Net zero target in jeopardy through lack of long-term planning from Government, say MPs

- Report finds Govt did not consider what levels of longer-term investment might be required up to 2050 to support net zero tech

- Warns of lack of clarity for businesses and lack of support for consumers

A lack of long-term planning from the Government risks jeopardising the UK’s legally-mandated pledge to achieve net zero carbon emissions by 2050, particularly in the context of the government's announcement in September 2023 to delay the phasing out of new fossil fuel vehicles and heating systems.

In a wide-ranging report published today, the Public Accounts Committee (PAC) warns that too often the Government’s plans for supporting the progression of net zero technologies are short-term, putting at risk the large amounts of private investment needed to achieve net zero by 2050.

The report finds that the Government, when setting out timescales for new technologies to be delivered in 2021, did not consider what levels of long-term public investment might be required up to 2050 to support new technologies to deliver net zero. This is despite the Government believing that long-term public investment will be needed to encourage the private sector to invest. To hit the 2050 target, new low-carbon investment in the UK from both public and private sectors will have to increase by two to three times each year from last year’s estimated total of £23 billion. Most of this increase would need to come from a private sector encouraged to invest by Government action.

The PAC’s inquiry also identified a lack of clarity and support from government for both businesses and consumers. The Government is dependent on businesses on the ‘supply’ side delivering successful innovation to reach net zero, but the report finds that businesses are finding sources of public sector funding difficult to navigate and access. On the ‘demand’ side, the report warns that developing new technology may be taking priority over focusing on the practical challenges consumers might face in taking them up. The PAC is calling on the Government to specifically assess these challenges.

The report further contains warnings on oversight and transparency in supporting innovation to deliver net zero. There is no single person or organisation with responsibility for overseeing the performance of government support for innovation. The lack of such oversight risks a lack of targeted support, a clear focal point for businesses and researchers, and continuing barriers to market deployment.

On transparency, the PAC finds that there is no clear mechanism for publicly reporting progress on government support for technologies which are priorities for achieving net zero such as offshore wind and nuclear advanced modular reactors. Without such a mechanism, it is not clear whether initial expectations for particular technologies are being met.

Dame Meg Hillier MP, Chair of the Committee, said: “Our Committee has warned time and again of the damage that can be done to delivering policy by the lack of long-term planning and funding from government. There is no more critical area where this is true than on net zero. If the Government continues to leave businesses to peer through a haze of uncertainty, then that investment will not be forthcoming. Businesses and consumers need certainty.

“On supporting innovation for net zero, the Government needs to agree with itself on what success looks like, what failure looks like, and report transparently on progress. Such basic building blocks being absent four years after a pledge critical to our very way of life was made is disappointing. The Government must call an end to this faltering approach, or risk spelling out to industry, the public and the world that the UK is simply not serious about tackling climate change.”  

PAC report conclusions and recommendations 

Too often the Government’s plans for supporting the progression of net zero technologies are short-term, which risks jeopardising efforts to attract the large amounts of private investment needed to achieve net zero by 2050.  When designing the Framework, the government did not consider what level of longer-term public sector investment might be required up to 2050 to support delivery of the 31 innovation technology challenge areas. Some commentators have suggested that many of the challenge areas will require longer-term financial investment from both the public and private sectors. The Government’s delivery plan, however, only reflects funding for the Spending Review period from 2022 to 2025. This provides little comfort for investors in the medium to longer-term, particularly in the context of the government’s announcement in September 2023 to delay the phasing out of new fossil fuel vehicles and heating systems. HM Treasury says that the next Spending Review will be an opportunity to reassess plans. DESNZ estimated in its 2023 Green Finance Strategy that new low-carbon investment in 2022 in the UK from the public and private sectors totalled £23 billion. It expects this will need to increase to around two to three times that level per year through the late 2020s and 2030s and that most of this increase will need to come from the private sector. The Government has announced longer-term support for Carbon Capture, Utilisation and Storage beyond the current spending period, but this remains the exception rather than the rule. 

Recommendation 1: DESNZ, working with the Treasury, should set out its plans for supporting priority technologies beyond the confines of the spending review period, including, where appropriate, potential funding support. It should explain how recent announcements to delay the phasing out of new fossil fuel vehicles and heating systems will impact on costs.

The Government is dependent on businesses delivering successful innovation to reach net zero, but too often it is difficult for businesses to know what support is available and how to access it.  The Government is providing £4.2 billion of support for net zero research and innovation to 2025 through 115 funding programmes across eight government departments. The funding arrangements are complex because of the number of institutions and different geographies involved.  DSIT tells us that it has no regrets about the large number of funding programmes, preferring to focus on trying to make them accessible and understandable for those businesses and other bodies seeking support. Innovate UK has recently launched the latest version of its Innovation Hub, which we are told will serve as a “front door” for helping businesses understand what support might be available. But it is too early to assess whether this Innovation Hub has made it easier for businesses to find government support for net zero research and innovation.

Recommendation 2: Ahead of the next Spending Review, the Treasury, working with DESNZ and DSIT, should take the opportunity to review whether the current complex funding arrangements, which largely pre-date the development of the Innovation Framework, are best suited to supporting the fast-paced innovation needed to deliver many aspects of net zero.

We are not convinced that the Government is paying sufficient attention to the practical challenges consumers can face in adopting low carbon technologies and how to overcome them. The Government selected the technology areas included in the Innovation Framework based on the opportunity to deliver major decarbonisation gains, the potential for major business opportunities for UK companies and the desire to create options for how to reach net zero.  However, we are concerned that technology development may take priority without giving sufficient attention to the practical challenges consumers might face. DESNZ says it sought to maximise opportunities for consumers to take part in technology development. However, it is not clear that government is giving timely consideration to how the take-up of new technologies is best supported.  The challenges can be significant, for example, ensuring an adequate charging network to support the projected rapid expansion in the use of electric cars.  The Government also has no research programme focusing on the behavioural change that will be needed to complement the deployment of technologies included in the Delivery Plan.

Recommendation 3: When it next reviews progress against the innovation priorities, DESNZ, working with other government departments, should commit to assessing specifically the challenges consumers might face in adopting new technologies and whether these are being adequately addressed when re-assessing priorities.

Despite the Government’s ambition to have an effective end-to-end innovation system, responsibility for overseeing progress is siloed, making it difficult to assess progress across each of the priority technology areas.  No single person or organisation has responsibility for overseeing the performance of government support for the end-to-end innovation system. Without such oversight, there is a risk that support is not targeted effectively at the right innovation stages, that barriers to market deployment are not addressed quickly, and that businesses and the research community lack a clear focal point for providing feedback.  DESNZ says that there is already a lot of joint working, and has put in place a governance and oversight process through the Net Zero Innovation Board, supported by the Innovation Delivery Board.  However, it acknowledges that there is more to do, in particular to bridge the boundary between research and innovation on the one hand and deployment and commercialisation on the other.

Recommendation 4: DESNZ, working with other departments, should identify clear responsibilities for overseeing cross-government progress on each of the net zero technologies.  These responsibilities should include paying particular attention to whether factors that might impede deployment of viable technologies are being given early enough attention, for example by policy teams, regulators and the investment community.

The Government has not yet defined what success will look like for the main net zero technology challenge areas and therefore lacks benchmarks with which to judge whether progress remains on track.  It is vital that desired outcomes are clearly defined to enable government and Parliament to assess whether progress in the individual innovation challenge areas are on track to contribute to the UK achieving net zero. DESNZ, with other departments, has started to establish a process for monitoring progress systematically across the Framework but it has still to define what outcomes, such as carbon reductions and business opportunities, it is seeking to support. It is still too focused on what individual projects are delivering rather than the bigger picture.  Without clear benchmarks it will be more difficult to judge whether the support it is providing is working and whether further action is needed.

Recommendation 5: Government should define the outcomes, rather the outputs, that it is hoping to deliver from each technology in the short, medium and longer-term to enable it to benchmark progress and ensure that taxpayer support continues to be well targeted.

A well-run innovation programme always carries with it the risk of failure, but government has yet to define what failure is tolerable overall before its net zero objectives are jeopardised.  We recognise that innovation involves a degree of risk and that a successful innovation portfolio will include both failures as well as breakthroughs. DESNZ, with other government departments, have yet to define what level of failure it could tolerate across the Framework, instead placing reliance on risk management by departments at the individual programme level. Each funding programme will have a business case including an assessment of risk. DESNZ says it has set a risk appetite for these sort of activities - ranging from medium to very high.  However, the Innovation Framework does not include a clear assessment of risk against each of the priority technology areas.

Recommendation 6: In reporting on progress on the priority technologies, government should include its assessment of which technologies are likely to deliver within the timescales required and those it regards as higher risk.  

There is no clear mechanism for reporting publicly progress in each of the priority technology areas.  Government uses its overall Net Zero Strategy to report on the overall approach and progress to net zero but acknowledges this will not give all the detail that Parliament needs on progress in the priority technology areas.  Some of the investment includes projects on the Government Major Projects Portfolio, for example the Net Zero Hydrogen Fund, and in those instances, performance is reported publicly.  However, these projects account for only a small number of the technologies in the Innovation Framework.  As we have previously recommended in relation to net zero, the Government needs to report progress to the public in a user-friendly way that details where we are against our net zero goals, whether we are on track and, if not, how much we still have to do.

Recommendation 7: For each of the technology areas, the Government should report publicly on progress against the measures of success that it has defined, to make it visible whether the initial expectations are being met./ENDS