New Labour government: is the UK back in the race to net zero?

Labour has Five National Missions:

• the first mission is to kickstart growth
• the second mission is to “make Britain a clean energy superpower to cut bills, create jobs and deliver security with cheaper, zero-carbon electricity by 2030, accelerating to net zero.” 

On 9 July, the Labour government announced that it had launched a first-of-its-kind “Mission Control” centre to help the government deliver its clean power mission (see Chris Stark to lead Mission Control to deliver clean power by 2030 - www.gov.uk). This is discussed in more detail below – see “Energy transition and clean power by 2030” section. 

The Green Prosperity Plan (GPP) is at the heart of the new government’s growth agenda. 

The GPP aims to use public investment to crowd in private funding.

The GPP is essentially a combination of the National Wealth Fund, Great British Energy, and the Warm Homes Plan (all discussed below).

Around £15 billion/year (reduced from an initial £28 billion/year) of public investment has been allocated for the GPP. 

The bulk of the money in the GPP will be allocated as follows: £8.3 billion for Great British Energy and £7.3 billion for the National Wealth Fund.

£7.3 billion has been allocated for a National Wealth Fund (NWF) to invest in strategic industries to promote growth and clean energy.

It is intended to provide “catalytic capital” to take on risks that are unattractive to infrastructure funds or unsuited to their business models.

The NWF is expected to channel capital into five preliminary areas: green steel, green hydrogen, industrial decarbonisation, gigafactories and ports. 

According to the Labour Manifesto – 

“The National Wealth Fund will have a remit to support Labour’s growth and clean energy missions, making transformative investments across every part of the country. The fund will have a target of attracting three pounds of private investment for every one pound of public investment, creating jobs across the country.”

On 9 July, the new Chancellor, Rachel Reeves, announced that the NFW will start investing in areas such as green steel and gigafactories “immediately” and that the money will be handed to the existing UK Infrastructure Bank (UKIB) so as not to delay things (see Boost for new National Wealth Fund to unlock private investment - www.gov.uk).  

The government says work has already begun to align the UKIB and the British Business Bank under the NFW - although ultimately the government plans to bring forward new legislation “when parliamentary time allows” to put the NWF on a statutory footing. 

The government indicated in its press release that the £7.3 billion initially allocated to the NFW is in addition to existing UKIB funding Further detail is expected to be set out ahead of the government’s international investment summit in October. 

The NFW is supported by a National Wealth Fund Taskforce, which is chaired by the CEO of the Green Finance Institute Rhian-Mari Thomas, and includes former Bank of England Governor Mark Carney, Barclays CEO C.S Venkatakrishnan, Aviva CEO Dame Amanda Blanc and large institutional investors. The Taskforce published its initial recommendations on 9 July - the report can be downloaded here.

According to the Taskforce’s Chair, Rhian-Mari Thomas - 

“The Taskforce recommendations set out how a combination of catalytic capital, deployed in partnership with a government delivering policy certainty, can make the UK the destination of choice for global investment. The National Wealth Fund will reshape the way we approach public, private risk-sharing, providing private investors with the confidence needed to fund the technologies and infrastructure needed to drive growth and create new jobs across the UK.”

Labour intends to publish a new Industrial Strategy, which is expected to prioritise sectors where the UK has a comparative advantage and will focus on areas such as advanced manufacturing, creative industries and green technology.

The expectation is that most of the attention and effort, at least initially, is likely to be focussed on the clean power aspect as this is a key priority for the new government.

Energy transition & clean power by 2030 

According to the Labour Manifesto, the clean energy transition represents a huge opportunity to generate growth, tackle the cost-of-living crisis and make Britain energy independent. 

Labour want to decarbonise the UK power system (i.e. have a zero carbon electricity system) by 2030. That is five years faster than the previous government, who were aiming for 2035. 

Sir Patrick Valance (the former Chief Scientific Adviser during the Covid pandemic) says in the Labour Manifesto that clean power by 2030 is achievable if Britain treats this mission like the “vaccine challenge”.

Labour want to work with the private sector to double onshore wind, triple solar power, and quadruple offshore wind by 2030.

Labour also want to invest in carbon capture and storage, hydrogen, and marine energy.

On nuclear – the Labour Manifesto says as follows:

“Labour will end a decade of dithering that has seen the Conservatives duck decisions on nuclear power. We will ensure the long-term security of the [nuclear] sector, extending the lifetime of existing plants, and we will get Hinkley Point C over the line. New nuclear power stations, such as Sizewell C, and Small Modular Reactors, will play an important role in helping the UK achieve energy security and clean power while securing thousands of good, skilled jobs” 

On natural gas – 

“Labour will maintain a strategic reserve of gas power stations to guarantee security of supply. We will ensure a phased and responsible transition in the North Sea that recognises the proud history of our offshore industry and the brilliance of its workforce, particularly in Scotland and the North East of England, and the ongoing role of oil and gas in our energy mix.”

On oil & gas – 

• “Labour will not revoke existing [oil & gas] licences and we will partner with business and workers to manage our existing fields for the entirety of their lifespan.” 
• “Crucially, oil and gas production in the North Sea will be with us for decades to come, and the North Sea will be managed in a way that does not jeopardise jobs.”
• “We will not issue new licences to explore new fields because they will not take a penny off bills, cannot make us energy secure, and will only accelerate the worsening climate crisis. 
• “In addition, we will not grant new coal licences and will ban fracking for good.”
• Labour intend to extend the sunset clause in the windfall tax on oil & gas companies (Energy Profits Levy) until 2029 and increase the rate of the levy by 3% (from 75% to 78%), as well as removing the “unjustifiably generous investment allowances”. 
• Labour has also said it will retain the Energy Security Investment Mechanism.

On EVs – 

• Labour want to reinstate the plan to ban the sale of internal combustion engine cars from 2030, after the previous government had pushed that date to 2035.
• Labour also want to help finance new additional battery gigafactories. 

The King’s Speech on 17 July is expected to include a new Energy Independence Bill to establish the framework for Labour’s energy and climate policies. 

On 9 July, the new government announced that it has launched a first-of-its-kind Mission Control for Clean Power (see Chris Stark to lead Mission Control to deliver clean power by 2030 - www.gov.uk). The former chief executive of the Climate Change Committee, Chris Stark, has been appointed to lead the Mission Control centre, tasked with delivering the clean power mission by 2030. 

According to the press release, Mission Control will be a one-stop shop, bringing together a top team of industry experts and officials to troubleshoot, negotiate and clear the way for energy projects. It will work with key energy companies and organisations including National Grid and the Electricity System Operator to remove obstacles and identify and resolve issues as they arise. 

Mission Control will focus on the following: 

• setting and tracking the overall approach to delivering 2030 across the energy system;
• real time monitoring of progress on UK infrastructure projects critical to 2030;
• acting as an innovation centre by encouraging discussion among experts; and 
• serving as a convener for the Mission Control approach across government and with industry.

This is the flagship of Labour’s net zero plans. 

Labour will create a new publicly owned company, Great British Energy (GBE) – likely to be based in Scotland.

The aim of the GBE will be to deliver more renewable energy which would help decarbonise UK power by 2030, and provide lower energy bills, more green jobs and greater energy security.

The GBE is intended to partner with industry to deliver clean power by: 

• co-investing in leading technologies; 
• help support capital-intensive projects; and 
• deploy local energy production (through a Local Power Plan).

£8.3 billion has been allocated for the GBE - funded mainly through an enhanced windfall tax on North Sea oil & gas (see above). 

Labour want to launch the GBE as quickly as possible after the election – this is a key priority – through a new Energy Independence Bill expected to be announced in the King’s Speech on 17 July.

The GBE is expected to focus on energy generation initially for the first five years - to support mature renewables, as well as nuclear, emerging technologies (floating offshore wind, tidal and renewable hydrogen), port infrastructure, and supply chains.

Labour have described the GBE as a “green investment vehicle” which will aim is to crowd in private investment.

See GBE website

Labour have said they will invest an extra £6.6 billion over the next Parliament to upgrade five million homes to cut bills for families. 

The Warm Homes Plan will offer grants and low interest loans to support investment in insulation and other improvements such as solar panels, batteries and low carbon heating to cut bills. 

Labour want to work with the private sector (including banks and building societies) to provide further private finance to accelerate home upgrades and low carbon heating. 

The new government want homes in the private rented sector to meet minimum energy efficiency standards by 2030. 

According to the Labour Manifesto – “Nobody will be forced to rip out their boiler as a result of our plans.”

Labour want to mandate UK-regulated financial institutions (including banks, asset managers, pension funds, and insurers) and FTSE 100 companies to publish and implement credible transition plans that align with the 1.5°C goal of the Paris Agreement. 

Labour want to be “world leading” on this and are expected to move fast on this policy, although no dates have been announced yet for a government consultation.

Our understanding is that Labour want to focus on greater interoperability with the EU Green Taxonomy and avoid divergence with the EU for the sake of divergence. 

Presumably, in line with Labour’s stance on no new licences for oil & gas (see above), they will be inclined to treat new fossil fuel projects under the Green Taxonomy less favourably than the previous government.

Civil servants have already done a lot of the groundwork on a UK Green Taxonomy so Labour could move fast on a consultation after the election – although no dates have been given yet for a consultation. 

CBAM and ETS

Labour is said to be exploring how to align the UK’s carbon market with the EU – both in terms of the Emissions Trading Systems (ETSs) and carbon border adjustment mechanisms (CBAMs).

In particular, Labour supports the introduction of a UK CBAM.

Labour is committed to reducing waste by moving to a circular economy. 

Labour want to make it mandatory to have zero-waste plans.

Nature

Despite the new government saying that it wants to deliver on nature, this is one of the less developed parts of its green agenda. 

According to the Labour Manifesto – 

• “Labour will deliver for nature, taking action to meet our Environment Act targets, and will work in partnership with civil society, communities and business to restore and protect our natural world.” 
• Labour plans to create nine new National River Walks (one in each region of England) and establish three new National Forests in England, as well as planting millions of trees and creating new woodlands.
• Labour wants to expand nature-rich habitats such as wetlands, peat bogs and forests. 

Water industry

According to the Labour Manifesto – 

• Labour will put failing water companies under special measures, rather than nationalise them. 
• Labour will give regulators new powers to block the payment of bonuses to executives of companies that cause pollution and bring criminal charges against persistent law breakers. 
• Labour will impose automatic and severe fines for wrongdoing and ensure independent monitoring of every outlet.

On 11 July, the new Environment Secretary of State, Steve Reed, announced a series of initial steps towards ending the crisis in the water sector:

• He has written to Ofwat to ask them to make sure funding for vital infrastructure investment is ringfenced and can only be spent on upgrades benefiting customers and the environment. He also wants Ofwat to ensure that when money for investment is not spent, companies refund customers, with money never allowed to be diverted for bonuses, dividends or salary increases. 
• Water companies will place customers and the environment at the heart of their objectives. The Secretary of State is clear that he expects companies to change their Articles of Association to make the interests of customers and the environment a primary objective. 
• Consumers will gain new powers to hold water company bosses to account through powerful new customer panels. Customers will have the power to summon board members and hold water executives to account.   
• Strengthened protection and compensation for households and businesses when their basic water services are affected. Subject to consultation, the amount of compensation customers are legally entitled to when key standards are not met will more than double. The payments will also be triggered by a wider set of circumstances including Boil Water Notices.

The press release says that changes will take time, and that over the coming weeks and months the government will outline further steps to reform the water sector. No indication has been given as to whether the King’s Speech on 17 July will include a Water Bill.  

See Government announces first steps to reform water sector - www.gov.uk  

Labour recognise that the current planning regime is a major obstacle to economic growth and clean energy. So one of the areas that it intends to act very quickly on is planning reform. 

A number of key announcements have already been made on this since the election and further announcements are expected in the coming weeks.

According to the Labour Manifesto and subsequent announcements -

• Labour plans to update the national planning policy framework to make it easier for the roll out of clean energy projects, as well as other key projects such as building digital infrastructure and gigafactories. A consultation on this has been promised shortly. The government has said it will set out new policy intentions for critical infrastructure in the coming months, ahead of updating relevant National Policy Statements.
• The Labour government has already issued a new Policy Statement to reverse the obstacles to onshore wind. 
• Labour intends to create a new National Infrastructure and Service Transformation Authority, bringing together existing bodies, to set strategic infrastructure priorities and oversee the design, scope, and delivery of projects.
• Labour intends to develop a ten-year infrastructure strategy, aligned with the industrial strategy and regional development priorities. The strategy is intended to guide investment plans and give the private sector certainty about the project pipeline.

One of the new government’s key planks for growth is to “get Britain building again”. According to the Labour Manifesto and subsequent announcements -   

• Labour will update the National Policy Planning Framework, including restoring mandatory housing targets. 
• Labour want 1.5 million new homes over the next parliament. A national task force will be set up to identify key housing developments that need planning intervention from central government. 
• Labour intend to fund an additional 300 planning officers, by increasing the rate of the stamp duty surcharge paid by non-UK residents.
• Labour will take a “brownfield first approach”, prioritising the development of previously used land wherever possible, and fast-tracking approval of urban brownfield sites. 
• Labour intend to take a more strategic approach to greenbelt land designation by releasing lower quality “grey belt” and introducing “golden rules” to ensure development benefits communities and nature. 
• Labour want to build a new generation of new towns.
• Labour want to ensure we are building more high-quality, well-designed, and sustainable homes and creating places that increase climate resilience and promote nature recovery.
• Labour have said they will unlock the building of homes affected by nutrient neutrality without weakening environmental protections.

The pledges in the Manifesto were confirmed by the Chancellor on 8 July, who indicated that further details and consultations will be published shortly – see Chancellor unveils a new era for economic growth - www.gov.uk.

Labour intend to reverse the previous government’s decision to prevent the Bank of England from giving due consideration to climate change in its mandate.

Labour intend to create a new Clean Power Alliance, bringing together a coalition of countries at the cutting edge of climate action - “We will provide leadership at home so we can influence others”.

For more information on the new Labour government’s net zero and green agenda, see: 

• Labour Manifesto  - this is the revised version which was published shortly before the election
• Chancellor unveils a new era for economic growth - www.gov.uk
• Boost for new National Wealth Fund to unlock private investment - www.gov.uk
• Chris Stark to lead Mission Control to deliver clean power by 2030 - www.gov.uk
• Energy Secretary Ed Miliband sets out his priorities for the department - www.gov.uk
• Government announces first steps to reform water sector - www.gov.uk 
• Green Finance Institute: National Wealth Fund Taskforce
• Great British Energy website
• How Labour will try to unlock Britain’s planning system (ft.com, subscription required)
• Can Labour lift UK business investment from the bottom of the league? (ft.com, subscription required)
• The City of London’s wish list for the new Labour government (ft.com, subscription required)

SEE ALSO our follow-up blog post: UK: King’s Speech 2024: Bills most relevant to the green and net zero agenda (linklaters.com)