Sunak’s net zero U-turn is about anything but the long-term

Yesterday, Rishi Sunak confirmed the government intends to significantly water down its net zero targets. This includes pushing back the ban on new petrol and diesel cars from 2030 to 2035 and a ban on new oil fired boilers from 2026 to 2035. The 2035 ban on new gas boilers remains unchanged but this has been undermined by the announcement some properties will be exempt after this date. And private landlords now will not have to upgrade their rental properties to an EPC C ever when they were expecting to have to do so for new tenancies from 2025.

Pressure for these changes has been building for some time because the reality is polls may say that over two thirds of people support net zero but this evaporates when faced with the direct costs and a ballot box.

The Tories won the Uxbridge byelection in the summer thanks to opposition to London mayor Sadiq Khan’s ultra low emission zone (ULEZ) expansion.

Take up of the government’s £5,000 grant towards the cost of installing a heat pump has been pathetically low because the devices are not suited to poorly insulated British homes without significant expenditure – and disruption –  to upgrade insulation and install larger radiators.

It is debatable whether the 50% increase in the grant to £7,500 will make much difference because heat pumps are no cheaper to run than gas boilers because the differential in energy efficiency is more than offset by the much higher price of electricity.

The real failure here is not the watering down of targets, rather using these as a fig leaf to mask government inaction

Forcing rural homeowners to fit heat pumps from 2026 has been likened to a rural ULEZ because many country dwellers are on low incomes and live in very draughty, poorly insulated homes.

And the initial rush to buy electric cars on the back of soaring fuel prices after Russia’s invasion of Ukraine last year has subsided as fuel prices have come down to the point it costs less to run a petrol or diesel car. It is also much cheaper to buy a conventionally fuelled car and owners do not need to worry about finding a charging point.

The real failure here is not the watering down of targets, rather using these as a fig leaf to mask government inaction. This has become a national disease because promising new hospitals, stopping illegal immigration or reducing NHS waiting lists is politically expedient regardless of how difficult it is to meet that target.

What is to be done? Regulation, however well intended, is electorally risky as the recent experience with the ULEZ expansion shows. Experience with heat pump subsidies shows these are ineffective if they do not cover all the extra costs of installation leaving owners with higher ongoing costs is a big turn-off.

The recent experience with electric cars points towards a solution. People rushed to buy these when elevated fuel prices meant an electric car was cheaper to run than a fossil fuel powered one. The answer is to create a market for electrically powered devices by changing the price differential between electricity and fossil fuels to stimulate demand. Electricity is currently over four times more expensive per unit than gas. Reducing that to two and half times would make heat pumps cheaper to run than gas boilers and electric vehicles would become economic too.

An essential step on the net zero journey, is to get serious about boosting renewable energy generation, which is now much cheaper than fossil fuels

A quick first win would be to shift green levies from electricity to domestic gas. These levies add about £170 to average annual electricity bills and were reintroduced in July after a two year suspension thanks to the energy price cap. Reducing the 20% VAT on public chargers to match the 5% domestic rate would also help.

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The second, more difficult but essential step on the net zero journey, is to get serious about boosting renewable energy generation, which is now much cheaper than fossil fuels, and getting it to where it is needed to reduce electricity prices further.

The recent auction where there were no bids for offshore wind generation contracts, because the government was deaf to wind farm developers warning that inflation meant the guaranteed prices were not enough to cover increased costs, demonstrates the government is out of touch with the market. It also demonstrates it has failed to grasp the criticality of boosting the UK’s renewable energy capacity, currently 14GW against a target of boosting this to 50GW by 2030. This latest auction was expected to add up 5GW of capacity, with developers warning this failure means achieving the 2030 target is now unlikely.

And the grid needs upgrading to cope with increased demand and the fact power comes from new places. This includes building five times more power transmission lines by 2030 than have been built in the last 30 years. Given it takes 14 years to get planning for a new line, meeting the 2030 target is going to be extremely challenging even if the government meets its ambition to reduce delivery times to seven years. It will mean facing down opponents in safe Tory seats in regions such as East Anglia, where power is being brought onshore, to get the lines up and running.

A change of government might help but Labour has been notably quiet about watering down the net zero targets. It is subject to the same electoral pressures and its funders, the unions, are unhappy about the party’s plan to ban new oil and gas extraction. As far as the construction industry goes, the constant chopping and changing of policy is a serious barrier to investing in net zero skills. A government-aided, market-based solution would be a step towards restoring some confidence.