Net zeroing in on investment: Can the Government deliver a fair transition?

The new Labour Government says it wants clean energy – and wider action on climate change – at the heart of its new economic strategy, pledging to go further and faster on decarbonising electricity, insulating homes, and shifting to electric vehicles than plans in the previous parliament.

These changes will facilitate economic growth and climate recovery in the long run, but the short-term costs in both political and actual capital investment should not be underestimated, and will need to be carefully considered. In particular, the Government should be acting now to ensure the costs are fairly shared, and do not lead to further declines in living standards for low-to-middle income households.

What scale of public investment can be achieved, given the condition of the public finances? How should the Government encourage the levels of private investment required? How can these costs be fairly shared across different regions and households? And will there be enough political will to deliver the investment needed for a fair transition?

1. Net zeroing in on investment Priorities for the new Government in delivering a fair transition Areeba Hamid, Joint Executive Director, Greenpeace UK Pilita Clark, Associate editor and columnist, Financial Times James Richardson, Interim Chief Executive, CCC Jonathan Marshall, Senior Economist, Resolution Foundation Chair: Lord David Willetts, President, Resolution Foundation July 24 @ resfoundation

2. 2 Historical greenhouse gas emissions and targets under forthcoming carbon budgets, for selected emissions sectors: UK Testing 2030 carbon targets mean more widespread decarbonisation is needed Notes: The UK Government is set to deliver a renewed Net Zero Strategy by May 2025, which could see changes in relative ambition between emissions sectors. Source: RF analysis of DESNZ, CCC data. @resfoundation The new parliament brings with it a need for faster and more widespread decarbonisation

3. 3 Proportion of household emissions by source, by equivalised after housing costs income deciles: UK, 2019 Lower income households face a disproportionate impact from measures to cut carbon from homes, transport and electricity Source: RF analysis of HMT, Net Zero Review data. @resfoundation The majority of poorer households’ carbon footprints are in the key areas where emissions reduction is needed

4. 4 Upfront investment costs as a proportion of lifetime costs, for selected technologies: UK, 2024 While lifetime costs in many cases can be lower, households will face a greater share of these at the point of purchase… …and will do so while facing significant economic headwinds Notes: For more detail on assumptions in this chart please see: J Marshall, Net zeroing in on investment, Resolution Foundation, July 2024. Source: RF analysis of DfT , Vauxhall, Ofgem, Autotrader, DESNZ data. @resfoundation Low carbon transport and heating will require households to make significant up-front investments

5. 5 Share of households eligible for selected energy efficiency schemes, by after housing costs income quintiles: England Stretched family finances means the need to target subsidies is more important than ever Notes: For more detail on eligibility criteria for the schemes shown above please see: J Marshall, Net zeroing in on investment, Resolution Foundation, July 2024. Source: RF analysis of English Housing Survey, IFS data. @resfoundation Unfortunately the UK has a mixed track record on ensuring support goes to those who need it most

6. 6 Share of unapproved onshore wind, solar photovoltaic and battery storage planning applications by IMD income deprivation quintile of the LSOA in which the project is located: England More than 90 per cent of renewable energy planning applications also in areas with an above-average share of residents aged 65 and over If financial incentives are to be used we must ensure they are proportionate Notes: Solar PV data is for ground-mounted installations only, excluding those on the roofs of buildings. Includes all planning applications submitted to June 2024 except those for projects that are now in operation. Source: RF analysis of DESNZ renewable energy planning database, ONS LSOA IMD data, 2021 Census data. @resfoundation And barriers to making investment happen, such as the planning system, need to be overcome

7. Net zeroing in on investment Priorities for the new Government in delivering a fair transition Areeba Hamid, Joint Executive Director, Greenpeace UK Pilita Clark, Associate editor and columnist, Financial Times James Richardson, Interim Chief Executive, CCC Jonathan Marshall, Senior Economist, Resolution Foundation Chair: Lord David Willetts, President, Resolution Foundation July 24 @ resfoundation