What’s going on?

UK Prime Minister Rishi Sunak announced on Wednesday a backtracking on a number of the UK’s current net zero policies. Although reiterating that he remains committed to the legally binding target of net zero by 2050, he has scrapped and delayed a number of initiatives that were intended to help the UK reach the target. He presented the changes as bringing pragmatism back into climate politics, and as offering more transparency about what changes will actually be needed to achieve net zero, but critics remain sceptical as to whether changes will actually benefit consumers and businesses or leave the UK with enough time to reach its targets.

The most contentious of these changes is the delaying of the banning of new petrol and diesel cars which had previously been scheduled for 2030, and will now be 2035. Sunak insisted in his speech on Wednesday that the upfront cost of electric cars was not falling fast enough and that investment in charging infrastructure is too low, and thus that this change is designed to alleviate the net zero burden on consumers. 

Second, Sunak has committed to significantly weakening the plan to phase out the installation of gas boilers by 2035, instead aiming for a phase-out of only 80%, while also delaying the 2026 ban on off-grid boilers to 2035, and also reducing that goal to an 80% phase out. He maintained that the government should never be in the business of forcing anyone to change their existing boiler for a new heater, stating that “you’ll only ever have to make the switch when you’re replacing your boiler anyway - and even then, not until 2035”. 

Further, while the UK retains some of the most badly insulated housing stock in Europe, Sunak has announced that the government would no longer require homeowners to meet proposed energy efficiency targets, which would have imposed fines for landlords who failed to upgrade their properties to a certain level of energy efficiency. He claims that by doing so the government has saved homeowners from what he called ‘expensive insulation upgrades’.

What’s in it for you?

Sunak suggests that these changes, as well as setting more realistic expectations as to what is achievable and in what timescale, will alleviate the long-term cost of net zero on businesses and the consumer, but critics suggest that this may not be the case. Experts such as Bob Ward, who leads the Grantham Research Institute on Climate Change and the Environment suggests that delaying the phase-out of combustion engines “would mean that UK drivers will remain exposed to the volatility of international oil prices” which have been rising amongst cuts from major producers such as Saudi Arabia and Russia. 

The same goes for changes to regulation of boilers; Ward argues that “the prime minister appears to have forgotten that the current cost of living crisis has been triggered by a huge increase in the price of natural gas following Russia’s invasion of Ukraine”. The Office for Budget Responsibility recently found that the cost of continued gas reliance were more than double those of reaching net zero. Such an argument suggests that the UK, in the face of an energy crisis, would actually be financially better off moving more quickly to embrace clean energy, rather than slowing down in an attempt to ease the medium-term financial pressure on consumers. 

Looking wider, such delays could see the motor industry lose significant confidence in the UK in the face of its seemingly quick-to-change targets and policies. Ford has been one of the most vocal, warning that “our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three”.

Despite Sunak insisting that the changes were designed to alleviate the cost of net zero to consumers amid a cost of living crisis, it seems more likely that the motivation was political. Most consumers, especially those adversely affected by the cost of living increase, are unlikely to be buying brand new cars in 2030, and most of the UK buy second cars regardless of macro economic changes. However, given the recent result in Uxbridge, and the extreme pushback over the decision to expand ULEZ, the government seems to have a clear incentive to push back commitments on net zero. Snap polling immediately after the decision showed support for the decision.

What happens next?

These changes are the hallmarks of an important behaviour change in Rishi Sunak’s conservative government that will see them no longer take forward policies that so heavily encourage, or perhaps oblige, more sustainable behaviour among consumers and businesses. This is clear from Sunak’s claim that he has additionally scrapped a number of proposals in government involving the taxing of meat and flights, legislation around compulsory car sharing, and requiring the public to sort their rubbish into seven different bins. Such policies have never been proposed by either party in government but have been discussed by civil servants in some governments as ways to reduce net zero. Rishi Sunak has thus decisively separated the conservative party from an approach that would see the government introduce legislation that would heavily regulate consumer behaviour in an attempt to achieve net zero by the 2050 target. 

The British electorate is remarkably supportive of policies that encourage sustainable living, with many in favour of the planned ban on new diesel and petrol cars from 2030, as well as flight taxes. They are also decisively more unified on such policies than those of other developed western nations, with both Labour and Conservative voters among the biggest green supporters of all major parties. Such support has been rewarded with some policy success, with Britain becoming the first in the G7 to commit its net zero ambitions to law.

However, Sunak’s changes have likely created a partisan divide on net zero policy, and has drawn the battle lines of net zero over which the next general election will be fought. Within minutes of the end of his speech, conservatives fired a number of questions at Labour, including challenging it on the issue of whether it would return to the 2030 target for the sale of petrol and diesel cars and reverse other changes. Labour representatives expressed that they would work with industry to meet the 2030 target, maintaining that consumers and businesses would ultimately be better off because EVs have cheaper lifetime costs. Many Labour MPs were also quick to denounce the changes, with one shadow frontbencher announcing that Sunak had ‘lost the plot’. Miliband has also suggested that these changes mark a ‘philosophical difference’ between the parties, expressing that “I think the PM sees net zero simply as an obligation to be managed and not an opportunity to be seized. That is the way he behaved as chancellor and that’s how he’s behaving today”. 

Sunak has shown that the conservatives are very happy to create a partisan dividing line on net zero, something that will undoubtedly create uncertainty and disruption for businesses ahead of the next general election. As Ford pointed out, businesses need certainty as it creates the best environment for making investment decisions, and such a change will have ripped up industry plans. Miliband expressed dissatisfaction at this new divide, warning: “I’m disappointed for the country because the country needs ambition and a sense of plan. I don’t know how you plan on the basis of what this government is offering from one day to next”. He has encapsulated the fear among businesses, as already vocalised by Ford and others, that without a consistent and confident net zero policy, uncertainty and increasing political volatility will prevent businesses from preparing effectively for regulatory changes. 

Amongst severe political uncertainty and disruption, it remains vital to be benefiting from the latest political intelligence. Reach out to Polis Analysis for support navigating political and regulatory changes that impact your business.