Chancellor Rishi Sunak’s Budget for 2021 lays out a spend now, pay later approach to a Covid-19 recovery. The announcement came not long after the Prime Minister’s roadmap out of lockdown and aims to provide some much-needed hope for the future. But what does Sunak’s Budget mean for energy and the environment, and do the plans go far enough?
What does the 2021 Budget include?
Covid recovery: extended support
Included in the plans were various schemes to help extend support to the vulnerable and boost new growth as the economy recovers. The furlough scheme and Self Employment Income Support has been extended until September. A 5% deposit scheme aims to encourage a new generation of UK homeowners. And a Recovery Loan Scheme will aid businesses of all sizes through the next step of recovery.
Yet there was no mention of fuel poverty and any further spending commitments to help improve domestic energy efficiency. In his summer statement, the Chancellor committed £320 million to extend the Green Home Grant and £150 million for the Homes Upgrade Grant between 2021-22. Sunak could have felt this point needed no further reiteration in this years’ Budget.
However, while the Green Homes Grant has had significant interest, ongoing administrative issues have hampered its success. Most low-income households who applied are still waiting for help. And many installers are still waiting to get paid by the scheme administrator. So, the lack of mention of the scheme or further financial commitment to it is worrying.
The Conservative Party manifesto also pledged £2.5 billion in Home Upgrade Grants and £3.8 billion towards a Social Housing Decarbonisation Fund. Sunak’s summer statement covered the first year of the scheme but there was no reference to the rest of the funding in this Budget.
Energy: low carbon and renewable technology funding
The funding for energy includes:
- £20 million to fund a UK-wide competition to develop floating offshore wind. This aims to support the government’s plans to generate enough electricity from offshore wind to power every home by 2030. Included in this proposal is funding for the construction of new port infrastructure for wind projects in Teesside and Humberside.
- £68 million to fund a UK-wide competition to deliver long-duration energy storage. This will reduce the cost of net zero by storing excess low carbon energy.
- ‘Future Fund: Breakthrough’ will invest in highly innovative companies such as those working in life sciences, quantum computing, or cleantech. It plans to raise at least £20 million in funding.
- £4 million for a biomass feedstocks programme in the UK. This will identify ways to increase the production of green energy crops and forest products that can be used for energy.
- £4.8 million to support the development of a demonstration hydrogen hub in Holyhead, Anglesey.
- Plans for at least £15 billion of green gilt issuance in the coming financial year. This will help finance critical climate-related projects and create green jobs across the UK.
- £27 million in the Aberdeen Energy Transition Zone and £5 million in the Global Underwater Hub in Scotland. This is the first stage in delivering the North Sea Transition Deal and is expected to be implemented in the first half of 2021. Oil and Gas UK said that this deal would be essential to decarbonisation.
- Confirmation of a “world-first” National Infrastructure Bank established to boost investment and accelerate progress to net zero. With climate change as one of its core objectives it will receive an initial capital of £12 billion from the Treasury and £10 billion in Government guarantees.
Net Zero: Do the plans fall short?
In many ways, the 2021 Budget is a promising step in the right direction. With funding for offshore wind, energy storage, hydrogen and green finance to help the country reach its net zero target.
Net-zero is now part of the government’s “economic policy objective”, which means climate change risks will be a mandated consideration by the Bank of England’s monetary and financial policy committees.
But whilst the energy and environmental plans announced in the Budget are encouraging, it has received criticism for not going far enough. The Labour party has even found fault in the new National Infrastructure Bank, saying it should have a ‘watertight’ environmental mandate.
Some energy industry leaders were also disappointed with the plans and felt they were not ambitious enough to achieve net zero. Energy UK’s Chief Executive, Emma Pinchbeck, said:
“The energy sector is ready to continue reducing emissions, supporting jobs all around the country, and driving economic growth… However, meeting the most ambitious climate change targets of any major economy will require more ambition than was in the Budget. We need a concerted, cross-Government approach to deliver on the Prime Minister’s 10 Point Plan and the Energy White Paper – particularly on how to make our buildings energy efficient and low carbon.”
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