Low carbon investment doesn’t have a ‘2030 time stamp’, and investors support ambitious policies that unlock this investment - LCP

LCP welcomes today’s advice from the Climate Change Committee (CCC) on the Seventh Carbon Budget (CB7), which sets a legal limit for net greenhouse gas emissions from 2038 to 2042. Since taking office, the current government has focused on decarbonising the power sector in line with its mission for ‘Clean Power 2030,’ but this timely CCC advice reminds us that the requirements for investment and action continue into the next decade.

To meet CB7 and put the country on the path to net zero, LCP is calling for the following to be considered:

• Due to greater electrification, post-2030 electricity demand on the UK electricity grid is set to increase by 50% by 2035 and double by 2050 from today’s level. This will require investment in emerging technologies such as carbon capture and hydrogen power generation, along with making tough decisions on how people use energy.
• An investment of £120 billion is needed to meet Clean Power 2030, and this is set to grow to £235 billion in power generation technologies between 2030 and 2050.
• The government should adopt a ‘Clean Home Energy 2035’ strategy to match the ambition of the power sector, accelerating progress by rebalancing electricity and gas prices through targeted policies and implementing measures to protect fuel-poor households.

Sam Hollister, Head of Energy Economics at LCP, said:

“There is understandably lots of policy focus on 2030, but today’s 7th carbon budget advice is a reminder that there isn’t a 2030 time stamp and that investment in low carbon technologies is needed beyond this time horizon. As other parts of the system electrify, such as heat and transport, this increases demand on the power sector. Our analysis highlights that by 2050, demand could double from today’s levels with the most significant rise in demand expected between 2030 and 2035 where EV and heat pump adoption ramp up significantly.”

Jennifer Arran, Head of Residential Energy at LCP, commented:

“It’s encouraging to see the residential sector highlighted in the CCC’s advice today. With 25 million homes in the UK contributing around 20% of the country’s carbon emissions, there’s an urgent need for clear targets to phase out fossil fuel-based technologies by 2035. Every year, 1.5 million gas boilers and 1.7 million internal combustion engine vehicles are sold, yet we lack a clear strategy to transition to clean alternatives. The residential energy market is growing, but it won’t reach its full potential to benefit households and help us achieve net zero without proper investment and targets.”

Claire Jones, Head of Responsible Investment at LCP, added:

“Last year, we launched five climate asks for policymakers that seek to reduce the financially material systemic risks facing our economy from climate breakdown. One of these asks is that climate action matches the scale of the risk, removing the current disconnect between policy ambition and implementation levels. It is supported by 56 asset owners with assets totalling £186bn. This ask demonstrates investor support for strong climate policies from the government, for example, by setting carbon budgets that keep the UK on track to meet its commitment to reach net zero emissions by 2050. The asks also include making it easier for pension schemes to invest in climate solutions and for governments to set clear and credible net zero plans so investors can confidently invest in the net zero transition. What this shows is that there is an appetite for investors to help invest in the infrastructure that will deliver our clean-powered future. We encourage the government to provide the supportive policy environment needed to unlock this investment.”