Presented to Parliament pursuant to Section 14 of the Climate Change Act 2008

Net Zero Build Back Greener

Foreword from the Prime Minister Our strategy for net zero is to lead the world in ending our contribution to climate change, while turning this mission into the greatest opportunity for jobs and prosperity for our country since the industrial revolution. Removing dirty fossil fuels from the global economy will lead to the creation of vast new global industries from offshore wind to electric vehicles and carbon capture and storage. By moving first and making the United Kingdom the birthplace of the Green Industrial Revolution we are building a defining competitive edge. Through our Ten Point Plan we have already attracted over £5.8 billion of new inward investment in just over ten months, and will create and support hundreds of thousands of new high skilled, high wage Over the last three decades we have already reduced our emissions by 44 per cent - while growing our economy by over 75 per cent – and this strategy sets out our plan for going the rest of the way. We will meet the global climate emergency but not with panicked, short-term or self-destructive measures as some have urged. Instead we will unleash the unique creative power of capitalism to drive the innovation that will bring down the costs of going green, so we make net zero a net win for people, for industry, for the UK and for This strategy sets out how we will make historic transitions to remove carbon from our power, retire the internal combustion engine from our vehicles and start to phase out gas boilers from our homes. But it also shows how we will do this fairly by making carbon- free alternatives cheaper. We will make sure what you pay for green, clean electricity is competitive with carbon-laden gas, and with most of our electricity coming from the wind farms of the North Sea or state-of-the-art British nuclear reactors we will reduce our vulnerability to sudden price rises caused by fluctuating international fossil fuel markets. The United Kingdom is not afraid to lead the charge towards global net zero at COP26, because history has never been made by those who sit at the back of the class hoping not to be called on. Indeed, as we set an example to the world by showing that reaching Net Zero is entirely possible, so the likes of China and Russia are following our lead with their own net zero targets, as prices tumble and green tech becomes the global norm. Net Zero Build Back Greener

For years, going green was inextricably bound up with a sense that we have to sacrifice the things we love. But this strategy shows how we can build back greener, without so much as a hair shirt in sight. In 2050, we will still be driving cars, flying planes and heating our homes, but our cars will be electric gliding silently around our cities, our planes will be zero emission allowing us to fly guilt-free, and our homes will be heated by cheap reliable power drawn from the winds of the North Sea. And everywhere you look, in every part of our United Kingdom, there will be jobs. Good jobs, green jobs, well-paid jobs, levelling up our country while squashing down our That is the clean and prosperous future that awaits every one of us as the UK leads the world in the race to net zero. Foreword from the Prime Minister

Foreword from the Secretary of Now is the time the world needs to go further and faster to tackle climate change. The UK is stepping up to that challenge. Here we set out our ambitious strategy – the first of its kind in the world of a major economy - to create new jobs, develop new industries with innovative new technologies and become a more energy secure nation with clean green British energy. At the same time we will reduce greenhouse gas emissions across the economy to reach The UK has already taken bold steps towards net zero, including bringing forward the end of sales of new petrol and diesel cars to 2030. We have committed over £12 billion of domestic green investment since March 2020, and have doubled our International Climate Finance commitment to £11.6 billion This Strategy sets out the next steps we will take to cut our emissions, seize green economic opportunities, and leverage further private investment into net zero. The policies and spending brought forward in the Net Zero we have mobilised over £26 billion of government capital investment for the green industrial revolution. Along with regulations, this will support 190,000 jobs by 2025, and 440,000 jobs by 2030, and leverage up to £90 billion of private investment by 2030. This will put us on an ambitious path to meet our Sixth Carbon Budget and our Nationally Determined Contribution, cutting emissions by at least 68% by 2030 on 1990 levels, and We know economic growth and reducing emissions can go hand-in-hand. As we continue to build back better from the COVID-19 pandemic, we will fuel a Green Industrial Revolution, creating jobs and business growth opportunities, and establishing the UK as a global leader in the technologies to tackle climate change. We will deliver the commitments in the Prime Minister’s Ten Point Plan and Build Back our plan for growth, and go further to build a resilient economy and level up the UK. Net Zero Build Back Greener

The changes will have wider benefits for the public and businesses alike. We will all enjoy cleaner air, increased biodiversity and improved access to green spaces. We will see greater efficiency in the way we travel and heat our buildings, which will be better protected from more extreme weather events. We will also put consumers at the heart of this transition, helping them make their homes warmer, more efficient, and ensure that they pay a fair, affordable prices for their energy.
But we cannot tackle climate change alone. We will take a coordinated approach, working across local and national government, the Devolved Administrations, and with businesses and civil society organisations. And we will make it easier and fairer for individuals, businesses and households to decarbonise, so that our whole society can work together to reduce emissions. This strategy demonstrates how the UK is leading by example, with a clear Secretary of State for Business, Energy & Foreword from the Secretary of State for Business, Energy & Industrial Strategy

Net Zero Build Back Greener

What is net zero and why do we From heating our homes to filling up our cars, burning fossil fuels releases the greenhouses gases that increase global temperatures. We are already seeing the effects here in the UK, with devastating floods in the West Midlands in January and torrential downpours submerging London Underground stations People are rightly concerned, with the latest IPCC report showing that if we fail to limit global warming to 1.5°C above pre-industrial levels, the floods and fires we have seen around the world this year will get more frequent and more fierce, crops will be more likely to fail, and sea levels will rise driving mass migration as millions are forced from their homes. Above 1.5°C we risk reaching climatic tipping points like the melting of arctic permafrost – releasing millennia of stored greenhouse gases – meaning we could lose control of our climate for good. But the good news is that there is, still, a path to avoid catastrophic climate change. The science could not be by the middle of this century the world has to reduce emissions to as close to zero as possible, with the small amount of remaining emissions absorbed through natural carbon sinks like forests, and new technologies like carbon capture. If we can achieve this, global emissions of greenhouse gases will be ‘net zero’. Delivering this requires urgent global action, including ending coal fired power generation, retiring petrol and diesel engines from all cars, and halting deforestation. These are the steps that the UK is calling for at COP26, the global climate change talks in Glasgow next month. Net Zero Build Back Greener

Since 1990 the UK has almost halved our greenhouse gas emissions. Thanks to the efforts of successive governments, we are almost half-way to ending the UK’s domestic contribution to man-made climate change, and in 2019 the UK became the first major economy in the world to legislate to finish the job with a binding target to reach net zero We are proud to lead the world in ending our own contribution to climate change, not just because it is the right thing to do, but because we are determined to seize the unprecedented economic opportunity it brings. We want to build back better from the pandemic by building back greener and levelling up our country with new high skilled, high wage, sustainable jobs in every part of Removing dirty fossil fuels will require the transformation of every sector of the global economy. It means no longer burning fossil fuels for power or heating; it means new ways of making concrete, cement, steel; it means the end of the petrol and diesel engine. These changes are already beginning to happen. Renewable energy is now the cheapest source of power across two-thirds of the globe. Clean, cheap power is already driving the decarbonisation of heavy industry around the world. Almost all major car companies are now developing or producing zero emissions vehicles as battery technology improves The question is whether the new clean machinery of the net zero future will be “made elsewhere” or “made in Britain”. By moving first, the UK can get ahead of the pack and make the birthplace of the industrial revolution the home of the new Green Indeed, as we produce more of our own electricity – from wind farms in the North Sea and state-of-the-art British nuclear reactors – families will be much better protected from energy price spikes caused by volatile international fossil fuel markets. At the same time, by getting ahead of the curve in driving down the costs of the latest clean technology, more consumers will enjoy more efficient cars and heating systems sooner. Furthermore, by accelerating the deployment of cheap renewable power, and rolling out further energy efficiency measures, government decarbonisation policies mean that the average consumer energy bill in 2024 will likely be cheaper than it would otherwise have been. We have shown the world that green and growth go hand in hand, and as a result other countries are already following our lead with their own net zero targets. When the UK was confirmed as host of COP26, less than 30% of global GDP was signed up to net zero or carbon neutrality targets. Today, in part again

The Ten Point Plan for a Green Last year, the government kick-started its mission to get ahead of the pack, by setting out a Ten Point Plan for a Green Industrial Revolution. Our ambition was to create the conditions for the private sector to invest with confidence, unleashing the unique creativity of capitalism to generate and grow new We mobilised £12 billion of government investment, shared some of the risks of pioneering new industries, and began to introduce regulations to assure industry of the future demand for green products – such as through our decision to end the sale of new petrol and diesel cars by 2030. We have also invested in the skills the British workforce will need for these new high wage green jobs, though our Lifetime Skills Guarantee, and we are helping investors to access capital for green projects by making the City of London the global centre of Green Finance. At the Global Investment Summit in October 2021, the Prime Minister announced a package of 18 deals worth £9.7 billion that will support green growth and create an estimated 30,000 UK jobs.
This is on top of the £5.8 billion already committed for sustainable projects since the Prime Minister launched his Ten Point Plan in November 2020. Now we need to build on this progress with a strategy to take us to net zero by 2050. Since 1990 the UK has reduced our greenhouse gas emissions by 44%, while growing our economy by over 75%. This strategy sets out this Government’s long- term plan to finish the job and end the UK’s domestic contribution to man-made climate Although every study shows that the costs of inaction on climate are far greater, there will, of course, be costs to the investments needed to make this transition happen. So we will approach these with four key 1. We will work with the grain of consumer no one will be required to rip out their existing boiler or scrap their current car 2. We will ensure the biggest polluters pay the most for the transition through 3. We will ensure that the most vulnerable are protected through Government support in the form of energy bill discounts, energy 4. We will work with businesses to continue delivering deep cost reductions in low carbon tech through support for the latest state of the art kit to bring down costs for consumers and deliver benefits This strategy is a long-term plan for a transition that will take place over the next three decades. Many of the policies in the strategy will be phased in over the next decade or longer. Given our success in decarbonisation to date we are confident in our approach, but this strategy does not intend to predict the exact shape of the British economy in 2050 and neither should it. Net Zero Build Back Greener

We are making the decisions that are needed now to drive investment into new low carbon technologies and as these develop and we test our approach, we will make informed decisions over how we scale to reach We have consistently underestimated how quickly the costs of clean technology would fall to date. There will be many more decisions to take, and many more steps on the journey to the finish line. But this strategy marks the beginning of the end of the UK’s domestic contribution to climate change. Ending the UK’s contribution to climate change is a long-term shift, and the Climate Change Act breaks up this challenge into bitesize chunks – five-year long We have hit all of our carbon budgets to date. This document sets out clear policies and proposals for keeping us on track for our coming carbon budgets, our ambitious Nationally Determined Contribution (NDC), and then sets out our vision for a Whilst there are a range of ways in which net zero could be achieved in the UK, we set out a delivery pathway showing indicative emissions reductions across sectors to meet our targets up to the sixth carbon budget (2033-2037). This is based on our current understanding of each sector’s potential, and a whole system view of where abatement is most effective. But we must be adaptable over time, as innovation will increase our understanding of the challenges, bring forward new technologies and drive down the costs of existing ones. The policies and spending brought forward in the Net Zero Strategy mean that since the Ten Point Plan, HMG has mobilised £26 billion of government capital investment for the green industrial revolution. Along with regulations, this will support up to 190,000 jobs by 2025, and up to 440,000 jobs by 2030, and leverage up to £90 billion of private

So this strategy sets out our plans for reducing emissions from each sector of our economy, while hoovering up any remaining emissions with greenhouse gas removals – either natural, like trees, or technological, using carbon capture. This is an historic plan. Taken together the transitions set out below for every sector of the UK economy meets Carbon Budgets 4 and 5, and puts us on the path for Carbon Budget 6 – and ultimately on course Net Zero Build Back Greener

Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview The policies and proposals for power in the Net Zero Strategy will … of £150-270 billion, in line with The net zero economy will be underpinned by cheap clean electricity, made in Britain. A clean, reliable power system is the foundation of a productive net zero economy as we electrify other sectors – so we will fully decarbonise our power system by 2035, subject to security of supply. Our power system will consist of abundant, cheap British renewables, cutting edge new nuclear power stations, and be underpinned by flexibility including storage, gas with CCS, hydrogen and ensure reliable power is always there at the flick of a switch. The transformation of the power sector will bring high skill, high wage job opportunities right across the UK. • By 2035 the UK will be powered entirely by clean electricity, subject to • Secure a final investment decision on a large-scale nuclear plant by the end of this Parliament, and launch a new £120 million Future Nuclear Enabling Fund, retaining options for future nuclear technologies, including Small Modular Reactors, with a number of potential sites including Wylfa in North Wales.
• 40GW of offshore wind by 2030, with more onshore, solar, and other renewables – with a new approach to onshore and offshore electricity networks to incorporate new low carbon generation and demand in the most efficient manner that takes account of the needs of local communities like those in East Anglia. • Moving towards 1GW of floating offshore wind by 2030 to put us at the forefront of this new technology that can utilise our North and Celtic Seas – backed by £380 million overall funding for our world-leading offshore wind sector. • Deployment of new flexibility measures including storage to help smooth out

The policies and proposals for fuel supply and hydrogen in the Net Zero Strategy will… of £20-30 billion, in line with While electricity will be the primary source of energy, we cannot rely on it alone. Many sectors require low carbon energy, including those where electrification is not a viable option, making the supply of cleaner fuels essential to achieving net zero. Building on commitments in the North Sea Transition Deal, we will significantly reduce emissions from traditional oil and gas fuel supplies, whilst scaling-up the production of low carbon alternatives such as hydrogen and biofuels. Current gas prices spikes underline the need to get off hydrocarbons as quickly as possible, but we will manage the transition in a way that protects jobs and investment, uses existing infrastructure, maintains security of supply, and minimises environmental impacts. • We have set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new hydrogen and industrial carbon capture business models. We will be providing up to £140 million to establish the scheme, including up to £100 million to award contracts of up to 250MW of electrolytic hydrogen production capacity in 2023 with further allocation in 2024. • Introducing a new climate compatibility checkpoint for future licensing on the UK Continental Shelf and regulating the oil and gas sector in a way that minimises greenhouse gases through the revised Oil and Gas Authority strategy. Net Zero Build Back Greener

Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview The policies and proposals for industry in the Net Zero Strategy will… industry, in line with our 2037 We will decarbonise industry in line with our net zero goals whilst simultaneously transforming our industrial heartlands by attracting inward investment, future-proofing businesses, and securing high wage, high skill jobs. We will do this by supporting industry to switch to cleaner fuels; helping them improve their resource and energy efficiency, and through fair carbon pricing to drive deep decarbonisation of industry. Growing new industries in low carbon hydrogen alongside CCUS and renewable energy will put our industrial ‘SuperPlaces’ at the forefront of technological development – accelerating decarbonisation in ‘clusters’, which account for approximately half of the UK’s industrial emissions. These clusters could have the opportunity to access support under government’s CCUS programme, which includes the £1 billion CCS Infrastructure Fund and revenue support mechanisms. • Following the Phase 1 of the Cluster Sequencing process, the Hynet and East Coast Clusters, will act as economic hubs for green jobs in line with our ambition to capture 20-30 MtCO2 per year by 2030. This puts Teesside and the Humber, Merseyside and North Wales, along with the North East of Scotland as a reserve cluster, among the potential early SuperPlaces which will be transformed over • Future-proofing industrial sectors, and the communities they employ through the £315 million Industrial Energy Transformation Fund (IETF), (£289 million for England, Wales and Northern Ireland, £26 million for Scotland). • Incentivise cost-effective abatement in industry at the pace and scale required to deliver net zero, through the UK ETS by consulting on a net zero consistent UK ETS cap (in partnership with the Devolved Administrations). Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview The policies and proposals for heat and buildings in the Net Zero Strategy will… billion, in line with our 2037 Reaching net zero means tackling all sources of emissions – and heating for homes and workspaces makes up almost a third of all UK carbon emissions. So we will improve the energy efficiency of housing and non- domestic properties across the UK, ensuring they require less energy to heat, making them cheaper to run and more comfortable to live and work in while reducing our dependence on imported energy. We are setting the ambition that, by 2035, once costs have come down, all new heating appliances installed in homes and workplaces will be low-carbon technologies, like electric heat pumps or hydrogen boilers. We will take a decision in 2026 on the role of hydrogen heating. Crucially, this will be a gradual transition that works with the grain of consumer choice.
But the costs of low carbon technology can fall quickly – working with industry, we expect a heat pump to be as cheap to buy and run as a gas boiler this decade. We want to reduce electricity costs so when the current gas spike subsides we will look at options to shift or rebalance energy levies (such as RO and FiTs) and obligations (such ECO) away from electricity to gas over this decade. This will include looking at options to expand carbon pricing and remove costs from electricity bills while ensuring that we continue to limit any impact on bills overall. We know that in the long run, green products are more efficient and cheaper, and we are putting fairness and affordability at the heart of our approach. • An ambition that by 2035, no new gas boilers will be sold. • A new £450 million three-year Boiler Upgrade Scheme will see households offered grants of up to £5,000 for low-carbon heating systems so they cost the same as a • A new £60 million Heat Pump Ready programme that will provide funding for pioneering heat pump technologies and will support the government’s target of 600,000 installations a year by 2028. • Delivering cheaper electricity by rebalancing of policy costs from electricity bills to Net Zero Build Back Greener

• Further funding for the Social Housing Decarbonisation Scheme and Home Upgrade Grants, investing £1.75 billion. Additional funding of £1.425 billion for Public Sector Decarbonisation, with the aim of reducing emissions from public sector buildings • Launching a Hydrogen Village trial to inform a decision on the role of hydrogen in the

Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview The policies and proposals for transport in the Net Zero Strategy will … the tailpipe and kickstart zero emissions international travel We will transform our cities and towns with greener, faster and more efficient transport. Our streets will be cleaner and people healthier from breathing cleaner air, walking and cycling more. Our zero emissions vehicle (ZEV) mandate will guarantee greater number of zero emission vehicles on our roads, unlocking the transformation of our road transport. Additional funding will support our automotive sector to stay at the cutting edge and capture jobs of the future. Significant new investment in vehicle grants and electric vehicle infrastructure will ensure that we see even more green vans delivering our goods and big improvements in local public chargepoint provision. We will increase the share of journeys taken by public transport, cycling and walking, electrifying more railway lines, investing £3 billion to transform bus services and £2 billion for cycling. We will build on our strong maritime heritage and the success of the Clean Maritime Demonstration Competition to deliver a more ambitious multi- year programme for the sector. Setting out an ambitious position on SAF will set us on a path to decarbonise this challenging sector. Accelerating the decarbonisation of transport will save lives and significantly reduce noise, making our urban centres more enjoyable • A zero emission vehicle mandate to improve consumer choice and ensure we maximise the economic benefit from this transition by giving a clear signal to investors. This will deliver on our 2030 commitment to end the sale of new petrol and diesel cars, and 2035 commitment that all cars must be fully zero • Further funding of £620 million for zero emission vehicle grants and EV Infrastructure, including further funding for local EV Infrastructure, with a focus on local on street residential charging. • Allocating a further £350 million of our up to £1 billion Automotive Transformation Fund (ATF) to support the electrification of UK vehicles and their supply chains. • Building on the success of our £20 million zero emission road freight trials, we will expand these to trial three zero emission HGV technologies at scale on UK roads to determine their operational benefits, as well as their infrastructure needs. Net Zero Build Back Greener

• £2 billion investment which will help enable half of journeys in towns and cities to be • £3 billion to create integrated bus networks, more frequent services and bus lanes • Transformation of local transport systems, with 4,000 new zero emission buses and the infrastructure to support them, and a net zero rail network by 2050, with the ambition to remove all diesel-only trains by 2040. • Building on the success of the Clean Maritime Demonstration Competition, we will be extending this to a multi-year programme, delivering real-world demonstrations and technology trials of clean maritime vessels and infrastructure to decarbonise the maritime sector. This is part of our commitment to a UK Shipping Office for • Significant investment in rail electrification and city rapid transit systems. • Aim to become a world-leader in zero emission flight and kick-starting the commercialisation of the UK sustainable aviation fuel so people can fly, and connect without guilt. Our ambition is to enable delivery of 10% SAF by 2030 and will be supporting UK industry with £180 million funding for the development of SAF plants. The policies and proposals for natural resources, waste, and fluorinated gases in the Net Afforestation in England could billion, in line with our 2037 rates in England, contributing Halting climate change and protecting the natural world are two sides of the same coin, so we will restore our countryside to reduce emissions, sequester carbon and build our resilience to climate change at the same time.
We will support farmers to implement a range of low carbon farming practices that can help increase productivity and enable more efficient use of land, such as through agroforestry. We will increase tree planting to sequester carbon, and protect and restore our peatlands. As part of reforms to the resources and waste system, we also will move towards a circular economy, improve resource efficiency, and achieve near elimination of biodegradable waste to landfill. We will continue to phase down the use of F-gases in line with domestic regulations and international commitments. • Supporting low-carbon farming and agricultural innovation through the Farming Investment Fund and the Farming Innovation Programme to invest in equipment, technology, and infrastructure to improve profitability, benefit the environment and • We will boost the existing £640 million Nature for Climate Fund with a further £124 million of new money, ensuring total spend of more than £750 million by 2025 on peat restoration, woodland creation and management – above and beyond what was promised in the manifesto. This will enable more opportunities for farmers and landowners to support Net Zero through land use change. • Restoring approximately 280,000 hectares of peat in England by 2050 and trebling woodland creation rates in England, contributing to the UK’s overall target of increasing planting rates to 30,000 hectares per year by the end of the Parliament. • £75 million on net zero related R&D across Natural Resources, Waste & F-gases, to Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview Net Zero Build Back Greener

• To support our commitment to explore options for the near elimination of biodegradable municipal waste to landfill from 2028, we are bringing forward £295 million of capital funding which will allow local authorities in England to prepare to implement free separate food waste collections for all households from 2025. Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview The policies and proposals for GGRs in the Net Zero Strategy will provide… New, highly skilled, jobs in our billion, in line with our 2037 Our most important step to achieving net zero is to take ambitious decarbonisation measures across society. However, greenhouse gas removals (GGRs) will also play a critical role in balancing residual emissions from the hardest to decarbonise sectors such as aviation, agriculture, and heavy industry. Our innovation-led approach position the UK as a global leader in this rapidly developing sector. Government intervention in the short term will support early commercial deployment of GGRs, with an ambition to move towards a market-based framework for GGRs. This will support our delivery of net zero emissions and position us to export our skills and expertise, capitalising on economic opportunities for the UK and supporting the global shift to net zero. • Delivering £100 million of investment in GGR innovation could enable further deployment of GGRs, which in turn will leverage private investment and demand for transferrable engineering expertise from the UK’s oil and gas sector. • Explore options for regulatory oversight to provide robust monitoring, reporting and verification (MRV) of GGRs, following the recommendations of the BEIS-led MRV Task & Finish Group involving experts from industry and academia. Net Zero Build Back Greener

Supporting the transition with We will maximise the opportunities of this transition, and make sure we are geared up to deliver these changes by also taking cross-cutting action. As the host nation for COP26 in Glasgow this year, we will use our global platform to continue to urge countries to set targets to get to net zero by 2050, and more ambitious 2030 emissions reduction targets to get us there. We will back innovation and our world-leading green finance sector. We will support each stage of the innovation chain to drive down costs and bring through key technologies and ideas to meet net zero. We will work with the private sector to leverage private investment to provide the finance needed, while providing the conditions for green finance to flourish. We will put consumers at the heart of the transition and our goal is to make choosing green options significantly easier, cheaper, and more rewarding. We will back training and skills, supporting workers to retrain and upskill and build low carbon industries with strong UK supply chains that are resilient to changes. We will also take a place-based approach to net zero, working with local government to ensure that all local areas have the capability and capacity for net zero delivery as we level up the country. And Government is leading the way – embedding climate into our policy and spending decisions, increasing the transparency of our progress on climate goals, and providing funding to drive ambitious emissions reductions in schools and hospitals. • Deliver at least £1.5 billion of funding to support net zero innovation projects.
• Use the UK Infrastructure Bank (UKIB) to crowd in private finance, support more than £40 billion of investment, and pull through low carbon technologies and sectors to maturity and scale. • Introduce a new Sustainability Disclosures Regime, including mandatory climate related financial disclosures and a UK green taxonomy. • Reform the skills system so that training providers, employers and learners are incentivised and equipped to play their part in delivering the transition to net zero. • Publish an annual progress update against a set of key indicators for achieving our Going further faster to decarbonise our electricity system Transitioning to a low carbon future Decarbonising how we heat and power our buildings Setting the pace for greener, better transport Natural resources, waste, and fluorinated gases Harnessing nature for net zero Balancing residual emissions to achieve net zero Leading the world in innovation and green finance Green jobs, skills, and industries Creating the skilled workforce to deliver net zero and putting UK supply chains at the forefront of global markets Embedding in government and local action Prioritising decarbonisation at every level of government Moving towards a net zero society together Net Zero An overview

Delivering the Prime Minister’s Ten Point Plan In the past year, we have already taken important action on climate change, delivering on the commitments in the Prime Minister’s Ten Point Plan. 56,000 jobs have been protected and created over the last ten months, since the publication of the Prime Minister’s Ten Point Plan and wider green agenda - with some already on line and others set to come on line over the coming decade We committed to… Since then we have… – Supported manufacturers via government investment schemes. Six manufacturers have already announced major investments in the UK offshore wind sectors and delivering up to 3,600 jobs by 2030. – Built our Offshore Wind capacity to 10.5GW, enough in 2020 to power 4.5 trillion LED light bulbs. This increased our share of electricity generated by Offshore Wind from 1% to 13% over the last decade. – Kicked off the biggest-ever round of our flagship renewable energy scheme for low carbon electricity (Contract for Difference) with £200 million for offshore wind projects and £24m for floating offshore wind. – Launched a £17.5 million competition to support innovative floating wind ideas from industry and joined the ORE Catapult’s FOW Centre of Excellence, contributing £2 million. – Leveraged over £1.5 billion investment into our offshore wind industry, following the £160 million to upgrade ports and infrastructure. – Published the Offshore Transmission Network Review, setting out two initial policy consultations to move to a coordinated approach for both in- flight and future offshore wind projects. – Hydrogen trials to test use of – Published the Hydrogen Strategy, setting out our comprehensive approach to growing the UK hydrogen economy. – Commenced an allocation process for electrolytic hydrogen in 2022 to award up to 100MW of contracts in 2023 and up to 400MW of contracts in 2024 and announcing a funding envelope in 2022 that will enable us to award the first contracts to CCUS-enabled hydrogen from 2023 through the Cluster Sequencing process, to deliver up to 1GW of CCUS- – Following our consultation on a proposed hydrogen business model, design of the £240 million Net Zero Hydrogen Fund and on a UK low – Invested £3 million to kick start the Tees Valley hydrogen transport hub, which is building early collaborations and operational learning. – Announced a £60 million competition to fund projects to develop innovative low carbon hydrogen supply solutions. – Started preparations for a hydrogen heating neighbourhood trial in Levenmouth, Fife led by SGN following funding awards by Ofgem and Net Zero Build Back Greener

We committed to… Since then we have… – Legislating for a new financing – Announced our aim to bring at least one large-scale nuclear project to the point of Final Investment Decision by the end of this Parliament, subject to value for money and all relevant approvals. Entered into negotiations with the developer of Sizewell C power station in December 2020. – Launched a Call for Evidence on Government’s preference to explore the potential of High Temperature Gas Reactors (HTGRs) to enable an AMR demonstration by the early 2030s. Point 4: Accelerating the Shift electrification of UK vehicles – Announced we will introduce a ZEV mandate to deliver our end of sales dates for new petrol and diesel cars and vans. – Announced funding for the UK’s first large-scale gigafactory as part of the Automotive Transformation Fund. The investor has committed to creating 1,000 jobs which will be realised during the period to 2025/26 as the facility is built and becomes operational. – Secured an additional 950 jobs through other automotive projects, for a total of 1,950 jobs to be realised through to 2025/26. – Built on existing successful projects, such as the Advanced Propulsion Centre - according to participating companies, APC projects agreed this year will support up to 5,200 direct jobs. – Seen increased demand for ZEVs – industry figures state that nearly one in ten of all new cars sold so far this year in the UK is fully electric and over 650,000 plug-in cars have been registered in the UK since 2010. – For this financial year, committed £70 million to roll out home, on-street – 70% of motorway service areas now have plans to install at least 6 high- – Announced the winners of the £20 million Zero Emission Road Freight Trials – projects that will help to design and develop cost-effective, zero emission HGVs and refuelling infrastructure. – Consulted on the phase out of non-zero emission HGVs.
We committed to… Since then we have… Point 5: Green Public Transport, Cycling and Walking, – £5 billion to support buses, – Launched the National Bus Strategy and a consultation on phase out of new non-zero emission buses and the £120 million Zero Emission Bus Regional Area (ZEBRA) scheme to support local transport authorities – Supported Coventry to become UK’s first all-electric bus city, with £50 million to fund up to 300 electric buses and charging infrastructure. – Committed £17.5 billion in the November 2020 Spending Review in capital funding for renewals, upgrades, and enhancements of the existing – Delivered more than 300 walking and cycling schemes. – Consulted on our proposals for reaching net zero aviation by 2050 and following a consultation on a UK Sustainable Aviation Fuels (SAF) mandate, confirmed our ambition for it to enable delivery of 10% SAF by 2030 , and we will make £180 million available to support the development of the UK SAF industry. – Announced the shortlist for the £15 million Green Fuels, Green Skies competition, to support UK pioneers in Sustainable Aviation Fuels. – Co-invested £150 million per year through the Aerospace Technology Institute to support greener aircraft technology like Rolls-Royce’s next gen UltraFan jet engine which aims to cut emissions by 25% and ZeroAvia’s – Allocated up to £23 million of match-funding to 55 projects through the Clean Maritime Demonstration Competition to support the development of zero emission technologies and greener ports. – Supported approximately 45,000 jobs in greener buildings in the first year since the Ten Point Plan was launched. – Announced that we will tighten Minimum Energy Efficiency Standards to ensure that landlords can no longer let properties covered by the Domestic Minimum Energy Efficiency Standards Regulations if they have an EPC rating below E, unless they have a valid exemption in place. – Allocated £1 billion funds from the Public Sector Decarbonisation Scheme, supporting up to 30,000 jobs. – Awarded £62 million to 19 projects in the Social Housing Decarbonisation Fund Demonstrator, with over 2,300 homes in the process of Net Zero Build Back Greener

We committed to… Since then we have… – Commitment for two industrial an aim for four sites by 2030, – We have set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme, providing up to up to £140 million to fund our new hydrogen and industrial carbon capture business models. – Announced £19.5 million of grant funding for projects developing novel CCUS technology and processes that reduce the cost of deployment. – Kicked off the process to decide the first carbon capture cluster locations – Published details of the design of funding mechanisms, including the 2 transport and storage, industrial CCUS, power CCUS, as well as the CCS Infrastructure Fund. Point 9: Protecting Our Natural – New National Parks and Areas – Supported an estimated 850 jobs in environmental protection – Launched the floods investment programme that is on track to better protect 336,000 properties from flooding. – Natural England has set out plans to start the process to designate four new areas of outstanding natural beauty - Yorkshire Wolds AONB, Cheshire Sandstone Ridge AONB, an extension to the Surrey Hills AONB, and an extension to the Chilterns AONB. – Announced 90 projects awarded grants under round 2 of the £80 million Green Recovery Challenge Fund (GRCF). Across all 159 projects, the GRCF is set to plant almost 1 million trees and create and retain up – Held three Landscape Recovery market engagement events and, subject to feedback, we aim to open applications for the first wave of pilot – Launched several schemes under the Nature for Climate Fund to expand our pipeline of tree planting and peatland restoration projects in England, including the new England Woodland Creation Offer and Tree Production – £1 billion Net Zero Innovation – Launched the Net Zero Innovation Portfoliow, providing funding for low-carbon technologies and systems across the areas of the 10 Point – Up to £68 million across two competition streams for Longer Duration – Funding for the first phase of GGR studies, which could remove between 100 and 1,000 tonnes of CO – Issued £10 billion Sovereign Green Bond, to raise money for green government projects like zero-emission buses, offshore wind, and – Launched the Green Jobs Taskforce in November 2020, which reported 15 recommendations in July 2021. 1 Estimate based on internal HMG analysis. Net Zero Build Back Greener

Net Zero Build Back Greener

Levelling up the country, ending 1. We are at a crossroads in our history. As we recover from the impact of the pandemic on our lives and livelihoods, we know that it will not be enough to go back to the way things were before. The science is clear, we know that human activity is changing our climate and that this will have a devasting impact on human lives, the economy, and the natural world – ranging from the extinction of some species and the melting of ice caps to extreme weather patterns threatening our homes, businesses, and communities. the latest report by the Intergovernmental Panel on Climate Change (IPCC) shows,2 this is no longer a challenge for we are already seeing the impacts today with increased incidence of events such as extreme heat, floods, and wildfires across the globe. We need to act urgently and reduce emissions globally to limit further global warming. The landmark 2015 Paris Agreement agreed to hold the increase in the global average temperature to well below 2°C above pre-industrial levels, and to pursue efforts to Net Zero Build Back Greener

The UK was the first major economy to create a legally binding target to bring greenhouse gas emissions to net zero by 2050. This target was set considering the latest scientific evidence and was recommended by the Climate Change Committee (CCC), the UK’s independent climate advisory body. The net zero target also responds to the overwhelming public support for acting on climate change.
In recent surveys of the UK public, 80% of participants expressed concern about climate change. Government is committed to ambitious decarbonisation measures across society. However, we know that this does not mean emissions will drop to absolute zero by 2050 – we acknowledge that sectors such as industry, agriculture, and aviation are difficult to decarbonise completely. Greenhouse gas removals (GGR), like trees and carbon capture and storage technology, are therefore essential to compensate for the residual emissions arising from these hard to decarbonise sectors, so we can reach net zero by 2050. 2. The sooner we act on climate change the lower the costs will be. Globally, the costs of failing to get climate change under control would far exceed the costs of bringing greenhouse gas emissions down to net zero. The Office for Budget Responsibility concluded that there could be significant fiscal benefits from early action to transition to net zero, meaning the costs will be lower only serve to put future generations at risk of crossing critical thresholds resulting in severe and irreversible changes to the planet, the environment, and human society. On the other hand, early and ambitious action would help protect lives and livelihoods, while maximising the co-benefits for people, society, the environment, and the economy. of the transition to net zero emissions, we will transform our energy system away from fossil fuels to low carbon sources of energy, such as renewable electricity generated in the UK. This will ensure sustainable and affordable energy supplies and protect consumers by reducing our exposure to volatile international fossil fuel markets which have caused the recent spike 3. The UK has long led the way in tackling climate change, and immediate action to reduce emissions brings enormous economic opportunities to revitalise our economy and deliver on our priority to level up the country. Across the globe, as governments, people and businesses rise to this challenge, a growing global green economy has the potential to create millions of new jobs. We are uniquely placed to seize this once-in-a generation opportunity and deliver a transition to net zero that has the potential to create thousands of 4. We must, therefore, build back better. Our vision, building on the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, is to level up our country with new green jobs, end our contribution to climate change, and reverse the decline of our natural environment, leading the world to a greener, more

This strategy sets out how we will build on the Prime Minister’s Ten Point Plan with our vision to create new jobs and net zero industries as we meet our climate targets. In turn, this will support levelling up the country, and put the UK at the forefront of the We are laying the foundations for businesses to invest in the UK’s green economy, taking action to ensure we have the right skills to deliver a green industrial revolution and committing to work with industry to develop sector and supply chain action plans in areas where the UK has an economic advantage. Build Back Our Plan for Growth sets out the Government’s commitment to supporting future growth sectors based on the UK’s comparative advantage and growth potential, and commits to publishing sector visions across these sectors. This strategy articulates our vision for the green economy. We will build on this with more detail in further Sector and Supply Chain Development Plans – such as the CCUS supply chains roadmap published earlier this year, and the Hydrogen Sector Development Action Plan which we will Net Zero Build Back Greener

Driving a green industrial revolution and levelling up the UK 5. The UK has long proved that tackling climate change and delivering economic growth can go hand in hand. Between 1990 and 2019, we cut emissions faster than any other G7 country, a 44% reduction. achieved this whilst growing our economy 7 Our latest official estimates show that 410,000 people work in the UK’s low carbon economy and its supply chains across the country, with an estimated turnover of even higher once we account for the jobs and economic activity supporting broader environmental policies such as climate The World Bank, UNFCCC National Inventory Submissions, ONS, BEIS Greenhouse Gas 6. As the world moves to tackle climate change, new opportunities will arise for UK companies in domestic and international markets. Updated analysis, based on the BEIS Energy Innovation Needs Assessment (EINA) suggests key net zero aligned sectors in the UK could contribute up to £60 billion of gross value added (GVA) a year by 2050. 7. We have immediate opportunities to capitalise on our core the largest market for offshore wind in the world, a world-class oil and gas sector, and the City of London is long established as a evidence from the Energy Innovation Needs Assessment (2019) and subsequent analysis, point to domestic and export opportunities for the UK in electric vehicle technologies and manufacturing, the next generation of offshore wind (including new approaches such as floating offshore wind), carbon capture, usage and storage (CCUS), low carbon hydrogen, smart energy systems and storage, and direct air carbon capture and storage (DACCS). 8. The opportunities for British innovation, expertise, and products will not just be confined to these shores. The value of goods and services exported by UK low carbon and renewable energy businesses exceeds £7 billion.12 The net zero transition will create new growth opportunities for UK based companies, such as Livingstone based FoundOcean and Trelleborg’s North West England based operation, who won contracts with the support of UK Export Finance (UKEF) to supply Taiwan’s growing offshore wind market. 9. These opportunities show that net zero and levelling up go hand in hand. Delivering net zero allows us to boost living standards by supporting jobs and attracting investment in the green industries of the future, which can be in areas that need this the most.
Crucially, delivering net zero also involves supporting workers employed in high carbon industries that will be affected by the transition, by giving them the skills they need to make the most of new opportunities in the green economy. But the link between net zero and levelling up is wider than just the economy, net zero can deliver wider benefits for people and communities across the UK by helping spread opportunity and restore pride in place. 10. We are already taking action to make the most of these opportunities. We have embedded a net zero principle in our levelling up funding initiatives, such as the Levelling Up Fund and the Towns Fund, so that these schemes can contribute to meeting our net zero targets and help places to reduce their carbon impacts. Later this year, we will publish a Levelling Up White Paper. This will build on the actions the government is already taking to both deliver net zero and level up across the country, including the ones set out in this strategy, and set out new interventions to improve livelihoods and drive economic growth in all parts of the UK. Maximising opportunities after leaving the EU Following the UK’s departure from the European Union in January 2020 the UK now has the flexibility to determine our own decarbonisation pathways to 2050, in a way that fully utilises the unique strengths and opportunities of UK diplomacy, industry and innovation. Since leaving the EU, the UK has built on our climate leadership, demonstrating an independent and ambitious approach to meeting our 2050 • Setting an ambitious Nationally Determined Contribution (NDC) under the Paris Agreement, committing to the fastest rate of reducing emissions on 1990 levels of • Setting out ambitious plans with bold policy action across key sectors of the economy, such as the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, the Energy White Paper, North Sea Transition Deal, Industrial Decarbonisation Strategy, Transport Decarbonisation Plan, Hydrogen Strategy, and the Heat and Buildings Strategy. • Establishing a UK Emissions Trading Scheme (UK ETS), to replace the UK’s participation in the EU ETS, that demonstrates the UK’s commitment to carbon pricing as an effective tool that will help fulfil our climate change objectives. The UK ETS will be aligned to our net zero target, giving industry the certainty they need to invest in low carbon technologies. Net Zero Build Back Greener

Supporting green jobs across the UK 11. Last year, the Prime Minister set out his Ten Point Plan for a Green Industrial Revolution, laying the foundations for a green economic recovery from the impact of COVID-19, outlining how we will level up the country and put the UK at the forefront of the 12. This strategy builds upon that the package of policies will support up to 190,000 jobs by the middle of the 2020s and up to 440,000 jobs in 2030. These jobs will contribute to our wider ambition of 2 million green jobs by 2030, which also factor in employment that contributes to other environmental goals. Updated analysis suggests that around 56,000 green jobs have been secured or created across the UK economy, with some being already online and others in the pipeline over the next decade. 13. There will be opportunities for each region of the UK. For example, we are supporting new investment in hydrogen and CCUS into industrial clusters across the UK. We are also driving the electrification of vehicles impacting manufacturing and supply chains in Wales, the Midlands and North East England, developing Gigafactories in the UK, accelerating the roll out of charging infrastructure across the UK, and supporting roll-out of zero emission buses which would boost manufacturers in Scotland and Northern Ireland. We are also supporting the development of new offshore wind power off the coast of England, Scotland, and Wales; and already investing in nuclear power in the South East and West of England. 14. The impact of the transition to net zero on the UK’s labour market could be with one estimate suggesting up to 20% of the workforce could see demand for their skills affected, either positively or negatively.13 Furthermore, as set out by HM Treasury’s Net Zero Review, although the net macroeconomic impact is likely to be small in 2050 relative to total growth over the period, impacts between and within regions over the next three decades can vary. Our approach will need to reflect that benefits and impacts of the transition will be dependent on individual household characteristics, such as their housing type and current vehicle usage, to support those low- income households most affected by individual 15. Our approach to supporting green jobs, attracting private investment, and tackling climate change will benefit the whole of the UK, including areas where a large proportion of people are currently employed in high- carbon sectors. However, while employment opportunities in green industries will emerge, high-carbon sectors will have to adapt or decline, resulting in a need to transition local labour markets to ensure people have the right skills to make the most of these opportunities. 16. Our sector deals, including on nuclear, offshore wind, automotive and the North Sea Transition Deal considered the skills needs and support for the labour market transition to net zero on a sectoral basis. The North Sea Transition Deal, for example, will support workers, businesses, and the supply chain throughout the transition by harnessing the sector’s existing capabilities, infrastructure, and private investment potential to exploit new and emerging technologies such as hydrogen production, CCUS, offshore wind and decommissioning. Through the Deal, the sector, government, and unions will work together over the next decade and beyond to deliver the skills, innovation, and new infrastructure required to decarbonise North

17. Our Automotive Transformation Fund and industrial clusters framework will help these industries, transition to a sustainable future.
We are also taking action to enable local employers to set out their green skills needs, and support workers to gain the skills they need to access green jobs - such as through 18. Supporting innovation will also help unlock jobs across low carbon sectors. For example, our portfolio of net zero innovation will provide at least £1.5 billion of government funding to help commercialise clean technologies and boost private investment across the UK. Net Zero Build Back Greener

Examples of clean growth investment across the UK for offshore wind, including the first successful floating turbines in Aberdeen. The city is benefiting Energy Transition Zone and the Global Underwater Hub, as well project £1.6 million from the UK £2.3 million project to develop South Wales Industrial Cluster Nearly £20 million to support the infrastructure will go to the South Wales Industrial Cluster which aims to create a net zero industrial zone from Pembrokeshire to the million project (£15.8 million from lightweight electric powertrains extreme levels of electrical power. transforming to build electric Stellantis to build electric vans, to 1,150 homes retrofitted and 3,500 local contractors retrained projects based in Bedford, Bristol and Cranfield to help the industry Net Zero Build Back Greener

£1 billion announced by Nissan and Envision AESC to create an electric vehicle manufacturing network project with mine water 5 buildings and up to 1,250 new homes to the Gateshead District Coventry will be the first zero emission bus town awarded ten of millions to replace the entire local operator bus fleet with heat pumps utilising warm waste Gamesa to expand their offshore creating and safeguarding up to Rase catchment helping climate

Case North East of England This region is leading the way in championing new technologies, whether it is electric vehicles (EVs), carbon capture, hydrogen, or renewables. Research undertaken for government indicates that the North East could gain an extra 27,000 jobs by 2050 arising from UK climate action. indicates that the gains to the region over time come to a large extent from specific investments needed for the UK to meet net zero, rather than baseline economic growth. In depth interviews with regional and industry stakeholders has also revealed a real and justified optimism about the region’s potential to level up due to the Green Industrial Revolution and remain an attractive location The optimism is backed by significant investments in offshore wind and EV manufacturing. Spurred on by our 40 GW offshore wind deployment plans and £160 million investment in ports and manufacturing, we have seen almost £1.5 billion in investment in our offshore wind manufacturing capabilities. Recently announced projects include GE Renewable Energy's plans for a new blade factory in Teesside, South Korea’s SeAH Wind, and GRI Renewable Industries’ construction of factories in the Humber and Smulders (Newcastle), and the expansion projects will support up to 3,600, Nissan and Envision AESC have reaffirmed their belief in the region and in Britain’s plans to shift to EVs, through their £1 billion flagship investment to establish an Electric Vehicle Hub in Sunderland. The hub will bring together electric vehicles, renewable energy, and battery production. Nissan will invest up to £423 million to produce a new-generation all-electric vehicle in the UK. Envision AESC will invest £450 million to build the UK’s first Net Zero Build Back Greener

19. We estimate that additional capital investment must grow from present levels to an average of £50-60 billion per year through the late 2020s and 2030s. Most of this investment will come from the private sector, providing new opportunities for businesses and investors. Over the same period, we could see additional resource savings of around £180 billion as a result of our reduced use of 20. The policies and spending brought forward in the Net Zero Strategy mean that since the Ten Point Plan, HMG has mobilised £26 billion of government capital investment for the green industrial revolution. Along with regulations, this will support up to 190,000 jobs in 2025, and up to 440,000 jobs in 2030, and leverage up to £90 billion of private 21. Development of existing clean energy industries can give a sense of the scale of investment we will likely need to develop and grow new low carbon sectors. According leveraged around £47 billion in our world leading offshore wind industry, almost half of all European investment in the sector. As existing strengths expand and newer strengths emerge, we will work with industry, investors, and innovators to mobilise the private investment required to deliver net zero. 22. Government has an important role to play in ensuring a comprehensive financing offer, long-term investment signalling and fit-for-purpose business models coupled with investment from numerous private sources. We will work to create an attractive environment to secure the right investment in UK projects, with benefits to UK business and communities. By building on our strengths, including potential for rapid scale up across the domestic value chain, and coupling this with a strategic approach from government on policy and investment, we can create the right conditions to unlock the significant scale of private investment that will be needed. 23. Recent steps include establishing a new Office for Investment (OFI), which will support high value investment opportunities into the UK which align with key government priorities. The new UK Infrastructure Bank will provide leadership to the market in the development of new technologies, particularly in the scaling early-stage technologies that have moved through the R&D phase. With an initial £12 billion of investment the Bank will crowd in private investment to accelerate our progress to net zero whilst helping to level up across the UK. (See Green Investment chapter

Creating wider benefits for society, the economy and the environment 24. Acting on climate change also brings the opportunity for wider benefits for our society individual wellbeing,17 economy, and environment from improving public health to protecting biodiversity.
These ü Cleaner air and less noise pollution, by replacing fossil fuels with renewables for generating electricity and moving to ü Better insulated homes will reduce energy consumption and lower bills, alongside ü Opportunities to tackle mitigation and adaptation together, and bring wider benefits. For example, sustainable land management can reduce emissions from land, assist adaptation, improve food security, and protect wildlife. ü Supporting biodiversity by planting woodlands and restoring peatlands. ü Physical and mental health benefits, and better connectivity to jobs, public services, and each other, by promoting more walking and cycling, and improving access 25. We know central government cannot and should not deliver these benefits by acting alone. We want to work in partnership with people and communities across the country. To do so, we will empower local leaders to kickstart their own net zero initiatives, taking responsibility for improving their areas and UK framework for ending our domestic contribution to 26. The UK has long been a global leader in tackling climate change. The 2008 Climate Change Act sets the legal framework for reducing emissions across the UK economy. In 2019, we became the first major economy to legislate to reach net zero by 2050. 27. On our pathway to net zero, the UK has interim targets called carbon budgets and Nationally Determined Contributions (NDCs). Carbon budgets restrict the total amount of greenhouse gases that the UK can emit over five-year periods, ensuring continued progress towards our long-term climate target. NDCs are commitments made by Parties to the Paris Agreement. They show how Parties intend to reduce their greenhouse gas emissions to meet the temperature goal of the 28. In 2020, we communicated to the UN Framework Convention on Climate Change (UNFCCC) our NDC pledge to reduce UK emissions by at least 68% by 2030 on 29. In June 2021, the Government set in law the sixth carbon budget (CB6) limiting the volume of greenhouse gases emitted from 2033 to 2037. CB6 reduces emissions by approximately 78% by 2035 compared to 1990 levels. For the first time, this carbon budget formally incorporates the UK’s share of international aviation and shipping emissions, enabling these emissions to be accounted for consistently with other emissions and demonstrating leadership in how we account Net Zero Build Back Greener

30. This strategy sets out the action we will take to keep us on track for the UK’s carbon budgets and 2030 NDC, and establishes our longer-term pathway towards net zero by 2050. The Net Zero Strategy will be submitted to the UNFCCC as our second Long-Term Low Greenhouse Gas Emission Development Strategy under the Paris Agreement. target covers the whole of the UK. All parts of the UK have an integral role to play in delivering the UK- wide carbon budgets on the path to net zero by 2050. Each nation faces different challenges based on the share of its emissions from hard-to-treat sectors. For example, proportion of its total emissions from agriculture (29%), compared to the The Climate Change (Emissions Reduction Targets) (Scotland) Act 2019, which amends the Climate Change (Scotland) Act 2009, sets targets to reduce Scotland’s emissions of all greenhouse gases to net zero by 2045 at the latest, with interim targets for reductions of 75% by 2030 and 90% by 2040 and annual targets for other years. Scotland's net zero target is in line with the independent, expert advice of the Climate Change Committee. The update to the Scottish Government’s 2018-2032 Climate Change Plan sets out the pathway to its new and ambitious targets set by the Climate Change Act 2019. It is also a key strategic document for its green In March 2021, the Senedd passed a suite of regulations to set a Net Zero Wales 2050 target, increase Wales decadal emissions targets, and set Wales Carbon Budgets 2 and 3 in line with them. Relative to the baseline established in legislation, the targets and • Carbon Budget 2 (2021-25): 37% average reduction with a 0% offset limit • Carbon Budget 3 (2026-30): 58% • 2050: at least 100% reduction (net zero) Welsh legislation requires Welsh Government Ministers to publish a plan for meeting each of its carbon budgets. Net Zero Wales will be published before COP26 and will set out the policies and proposals to meet Wales Carbon Budget 2 (2021-25) and set Wales on a longer-term pathway to net zero. Net Zero Build Back Greener

The current legislative framework for tackling climate change in Northern Ireland is the UK Climate Change Act 2008. Although this extends to Northern Ireland, it does not set a specific greenhouse gas emissions reduction target for Northern Ireland. It is implicit, and based on independent advice of the Climate Change Committee, that Northern Ireland contributes its fair share of required greenhouse gas emission reductions to meet the UK-wide net zero by 2050 target and the UK Government’s 5-yearly carbon budgets set under the UK Climate Change Act. A Climate Change Act for Northern Ireland, whilst not yet introduced, is currently being progressed and remains a priority for delivery during the current Assembly mandate, by March 2022. The Northern Ireland Executive is also currently developing a multi-decade Green Growth Strategy. This longer-term Strategy will be delivered through a series of Climate Action Plans, which will set out the actions to meet sector-specific greenhouse gas

Leading the world to a greener, more sustainable future 31. The UK accounts for less than 1% of global emissions.23 It is essential to enhance international collaboration with other countries and take urgent, concrete action globally to reduce emissions in the near-term. The 2020s is a critical decade in determining whether the Paris temperature goals can be kept within reach. The UK’s role in international climate action is set out in the International Climate Leadership and Collaboration chapter. 32. The UK is leading the way in global climate action.
Countries that are covered by a commitment to net zero or carbon neutrality now account for around 75% of global GHG emissions, and around 80% of global GDP . When the UK took the role of incoming COP Presidency in December 2019, coverage was less than 30% of world GDP . We have a unique opportunity to further this leadership through our G7 Presidency in 2021, and as the host and president of the COP26 summit, in partnership with Italy. The COP26 summit will bring together nearly 200 Parties to accelerate action towards the goals of the Paris Agreement and the UNFCCC, and our drive towards global net zero. 33. COP26 will be the forum to define the decisive decade of climate action and setting the path to global net zero emissions. The UK is urging all parties to demonstrate how they will reach net zero greenhouse gas emissions through near term 2030 NDC targets and Long-Term Strategies to 2050, protect people and nature from climate change impacts, fund climate action, and work together to deliver immediate steps to keep warming within 1.5℃. There will also be a renewed focus on accelerating near-term action in the top priority areas of coal phase out, zero-emission vehicles, climate finance, and 34. The four goals for the UK’s COP26 a. bring parties together to deliver commitments on mitigation. All countries should come forward with ambitious 2030 climate plans (Nationally Determined Contributions, or NDCs) and long-term strategies to reach net zero greenhouse gas emissions, with the aim of keeping the goal of limiting global warming b. establish a new consensus on protecting people and nature from climate change impacts. All countries should come forward with ambitious adaptation plans and communications to help their societies and economies adapt c. To deliver on our first two goals, developed countries must deliver on their promise to mobilise at least $100 billion in climate finance per year by 2020, and through to 2025, to help developing countries tackle and adapt to climate change. International financial institutions must play their part and we need work towards unleashing the trillions in private and public sector finance required to d. bring countries together to reach an outcome accelerating climate action and finalising the Paris Rulebook. Use the power of a fair and inclusive Presidency to enhance international collaboration among policy makers, investors, business, young people, indigenous peoples, and civil society. This can help to solve key challenges and accelerate the delivery of the Paris Agreement goals, adaptation and resilience, nature, clean energy and transport, and finance. Net Zero Build Back Greener

35. In delivering net zero, the UK also has the opportunity to be at the forefront of large, expanding global markets and capitalise on export opportunities in low carbon technologies and services. This includes renewables, CCUS, hydrogen, smart energy systems and storage, Greenhouse Gas Removals (GGRs), Advanced Modular Reactors (AMRs), and transport. By leading the world in the transition to a net zero future, the UK will be well placed to benefit economically by leading in the export of sustainable technologies and solutions. 36. As the world economy moves to meet the Paris commitments, with over 80% of world GDP now committed to net zero, the UK will set a clear direction and give businesses the certainty they need to invest, grow, and develop the technologies of the future. Some commentators estimate global investment in energy supply and infrastructure to reach $92 trillion and $173 trillion over the next thirty years. To achieve this level, the global economy will need to more than double annual investments from around $1.7 trillion per year to between $3.1 and $5.8 trillion per 37. This strategy sets out our approach to reaching net zero emissions and securing the vast wider benefits as we transition to a greener, more sustainable future. We urge other countries to follow this example with ambitious commitments at COP26 and detailed plans to deliver on them. 15 BEIS (2021), ‘Second wind for the Humber, Teesside and UK energy industry’, [Press release], 16 Wind Europe (2021), ‘Offshore Wind in Europe, Key Trends and Statistics 2020’, exchange rate based on monthly average between Jan 2011 and Dec 2020, intelligence-platform/product/offshore-wind-in-europe-key-trends-and-statistics-2020/ 17 HM Treasury (2021), ‘Green Book supplementary wellbeing’, publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1005388/ Wellbeing_guidance_for_appraisal_-_supplementary_Green_Book_guidance.pdf 18 IPCC (2021), ‘Working Group 1 contribution to the Sixth Assessment Report’, ipcc.ch/report/ar6/wg1/#FullReport 19 BEIS (2020), ‘The UK’s Nationally Determined Contribution under the Paris Agreement’, 20 The UK NDC is based on territorial emissions – greenhouse gases emitted from sources within the UK – so does not include emissions from international aviation and shipping. This is in line with international reporting requirements, international expectations, and advice from the 21 CCC (2020), ‘Sixth Carbon Budget’, 22 BEIS analysis (2021), Greenhouse Gas Inventories for England, Scotland, Wales & Northern 1990-2019 using AR5 with climate feedback Global Warming Potentials defra.gov.uk/reports/cat09/2106240841_DA_GHGI_1990-2019_Final_Issue1.2.xlsx 23 PBL (2020), Trends in Global CO2 and Total Greenhouse Gas Emissions; 2020 Report, 24 BloombergNEF (2021), ‘New Energy Outlook 2021’,

Net Zero Build Back Greener

1. Transforming the UK’s economy over the next three decades to reach net zero will be a journey of unprecedented opportunity and change. Our greenhouse gas emissions have fallen by more than two-fifths in the last thirty years, with particular progress in the decarbonisation of our electricity system, but we need to go further and faster in the next thirty years, right across the economy.1 It will mean developing and rolling out new, innovative, and climate resilient technologies; embracing new ways of doing things – from new ways of travelling, heating our homes, and using our land; and creating new industries and jobs through our green 2. The policies to drive these changes, and the opportunities arising for individuals and the UK economy, are set out across the remaining chapters of this Strategy.
This chapter first explores what reaching net zero by 2050 could mean for the UK; potential scenarios of how we will get there; and an indicative pathway to deliver on our ambitious carbon budgets along the way, while navigating the inherent uncertainty. We look at this journey from a whole-economy perspective, considering the key interactions between sectors, technologies and the energy system that need to be planned for as Net Zero Build Back Greener

Chapter 2 – The Journey to Net Zero reinvigorated, with innovation hydrogen in multiple locations North East; or the manufacture of batteries and electric vehicles the UK, including in rural areas. resilient to the global net zero Our goods are designed to last health and protection from risks like flooding and overheating. A systems approach to the net zero journey 3. The characteristics of the net zero challenge – requiring action by multiple parties across the public and private sectors, delivery at pace, and management of large uncertainties – underline the need for strong coordination in policy development and clear signalling to markets. Government taking a systems approach to policy will help to navigate this complexity. We must consider the environment, society, and economy as parts of an interconnected system, where changes to one area can directly or indirectly impact others. This will help to ensure we design policy to maximise benefits, account for dependencies, mitigate conflicting interests and take account of learning as we go. It reduces the risk of unintended consequences, ensuring individual decisions designed to help achieve net zero do not end up hindering it or 4. A systems approach does not attempt to design a ‘perfect’ net zero end-state thirty years into the future. It aims to enable innovative and desirable solutions to be developed, and to ensure that decisions are made when needed, based on the best evidence available at that time and with the fullest possible range of considerations brought to bear. This includes taking a dynamic approach to policymaking and updating our assumptions on an ongoing basis; considering public reactions to a policy; accounting for where a particular investment or technology deployment may affect another sector’s decarbonisation; and considering the net costs and benefits across different parts of 5. We have implemented several key elements of a systems approach, • Establishing forums for delivering shared net zero goals and identifying key issues through cross-system governance structures, including two new Cabinet • Working towards a shared understanding of interdependencies and risks across different parts of the net zero challenge, for example through £2 million funding from the Shared Outcomes Fund to develop • Testing and determining feasible net zero scenarios with our whole energy systems modelling suite, and supporting our work to identify high leverage, systemic actions such as CCUS that will be necessary in a 6. Work will continue to develop this approach further. This Strategy encompasses changes from across the system that will need to be delivered to achieve net zero. sector of the economy will play a vital role in the future net zero system, and these are highly connected – changes in one area can directly or indirectly impact others. 8. Applying a systems approach to policymaking can help to address complex policy challenges, including to identify interdependencies. The case study below for electric vehicles demonstrates the need to understand the complex interactions which drive change. Government will continue to test and update its understanding of systems and how they relate to one another, which forms an important part of how we will monitor delivery, explored further in the Embedding net Net Zero Build Back Greener

Role of develops cleaner ways to produce the wide range of products we all rely on, from food and drink to iron and steel. Relationship with other depends on low carbon energy supply from power and hydrogen, as well as the use of carbon capture technology alongside power, hydrogen and greenhouse gas removals. Role of land provides both energy sources and natural carbon sinks, while polluting areas, including agriculture and the treatment of waste, Relationship with other depends on developing new ways of using land sustainably, while end uses like agricultural machinery will rely on Role of generates electricity to meet low carbon energy demand across all sectors. Relationship with other depends on demand across end use sectors, while specific forms of generation can use carbon capture technology, hydrogen, and waste. Role of alongside natural carbon sinks, engineered removals deliver negative emissions, either directly from the air or as a co- benefit of methods to generate residual emissions to ensure a removals also use electricity. Net Zero Build Back Greener

Chapter 2 – The Journey to Net Zero Role of all forms of travel that keep modern society moving – road, rail, aviation, and shipping – Relationship with other depends on low carbon energy, while different transport options will in turn impact the development of supply sectors. Role of supports energy supply, especially in areas that are harder to electrify such as heavier transport. Oil and gas play a far reduced role where needed and abated by carbon capture technology Relationship with other depends on demand across end use sectors, while different types of hydrogen production use electricity, carbon capture, Role of our public, business, industrial and residential buildings, as well as products we use for cooking and everyday living, move to green forms of Relationship with other depends on low carbon energy, while different heat options will in turn affect the development of supply sectors. The transition to EVs is central to decarbonising road transport. Higher sales of EVs means overall electricity demand will increase, requiring greater electricity generation and grid capacity. Over the lifetime of an EV, overall carbon emissions are already significantly lower than a traditional internal combustion engine car and, as the electricity grid continues to decarbonise, the lifetime of emissions from driving an EV reduce.
The transition to EVs therefore has a potential knock-on impact on the industrial sector and its wider supply chains, particularly in certain regions of the UK, for example creating additional demand for new wind turbine More EVs will affect both the scale and nature of electricity demand, including the timing and scale of peaks, as patterns of charging behaviour develop (e.g. many people choosing to charge at the end of the working day). The changes this could bring need to be carefully thought through, and opportunities seized. For example, innovative technology could support smoothing of electricity demand, by allowing electricity stored in batteries to be fed back into the grid at times of low renewable generation or high demand (vehicle-to-grid technology). Smart charging (enabled by regulations that Government plans to lay later this year) will also help times as well as helping consumers to benefit from lower cost off-peak The roll out of EVs will have an impact on demand for petrol and diesel, with potential to impact through the supply chain, from production to processing, distribution and retail. Uptake will also have an impact on R&D, investment, and manufacturing of both EVs, and the infrastructure required to use them. The effect of investment in these areas would be wider availability of the infrastructure required for charging, reduction in the cost of manufacturing, and further advances in EV Manufacturing costs will likely fall as production increases at scale and investment in R&D will bring down the costs of components. Wider availability of reliable charging infrastructure should remove range anxiety for EV drivers and streamlining payment methods should improve the consumer experience. These two factors will then encourage further take up of EVs with these sets of relationships representing The examples above are a significant simplification of some of the interactions between sectors as EV roll out progresses. The below systems map shows a more granular picture, though this is also a simplification and some variables will have other influences that are not displayed here. Net Zero Build Back Greener

in the roll out of electric vehicles Chapter 2 – The Journey to Net Zero

9. There are a range of ways in which net zero could be achieved in the UK. Our exact route will depend on the availability and deployment of key technologies, supported by long-term market growth, as well as the extent to which individuals and businesses adopt green choices. Our approach must consider physical factors, such as land availability and climate change risks like drought and flooding. As a principle, we will pursue options that leave the environment in a better state for the next generation by improving biodiversity, air quality, water quality, natural capital, and resilience to climate change where appropriate. 10. As we increase our efforts to decarbonise domestically, we must ensure production, and the associated greenhouse gas emissions, does not shift to other countries with lower climate obligations. In the Net Zero Review we consider the carbon leakage risk facing UK businesses on a sectoral basis and discuss the approaches to help address this 2 In addition to encouraging our trading partners to increase their own efforts, we are engaging with industry to better understand the risks and consider the full range of options to address these, including through the UK Emissions Trading Scheme, discussed further 11. While there are significant costs in reaching net zero, the cost of inaction is much higher. The Office for Budget Responsibility’s recent report showed unmitigated climate change resulting in “debt spiralling up to around 290% of GDP thanks to the cost of adapting to an ever hotter climate and of more frequent and more costly economic shocks”.3 In addition to reducing the risks of catastrophic climate change, net zero will also bring significant benefits and opportunities, such as economic growth and jobs in new green sectors, reducing air pollution with benefits for health, and enhancing biodiversity. We also expect costs to continue to fall as green technology advances, industries decarbonise, and private sector investment grows. Recent cost benefit analysis for the significant benefits of net zero more than offset the costs, resulting in a net benefit. 12. Most costs are the additional capital costs (and associated financing) of low carbon technologies, although significant fuel savings help to offset these. We estimate that the net cost, excluding air quality and emissions savings benefits, will be equivalent to 1-2% of GDP in 2050. Our approach will need to reflect that benefits and impacts of the transition will be dependent on individual household characteristics, such as their housing type and current vehicle usage, to support those low- income households most affected by individual technology transitions. The government’s approach will also support the principle that those who produce the pollution should bear the costs of managing it. Further information on the economic impacts is set out in HM Treasury’s Net Zero Review, which informs our approach to achieving a transition that works for households, businesses and public finances, and maximises economic growth. 13. The exact technology and energy mix in 2050 cannot be known now, and our path to net zero will respond to the innovation and adoption of new technologies over time. We expect, however, to rely on the following key green technologies and energy carriers, which interact to meet demand across sectors and • Electricity from low carbon generation and storage technologies meets higher demand for low carbon power in buildings, industry, transport, and agriculture; Net Zero Build Back Greener

• Hydrogen can complement the electricity system, especially in harder to electrify areas like parts of industry and heating, and in heavier transport such as aviation and shipping. A range of low carbon production methods could be used; • Carbon capture usage and storage generation, hydrogen production, and industrial processes – storing it underground or using it.
This technology also supports negative emissions from engineered greenhouse gas removals – bioenergy with carbon capture and storage (BECCS) and Direct Air Carbon Capture • Biomass combined with CCUS can remove carbon from the atmosphere and support low carbon electricity and hydrogen generation. Biomass and other wastes can also support low carbon fuels for industry, buildings, and transport. 14. These new technologies could transform our energy system by 2050. Electricity, low carbon hydrogen, and BECCS could all scale up, while reliance on fossil fuels will drop considerably and can be combined with carbon capture technology to abate emissions, with any residual emissions offset Chapter 2 – The Journey to Net Zero

15. Modelling illustrative net zero scenarios allows us to explore possible energy and technology solutions in 2050, better understand important system-wide interactions, and identify features common to all options. Below we show three modelled scenarios all reaching net zero by 2050 through the same pace of decarbonisation, which demonstrate a range of practical ways in which net zero could feasibly be delivered with technology and resources known today.7 They do not represent ‘most likely’ or ‘preferred’ solutions, and the actual position in 2050 may also vary outside of these scenarios. There is a great deal of uncertainty inherent in any modelling as far into the future as 2050, which is highly sensitive to economic, societal, and technological developments – see the Technical Annex for Net Zero Build Back Greener

2050 Scenario 1: High electrification Explores the impact of widespread electrification to support transport, heating, and industry decarbonisation, relative to other scenarios, with deep decarbonisation of This pathway sees UK electricity generation increasing to around 690 TWh, more than doubling from today,8 and low carbon hydrogen production scaling up to 240 TWh by 2050. Sectors such as road transport and buildings reach near zero emissions, through widespread electrification, with small residual emissions possible in personal and heavy goods transport; while the majority of buildings use electric heating, with the remainder using connected low carbon district heat networks. Industry emissions are near zero, through the full suite of green technologies (electricity, hydrogen, and CCUS), alongside energy efficiency measures. Electricity generation is overwhelmingly decarbonised, through widespread deployment of renewables alongside other low carbon generation including nuclear power and gas with CCUS. Residual emissions remain in aviation, agriculture, and waste, though these reduce from today’s levels through, for example, sustainable aviation fuels, more efficient farm practices, and reduction in landfill waste. These emissions are balanced by significant afforestation, together with engineered removals (primarily International aviation & shipping Chapter 2 – The Journey to Net Zero

2050 Scenario 2: High resource Explores the impact of using low carbon hydrogen more extensively, particularly for decarbonising buildings, power, and heavy vehicles. It also assumes higher levels of tree- planting are achievable, increasing the ‘negative emissions’ available from land-use sinks. This pathway sees low carbon hydrogen generation increasing to around 500 TWh. As hydrogen is the main energy source for heating, electricity demand and therefore generation is lower than in scenario 1 at 610 TWh. Electricity and district heat still play a role in both residential and non- domestic buildings but the majority of building heat demand is assumed to be met by hydrogen. End users of energy (e.g. transport and buildings) reach similar levels of decarbonisation as in scenario 1. In heavy transport, there is a shift to increased use of hydrogen. Compared to scenario 1, greater levels of tree planting allow for slightly higher residual emissions to remain, primarily in hydrogen production. Engineered removals are at a similar scale to scenario 1 to offset remaining residual emissions in the hardest-to-decarbonise sectors of aviation and agriculture. International aviation & shipping Net Zero Build Back Greener

2050 Scenario 3: High innovation Explores a world in which successful innovations enable lower residual emissions to be reached in aviation, while higher capture rates increase the impact of carbon capture technologies, with higher levels of DACCS deployed over the 2040s. In scenarios 1 and 2, end users of energy such as transport, industry, and buildings are decarbonised extensively, while accounting for residual emissions in aviation and baseline assumptions on the technological potential for carbon capture. In this scenario more optimistic assumptions around carbon capture and aviation, such as the availability of sustainable fuels at scale and zero emission aircraft, cause a divergence from scenarios 1 and 2 in the deployment of certain technologies. With lower residual emissions in aviation and improvement in capture or negative emission potential, end use sectors such as transport, buildings, agriculture and industrial dispersed sites can decarbonise to a lesser extent. This pathway sees electricity and low carbon hydrogen generation requirements in between the two scenarios explored previously, at 670 TWh and 330 TWh respectively. International aviation & shipping Chapter 2 – The Journey to Net Zero

Insights from potential 2050 outcomes for net zero journey 16. Despite the uncertainties, we can draw some broad conclusions from the illustrative scenarios above to help shape our approach • Extensive decarbonisation is required across transport, buildings, and industry, given the need to account for possible residual emissions in agriculture, aviation, waste, and heavy industry and possible limitations on deployment of greenhouse • Given this, extensive energy efficiency measures across these sectors are likely to be beneficial to bring down energy demand and cost across the system. Every scenario sees overall energy demand from end use sectors reduce substantially; • Different technologies for these sectors can be accommodated (for example, predominantly electric heat pumps or hydrogen for heating), meaning wide ranges of possible electricity and hydrogen • Both electricity and hydrogen demand grow significantly from today, and need to be produced with very low levels of emissions by 2050. Biomass also becomes a key energy carrier to enable engineered removals and support low • Given the need to plan for some residual emissions, it is appropriate to plan for use of greenhouse gas removals.
The carbon capture processes needed for this are likely to play a significant role in wider decarbonisation, for example in power; • Primary energy sources increase in number and diversify, including a range of renewables, and from biomass and waste. This diversified system for energy generation also becomes Indicative delivery pathway to 2037 An indicative pathway meeting our emissions targets up to Carbon 17. Drawing on the insights from our illustrative 2050 scenarios, we have developed a delivery an indicative trajectory of emissions reductions which meets our targets up to the sixth carbon budget ending in 2037. This is broadly consistent with all three 2050 scenarios and follows decarbonisation that we aim to achieve through this Strategy. The uncertainties inherent in our 2050 scenarios also apply to our 2037 delivery pathway. It is designed only to provide an indicative basis on which to make policy and plan to deliver on our whole-economy emissions targets. The exact path we take is likely to differ and must respond flexibly to changes that 18. The pathway is based on our understanding now of the potential for each sector to reduce emissions up to 2037, considering the balance between sectors that is optimal for the entire economy in terms of delivery and cost. Emission reductions beyond our existing policies combine evidence on theoretical potential for abatement with judgements about barriers to delivery, the rate at which low carbon options could be adopted in practice and timescales for key decisions. We take an economy-wide view, including to balance end use sector demands with supply side considerations, such as infrastructure and the operation of the electricity and other fuel Net Zero Build Back Greener

19. As a general principle, our indicative pathway to 2037 prioritises emissions reductions where known technologies and solutions exist and thereby minimises reliance on the use of greenhouse gas removals to meet our targets. It is designed to drive progress in the short-term, while creating options in a way that seeks to keep the range of options presented in the illustrative 2050 scenarios open. The Embedding Net Zero in Government chapter sets out how Government will monitor progress to ensure we stay on track for our emissions targets and respond to developments affecting our Chapter 2 – The Journey to Net Zero

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2025 – 55% reduction (excluding international aviation and shipping emissions) 2030 – NDC target for at least 68% reduction (excluding international aviation 2035 – 78% reduction (including international To meet whole-economy net zero target Net Zero Build Back Greener

Indicative sectoral decarbonisation 20. Broken down by sector, our indicative delivery pathway implies the reduction in emissions up to 2037. These indicative sector pathways, presented as ranges for residual emissions to reflect the inherent uncertainty, help to drive change and to plan how we can remain on track to meet our targets. Given the interdependencies and interactions within and between sectors, the exact areas for emissions savings may shift, as our understanding increases. These pathways are therefore not predictions or the emissions savings ultimately contributed by each sector are likely to differ as we respond Chapter 2 – The Journey to Net Zero

21. The pathway considers that sectors have the potential to make progress at different rates, for example, depending on the availability and deployment of technological solutions; development of supply chains, financing, and infrastructure; and the need to overcome wider delivery barriers. These constraints and action to overcome them are summarised below and explored in more detail Key features of the delivery pathway 80-85% By 2035, all our electricity will need to come from low carbon sources, subject to security of supply, moving to a fully decarbonised power system whilst meeting a 40-60% increase in demand. Expected residual emissions will be limited to CCUS plants, unabated gas, and energy from waste. This means increased investment in the grid network, electricity storage solutions and flexible grid management, to ensure decarbonisation without risking security of supply. 53-60% Large potential from electrification of oil and gas installations and addressing venting and flaring in the existing fuel supply sectors where demand is expected to fall over time. Emissions savings in the incumbent fuel supply sector will be marginally offset by emissions expected from low carbon hydrogen and fuel production, which will enable significant emissions savings through fuel switching across a range of end use sectors. Hydrogen production is expected to establish in the 2020s before a significant ramp up in the early 2030s, using a range of production methods to 63-76% Deep decarbonisation through resource and energy efficiency, fuel switching, and CCUS deployment are all required, starting with industrial clusters and major emitters, such as the steel sector. Decarbonisation of smaller and more dispersed sites will also be needed, placing demands on associated infrastructure. Net Zero Build Back Greener

47-62% Addressing heat emissions will require a substantial increase in the uptake of low carbon heating up to 2035, when all new installations will be net zero compatible. In any heat pathway, improved energy efficiency – through investment in buildings fabrics and better product standards – will reduce overall energy use and costs. Advanced smart meters will inform consumers and businesses about their energy use, encouraging energy-saving 47-59% Road transport is transformed through increasing use of zero emission vehicles, driven in part by ending the sale of new petrol and diesel cars and vans by 2030 and supported by increasing the share of trips taken by cycling, walking, and public transport. Progress is expected to decarbonise aviation and shipping through efficiency improvements and the uptake of low carbon fuels. These will require international coordination. 39-51% Increased afforestation and peat restoration contribute significantly, though with long lead-in times.
By 2035, perennial energy crop and short rotation forestry can contribute significantly to carbon sequestration, with potential to support power, fuel supply, industry, and transport through BECCS and Waste emissions reduce with increased diversion of municipal biodegradable waste streams away from landfill, and potential savings from other parts of the sector, such as wastewater. Use and therefore emissions of F-gases continues to reduce in response to Agriculture emissions are largely from livestock and nutrient management. The pathway assumes emissions will be reduced through improved and innovative farming practices. Deployment of BECCS and DACCS. Deployment dependent on development of UK CCUS infrastructure and the availability of suitable, sustainable, and low-cost biomass feedstocks. Chapter 2 – The Journey to Net Zero

22. The changes we expect in sectors will evolve over time. In some cases, alternative measures within a sector could achieve broadly the same level of emissions abatement. In other cases, we will need to respond to strategic decisions that government makes in the future. One of the most significant decisions that will affect our pathway will be on the balance of types of low carbon heating solutions, mainly electricity and hydrogen, deployed in buildings. The Heat and Buildings Strategy commits to strategic decisions on the relative roles of hydrogen and electrification for on-grid homes by 2026 and the relevant sector chapter in this strategy explores alternative options that are consistent with the level of ambition implied by our Key energy changes and deployment implied by the delivery pathway 23. Assumed energy demand in our pathway is based on government’s central assumptions about required technology uptake, with a variation to reflect the outstanding strategic decision on the potential role of hydrogen to heat buildings. We expect both natural gas and oil demand to more than halve by 2037 while overall, energy demand reduces significantly through increased efficiency and fossil fuels are replaced by new sources of energy. Electricity generation increases to meet a larger share of energy demand, and low carbon hydrogen grows from a near zero base to play a significant role from the 2030s. 24. Decisions in 2026 around hydrogen’s role in providing heat in buildings will have a substantial impact on relative hydrogen a scenario where hydrogen is not used to heat buildings, which is predominantly decarbonised via electrification through heat pumps. In a scenario where hydrogen has a more significant role in decarbonising heat in buildings, hydrogen demand would increase by 70 TWh by 2035 and electricity demand would decrease by 20 TWh (due to the high efficiency of heat pumps more hydrogen is required to produce the same amount of heat). Beyond heat, the indicative delivery pathway describes just one scenario for potential hydrogen demand in industry, transport, and power – the UK Hydrogen Strategy takes a wider view to consider greater ranges for Net Zero Build Back Greener

Natural gas Oil ElectricityBioenergy Hydrogen 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 for illustrative purposes, this shows energy demands in a scenario in which electricity is predominantly used to heat buildings. See the Technical Annex for hydrogen for heat scenario. Chapter 2 – The Journey to Net Zero

25. Meeting the increasing demand for low carbon energy across the economy relies on scaling up significantly, the new green technologies and energy carriers identified above. While the deployment of these will respond to changes over time, our indicative pathway suggests they are central to decarbonisation over the next 15 • Electricity sees an expected 40-60% increase in demand by 2035, all met from low carbon sources to bring forward the government’s commitment to a fully decarbonised power system by 15 years, subject to security of supply; • Hydrogen production capacity ambition for 5 GW by 2030, which is expected to increase to around 10 or 17 GW by 2035 (depending on the role of • Carbon capture is expected to need to reach capacity for a total of ~20-30 MtCO per year by the early 2030s across the economy – more than double what was set out in the Ten Point Plan – and at least • Biomass is anticipated to need increases in feedstock supply from the 2020s to support BECCS deployment through various routes for use in ‘hard-to-decarbonise’ areas. These resources will be explored in the illustrative deployment of technologies or measures assumed in our pathway to demonstrate a sense of the scale and pace of change required. These are based on modelling assumptions, which are detailed in the Technical Annex, and do not represent targets – the delivery of such measures will depend on, and respond to, real- Net Zero Build Back Greener

Today Mid 2020s Early 2030s Mid 2030s For illustrative purposes, icons represent approximate and rounded figures from our modelling. Where there are ranges, an approximate central point has been shown. * Homes with low carbon heating includes homes heated by heat pumps, hydrogen or connected to heat networks Chapter 2 – The Journey to Net Zero

Essential activity driving the delivery pathway 27. It is, of course, impossible to predict every possible path to net zero that might arise over the next 30 years – we do not seek to do so. New innovations may emerge, enabling the market to move more quickly or at lower cost than expected, while in other areas progress may be hindered by unexpected deployment challenges as technologies are brought to scale. This Strategy does not attempt to ignore these uncertainties, but rather to plot a path which maintains flexibility in the future, while ensuring we do not delay the action we know is needed in the near-term. This aims to provide the certainty to drive forward investment and change, while allowing the market to respond to new opportunities and challenges which arise from the transition. The UK Emissions Trading Scheme is a crucial way in which we ensure that our pathway is rooted in cost-effective, market-led solutions.
Net Zero Build Back Greener

UK Emissions Trading Scheme as a key driver of our path to net zero The UK ETS, a ‘cap and trade’ scheme, is a market-based pricing mechanism to incentivise and control the reduction of emissions in a cost-effective way. A cap is set on the total amount of certain greenhouse gases that can be emitted by the sectors covered by the scheme over a given period. The cap is divided into allowances, and participants receive or purchase allowances which they can sell and buy with one another as needed. This UK ETS cap will reduce over time, providing a long-term market signal so companies can plan and invest in abatement accordingly – offering new trade and export opportunities. The cap is initially set 5% below the UK’s notional share of the EU ETS cap for Phase IV of the EU ETS. We will consult in the coming months on an appropriate cap The UK ETS acts as a cross-cutting policy lever to drive market-based abatement, incentivising industries to find the most cost-effective solutions to decarbonise. This ensures that, as industries develop lower carbon processes, our path to net zero adapts to cost-effective abatement routed in market- based solutions. We have committed to exploring expanding the UK ETS to the two thirds of uncovered emissions and we will provide a further update in due course. It remains important, however, that we develop policies which actively support and encourage sectors to decarbonise, rather than rely on the consequent carbon pricing as our sole mechanism. Our delivery pathway provides a sound basis To mitigate the risk of carbon leakage, in which production and associated greenhouse gas emissions are offshored in ways that would not have happened if the pricing of emissions across jurisdictions was implemented in an equivalent way, we currently give at risk sectors a proportion of their allowances for free to reduce their exposure to the carbon price. We initiated a review of free allocation policy earlier this year with a call for evidence and plan to consult in the coming months, as part of a wider review into the UK ETS. This review will focus on how free allocations can be better targeted in line with a reduction to the overall cap, while still preserving the incentive to decarbonise. Chapter 2 – The Journey to Net Zero

28. Our analysis points to the following essential planks that we can be confident net zero will depend on. These underpin the chapters that follow in this Strategy. • Integration of low carbon energy sources in a smart and flexible way. For example, fully decarbonising our electricity system – in addition to renewables, nuclear, and power CCUS – could also rely on large-scale long duration storage, as well as use of BECCS and hydrogen-fired generation, to manage peaks in demand. Hydrogen could require substantial electricity for production via electrolysis, but in turn could help improve the efficiency of a high-renewables electricity system by using excess supply during periods of high generation and low demand, as well as further energy storage. • Increasing diversity of energy sources for end uses. The removal of unabated fossil fuels from the system which currently supply most of the energy requirements in end use sectors, such as transport and heating, has potential to lead to a greater range of technologies and energy carriers playing a part in future. This could create some resilience, though there may not always be scope for direct substitution. • Increasing energy efficiency. The low carbon energy system depends on overall energy demands reducing significantly. This means all demand sectors becoming far more efficient, through adoption of new technologies, better energy management, and direct investment in energy efficiency measures. Such measures can be considered ‘low regret’ to pursue throughout the transition and will, in turn, affect the level of energy supply and carbon capture required • Innovation for new technologies. Green technology, including research and development into new options, is a cornerstone of the net zero journey. As well as the supply-side technologies discussed above, this also means new technologies in end use sectors – for example, installing zero carbon heating and delivering zero emission surface transport, while transforming the way we use natural resources, farm our land, and manage our waste. Different types of public and private support are required to develop nascent technologies and deploy known ones at scale. Government has a role to play in a financing offer, investment signalling, and • Green investment. Private investment will provide most of the financing needed to commercialise early technologies and scale low carbon sectors. We need additional net zero investment to reach c. £50-60 billion/year in the late-2020s and 2030s. However, public finance and public finance institutions will provide much of the early investment, intervention, and signalling that will create the conditions for an acceleration of net zero investment. This will also generate significant financial savings if achieved and accompanied by effective policy, thereby lowering the cost • Demand-side changes and public engagement. The rollout of low carbon solutions relies on positive public reception and demand to adopt them. Consumers need to have access to the right technologies, understand their benefits, and have confidence that they will be protected if they use them. The deployment of technologies should also respond to their reception by consumers, and go with the grain on consumer behaviour and trends. We also need our workforce to have the skills to meet increasing demand, including in areas such as housing retrofit, heat pump installation, electric vehicle manufacturing, charge Net Zero Build Back Greener

point installation and forestry. More widely, low carbon and environmental practices will require people and businesses to make green choices, and government has a role to play in making these as easy, attractive, and accessible as possible. The net zero journey must be a joint one and will be affected by how engaged and supportive • New standards and regulation.
In certain areas government will need to support and complement market-led decarbonisation with standards and regulation to ensure that, where appropriate, green options are pursued, while high carbon options are phased out. This will help to accelerate low regrets areas like energy efficiency, such as ensuring our homes are built to new standards, and high impact areas like zero emission vehicles. It will also ensure suppliers of higher-carbon technologies and fuels provide low carbon alternatives, • Planning and infrastructure. Low carbon solutions rely on transforming the infrastructure needed to deliver them. Increasing electricity generation needs to be accompanied by building out a flexible grid. Alongside dedicated hydrogen storage infrastructure is needed for the use of CCUS which will require investment of around £15 billion from now to the end of the Carbon Budget 6 period. We need to ensure that low carbon energy generation can be connected to sources of demand geographically, which means improving knowledge of local circumstances and opportunities for generation. We also recognise the importance of the planning system to common challenges like combating climate change and supporting • Sustainable use of resources. Net zero will mean maximising the value of resources within a more efficient circular economy. It will need a significant increase in the use of certain types of resources – critical minerals like lithium, graphite, and cobalt, as well an increased demand on resources like copper and steel – from manufacturing green technologies to building large-scale infrastructure. This will require new robust supply chains and provide economic opportunities, but there will be environmental trade-offs, and potential negative impacts on habitats, biodiversity, and water resources to be managed carefully. For example, ammonia emissions from anaerobic digestion, which can use waste as a feedstock, can also affect biodiversity and health. • Understanding land use trade-offs. Like other resources, our land is finite and competition for it will need to be managed as we rely on natural resources and use land for multiple new purposes, such as perennial energy crops and short rotation forestry for energy generation, while allowing for afforestation and peatland restoration to sequester and avoid emissions. We will also need to ensure net zero is compatible with wider uses of land such as agriculture, housing, infrastructure, and environmental goals. These land use challenges are exacerbated by the impact of climate change on the availability of productive land and water in future. 29. These features underpin the critical activity driving decarbonisation across sectors of the economy. A summary is provided below up to 2035, which is not exhaustive but focuses on the new technologies which need to be developed and deployed over the next decade. Policies and proposals to detail how this activity is achieved are set out in Chapter 2 – The Journey to Net Zero

Markers indicate the year milestones will occur rather than the precise point in a given year, while arrows of activity are inclusive of the years in which they start and finish 20252023 2027 20302022 2026 20292024 2028 2035 Market mechanisms continue to evolve to support electricity system decarbonisation, especially from the 2030s Improvements to energy efficiency of buildings to reduce emissions and make them ready for low-carbon heating technologies Building out electricity infrastructure, especially in the 2020s Accelerate heat pump rollout, reducing costs by growing and expanding UK manufacturing Strategic approach to energy networks, smart technologies, and market reform to incorporate low carbon and flexible technologies efficiently Transformation of heat networks – introducing the market framework and zoning Depending on hydrogen decision, prepare for conversion of gas grid Introduction of demand-side measures (e.g.
product standards, product labelling) Development and implementation of regulatory and market frameworks for hydrogen Increasing resource efficiency, energy efficiency and fuel switching (mainly to electricity and low carbon hydrogen) Small scale electrolytic hydrogen production Review barriers to electrification of oil and Develop business models and negotiate contracts for initial industrial CCUS, 6 longer duration storage demonstrations Build CCUS capacity and infrastructure in clusters, including transport and storage networks Deployment of low carbon heat increases and market continues to transform – technology mix dependent on role of hydrogen Opening of Allocation Round 4 – UK’s largest ever renewables auction (including a minimum budget for floating offshore wind) Hinkley Point C operational (EDF Finalise hydrogen business model Net Zero consistent UK Emissions Trading Scheme cap (by 2024 latest) Decide on role of hydrogen in buildings domestic buildings, subject to consultation 600,000 heat pumps installed per year At least 2 CCUS clusters by mid-2020s Decision on next steps for long duration storage Large scale electrolytic and CCUS-enabled electrolytic hydrogen production At least 1 CCUS plant by mid-2020s SMR designs complete regulatory Net Zero Build Back Greener

Markers indicate the year milestones will rather than the precise point in a given year, while arrows of activity are inclusive of the year they run to start and finish 20252023 2027 20302022 2026 20292024 2028 2035 Explore introduction of proven agricultural innovation measures, potentially including the use of feed additives for livestock Sustainable increase in tree-planting, peatland restoration and perennial energy crops Rollout of environmental land management Sustainable Farming Incentive, Local Nature Recovery scheme, Landscape Recovery scheme Treble tree planting rates by the end of this parliament Continue to develop evidence of land-use synergies and trade- offs to inform policy approach Piloting and early roll out of new environmental land R&D into low carbon aviation & shipping Ramp up supply and production of sustainable aviation fuels, and deployment of new zero emission vessels and fuels Mandate supply of sustainable aviation fuel, subject to consultation per year across the UK from 2025 onwards trees by 2030Launch of Farming for Biomass Strategy to determine amount of sustainable biomass available to UK Launch Farming Innovation Programme Consult on innovative financing scale upBiomass Strategy to inform role that BECCS can play and options Decision on HGVs technology in mid-2020s Explore policies to work towards the near elimnation of biodegradable municipal waste to landfill by 2028 Increasing targets for low carbon fuels and development of key infrastructure, including ongoing rail electrification and EV chargepoints Accelerate modal shift to public and active transport Continue to accelerate the uptake of zero emission vehicles Hydrogen buses, HGVs, rail, shipping ‘First of a kind’ greenhouse gas removals deploy at scale & increasingGreenhouse gas removals business models enable early ‘First of a Kind’ plants Regulatory framework unlocks capital for early projectsand long term market CCUS transport and storage rollout provides capacity for capture CO2 Chapter 2 – The Journey to Net Zero

1 BEIS analysis (2021), ‘Final UK greenhouse gas emission national 1990 to 2019’, 2 HM Treasury (2021), ‘Net Zero Final Report’. 3 OBR (2021), ‘Fiscal Risks Report’, 4 BEIS (2021), ‘Impact Assessment for the sixth carbon budget’, ukdsi/2021/9780348222616/impacts 5 Production methods electrolysis, which splits water into hydrogen and oxygen using electricity; steam methane reformation with CCUS, which uses heat, steam, and catalysts to break methane (from natural gas) into hydrogen and carbon dioxide which is then stored underground; and biomass gasification with CCUS, where heating biomass in special conditions produces a mix of gases including hydrogen and carbon dioxide which is used or 6 BEIS analysis based on 2019 data from the BEIS, Digest of UK Energy Statistics, gov.uk/government/collections/digest-of-uk-energy-statistics-dukes#2021 7 These scenarios have been developed using whole system cost-optimisation modelling (UK TIMES) to produce a feasible range of least-cost solutions and deployment requirements for 8 Terrawatt-hour is a unit of energy equal to one trillion watts for one hour to indicate energy 9 Emissions from Greenhouse Gas Removals only include engineered removals. Nature-based solutions, such as afforestation, are included in the Agriculture and LULUCF subsector. For further detail see the Natural Resources, Waste & F-Gases and Greenhouse Gas Removals 10 Estimates of historical UK GHG emissions are revised annually to incorporate methodological improvements, updated data and changes to international guidelines. The percentage reductions implied by CB levels are therefore subject to change. 11 BEIS analysis (2021), ‘Final UK greenhouse gas emission national 1990 to 2019’, 12 Transport emissions include emissions from domestic transport and international aviation and 13 BEIS (2021), ‘UK Hydrogen Strategy’, Net Zero Build Back Greener

Chapter 2 – The Journey to Net Zero

Net Zero Build Back Greener

Delivering a decarbonised power system by 2035 • Take action so that by 2035, all our electricity will come from low carbon sources, subject to security of supply, bringing forward the government’s commitment to a fully decarbonised power system by 15 years. • Accelerate deployment of low-cost renewable generation, such as wind and solar through the Contracts for Difference scheme by undertaking a review of the frequency of the CfD auctions. • Deliver 40GW of offshore wind, including 1GW of innovative floating offshore • Implement the Dispatchable Power Agreement (DPA) to support the deployment of first of a kind power CCUS plant(s). • Secure a final investment decision on a large-scale nuclear plant by the end of this Parliament whilst taking measures to inform investment decisions during the next Parliament on further nuclear projects as we work towards our net zero target. • Adopt a new approach to onshore and offshore electricity networks to incorporate new low carbon generation and demand in the most efficient manner, taking account of the environment and local communities. • Deliver the actions in our recent Smart Systems and Flexibility Plan and Energy Digitalisation Strategy to maximise system flexibility. • Provide £380m for our world-leading offshore wind sector, investing in supply chains, infrastructure and early-coordination of offshore transmission networks, securing jobs and benefitting communities across the UK.
• Reform system governance so that the whole system can achieve our net zero ambitions and meet consumers’ needs. • Drive market-wide rollout of smart meters with a new four-year policy framework that introduces fixed minimum annual installation targets for energy suppliers from 1 • Consider whether broader reforms to our market frameworks are needed to unlock the full potential of low carbon technologies to take us all the way to net zero. • Ensure that consumers pay a fair, affordable price for their energy, and can engage with a retail energy market that offers the products and services required to make choices that support net zero. Net Zero Build Back Greener

• Ensure the planning system can support the deployment of low carbon energy • Explore the system need and case for further market intervention for long duration storage and hydrogen in power. 1. The transformation of the power sector over the last 30 years provides a strong basis on which to move forward, on our way to reaching net zero emissions by 2050 across the UK economy. Decarbonising the power sector has led the UK’s efforts to reduce GHG 2. In 2019, net UK GHG emissions from the power sector totalled 58 MtCO2e and accounted for 11% of total net UK GHG between 1990 and 2019. In 1990, the power sector accounted for 23% of UK achieved through natural gas generation and renewables displacing coal, and more energy efficient appliances contributing to the reduction of electricity demand. Today, the country gets over half of its power from low 3. In 2020, we published the Ten Point Plan for a Green Industrial Revolution and the Energy White Paper, including commitments to put the power sector on an ambitious decarbonisation pathway over the next decade. Since then we have launched a £17.5 million competition to support innovative floating wind ideas for industry and initiated this year’s Contract for Difference allocation round, with a £200 million budget for offshore wind and £24 million for floating offshore wind. On delivering new and advanced nuclear power, we have committed to reaching a final investment decision on a large-scale nuclear plant this parliament, subject to value for money and approvals. We are in negotiations with the developer on Sizewell C project in Suffolk. We have since taken further in June, we announced that phasing out of unabated coal generation will be brought forward by one year, to October 2024. July, we published the Smart Systems and Flexibility plan 2021 and the UK’s first Energy Digitalisation Strategy, jointly developed with InnovateUK. Our approach includes measures to facilitate flexibility from consumers, removing barriers to flexibility on the grid including long duration storage, reforming markets to reward flexibility, and digitalising Chapter 3 – Reducing Emissions across the Economy

Net zero transition and opportunities for the sector 4. Reliable and affordable power is a foundation of a modern industrial economy. It is also critical in decarbonising the economy and achieving our net zero goal cost effectively. Although ambitious decarbonisation is required in every sector, deep reductions in emissions from power could offset the need for relatively more expensive decarbonisation efforts elsewhere. Our exposure to volatile gas prices shows the importance of our plan for a strong home-grown renewable power sector to strengthen our energy security into 5. The next 30 years will see a decisive and permanent shift away from the use of unabated oil and gas as the engine of our economy. In the Energy White Paper, published in December 2020, we set out what this means for the power sector. carbon power is expected to become the predominant form of energy in 2050. It will account for approximately 50% or higher share of final energy consumption, up from 5 as it displaces petrol in light vehicles and gas for heat in homes. 6. Based on our whole-system modelling, by 2050, emissions associated with power could need to drop by 95-98% compared to meet our NDC and CB6 targets, we expect emissions could fall by 71-76% by 2030 and 80-85% by 2035, compared to 2019 levels. These figures are based on an indicative power sector pathway contributing to the whole-economy net zero and interim targets Net Zero Build Back Greener

2050204520402035203020252020201520102005200019951990 2050204520402035203020252020201520102005200019951990 7. Even with major improvements in overall energy efficiency and increased flexibility in the energy system, this could represent a potential doubling of demand. This would require a four-fold increase in low carbon electricity generation and significant expansion of the networks that transport it to where it 8. We will need to achieve this whilst maintaining a reliable and affordable supply of power. We cannot compromise the essential resilience and reliability of the energy system. It is essential for the critical services we rely on – from hospitals to traffic lights and mobile devices – and its reliability will be fundamental to consumer confidence in adopting new ways of powering their cars or heating their homes. 9. Our understanding of the role of power in 2050, what the system will look like and the level of demand it will need to meet, will evolve over time. This will be informed by the approach to decarbonising other sectors, such as the extent to which hydrogen is used for heat, and what we learn about the cost and achievability of those approaches. It will also be informed by the availability and costs of GHG removal technologies, such as bioenergy with carbon capture and storage (BECCS) and direct air carbon capture and Chapter 3 – Reducing Emissions across the Economy

10. The Energy White Paper set out our goal of a fully decarbonised, reliable, and low-cost power system by 2050. CB6 represents a very significant increase in the pace of power sector decarbonisation, coupled with increased demand due to the accelerated action in other sectors dependent on low carbon electricity. Although the Energy White Paper envisaged achieving an overwhelmingly decarbonised power system during the 2030s, we have since increased our ambition further.
By 2035, all our electricity will need to come from low carbon sources, subject to security of supply, bringing forward the government’s commitment to a fully decarbonised power system by 15 years, whilst meeting a 40-60% 11. However, the Energy White Paper’s fundamental approach remains unchanged. A low-cost, net zero consistent electricity system is most likely to be composed predominantly of wind and solar generation, whether in 2035 or 2050. To ensure the system is reliable, intermittent renewables need to be complemented by known technologies such as nuclear and power CCUS, and flexible technologies such as interconnectors, electricity storage, and demand-side response. These flexible technologies can help to minimise the amount of generation and network capacity needed to meet our demand needs, for example, by matching new sources of demand to renewable generation both nationally and locally. To do this, the new critical supply chains for these technologies also need to be resilient to ensure the UK can build the capacity it needs for a 12. Our Carbon Budget 6 trajectory suggests that we will need to build all of these technologies at, or close to, their maximum technical limit, to meet the twin challenge of accelerating decarbonisation and servicing increased demand. This represents a considerable delivery challenge. While unabated gas generation currently plays a critical role in keeping the UK electricity system secure and stable, it will be used less frequently in the future, running only when the system most needs it for security of supply. 13. The government is actively taking steps to bring forward low carbon technologies capable of replicating the role of unabated gas in the electricity system, including CCUS-enabled generation, hydrogen-fired generation, BECCS, and flexible storage. We are also bringing forward measures to ensure that any new build combustion power stations, including gas, can convert to clean alternatives in the future. We issued a call for evidence on our plans for Decarbonisation Readiness in the summer and subject to feedback on the proposals and parliamentary time, we aim to implement these requirements by 2023. 14. The use of hydrogen to generate electricity can reduce reliance on unabated natural gas. It can also provide additional system flexibility if produced through electrolysis and where there is hydrogen storage. This could contribute to energy security, lowering emissions and system costs. There are trade-offs between the deliverability, optimal fit, and other benefits of emerging technologies versus known technologies. Waiting for emerging technologies before deciding to deploy nuclear and power CCUS at scale could put our CB6 and net zero ambitions at risk. Over the next decade we need to continue to deploy all known low carbon technologies at scale to ensure optionality is maintained, whilst developing new options to mitigate delivery risk and Net Zero Build Back Greener

15. However, a reliable power system is not only about having a balanced mix of generation technologies. We also need to ensure that the networks can transport electricity to where it is required in a cost-effective manner, and to enable crucial system services such as frequency response. Markets should determine the best solution for such a system. We are not targeting a particular solution but will rely on competition to spur investment in technologies which are cheaper and more efficient; and on innovation to reduce the cost of existing options. The government’s role is to ensure a market framework which encourages effective competition and delivers an affordable, secure, and reliable system that is, consistent with net zero emissions. We will intervene to address any potential market failures and continue to invest in innovation which helps commercialise new technologies and increase the options available to meet this challenge. 16. The CCC’s Independent Assessment of UK Climate Risk (June 2021)7 set out that climate change will likely result in more extreme weather that has the potential to negatively impact GB’s power sector. We continue to work closely with industry, regulators, sector bodies, and other stakeholders to ensure that our electricity system is resilient and secure, including to the 17. Transforming the power system offers significant opportunities for UK businesses to exploit technology and know-how in domestic and global markets. Investments in innovation will enable new technologies to deliver benefits to the system and this will be crucial to help us meeting our carbon reduction targets. Innovation will create value by accelerating the commercialisation of low carbon power systems. It can bring costs down, enable us to preserve and develop options and bring forward information to reduce future uncertainty. Renewable energy can also help contribute to our industrial ‘SuperPlaces’, providing plentiful low carbon electricity to enable the low carbon technologies such as hydrogen, which also offers a renewed era for 18. To fully decarbonise the power sector at the pace we have set out whilst meeting increasing demand, total public and private investment of £280-400 billion is needed in generation capacity and flexible assets – around £150-270 billion of this reflects increased ambition from Carbon Budget 6. The electricity transmission and distribution networks will also both require significant expenditures with an additional £20-30 billion required by 2037 to maintain and reinforce Great Britain’s electricity network. 19. The offshore wind sector alone will see over £20 billion in private investment by 2030, and in the last six months around £1.5 billion of investment has already been announced. This includes two purpose-built manufacturing ports and five offshore wind 20. Decarbonising the power sector will regenerate communities and open up new employment opportunities right around the UK. Based on current estimates, policies and proposals to reduce emissions in the sector could support up to 59,000 jobs in 2024 and 21. For example, the offshore wind sector could support up to 60,000 jobs by 2030, including in the supply chain, with further employment opportunities during construction. Increased deployment of storage and demand side flexibility could support up to 7,000 jobs, levelling up the power sector across Chapter 3 – Reducing Emissions across the Economy

Prioritising critical system enablers 22.
Crucially, a whole system approach puts more emphasis on addressing critical system enablers. These measures will integrate different low carbon technologies into a coherent, single entity and optimise the system most efficiently and cost-effectively, in 23. This means adopting a new approach to developing and delivering electricity networks, both onshore and offshore, to ensure that new low carbon generation can be connected to growing sources of demand. The Offshore Transmission Network Review (OTNR) is transforming how the connections for offshore wind and other offshore transmission infrastructure is planned, designed, and delivered with changes being progressed across the near, medium, and long term. Coordination in how we connect offshore wind can potentially save consumers between £3-6 billion by 2050 and reduce the number of assets and onshore landing points by 8 Ofgem has recently consulted upon regulatory changes to enable offshore coordination for in-flight projects, including potentially allowing anticipatory investment. BEIS is currently consulting on a new long-term policy regime for offshore networks. Onshore, we welcome electricity networks’ efforts to invest strategically ahead of need in new capacity, where it is efficient to do so, as well as Ofgem’s work to create a price control framework which allows and encourages this. In recognition of the essential role of electricity networks as an enabler of net zero, we will publish, jointly with Ofgem, an Electricity Network Strategy, which will set out how we will facilitate an agile, flexible onshore network that allows the rapid, transformational change required while responding to consumer and energy system needs. This will include our plans to introduce competition in the building, ownership, and operation of onshore network assets, on which we published a 24. We will look to deliver these changes whilst minimising the impacts on citizens and communities. Network companies work closely with local and transport authorities and are incentivised to deliver network upgrades as efficiently as possible both domestically and through the RIIO price control framework, for example by laying larger cables to avoid reopening roads twice. Connection upgrades are becoming increasingly digitalised for domestic customers looking to install a heat pump or electric vehicle chargepoints. In cases where network upgrades require a temporary power disruption, network companies are required to give notice to customers of planned outages. Advice and ongoing information is also provided including support for vulnerable customers, such as providing generators for customers who are medically dependent on electricity. 25. The deployment of smart technologies and flexibility will underpin our energy security and the transition to net zero. Flexibility from technologies such as energy storage, smart and bidirectional charging of electric vehicles, flexible heating systems, and interconnection could save up to £10 billion per year by 2050 by reducing the amount of generation and network needed to decarbonise. These technologies offset the need for more expensive capital investment in traditional infrastructure, as well as help optimise how efficiently the system operates by better integrating intermittent renewables into the system and reducing peak demand. Net Zero Build Back Greener

26. A key enabler for demand side flexibility will be smart meters, which enable innovative products and services such as smart time-of-use tariffs. These tariffs reward consumers financially for using energy outside peak times, when demand is low or when there is excess generation available. Technologies such as electric vehicles and smart appliances can be automatically programmed to take advantage of cheaper rates, cost-effectively integrating them with renewable energy sources and saving consumers money. At the end of June 2021, there were 25.2 million smart and advanced meters in homes and small businesses across Great Britain, representing 46% 27. The Smart Systems and Flexibility Plan sets out a vision, analysis, and actions for delivering a smart and flexible energy system. We will facilitate flexibility from consumers and remove barriers to flexibility on the grid, both for small-scale and large-scale long-duration electricity storage, as well as driving policy to increase interconnector capacity. The Plan also sets out actions to improve market design and coordination so that flexibility providers can secure revenues across multiple markets. Data and digitalisation are a core aspect of the future system; we have set out a strategic approach to digitalisation and opening data across the energy sector through the Energy 28. This transformation of the energy system means our approach to system governance needs to evolve to help the whole energy system achieve our net zero ambitions and meet consumers’ needs at the least cost. BEIS and Ofgem have jointly consulted on the future of system operation.11 We set out proposals for an expert and impartial Future System Operator (FSO) with responsibilities across both the electricity and gas systems, to drive progress towards net zero while maintaining energy security and minimising costs for consumers. These proposals set out how detailed expertise gained from system operation could be used to provide a whole energy system approach to coordination and planning while ensuring that market participants and government has confidence in the impartiality of the FSO’s advice and facilitation of markets, competition, and system development. We have also, jointly with Ofgem, consulted on the future governance of energy codes, which set out the detailed technical and commercial rules for the system, building on the government and Ofgem’s joint review of code governance and the work of the independent panel on 29. Significant progress towards net zero can happen, and is already happening, within our existing market framework. This combines markets for wholesale power, balancing, and system services with a Contracts for Difference scheme (CfD) for low carbon generation and a capacity market to ensure security of supply. We have recently published a Call for Evidence on actions to better align the capacity market 13 including potential actions to encourage the participation of more low carbon capacity. However, it will be necessary to consider whether broader reforms to our market frameworks are needed to unlock the full potential of low carbon technologies to Chapter 3 – Reducing Emissions across the Economy

30.
Throughout the transition, consumers should pay a fair, affordable price for their electricity, and be able to engage with a retail energy market that offers the products and services that allow them to make choices that support net zero. To support these aims, the government is considering what reforms to the retail energy market are needed to support progress to net zero through the 2020s, including the role of suppliers and how they are regulated.14 In considering these reforms, the government will take account of the lessons of the current market, in which high gas prices have placed financial pressures on suppliers. In the future, the market will need to be resilient and sustainable, and continue to protect consumers as we move to a net zero system. The market will also need to remain competitive, and consumers will need to be engaged with positive choices about their energy supply. To support these choices, consumers should receive accurate information about the carbon content of their energy products, and we will consider the case for reforming the framework which underpins green electricity tariffs and wider environmental carbon accounting schemes. 31. We will also need to address cross-cutting, overarching enablers such as ensuring the planning system has the capacity to support the deployment of low carbon energy infrastructure, while also representing the interests of the environment and of the communities which host this infrastructure. We will do this by updating the energy National Policy Statements to provide greater clarity on the need and urgency for low carbon infrastructure, exploring ways of streamlining processes through the Nationally Significant Infrastructure Projects (NSIP) reform programme and addressing issues at a strategic level, for example through the Offshore Wind Enabling Actions Programme. 32. We will need to consider how low carbon energy infrastructure can be deployed at an unprecedented scale and pace sympathetically alongside the interests of communities and consistent with our obligations to a sustainable environment, both land-based and marine. We will also need to streamline the consenting process to ensure that the deployment needed to stay on track for our 2030 and CB6 targets is delivered. 33. In addition, we will need to grow our supply of skilled workers and further strengthen the UK supply chain to service the demands of energy infrastructure, creating economic opportunity for citizens and communities across the UK. The £160 million announced in the Ten Point Plan, has substantially grown our industrial capabilities in the offshore wind sector. To help keep us on track for our Carbon Budget 6 and net zero targets we will need to deploy substantial volumes of floating offshore wind. Our target of 1 GW floating offshore wind by 2030 is a stepping stone to further growth in the UK, which will also develop jobs and opportunities in the associated industrial supply chain putting us at the forefront of this new technology that can utilise our North and Celtic Seas. We will build on this with £380m for our world-leading offshore wind sector, investing in supply chains, infrastructure and early-coordination of offshore transmission networks, securing jobs and benefitting Net Zero Build Back Greener

Supporting sustained deployment of 34. While our strategic approach to decarbonising power in line with CB6 is predicated on a whole system approach, with a key role for the market in delivering the most efficient solution, part of the CB6 challenge is nonetheless one of deploying low carbon electricity generation infrastructure at an unprecedented scale and pace whilst maintaining optionality for more nascent sources for power generation, such as hydrogen, to help reduce the risk of delivery. In a scenario with higher electricity demand, if there is no hydrogen generation in the power sector, we are likely to need to build all known technologies at or close to their maximum deployment potential by the mid-2030s. 35. In the Energy White Paper, we committed to a target of 40 GW of offshore wind by 2030, including 1 GW floating wind, alongside the expansion of other low-cost renewable technologies. We need to continue to drive rapid deployment of renewables, for example offshore wind, so we can reach substantially greater capacity beyond 2030, and accelerate the cost reduction and commercialisation of floating offshore wind. As we decarbonise our electricity system our wholesale prices will become less exposed to fluctuations in global fossil fuel prices, and we would expect 36. CB6 also requires a sustained increase to the deployment of land-based renewables such as locally supported onshore wind and solar in the 2020s and beyond. We will seek to ensure a facilitative environment for the deployment of unsubsidised rooftop solar to complement our market-based approach of ensuring exporters receive a fair price through the Smart Export Guarantee. We also have one of the best ocean energy resources in the world and we continue to explore the role of marine technologies in net zero. 37. This step change in renewable deployment will be achieved primarily by providing ongoing support through the CfD scheme, starting with allocation round 4 this December – which will be the biggest-ever round of our flagship renewable energy scheme. The CfD will be key to delivering the levels of generation required by 2030. To support this step change we will undertake a review of the frequency of the CfD auctions. Looking beyond this, ensuring we retain effective means to provide long-term stability will be crucial throughout the 2030s to achieve affordable, scalable deployment. 38. We also need to increase our nuclear capacity, which is why we said in the Energy White Paper that we will aim to bring at least one large-scale nuclear project to the point of final investment decision by the end of this Parliament, subject to clear value for money and all relevant approvals. In December 2020 we announced the start of formal negotiations on Sizewell C and those negotiations are ongoing. To facilitate a decision this Parliament, we plan to establish the Regulated Asset Base model to fund new nuclear projects at a low cost of capital, saving 39.
The government will also take measures to inform investment decisions during the next Parliament on further nuclear projects as we work towards our net zero target. This will include consideration of large- scale and advanced nuclear technologies, including Small Modular Reactors (SMRs) and potentially Advanced Modular Reactors (AMRs). As part of this, we are announcing a new £120 million Future Nuclear Enabling Fund to provide targeted support in relation to barriers to entry. Further details of how this fund will operate will be published in 2022 alongside details of a roadmap for deployment that takes into account value for money. Chapter 3 – Reducing Emissions across the Economy

40. We are also providing funding for a SMR design through our £385m Advanced Nuclear Fund and are progressing plans for an Advanced Modular Reactor demonstrator in the early 2030s. Whether large- or small-scale projects, there remain a number of possible sites available for these options, including 41. To help deliver emissions reductions to keep us on track for Carbon Budget 6, we will need significant expansion of power CCUS beyond the Energy White Paper commitment of one power plant by 2030. To do this we will implement the Dispatchable Power Agreement (DPA), and seek to bring forward at least one power CCUS plant in the mid 2020’s through the CCUS Cluster Sequencing Process, subject to the outcome of that process including value for money and affordability considerations. We will also aim to begin competitive allocation in the 2020’s to support a future pipeline of projects and cost reduction via increased deployment and competitive tension. Finally, we will continue to review and evolve the policy framework to stimulate the delivery of future power CCUS projects. 42. Bioenergy has already played a significant role in decarbonising the electricity system, accounting for 12.6% of total renewables generation in 2019.15 Technological changes mean that biomass usage can now go beyond carbon-neutral and deliver negative emissions by combining it with carbon capture and storage (BECCS). As committed to in the Energy White Paper, we will publish a Biomass Strategy in 2022 that will set out how BECCS could be deployed. As is the case with all UK biomass use, any future BECCS projects will need to meet stringent sustainability and air quality requirements for the production and use of biomass, as will be set out in the Net Zero Build Back Greener

43. Although we need to ensure we can deploy existing low carbon generation technologies at close to their maximum to reach Carbon Budget 6, we also need to de-risk the delivery challenge. We will pursue innovative technology solutions which ease • Exploring the system need and case for market intervention for long duration storage and hydrogen in power – both technologies have the potential to provide important low carbon peaking capacity during periods of high demand and over extreme events such as long periods of low wind. Long duration storage technologies could provide a range of system stability services such as the provision of inertia. An expansion of hydrogen in power could also reduce the need to build other technologies at the limit of what is technically feasible and could be a form of storage for excess power generated by renewables. We are supporting innovation in longer duration energy storage projects through a £68 million competition for prototypes and • Reducing emissions from the energy from waste sector – emissions from energy from waste plants represent a significant part of the residual emissions in the power sector. We are exploring options to reduce emissions from these plants within the power sector, including whether support for CCUS at Energy from Waste plants could be provided by the Industrial Carbon Capture Business Model. The Government’s approach in respect of this is still under consideration and we intend to provide further details later this year; • Maximising system flexibility, including through storage technologies, demand side response, and interconnectors – to integrate renewables, balancing the intermittency of renewables and helping to • Promoting more ambitious and sustained demand reduction and energy efficiency measures to reduce overall power demand – allowing demand to increase unconstrained as we electrify other parts of the economy could prevent us hitting very low levels of Chapter 3 – Reducing Emissions across the Economy

Working together across the UK Examples of policy action by the Scottish Government, Welsh Government, and Northern Ireland Executive UK Government is working across all levels of government and with Devolved Administrations to ensure consistent action to reduce emissions across the power sector, The Welsh Government has supported the development of four regional energy strategies that identify the scale of change needed to reach a low carbon energy system and establish regional priorities for energy. This work models future demand for power, heat and transport, and assesses the economic impact of delivering the proposed ambitions. In addition, Conwy and Newport local authority areas are piloting local area energy planning. This work will identify the low-regret actions to decarbonise a local energy system and can be used by grid network operators to inform their infrastructure investment. The Scottish Government’s £62 million Energy Transition Fund will support Scotland’s energy sector and the North East, over the next five years, to make progress on energy transition as Scotland moves toward a net zero The Emerging Energy Technologies Fund is a £180 million package of funding over five years that will provide capital support to accelerate low carbon infrastructure projects that will be essential to deliver net zero. The Fund will make £100 million available to support hydrogen projects in line with the Scottish Government’s Hydrogen Policy Statement.
A further £80 million of this funding will be directed to projects supporting the development of carbon capture, utilisation and storage and negative emission technology The purpose of the hydrogen funding programme is to support the delivery of the Scottish Government’s upcoming Hydrogen Action Plan, the development of a hydrogen economy in Scotland, to help overcome challenges to scaling up hydrogen production and to deliver lasting benefits for business and Northern Ireland has already demonstrated its commitment to decarbonisation of the power sector through rolling out renewable electricity generation under the Northern Ireland Renewables Obligation (NIRO) - 45.4% of the electricity consumed in Northern Ireland between 1 July 2020 and 30 June 2021 was generated from renewable sources. Building on this achievement and with a view to meeting the ambition of net zero by 2050, the Minister for the Economy, in considering requirements for the NI Energy Strategy (to be published by end of 2021), has set a renewable electricity target of at least Net Zero Build Back Greener

Transitioning to a low carbon future • An ambition for 5 GW UK low carbon hydrogen production capacity by 2030. • We have set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new hydrogen and industrial carbon capture business models. We will be providing up to £140m to establish the scheme, including up to £100m to award contracts of up to 250MW of electrolytic hydrogen production capacity in 2023 with further allocation in 2024. • Implement the £240 million Net Zero Hydrogen Fund and finalise the Hydrogen Business Model and the Low Carbon Hydrogen Standard in 2022. • Work with the sector to help develop a low carbon fuel strategy for transport for publication in 2022, as announced in the recent Transport Decarbonisation Plan, and deliver commitments on sustainable aviation fuels. • Work with stakeholders to address barriers to electrification of oil and gas production by Q4 2022 and continue to drive down routine flaring and venting. • Regulate the oil and gas sector in a way that minimises GHG emissions, notably through the revised Oil and Gas Authority strategy, which empowers the OGA to assess operators’ plans to reduce their emissions levels against effectively a net zero test, and establish a climate compatibility checkpoint for future licensing on the 1. In 2019 net UK GHG emissions from fuel supply totalled 26 MtCO2e and accounted for 5% of total net UK GHG emissions. Emissions today mainly derive from fossil fuels and can be attributed to stages of the supply journey. This chapter covers all aspects of fuel • Extraction (‘upstream’) – exploration and production of oil and gas including drilling, surfacing resources and onshore • Transportation (‘midstream’) – transportation and storage of oil and gas including pipelines, pumping stations, trucks, and transcontinental tankers; Chapter 3 – Reducing Emissions across the Economy

• Refinement (‘downstream’) – refining oil into products including transport fuels, bitumen, lubricating oils, liquid petroleum gasses, heating oils, marine fuels, polymers, solvents, and alcohols. Refining emissions are counted as part of the industry sector but are discussed in this chapter to take a holistic view of supply. 2. Overall, between 1990 and 2019, net UK GHG emissions from fuel supply have decreased by 61%. North Sea production has fallen; older, more polluting installations have been decommissioned whilst cleaner ones have been brought online; regulatory frameworks have supported efficiency gains; coal mines have closed; and iron pipes have been replaced with plastic to reduce methane leakage across the gas network. 3. We have also made progress in low carbon fuel production. An estimated 10-27 TWh of hydrogen production now exists today but is almost all derived from fossil fuels without carbon capture and for use outside of the energy system.18 In 2019, renewable fuels supplied under the Renewable Transport Fuel Obligation (RFTO) accounted for 5% of total road and non-road mobile machinery fuel. This mainly consisted of biodiesel and bioethanol but also included biomethane and 4. Building on the Ten Point Plan, we recently published the UK Hydrogen Strategy and associated consultations on a hydrogen business model, the Net Zero Hydrogen Fund (NZHF) and a low carbon hydrogen standard, outlining our approach to kickstarting the production of low carbon hydrogen and developing a robust UK hydrogen economy. Net zero transition and economic opportunities 5. There is a need for widespread electrification across the economy, but we cannot rely on electricity alone. Many end use sectors require low carbon energy including those where electrification is not viable or cost-effective, making the supply of cleaner fuels essential to achieving net zero. 6. Our fuel supply will look very different by 2050. Oil and gas production will contract significantly as the UK Continental Shelf matures and investment in the North Sea pivots to new opportunities from CCUS and hydrogen, accelerated by widespread electrification and low carbon fuel switching. This shift away from fossil fuels will protect consumers from volatile gas prices. Remaining oil and gas installations will use low carbon power, with residual emissions minimised. In the Energy White Paper, we committed to this, by stating that we will work with the oil and gas sector to transform the UK Continental Shelf into a net zero basin by 2050. 7. Refineries can play an important role in low carbon clusters utilising CCUS and low carbon fuels, and the production of low carbon fuels will increase significantly to meet demand where electrification is not viable. In these areas there will be significant scale up of hydrogen networks and storage, from new and repurposed existing infrastructure. Net Zero Build Back Greener

8. Based on our whole-system modelling, by 2050, emissions associated with fuel supply could need to drop by 71-99% compared to 2019, down to 0-8 MtCO2e. In the interim, to meet our NDC and CB6 targets, we expect emissions could fall by 37-45% by 2030 and 53-60% by 2035, compared to 2019 levels.
These figures are based on an indicative fuel supply sector pathway contributing to the whole-economy net zero and interim targets 2050204520402035203020252020201520102005200019951990 2050204520402035203020252020201520102005200019951990 Pre-Hydrogen Strategy & NSTD & 2050204520402035203020252020201520102005200019951990 9. We have agreed ambitious interim targets for emissions reductions with industry through the North Sea Transition Deal (NSTD) including 10% by 2025, 25% by 2027, and 50% by 2030 compared to a 2018 baseline. 10. The Ten Point Plan announced our ambition for 5 GW of low carbon hydrogen production capacity by 2030, alongside steps to drive the uptake of sustainable aviation fuels (SAF). Since then we have invested £3 million in kick starting the Tees Valley Hydrogen Transport Hub and announced a £60 million Low Carbon Hydrogen Supply 2 Competition to fund projects to develop innovative low carbon hydrogen solutions. The UK Hydrogen Strategy further sets out our comprehensive approach to growing a UK hydrogen economy, indicating that use of low carbon hydrogen enabled by 5 GW of production capacity could deliver total emissions savings of 41 MtCO2e between 2023 and 2032, the equivalent of the carbon captured by 700 million trees over the 11. Looking across a range of end use scenarios, the UK Hydrogen Strategy suggests that we could need 7-20 GW of Chapter 3 – Reducing Emissions across the Economy

production capacity in 2035 and 15-60 GW in 2050, depending on developments across heat, industry, transport, and power.20 Using more specific end use assumptions, the illustrative pathway in this Strategy suggests production capacity in 2035 would need to be 10 GW if heat is electrified, or 17 GW if hydrogen is used widely for heat.21 12. As the production of low carbon fuels replaces fossil fuels, we intend to follow the • Integrating a whole system view. We will take an economy-wide view, including to balance end-use sector demands with supply side considerations, such as infrastructure and the operation of the electricity and other fuel • Taking a portfolio approach. We will remain flexible to a supply mix of low carbon fuels that could be affected by technologies in early development. As demand grows, we expect innovators, investors and producers will respond with advances delivering further cost or emissions savings. Our hydrogen modelling assumes a combination of electrolysis from renewable electricity, methane reformation with CCUS, and BECCS but we are aware of industry plans involving other production methods and will update our modelling with new technologies as evidence develops. • Minimising environmental impacts. Any impacts from low carbon fuel production on air quality or the environment must be kept under consideration and comply with evolving regulatory standards. We must maintain strict sustainability requirements for fuels to be eligible for government support schemes to achieve genuine emissions savings compared to fossil fuels and minimise environmental impacts. 13. Drawing on the OECD’s ‘Trade in Embodied CO2’ database, as well as the relative levels of trade openness of UK sectors, our analysis suggests that refineries are currently amongst the areas most at risk of carbon leakage. We are committed to mitigating this risk by engaging with industry to better understand their concerns around carbon leakage. Further analysis and information on the potential mitigations for consideration are set out in HM Treasury’s Net 14. To achieve the level of emissions reductions in the fuel supply sector indicated by our delivery pathway to 2037, we will need additional public and private investment of 15. Government investment in domestic hydrogen production, to de-risk early projects, could also unlock private sector capital co- investment of over £4 billion by 2030. This could increase to £10-22 billion to meet the 2037 delivery pathway in electrification and hydrogen scenarios for heat respectively. Net Zero Build Back Greener

16. Decarbonising fuel supply and growth of the hydrogen sector will regenerate communities and open up new employment opportunities right around the UK. Based on current estimates, policies and proposals to reduce emissions in fuel supply and growing the hydrogen sector could support up to 10,000 jobs in 2030. We will build on existing commitments in the NSTD to facilitate reskilling and support 40,000 jobs across the supply chain, ensuring everyone employed in the sector can fulfil their potential. Many skills will also be transferable to clean growth industries like offshore wind, CCUS and hydrogen production. Producing low carbon hydrogen at scale will be made possible by carbon capture and storage infrastructure, and we plan to grow both of these new British industries side by side in industrail 17. The development of a domestic SAF industry alone could generate support up to 1,000 jobs in 2030, with new jobs as plants are developed as well as opportunities to retain existing fuel expertise across the country. Industry has committed to creating an integrated skills plan to help its transition and diversification with strong support from government, academia, and trade unions. 18. Achieving our 5 GW ambition for hydrogen production capacity could support over 9,000 jobs in 2030, across the full hydrogen value chain. Meeting the delivery pathways set out in the Journey to Net Zero chapter could support 13,000-19,000 jobs across the hydrogen economy by 2035.23 19. Oil and gas will continue to play an important role as we transform from an economy based on fossil fuels to one based on clean energy. We will manage the transition in a way that protects jobs and investment, uses existing infrastructure, maintains security of supply, and accounts for climate risk. Case The Phillips 66 Humber refinery The sector can already compete on the world stage and provide domestic resilience by producing products essential for decarbonisation. UK refining includes a global leader and the only European producer of high-grade speciality coke for batteries used in electric vehicles and consumer electronic goods. The Phillips 66 Humber refinery’s world scale production capability is equivalent to 1.3 million electric vehicles (EV) per year. . Whilst the majority is currently exported, it has the potential to underpin a domestic UK battery industry and development of a broader EV battery manufacturing base in the UK.
Chapter 3 – Reducing Emissions across the Economy

20. We have always been clear that as we reduce our dependence on fossil fuels, the North Sea basin has a key role to play. Our approach will ensure that it does contribute to the transition, driving investment in transition technologies and providing the skills needed for net zero. However, we are clear that we do need to reduce our reliance on hydrocarbons as swiftly as possible. The best way to protect British businesses and consumers from volatile international fossil fuel markets is to get 21. Upstream, the North Sea Transition Deal (NSTD) has set us on a transformational path to deliver the long-term skills, innovation, infrastructure, and investment required to decarbonise oil and gas production and industry more widely. The deal will hold the industry to account on commitments it has made to halve its operational emissions by 2030, while supporting up to 40,000 high-quality direct and indirect supply chain jobs in Scotland and our industrial heartlands in the North East, North West and East of England. It also emphasises our shared commitment to achieving 10 2/year of CCUS capacity, with industry leveraging existing infrastructure to provide key transport and storage capability; and positions the sector to help deliver our 5 GW 22. The Oil and Gas Authority (OGA) published its revised strategy in February, enshrining a range of new net zero obligations for the UK oil and gas industry. This is reflected through the suite of levers available to the OGA, making net zero a key factor in its decisions, including to grant consent for projects. It empowers the OGA to assess operators’ plans to reduce their emissions levels against effectively a net zero test, in accordance with its revised strategy, the OFS can now encourage operators to invest in transition technologies such as CCUS and hydrogen – seizing the economic opportunities available to the sector in a net zero future and living up to the commitments of the Transition Deal. The Strategy also introduces full societal carbon cost assessments into the 23. Step-change abatement will be delivered by the electrification of existing and new offshore assets, through connections to onshore networks or offshore renewables. We will work with regulators to review supporting infrastructure in the Offshore Transmission Network Review and to address regulatory barriers. We will support removing further barriers through £1 million of additional Net Zero Build Back Greener

24. Beyond power generation, flaring and venting account for most remaining upstream emissions and we will need to be ambitious to allow us to stay on track for our CB6 target. We have endorsed industry’s commitment in the NSTD to accelerate reductions beyond the World Bank’s ‘Zero Routine Flaring by 2030’ initiative and new OGA guidance sets out the expectation that all facilities should have zero routine flaring and venting by 2030 or sooner. Industry is taking steps through its Methane Action Plan for continuous emissions reductions with specific methane emissions reduction targets, whilst setting the expectation that assets will have individual 25. Further, following the conclusion of our review into the future of offshore oil and gas licensing earlier this year, we will also introduce a formal climate compatibility checkpoint on future licensing rounds for oil and gas exploration. This will ensure future licences are only awarded following a compatibility assessment against the government’s broad climate change ambitions, including reaching net zero by 2050. This checkpoint will be designed by the end of 2021. We will be seeking input on the design through a consultation to be published before COP26. 26. This checkpoint builds on the existing checks within our regulatory system, including the OGA Strategy, and the role of the Offshore Petroleum Regulator for Environment and Decommissioning (OPRED). These checks include a full environmental impact assessment and a public consultation. 27. Additional work is being carried out by the government and regulators to review what action can be taken to further reduce emissions. Improved measurement, reporting and verification will play a critical role in this. The government, including the Offshore Petroleum Regulator for Environment and Decommissioning, is working closely with the OGA to collect robust industry data which will enable effective implementation of their strategy. The OGA’s tracking of overall emissions reductions and benchmarking of flaring and venting data will also improve performance across industry. Government and regulators will continue to work with industry to drive emissions reductions, including through improved process efficiency, to stay 28. Midstream, the gas network must be effective at minimising gas leakage and associated emissions by replacing iron pipes with plastic, even with gas demand decreasing leading to 2050. Through network price controls, Ofgem has set gas distribution companies a target to replace 15,500km of iron mains and associated services in 5 years, from April 2021. This will reduce leakage by financial incentives will encourage further action through pressure management and gas conditioning. We continue to work with Ofgem and HSE to review how best to continue to reduce methane leakage to 0% in all future 29. Blending hydrogen into the gas grid could also support initial steps to decarbonise heating. This will consider the air quality impacts of hydrogen combustion in domestic settings. Government is working closely with key delivery partners to explore options to blend hydrogen up to 20% by volume into the gas distribution network, and up to 2% into the gas transmission network, along with biomethane and natural gas. Subject to both the economic and safety case for blending being demonstrated, we are aiming to make a final decision on blending by the end of 2023. Chapter 3 – Reducing Emissions across the Economy

30. We recognise that industry will need early sight of decisions should blending proceed and propose five principles for • Safety. Blending must remain within safe limits set by the Health and Safety Executive and changes to gas quality and infrastructure must meet all safety • Operability.
Changes to gas quality and infrastructure must maintain existing system, pipeline, and consumer appliance • Security of Supply. Blending must not prevent consumers’ secure gas supply; • Affordability. Costs to consumers should be affordable and value for money; and • Temporary. Blending could support initial development of the hydrogen economy but is not a preferred long-term solution. 31. Acknowledging that the future demand for gas will decline as we decarbonise, means that the gas system will need to change to meet the net zero targets. We will publish a call for evidence this autumn, seeking views from stakeholders on the future of the gas system, with a focus on infrastructure and markets. This will enable us to determine how the gas market will need to evolve to ensure the right market and regulatory signals are in place to offer the necessary level of investment and maintenance throughout the transition. Gathering evidence on the amount of natural gas, biomethane, and hydrogen available and the ongoing role for gas will inform what action 32. Downstream, UK refineries already underpin major CCUS and hydrogen projects in key industrial clusters. These include Gigastack (Phillips 66), Humber Zero (Phillips 66) and HyNet (Essar Oil UK). The Industrial Energy Transformation Fund recently awarded £7 million and £800,000 to Essar Stanlow and Phillips 66 respectively, in support of hydrogen focussed net zero projects. We are also encouraged to see operators investing in the production of low carbon fuels and will continue to work with the sector to encourage innovation, maximise economic opportunities from net zero, and remove regulatory barriers which hinder the transition away from Fulcrum BioEnergy has announced plans to develop its first UK residual waste to low carbon SAF plant. The ‘Fulcrum NorthPoint’ biorefinery will be located at the Essar Oil (UK) Limited refinery at Stanlow, Ellesmere Port in the North West 33. We have also published the draft Downstream Oil Resilience Bill which will give the government the powers it needs to ensure secure fuel supplies are maintained during the Net Zero Build Back Greener

34. The UK has a unique opportunity to be a leader in low carbon fuel production and this will be captured in strategies that we will 35. A new Biomass Strategy will set how sustainable biomass could be best used across the economy to help achieve net zero, including to produce low carbon fuels. It will also assess our existing sustainability standards, already some of the world’s most stringent, and set out where and how we can improve them further. When coupled with carbon capture and storage, it is possible that sustainable biomass can not only enable production of low carbon fuels but could also deliver vital negative emissions. Any future BECCS project will need to meet stringent sustainability requirements for the production and use of biomass, as will be set out in the 36. This will be complemented by a long-term strategy for low carbon fuels as announced in our recent Transport Decarbonisation Plan. The strategy will consider how to maximise emissions savings from low carbon fuels used across different transport modes in the 37. The latter of the two strategies will build on the success of the Renewable Transport Fuel Obligation (RTFO), which has supported the market for low carbon fuel supply since 2008. Fuels supported under the RTFO need to comply with sustainability criteria such as minimum GHG thresholds, and by incentivising fuels produced from wastes, it saved 5.37 MtCO2e in 2019 alone. Further to sub-targets for so-called development fuels of strategic importance, we have recently widened support to more diverse fuels and announced more ambitious targets for the RTFO to 2032 set at 14.6% of total liquid 38. To accelerate the development of UK plants to produce advanced fuels we have provided grant funding through schemes including the Future Fuels for Flight and Freight Competition (F4C) and Advanced Biofuels Demonstration Competition (ABDC). Delivering on the Ten Point Plan we also recently announced the shortlist for the £15 million Green Fuels, Green Skies Competition (GFGS) supporting eight companies pioneering new SAF technologies. To accompany this announcement, we published a consultation on proposals for a new UK SAF blending mandate aiming for introduction in 2025. It included design questions on which feedstocks and technologies should be eligible and welcomed views on what our SAF ambition and targets should be. We are currently reviewing the responses to the SAF mandate consultation, but our ambition is for a comprehensive policy framework, including the mandate, to enable the delivery of 10% SAF by 2030. Further detail can be found in 39. The UK’s skills, capabilities, assets, and infrastructure mean that we have the potential to excel in both CCUS-enabled and electrolytic low carbon hydrogen production. Alongside the scale of production that CCUS-enabled methane reformation or ‘blue’ hydrogen can bring, our renewables can support the growth of electrolytic or ‘green’ hydrogen, bringing down costs and increasing production capacity whilst new production technologies such as hydrogen from nuclear and biomass are developed. Supporting a variety of different production methods will enable us to develop low carbon hydrogen rapidly at scale during the 2020s and 2030s to deliver what is Chapter 3 – Reducing Emissions across the Economy

40. Our approach to scaling up the UK hydrogen economy in the 2020s is set out in our recent UK Hydrogen Strategy, which describes our key policies and proposals to overcome key barriers to development. Alongside the Strategy, we published a package of documents consulting on proposed policy support mechanisms for new hydrogen production. This approach, subject to further policy development following these consultations, and together with the ambition shown by proposed hydrogen projects, provides confidence we can achieve low carbon production sufficient to deliver on our targets under the Climate Change Act. We know there will be more to do and will keep our policy approach under review as the use of hydrogen in the energy system develops and production methods evolve. 41.
The UK is already at the forefront of innovation across the hydrogen value chain, reducing technological barriers to production and end use cases. We recently launched a new £60 million Low Carbon Hydrogen Supply 2 Competition, which will develop novel hydrogen supply solutions for a growing 42. Low carbon hydrogen is not yet competitive with traditional fuels as production projects face additional costs compared to existing energy sources. Investors cannot currently justify upfront capital investments without visibility or predictability of revenue and returns. Lessons learnt from the success of UK offshore wind deployment suggests government intervention to address this cost difference is a key requirement to bring forward hydrogen supply at scale. 43. In August this year we published our consultation on our preferred hydrogen business model25 to provide revenue support to hydrogen producers and help overcome the cost challenge to bring through investment in new low carbon hydrogen projects. As set out in the Industry chapter, and Hydrogen Revenue Support (IDHRS) scheme to fund our new hydrogen and industrial carbon capture business models. We will be providing up to £140 million to establish the scheme, including up to £100 million to award contracts of up to 250 MW of electrolytic hydrogen production capacity in 2023 with further allocation in 2024. The IDHRS will fund the allocation of the hydrogen business model contracts to both electrolytic and CCUS-enabled projects from 2023, resulting in up to 1.5 GW of low carbon hydrogen contracts awarded to projects. 44. As set out in the August consultation,26 our Net Zero Hydrogen Fund (NZHF) will provide up to £240 million for government co-investment to support new low carbon hydrogen production out to 2025. The aim of the Fund is to support commercial deployment of new low carbon hydrogen production projects during the early 2020s, by helping to address barriers related to commercial risk and high upfront costs relative to fossil fuel alternatives, unlocking private sector investment in projects. We intend to launch 45. In August we also published a consultation27 on the proposed UK low carbon hydrogen standard which will define what is meant by low carbon hydrogen, allowing us to incentivise and support the right production for supply across the energy system. It will establish a threshold for greenhouse gas emissions allowed in the production process for hydrogen to be considered low carbon and Net Zero Build Back Greener

46. The RTFO has supported the supply of renewable hydrogen into transport since 2018 and has been successful in launching small-scale renewable hydrogen supply. In July, the Department for Transport announced changes to the RTFO which could further encourage the uptake of renewable hydrogen in transport, including in rail and shipping. The original consultation, published in March, also proposed to make evidencing the provision of renewable electricity for hydrogen production easier through power purchase agreements and recognising the importance of regional grids. The final decision on these changes will 47. The UK Hydrogen Strategy sets out the initial steps being undertaken to develop the hydrogen economy over the 2020s, to deliver our 2030 5 GW production capacity ambition and position the hydrogen economy for further ramp up needed to support CB6 and net zero. But we know there will be more to do beyond this. That is why we committed in the strategy to say more on the mix of production technologies and supporting network and storage infrastructure that could help meet future hydrogen demand following conclusion of our consultations and further work. Similarly, we set out our plans to develop appropriate regulatory and market frameworks to support an expanding hydrogen economy throughout the 2020s and beyond. We will publish a Hydrogen Sector Development Action plan in Chapter 3 – Reducing Emissions across the Economy

Working together across the UK Examples of policy action by the Scottish Government, Welsh Government and Northern Ireland Executive UK Government is working across all levels of government and with Devolved Administrations to ensure consistent action to reduce emissions across the fuel supply and hydrogen sectors, and across the UK. In December 2020 the Welsh Government commissioned a report on hydrogen that included baseline reporting on related activities and expertise, and a pathway for developing 28 The proposed pathway contains ten objectives covering both supply and use of hydrogen, including the establishment of at least one 10+ MW renewable production site and the deployment of 200 fuel cell buses. The Welsh Government consulted on the pathway earlier this year and following analysis of the responses it will finalise a pathway for hydrogen development over the second Welsh carbon budget period (2021-25). In December 2020, the Scottish Government published a Hydrogen Policy Statement which sets a vision for Scotland to become a leading Hydrogen Nation with an ambition to generate 5 GW of renewable and low-carbon hydrogen by 2030, committing to £100 million funding to accelerate the hydrogen economy in Scotland The Hydrogen Policy Statement has provided the framework for the development of a Hydrogen Action Plan in 2021 which will provide further detail on the planned approach and necessary actions to implement the policy positions outlined in the Policy Statement. The Hydrogen Action Plan will be published The Scottish Government has led the way in supporting world-leading hydrogen demonstration projects in Scotland that are helping to determine the role of hydrogen in Scotland’s future energy system. This includes the provision of £7 million funded support towards the cost of a world first £28 million demonstration of an end-to-end 100% hydrogen energy system.
The project will construct and operate a hydrogen heat network system in Fife able to service around 300 houses and will be of UK-wide significance to evidence the role that hydrogen can play in decarbonising heat, using the Net Zero Build Back Greener

Chapter 3 – Reducing Emissions across the Economy A new Northern Ireland Energy Strategy is expected to be published by the end of 2021, with proposals on phasing out coal, solid fuels and heating oil alongside decarbonising our gas network, including the future injection of biomethane and potential hydrogen blending. Northern Ireland is uniquely positioned to become a leader in the hydrogen economy and secure these benefits locally. This is already gathering momentum, with NI Water trialling an innovative new hydrogen electrolyser at its wastewater treatment works – the first such project of its kind across the UK. Translink, the public transport service provider in Northern Ireland, is also introducing three new hydrogen buses to its fleet and is procuring a new hydrogen fuelling station for these and an anticipated 20 more under a new contract. The GenComm project, led by Belfast Metropolitan College, will trial hydrogen production via electrolysis for hydrogen buses. They are also engaged with a range of potential complementary projects to build on this momentum and contribute to the growth of an indigenous hydrogen economy in

Stretching our ambition for net zero • Ambition to deliver 6 MtCO2 per year of industrial CCUS by 2030, and 9 MtCO2 per • Set up the Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme to fund our new industrial carbon capture and hydrogen business models. • Support the deployment of CCUS through the £1 billion CCS Infrastructure Fund. • Following Phase 1 of the Cluster Sequencing process, the Hynet and East Coast Clusters have been confirmed as Track 1 clusters. • Support the installation of energy efficiency and on-site decarbonisation measures through the £315 million Industrial Energy Transformation Fund (IETF) (£289 million for England, Wales and Northern Ireland, £26 million for Scotland). • Support the increased requirement for fuel switching to low carbon alternatives, with an ambition to replace around 50 TWh of fossil fuels per year by 2035. • In collaboration with the Steel Council we will consider the implications of the recommendation of the Climate Change Committee to set targets for ore-based steelmaking to reach near-zero emissions by 2035, and the business environment necessary to support the transition. • Develop several Resource and Energy Efficiency (REEE) measures with ambition of achieving the anticipated requirement of 11 MtCO including up to 3 MtCO2e of potential abatement in the Iron and Steel sector. • Incentivise cost-effective abatement in industry at the pace and scale required to deliver net zero, through the UK ETS by consulting (in partnership with the Devolved Administrations) on a net zero consistent cap. • Explore opportunities for faster decarbonisation of dispersed sites in the 2020s. Net Zero Build Back Greener

1. The UK’s manufacturing and refining sector plays an essential role in society. It contributes £180 billion to the overall economy,29 directly accounting for 8% of GDP30 and provides 2.5 million direct jobs across the country31 as well as over 5 million across the value chain.32 2. However, industry33 is also a major source of CO2 emissions, producing 15% (78 MtCO2e)34 of the UK’s current total. Around half of industrial emissions are concentrated in specific clusters – geographical areas with large concentrations of industry. 3. Industry emissions have more than halved since 1990, due mainly to the changing structure of the UK’s manufacturing sector, improved energy efficiency, and a shift to low carbon fuels. Despite this progress, the overall pace of reductions is slowing, and more action is needed to achieve our net zero 4. The Industrial Decarbonisation Strategy (IDS), published in March 2021, was the first of its kind in a major economy. It sets out how industry can decarbonise in line with net zero while transforming industrial regions by attracting inward investment, future-proofing businesses, and securing the long-term 5. This followed previous work including the landmark Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050, published in 2015, which set out a series of pathways for emissions reductions for 6. We plan to have the world’s first net zero industrial cluster by 2040, awarded grants from the £315 million Industrial Energy Transformation Fund (IETF), announced a £1 billion Carbon Capture and Storage Infrastructure Fund, and a £240 million Net Zero Hydrogen Fund. Additionally, as part of the Industrial Decarbonisation Challenge (IDC), we recently announced £171 million of funding, matched by over £200 million industry investment, for nine projects within 7. Growing new industries in low carbon hydrogen alongside CCUS and renewable energy will put our industrial ‘SuperPlaces’ at the forefront of technological development. Together this will develop resilient supply chains, support jobs, and position UK companies at the forefront of an exciting growing global market, as well supporting industrial processes, industrial heat, power, shipping and trucking to make the shift 8. Energy intensive industry in the UK has been covered by a cap-and-trade policy since 2005. The UK government and Devolved Administrations successfully launched the UK Emissions Trading Scheme (UK ETS) on 1 January 2021. The UK ETS cap, which sets the limit on emissions for sectors covered by it, will be aligned with a net zero consistent trajectory by January 2023, or January 2024 at the latest. In the coming months, we will be publishing a consultation on the level of the cap and other elements of UK ETS evolution. Chapter 3 – Reducing Emissions across the Economy

9. We recognise the importance of addressing the risk of carbon leakage so policy interventions do not lead to increased emissions elsewhere, and to ensure that UK industry has the confidence needed to fully decarbonise.