Lords Committee warns government still have not provided the policy clarity required to mobilise investment in crucial low carbon infrastructure

The government has today faced the second highly critical report of its Net Zero Strategy from a parliamentary committee inside a week, after the House of Lords Industry and Regulators Committee followed the Commons’ Public Accounts Committee (PAC) in accusing Ministers of failing to plug significant gaps in its decarbonisation plans.

The Lords Committee said that while last autumn’s Net Zero Strategy represented progress there was still insufficient policy detail in a host of key areas, which meant the government was failing to incentivise the £50bn a year of investment that is estimated to be needed to meet clean energy and net zero goals.

Echoing numerous previous reports and complaints from business groups, the report argues there is insufficient clarity on how the government plans to deliver on its goals for new nuclear plants, energy efficiency upgrades, heat pump installations, and a raft of other areas.

It also argues that the government is yet to clearly spell out how the upfront cost of low carbon infrastructure and upgrades should be funded.

“The government has set ambitious targets for net zero including a carbon-free power system by 2035; however there is no point planning a carbon-free energy future if you haven’t got a clue how you will get there or how it will be paid for,” said Lord Hollick, Chair of the Committee.

“We now need urgent action from the government to answer outstanding questions on issues such as how they will incentivise households to replace gas boilers with heat pumps – and what plans there are for the six million homes where heat pumps may be unsuitable – what funding mechanisms will be established to encourage investment in small modular nuclear reactors and how the upgrade of our infrastructure to allow the use of hydrogen for heating will be funded. These are basic questions that need to be answered before we will get the investment we need to get to net zero.”

To help fill the on-going policy gaps the Committee calls for the urgent establishment of a Transformation Taskforce within government, reporting to the Prime Minister and housed within the Cabinet Office. “This taskforce would work across government departments, including the Treasury, to set out a clear roadmap for the development and implementation of energy policies, and act as a coordinator and monitor of progress,” the Committee said.

The report also argues that the Treasury should be willing to increase borrowing to help fund net zero-related projects. “The amounts that can realistically be raised via surcharges on energy bills is not enough,” Hollick said. “Bills are regressive as the poor pay more of their income on energy costs; it is also unfair to the current generation as we are asking current billpayers to cover the huge costs of something that is designed to mainly benefit future generations. The government should look again at using greater public borrowing to fund what are huge and long-term infrastructure costs.”

He added that such a move “would give investors confidence to invest in new technologies and ensure the public aren’t hit immediately with higher bills at a time that many are already struggling with fuel poverty”.

In addition, the report argues that the government should review whether regulator Ofgem, is creating barriers to the net zero transition and argues that the government should beef up energy security measures, setting out clearly the future role for nuclear and gas, including domestic gas exploration, to backup more weather-dependent intermittent energy sources.

The report follows similar criticism earlier this week from the PAC, which accused the government of producing a Net Zero Strategy that lacked information on how it will be funded and highlighted concerns over the Treasury’s failure to address how to manage fuel duty revenues that are set to fall as electric vehicle demand soars.

The reports come as calls are growing for the government to urgently bring forward new measures to curb UK energy demand and boost domestic energy generation so as to slash Europe’s reliance on Russian gas in response to the invasion of Ukraine.

The government has signalled that it wants to ramp up renewables and nuclear development, accelerate energy efficiency measures, and boost domestic production, while some Ministers are reportedly calling for a revival of controversial fracking projects. But the government is yet to come forward with any new policy measures in response to the crisis in Ukraine, soaring energy prices, and the growing threats to European energy security.

In response to the Lords Committee report a government spokesperson insisted the UK remained on track to meet its net zero emissions goals. “Detailed measures are set out in our comprehensive Net Zero Strategy, which has been widely welcomed by a range of experts, including the independent Climate Change Committee,” they said. “With oil and gas prices are at record highs, so we need to move away from expensive fossil fuels. The more clean, cheap and secure power we generate at home, the less exposed we will be to expensive gas prices set by global markets.”

Want to find out more about how the net zero transition will impact your business? You can now sign up to attend the virtual Net Zero Finance Summit, which will take place live and interactive on Tuesday 29 March and will be available on demand for delegates after the event.

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