Who pays for Net Zero?

The government has published its latest carbon budget, looking ahead to a period some way from now, about 15 years into the future, promising an 87% emissions reduction

So how are we going to get there? What's it going to cost? What are the upsides? And is it indeed the right thing to be pursuing

Well, I'm joined by climate change minister Katie White to discuss all of this. Minister, thanks for coming in to City AM

Thank you for having me. So, carbon budget number seven. Number seven

seventh of its kind. This all began, did it not, with the 2008 Climate Change Act. And then

obviously, the whole shebang was put into law under Theresa May to achieve net zero by 2050

And the carbon budget is about a reduction in emissions over set periods. So we're now talking

about an 87% emission reduction for the period 2038 to 2042. Families and businesses will continue

to reap the benefits of this transition is a line from the announcement today. Families and

businesses will also bear the costs of this, won't they? Let's just take it back a step because you

just gave a hefty introduction. But I just want to take us back because you're right that in 2008

we introduced climate change. It was made legal in 2008. So it became legally binding in 2008

What Theresa May did a few years later was to tweak the end target. But the principle and the

concept is really important because what we were saying was look we have a long-term challenge in

this country across the world as well but how do we meet that challenge and we wanted to make sure

we got a lot of investment I'm looking at you but yeah as the representative of the city is going to

be one of our key areas of investment and how do we do that and we said we what we're going to do

is you know businesses are always coming to us saying we want certainty so we looked at and

actually it was an idea that came from David Cameron but was implemented by the last Labour

government and said we're going to look at having budgets over time we're going to set a trajectory

and it would set that level of ambition without a straitjacket that was really important because

we weren't saying you know you can't have this technology or that technology and so actually at

the time it was digby jones of the cbi if you remember digby jones he was also because he was

massively pro-nuclear and there was no nuclear power so he was very out of fashion and he was

saying we want nuclear power to you know for future generations so it was around we wanted

those long-term investments how could we say that where whichever government was in power we would

have that so since tooth and out with 2008 we have been working on this and you say with today

we've introduced the seventh that we're putting down in parliament the seventh carbon budget but

over time we are already we're in carbon budget four at the moment so we've already delivered on

one two and three over that time and so it's it's a really sensible framework you know actually

when I describe it to people they're like oh this is the politics we actually want you know

looking ahead thinking ahead saying to business we want to work with you to deliver on a high

ambition agenda how can we do that and we've set that long-term trajectory yes Theresa May tweaked

to the end of it saying actually but I've been around this for 20 years and actually nobody used

to talk about net zero until sort of 10 years ago it's a long-term thing and actually what we're

thinking about is that framework over time how do we work together so you've got the certainty of

investment and we're delivering on those emissions reductions so i just wanted to make that clear no

i appreciate the context actually because as you say there's years and years have taken us to this

point and you talk about that long-term framework as being one of the advantages of this policy in

this arrangement is it the case that you're setting targets for a future that are dependent on

technologies or infrastructure industries that do not yet exist you use the phrase that you didn't

want to be any straight jackets it does feel a bit straight jacketing well well let's let's say

when you talk about technologies that exist so some of the technologies already exist so in 2008

when the climate change act was introduced i think we had 156 electric vehicles on british roads

there was the leaf which i think went 48 miles or the gee whiz you know there was those first which

which you know there were some people i wasn't one of them i'm afraid i have to admit that that

took the leap and took one of those with and they could maybe get from Leeds, so from Leeds to

York. Have you taken the leap now? I have done. I've been an electric vehicle driver for six years

but now the plethora of vehicles you can get, we've now got two million electric vehicles on

our road. So you can see the change in that. It used to be, you know, that we had a couple of

offshore wind turbines. Now you can see them all over and we've got sort of over 16 megawatts of

offshore wind and you know one of the it's one of our best industries as a windy little island

we're taking advantage of our natural resources there so just say i think some of the technologies

are already there we're seeing heat pumps coming you know into houses more solar panels on people's

homes we are looking to introduce the plug-in solar so a lot of this is actually already there

you might find that is it little middle aisle that's the one no not just yet i can't wait to

get a little together but what's happening is it's already been used in germany and actually i was in

germany and went to went to a shop you could walk in off the high street buy the the panel and go and

literally plug it in at home and that's what we're hoping to do we've got to get through the

element of expectations of consumer change behavior change etc and indeed in the latest update today

you say that i think once once parliament signs off on this latest iteration um a delivery plan

on how this will be met will be published in due course. Yes. And is that where we'll get more information about what exactly this is going to require

of households and consumers, behaviour change? Yes. So we've laid out some of that

So we've done there's an impact assessment, which is laid to that. The precedent has always been that we do it sort of we lay it down

We agree the target with an impact assessment and then we come back in, you know, 18 months, two years time with with an actual plan

much we've looked at all of that. We actually had to put a plan out for carbon budget six last year because the last government got

reviewed. So we had to look at that. But obviously we looking ahead all the time and we will come forward to parliament with a fully formed plan of what we want to do and how we intend to meet that um we we we have said i mean the committee on climate

change is an independent body they give their advice and we as government decide whether we're going to take that advice or not in terms of the target we've taken the middle road so they said

this is the most ambitious the least ambitious in the middle way we're taking the middle road how we're going to do that we're going to do it slightly differently to what the committee says

committed that it would be cheaper to do some more consumer interventions but at the end of the day

we have to listen to people and and we think we can take a bit more of that behind the scenes so

it's not about behavior change now if people want to make behavior change for other reasons for

health reasons or any other reasons great but we as a government are looking at how we can support

businesses and consumers to make that change more easily we're looking at making sure this is an

upgraded lifestyle. Okay, we'll come back to some of the specifics about what it will mean for

businesses and investment decisions, households, changes, etc. Now, I don't want to start mixing up

different elements of wider government policy, but it strikes me that a large part of this is also

the Clean Power 2030 objectives to decarbonise the electricity grid fully by 2030. I began by asking

you about the costs associated with this policy, because you would never pretend that there aren't

any, when it comes to a very ambitious plan to decarbonise the electricity system by 2030

so a few short years from now, that's got a price tag of about £40 billion a year. And

the expectation is that a huge of that and those sort of non-commodity costs are going

to find their way onto both household and industrial energy bills. There's no way around

that, isn't there? So let's just break this down because you're right. It's easy to confuse

the elements of this. So what we came in was there is, and when we talk about energy

people often say energy and electricity and you'll understand that we're talking about electricity is

is one element and it's usually been electricity, heat and transport as different elements of that

As we electrify all of that, then obviously the electricity part becomes bigger and bigger and

more important. So when this government came in, nothing to do with this overarching climate change

Act that I'm talking about today, which is that overarching, we looked at, the Secretary of State

looked at how we have this clean power mission by 2030 to make sure. A lot of that we had, we've done

through these auction rounds. So we're doing it through a contract for difference, which is around

giving that price, that guaranteed price to make sure that we're bringing forward renewables

offshore wind and those have been hugely successful and secured at the last auction

round we said at 40% less than the gas price so there is a piece there you also then talk about

what what are the costs I would I would say this is investment it's also around making sure that

investments we have an energy system that we have to invest in because we want to we have a grid

that needs investment we want to make sure we take advantage of the opportunities whether that's

around AI or around other forms of expansion of electricity, that requires investment

There is choices on what investment you want to make and whether you want to invest more

in a fossil fuel-based system or whether you want to invest more in a clean power system

And we've chosen to invest in that clean power system going forward

And the Committee on Climate Change on the Carbon Budgets, which is the bigger piece

has said their impact assessment has said, actually, in terms of the cost benefit

you know you're looking at two times the benefit to those investment costs so the question of

investment as you put it or cost as other people would put it because this is not an uncontroversial

subject matter are such that the associated costs and i'm going to stick with the issue of

decarbonizing the electricity grid are one thing but so is the time frame and there are a lot of

industry voices, some of whom we've spoken to, some of the biggest players, and you'll have more

meetings with them than I do, who say that whilst they can understand the rationale for this, whilst

indeed it might be an absolutely required form of investment and transition, some people are saying

that 2030 as a date, for example, is contracting so much investment and expenditure, which will find

its way onto a variety of bills and other forms, is a problem. And some people are actually saying

What's the rush? If this is something which is going to happen because it's got sufficient investment support behind it, sufficient public support, sufficient support from government and policymakers, if it's going to happen, why do you say it has to happen by 2030

If condensing it into that time frame at a £40 billion a year cost for Clean Power 2030, some people have suggested this is almost artificial

look i think what there's lots of different moving parts here we have already secured through our

auction rounds a certain amount of investment and so that is already in train if we have a

more electrification which we're looking to support more electrification then actually some

of those costs will be spread more out the way i explain it although i'm sure your audience doesn't

need this is you know we're moving from a commodity based system towards we're almost having a down

payment on a far more infrastructure-based system. So we're moving from a rental model to a buying

And so there is a down payment cost in terms of doing that. But actually, as the electrification

spreads throughout our economy, so the costs will be spread out as well. So there are some moving

elements here. I think all our assessments and certainly our Clean Power Mission and our central

control and Chris thought we think we are on track and they are confident we're on track to deliver

on that Clean Power Mission 2030. But as you said, that is one element

of our overarching carbon budgets. And as the electrification spreads throughout the economy

those costs get spread across the economy And as we were in the middle of a energy crisis in the middle east then clearly there is more pressure for people to move towards electrification and you seeing that

across the uk but also across europe and the rest of the world do you think there is an element by

which we're sort of trapping ourselves by past commitments made at a different time and with

some very bold ambitions you mentioned for example old digby jones sorry i keep calling him old

but Digby James for example one of many who have said previously that the UK should have

invested much more significantly in nuclear energy for example is there not a case to say that we

wouldn't have started from here if we had a choice the UK is now putting well in the sense that the

UK has put in place some very well now legally binding and very ambitious and very expensive

targets on how it's going to generate electricity and how it's going to decarbonize but we haven't

in fact put ourselves in contrast to other countries like France or Scandinavian countries

in a position where we can do that in a way that doesn't result in quite substantial burdens

and a long-term energy policy environment that has given us some very, very high energy costs

In other words, I put it again, in an ideal world, we would not have started from here

So I slightly question the premise of what you said, because in terms of actually

I think the carbon budget has been a great British success story

We've had 90 billion of investments since 2024 within Clean Energy. We have CBI coming out saying that, you know, we've got a million jobs now, which are as a direct..

It wasn't the CBI themselves, though, was it? It was the CBI's economic consultancy wing, which is quite different

OK. Well, the CBI coming out today saying they've... Well, the CBI's economics consultancy wing

OK. Well, the CBI said to... OK. So they were saying that in terms of... They were saying they've got a million jobs as a direct result of this

I think if you're saying to me, should we have had more investment in nuclear sooner? Definitely. You know, I would have much rather we hadn't messed around and we hadn't talked about nuclear power since the 2000s and we were much further on with that investment. Would I prefer that we were moving further and faster in some of this? Absolutely

but I think if we look back in retrospect the legally binding element

the only legally binding element is that we have a trajectory over time which allows us a sensible management system

in order to do that that's the only piece that we can do that

so I don't think there's any regrets from that decision the Clean Power mission is a different mission

that we're doing to try and supercharge that and I think actually

given where we are in terms of the international context in terms of the Middle East

I think we are looking at whether, you know, that actually having more clean homegrown energy is a good thing

Do we want to bring bills down further? Yes. Look, I'm not going to. As a constituency MP, it's certainly an issue that comes up for me

whether that's within consumer households or within businesses. And certainly as you say, when businesses come to me, we need to look at that

And part of that is the decoupling. Sorry, Mr. Dyer. I don't mean to interrupt you, but you mentioned that point about bringing energy bills down again

And of course, I understand the situation of energy price cap and the Iran war consequences

But why is it that we're hearing from industry leaders who say that household energy bills, say nothing of business energy bills, will likely be higher in 2030 than they were in 2021

I mean, in terms of it's from 2030 to 2021, you'd expect, I guess, it's the proportion of how that is in terms of a household spend

When we came into the bills, energy bills, energy bills. than they were in 2021 is a quite commonly understood expectation

in the UK among energy industry leaders. But we're talking about whether in line with inflation

whether that's lower and therefore it's a lesser percentage cost of people's budgets

We're talking about higher bills as a consequence of the additional costs

that account for the infrastructure spend out, the transition costs, subsidies, etc.

that are going to find their way onto people's bills. Indeed, they already are. So there's definitely an investment cost that we have to take it out

The idea, though, that we're saying is there is a counterfactual of what do we do if we do nothing

We have to pay for, we are in a situation where in the UK we have a certain amount of fossil fuels in the North Sea

but it's not enough to support the whole of our economy. We want to make sure that we have enough energy

and then we want to make sure that is a price that supports our economy

our productivity overall. So we have to make some investment within that

and therefore there is going to be a cost, but we need to make sure that, as I say

you're comparing as if nothing would happen as opposed to there has to be something

But in terms of, as we have a degrading grid, we have to make sure that there is an investment within that grid

and therefore there will be some costs. Now we did take some of those costs onto the exchequer

We took £150 off energy bills and that was why the price cap was lower

Obviously it has increased because of the Middle East crisis. We know that could get worse

So we're looking now at how we can protect consumers going into winter. Okay, I have a couple of questions to end on

because we talked a little bit at the beginning of this interview about what are the sort of changes to households or behaviour that we're going to need to see

And one of the areas in which successive governments have put a huge emphasis is on things like changing the heating infrastructure in homes

There's an argument about retrofitting versus new build homes, but the warm homes plan is a big part of this, trying to upgrade under that plan

I think five million homes to things like heat pumps and solar panels away from traditional boilers

The only reason I raise it now opportunistically is because we heard from the head of one of

the specialist lenders in the city of Paragon Bank today, who's quite involved in this sector

and in the construction sector, who says there's just absolutely no way that that's going to

be achieved And to do this again it by 2030 there that date again you need 1 properties a day every day between today and the end of 2030 1 properties a day having their old boiler replaced with a heat pump There just no

capacity to do that. These are the sorts of targets that they make successive governments

like to do this. The good announcements, maybe you say it's a stretching ambition or a stretching

target but why when there's just not even sufficient capacity to do that kind of work

would we remain committed to it so i think we go back to as you we keep talking about different

targets of the budget the clean power mission and now we're talking about the warm homes which

and i think the nice thing about the carbon budget which i keep coming back to is because we have

it has worked over successive governments so it's not just around and we have delivered on each of

the budgets to date every single budget we have delivered on to date in terms of the emissions

reductions, our commitments. And that's not a Labour government. The Labour government did their

bit. But then when we handed over the Conservatives, they did their bit. So full cross-party consensus

support we each delivered. So that is a good example. You're right to challenge and say

is government up for it? I'm going to go look at the Paragon report, because to be honest

when I've been out on visits, I've been talking to heat pump manufacturers in the UK and they're

saying we have more capacity within our system. I've been to technical colleges meeting with

apprentices who are training up, who are hugely excited about this opportunity

and boiler manufacturers who are retraining middle aged, they were all gentlemen, but there

were some women in it, but were retraining to do that. So they had as much of the capacity

And I know people who I've spoken to amongst colleagues who were saying, I cannot get

I want her to change in my house. And I can't get the, you know, the people because there's so much

demand going on that so i think we are in a hopefully a fortunate position where we can ramp

that up i will take it back to check whether we think there's a gap between that there's always

a case of listen we're always going to try and get ambition up there but i also want a realistic

delivery and so that's why it's you know great to come and talk to you to hear i want to be

challenged i want to see where the gaps are so that we can come together because i do think this

is a great opportunity for us and that's just whether it's on those practicalities is also

much the city because you know as we're sat here at city and there's green finance is something that

for the city of london is an absolute area of expertise in which we you know are keen to support

and continue being the case it is and our my final question then since we're here in the city is to

get your thoughts on something which we've noticed happening a lot in in recent months and over the

last year 18 months or so um whilst government remains legally committed to that wider net zero

by 2050 argument. That was also an ambition that, well, we saw a lot of businesses, a lot of

businesses make their own net zero or climate neutral pledges and they were having dates like

2030 in mind etc. And we're seeing a lot of industries and businesses row back quietly

more often than not, row back from those commitments. We've seen it at Unilever, we saw it just last week at Burberry, we see the banking sector pulling back from all sorts of

commitments that they made when perhaps it seemed like everyone else was doing the same in 2020

2021. Why do you think we're seeing businesses who are looking at their own cold, hard light of day

pulling back from commitments that they made just a few years ago? I'll say a couple of things. One

is I've been in this for 20 years, not as long as Jigby Jones. We keep opposing. But in terms of

there are cycles. There are cycles of this. There are cycles of this is an issue that is the top of

the agenda and then it goes down like and there was cycles and there is like academics that have

looked at what these cycles we are in a down spot in terms of a huge amount of support and chat about

that i'm not gonna why do you think that is well well i think because we're in this cycle but but

the down spot because i think we are we are at a moment where i mean i think we are just there is a

natural cycle we can't always be at the top of the agenda and we will have a moment and i think we

will come back and doing that. I think actually when you look at what is being delivered, you know

I'm very much looking at the positives and in terms of the carrots rather than sticks. And I

think actually we have shifted. I mean, in the UK, we've had a 54% reduction in emissions whilst our

economy has grown 80%. That is incredible. You know, in terms of we talk about whether it's 156

electric vehicles to 2 million vehicles, there is a shift going on. You go around, I was at Siemens

Gamesa yesterday and Orsted and Hull. The size and scale of what that investment is and that

company was only you know has only been there in the 2000s so the shift that is happening here

is really exciting. Look am I going to get caught up in what's going to happen whether we meet

95% or 100% in 2048 or 2052? No I'm not going to call up because the opportunity here and we are

moving from this point over here. The shift here is so exciting. There is jobs, there is investment

there is productivity gains to be had across our economy, you know, and this is around us building

a future together that is cleaner, that is more productive, that has all those growth opportunities

At the same time, I want to work, you know, and hear where the challenges are along that. But I

think, you know, we quite often, it's easy to look at where the negatives are, but I'd also look at

where the positives are and where the amount of clean electricity is

there is a big opportunity in the UK if we do shift towards electrification, of which pretty much everybody agrees that is a good thing for us

You know, that is a good opportunity. And I'm keen to focus on that rather than whether we hit a target in 2050

You know what? We got through this fascinating conversation and I haven't even mentioned North Sea oil and gas

You're going to have to come back for another bite at this because that's a big part of this conversation

and we haven't had time to talk about it. And that's on me. We spent too much time talking about Digby Jones

God bless him. But Minister, thanks very much for coming in to City AM. Thank you very much