installation rates are more ambitious but considered achievable with strong policy in our testing with stakeholders. The rest of this section is set out in three a) The Balanced Net Zero Pathway for buildings b) Alternative routes to delivering abatement in the mid-2030s c) Impacts of the Scenarios – costs and benefits emissions in buildings to zero in supply chains for insulation,

Chapter 3: Sector pathways to Net Zero 110 a) The Balanced Net Zero Pathway for buildings Across all buildings, around 34% of abatement to 2030 comes from energy efficiency measures, with a growing share of abatement from low-carbon heating, carbon heat networks, high efficiency and flexible electrification, along with some hydrogen near industrial clusters from 2030. Our Balanced Net Zero Pathway takes Government policy priorities as its starting point – in particular the plans to improve the energy efficiency of all buildings over the next 10-15 years, to phase-out the installation of new high-carbon fossil fuels in the 2020s, and to expand heat networks through to 2050. We have assessed what additional levers are required in order to remove all remaining fossil fuel emissions from buildings, while minimising costs and • Minimising costs and disruption means working as much as possible with existing technology lifetimes – particularly the heating technology stock. • At the same time, we want to move quickly enough to be able to reach Net Zero without scrapping existing heating systems. Balanced Net Zero Pathway for Buildings BEIS (2020) Provisional UK greenhouse gas statistics 2019; Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget; CCC analysis. Residential low-carbon heat includes some efficiency associated with new homes. Non-residential energy efficiency also includes some behavioural measures. Non-residential other includes catering and other non-heat the efficiency of buildings and Buildings shift on to low-carbon heat networks, high efficiency We look at a set of additional policy a phase out date for the installation of natural gas boilers in 2033, along with lenders and at point of sale to drive efficiency renovations in

111 Sixth Carbon Budget – The path to Net Zero Given boiler lifetimes of around 15 years, we have looked at phasing out the installation of fossil fuel boilers, in advance of 2035.
We adopt a central date of 2033 for gas boilers across buildings, with public buildings moving • For homes, we pick a central phase out date of 2028 for high-carbon fossil fuel boilers not connected to the gas grid, and a phase out date of 2033 • The key date of 2033 balances the need to scale up heat pump supply chains sustainably, while allowing for a small amount of headroom over a typical 15-year boiler stock turnover before 2050. • In non-residential buildings we use 2025 for high-carbon fossil fuel boilers in public buildings and 2026 in commercial buildings, based on the feasibility and benefits of moving faster. We use phase out dates for gas boilers of 2033 in commercial buildings and 2030 in public buildings in the Balanced pathway. The faster pace in public buildings allows the Government to meet its targeted 50% reduction in emissions by 2032. • These dates operate alongside the deployment of low-carbon heat networks and a regional rollout of hydrogen conversion of the gas grid, informed by our industry scenarios. This means that the phase-out does not apply in any areas designated for these alternatives. The other key dates are then based on the need to build critical supply chains and skills, and prepare the building stock for the transition to low-carbon heating, with most of the energy efficiency programme completed by the time fossil fuel boiler This energy efficiency programme is also underpinned by a timetable of standards –rented homes achieve EPC C by 2028 in line with new Government proposals, with social homes aligned to the same timetable. We test two new policy proposals for the two-thirds of homes which are owner- occupied, and therefore not covered by existing proposals outside of Scotland. This includes a requirement on lenders to first report on and then improve the average efficiency of their mortgage portfolios, covering just under half of the owner-occupied stock. A further subset are captured by regulations at point of sale, drawing on proposals published by the Scottish Government. Chapter 3: Sector pathways to Net Zero 112 Implications in the Balanced Pathway for buildings 100% of buildings built with high -levels of energy efficiency and low-carbon heating (e.g. heat pumps or low-carbon heat Rented homes to achieve EPC C by 2028, such that all practicable lofts and cavities are insulated alongside other low-regret measures, with solid wall insulation deployed where this supports low -carbon heat and wider benefits. Standards for lenders targeting Homes with mortgages achieve EPC C by 2033, such that all practicable lofts and cavities are insulated alongside other low-regret measures, with solid wall insulation deployed where this supports low -carbon heat and wider benefits. This covers just under h alf of all owner-occupied homes. All homes for sale EPC C 2028 No dwellings can be sold unless they meet the minimum standa rd. At the current housing turnover of once every ten years for mortgagors and once every 24 years for outright owners, regulations at point of sale would be expected to result in a further 15% of owner occupied homes meeting the required standard by 2035 (with further upgrades driven by the standards on lenders, totalling at least 60% of owner -occupiers 2030 All energy efficiency improvements are made by 2030 to meet the Government’s target of red ucing business and industrial All boilers are hydrogen -ready 2025 By 2025 at the latest, all new gas boilers are hydrogen -ready. 2028 100% of heating system sales off the gas grid are low -carbon from 2028, with exemptions for any buildings in zo nes designated for low -carbon district heat. Earlier dates may be possible in public and commercial buildings. for low-carbon district heat or 2033 100% of heating system sales are low-carbon from 2033, with exemptions for any buildings in zones designated for low - carbon district heat or hydrogen -conversion. We assume an earlier date of 2030 in public buildings so as to achieve the Clean Growth Strate gy target of 50% emission reduction by 2025 Currently, around 93% of district heat networks use a fossil fuel - based primary f uel source. We assume that all new district heat network connections from 2025 a re low-carbon. All heat networks supplied by legacy CHP schemes convert to low - The fossil phase-out dates drive uptake of building-scale low-carbon heating – predominantly heat pumps, with some flexible resistive electric heating such as storage heating and panels. 113 Sixth Carbon Budget – The path to Net Zero Energy efficiency in the Balanced Net Zero Pathway The household energy efficiency programme in our Balanced Net Zero Pathway corresponds to a similar level of ambition as the Government’s EPC C • It entails £55 billion of investment in home energy efficiency to 2050. • BEIS’s published estimate of £35-65 billion to achieve the EPC C standard implies a broadly consistent level of ambition. • It remains important that EPCs are reformed to ensure they drive the energy efficiency measures needed, as detailed in our accompanying Policy In total, 15 million households receive one of the main insulation measures (loft/wall/floor) and a further 8 million benefit from draught-proofing. Most homes with hot water tanks benefit from hot water tank insulation. All fuel poor homes receive a high efficiency • We deploy low-cost measures such as draft proofing and hot water tank insulation in all homes, as well as insulating all practicable cavities and lofts (including top-ups where existing insulation is below 200mm). • Our assessment is that this leads to the deployment of around 3 million cavity insulation measures and 11 million loft insulation measures to 2050. • We include solid wall insulation in just under half of all uninsulated solid- walled homes (3.4 million in total) including all those in fuel poverty. Energy efficiency and behavioural measures in our Balanced Pathway deliver a 12% reduction in heat demand to 2050 (compared to a 22% reduction in our Tailwinds scenario).
* This is a conservative estimate which reflects how measures are currently performing when installed in existing homes (further detailed in the accompanying Method report). Higher savings are possible with greater improvements in tackling the performance gap, innovation and public There remains uncertainty over the balance of costs and benefits for wall insulation in solid walled homes in particular, as well as levels of public support. This includes uncertainty over the energy savings which can be achieved and the potential for innovative new approaches which minimise cost and disruption (detailed in the separate Methodology report). Further research is needed here to inform deployment. To the extent there is any under delivery of solid wall insulation relative to our scenarios, the abatement would need to be delivered in other ways e.g. through increased uptake or performance of other energy efficiency measures, or through a faster rate of heat pump deployment. * This represents an aggregate reduction in heat demand across the stock, taking into account technical and economic potential, and is not reflective of the savings which might be delivered in an individual home which has minimal existing insulation. A typical household in our Balanced Pathway which installs cavity wall insulation, loft insulation, and floor insulation sees heat demand savings of 30%, while very deep retrofits might deliver savings in the region of 57% (Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the s ixth carbon budget). The lower stock-level heat demand savings relative to our Net Zero analysis reflect a number of factors, including updated savings assumptions based on data from the National Energy Efficiency Database, and the latest evidence on costs and technical and economic potential. These factors lead to lower deployment relative to Net Zero, but similar deployment to that modelled for the Fifth Carbon Budget. heat efficiency savings of 12%

Chapter 3: Sector pathways to Net Zero 114 The timetable associated with our Balanced Net Zero Pathway allows for rapid • Total loft insulations rise rapidly from just 27,000 lofts insulated in the past year to back to over 700,000 installations per year by 2025. This compares to 1.6 million which were insulated in 2012 under the supplier obligations. • The rate of cavity wall insulation rises from 41,000 cavities to over 200,000 a • Solid wall insulation measures also increase to just over 250,000 a year by 2025 from just 11,000 in the past year. This puts us on track for insulating 3.4 million by 2050, or just under half of the total UK stock of solid wall buildings. Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget. This does not include measures which save other electrical demand such as LEDs, wet and cold appliances. Behavioural measures include multi-zonal heating controls and pre-heating (i.e. turning heating on early, off-peak). Our non-residential building scenarios include a 27% reduction in energy consumption compared to our 2018 baseline. In our Balanced Pathway, commercial energy efficiency is fully deployed by 2030 in line with the Clean Growth Strategy target and public sector measures are fully deployed by 2032 to contribute to the Government’s emission reduction target. solid wall insulation is highly uncertain, as are the costs and solid walls (out of a total of 8 25% energy efficiency savings. 115 Sixth Carbon Budget – The path to Net Zero Low-carbon heating in the Balanced Net Zero Pathway Our Balanced Net Zero Pathway implies that by 2030, low-carbon heat installations in homes could represent up to around 80% of sales. * Of these low-carbon heat installations, 75% are heat pumps (including hydrogen hybrids), 19% are low- carbon heat networks, and 5% are other flexible electric heating with space heat • By 2030, heat pump sales reach just over 1 million per year in new and existing homes of a total market of 1.8 million boiler installations currently. There are a total of 5.5 million heat pumps installed in homes by 2030, of • Hydrogen trials are scaled up rapidly in the 2020s to enable rapid grid conversion from 2030 onwards (as detailed in the separate Policy report). • Low-carbon heat networks are built through 2020-2050, with scaling up through to 2028, from which point around 0.5% of total heating demand is converted per year. By 2050, around a fifth of heat is distributed through Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget. By 2030 37% of public and commercial heat demand is met by low-carbon sources. Of this low-carbon heat demand 65% is met by heat pumps, 32% district heating and 3% biomass. By 2050 all heat demand is met by low-carbon sources of which 52% is heat pumps, 42% is district heat, 5% is hydrogen boilers and around 1% * Based on low-carbon heat installations in existing homes in 2030 of 1.2m, low-carbon heat installations in new homes of 0.3m, and current annual boiler sales of 1.8m per year. installations are low-carbon – faster pace, leading to higher

Chapter 3: Sector pathways to Net Zero 116 is new direct electric heating. b) Alternative routes to delivering abatement in the mid -2030s All buildings scenarios achieve close to zero emissions by 2050. The Tailwinds and Widespread Engagement pathways are faster than the Balanced Pathway, reductions of 45% - 65%, relative to current emissions. We explore different contexts by varying the key timings, costs and performance assumptions and by exploring the impact of innovation such as new business • Widespread Engagement. Households and businesses are prepared to undertake renovations at scale through the 2020s, with high levels of pre- heating and other behaviour change in homes.† They also support earlier • Innovation. Power sector innovation drives down electricity costs.