Households adopt smart, flexible electric heating including hybrid heat pumps, as well as high-temperature heat pumps (which are able to operate at higher temperatures, reducing the need for radiator upgrades).4‡ New business models such heat-as-a-service and new financial models for deep retrofits become common, delivering high performance solutions. High levels of cost reduction through learning, and increases in performance over time. • Headwinds. People change behaviour and new technologies develop, but there are no widespread behavioural shifts or innovations that significantly reduce the cost of green technologies ahead of current projections. Alongside strong electrification, there is widespread use of hydrogen, led by the conversion of industrial clusters. • Tailwinds. Households and businesses support early regulatory approaches, and minimise their use of energy through behaviour change and the highest uptake of energy efficiency measures. At the same time, innovation drives down costs (with 40% reductions in heat pump costs to 2050) and Availability of hydrogen in Headwinds is increased at an ambitious rate in the 2030s, implying that some possible hydrogen-dominated pathways could lead to lower emissions in the budget period. However, as a result this scenario has considerably higher overall hydrogen demand, creating a substantially bigger challenge to source sufficient volumes of low-carbon hydrogen. In turn, this is likely to lead to more use of fossil gas reforming with carbon capture and storage (CCS), increasing residual emissions from hydrogen production and increasing reliance on CCS and fossil gas imports (see section 5). While higher buildings demands could be conceived of, they are not included in our scenarios due to these supply challenges and residual emissions. * Some additional rollout of low-carbon heat networks occurs to 2050. † Where homes are sufficiently well insulated, it is possible to pre-heat ahead of peak times, enabling access to cheaper tariffs which reflect the reduced costs associated with running networks and producing power off-peak. ‡ While high temperature heat pumps are specifically designed for high temperature operation, the designs of ‘conventional’ heat pumps are increasingly being improved to reach 60-65°C at reasonable efficiency. We assume that radiator upgrades could be avoided where flow temperatures of 65-70°C are reached. An efficiency penalty is associated with operation at these higher temperatures, although discussions with manufacturers suggest efficiency benefits relative to resistive heating are maintained even in very cold weather. 117 Sixth Carbon Budget – The path to Net Zero Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget; CCC analysis. Chapter 3: Sector pathways to Net Zero 118 Summary of key differences in the buildings sector scenarios * Legionella bacteria are widespread in natural water systems and can cause Legionnaires’ disease where conditions are conducive e.g. where water is maintained at a temperature high enough to encourage growth. Legionella bacteria can multiply where temperatures are between 20-45°C, but do not survive above 60°C. HSE is currently undertaking work with CIBSE looking at guidance for low-temperature systems to manage legionella risk. 119 Sixth Carbon Budget – The path to Net Zero Critical dates and scenario metrics in the Balanced Net Zero Pathway All new homes are zero -carbon 2025 at the latest 2024-2025 Rented h omes achieve EPC C 2028 2027-2030 Standards for lenders targeting EPC C across the housing portfolio 2025 - 2033 From 2025 to 2030/2035 All homes for sale EPC C 2028 2025-2030 Commercial energy efficiency complete 2030 2030-2035 Public sector energ y efficiency complete 2032 2030-2032 (outside of any zones designated for low- (outside of zones designated for low -carbon district heat or hydrogen -conversion ) * Dominated by water- and sewage-source heat pumps and waste heat from industrial sources. Chapter 3: Sector pathways to Net Zero 120 c) Impacts of the costs, benefi ts and co-impacts on In our 2019 Net Zero report, we identified buildings as one of the most costly challenges across the economy, with in-year costs in 2050 of around £15 billion per year and uncertainty around the total costs throughout the period to 2050. Our updated Sixth Carbon Budget pathways estimate these full costs. The Balanced Pathway requires investment across all buildings (residential and non-residential) at an average rate of around ~£12 billion per year to 2050, offset by reductions in operating costs of ~£5 billion per • Total investment costs are £360 billion to 2050, of which around £250 billion is public and commercial buildings. • Total investment in the programme of efficiency in existing homes in this scenario is around £45 billion to 2035 with a total spend of £55 billion by 2050. This compares to BEIS’s published estimate of £35-65 billion to achieve • Total investment costs are less than £10,000 per household on average in our Balanced Pathway. 63% of homes need spend no more than £1000 on retrofitting energy efficiency measures. • The deployment of all energy efficiency potential in public and commercial buildings entails £2 billion per year of commercial investment to 2030 and £0.5 billion per year of public sector investment to 2032. Annual operating cost savings of around £1.5 billion and £0.5 billion result for commercial and public buildings respectively. • Including low-carbon heat increases this to £2.8 billion per year investment in commercial buildings and £0.9 billion in public buildings through the 2030s and 2040s. This is associated with total operating cost savings of £3 billion per year across public and commercial buildings. 3.2.e), resulting in lower overall bills for households in all scenarios apart from Headwinds (Chapter 6). Behaviour change in our Balanced Pathway is estimated to contribute around £0.4 billion of savings per year by 2050. billion per year to 2050, offset by reductions in fuel costs of Total investment costs are less

121 Sixth Carbon Budget – The path to Net Zero costs for existing homes, Balanced Net Zero Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget; CCC analysis.
Chapter 3: Sector pathways to Net Zero 122 Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget; CCC analysis. Opex not calculated for transition to low-carbon cooking or for decarbonisation of household and garden Reduction of costs – through learning by doing and by incentivising flexibility – is essential (see accompanying Policy report). This is a major investment programme which, if managed well, can have strong economic benefits. In particular, the investment can act as a stimulus and create skilled employment throughout the UK, with the Construction Industry Training strong reason to believe these jobs would be additional to the current workforce. Energy efficiency retrofits are expected to provide new jobs and have already been recognised as an important part of the green recovery. Low-carbon heat installations, while replacing fossil fuel installations, are expected to drive additional jobs due to the additional labour required for more complex installations and * Recently published evidence from BEIS suggests that the labour costs for installing an air source heat pump are roughly double those for a conventional gas boiler, with the costs being around three times higher for a ground source heat pump (Delta EE for BEIS (2020), Cost of installing heating measures in domestic properties). These increased costs are representative, in part, of the increase in effort required. While there is potential for labour differentials to be more limited for hydrogen boilers and heat network connections to homes, the need for regional conversions could drive additional jobs relative to the installations which might otherwise be associated with natural

123 Sixth Carbon Budget – The path to Net Zero Upgrading the building stock will deliver a significant set of wider benefits in terms of improved comfort and health, particularly for the fuel poor. The current estimated cost to the NHS from poor quality housing is £1.4-2 billion per year, in England alone.6 Energy efficiency – done alongside ventilation and shading upgrades – can improve comfort levels year-round and guard against damp (Box 3.2.a). The retrofit of homes to both address and adapt to climate change has potential to deliver regeneration benefits. More widely, the shift to electrification and heat networks can also deliver improved energy security and improved air quality. There is some evidence to suggest that there could also be air quality benefits from switching to hydrogen heating in terms of reduced NOx emissions, although further research is needed.7 qualification level and specialist skill CITB (2020) Building Skills for Net Zero (draft report); CCC analysi s. Figures adjusted to represent a 2-year rolling average. ‘TrustMark retrofit other specialisms’ includes retrofit designers, installers, advisers and assessors. FTE equivalent by skills do not sum exactly to equivalent numbers by

Chapter 3: Sector pathways to Net Zero 124 A holistic approach to retrofit Measures to address thermal efficiency, overheating, indoor air quality and moisture must be considered together when retrofitting or building new homes. There are zero cost actions householders can take now to better ventilate and shade their homes, including shutting curtains during the day to limit solar gains, and opening windows to improve ventilation. * There are also home upgrade measures which can improve ov erheating and ventilation further. • Shading measures can include high specification blinds (e.g. with reflective backing) and/or external shading or awnings. We estimate that installing moderate cost measures to the most at -risk property types would a dd £4-£5 billion of total investment • Ventilation measures (which can also he lp mitigate overheating risk) include extract fans, mechanical extract ventilation (MEV) and mechanical extract ventilation and heat recovery (MVHR). Installing ex tract fans is estimated to cost around £550 per home, while MEV or MVHR could add between £1, 700-£4,100 per home. 9 Wider adaptation needs, such as water efficiency and flood resilience, should be considered as part of retrofit needs but have not been coste d as part of this work . CCC and Element Energy analysis. * Windows should be opened when room temperatures reach 22 degrees, but should remain closed if outdoor temperatures rise above indoor temperatures. Overheating and ventilation can both be improved by opening windows during the night to purge heat. † This assumes all flats within the housing stock install high specification blinds designed to reflect solar gain and/or

125 Sixth Carbon Budget – The path to Net Zero 3. Manufacturing and construction Our Balanced Net Zero Pathway sees manufacturing and construction emissions reduced by 70% by 2035 and 90% by 2040 from 2018 levels, based on fuel- This pathway has faster reductions than the pathway underpinning our 2015 Fifth Carbon Budget advice. This reflects substantially improved knowledge of deep decarbonisation and resource efficiency options (see Methodology Report) and the shift to an economy-wide Net Zero target. The pathway assumes that the Government establishes a policy framework to support UK manufacturing to reduce emissions in a way that does not drive manufacturers overseas and that benefits jobs and investment in UK manufacturing (see Chapter 4 in the accompanying Policy Report and Chapter 6 in this report for more on competitiveness and jobs). Balanced Net Zero Pathway for the manufacturing and construction sector BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. in the removals subsection of Chapter 3. The pathway requires policy to drive emissions reductions in a

Chapter 3: Sector pathways to Net Zero 126 This section is split into three a) The Balanced Pathway for manufacturing and construction 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 manufacturing and The pace of decarbonisation in the Balanced Pathway for manufacturing and construction gradually accelerates through the 2020s to mid-2030s with the increasing implementation of new technologies, policy, resource efficient approaches, and development of infrastructure and supply chains.
Most overview of the emissions reduction actions and timing of the Balanced Pathway • Improvements in resource and energy efficiency lead to the largest emissions reductions in the early 2020s, with smaller contributions from electrification, biofuel use and material substitution. Fuel-switching and CCS deployment scale up from 2025. • Infrastructures for CCS and hydrogen are deployed from 2025 in the pathway, starting near industrial clusters. Electricity network connection capacity is also increased around newly electrifying sites. The 2030s sees substantial scale-up across these three major networks. • Policy develops rapidly to ensure that it pays for companies to implement societally cost-effective measures and that non-financial barriers are addressed. See the accompanying Policy Report for policy • Supply chains scale up at pace in the pathway. More workers acquire skills to implement low-carbon measures, the supply of necessary technologies and equipment grows, and the availability of finance increases. Improvements in resource and energy efficiency and material substitution in the Balanced Pathway reduce emissions by 12 MtCO2e per year by 2035, contributing 8 MtCO2e, 3 MtCO2e and 1 MtCO2e • Resource efficiency abatement gradually increases from 2020 to 2035. • Improvements that reduce end-user consumption of new resources measures such as consumers using clothes and electronics products for longer, which may require improved durability. • Measures that improve resource efficiency in production reduce emissions by 5 MtCO2e per year in 2035. This includes measures such as optimising building design to reduce material use. • The resource efficiency measures can alternatively be split into the following design optimisation to reduce material inputs (3 MtCO2e per year in 2035), increased recycling and reuse (3 MtCO2e, of which half is through reuse of construction materials), increasing product longevity (2 MtCO2e, largely from electronics), and increased product utilisation and sharing (1 MtCO2e, including sharing leisure technologies, policy, resource Recycling, reusing and sharing

127 Sixth Carbon Budget – The path to Net Zero • Energy efficiency improvements achieve emissions reductions of 4 MtCO2e per year by 2050. Measures in the most energy-intensive sectors are divided between heat recovery (0.5 MtCO2e), process upgrade (1 MtCO2e), equipment upgrade (1 MtCO2e) and integration/clustering (0.5 MtCO2e), with a further 1 MtCO2e in less energy intense sectors. • Material substitution measures in the pathway include partial substitution of clinker in cement and the use of wood in construction, and increase steadily over the period to 2050. abatement and residual emissions in 2050 in Balanced Net Zero Pathway against Fuel-switching reduces sector emissions in the Balanced Pathway in 2035 by 18 of fuel-switching technologies are deployed to keep options open for subsequent deployment, given uncertainty about which fuel-switching options will prevail in the 2030s. In the 2030s options are deployed where they are cost-effective under our cost assumptions - this results in a mix of electrification, hydrogen and bioenergy deployment, reflecting variation in cost-effectiveness between different • Electrification reduces emissions by 9 MtCO2e per year by 2035, increasing to 14 MtCO2e by 2045. Electrification measures include electric boilers, switching from on-site generation to a grid connection, electric arc furnaces, electric mobile machinery, electric dryers and electric infra-red largest emissions reductions in With falling electricity costs, Switching from fossil fuels to

Chapter 3: Sector pathways to Net Zero 128 Some electrification options are introduced in the early 2020s due to high levels of technology and commercial readiness. Some electrification measures involve scrapping existing assets before the end of their expected lifespan. This reflects preferable economics over the alternatives and the inability to retrofit some electrification options. • Hydrogen use reduces emissions by 7 MtCO2e per year by 2035, increasing to 14 MtCO2e by 2045. Hydrogen measures include hydrogen boilers, CHP, generators, mobile machinery and kilns. Our latest evidence suggests that these measures can typically be retrofitted, limiting the need to wait for a replacement cycle or to scrap assets before fitting. • Bioenergy use reduces fossil emissions by 2 MtCO2e per year by 2035 increasing to 2.5 MtCO2e in 2045. Its use is prioritised for sectors already using bioenergy, such as cement and pulp, or with the potential to fit CCS. CCS is applied to all new bioenergy use in manufacturing and construction*, apart from biofuel use in mobile machinery. In 2035, biofuels contribute 0.5 MtCO2e per year of abatement, falling to zero by 2040. The application of CCS to bioenergy results in further abatement of 3 MtCO2e in 2045 – this fraction of the BECCS is not accounted for in our manufacturing results, but rather in greenhouse gas removals (see section 11). CCS reduces manufacturing emissions in the Balanced Net Zero Pathway by 6 pathway, CCS is applied to fertiliser plants, half of the UK’s integrated steelwork capacity, and processes where it is the only deep decarbonisation option • There is 5 MtCO2e per year of abatement in 2045 from processes where we have not identified alternative options to reduce emissions to near-zero. This includes processes that a) produce CO2 from non-combustion processes, such as cement production and b) combust fuels (sometimes called internal fuels or off-gases) that are produced as part of the industrial • CCS is also applied as a lower-cost measure to existing ammonia/fertiliser plants in the mid-2020s and half of the UK’s integrated steelwork capacity in the early 2030s. This contributes 4 MtCO2e per year of abatement in 2045. • Smaller scale, more expensive CCS is deployed in the late 2030s and 2040s. The geographical distribution of fuel-switching and CCS measures is focussed around industrial clusters. However, there is still substantial abatement outside of • The location of sites may affect the choice of deep decarbonisation option when multiple options are possible – our evidence suggests that electrification has an advantage over hydrogen at dispersed sites, due to differences in electricity and hydrogen distribution options and availability. • Pipeline, train, truck or shipping are considered as options to transport CO2 from dispersed sites where CCS is their only deep decarbonisation option, such as cement, lime and other mineral sites.
* We have not accounted for the small amount of bioenergy that we expect may be introduced prior to the fitting of Hydrogen used in boilers, CHP, available. It is also applied to fertiliser plants in the mid-2020s. substantial action focussed in

129 Sixth Carbon Budget – The path to Net Zero measures in the manufacturing and construction sectors in the Balanced Net Zero Pathway in 2050 The individual pies represent emissions within a certain geographical radius and may include more than one site. Map excludes small sites where geographical data was not available, which includes all industrial off-road mobile machinery, together these constitute 42% of manufacturing and construction deep decarbonisation abatement. Map does not include abatement of emissions from electricity generation, fuel supply or waste. It does not include abatement from resource efficiency or energy efficiency measures. The different subsectors of industry have different mixes of abatement measures different technology options, geographical distribution, underpinning infrastructure requirements and opportunities for energy and resource efficiency. • Resource efficiency measures have the most substantial impact on the cement & lime and iron & steel sectors, particularly as a result of measures in the construction, vehicles and fabricated metal sectors. The paper sector has the highest fraction* of abatement from energy efficiency (38% in 2050), with a substantial saving from clustering and using waste heat from other sites. The largest absolute abatement from energy efficiency is in the chemicals sector (1 MtCO2e in 2050), driven largely by equipment * Compared to other sectors. Sectors with fewer sites, such as iron and steel, can see fast

Chapter 3: Sector pathways to Net Zero 130 • Sectors with larger numbers of sites, smaller sites and more dispersed sites decarbonise slower, such as food and drink, other manufacturing and construction and off-road mobile machinery (which doesn’t have fixed sites). Sectors with fewer sites, such as iron and steel, can see faster for manufacturing and construction subsectors in

131 Sixth Carbon Budget – The path to Net Zero Consumption emissions also decline on our Balanced Net Zero Pathway, reflecting domestic decarbonisation actions, reductions in consumption that reduce imports, and policy on the carbon intensity of imports (see accompanying Policy Report) and international decarbonisation action. Exploratory analysis of the effect of the combined manufacturing and construction and fuel supply sectors and effect of import policy under the Balanced Net Zero Pathway for two scenarios of international action Calculations are indicative. The consumption emissions baseline assumes simple % growth in consumption of different sectors combined with NDC level action internationally. The territorial emissions baseline uses a different methodology based on Government emissions projections (see Methodology Report). Import policy is assumed to gradually improve the carbon intensity of imports to manufacturing, construction and fuel supply is a production Pathway, with a role for policy

Chapter 3: Sector pathways to Net Zero 132 b) Alternative routes to delivering abatement in the mi d-2030s assumptions (see Methodology Report). The main divergences in pace are in the Headwinds and Tailwinds scenarios higher, there is less resource efficiency and companies are less willing to electrify because it involves a full equipment refit and possibly scrapping assets. In Tailwinds the combination of lower technology costs, more Government support, businesses acting beyond incentives and faster development of supply chains increase pace. The most substantial variation in outcome between the scenarios is in the fuel- switching options. This reflects the uncertainty around whether, where and when electrification, blue hydrogen or green hydrogen will be most competitive, although all scenarios have a mix of electrification and hydrogen. Outcomes that vary less include energy efficiency and CCUS on process emissions. Both are low-regret actions. The former is low-cost and for the latter there is no manufacturing and construction sector BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. use. This reflects uncertainty competitiveness of the options

133 Sixth Carbon Budget – The path to Net Zero Summary of key differences in the manufacturing and construction sector scenarios Moderate levels High level driven Business attitude Most businesses c) Costs and benefits of the Balanced Net Zero Pathway The Balanced Net Zero Pathway will incur additional financial costs in the manufacturing and construction sector, as well as some savings from resource and energy efficiency improvements. With well-designed policy, it can drive investment and support jobs in the manufacturing and construction sectors (see chapter 5). We estimate the annualised cost* of the Balanced Net Zero Pathway for manufacturing and construction to be around £1 billion/year in 2030, £2 billion/year in 2035 and reaching £4 billion/year through the 2040s. In 2040 this represents an average cost of abatement across all measures of around • Additional capital costs are around £1 billion/year in the late 2020s increasing to £2 billion/year in the early 2030s and peak at around £3 billion/year in the late 2030s, before falling to around £2 billion/year in the • Additional operational costs from fuel-switching and CCS are around £0.5 billion/year in late 2020s, increasing to £1 billion/ year in the early 2030s, £2.5 billion in the late 2030s and reaching £3 billion/year in the 2040s. These may be partially offset by savings of up to £1billion/ year from the late 2020s from We estimate that the cost to the exchequer of enabling the deep decarbonisation measures - fuel switching and CCS - in the Balanced Net Zero Pathway, in a way that protects trade-exposed subsectors, would be around £2 billion/year in 2030. This cost could reduce over time as policy is applied to imports and industry are subsequently able to pass through costs to consumers. There may also be a further cost to remove legacy levy control framework costs from industry power bills, which is not accounted for in these estimates. * Where capital costs are spread over the lifetime of the investment. Chapter 3: Sector pathways to Net Zero 134 In this section we set out how to reduce emissions from electricity generation to near-zero.
This will require a significant expansion of low-carbon generation, in particular low-cost renewables and decarbonised back-up generation, in conjunction with more flexible demand and use of storage. Our Balanced Net Zero Pathway decarbonises electricity generation by 2035, with action thereafter focused on meeting new demands in a low-carbon way. We set out the analysis underpinning these conclusions in the following three a) The Balanced Net Zero Pathway for electricity generation b) Alternative routes to delivering abatement in the mid-2030s c) Impacts of the costs, investment, and co-impacts Further detail on the approach to developing the scenarios is set out in Chapter 5 of the accompanying Methodology Report. a) The Balanced Net Zero Pathway for electricity generation Our Balanced Net Zero Pathway very largely decarbonises electricity generation by 2030, and decarbonises it completely by 2035, with action thereafter focused on meeting rising demand with low-carbon generation. The key features of the scenario are an increasing demand for electricity, decreasing carbon intensity of generation, and a more flexible • Increasing demand for electricity. This reflects increasing electrification of the economy (e.g. use of electric vehicles in transport). There is a doubling of demand, from around 300 TWh today to 360 TWh in 2030, 460 TWh in hydrogen using surplus generation, which accounts for an additional 30 TWh of electricity generation in 2035 and 120 TWh in 2050. • Decreasing carbon intensity of electricity generation. Carbon intensity of generation falls from 220 gCO2/kWh in 2019 to around 50 gCO2/kWh in – Phasing out unabated fossil fuel generation by 2035. Electricity generation will be completely low-carbon once unabated coal and gas plants are no longer generating. Following the coal phase-out by 2024, almost all remaining emissions will come from unabated gas. The Balanced Pathway phases out use of unabated gas by 2035, meaning electricity generation is completely low-carbon from that date. That is achievable with the cost-effective deployment of renewables, gas CCS, and hydrogen at scale. Chapter 5 in the Methodology Report sets out further detail on why this is an achievable date, and Chapter 5 in the Policy Report sets out the policy implications. – Increasing variable renewables to 80% of generation by 2050. Under the Balanced Pathway variable renewables reach 60% of generation by 2030, 70% by 2035, and 80% by 2050. This generation allows new electricity demands to be met with minimal emissions and at low cost. Electricity generation is entirely

135 Sixth Carbon Budget – The path to Net Zero • Wind, particularly offshore, is the backbone of the system, providing 265 TWh of generation in 2035 and 430 TWh in 2050. That requires deploying 3 GW per year of new wind capacity, plus repowering of older sites as they reach the end of their (25-30 year) • Solar generation increases from 10 TWh in 2019 to 60 TWh in 2035 and 85 TWh in 2050. On average, 3 GW per year will need to be installed to reach this level of solar generation. – Dispatchable low-carbon generation. Some flexible low-carbon generation (e.g. gas or bioenergy with carbon capture and storage (CCS), or hydrogen) will be required, in particular during periods of low production from variable weather-dependent renewables. • Gas with CCS. From the second half of the 2020s, the Balanced Pathway sees the development of CCS infrastructure, which enables the deployment of gas CCS. By 2035, 30 TWh of generation comes from gas CCS, meeting 6% of demand. • Bioenergy with carbon capture and storage (BECCS). Development of CCS infrastructure also enables deployment of BECCS plants. These could provide 3% of generation by 2035. Although they have higher costs than other ways of generating electricity, these plants provide an additional benefit of removing carbon from the atmosphere (see Section 3.11). • Hydrogen can provide a flexible form of dispatchable generation similar to unabated gas. In the Balanced Pathway, some gas plants start to switch to hydrogen in the 2020s. By 2035, hydrogen gas plants provide 20 TWh of generation, meeting 5% of demand. – Nuclear. Despite retirements of existing nuclear plants in the 2020s, this scenario sees new nuclear projects restore generation to current levels by 2035. The Balanced Pathway reaches 10 GW of total nuclear capacity by 2035, with 8 GW of new-build capacity. • A more flexible electricity system will help balance out the variability in renewable generation. Increasing flexibility comes from both demand (e.g. demand-side response, and use of surplus renewable generation to produce hydrogen) and supply (e.g. use of electricity storage). – Storage. With an increasing share of variable renewables, storage can capture surplus energy when demand is low and provide backup generation when demand is particularly high. • The Balanced Pathway uses hydrogen as the primary source of storage. However, a similar role could also be performed by other medium-term storage technologies. • Pumped hydro storage offers dispatchable flexibility. Our analysis assumes capacity at similar levels to the currently installed 3 GW. However, there are already plans to develop new schemes and new sites have been identified which could provide an additional • Batteries can provide within-day flexibility. The Balanced Pathway assumes 18 GW of battery storage capacity by 2035. Chapter 3: Sector pathways to Net Zero 136 – Flexible demand. Our analysis assumes that pre-heating and storage in buildings, and smart charging in transport can provide flexibility to the power system, by shifting electricity demand away from peak hours. The Methodology Report chapters on surface transport and buildings set out further detail on this. – Use of surplus electricity. The Balanced Pathway has an important role for electrolysers to produce hydrogen at low cost from surplus generation. In the Balanced Pathway 25% of hydrogen supply comes from electrolysis in 2035, increasing to 45% by 2050 (see Section 3.5 on – Interconnectors. Interconnections between the UK and neighbouring countries have a total current capacity of 6 GW.11 These allow the sale of surplus energy to neighbouring markets and provide access to resources in other countries.
Under the Balanced Pathway interconnector capacity increases to 18 GW by 2050. However, until the power systems in the rest of Europe become fully decarbonised, there is uncertainty around the carbon intensity of imported electricity. Balanced Net Zero Pathway (2020-50) Other category includes agriculture, aviation, direct air capture, shipping and F-gases. 2050, reflecting electrification

137 Sixth Carbon Budget – The path to Net Zero The transition to a near-zero emission electricity system will have several • 2020s – Deploying low-cost renewables at scale and developing the markets for gas CCS and hydrogen, with some new build nuclear. • 2030s – Transitioning to a completely low-carbon system by displacing unabated gas with low-carbon alternatives by 2035, alongside ramping up deployment of zero-carbon generation to keep pace with electrification of end-use sectors and increasing potential for demand-side flexibility via electric vehicles, heat pumps, and hydrogen production. • 2040s – Running a near-zero emission electricity system, with variability in renewable generation managed through flexible demand, medium- and long-term storage, and use of dispatchable low-carbon generation. The result is that generation under the Balanced Pathway is completely low- BEIS (2020) 2018 UK greenhouse gas final figures. BEIS (2020) 2019 UK greenhouse gas provisional figures; CCC analysis. Rate of reduction in carbon intensity accelerates from 2025, reflecting a rapid expansion of low-carbon Balanced Pathway falls rapidly transition to a full low-carbon

Chapter 3: Sector pathways to Net Zero 138 Balanced Net Zero Pathway (2020-50) fossil fuel generation includes coal and gas. Variable renewables include wind and solar. Firm power includes nuclear. Dispatchable low-carbon generation includes gas CCS, BECCS and hydrogen. b) Alternative routes to delivering abatement in the mid -2030s In addition to the Balanced Pathway, we have developed four exploratory scenarios. The overall approach to these is set out in Chapter 1. These scenarios explore alternative ways of reaching near-zero emissions from electricity generation over the period to 2050. They have a similar pathway for emissions but reflect different levels of electrification across the economy, as well as different technology mixes to generate that electricity. Across the exploratory scenarios, electricity demand ranges from 350 to 370 TWh in unabated fossil fuel use after

139 Sixth Carbon Budget – The path to Net Zero exploratory scenarios (2010-50) BEIS (2020) Digest of UK Energy Statistics; CCC analysi s. Excludes demand from electrolysis using surplus electricity generation. That accounts for an additional 65- 290 TWh in 2050, depending on the scenario. These ranges for electricity demand reflect different patterns and levels of electrification in other • Headwinds. This scenario has the least amount of electrification across the economy, and therefore the lowest demand level. Cars and vans are electrified, as in all the scenarios, and in this scenario heat and industrial processes in manufacturing are partially electrified, in total adding 245 TWh of electricity demand by 2050. • Widespread Engagement. In this scenario Heavy Goods Vehicles (HGVs) are also electrified, but a switch towards active travel and public transport moderates transport demand. A greater proportion of manufacturing and most heat energy demand is electrified. Together this leads to 310 TWh of new electricity demands by 2050. • Widespread Innovation. This is a scenario with widespread electrification, as a result of low electricity costs. Heating, surface transport (including HGVs), and manufacturing and construction electrify extensively. In addition, there are new demands from Direct Air Capture and to a lesser extent from agriculture and aviation. Overall, these sectors add 375 TWh of electricity

Chapter 3: Sector pathways to Net Zero 140 • Tailwinds. This scenario is similar to Widespread Innovation, but with a lower degree of electrification of heating and surface transport. There is an additional 315 TWh of new demand by 2050. Onto these different demand levels, we overlay scenarios for future low-carbon technologies. The range for carbon intensity under these scenarios is less than 50 gCO2/kWh in 2030, 10-15 gCO2/kWh in 2035, and 1-2 gCO2/kWh in 2050. These compare to a carbon intensity of 220 gCO2/kWh in 2019. Decarbonisation is similar across our scenarios over the 2020s, with variable renewables reaching 65-70% of electricity generation in 2030. However, the pace of low-carbon deployment and the mix of generation technologies in the • Headwinds. This scenario has the lowest share of variable renewables in 2050, with a greater role for dispatchable low-carbon generation and – Past 2030, the share of renewable generation increases to around 75%. Nuclear also meets some of the growth in the 2030s, while dispatchable low-carbon generation plays an increasingly important role, meeting 20% of demand by 2050. Unabated gas generation is phased out by 2040, later than in the Balanced Pathway. – At this level of variable renewable generation, there could be 70 TWh of surplus electricity production. Most of that could be used to produce green hydrogen, with installed electrolyser capacity of 10 • Widespread Engagement. In this scenario there is a greater emphasis on variable renewables and dispatchable low-carbon generation. – Despite higher levels of demand, this scenario sees the renewable share of generation grow to 85% by 2050. Dispatchable low-carbon generation and nuclear play a consistent role in providing about 15% of generation in total. In this scenario, hydrogen plants or storage solutions are particularly important to ensure security of supply. – The surplus electricity that stems from variable generation can help produce 95 TWh of green hydrogen in 2050. In order to capture that there is 10 GW of installed electroyser capacity in 2030 and 100 GW in • Widespread Innovation. This scenario has the highest share of variable renewable generation, reaching 90% in 2050.
– With 90% of generation being met by variable renewables in 2050, the remaining 10% of generation is delivered by a mix of nuclear, gas CCS, – The high level of demand in this scenario requires high and rapid deployment rates for low-carbon capacity, including an average of 6 GW per year of wind and 2 GW per year of hydrogen plant between – The high level of renewables also provides more opportunity for use of energy that could produce up to 180 TWh of green hydrogen in 2050. This would require 10 GW of electrolysers by 2030 and 95 GW by 2050. 141 Sixth Carbon Budget – The path to Net Zero • Tailwinds. This scenario is very similar to Widespread Innovation, with variable renewables making up 90% of generation in 2050, with a mix of low-carbon generation to balance the system. For the Sixth Carbon Budget period (2033-37), emissions from electricity generation MtCO2e over the five years. The range largely reflects the differing dates for phasing out unabated gas generation. Once this happens, all electricity is from decarbonised sources, with any residual emissions only coming from the small proportion of CO2 emissions not captured at fossil CCS plants. This occurs by 2035 across all scenarios except for Headwinds, in which it happens by 2040. exploratory scenarios (2035 and 2050) fossil fuel generation includes coal and gas. Variable renewables includes wind and solar. Firm power includes nuclear. Dispatchable low-carbon generation includes gas CCS, BECCS and hydrogen. have greater potential for use

Chapter 3: Sector pathways to Net Zero 142 BEIS (2020) 2018 UK greenhouse gas final figures, BEIS (2020) 2019 UK greenhouse gas provisional figures; CCC analysis. Emissions over the Sixth Carbon electricity generation are very

143 Sixth Carbon Budget – The path to Net Zero Summary of key differences in the electricity generation scenarios (2050) Zero Pathway Headwinds Widespread Demand (TWh) 610 550 610 680 620 unabated gas 2035 2040 2035 2035 2035 *Although cars and vans electrify, these scenarios see a wider use of public transportation and active travel, thus reducing overall demand. **Variable renewables include wind and solar, including generation for electrolysis. ***Dispatchable low-carbon generation includes gas CCS, BECCS and hydrogen. These numbers do not include demand for producing hydrogen with electricity. Our scenarios produce electrolytic hydrogen using surplus electricity only, and with methane reformation if surplus electricity is not available. It does not therefore necessarily reflect an additional c) Impacts of the costs, investment, and co -impacts Our overall approach to assessing costs and benefits is set out in Chapter 5 of this report. This section sets out the implications for electricity generation, covering costs, investment requirements, and co-benefits. We compare the costs of running the low-carbon electricity systems in our scenarios to the cost of running a high-carbon system (i.e. one based on unabated gas in the long-run). Although each scenario follows a broadly similar pathway for emissions, they do so with different levels of demand and different mixes of technologies. Both of these influence total • Scenarios with higher levels of demand tend to have higher total costs, because more generating capacity and network investment is required. • Scenarios with more deployment of relatively expensive technologies have

Chapter 3: Sector pathways to Net Zero 144 Costs of generation technologies Unabated gas plant (excluding carbon price) 50 60 60 Variable renewables 65 40-45 25-40 Dispatchable low -carbon power - 100-205 110-220 CCC analysis based on BEIS (2020) Electricity Generation Costs, CCC (2018) Hydrogen Review, Wood Group (2018) Assessing the Cost Reduct ion Potential and Competitiveness of Novel (Next Generation) UK Carbon Capture Technology. Costs in 2019 prices. Costs based on a central gas price scenario. Variable renewables include wind and solar. Firm power includes nuclear. Dispatchable low-carbon generation includes gas CCS, BECCS, and hydrogen. Our analysis shows that a near-zero electricity system has limited additional costs in 2035 compared to a high-carbon system (e.g. up to £3 billion). By 2050 the annual additional cost ranges between -£5 billion and £9 billion across the scenarios. • Balanced Pathway. In this scenario, there is an additional cost in 2035 of £3 billion compared to a high-carbon system. By 2050, costs decrease with the uptake of relatively cheap renewables, resulting in cost savings of £5 billion. • Headwinds. The additional cost in this scenario is £2 billion in 2050. With the lowest level of demand (550 TWh) and the highest share of the most expensive technologies, that implies a relatively high average cost of generation compared to the other scenarios. • Widespread Engagement. In 2050 there is no additional cost for delivering this scenario. Despite a higher level of demand (610 TWh), this is achieved through a greater use of relatively cheap renewables compared to the • Widespread Innovation. This scenario has an additional cost of £2 billion in 2050, but with the lowest average cost of generation. Compared to the Headwinds scenario it meets 25% more electricity demand for the same • Tailwinds. This scenario has an additional cost of £9 billion in 2050, which is the highest across all of the scenarios. That reflects the higher share of more expensive technologies in the generation mix (e.g. BECCS), combined with These estimates compare to an additional annual cost of £4 billion in our 2019 Net Zero advice for moving to a low-carbon system in 2050. Since then renewables costs have fallen (e.g. offshore wind costs in the Government’s latest auction were £45/MWh for 2025 (in 2019 prices), compared to our previous assumption of £50/MWh in 2050), helping to reduce overall costs and increase the share of renewables in the scenario generation mixes. Delivering our scenarios will require significant investment in deploying the low- carbon technologies needed to reduce emissions and meet new electricity reduction in cost of renewable electricity generation peaks in the 2030s at around £15 billion

145 Sixth Carbon Budget – The path to Net Zero savings, for the Balanced Pathway compared to a high-carbon baseline.
• The total additional capital investment required (compared to a high- carbon system) rises to around £15 billion in 2035 and £5 billion in 2050. – Investment requirements peak in the 2030s, and are lower in the following period as costs of low-carbon technologies fall. – These investment costs include the additional cost of strengthening the electricity network to accommodate higher levels of demand. These costs make up around 30% of the total on average. – Capital investment in electricity generation helps avoid operational costs in other sectors, as those sectors electrify. • Total costs are lower than investment costs, given the significantly lower operational costs of running low-carbon technologies (i.e. renewables have no fuel input costs). The Balanced Pathway saves £10 billion in operational costs in 2050 compared to the high-carbon baseline. Overall, by 2050 the operational cost savings under the Balanced Pathway more than offset the additional investment required in electricity generation. This capital investment is more than offset by the operational

Chapter 3: Sector pathways to Net Zero 146 For electricity generation in the Balanced Net than offset by operational cost

147 Sixth Carbon Budget – The path to Net Zero Reducing emissions in line with our scenarios will bring a range of • Air quality. Switching from use of unabated fossil fuel for electricity generation to zero-carbon generation (i.e. variable renewables, nuclear) will help improve air quality, given these have no emissions. In addition, there will be wider improvements in air quality through the electrification of buildings, transport, and industry.12 • Electricity prices. Policy should ensure that electricity prices are cost- reflective (i.e. they reflect the low cost of adding low-carbon capacity and account for any system costs they impose), so that barriers to electrification are reduced and electricity consumers benefit from cost reductions in these technologies. That could include moving some costs away from electricity bill payers and onto general taxation, including for legacy costs of early renewables deployment. Chapter 6 sets out our analysis on energy • Industrial opportunities and Just Transition. The investment required to expand renewable generation, and to develop new markets in CCS and hydrogen, will help create new opportunities for firms, exports, and jobs. A strong signal from Government on the long-term pathway for these new sectors will help give industry and investors confidence to undertake the long-term investments required to unlock these benefits. – Exports. There is a significant opportunity for the UK to export engineering expertise, components, and services to the rapidly growing EU and global market for offshore wind. Similar opportunities would exist for CCS, where the UK is well placed to develop this – Just Transition and employment. New offshore wind, hydrogen and CCS industries could help support the Government’s ‘levelling up’ agenda through investment in regional economies, and by providing new jobs. A recent Policy Exchange study13 estimated these could lead to a net gain of 40,000 direct jobs, plus more across the wider Further detail on the economy-wide co-benefits of the transition to Net Zero is set There could be significant co- power, including for air quality, electricity prices, exports, and

Chapter 3: Sector pathways to Net Zero 148 Our Balanced Net Zero Pathway for Fuel Supply involves a transition from producing 1,100 TWh of fossil fuels and 170 TWh of bioenergy in 2018 to producing 425 TWh of low-carbon hydrogen and bioenergy in 2050, for sectors of the economy that are likely to use fuels, rather than electricity. Production of fossil fuels Recent cost reductions for renewables mean that electrolytic hydrogen plays a greater role than in our previous work, especially after 2035. However, there is an important role for hydrogen produced from fossil gas with CCS in the medium term to enable applications for hydrogen to grow as necessary. Bioenergy resources increase in line with expanding UK production of forestry residues and perennial energy crops, with a wholesale shift to use with CCS accelerating during the 2030s. The Balanced Pathway also requires action to reduce emissions from the remaining fossil fuel supply (the main source of Fuel Supply emissions) by 75% by 2035 from 2018 levels. Mitigation actions include fuel switching, CCS and technologies to reduce methane flaring, venting and leakage. The analysis draws on new consultancy work from Element Energy, existing bioenergy resource work from our 2018 Biomass in a low-carbon economy report, and aligns with our new waste resource assumptions from the Waste sector (section 9). Further details are set out in our Methodology Report. This section is split into three a) The Balanced Net Zero Pathway for Fuel Supply b) Alternative pathways to delivering abatement and fuel supplies a) The Balanced Net Zero Pathway for Fuel Supply The Balanced Net Zero Pathway includes actions to i) reduce emissions from Fuel Supply, which mainly derive from fossil fuel supply ii) scale up hydrogen supply to enable decarbonisation in other sectors iii) provide bioenergy to other sectors while managing sustainability and achieving negative emissions. Our Balanced Net Zero Pathway requires fossil fuel supply emissions to be reduced by 75% by 2035 from 2018 levels. While the Fuel Supply emissions category is dominated by emissions from fossil fuel supply, there are also some new emissions arising from future production of low-carbon hydrogen fuel. * This is reflected by the * Existing UK high-carbon hydrogen production for use as an industrial feedstock is included within our manufacturing sector. Our Fuel Supply sector contains low-carbon hydrogen to be used as a fuel. an increasingly important role

149 Sixth Carbon Budget – The path to Net Zero Balanced Net Zero Pathway for the fuel supply BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. New hydrogen supply arising due to climate mitigation policy increases emissions relative to the baseline, so emissions appear above the baseline. As a result the Balanced Net Zero Pathway appears slightly above the bottom of the lowest wedge of emissions abatement.
The biomethane abatement reflects biomethane use displacing residual natural gas use across the economy, not only in the fuel supply sectors. This means that the lowest emissions wedge drops slightly below zero in 2050. In this report, we have also accounted for abatement from the additional use of biomethane to displace fossil gas across the economy. * After accounting for hydrogen production and biomethane abatement, our Balanced Pathway for the whole Fuel Supply sector requires emissions to be reduced by around 80% by 2035 The emissions from fossil fuel supply include those directly from oil refining, oil and gas production, oil and gas processing terminals, gas transmission and distribution networks and open and closed coal mines (see Methodology report for further details).Oil refineries emissions are abated through reduced oil demand, CCS and energy efficiency improvements. • Fuel switching away from petroleum across the economy, such as in surface transport, is the largest emissions reduction action. This reduces oil refining in the UK and the associated emissions by 5 MtCO2e/year by 2035. * While we have aggregated biomethane abatement and included this all within Fuel Supply, in practice the biomethane would abate emissions within the sectors where the use of fossil gas is displaced by biomethane. Refinery output will fall as a result of decarbonisation in the In our pathway, emissions from fossil fuel supply are reduced levels , through fuel switching,

Chapter 3: Sector pathways to Net Zero 150 • CCS is the main emissions reduction measure for the remaining emissions from oil refineries, with 1.5 MtCO2e/year of abatement in 2030, 3 MtCO2e/year in 2035 and 4.5 MtCO2e/year in 2040. Energy efficiency measures also reduce emissions by 0.5 MtCO2e/year in 2035. Emissions from oil and gas production, predominantly from offshore platforms and from onshore processing terminals, are decarbonised mainly by fuel switching and measures to reduce methane flaring and • Electrification of offshore platforms and processing terminals contributes 5 MtCO2e/year of abatement in 2035. This involves 4 MtCO2e/year of electrification of compressors and generators on oil and gas platforms, which requires connecting the platforms to either the onshore electricity grid or offshore wind generation. The remaining 1 MtCO2e/year of electrification is at oil and gas processing terminals. These actions start in the mid-2020s, with some action electrification of platforms assumed to • Use of hydrogen plays a smaller role in the fossil fuel abatement pathways, providing 1 MtCO2e/year of abatement across platforms and terminals. • Measures to reduce methane flaring and venting, such as capturing the gas and selling it, and switching from venting to flaring (where safety requires at least one or the other) save 1.5 MtCO2e/year in 2030 and 1 Methane leaks from the gas distribution and transmission networks are reduced in the Balanced Pathway using a combination of Leakage Detection and Repair (LDAR) technologies and continuous monitoring technologies, resulting in 3.5 Other abatement measures in the fuel supply Balanced Pathway include 0.5 MtCO2e/year of abatement in 2035 from a variety of resource efficiency measures across the economy and 1.5 MtCO2e/year of abatement from the use of biomethane to displace fossil gas in the gas grid. The largest sources of remaining emissions from fossil fuel supply in 2050 is from closed coal mines (0.4 MtCO2e/year). From the wider Fuel Supply sector, there is also 1 MtCO2e/year remaining from hydrogen production in 2050. ii) Low-carbon hydrogen supply The role for the hydrogen supply sector is to enable decarbonisation in other sectors while managing costs and wider energy system impacts. Hydrogen appears to be essential for reaching Net Zero, but it is important for it to be focused on the applications of highest value, where electrification is less feasible, and for it to be produced in a low-carbon way. Hydrogen demands in the Balanced Pathway start growing in the second half of the 2020s, before strong growth over the period 2030 to 2045. Manufacturing, shipping (as ammonia), and back-up power generation are the largest three sectors in terms of demand, with smaller contributions from other sectors including buildings and surface transport. reduced venting and flaring of

151 Sixth Carbon Budget – The path to Net Zero Demand in shipping is likely to be as ammonia rather than compressed hydrogen. Demand given is for H2 produced in the UK or for imports of H2. Imports of ammonia (used in shipping) and imports of synfuels (used in aviation) are not included, but on a H2 feedstock basis would equate to another 23 and 5 TWh respectively by 2050 (i.e. 18 TWh of ammonia and 2.6 TWh of synfuels). In the Balanced Net Zero Pathway, hydrogen production is from a mix of supply routes, with differing contributions over – The relatively low costs of variable renewables, especially offshore wind, make it attractive to err on the side of ‘over-building’ renewable capacity relative to electricity demands, which generates a surplus of generation at some points of the year. Some of this generation that would otherwise be curtailed is then used to produce hydrogen, providing extra value from the renewable capacity. – However, over the period to 2035 the volumes of electrolytic hydrogen are constrained by how much renewable capacity can be built and contribute economically to meeting demands for electricity as well as hydrogen. Electrolysis comprises 21% of hydrogen supply by 2035, but this rises to 44% by 2050 as costs fall and supply constraints ease. Manufacturing and Construction Power electrolysis, fossil gas with CCS,

Chapter 3: Sector pathways to Net Zero 152 • Fossil gas with Reformation of fossil gas with CCS is capable of producing low-carbon hydrogen at scale. However, it is not zero-carbon, with lifecycle emissions savings of up to 85% relative to unabated fossil gas.14 So, while reforming of fossil gas with CCS is important in establishing a mass market for hydrogen, providing around 60% of hydrogen supply by 2035, it falls into more of a supporting role by 2050, providing 32% of hydrogen supply.
The smaller share for hydrogen from fossil gas in 2050 limits emissions from the production process and upstream emissions from fossil • Bioenergy with CCS (BECCS): Biomass undergoes gasification to produce biohydrogen, with the biogenic CO2 being captured and stored. This route provides 5% of supply by 2035 and 11% by 2050. • In the Balanced Pathway, imports of hydrogen made from renewable electrolysis abroad amount to 13% of total hydrogen consumption by 2050. There are also further imports of renewable ammonia used for shipping, and imports of synthetic jet fuel used for aviation. This only includes H2 produced in the UK, or imports of H2. Imports of ammonia and synfuels are not plotted, but on a H2 feedstock basis would equate to another 23 TWh and 5 TWh respectively by 2050 (i.e. 18 TWh of ammonia and 2.6 TWh of synfuels). Electrolysis Fossil gas + CCS Biomass + CCS Imported hydrogen particularly in the 2030s while The contribution of electrolysis reforming of fossil gas with C C S

153 Sixth Carbon Budget – The path to Net Zero Sustainable bioenergy is essential for reaching Net Zero. Given resource supply limitations, it must be used in those applications with the highest GHG savings (those with CO2 sequestration and/or displacement of high carbon alternatives). By 2050, the large majority (85%) of bioenergy will need to be used with CCS, achieving negative emissions, across electricity generation, industrial heating, These values are TWh/yr HHV, given as the starting CCC ‘Primary’ bioenergy and waste resources, i.e. solid biomass, gaseous biogas, liquid bioethanol and waste biodiesel, and solid wastes. There are minor differences between these total supply estimates and the total use estimates due to manufacturing and energy from waste In the Balanced Pathway, bioenergy production occurs via a mix of supply routes, involve CCS, with further details of the GHG removals involved given in section 11: • Solid biomass. Domestic and imported biomass feedstocks are supplied directly (without conversion) to the Power, Manufacturing & Construction, Residential & Non-residential Buildings and Agriculture sectors. Use of solid biomass in combustion boilers phases out in Buildings and Agriculture by the early 2040s. Manufacturing & Construction continues to use biomass, with a gradual decline over time, and with a small amount also used with CCS by significant growth markets for

Chapter 3: Sector pathways to Net Zero 154 Use in unabated biomass power plants quickly phases out in the late 2020s, while use in power with CCS starts to slowly ramp-up from the late 2020s (via retrofits and newbuild BECCS plants) to reach significant levels by 2040, providing 4% of electricity generation. Biomass imports comprise 21% of total bioenergy & waste supplies by 2050. • Biohydrogen. Solid biomass feedstocks are gasified then converted into hydrogen, with CCS. Deployment starts in 2030, and ramps-up as described • Biojet. Solid biomass feedstocks are gasified then converted into aviation biofuel, with CCS. Starting from the mid-2020s, this route ramps-up to meet 11% of aviation fuel demand by 2050. In addition, waste fats/oils are converted into biojet, with a transition from biodiesel in the 2030s, with their use alongside limited biojet imports ultimately meeting 6% of aviation • Biodiesel. Solid biomass feedstocks are gasified then converted into biodiesel, with CCS. Starting from the mid-2020s, this route increases production to meet 2% of car/van diesel demand by the early 2030s, and 10% of HGV/bus diesel demand by 2040. As liquid fuel volumes fall in each road transport mode, these plants transition to focus on biojet production. Biodiesel made from waste fats/oils in existing facilities, and imports, continue to supply 3% of road diesel. There is some additional use in off- road machinery and agricultural equipment ramping up to the early 2030s, • Heating biofuels. A range of liquid biofuels made from biomass (with CCS) or from waste fats/oils can be used for home heating, including bio-LPG and biokerosene amongst other options. Starting from the mid-2020s, use of bioliquids ramps up to 5 TWh/year in the 2040s, supplying hybrid heat pump systems situated in homes off the gas-grid. • Bioethanol. Arable crops are fermented into bioethanol in existing facilities. After the 2021 increase of bioethanol blended into petrol (to 10% by volume, 7% by energy), supplies stay at this % of road petrol use. • Biomethane & biogas. Biogas produced from anaerobic digestion of food waste, sewage sludge & animal manures, plus captured landfill gas, can be upgraded to biomethane for gas grid injection, along with the capture of biogenic CO2 for sequestration. Biomethane injection more than trebles by 2030 from today’s levels. Biogas also continues to be used in Power and Manufacturing, although its use declines in the near-term with the fall in landfill gas. Combined, these routes could displace 10% of fossil gas in 2050. • Residual waste. After re-use & recycling, any residual waste volumes not exported or landfilled are predominantly incinerated in energy from waste plants, with some small use in Manufacturing. All energy from waste plants fit CCS by 2050, to capture the fossil and biogenic CO2 emissions resulting from the mixed fossil/biogenic waste fractions. Waste fats/oils currently used for road transport biodiesel will transi tion to biojet during the increasingly focus on biojet for injection into the gas grid m ore

155 Sixth Carbon Budget – The path to Net Zero These values are TWh/yr HHV, given as the starting CCC ‘Primary’ bioenergy and waste resources, i.e. solid biomass, gaseous biogas, liquid bioethanol and waste biodiesel, and solid wastes. The dashed line shows the supply available to the UK were the UK to, in all years, use all of its fair share in the globally traded sustainable b) Alternative pathways to delivering abatement and fuel supplies Our Fuel Supply scenarios i) set out different abatement pathways; ii) present a variety of hydrogen supply mixes; and iii) use different allocations of bioenergy for The four exploratory pathways contain similar emissions abatement measures (concentrated in fossil fuel supply) to the Balanced Pathway.
There could however be a greater role for hydrogen in the reducing emissions from offshore platforms and onshore processing terminals than reflected in the scenarios. Decarbonisation of emissions from increased onshore petroleum production, such as shale gas, is considered in our Widespread Innovation Scenario. The pace of decarbonisation differs slightly between scenarios, as a result of different future energy prices, supply-chain capacities and the varying levels of

Chapter 3: Sector pathways to Net Zero 156 BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. ii) Low-carbon hydrogen supply Low-carbon hydrogen demands vary considerably across the exploratory This reflects different mixes of decarbonisation solutions being applied in the end- use sectors, with the role in buildings heating particularly contributing to the upper end of demand. Hydrogen is also used in Direct Air Capture with CCS or synthetic jet fuel production in the Widespread Innovation and Tailwinds scenarios. Based on our assessment of available supply routes for hydrogen and the challenges they face, our scenarios for hydrogen demand are considerably lower than could be the case if hydrogen were used in all conceivable uses across the energy system (e.g. exceeding 800 TWh in 2050 compared to 225 TWh in the This is due to limits on scaling up further the contributions on hydrogen supply from electrolysis (e.g. due to build rates for zero-carbon capacity and costs) and from BECCS (i.e. due to finite bioenergy supplies) – as a result, higher hydrogen demand would be likely to lead to much greater dependence on reforming fossil gas with CCS. In turn, this would increase residual emissions from hydrogen production and fossil fuel production, as well as increasing reliance on CCS and imported fossil gas. due to end-use sector choices. since the 1990s to today needs

157 Sixth Carbon Budget – The path to Net Zero BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Demands in shipping is likely to be as ammonia rather than compressed hydrogen. Demand given is for H2 produced in the UK or for imports of H2. Demands for imports of ammonia (for shipping) and imports of synfuels (for The mix of hydrogen supply routes that meet these demands also vary, depending on total hydrogen demand, technology costs and the development of the electricity system. High demand for low-carbon hydrogen leads to a higher contribution from fossil gas with CCS, whereas more renewables on the grid leads • In Headwinds, low-carbon hydrogen demand is relatively high (around 375 TWh in 2050). This is primarily due to the high demand from buildings, which is around half of the total. The role of variable renewables on the electricity grid is lower than in other scenarios, which limits the role of electrolysis in 2050 to 13% of supply. There are also relatively modest roles for BECCS (11%) and imports (14%). As a result of the higher demand, there is an increased role for hydrogen supply from reforming of fossil gas (63%), leading to a relatively high reliance on fossil gas imports and CCS. • In Widespread Engagement, low-carbon hydrogen demand is relatively low (around 160 TWh/year in 2050). Electrolysis supply follows a similar path to the Balanced Pathway, but due to the lower level of total hydrogen demand, electrolysis plays a bigger relative role in this scenario, meeting 59% of supply by 2050. However, there is an important role for fossil gas with CCS, especially in the transition, which contributes 34% of supply in 2035 and falls to 18% in 2050. Imports are also 23% in 2050, and there is no BECCS hydrogen assumed in this scenario. Manufacturing and Construction Power whereas scenarios with lots of

Chapter 3: Sector pathways to Net Zero 158 • Widespread Innovation has a similar overall level of low-carbon hydrogen demand (233 TWh/year in 2050) as in the Balanced Pathway, as low-cost renewables enable electrification to outcompete hydrogen across a number of applications. However, the high share of low-cost variable renewables in the power system also means that electrolysis is particularly cost-effective compared to other low-carbon hydrogen supply options, and so electrolysis contributes strongly to UK supply (76% by 2050). Again, there is an important role for fossil gas with CCS in the transition, which provides 46% of supply in 2035 before falling into a back-up role supplying just 5% in 2050. The contribution of BECCS hydrogen production rises to 9% by 2050, and imports supply 10%. • Tailwinds is similar to the Widespread Innovation scenario by 2050, although it has significantly higher total hydrogen demand in earlier years, peaking at just over 250 TWh at the point this scenario reaches Net Zero in the early 2040s. Electrolysis dominates the supply mix again, reaching 59% by 2050, with BECCS supplying much of the rest (26%). Due to the more rapid uptake of hydrogen in the period to 2035, fossil gas with CCS plays a crucial transitional role, supplying 66% of hydrogen in 2035 before falling into a back-up role of 2% by 2050. Imports provide 12% of supply in 2050. This only considers H2 produced in the UK, or imports of H2. Imports of ammonia and synfuels are not plotted. Electrolysis Fossil gas + CCS Biomass + CCS Imports

159 Sixth Carbon Budget – The path to Net Zero Demands for bioenergy and waste vary considerably across the exploratory scenarios, with a range for total primary bioenergy supplies used in 2050 of 210-390 TWh/year (before any further conversion within the Fuel Supply sector). This reflects different mixes of feedstocks, conversion technologies and end-use solutions, with the role of BECCS power and BECCS hydrogen contributing to the largest differences between the scenarios. These values are HHV, given as the starting CCC ‘Primary’ bioenergy and waste resources, i.e. solid biomass, gaseous biogas, liquid bioethanol and waste biodiesel, and solid wastes. Domestic bioenergy compromises the large majority of our supply estimates, with biomass imports only contributing significantly to the higher supply scenarios.
The mix of domestic bioenergy and waste supplies that meet these demands also • In the Headwinds scenario, bioenergy demand is relatively high. The role of variable renewables in electricity is lower than in other scenarios, allowing a larger role for BECCS power, and high hydrogen use allows a large role for BECCS hydrogen. Less waste prevention & recycling also leads to more use in energy from waste. By 2050, 42% of total supply is from biomass imports. imports, which only contribute significantly in high bioenergy

Chapter 3: Sector pathways to Net Zero 160 • In Widespread Engagement, bioenergy demand is low. Due to lower hydrogen demand, there is no role for BECCS hydrogen. Waste prevention and recycling, and allocation to jet production, results in low use in energy from waste plants. By 2050, 25% of total supply comes from biomass imports, with very limited uptake of domestically grown perennial energy crops. • The Widespread Innovation scenario has less hydrogen demand across the economy, and very high levels of low-cost renewable electricity, resulting in more modest roles for BECCS power and BECCS hydrogen by 2050. There is earlier use of biomass gasification to biomethane, before these plants transition to biohydrogen and retrofit CCS from the mid-2030s. This scenario relies heavily on domestically grown perennial energy crops, making up 36% of total supply by 2050, and biomass imports phase out by 2050. • The Tailwinds scenario combines the most ambitious elements of the above three scenarios, with the high biomass imports from Headwinds (providing 40% of total supply by 2050), the high deployment of domestically grown perennial energy crops in Widespread Innovation (providing 23% of total supply by 2050), and ambitious action on waste prevention & recycling as in Widespread Engagement. The result is significantly more biomass available for BECCS power and hydrogen. As in Widespread Innovation, there is also a transitional role for biomass gasification to biomethane. These values are HHV, given as the starting CCC ‘Primary’ bioenergy and waste resources, i.e. solid biomass, gaseous biogas, liquid bioethanol and waste biodiesel, and solid wastes. There are minor differences between these total supply estimates and the total use estimates due to manufacturing and energy from waste modelling approximations. MSW = Municipal Solid Waste. C&I = Commercial and Industrial. Waste could be used in jet fuel Across our scen arios, biomass

161 Sixth Carbon Budget – The path to Net Zero The Balanced Pathway will incur additional financial costs in the Fuel Supply sector associated with reducing emissions from fuel supply, and the production of low- carbon fuels. Essential to this transition from fossil fuel production to low-carbon fuel production, is a just transition for workers in the declining fossil fuel sectors (see We estimate the annualised cost of the Balanced Pathway for decarbonising (mainly fossil) fuel supply to be around £1 billion /year in 2030, peaking just below £2 billio n/year in 2040 before declining to £1 billion/year in 2050s. In 2035, this represents an average cost of abatement across all measures of around £70/tCO2e. The costs of producing hydrogen and bioenergy supply are accounted for in abatement costs in those sectors in which the hydrogen and bioenergy are This includes the capital and operating costs of low-carbon fuels – these costs are also accounted for in the operational fuel costs paid for by sectors that use low- carbon fuels (e.g. shipping, aviation, manufacturing). costs for the fuel supply sector in the Balanced Hydrogen supply wedges also account for costs associated with production of ammonia and synthetic fuels. Opex costs are positive in the fuel supply sector. supply is around £1 billion/year

Chapter 3: Sector pathways to Net Zero 162 Investment costs for hydrogen supply result from development of hydrogen storage and network infrastructure, plus investment in electrolysis and fossil gas with CCS capacity. Overall capital investment for hydrogen supply increases to around £4 billion/year by the 2040s, with operating costs peaking at around £4 billion/year These hydrogen supply cost wedges include the investment and operating costs for new ammonia (for shipping) and synthetic jet fuel (for aviation) production facilities, that use some of the low-carbon hydrogen produced in the Fuel Supply sector. In the Balanced Pathway, building UK ammonia plants will require capital investment of around £400 million/year in the early 2030s and early 2040s, and UK synthetic jet fuel plants will require investment of £250 million/year by 2040. There is also a share of ammonia and synthetic jet supplied via imports (25% assumed for both sectors in the Balanced Pathway). These imports are assumed to be produced from renewable electrolysis and air separation/direct air capture, and this fuel cost is only counted in the relevant end-use sectors. Investment costs for bioenergy supply result from the construction of new biojet, biodiesel, heating bioliquids, biomethane and biohydrogen conversion facilities. These are capital intensive, as well as having significant ongoing operating costs due to biomass feedstock costs. However, the added costs of installing CCS onto a biofuel/biohydrogen plant are generally modest, given the availability of high concentration CO2 streams at these facilities. Bioenergy conversion plant investment costs peak at £670 million/year around 2030, due to this being the fastest period of growth in these bioenergy facilities, before falling to £200 million/year by 2050. Operating costs, including biomass feedstock costs, ramp-up over time to reach £2.8 billion/year by 2050. On both capital and operating metrics, biojet and biohydrogen conversion plants dominate these bioenergy fuel supply costs. biohydrogen and biojet routes. 163 Sixth Carbon Budget – The path to Net Zero 6. Agriculture and land use, land-use change and forestry Combined agriculture and land greenhouse gas (GHG) emissions were 67 MtCO2e in 2018, which could fall to 40 MtCO2e by 2035 in our Balanced Net Zero Pathway. Annual savings total 25 MtCO2e when compared to emissions in the Business as under the Balanced Pathway but fall to Net Zero by 2047 in the Wider Innovation Delivering this transition requires a transformation in the use of land.
Around 9% of agricultural land will be needed for actions to reduce emissions and sequester carbon by 2035 with 21% needed by 2050. * Improvements in agricultural productivity and a trend towards healthier diets are key to releasing land for afforestation, peatland restoration and bioenergy crops. Investment of £1.5 billion per year by 2035 will be required to implement the necessary changes, but there will be co-benefits for health and recreation, air quality, flood alleviation and biodiversity. Our analysis balances the need to reduce emissions from land with other essential functions of land including maintaining food production and adapting to climate impacts. We draw on our previous reports,15 new modelling work by the Centre for Ecology and Hydrology (CEH) on land-based pathways,16 and Scotland’s Rural College (SRUC)17 on options to reduce agricultural emissions as well as extensive literature reviews and stakeholder engagement. The rest of this section is set out in five a) The Balanced Net Zero Pathway for agriculture b) Alternative routes to reducing agriculture emissions c) The Balanced Net Zero Pathway for the land use sector d) Alternative routes to reducing land use emissions e) Scenario costs, benefits and co-impacts on society * Rises to 11% and 23% when including land for settlement growth. Land is a critical natural asset providing a range of essential

Chapter 3: Sector pathways to Net Zero 164 Reduce agriculture and land use emissions, BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; Centre for Ecology and Hydrology (2020); CCC analysi s. ‘Other’ forestry and energy crops is the additional savings elsewhere in the economy by displacing fossil fuels with biomass material. These are annual savings compared to emissions in the baseline in 2035. Numbers are a) The Balanced Net Zero Pathway for agriculture Agricultural emissions were 54.6 MtCO2e in 2018, 10% of UK greenhouse gas emissions (GHGs). Completely decarbonising the agricultural sector is not possible (on current understanding) due to the inherent biological and chemical processes in crop and livestock production. However, there are options to reduce these emissions covering behaviour change, productivity improvements and the take-up of low-carbon farming practices. Our analysis starts with the assumption that land is prioritised for housing and other economic activity and food production before climate objectives. We estimate that sectoral emissions could fall to 39 MtCO2e in • Low-carbon farming practices. We commissioned SRUC to assess the abatement potential from measures to reduce emissions from soils (e.g. grass leys and cover crops), livestock (e.g. diets and breeding) and waste and manure management (e.g. anaerobic digestion). These reduce agricultural emissions by 4 MtCO2e in 2035. This takes account of the interaction with other actions, notably diet change, which reduces the * All abatement savings are in reference to GHG emissions under the Business as Usual (BAU) scenario in that year. 165 Sixth Carbon Budget – The path to Net Zero • Fossil fuel use in agriculture. Currently 18 TWh of fossil fuels are used in agricultural vehicles, buildings and machinery, resulting in emissions of 4.6 MtCO2e. Options to decarbonise fossil fuel use are similar to those in surface transport, off-road machinery in industry and commercial buildings. These cover electrification, biofuels, hydrogen and hybrid vehicles. Our Balanced Pathway assumes biofuels and electrification options are taken-up from the mid-2020s and hydrogen from 2030, reducing emissions to 2 MtCO2e in • Measures to release land. Changes in consumer and farmer behaviour can release land from agriculture while maintaining a strong food production sector. We considered five measures that could release land covering societal changes and improvements in agricultural productivity. Our analysis implies that these five measures could reduce annual agricultural GHG emissions by 8 MtCO2e by 2035, rising to just over 11 MtCO2e by 2050, with diet change the most – Diet change. Our Balanced Pathway involves a 20% shift away from meat and dairy products by 2030, with a further 15% reduction of meat products by 2050. These are substituted with plant-based options. This is within range of the Climate Assembly’s recommendations for a 20- 40% reduction in meat and dairy consumption by 2050.18 Our pathway results in a reduction in livestock numbers and grassland area, delivering annual abatement of 7 MtCO2e by 2035, rising to nearly 10 – Food waste. We assume food waste is halved across the supply chain by 2030 in line with the Waste and Resources Action Programme’s (WRAP) UK Food Waste Reduction Roadmap. This would reduce UK emissions by almost 1 MtCO2e in 2035. – Productivity improvements. There is scope for further abatement from measures to increase agricultural productivity, which in our Balanced Pathway could reduce emissions by 1 MtCO2e in 2035 and 2050. These • Improving crop yields without the need for additional inputs such as fertiliser and pesticides can be achieved through improved agronomic practices, technology and innovation while taking account of climate impacts. Our Balanced Pathway assumes that wheat yields increase from an average of 8 tonnes/hectare currently to 11 tonnes/hectare by 2050 (with equivalent increases • Stocking rates for livestock can be increased through improving productivity of grasslands and management practices such as rotational grazing. Evidence suggests there is scope to sustainably increase stocking rates in the UK.19 – Moving horticulture indoors. Shifting 10% of horticulture production indoors under a controlled environment reduces the carbon, nutrient, Delivering emissions reduction should not be at the expense of increasing food imports that risk ‘carbon leakage’. Therefore, both production and consumption of the highest carbon foods need to fall. in the way land is used in the agriculture through innovation and better agronomy are vital. Chapter 3: Sector pathways to Net Zero 166 Our analysis assumes that the same proportion of UK food demand is met by UK food production in 2050 as is the case currently. * The carbon footprint of the UK’s imported food would also fall, with the change in diets reflected in reduced imports of meat and dairy products.
Policy will need to be carefully designed to ensure that risks of carbon leakage are avoided (see the accompanying Policy Policies for the Sixth Carbon Budget & Net Zero). Balanced Net Zero Pathway for the agriculture BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; SRUC (2020); CCC analysi s. b) Alternative routes to reducing agriculture emissions We explore alternative pathways for transitioning to Net Zero by varying the deployment rate, timing and ambition of the measures outlined above. We also consider other options that could emerge over time, given investment in R&D and innovation as well as wider public acceptability for options that require behaviour The alternative pathways deliver annual emissions savings ranging between 9–19 MtCO2e by 2035 relative to the baseline. Apart from the Headwinds scenario, these * Taking account of the nutritional composition of different food after diet change. 167 Sixth Carbon Budget – The path to Net Zero • Low-carbon farming measures. We assume the take-up of measures associated with changing farming practices (e.g. planting cover crops, livestock health measures and feeding cattle a high starch diet) is highest in the Widespread Engagement scenario, and take-up of more innovative options (e.g. 3NOP additives, GM cattle, and breeding) is highest in Widespread Innovation. However, there is relatively little difference in emissions savings across these scenarios, which vary from 4 MtCO2e in Widespread Engagement to 5 MtCO2e • Agricultural machinery. While the mix of technologies differ across the pathways, they all achieve the same level of abatement by 2050. Which technologies emerge will depend on technology development and costs. • Measures to release land. Among the measures to release land, moving diets away from the most carbon-intensive foods delivers the highest emissions savings. A higher or lower willingness to act on changing diets, reducing food waste and productivity improvements could change emissions relative to the – Under the Widespread Engagement scenario, a greater shift away from meat and dairy (e.g. a 50% switch by 2050) and a greater willingness to act on food waste results in additional GHG savings of 2 – In the Widespread Innovation scenario, we assume that technology develops lab-grown meat for the market, such that 30% of the higher level of diet shift is towards lab-grown meat rather than plant-based alternatives. This results in 5 MtCO2e additional GHG savings by 2035. – In the Headwinds scenario we assume a 20% shift away from meat and dairy products is achieved by 2050 instead of 2035. There is no further reduction in food waste beyond the 50% target reached in 2030. This results in 6 MtCO2e lower GHGs savings in 2035 than the – Crop breeding (e.g. development of new cultivars /traits) could lead to higher yields (e.g. to 13 tonnes/hectare for wheat by 2050). Higher livestock stocking densities on permanent grassland releases around 0.8 million more hectares of land out of agricultural production under the Widespread Innovation and Tailwinds scenarios compared with the Balanced Pathway. These result in 1 MtCO2e additional GHG practices offers some emissions reduction but is not enough for agricultural land for other uses. Chapter 3: Sector pathways to Net Zero 168 BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; SRUC (2020); CCC analysi s.

169 Sixth Carbon Budget – The path to Net Zero Summary of key differences in the agriculture sector scenarios

Chapter 3: Sector pathways to Net Zero 170 c) The Balanced Net Zero Pathway for the land use sector Land sector emissions were 12.8 MtCO2e in 2018, equivalent to 2% of UK GHG emissions. The land-based measures in the Balanced Pathway could deliver annual savings (against a baseline) of 12 MtCO2e in 2035, and 30 MtCO2e by 2050, moving reduction could be delivered in other sectors from the use of biomass material e.g. in displacing fossil fuels or when used with Carbon Capture and Storage (CCS). Key • Afforestation. Scaling up afforestation rates to 30,000 hectares a year by 2025 in line with the UK Government’s commitment, rising to 50,000 hectares annually by 2035. This would increase woodland cover from 13% of UK land area to around 18% by 2050*, with a mix of tree types that focus on broadleaves. This could deliver annual savings of over 2 MtCO2e in 2035 and 12 MtCO2e in 2050. It is important that the right tree is planted in the right place. Decisions on tree planting should take account of biophysical suitability of different species, projected climate impacts and other • Peatlands. Full restoration of upland peat by 2045 (or stabilisation if degradation is too severe to restore) and re-wetting and sustainable management of 60% of lowland peat by 2050. These would deliver annual saving of nearly 6 MtCO2e by 2035 and around 10 MCO2e by 2050. • Energy crops. Planting perennial energy crops (e.g. miscanthus and short- rotation coppice) alongside short rotation forestry needs to accelerate quickly to at least 30,000 hectares a year by 2035, so that 700,000 hectares are planted by 2050. This could sequester 2 MtCO2e by 2035 and over 6 MtCO2e by 2050. When used with Carbon Capture and Storage (CCS) technologies this could displace a further 3 MtCO2e of GHG emissions elsewhere in the economy by 2035, increasing to 10 MtCO2e by 2050. • Other land measures. Increasing on-farm diversification with the integration of trees on 10% of farmland and extending the length of hedgerows by 40% by 2050. Together with better woodland and hedge management, these could increase annual carbon removals by over 1 MtCO2e by 2035 and by Our analysis balances the need to reduce land-based emissions with other essential functions of land. The Balanced Pathway sets out a desirable and achievable level of ambition across all options.
Together, our measures result in more land released out of agriculture than is required and choices will need to be • The Balanced Pathway requires 9% of land to be released from agriculture for measures that reduce emissions and sequester carbon by 2035, rising to a fifth by 2050.† This rises to 11% and almost a quarter when taking account of land needed for settlement growth by 2035 and 2050 respectively. • The measures we identify to release land result in 2 million more hectares than is required by our scenarios by 2035.
* Total woodland area increases to 18.6% if we include the 15% open ground area assumed in the afforestation † A further 1% of non-agricultural land that is forested peat and peat extraction sites is also restored by 2035. As well as carbon sequestration services such as water regulation, flood protection and habitats for

171 Sixth Carbon Budget – The path to Net Zero • Choices on how this additional land could be used include less-intensive farming (e.g.
agroecology farming), measures to deliver deeper emissions reduction (e.g. more tree planting) and conversion to other uses (e.g.
wildflower meadows and natural regeneration) to deliver wider environmental benefits. The GHG impacts of these options are not included in our scenarios due to the lack of robust evidence on the abatement potential (see Chapter 7 of the Methodology Report). Balanced Net Zero Pathway for the LULUCF BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; Centre for Ecology and Hydrology (2020); CCC analysi s. d) Alternative routes to reducing land use emissions We explore different pathways for emissions by varying key factors such as roll-out rates of land-based measures, timings of behavioural measures and technological • The Widespread Engagement scenario assumes that higher ambition on diet change and food waste reduction can be achieved with greater societal engagement. This allows for a higher level of woodland creation of can be part of the picture, but

Chapter 3: Sector pathways to Net Zero 172 In this scenario we also assume that tree planting is focused on more biodiverse woodlands (e.g. higher broadleaf mix) over productive forestry and planting of energy crops is reduced to a third. This results in 1 MtCO2e more GHG emissions in 2035 compared to the Balanced Pathway. • The Widespread Innovation scenario is characterised by technological solutions, increasing yields of food crops, trees and energy crops and a doubling in the planting rate of energy crops. Compared with the Balanced Pathway, this results in 4 MtCO2e additional emissions savings in • The Headwinds scenario assumes less progress on behavioural change to release land and the same ambition on technological progress on yields and productivity measures. There is lower ambition on afforestation, with 30,000 hectares per year in the 2030s, and peatland, with 50% less lowland peat rewetted by 2035. This results in residual emissions that are 3 MtCO2e • Tailwinds delivers faster progress on behaviour change, technological improvement and more ambition on converting agricultural land to the planting of all types of biomass. Emissions are 6 MtCO2e lower by 2035 compared with the Balanced Pathway. BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; Centre for Ecology and Hydrology (2020); CCC analysi s.

173 Sixth Carbon Budget – The path to Net Zero These scenarios draw out potential choices that society could make on how far to change current consumption patterns, the types of trees planted and use of • Diet change. A higher ambition on switching away from meat (e.g. 28% by 2035) would release around a fifth more land out of agricultural production than in the Balanced Pathway. This allows for increased afforestation, trees on-farm, and the planting of energy crops. The differing levels of ambition for each are explored in the Widespread Engagement and Widespread • CCS. The roll-out of CCS elsewhere in the economy could determine how land could be used. Bioenergy crops used with CCS deliver more GHG savings than standing forest alone (see Methodology report). If widespread CCS is needed more land will be required for energy crops (e.g. 60,000 hectares per year by 2035) with a focus on improving energy crop yields (Widespread Innovation). Where the ambition for CCS is low (the Widespread Engagement scenario), energy crop planting is just 10,000 hectares by 2035, with a greater emphasis on afforestation. • Afforestation in the Widespread Engagement and Widespread Innovation scenarios achieves similar levels of annual sequestration by 2050 (around 15 MtCO2e) but differences in afforestation rates and planting regimes drive different cumulative sequestration rates to 2050: – The Widespread Engagement scenario has the highest level of afforestation (70,000 hectares a year from 2035), and societal preference for more biodiverse woodlands results in lower planting density and a higher mix of broadleaves. This pathway sequesters 149 MtCO2e cumulative GHGs by 2050. This rises to 155 MtCO2e when Including use of harvested material elsewhere in the economy. * – The Wider Innovation scenario is focused on delivering more productive forestry, resulting in higher planting density and a higher proportion of conifers with higher yields. These factors offset the lower planting rates (50,000 hectares a year from 2030), sequestering 178 MtCO2e to 2050. This rises to 182 MtCO2e when including emissions abated by using harvested material in other sectors. Summary of key differences in the LULUCF sector scenarios * Based on the harvest material from the planting of new broadleaves only. Chapter 3: Sector pathways to Net Zero 174 In this section we set out estimates of the costs and benefits of delivering the Balanced Pathway in agriculture and land use. Our assessment is that private costs exceed private benefits by £1.7 billion in 2035. Wider societal benefits of £0.1 billion in 2035 could be delivered from improved air filtration, flood alleviation, health and recreation. There are likely to be further environmental benefits (e.g. biodiversity and water quality) but we have been unable to quantify these. Our assessment of costs and benefits updates work we commissioned from Vivid Economics20 and SRUC. It covers all private costs and benefits and wider social benefits of increased recreation, improved air quality, improved health and flood alleviation. Wider environmental impacts on biodiversity and water quality are Delivering the Balanced Pathway will require significant up-front investment in trees, bioenergy crops, peatland restoration and peat management and for some agricultural measures such as AD plants, zero-carbon machinery and livestock breeding. Some of this will be offset by revenues from harvested materials. It will require a scaling up of supply chains and investment in training, skills and R&D to overcome non-financial barriers. • The Balanced Pathway requires net investment of £1.5 billion in 2035, with £1.4 billion in the land sector and £0.1 billion for agricultural measures. • On-going operating costs are associated with managing woodlands and hedges, harvesting biomass from trees and energy crops, maintenance of peatlands and on-going costs for zero-carbon fuels and farming practices. These are estimated at £0.3 billion in 2035.
• These are partly offset by revenues from the sale of harvested products from energy crops, existing broadleaf woodlands and thinnings from the planting of new trees, estimated at £0.1 billion in 2035. • Addressing non-financial barriers for many of these options include widespread information around new practices, re-skilling, and tenancy issues for tenant farmers. More innovative options (e.g. improved crop varieties and use of hydrogen) will require R&D and market commercialisation to bring these to market. 175 Sixth Carbon Budget – The path to Net Zero Wider social and environmental impacts We estimate that the social benefits of land-based measures will contribute around £0.1 billion per year to the UK economy by 2035, rising to £0.6 billion per year by 2050 in the Balanced Pathway. The largest of these is recreation benefits from increased use of woodlands (74%), physical health benefits from exercising in the natural environments (14%), air filtration from increased natural vegetation, primarily trees near urban areas and flood risk alleviation from woodland creation in the upper catchments of rivers. There are also impacts on biodiversity and water quality which have not been possible to quantify. These are detailed in the Energy crops & SRF Broadleaf planting Conifer planting Peatland restoration Agriculture measures Agroforestry & hedges Societal benefits take time to billion by 2050 in benefits to

Chapter 3: Sector pathways to Net Zero 176 Aviation is one of the sectors in which we expect there to be significant remaining positive emissions by 2050, given the limited set of options for decarbonisation. Remaining residual emissions will need to be offset by greenhouse gas removals (see section 11) for the sector to reach Net Zero. The evidence base on how to achieve GHG savings in aviation in the UK relies on internal modelling from DfT, Climate Assembly UK demand scenarios and internal CCC analysis of sustainable aviation fuel costs. Further details are provided in the We present the scenarios for aviation emissions in three a) The Balanced Net Zero Pathway for aviation b) Alternative pathways for aviation emissions c) Investment requirements and costs a) The Balanced Net Zero Pathway for aviation In the Balanced Net Zero Pathway, the aviation sector returns to close to pre- pandemic demand levels by 2024. Thereafter, emissions gradually decline over This gradual reduction in emissions is due to demand management, improvements in efficiency and a modest but increasing share of sustainable aviation • Demand management. The Balanced Net Zero Pathway does allow for some limited growth in aviation demand over the period to 2050, but considerably less than a ‘business as usual’ baseline. We allow for a 25% in growth by 2050 compared to 2018 levels, whereas the baseline reflects unconstrained growth of around 65% over the same period. We assume that, unlike in the baseline, this occurs without any net increase in UK airport capacity, so that any expansion is balanced by reductions in capacity • Efficiency improvements. The fuel efficiency per passenger of aviation is assumed to improve at 1.4% per annum, compared to 0.7% per annum in the baseline. This includes 9% of total aircraft distance in 2050 being flown • Sustainable aviation fuels (SAF) contribute 25% of liquid fuel consumed in 2050, with just over two-thirds of this coming from biofuels* and the remainder from carbon-neutral synthetic jet fuel (produced via direct air capture of CO2 combined with low-carbon hydrogen, with 75% of this synthetic jet fuel assumed to be made in the UK and the rest imported). * Biofuels are assumed to be produced with CCS on the production plant – overall carbon-negative but assumed to have zero direct CO2 emissions in aviation. Removals are accounted for in section 11. A quarter of jet fuel by 2050 is

177 Sixth Carbon Budget – The path to Net Zero Balanced Net Zero Pathway for the aviation BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. a critical role in ensuring GHG

Chapter 3: Sector pathways to Net Zero 178 b) Alternative pathways for aviation emissions Each of our exploratory scenarios for aviation sees emissions fall from 2018 to 2050 • Headwinds assumes the same 25% growth in demand from 2018 to 2050 as in the Balanced Pathway, although with higher demand in the 2030s due to a net increase in airport capacity. Improvements in efficiency are as in the Balanced Pathway, while biofuels comprise 20% of the fuel mix by 2050. Emissions are 25 MtCO2e in 2050, 36% below 2018 levels. • Widespread Engagement has lower demand, with an overall reduction of 15% on 2018 levels and therefore around half the 2050 demand as in the baseline. This is in line with the Climate Assembly UK’s ‘flying less’ scenario. It includes a substantial reduction in business aviation due to widespread near-term adoption of videoconferencing. Efficiency improvements are slightly faster than those in the Balanced Pathway at 1.6% per annum, while the share of biofuels in 2050 is slightly lower at 20%, with a further 5% contribution from the biogenic fraction of waste-based fuels. * Emissions in 2050 are 15 MtCO2e, 62% below 2018 levels. • Widespread Innovation has a greater contribution from technological performance, both in terms of improved efficiency (2.1% per annum) and the contribution of sustainable aviation fuels. By 2050, around a quarter of fuel use is biofuel, with a further quarter carbon-neutral synthetic jet fuel. These technical improvements lead to a lower carbon-intensity and lower cost of aviation, although demand in this scenario is considerably higher, reaching 50% above 2018 levels by 2050 (in line with the Climate Assembly UK’s ‘technological change’ scenario). Emissions in 2050 are 15 MtCO2e, • In Tailwinds, the reductions in demand under Widespread Engagement are combined with the technology improvements in Widespread Innovation. Demand in 2050 is 15% below 2018 levels and efficiency improves at 2.1% per annum.
Very similar volumes of sustainable fuels are used as in Widespread Innovation, but when applied to the lower fuel consumption in Tailwinds these comprise a higher combined share of 95% of fuel use. Emissions in 2050 are 1 MtCO2e, 97% below 2018 levels. In each case, for the aviation sector to reach Net Zero by 2050, the remaining emissions will need to be offset with greenhouse gas removals (see section 11). In addition to the GHG emissions presented here, aviation also has non-CO2 warming impacts due to contrails, NOx emissions and other factors. While outside of the emissions accounting framework used by UK carbon budgets (see Chapter 10), we estimate the additional warming from these non-CO2 effects in section 4 of * Waste-based fuels save less CO2 than biofuels, due to approximately half of the waste carbon content being of fossil origin. Only the biogenic fraction of wastes save CO2 compared to fossil jet fuel. growth is possible, due to rapid

179 Sixth Carbon Budget – The path to Net Zero BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Only direct CO2, CH4 and N2O combustion emissions in aviation are shown. ‘Non-CO2 impacts’ are excluded. Summary of key differences in the aviation scenarios Biofuel share in 2050 17% 20% 20% 26% 51% Bio-waste fuel share in 2050 - - 5% - - Synthetic jet fuel share in 2050 8% - - 25% 44%

Chapter 3: Sector pathways to Net Zero 180 c) Investment requirements and costs In our 2019 Net Zero report, we identified aviation as one of the sectors with cost- effective GHG savings, given that efficiency gains could offset the added costs of sustainable aviation fuels. Our updated Sixth Carbon Budget pathways estimate the full costs and savings • In the Balanced Net Zero Pathway we estimate total added investment costs above our baseline of around £390 million/year in 2035 and £570 • However, these added investment costs are offset by operational cost savings of around £1,230 million/year in 2035 and £2,750 million/year in 2050. There are also added operational costs of using sustainable aviation fuels, given their additional cost above fossil jet fuel, of £470 million/year in any costs or savings to reductions in demand in our scenarios. Additional investment in Balanced Net Zero Pathway compared to the baseline, due to higher costs of m ore efficient aircraft. No costs or savings have been assumed for reductions in demand vs. the baseline trajectory. No military aviation cost data available. Sustainable aviation fuels add

181 Sixth Carbon Budget – The path to Net Zero • Reducing GHG emissions from UK domestic and international aviation is therefore expected to cost between -£90 and -£40/tCO2e abated in 2035, and between -£30 and +£20/tCO2e abated by 2050. * There are increases over time due to higher aircraft costs, and the higher share of GHG savings from biofuels and more expensive synthetic jet fuel. In earlier years, efficiency gains significantly outweigh added fuel costs. • As an example of costs for passengers, sustainable aviation fuels priced with marginal GHG removals might add £35 to a return ticket from London to New York in 2050 in the Balanced Pathway, minus £21 of fuel savings from improved efficiency. * If full decarbonisation were paid for using GHG removals to offset residual emissions, this may add a further £41, giving a • The cost of GHG savings in military aviation is based only on the use of biofuels and synthetic jet, and falls to around £110/tCO2e abated in 2035, staying at around this level to 2050 in the Balanced Pathway. Additional operational costs in Balanced Net Zero Pathway compared to the baseline, due to higher costs of sustainable aviation fuels and costs savings from improved efficiency. No costs or savings have been assumed for reductions in demand vs. the baseline trajectory. No military aviation cost data for efficiency savings available. * Internat ional aviation is typically at the lower end of this cost range, and domestic aviation at the upper end. Efficiency costs are -£280 to -£135/tCO2e, and SAF costs are £110/tCO2e on average. * Based on ICAO (2020) Carbon Emissions Calculator current value of 671 kgCO2 per passenger, economy return. In 2050, 243 kgCO2 is saved via efficiency, 108 kgCO2 directly via sustainable aviation fuels, with 89 kgCO2 saved upstream from biogenic CO2 sequestration, leaving a further 230 kgCO2 to be offset via other GHG removals. £180/tCO2 is assumed for residual offsetting and marginal SAF costs (based on Direct Air Capture with CCS). Paying for a fully zero-carbon

Chapter 3: Sector pathways to Net Zero 182 In this section, we set out pathways for how UK domestic shipping plus the UK’s share of international shipping can be reduced to close to zero by 2050, largely through the use of zero-carbon fuels such as ammonia. The evidence base on how to decarbonise shipping in the UK relies on UMAS modelling for the DfT’s Clean Maritime Plan and internal CCC analysis of zero- carbon fuel costs. Further details are provided in the Methodology Report. We present the scenarios for shipping emissions in three a) The Balanced Net Zero Pathway for shipping b) Alternative pathways for shipping emissions c) Investment requirements and costs a) The Balanced Net Zero Pathway for shipping In the Balanced Net Zero Pathway, the shipping sector returns to pre-pandemic demand levels in 2022. Thereafter, emissions hold relatively flat to 2030, before well beyond the current International Maritime Organisation (IMO) target for a reduction of 50% in global shipping emissions by 2050 from 2008 levels. We assume that shipping serving the UK will adopt the zero-carbon fuels required to meet the global target, but on an accelerated timetable. The emissions reductions in our scenarios result from some acceleration in efficiency improvements and electrification relative to baseline forecasts, together with a wholesale shift to zero-carbon fuels between 2030 and 2050: • Efficiency and electrification.
Total fuel use is assumed to increase by an average of only 0.9% per annum, compared to 1.2% per annum in the baseline. By 2050, 3 TWh/year of electricity is used in electric propulsion and shore power, compared to 0.2 TWh/year in the baseline. • Zero-carbon fuels comprise the large majority (87%) of the emissions savings from shipping. In our scenarios, this is assumed to be ammonia, due to the potential to retrofit ship engines, and its higher energy density compared to hydrogen and battery electric options. 75% of this ammonia is assumed to be produced in the UK, using low-carbon hydrogen (see section 5), with the remainder imported (made abroad using renewable electrolytic hydrogen). Commercial deployment starts in 2030, with domestic shipping decarbonising faster than international shipping. Although it is likely that there would be some reduction in shipping emissions in the transition to 2050 due to a reduction in shipping demand associated with importing fossil fuels (see section 5), we have not included this effect in our analysis. The emissions in the Balanced Net Zero Pathway therefore err on the side of being too Ships will increasingly plug into used in shipping at scale from

183 Sixth Carbon Budget – The path to Net Zero Balanced Net Zero Pathway for the BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; UMAS (2019) modelling for DfT’s Clean Maritime Plan; CCC analysis. b) Alternative pathways for shipping emissions Our assessment of the shipping sector is that there is clear potential to reduce emissions to close to zero by 2050 though use of carbon-free fuels, for example through adoption of ammonia produced via low-carbon methods. Consistent with the emerging evidence (see the accompanying Methodology Report, Chapter 9), we assume that the vast majority of existing ship types and sizes can be retrofitted Each of our exploratory scenarios for shipping sees emissions fall to close to zero by • Headwinds has the same emissions and transition to zero-carbon fuels as in • Widespread Engagement assumes a more back-ended pathway for uptake of zero-carbon fuels in the 2040s, due to higher assumed ammonia • Widespread Innovation and Tailwinds both assume widespread adoption of zero-carbon fuels in the period 2030 to 2040, due to the lower costs of fuel production from low-cost renewable energy. the late 2040s, due to the use shipping and fully roll-out zero- higher sector emissions in the

Chapter 3: Sector pathways to Net Zero 184 BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Widespread Innovation and Tailwinds follow the same trajectory. Headwinds and Balanced Net Zero Pathway follow the same trajectory. c) Investment requirements and costs In our 2019 Net Zero report, we identified shipping as having relatively expensive GHG savings, given the added costs of using low-carbon ammonia, although the size of the sector means that total shipping decarbonisation costs are smaller than Our updated Sixth Carbon Budget analysis estimates the full costs • In the Balanced Pathway we estimate total added investment costs above the baseline of around £160 million/year in 2035 and £350 million/year in 2050, for efficiency, electrification and infrastructure changes required to use zero-carbon ammonia (e.g. engine retrofits, port storage). • The majority of investment in domestic shipping occurs in the 2030s to early 2040s, in comparison to the majority of investment in international shipping

185 Sixth Carbon Budget – The path to Net Zero UMAS (2019) modelling for DfT’s Clean Maritime Plan; CCC analysi s. Additional investment in Balanced Net Zero Pathway compared to the baseline, due to higher costs of m ore efficient vessels electrification and ammonia infrastructure (ports and engine retrofits). No naval shipping cost data • Cost savings from the combined impact of efficiency and electrification are modest at £70 million/year in 2035 and £130 million/year in 2050. Use of zero-carbon ammonia, given its higher cost compared to fossil marine fuels, • Decarbonising UK shipping is expected to cost £130-140/tCO2e abated in 2035, and £170-190/tCO2e abated by 2050 in the Balanced Pathway. This abatement cost increases over time due to the falling cost of the fossil fuel counterfactual, and the rising share of GHG savings from ammonia. • Almost all cost reductions in ammonia are assumed to occur before 2030 due to cost reductions in feedstock hydrogen, and little change is assumed after 2030. These abatement costs apply to domestic and international shipping, since we have not estimated the costs or potential for • As an example of the impact of decarbonisation, the added cost of zero- carbon shipping may add £8 to the price of sending one tonne of freight from Southampton to New York in the Balanced Net Zero Pathway. * * Based on OOCL Carbon Calculator (2020), based on the Clean Cargo Working Group (CCWG) calculation methodology. This gives a value of 39 kgCO2, one-way. relatively high in shipping, due

Chapter 3: Sector pathways to Net Zero 186 UMAS (2019) modelling for DfT’s Clean Maritime Plan; CCC analysi s. Additional investment in Balanced Net Zero Pathway compared to the baseline, due to higher costs of ammonia and cost savings from improved efficiency. No naval shipping cost data available. costs of zero -carbon fuels in

187 Sixth Carbon Budget – The path to Net Zero Emissions from waste arise mostly from decomposition of organic matter in landfills, wastewater treatment processes and combustion of residual waste in energy-from- waste plants. Sector emissions can be reduced by 75% by 2050, through greater waste prevention, recycling, higher landfill methane capture rates, improvements to wastewater treatment and composting facilities, and adding CCS to energy- The evidence base on how to decarbonise the waste sector in the UK is more limited than the evidence available for other sectors. Our analysis has relied on data in BEIS’s Energy and Emissions Projections pathways, Ricardo’s MELMod landfill model, research by WRAP and Water UK, as well as internal analysis starting from and accelerating English and Devolved Administration announced policies. Further details are given in the Methodology Report.
This section is split into three a) The Balanced Net Zero Pathway for waste b) Alternative pathways for waste emissions c) Investment requirements and costs a) The Balanced Net Zero Pathway for waste Our Balanced Net Zero Pathway sees waste sector emissions fall 75% from today’s levels to reach 7.8 MtCO2e/year by 2050. Around 80% of the abatement to 2035 is from waste prevention, increased recycling and banning biodegradable waste from landfill. By 2050, 30% of sector abatement comes from retrofitting CCS to the UK’s fleet of energy-from-waste facilities. The additional 10% of emissions reductions comes from capturing more methane at landfills, reducing wastewater treatment • Waste prevention, recycling and landfill bans. Edible food waste is reduced by just over 50% by 2030 (meeting UN SDG Target 12.3) and just over 60% by 2050, compared to 2007 levels. Compared to a steadily increasing baseline, a third of non-food waste arisings are prevented by 2037 via product redesign, light-weighting, extended lifetimes and asset sharing. Currently around 45% of all household waste is recycled in the UK, along with 55% of commercial & industrial waste. UK-wide recycling rates increase to a blended 70% by 2030 (with Wales and Scotland achieving this by 2025). Anaerobic digestion and composting play an important part in recycling food and garden wastes, helping enable a ban on all biodegradable waste going to landfill by 2025. Landfill methane emissions fall to 1.1 MtCO2e/year by 2050. • Carbon capture and storage (CCS) at energy-from-waste (EfW) plants. Further growth in fossil emissions from UK energy-from-waste facilities is avoided due to prevention and recycling efforts, with EfW emissions staying relatively flat at 5-6 MtCO2e/year until 2040. to landfill are the key pillars to can be constrained, before all

Chapter 3: Sector pathways to Net Zero 188 CCS is then fitted to 100% of plants starting in 2040 (when our scenario also bans all waste going to landfill, leading to a temporary uptick in emissions due to higher residual waste volumes). With the use of CCS, EfW emissions fall to 0.4 MtCO2e/year by 2050. • Wastewater treatment improvements. Process methane and nitrous oxide emissions from wastewater treatment are hard to mitigate. A combination of enhanced monitoring, operational measures and continued roll-out of advanced anaerobic digestion leads to a 21% improvement by 2030. Wastewater becomes the majority source of Waste sector emissions by • Landfill methane capture. Even with banning key biodegradable waste streams from entering landfill, there will still be legacy methane emissions given the long decay time. More of this methane can be captured (for use in power or the gas grid), and capture rates increase from an estimated • Composting improvements. Use of pumped air to improve compost aeration and product quality at a third of sites by 2030, leading to a 23% improvement in methane and nitrous oxide emissions. Use of composting increases over time, so emissions return to 1.3 MtCO2e/year by 2050. Balanced Net Zero Pathway for the waste BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. * Emissions from the spreading of sewage sludge or digestate to land are counted in the Land Use sector. 189 Sixth Carbon Budget – The path to Net Zero b) Alternative pathways for waste emissions Each of our exploratory scenarios for the waste sector see emissions fall more than 70% from 2018 to 2050, with a range of residual emissions of 6.0-9.5 MtCO2e/year in BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Across the scenarios, we explore different contexts by varying the key timings, deployment of technologies and costs, and by exploring the impact of different • Headwinds. Recycling rates follow the Balanced Pathway, although later landfill ban dates are implemented. There are no further reductions in food waste after 2030, and reductions in non-food waste are smaller, reflecting lower levels of behaviour change. Landfill methane capture rates remain • Widespread Engagement. Households and businesses are prepared to recycle significantly more than they do today, with further increases in recycling after 2030, along with further reductions in food waste. All waste is banned from landfill at an earlier date of 2035, and landfill methane capture rates remain unchanged from today. Residual waste is increasingly allocated to jet fuel production instead of EfW incineration. with less waste sent to landfill. Chapter 3: Sector pathways to Net Zero 190 • Widespread Innovation achieves slightly smaller reductions in non-food waste than the Balanced Pathway, although it also targets reductions in inedible food waste (e.g. through lab-grown meat). Landfill methane capture and oxidation technologies are deployed during the 2020s, and wastewater treatment facilities install more novel technologies after 2030 to further reduce their emissions. • Tailwinds combines the highest waste prevention and recycling rates, the earliest landfill ban dates, and the highest technical improvements at landfill, compost and wastewater treatment sites. CCS also starts being installed on EfW plants much earlier, from the late 2020s. The result is emissions fall further and much faster than in the other scenarios. Summary of key differences in the w aste sector scenarios * Measured from 2007 base year for household edible food waste, and 2011 for business edible food waste. ** Measured in-year from a baseline of increasing household and commercial & industry waste arisings

191 Sixth Carbon Budget – The path to Net Zero c) Investment requirements and costs In our 2019 Net Zero report, we identified waste as a sector with potentially low cost GHG savings, based on recycling and banning biodegradable waste from landfill. Our sector categorisation and analysis has expanded to now include energy-from- waste plants, as well as abatement in the composting and wastewater sub-sectors.
While some of these sub-sectors have much higher costs of abatement, our new estimates still suggest that reducing waste sector emissions is achievable as part of a cost-effective scenario towards the Sixth Carbon Budget and the UK’s Net Zero • In the Balanced Pathway, we estimate total added investment costs above the baseline of around £175 million/year in 2035 and £2,100 million/year in • However, investment starts early in the 2020s, as robust action is taken on recycling (new vehicles, bins and downstream infrastructure) costing £100- 800 million/year in order to ban biodegradable waste from landfill, as well as £430 million/year for rolling out advanced anaerobic digestion at municipal and industrial wastewater sites. BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Additional investment in Balanced Net Zero Pathway compared to the baseline, due to costs of new equipment for landfill methane capture, compost forced aeration, (municipal and industrial) waste water advanced AD, and new waste collection and recycling infrastructure. Front-loaded investment in the 2020s will be required to realise a biodegradable waste landfill

Chapter 3: Sector pathways to Net Zero 192 • By the 2030s, there is no assumed further increase in recycling rates or wastewater improvements, so waste collection vehicle fleet turnover is the main cost. From 2040, the majority of added investment is retrofitting CCS to all the UK’s remaining EfW plants, along with wastewater equipment • We estimate total added operating costs above the baseline of However, during the 2020s, reduced total waste arisings, fewer collections of residual/black bin-bag waste from households and businesses, and improved quality and consistency of collected recyclable materials leads to cost savings* that can outweigh the added transition costs. Larger businesses are likely to increase recycling rates earlier and at lower cost, whereas smaller businesses face higher costs and are likely to be slower, leading to some marginal net long-term costs from 2030. From 2040, the installation of CCS on EfW plants leads to increased energy and labour costs, dominating waste sector added operating costs. Additional operating costs in Balanced Net Zero Pathway compared to the baseline, due to costs of operating new equipment for CCS at EfW plants, landfill methane capture, composting forced aeration, and new waste collection and recycling infrastructure. No additional operating costs are assumed for waste water * This analysis excludes the cost savings from local authorities and waste management companies paying less landfill tax (currently £650 million/year is paid). recyclable materials. CCS will

193 Sixth Carbon Budget – The path to Net Zero • For comparison, baseline costs (investment plus operations combined) are estimated at approximately £8.6 billion/year for solid waste handling across the UK, so the added costs of recycling and banning biodegradable waste from landfill are estimated at under 10%. The added investment in municipal wastewater treatment (excluding industrial wastewater) would add £4 a year to each UK household water bill during the 2020s. • Reducing emissions from UK waste comes at an average cost of around £70/tCO2e, although there is significant variation between sub-sectors, with wastewater abatement having very high costs compared to low cost methane capture and composting improvements. • Reducing waste emissions will also produce benefits with improved air, soil and water quality, and recreational benefits from faster return of landfill sites to other uses. Lower landfill methane generation results in less methane captured for energy generation, although this decline is compensated for via increased use of anaerobic digestion for food wastes, sewage sludge

Chapter 3: Sector pathways to Net Zero 194 Fluorinated gases (F-gas) are man-made gases that can stay in the atmosphere for centuries. Their emissions account for around 3% of total UK GHG emissions. Major emissions sources are refrigerants, aerosols, solvents, insulating gases, or blowing agents for foams and medical equipment. They can also arise as fugitive emissions from other manufacturing processes. Most of the emissions reduction to 2050 will be driven via F-Gas regulations, with further abatement possible through a faster shift to lower Global Warming Potential (GWP) F-gases, behavioural shifts to Dry Powder Inhalers (DPI) and reduced leakage. The evidence base on how to decarbonise F-gases builds on our 2019 Net Zero report, and in particular a 2019 report commissioned by the CCC from Ricardo and Gluckman Consulting on decarbonising the F-gases sector. This section is split into three a) The Balanced Net Zero pathway for F-gases 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 F -gases F-gas emission levels were 15 MtCO2e in 2018, accounting for 3% of total UK GHG Approximately 95% of F-gas emissions are hydrofluorocarbons (HFCs) which are emitted from the production, use and manufacture of refrigeration and air- conditioning equipment; aerosols; foams; metered-dose inhalers; and fire equipment. Sulphur hexafluoride (SF6), perfluorocarbons (PFCs), and NF3 comprise the remaining percentage and are released in various industrial processes and F-gases are emitted in small volumes but have a high global warming potentials (GWPs)* and can be several thousand times more warming than CO2 (GWP = 1): • HFCs have GWPs ranging from approximately 100 to over 10,000 • PFCs have GWPs of approximately 7,000 to approximately 19,000 • NF3 has a GWP of 16,100. These emissions are very low (less than 0.001 MtCO2e) and do not count towards the UK’s climate targets. Our pathways start from an existing policy baseline where the UK maintains comparable legislation to the EU F-Gas Regulation that was introduced in 2014. * Values given are AR5 GWPs with carbon-cycle feedbacks. used in refrigeration and air-

195 Sixth Carbon Budget – The path to Net Zero The regulation sets a cap on the amount of HFCs that producers and importers are allowed to place on the EU market. The cap will be cut every three years until reaching a 79% cut from 2015 levels by 2030.
The Government has legislated provisions for equivalent regulation into UK law to come into force from 2021, meaning that the UK’s departure from the EU should not impact this baseline Reducing emissions further requires a range of behavioural and technical • Further replacement of current F-gases with lower GWP F-gases. The deployment of lower GWP alternatives to current F-gases in heat pump systems and refrigerators has the potential to reduce emissions from the sector further. Specifically, the deployment of low-GWP alternatives to R448A and R449A F-gases and accelerated transition away from R-404A systems, and retrofitting of R-134a car air-conditioning systems. * A host of low-GWP F-gases or F-gases alternatives are already available on the market, and innovation will likely bring more forward. • More widespread move to dry power inhalers (DPIs). Metered dose inhalers (MDIs) are a significant source of F-gases emissions. Our Balanced Pathway assumes widespread move from MDIs to DPIs – which are already in common use in Europe – for some drugs, with lower-GWP MDIs developed for other drugs such as salbutamol. • Reduced leakage from heat pump and refrigerators through improved equipment design and installer training. Our Balanced Net Zero Pathway involves a widespread rollout of heat pumps from now until 2050 (see section 2). Heat pumps emit some F-gases during their product lifetimes as a result of refrigerant leakage and disposal. If existing standards are maintained, the greenhouse gas savings of a switch to heat pumps are orders of magnitude higher than the additional F-gas emissions (see Box 11.2 of the Methodology Report) and we account for those additional emissions in our b) Alternative routes to delivering abatement in the mid -2030s All F-gases scenarios aim to reduce emissions as far as possible by 2050, resulting in a range of residual emissions of 1.5-2.5 MtCO2e/year, and emissions of 2.5-4.0 scenarios we vary the assumptions relating to behavioural change and • Headwinds. Decreased leakage from heat pumps and refrigerants, greater rollout of low-GWP alternatives to F-gases, retrofitting of some car air- conditioning systems and partial replacement of MDI inhalers with DPI inhalers (beclomethasone dipropionate and compound drug inhalers). • Widespread Engagement. All the measures from Headwinds are included, alongside greater willingness to shift to DPI inhalers (specifically switching from salbutamol MDIs to DPIs). * R448A and R449A F-gases are high-GWP F-gases used as refrigerants. R-134a is a high-GWP F-gas use in car air- conditioning systems that was banned from being used in new cars from January 2017. Further abatement is possible if deployed, and there is greater

Chapter 3: Sector pathways to Net Zero 196 • Widespread Innovation. All the measures from Headwinds are included. Further shift away from HFCs for which low-carbon alternatives are currently at an earlier stage of deployment. Measures outlined as technically feasible but not costed in our Net Zero report are included in this scenario. • Tailwinds. Tailwinds includes the measures from Headwinds, Widespread Engagement and Widespread Innovation. BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. Headwinds and Widespread Engagement scenario are obscured by Balanced Net Zero Pathway curve. Full date can be found in the exhibits CCC’s databook. c) Impacts of the costs, benefits and co -impacts on Our estimates suggest that reducing emissions from the UK’s F-gases sector is achievable as part of a cost-effective scenario towards the Sixth Carbon Budget. In the Balanced pathway we estimate costs of around £7 million per year in 2035, and net savings of around £1 million per year by 2050. The majority of the 2035 costs are due to upfront investment in refrigeration and heating systems that have greater efficiency and lower GWP F-gases that are also often cheaper. By 2050, the efficiency savings more than offset this additional capital investment. Abating emissions from F-gases should be cost saving by 2050. 197 Sixth Carbon Budget – The path to Net Zero Engineered greenhouse gas removals, such as Bioenergy with carbon capture and storage (BECCS), Direct Air Capture of CO2 with storage (DACCS) and increased use of Wood in Construction will be required to permanently remove carbon from the atmosphere, in order to offset remaining residual emissions in the UK and achieve Net Zero by 2050. As set out in Chapter 1, our scenarios aim to reduce emissions where decarbonisation solutions exist, and minimise the need for The evidence base used for our analysis on GHG removals is largely that compiled for the Committee’s 2019 Net Zero report, but is supplemented by new data on costs and efficiencies for DACCS from The Royal Society and International Energy Agency (IEA), and updated BECCS data from the Energy System Catapult’s ESME model and bespoke analysis for industrial and energy-from-waste plants. Evidence on the potential supply of sustainable low-carbon bioenergy is drawn from our detailed work in the 2018 Bioenergy in a low-carbon economy report, as detailed in the accompanying Methodology report, Chapter 6. This section is split into three a) The Balanced Net Zero Pathway for GHG Removals b) Alternative routes to delivering abatement in the mid-2030s c) Investment requirements and costs a) The Balanced Net Zero Pathway for GHG removals In the Balanced Net Zero Pathway we estimate that engineered emissions nature-based sinks of 39 MtCO2/year from UK land (covered in section 6). Engineered greenhouse gas removals are a group of technologies (also known as ‘GGRs’ or ‘negative emissions technologies’) that can remove carbon from the atmosphere. * BECCS and DACCS are not currently operating at scale in the UK, although there are demonstration plants operating globally and larger commercial projects proposed. Biogenic CO2 is already captured at commercial scale from bioethanol and anaerobic digestion plants, although it is typically used (e.g. for drinks manufacture and horticulture) rather than sequestered. In constructing the Balanced Pathway, we have taken into account the time needed to scale-up BECCS and its supply chains starting in the late 2020s, the need to demonstrate DACCS in the 2020s for scale-up late in the 2030s, and the new-build market potential for wood in construction.
* The use of engineered removals raises concerns around sustainability, particularly around the large-scale use of bioenergy, and the potential moral hazard of reduced mitigation efforts. For discussion of these issues, see CCC (2019) Net Zero Technical Report (Chapter 10), and CCC (2018) Bioenergy in a low-carbon economy. not yet available at scale, but

Chapter 3: Sector pathways to Net Zero 198 Balanced Net Zero Pathway for the GHG BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; CCC analysis. M&C = Manufacturing and Construction. Both BECCS and DACCS routes rely on the development of UK CCS infrastructure, and the provision of low-cost feedstocks (bioenergy supply chains for BECCS or low-carbon hydrogen & power for DACCS): • Bioenergy with carbon capture and storage (BECCS) involves the use of sustainable biomass in generating power, heat or fuels, where biogenic CO2 generated in the process is captured and sent to long-term geological storage. The same process can also be applied to biogenic waste, biogas upgrading and some biofuels plants. Our Balanced Pathway has BECCS facilities removing 22 MtCO2/year from the atmosphere by 2035, and 53 MtCO2/year by 2050,** across a mix of biomass power, waste-to-energy, industrial heat, biohydrogen, biojet and other biofuel & biomethane • Direct Air Capture of CO2 with storage (DACCS) involves the separation of CO2 from ambient air using chemical reagents and process heat, which we assume comes from low-carbon hydrogen. The captured CO2 is then sent to long-term geological storage. In our Balanced Pathway, DACCS starts to scale up from 2040 to reach 5 MtCO2/year by 2050. ** For context, at least 50 MtCO2/year of biogenic CO2 currently goes uncaptured in energy applications in the UK. 199 Sixth Carbon Budget – The path to Net Zero • Wood in Harvested wood can be used as a construction material, creating an additional multi-decade/century store of carbon in the built environment. Currently timber-framed houses and engineered wood systems make up around 15-28% of total construction materials in new homes. In our scenarios this increases to 40% by 2050, removing 0.25 MtCO2/year by 2035 and 0.44 MtCO2/year by 2050 on top of the wood product GHG savings already accounted for in the land-use sector. • Other removals technologies such as biochar, carbon-negative cement and enhanced weathering are also able to remove carbon from the atmosphere. However, we consider these to be more speculative options, and so these have not been included in our scenarios. Research and development should continue into these options, to allow them to be Our scenarios for bioenergy use assume that harvested sustainable biomass and biogenic waste is used where it can best help to minimise overall GHG emissions. This is essential, as there will be finite supplies of bioenergy available to the UK that is truly low-carbon and does not compromise other aspects of sustainability (e.g. food production, water supplies and biodiversity). The size of this resource was assessed in detail as part of our 2018 report Biomass in a low-carbon economy. b) Alternative pathways for GHG removals The level of engineered GHG removals in our pathways is dictated by the amount of remaining emissions needed to be offset, in addition to nature-based sinks, to reach Net Zero, and the pace of the transition to Net Zero, including the need to demonstrate engineered removals at scale. 3.11.b). Reaching this level of ambition by 2050 requires a cumulative 73-157 MtCO2 of removals over the Sixth Carbon Budget period, in addition to nature- based sinks in the scenarios. Across the scenarios we explore different contexts by varying the key timings, costs and performance assumptions, resulting in different • Headwinds has higher residual emissions (e.g. in aviation and agriculture) than in the Balanced Pathway, requiring additional removals to reach Net Zero. As rates of tree planting and peatland restoration are also lower in this scenario, this scenario requires 87 MtCO2/year of engineered removals by 2050. Higher levels of biomass imports are used to generate BECCS power and hydrogen, and more CCS at energy-from-waste plants is required. • Widespread Engagement has higher levels of diet change and waste reductions, more tree planting and less flying, leading to reduced residual emissions and higher natural removals than Headwinds. This means that lower levels of engineered removals are required in 2050 (45 MtCO2/year). Energy produced from BECCS is largely used in power and biojet. • Widespread Innovation has more ways to reduce emissions at reasonable cost, including using synthetic fuels in aviation based on CO2 from direct air capture. Both BECCS and DACCS play roles, with the latter starting in the mid-2030s and contributing 15 MtCO2/year out of total engineered removals of 63 MtCO2/year in 2050 (by when emissions are below Net Zero). Energy produced from BECCS is mostly used in power, hydrogen and biojet. • Tailwinds combines the lowest-carbon actions resulting from increased behaviour change and technological improvement to reduce emissions further and faster than the other scenarios. Chapter 3: Sector pathways to Net Zero 200 In this scenario, DACCS scales up as in Widespread Innovation, and biomass imports increase as in Headwinds, which leads to total engineered removals scaling up more quickly to reach 112 MtCO2/year by 2050 (with total emissions below Net Zero). Energy produced from BECCS is mostly used in power, hydrogen and biojet. Summary of key differences in the GHG removal sector scenarios ( MtCO2/year in 2050) BECCS energy-from-waste 7 10 1 5 7 BECCS biomethane 0.6 0.6 0.5 0.5 0.5 Wood in construction 0.4 0.4 0.4 0.4 0.4 removals starting from the late after this varies considerably. 201 Sixth Carbon Budget – The path to Net Zero c) Investment requirements and costs In our 2019 Net Zero report, our Further Ambition scenario only identified a 96% reduction in UK GHG emissions by 2050 from 1990 levels, with the remaining 4% needing to be filled with more speculative options. In our cost analysis for achieving Net Zero, we assumed that this 4% gap could be met by removals at a high cost of £300/tCO2.
Together with high costs of imported biomass for BECCS and early-stage estimates for DACCS, these led to high costs for the Removals sector in our Net Zero report. BECCS plants, which make up the majority of engineered removals in all of our scenarios, also produce significant volumes of carbon-negative energy, such as electricity, hydrogen, jet fuel, methane and industrial heat. The costs allocated to the Removals sector are the direct costs of using DACCS, along with the additional cost of using carbon-negative BECCS instead of the counterfactual method of producing this energy assumed by each end-use sector. * There are no additional costs assumed for using wood in construction beyond those already counted in the Land Use and Manufacturing & Construction sectors. Our estimates for the Balanced Pathway suggest • Scaling up engineered GHG removals is likely to lead to added costs of £2.3 billion/year in 2035 and £5.7 billion/year by 2050. DACCS does not contribute in 2035 but will make up around 15% of removals costs in 2050. • The average cost of removals in our scenarios is around £100/tCO2 during the 2030s and 2040s, although there is a wide variation in costs between sectors. For example, using domestic biomass in retrofitted BECCS power plants might cost £70/tCO2 in the mid-2030s, compared to £150/tCO2 for imported biomass in a newbuild BECCS power plant, £110/tCO2 for BECCS hydrogen production using imports, or £100-275/tCO2 for BECCS industrial heat using domestic biomass. BECCS costs across the sectors generally fall to £40-190/tCO2 by 2050, although routes using biogenic waste may be • Early-stage DACCS plants are estimated to cost as much as £400/tCO2 during the 2020s, before reducing towards £180/tCO2 by 2050 as the technology develops and is scaled up globally. The capital investment and operating costs for BECCS are included within the sectors in which the BECCS plant sits. The analysis of capital investment and DACCS investment costs peak at £420 million/year in 2040, and then fall as subsequent plants get cheaper. DACCS operating costs ramp-up to £590 million/year by 2050, with most of this cost being the low-carbon hydrogen used as * For example, the added costs of BECCS power are calculated using the UK grid average intensity and costs (without BECCS) from our scenarios, i.e. low cost and very low emissions power by 2050. A similar approach is used for BECCS hydrogen, comparing against a blend of renewable electrolysis, gas CCS and imported renewable hydrogen. The added costs of BECCS energy-from-waste and BECCS M&C are the installation and operation of CCS on existing EfW and Manufacturing facilities. The added costs of BECCS biofuels and BECCS biomethane are calculated using the emissions and costs of the relevant fossil jet, diesel, LPG or natural gas comparators. retrofit vs. newbuild, and the significantly, but cost of the

Chapter 3: Sector pathways to Net Zero 202 Only DACCS investment and operating costs are quantified within GHG removals sector, as BECCS capex and opex are fully considered as part of the other CCC sectors, and no additional costs are assumed for wood in construction beyond those already in land use and manufacturing and construction. An indicative UK demonstration project starting in the late 2020s is shown. 203 Sixth Carbon Budget – The path to Net Zero 1 Element Energy for the CCC (2020), Analysis to provide costs, efficiencies and roll-out trajectories for zero-emission HGVs, buses and coaches. 2 Department for Transport (2019) Road traffic Great Britain 2019. 3 Centre for Sustainable Road Freight for the CCC (2015) An assessment of the potential for demand-side fuel savings in the Heavy Goods Vehicle (HGV) sector. 4 For further discussion see The Carbon Trust and Rawlings Support Services for BEIS (2016) Evidence Gathering – Low Carbon Heating Technologies and Delta EE for BEIS (2018) Technical feasibility of electric heating in rural off-gas grid dwellings. 5 Government response to BEIS Select Committee’s recommendations. 6 Nicol S. et al. (2015), The cost of poor housing to the NHS. 7 Gersen, S. Darmeveil, H. Van Essen, M. Martinus, G.H. and Teerlingc, O.J (2020) Domestic hydrogen boilers in enabling the use of hydrogen in the built environment. These findings are supported by testing currently being undertaken by Worcester Bosch. 8 Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget 9 UCL (2020) Analysis work to refine fabric energy efficiency assumptions for use in developing the sixth carbon budget; Currie & Brown (2019) The costs and benefits of tighter standards for new buildings; Element Energy for the CCC (2020) Development of trajectories for residential heat decarbonisation to inform the sixth carbon budget. 10 Jacobs (2020) Strategy for Long-Term Energy Storage in the UK 11 Ofgem 12 Air Quality Expert Group (2020) Impacts of Net Zero pathways on future air quality in the UK 13 Policy Exchange (2020) The Future of the North Sea 14 CCC (2018) Hydrogen in a low-carbon economy 1515 CCC (2020) Land Use – Policies for a Net Zero UK; CCC (2019) Net Zero – Technical Report 16 Centre for Ecology and Hydrology (2020) Updated quantification of the impact of future land use scenarios to 2050 and beyond. 17 Scottish Rural College (2020) Non-CO2 abatement in the UK agricultural sector by 2035 and 18 Climate Assembly UK (2020) The path to net zero. 19 ADAS (2016) Refining estimates of land for bioenergy. 20 Vivid (2020) Economic impacts of Net Zero land use scenarios. Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 204 Ireland’s contribution to Net Zero 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 206 Scotland, Wales and Northern Ireland have an integral role to play in delivering the UK’s Sixth Carbon Budget on the path to Net Zero.
Combined, they produced 23% of UK emissions in 2018, while accounting for 16% of the UK’s population, 13% of relevant to emissions reduction. Key areas of devolved responsibilities include demand-side transport measures, energy efficiency and heat in off-gas properties, agriculture, land use and waste, and most energy policy in Northern Ireland. The devolved administrations can also ensure that UK policy in reserved areas (e.g. a regulatory phase-out of petrol and diesel car sales) is delivered effectively through the provision of additional incentives, public engagement, and supporting policies such as planning. The UK cannot achieve its climate targets without strong policy action across Scotland, Wales and Northern Ireland. This chapter sets out what the different pathways for UK Net Zero mean for emissions in Scotland, Wales and Northern Ireland, the costs of action, and high- level policy recommendations for the devolved administrations. A full discussion of costs and their distribution can be found in Chapter 5 and 6, and a detailed set of policy recommendations is laid out in the Policy Report that accompanies this Scotland, Wales and Northern Ireland are at different stages of developing their own climate legislation, targets and • Scotland has already legislated a Net Zero target for 2045 and a set of legally binding targets between 2020 and 2045. The Scottish Government is now preparing an update to the Climate Change Plan containing policies and proposals to meet those targets that will be published shortly after this • The Welsh Government already has a climate legislation framework and currently has a legal target to reduce emissions by 80% in 2050 compared to 1990 levels. The Welsh Government is in the process of defining and legislating new targets that are consistent with UK Net Zero by 2050. In 2019, Wales committed to setting a 95% reduction target in 2050, with an ambition to set a Net Zero target if possible.1 • The Northern Ireland Executive is planning to introduce new climate change legislation as part of the New Decade, New Approach power- We will shortly publish two joint reports reflecting on progress towards meeting Wales’ existing climate targets and giving new recommendations on the level of the Wales’ 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 Ireland have an integral role to levers are held in Westminster,

207 Sixth Carbon Budget – The path to Net Zero Our key messages in this chapter • The credibility of the Sixth Carbon Budget rests on action in all parts of the UK. 23% of the abatement in our Balanced Net Zero Pathway during the Sixth Carbon Budget period is delivered in Scotland, Wales and Northern • The technical and behavioural challenges and solutions to tackling greenhouse gas emissions are broadly similar across the UK. This does not mean that each country will follow the exact same emissions reduction pathway, nor does it lessen the need for policies that are tailored for national, regional and local needs (see Local authorities and the Sixth Carbon Budget in the Policy Report). • Equal effort towards UK Net Zero will lead to different emissions pathways. The balance of activity across different sectors - particularly aviation, agriculture and land use, manufacturing and construction, fuel supply and greenhouse gas removals - means different levels of emissions reduction are possible in different parts of the UK through the Sixth Carbon Budget • The scale of action required in Scotland, Wales and Northern Ireland is broadly comparable to the current share of UK emissions. The costs of decarbonisation in Scotland, Wales and Northern Ireland will likely be shared across the whole of the UK to some degree. • Devolved policies have a crucial role to play. 11% of all the abatement in the UK Balanced Net Zero Pathway is in areas where some or all key powers are reserved to the Scottish Government, Welsh Government and Northern • Nearly 60% all the abatement in Scotland, Wales and Northern Ireland is in sectors where key powers are partially or mostly devolved. Priority sectors for devolved policy include agriculture and land use, buildings efficiency and heat, demand-side transport measures and waste. amounts of effort, but lead to different overall reductions in

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 208 1. Opportunities to reduce emissions Chapter 2 of this report sets out the actions that are required for the UK to meet our recommended Sixth Carbon Budget on the pathway to reach UK Net Zero by All our scenarios reflect strong contributions from a set of key technologies and behaviours. The technical and behavioural challenges and solutions to tackling greenhouse gas emissions in the 2020s and beyond are broadly similar across the • Consumer and business choices. Significant changes in behaviour can be made alongside improvements to people’s lives. In some cases that means adopting new technologies that provide the same service (e.g. electric cars), in others it means larger changes (e.g. shifting to home-working or walking/cycling). Particularly important in our scenarios are a continued shift in diets away from meat products, a slow-down in growth of flying and • Efficiency. Much of our use of energy, and wider resources, is currently inefficient. By better insulating buildings, improving vehicle efficiency and improving efficiency in industry the UK can use the energy we produce and the resources we consume most productively. • Electrification. Low-carbon electricity can now be produced more cheaply than high-carbon electricity and has potential to be rolled out at a scale many times larger than the UK’s current entire electricity demand. • Hydrogen & CCS. Low-carbon hydrogen can be produced from electricity or from natural gas with carbon capture and storage. Carbon capture and storage (CCS) is used to avoid further emissions from industry, alongside a role in permanent removal of CO2 from the atmosphere and potentially in electricity and hydrogen production. • Land and removals.
A transformation is needed in the UK’s land. Our scenarios involve planting of 300,000 hectares of mixed woodland by 2035 across Scotland, Wales and Northern Ireland, accelerating to 850,000 hectares by 2050. Peatlands must be restored widely and managed sustainably. Food waste will need to be reduced and diets will need to shift away from the most carbon-intensive products. Low-carbon farming practices must be adopted widely, and farm productivity raised. Alongside these nature-based removals, by 2035 the UK should be using bioenergy with CCS to deliver engineered removals of CO2 at scale – some of which could be located in the devolved administrations. The key factors determining the rate at which the devolved administrations can reduce their emissions before, during and beyond the Sixth Carbon Budget period different levels of activity and emissions in each sector today; existing land usage and opportunities for land-based removals; existing infrastructure; opportunities to remove CO2 from the atmosphere; and existing policy. different starting point and set of opportunities to contribute

209 Sixth Carbon Budget – The path to Net Zero Greenhouse gas emissions relative to population, economic activity, and land area UK Scotland Wales Northern Ireland GHG emissions in 2018 (MtCO 2e) 539 55 42 25 (km2) 250,000 80,000 21,000 14,000 ONS (2020) Population estimates for the UK, England and Wales, Scotland and Northern mid-2019; ONS (2020) Regional economic activity by gross domestic product, 1998 to 2018; ONS (2020) The Countries of the UK; NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2018. a) Existing levels of emi ssions and activity in each sector The current sectoral shares of total emissions are different in each devolved Higher or lower shares of current emissions and activity in each sector mean that the pace and scale of mitigation actions - or failures to act - will have a proportionally higher or lower impact on the economy-wide emissions pathways for Scotland, Wales and Northern Ireland. Higher shares of emissions in sectors that can decarbonise rapidly in the next decade will mean that economy-wide emissions will fall more quickly. Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 210 Wales and Northern Ireland compared to the UK BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019; CCC analysis. Values shown use AR5 Global Warming Potentials with carbon-cycle feedbacks and include an estimate of The following sectors differ from the UK share by more than five percentage points in one or more of Scotland, Wales and Northern • Agriculture. All three of the devolved administrations have a significantly higher proportion of their total emissions from agriculture compared to England. Around 10% of all UK emissions are from agriculture, compared to 16% in both Scotland and Wales and 27% in Northern Ireland. • Aviation comprises a much smaller share of emissions, particularly in Wales (<1%) and Northern Ireland (2%), compared to the UK as a whole (7%). • Electricity supply. Scotland has already nearly entirely decarbonised its electricity generation sector – meaning there is less potential to directly reduce emissions from the power sector in Scotland through the 2020s. In contrast Wales is a net exporter of gas-fired electricity to the rest of the Great Britain network, so decarbonisation of the electricity generation in the 2020s will have a greater proportional impact on the Welsh emissions • The manufacturing & construction sector has a much larger role to play in Wales, with the proportional contribution of Welsh emissions from this sector (23%) double the contribution for the UK as a whole (12%). emissions from fuel supply and agriculture and relatively low Northern Ireland has relatively high agricultural emissions but Agriculture is bigger in each of UK Scotland Wales Northern Ireland Shipping Residential buildings Non-residential buildings Electricity supply Manufacturing and construction Fuel supply

211 Sixth Carbon Budget – The path to Net Zero • Surface transport emissions make up a smaller proportion of total emissions in Wales (14%) and Northern Ireland (16%) than in the UK (21%), but this is not due to a more carbon-efficient surface transport sector. Other sources of emissions increase the total national emissions that surface transport emissions are compared to (i.e. agriculture in Northern Ireland and manufacturing in Wales) making the share of transport emissions of the total smaller. Per person, surface transport emissions are actually higher in both Northern Ireland and Wales than the UK average. • Fuel supply emissions are very low in Northern Ireland compared to the rest of the UK, with virtually zero emissions from oil and gas production or • Offshore oil and gas emissions. Around 15 MtCO2e of GHGs from offshore oil and gas exploration and production are classified within the UK Greenhouse Gas Inventory as ‘unallocated’ emissions and are not attributed to any of the devolved administrations totals. Decarbonising these sources of UK emissions will not directly affect the pathways for Scotland, Wales or Northern Ireland – though there will be knock-on impacts for onshore emissions from oil and gas production. b) Existing land use and opportunities to remove CO 2 from the Emissions from land use, land-use change and forestry (LULUCF) are inherently location-specific. Across the UK, there are differences in the types of existing land use, as well as in the types of land-use change needed to deliver the UK Net Zero target and the costs associated with those changes. As a result, the costs and benefits for England, Scotland, Wales and Northern Ireland differ to the results for the UK as a whole. The two main differences across the UK that have been incorporated in our analysis • Different combinations of measures that can be deployed across England, Scotland, Wales and Northern Ireland based on differences in geographies – Scotland.
Around 18% of land in Scotland is currently forested, the highest proportion in the UK, but emissions from degraded peatland compared to net total emissions are much higher in Scotland (potentially up to 20%) than the UK as a whole (around 5%). – Wales. Wales has a comparable level of forest coverage to the UK, and has a very low amount of emission associated with degraded peatland, which is expected to add less than 0.5 MtCO2e to estimates of emissions once it is included in the inventory. Wales has a much lower proportion of land area used for crops compared to grasslands. – Northern Ireland. The livestock sector dominates agriculture in Northern Ireland (over 90% of agricultural GVA in 2017), particularly beef and dairy. This is reflected in the high proportion of grassland in Northern Ireland and low proportion of cropland. Forest coverage is also lower than the rest of the UK at around 8% (including small woodland area). • Differences in land acquisition costs in England, Scotland, Wales and Northern Ireland. Other costs are also likely to vary (e.g. based on remoteness of land) but it has not been possible to take this into account. forest area, but also a lot of

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 212 Our 2019 Land Use Policy Report found that the set of measures to reduce emissions from agriculture and land use in our scenarios deliver a higher ratio of benefits to costs in each of Scotland, Wales and Northern Ireland than in England. and Northern Ireland compared to the UK Centre for Ecology and Hydrology (2020) and CCC analysis. Does not include land used for agro-forestry and hedgerows (<1% at UK level) for Scotland, Wales or Northern Ireland. 'Forestry' includes small woodlands. Some differences in infrastructure will continue as far as 2050. This is particularly important for the gas and electricity networks, existing housing stock, and clusters • The gas network is much less developed in Northern Ireland, with only 24% of households connected to the gas grid in 2017 (although this is increasing), compared to 87% for the UK as a whole.3 Scotland and Wales also have a higher proportion of homes off the gas grid than the UK average. Heat decarbonisation options that rely on the gas network will not be possible in these particular properties, and will require a greater use of other options such as heat pumps and smart storage heating. • The existing building stock, including current levels of energy efficiency, ownership or tenancy type, heating technology, suitability for low-carbon district heating, and the proportion of buildings that are ‘hard-to-treat’ or Properties off the gas grid in Northern Ireland are likely to UK Scotland Wales Northern Ireland Rough grazing Forestry Agro-forestry

213 Sixth Carbon Budget – The path to Net Zero Our analysis takes into account the different characteristics of buildings in Scotland, Wales and Northern Ireland using a detailed model of the housing stock. Differences in population density also affects the number of miles driven by people in different parts of the UK. • Large point sources of emissions. Existing fossil-fuelled power stations and industrial clusters (e.g. the South Wales industrial cluster and Grangemouth in Scotland) are large point-sources of emissions that will continue to pollute until effective measures to decarbonise them are put in place (see Chapter 3 and the Methodology Report). Reducing emissions from any large point- source of emissions will have a larger proportional impact on Scottish, Welsh and Northern Irish emissions than it will on the UK total. The timing and pace of the transition to low-carbon technologies at individual locations will have larger impact on the total emissions pathway for each nation. • The UK’s airport infrastructure is concentrated in England, particularly around London. This means that successful abatement of – or failures to act on – aviation emissions will have a smaller impact on the total emissions pathways for Scotland, Wales and Northern Ireland. • The Integrated Single Electricity Market is the all-island electricity network shared between Northern Ireland and the Republic of Ireland. As interconnection increases, energy policy in Northern Ireland must support an efficient, low-carbon electricity market to operate on both sides of the Carbon capture and storage (CCS) is crucial for the transition to Net Zero. In addition to playing a central role in reducing emissions from industrial processes and combustion, as well in electricity generation and potentially hydrogen production, CO2 will also need to be removed from the atmosphere through greenhouse gas removals technologies, such as bioenergy with CCS (BECCS) and direct air CO2 capture with storage (DACCS). Under IPCC accounting rules the emissions credit for BECCS removals is allocated where the CO2 capture occurs (i.e. where the biomass is combusted), rather than where the biomass is grown. Greenhouse gas removal technologies could – in theory – be located anywhere in the UK and would count towards UK emissions However, there are strategic reasons why BECCS and DACCS might be best located in certain areas of the country – such as co-location with industrial CCS The timing with which industrial clusters in Scotland and Wales

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 214 Energy Technologies Institute LLP, NERC and The Crown Estate (2020) CO2 Stored Database. The emissions pathways for Scotland, Wales and Northern Ireland are therefore highly dependent on carbon storage • If CCS is used in places that are not located near to CO2 storage sites, the CO2 that is captured must be used or transported to a storage site. This will incur higher costs (e.g. the additional costs of shipping CO2 at around £10-20/tCO2)4 and may make other solutions that do not require CCS such as electrification more cost competitive.
• Large parts of Wales and Northern Ireland have more limited access to CO2 storage sites and therefore do not appear to be the most ideal places to • Scotland has access to large CO2 storage sites in the North Sea, including disused oil and gas fields. Scotland’s land area and high forest coverage also provide excellent potential to grow and supply a large proportion all UK biomass. Together these imply Scotland is a good place for deploying BECCS power, although electricity transmission constraints will also need to

215 Sixth Carbon Budget – The path to Net Zero Particularly in the 2020s and early 2030s, the location of existing biomass power generation capacity in the UK will be important as these sites could be the first to be retrofitted with carbon capture and storage. Existing and planned policies will have lasting effects for emissions pathways for Scotland, Wales and Northern Ireland. To the extent possible, we include these impacts in our analysis. These • Long-term contracts for electricity production that will drive new offshore wind capacity in the 2020s and recent UK Government decisions on other low-carbon electricity generation projects, including nuclear and tidal • Tree planting. The trees that are planted today will continue to sequester carbon over time – particularly in Scotland where planting rates have more than doubled in the last five years, a supply chain is in place and funding is already secured for the next decade. • Peatland restoration. The Scottish Government is already carrying out significant peatland restoration actions, and has committed to fund the restoration of 220,000 hectares of peatland before 2030. These actions are included in the baseline emissions projections for Scotland, and our scenarios include the impacts of peatland restoration that is already taking place in Scotland but not yet accounted for in the existing GHG inventory. • Waste management policy is mostly devolved and differs across devolved administrations. This has been reflected in our analysis, with Wales and Scotland achieving higher recycling rates than England in our scenarios before 2030. Waste sent to landfill today can continue to emit greenhouse gases for decades, so existing policy will have an impact on long-term emissions pathways in the waste management sector. Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 216 2. Pathways for Scottish, Welsh and Northern Irish emissions Chapter 1 of this report sets out how the Committee has developed new scenarios 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 for In this section, we present an analysis of what the Balanced Net Zero Pathway and exploratory scenarios and the for the UK mean for emissions pathways in Scotland, Wales and Northern Ireland. It is in four a) Defining pathways for Scotland, Wales and Northern Ireland b) Balance of sectoral emissions in 2050 c) Scenarios on the path to Net Zero emissions for the UK d) Range of greenhouse gas removals needed to reach Net Zero a) Defining pathways for Scotland, Wales and Northern Irel and We have derived pathways for the devolved administrations in parallel with our UK • Deriving a baseline emissions projection for each sector to 2050 for each of the devolved administrations that takes into account, as far as possible, differences in current and projected trends across Scotland, Wales and • Analysing the amount of abatement in each country that is consistent with the UK-wide scenario in each sector. • Combining these to provide five scenarios for each of Scotland, Wales and Northern Ireland for the period 2020-2050. • Assessing the costs, savings and co-impacts of these actions. More detail on sector-specific methodologies for deriving sectoral pathways for Scotland, Wales and Northern Ireland is available in each chapter of the accompanying Methodology Report. A challenge in defining these scenarios has been to determine where greenhouse gas removals in the UK scenarios could be located geographically as – unlike reductions in existing emissions – these are not tied to a specific geographical location or existing activities. The Committee’s pathway analysis does not allocate specific levels of greenhouse gas removals that are used in UK scenarios. This includes the combustion of biomass to generate electricity with CCS (BECCS power) or the use of direct air capture with carbon capture and storage (DACCS). All of the emissions pathways in this chapter are therefore presented without the inclusion of any engineered greenhouse gas removals. Here we present the results of present results without these. 217 Sixth Carbon Budget – The path to Net Zero However, we do provide a partial analysis of the potential for removals in two • Wood in construction. The potential for the use of wood in construction to store biogenic carbon for the lifetime of each building (typically 50-100 emissions removals from the use of wood in construction is much less than 0.5 MtCO2 per year in our scenarios for Scotland, Wales or Northern Ireland. • BECCS in industry. Modelling of the manufacturing & construction sector identified opportunities to use biomass, biogas and biogenic wastes with CCS to generate process heat. These removals are not included in the pathways presented in this Chapter, but the range of potential is presented When recommending targets (e.g. in our parallel advice for Wales), we consider these pathways without engineered removals and then what different shares of total UK removals might mean for what level of emissions reduction is feasible.
five costed pathways for Scotland, Wales and All achieve Net Zero by 2050 or earlier, w it h different balance of effort and success

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 218 b) Scenarios on the path to Net Zero emissions for the UK i) Contribution to Net Zero e missions for the UK Across the Balanced Net Zero Pathway, the contributions of Scotland, Wales and Northern Ireland to emissions reductions remain comparable to their existing share • Scotland contributes to 8% of all abatement action across the Sixth Carbon Budget period and 9% in 2050 in our Balanced Net Zero Pathway, compared to 10% of UK emissions in 2018. Scotland is likely to also have a significant share of UK greenhouse gas removals. • Wales contributes to 9% of all non-GGR abatement action across the Sixth Carbon Budget period and 8% in 2050 in our Balanced Net Zero Pathway, compared to 8% of UK emissions in 2018. • Northern Ireland contributes to 4% of all non-GGR abatement action across the Sixth Carbon Budget period and 3% in 2050 in our Balanced Net Zero Pathway, compared to 5% of UK emissions in 2018. abatement during the Sixth Carbon Budget BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019; CCC analysis. emissions are similar across the Out-turn and baseline Balanced Pathway (no GGRs)

219 Sixth Carbon Budget – The path to Net Zero ii) Balance of sectoral emissions in 2050 As set out in Chapter 2, the balance of sectoral emissions in the UK in our scenarios for Net Zero in 2050 is most sensitive to residual emissions from aviation, agriculture and the amount of CO2 that can be removed from the atmosphere through forestry and greenhouse gas removals. As the size of the existing aviation sector in Scotland, Wales and Northern Ireland is much smaller than England, the net emissions for each nation in 2050 are determined mostly by emissions from LULUCF and agriculture, and the amount of greenhouse gas removals that can be deployed. each scenario excluding any greenhouse gas removals. These charts also allow a comparison to the ‘Further Ambition’ scenario that was set out in our 2019 Net Zero report.5 Compared to the Further Ambition • The Balanced Pathway has lower emissions from manufacturing & construction and fuel supply (defined as ‘industry’ in our Further Ambition scenario). This is particularly important for Scotland and Wales where our sectoral analysis has focused on clusters at Grangemouth and South Wales. • The Balanced Pathway typically has comparable - or slightly higher - emissions in the agriculture sector. • The scenarios are typically lower than in the 2019 Net Zero Report, despite the fact that they do not have any greenhouse gas removals allocated to The Headwinds, Widespread Engagement, Widespread Innovation and Tailwinds scenarios explore a wider range of sectoral pathways in 2050. For Scotland, Wales and Northern Ireland, the sectors which have the biggest impact on emissions in • The size of the net land use sink in 2050 which varies based on the scale of measures to remove carbon from the atmosphere, particularly tree • The potential for further reductions in the agriculture sector due to behaviour changes and technological innovations. iii) Emissions pathways for Scotland Scotland’s emissions pathway gets to very low levels in 2050, reaching virtually Net Zero emissions in 2050 (99% reduction) even before accounting for Scotland’s would likely get to net-negative emissions well before 2050 in the Balanced Pathway once greenhouse gas removals are deployed across the • The Balanced pathway is 64% lower than 1990 levels in 2030, and an average of 76% lower during the Sixth Carbon Budget period, rising to a Scotland has high potential for natural removals and relatively

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 220 • The scenarios begin to diverge during the mid to late 2020s. Across the period 2033-2037, annual emissions in the Headwinds scenario are on average 2.4 MtCO2e (+11%) higher than the Balanced Pathway while the Widespread Engagement (-0.8 MtCO2e, -4%) and Widespread Innovation scenarios (-2.8 MtCO2e, -13%) are lower but broadly comparable to the level of the Balanced Pathway during the Sixth Carbon Budget period. • The Tailwinds scenario diverges most from the Balanced Pathway, reaching 69% below 1990 levels by 2030 and Net Zero in 2045 without any BEIS (2020) Provisional UK greenhouse gas emissions national statistics 2019; NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019; CCC analysis. 2010 2015 2020 2025 2030 2035 2040 2045 2050 Headwinds Widespread Engagement Widespread Innovation Tailwinds

221 Sixth Carbon Budget – The path to Net Zero in comparison to the 2019 Net Zero report CCC (2019) Net The UK's contribution to stopping global warming; CCC analysis. The 'Industry' sector from the 2019 Further Ambition Scenario maps closely to the Manufacturing & Construction and Fuel Supply sectors. Fuel Supply emissions may appear slightly negative in some scenarios due to emissions savings from biomethane in the gas grid being allocated to Fuel Supply rather than to the end-use sectors. These additional emissions savings are larger than the other residual emissions from fuel supply. iv) Emissions pathways for Wales Wales’ emissions pathways also achieve very low levels of emissions in 2050 without • The Balanced pathway is on average 78% lower than 1990 levels during the Sixth Carbon Budget period, rising to a 96% reduction by 2050. • The Widespread Engagement, Widespread Innovation and Tailwinds scenarios all reach Net Zero emissions by 2050 without the use of • There is a distinct step-change in Wales’ decarbonisation pathway in the early- to mid-2030s due to decarbonisation at the South Wales cluster. The timing of the decarbonisation of Wales’ manufacturing, construction and fuel supply industries will be crucial for the overall Welsh emissions pathway as a contribution to UK Net Zero. potential for natural removals.
Sixth Carbon Budget Scenarios 2019 Net Manufacturing & construction Fuel supply Electricity supply Non-residential buildings Residential buildings Shipping

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 222 NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019; CCC 2010 2015 2020 2025 2030 2035 2040 2045 2050 Headwinds Widespread Engagement Widespread Innovation Tailwinds

223 Sixth Carbon Budget – The path to Net Zero in comparison to the 2019 Net Zero report CCC (2019) Net The UK's contribution to stopping global warming; CCC analysis. The 'Industry' sector from the 2019 Further Ambition Scenario maps closely to the Manufacturing & Construction and Fuel Supply sectors. Fuel Supply emissions may appear slightly negative in some scenarios due to emissions savings from biomethane in the gas grid being allocated to Fuel Supply rather than to the end-use sectors. These additional emissions savings are larger than the other residual emissions from fuel supply. Sixth Carbon Budget Scenarios 2019 Net Manufacturing & construction Fuel supply Electricity supply Non-residential buildings Residential buildings Shipping

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 224 v) Emissions pathways for Northern Ireland Northern Ireland can achieve very significant reductions of greenhouse gas emissions in 2050 without the use of greenhouse gas removals, but none of our scenarios for UK Net Zero see Northern Ireland achieving Net Zero emissions • The Balanced pathway is on average 60% lower than 1990 levels during the Sixth Carbon Budget period, rising to an 82% reduction by 2050. • None of the exploratory scenarios reach Net Zero by 2050, with the very • All of the scenarios see Northern Ireland reaching a further reduction by 2050 than the ‘Further Ambition’ scenario, particularly due to greater emissions reductions in land use sector. • Emissions from agriculture are marginally higher in the Balanced Pathway compared to the ‘Further Ambition’ scenario from 2019. without greenhouse gas removals NAEI (2020) Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019; CCC largely due to high agriculture 2010 2015 2020 2025 2030 2035 2040 2045 2050 Headwinds Widespread Engagement Widespread Innovation Tailwinds

225 Sixth Carbon Budget – The path to Net Zero Northern Ireland in comparison to the 2019 CCC (2019) Net The UK's contribution to stopping global warming; CCC analysis. The 'Industry' sector from the 2019 Further Ambition Scenario maps closely to the Manufacturing & Construction and Fuel Supply sectors. Fuel Supply emissions may appear slightly negative in some scenarios due to emission s savings from biomethane in the gas grid being allocated to Fuel Supply rather than to the end-use sectors. These additional emissions savings are larger than the other residual emissions from fuel supply. Sixth Carbon Budget Scenarios 2019 Net Manufacturing & construction Fuel supply Electricity supply Non-residential buildings Residential buildings Shipping

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 226 c) Range of greenhouse gas removals nee ded to reach Net Zero The scenarios set out in previous sections of this chapter are presented without any share of UK greenhouse gas removals. This section explores the range of greenhouse gas removals that would be required to reach Net Zero emissions in The conclusions of this analysis • Scotland. Greenhouse gas removals should play a role in meeting Scotland’s 2045 target for Net Zero and are a key reason why Scotland has been able to set a Net Zero target ahead of the rest of the UK. • Wales. Greenhouse gas removals could play a role in Wales’ emissions pathway. We have identified some pathways for Wales to get to Net Zero emissions by 2050 without the use of any greenhouse gas removals, but our Balanced Pathway would require 2.2 MtCO2e in 2050. There is potential for around 1 MtCO2e of removals in the manufacturing and construction sector, including 1.0 MtCO2e of BECCS and around 0.2 MtCO2e from wood • Northern Ireland would not reach Net Zero emissions even in our very stretching Tailwinds scenario, unless a much larger share of UK removals relative to Northern Ireland’s expected storage capabilities and size of population and economy were located there.
Range of greenhouse gas removals required to meet Net Zero in a given year (MtCO 2) Scotland 2045 6 3 - 9 0.5 - 1.0 12 (in 2050) Scotland 2050 1 0 - 4 0.5 - 1.2 12 Wales 2050 2 0 - 4 0.5 - 1.3 1 Ireland 2050 5 2 - 6 0.1 - 0.4 <1

227 Sixth Carbon Budget – The path to Net Zero that would be required to reach Net Zero in The range shown is defined by the Headwinds, Widespread Engagement and Widespread Innovation 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Range Balanced Net Zero Pathway 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 228 This report does not set out specific recommendations relating to climate legislation of Scotland and Wales, nor the creation of new climate legislation in We will shortly publish two joint reports reflecting on progress towards meeting Wales’ existing climate targets, and giving new recommendations on the level of the Wales’ 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 a) Targets under the Environment (Wales) Act Wales’ existing set of targets on the pathway to an 80% reduction in emissions by 2050 are not consistent with the UK’s Net Zero target or our recommended Sixth • In 2019, when recommending the UK Net Zero target, the Committee recommended that Wales should a target for a 95% reduction in emissions • The Welsh Government accepted the 95% target, and requested further advice from the Committee on whether a Net Zero target was feasible for • On 17 December 2020, we will give advice, as requested by Welsh ministers, on Wales’ Second and Third Carbon Budgets (2021-2025 and 2026-2030) and targets for 2030, 2040 and 2050. This advice will include a recommendation on whether or not there is new evidence that would allow Wales to set a Net Zero target. Our advice on targets for Wales in the next decade is made more complex by the uncertainty associated with COVID-19. The lasting impacts of the pandemic on Wales’ emissions pathway in the next decade – either through permanent changes in behaviours or through reduced economic output – are still unclear. Future changes to the emissions inventory – particularly for emissions associated with forested peatland – add further uncertainty to setting those targets. b) Targets under the Climate Change (Scotland) A ct Achieving Net Zero by 2045, ahead of the rest of the UK, remains the appropriate goal in Scotland. In our Balanced Net Zero Pathway, Scotland can achieve Net Zero in 2045 with a lower level of greenhouse gas removals than we assumed for 2050 in the Further Ambition scenario for Scotland in our 2019 advice on Net Zero. In placing the Net Zero target for 2045 in legislation that amended the Climate Change (Scotland) Act, the Scottish Parliament also set in law a target for a 75% reduction in greenhouse gas emissions for 2030 on 1990 levels. This went beyond the 2019 Committee’s recommendation for a target of 70%. 2020 will provide advice on the

229 Sixth Carbon Budget – The path to Net Zero Scotland’s 75% target for 2030 will be extremely challenging to meet, even if Scotland gets on track for Net Zero by 2045. Our Balanced Net Zero Pathway for the UK would not meet Scotland’s 2030 target – reaching a 64% reduction by 2030 – while our most stretching Tailwinds scenario reaches a 69% reduction. Decisions on the greenhouse gas accounting methodology made by the UK Government could shift Scotland’s 2030 target more in line with our analysis for this • Our analysis uses conservative assumptions for how the global warming impacts of methane emissions and the way that emissions from wetlands are measured in the greenhouse gas inventory in future (see Chapter 2, Box 2.1). This is to ensure that our recommended targets can be met regardless of the inventory methodology that is chosen. • The choice of methodology for the forthcoming inventory changes makes a particular difference in Scotland, of around five percentage points. Therefore, if the lower range of both of these methodologies (‘low-low’) is used our Balanced Pathway would equate to a 68% reduction by 2030 and our Tailwinds scenario would be 73% below the baseline. The Scottish Government should not rely on uncertain methodology changes to meet the legal target set by the Scottish Parliament. Contingency plans must be in place to ensure the 2030 target can be met regardless of the inventory choices In our Balanced Net Zero Pathway, Scotland would not reach a 75% reduction in emissions until 2035 (range of 2033-2036 across all scenarios). This suggests the need to potentially accelerate fifteen years of mitigation actions by around five years in order to meet that target, across all sectors of the economy. This would be extremely challenging, as these pathways already lie near the limits of technical As set out in Chapter 2, the Tailwinds scenario – our most optimistic scenario, for which we currently lack the evidence to have full confidence, even if good policy is in place – only reduces emissions in 2030 by marginally more than the Balanced Pathway. The analysis presented in this Chapter suggests that even full delivery of the Tailwinds scenario in 2030 and ‘low-low’ inventory changes would leave Scotland short of the 2030 target. We give further recommendations on policy actions and external factors that could allow the 2030 target to be met in more detail in a letter to the Scottish Government published in parallel with this advice.
c) A Climate Change Act for Northern Ireland Achieving the Net Zero emissions for the UK by 2050 does not necessitate that every part of the UK gets to Net Zero. Some parts of the UK will be ‘net sources’ of greenhouse gases by 2050 with emissions offset in other parts of the UK that are The analysis carried out for this report suggests that Northern Ireland achieving Net Zero greenhouse gas emissions is not necessary for the UK to meet its climate would not reach the legislated

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 230 Emissions reductions in Northern Ireland are still crucial if the UK is to reach Net Zero • In every scenario for achieving UK Net Zero that we have constructed, Northern Ireland would not get to Net Zero greenhouse gas emissions by • In our Balanced Net Zero Pathway, Northern Ireland would reach an 82% reduction in greenhouse gases by 2050 compared to 1990 levels excluding engineered greenhouse gas removals. • Northern Ireland would achieve Net Zero CO2 emissions by 2050 as part of the Balanced Pathway to UK Net Zero. Our current analysis does not show a credible pathway for Northern Ireland to reach Net Zero greenhouse gas emissions as part of its contribution to the UK Net Zero target. We therefore do not recommend that Northern Ireland set a Net Zero target for all greenhouse gases. Instead, Northern Ireland should aim for at least an 82% reduction in all greenhouse gases by 2050. There is no purely technical reason why Net Zero is not possible in Northern Ireland. However, compared to the scenarios set out in this report, Net Zero GHGs in Northern Ireland would mean one (or both) of the • A substantial reduction in output from Northern Ireland’s livestock farming sector that goes beyond the stretching scenarios we have analysed in this • A much greater than equal share of all UK greenhouse gas removals being located in Northern Ireland compared to its current emissions, population or A target for Net Zero CO2 emissions in Northern Ireland by 2050 would be consistent with the UK’s Net Zero ambition. * Emissions reductions for North ern Irela nd in the UK Balanced Net Zero Pathway Time period Reduction in all GHG emissions Reduction in CO2 emissions compared to 1990 * The Republic of Ireland’s Climate Change Advisory Council ‘Annual Review 2020’ recommends seeking EU agreement to creating a split national target for 2050: Net Zero emissions of long-lived greenhouse gases and anthropogenic methane’, with a separate, longer target for biogenic methane. The Committee will comment by letter on what an equivalent target would be for Northern Ireland. Northern Ireland achieving Net

231 Sixth Carbon Budget – The path to Net Zero 4. Costs and benefits in Scotland, Wales and Northern Ireland Chapters 5 and 6 of this report analyse the costs and benefits of meeting the Sixth Carbon Budget for the UK and how those costs are distributed fairly and efficiently The economic resource costs of reducing emissions in Scotland, Wales and Northern Ireland will vary by scenario and over time, as the balance of measures to reduce emissions will be different than for the UK as a whole. That is reflected in the cost estimates presented in this Chapter. We estimate the costs of taking action but do not identify how these will be paid for, either in terms of policy design or who pays. Chapter 6 expands on the distributional considerations of meeting the Sixth Carbon Budget, • jobs and opportunities in the transition; • distribution of costs, household energy bills and fuel poverty; The net resource costs we report in this section should not be interpreted as the costs that would be delivered via devolved budget expenditure, nor as costs that only Scottish, Welsh or Northern Irish businesses and consumers have to bear. Many of the actions to reduce emissions will likely be paid for at UK level and/or socialised across the whole of the UK. For • The costs associated with building new low-carbon generation will be shared across all consumers of electricity on the GB grid. We have reflected this by allocating resource costs for electricity supply in proportion to consumption, rather than make assumptions on where new zero-carbon generating capacity (e.g. nuclear power stations) are located. • The costs of decarbonising industrial clusters could be met through a combination of direct financing from the UK Exchequer and/or be passed through to the end-users of low-carbon products. • A market mechanism for greenhouse gas removals could see the UK aviation industry offsetting emissions by paying for removals, including planting trees, in all areas of the UK. The extent to which costs and savings are shared across the UK – including the amount of expenditure through devolved administrations’ budgets – will be determined by policy at UK and devolved level. the devolved administrations in the Balanced Pathway. A more detailed set of sectoral costs will be available on the CCC website. * Annualised resource costs are the annualised additional investment, cost of capital and operating cost implications in a given year of a given measure relative to costs in an alternative scenario (generally a hypothetical world with no new climate action or climate damages). costs at devolved level do not imply that these costs will be

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 232 Our analysis shows that the costs of decarbonisation in Scotland, Wales and Northern Ireland are roughly proportional to their existing share of UK emissions during the Sixth Budget Period. Annualised resource costs over the Sixth Carbon Budget period under the Balanced Net Zero Pathway UK Scotland Wales Northern Ireland

233 Sixth Carbon Budget – The path to Net Zero Delivering extensive decarbonisation in the UK will require a strong policy framework at UK, devolved, regional and local Government level.
Scotland, Wales and Northern Ireland have (fully or partially) devolved powers in a number of areas relevant to emissions reduction. There are also clear overlaps with the need for policies at local level. While all sectors will require a significant degree of interdependent policies from both the UK and devolved Governments, the nature of the devolution agreements means that the balance of policy action between devolved and UK Governments policy landscape is far more complex. Many areas of devolved and reserved policies cut across multiple sectors. For example, devolved powers (e.g. carbon trading, education and public engagement), and reserved powers (e.g. energy taxation, monetary policy and international trade) can have significant impacts in Sole responsibility for any sector of the economy cannot be simply allocated to policymakers in Westminster, Holyrood, Cardiff and Stormont; co-ordinated policy action is required across every sector and by every department. Balance of devolved powers by sector Sectors whe re key policy levers are Sectors where key policy levers are Sectors where policy levers are • Land use, land -use change and • Manufacturing & construction In total, 11% of all UK abatement in our Balanced Net Zero Pathway will take place in sectors where key policy levers are ‘mostly’ or ‘partially’ reserved to Scotland, the abatement in our pathways for Scotland, Wales and Northern Ireland is in areas where key policies are ‘mostly’ or ‘partially’ reserved. levers are held in Westminster, where key policies are ‘mostly’

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 234 sectors where key policy levers are ‘mostly’ The range shown is defined by the Headwinds, Widespread Engagement and Widespread Innovation Strong policy action is essential in areas where key powers are largely • Demand-side transport measures. Devolved administrations must implement effective policies to make it easy for people to walk, cycle and use low-carbon public transport. Electric vehicle charging infrastructure must also be expanded across all parts of the UK to ensure that the electric vehicle switchover works for all road users. • Buildings energy efficiency. Meeting the earliest possible date for Net Zero emissions will require major improvements to the energy efficiency of new and existing buildings, in order to improve comfort levels, lower energy bills and prepare the building stock for a switch to low-carbon heating. Policy to achieve these results in Scotland, Wales and Northern Ireland will largely be delivered through devolved buildings standards and policy. • Agriculture and land use. Low-carbon farming practices, afforestation, agroforestry and peatland restoration all have a crucial role to play in reducing emissions by 2050. The framework to follow the Common Agricultural Policy in each devolved administration provides an opportunity for more closely linked financial support to agricultural emissions reduction and increased carbon sequestration. • Waste. Devolved administrations are responsible for reducing emissions from waste, with a focus on reducing, reusing and recycling waste, diverting biodegradable waste from landfill, and capturing methane from 'Mostly' devolved 'Partially' devolved 'Mostly' reserved Abatement in England and offshore Balanced Net Zero Pathway Out-turn and baseline

235 Sixth Carbon Budget – The path to Net Zero • Electricity and heat in Northern Ireland. Unlike Scotland and Wales, Northern Ireland has devolved control of its power sector, although the operation of Northern Irish I-SEM is affected by both UK and Republic of Ireland policy. For the UK to achieve Net Zero emissions, Northern Ireland must achieve equally ambitious decarbonisation in the power sector. • Heat off-gas properties in Scotland and Wales. Heat policy, energy efficiency and building standards are devolved, while regulation of energy markets, oil and gas, electricity and gas networks and consumer protection remain reserved to the UK Government. The Scottish Government can introduce measures to decarbonise heat in buildings without using mains gas, though it currently participates in the GB-wide Renewable Heat • Carbon trading is a devolved matter and the devolved administrations and UK Government have consulted on a UK-wide Emissions Trading System that is collectively agreed with the rest of the UK. • Leadership role. Effective policies in Scotland, Wales and Northern Ireland can set the standard for the rest of the UK. Recent examples include the Energy Efficient Scotland Programme and the Welsh Government’s Towards Where powers are reserved to the UK level, the devolved administrations have an important role in ensuring that the emissions reductions take place. In particular, the devolved administrations should focus on the following • Planning. Planning frameworks are another useful lever over infrastructure that needs to be well aligned to objectives for emissions reduction in devolved administrations (e.g. through encouraging walking, cycling and use of public transport, ensuring readiness for or installation of electric vehicle charging points in new developments, and a favourable planning regime for low-cost onshore wind). • Procurement. The public sector in devolved administrations can use procurement rules positively to help drive emissions reductions in a number of areas (e.g. uptake of ultra-low emission vehicles, energy efficiency and low-carbon heat in buildings, low-carbon products). • Convening role. It is important the devolved administrations maximise their potential to bring stakeholders together, and facilitate dialogue and strengthen relationships, to enable the development of mutually beneficial projects that contribute to decarbonisation. • Working with the UK Government to ensure that UK-wide policies work for • Access to UK-wide funding. The devolved administrations should seek to ensure that households and businesses have good access to UK-wide funding opportunities where possible and appropriate. • Communication and public engagement of climate risks and the options and choices available to reduce emissions across the UK. Actions by the UK Government will be necessary to deliver the Welsh and Scottish targets, and actions by the devolved administrations will be necessary to deliver

Chapter 4: Scotland, Wales and Northern Ireland’s contribution to Net Zero 236 1 Welsh Government (2019) Wales accepts Committee on Climate Change 95% emissions 2 UK Government and Irish Government (2020) New Decade, New Approach. 3 CCC (2019) Reducing emissions in Northern Ireland. 4 BEIS (2018) Shipping CO2 – UK Cost Estimation Study.