Amid growing concerns and uncertainty about the slow progress of climate policy development, a call for urgent action has emerged. The recent report by the Climate Change Committee (CCC) highlights the need for enhanced climate policy implementation to meet future emission targets and to secure the UK’s position as a climate leader once again.

CCC Chair Lord Deben (former Conservative MP John Selwyn Gummer) stated: “Much has been said of the UK’s climate leadership. However, the true test of leadership is delivery. And here, I am more worried. The commitment of the government to act has waned since our COP26 presidency. There is hesitation to commit fully to the key pledges.”

The CCC’s report, released in June 2023, comes as a wake-up call for the nation, signalling that the UK is no longer leading the fight against climate change as it once did. The report emphasises the urgency of taking decisive actions to steer the country back on track toward its net-zero goals.

Challenges in different sectors

The report outlines ambitious targets set in the Carbon Budget Delivery Plan (CBDP), including a 58% reduction in surface transport emissions by 2035 and a 29% reduction in emissions in the agriculture and land-use sectors. However, it highlights that significant challenges lie ahead, especially in the agriculture sector, where emissions have remained largely unchanged for more than a decade.

One concerning aspect of the report is the lack of a published sectoral breakdown, raising questions about whether the CBDP will effectively address the government’s 15% target for buildings and industry. Greater transparency is crucial to gauge progress towards energy reduction targets and identify areas requiring additional measures. This is where chartered accountants play a pivotal role in measuring and reporting data, enabling strategic planning and investment decisions that promote sustainability and resilience.

Sarah Reay, ICAEW Climate Change Manager, pinpoints two of the biggest climate policy gaps as building and industry: “These are areas in which members can actively have an impact, through measuring energy usage and productivity and identifying ways in which to improve efficiencies, linking this to financial planning, investment appraisals and decarbonisation activities.”

Seizing opportunities 

The report identifies opportunities for businesses to address their transport emissions through direct fuel usage and supply chain evaluations. Flexible working policies in response to the COVID-19 pandemic have led to a 3% increase in surface transport emissions compared with pre-pandemic levels, showing the potential for reductions in the future.

Regarding energy demand, the report stresses the need to decarbonise the power sector and focus on demand-side reforms. The decline in electricity and gas demand indicates a shifting energy landscape driven by changing consumer behaviour and energy efficiency initiatives. 

Riona Bowhay ACA, Senior Macro Stewardship Analyst at Aviva Investors’ Sustainable Finance Centre for Excellence, points out that “a clear policy environment is essential to direct private investment into areas such as low-carbon technologies – and to do so at the right cost, pace and scale, and support the transition towards net-zero emissions.”

However, beyond public policy, achieving the government’s target of a 15% decrease in final energy demand by 2030 will require proactive efforts and strategic financial planning from businesses, with accountants playing a vital role in identifying cost-effective measures and investments.

She added: “The UK has so far made limited cuts to emissions outside the power sector, so time is very much of the essence if the country is to be competitive in the low-carbon economy. To get there will require the UK taking a two-pronged strategy. Firstly, developing a response to the US Inflation Reduction Act and European Green Deal, helping to channel finance to areas such as heavy industry, where market barriers are slowing down low-carbon investment.

“Secondly, plugging existing policy gaps in the wider net-zero strategy to unlock private investment in low-carbon solutions across sectors such as buildings, power and surface transport.”

Chartered accountants’ pivotal role

The analysis from the CCC emphasises the need for stronger incentives to drive demand reduction, as well as the financial implications of not providing these incentives. ICAEW has a role in advocating for these incentives and to ensure members are adequately prepared in the transition to net zero.

Reay expressed the need for more ambitious targets and stronger political leadership to drive net zero across all sectors of the economy. She said: “Despite the creation of the Carbon Budget Delivery Plan, progress on reaching the 2030 target has stalled, with the CCC now having less confidence that the UK will meet its target than in the previous year.

“There is a lack of ambition, lack of delivery on plans and lack of strong political leadership to ensure government departments take a joint approach in driving net zero across all sectors of the economy.”

To regain climate leadership status, the report states that the UK needs to stay firm on existing commitments and move to delivery. The government’s strong commitments, including the 2030 fossil-fuel vehicle phase-out, 2035 electricity system decarbonisation, 600,000 heat-pump installations per year by 2028, and scaling up hydrogen and greenhouse gas removal industries, must be swiftly delivered.

Ensuring the required skills base and guiding private sector action and investment are crucial. The recent £20bn funding for CCS is a positive step, awaiting detailed implementation plans.