UK's Climate Change Committee Publishes Seventh Carbon Budget

The UK's Climate Change Act 2008 requires the UK government to set five-year carbon budgets that cap total greenhouse gas ("GHG") emissions. The UK is currently operating within its Fourth Carbon Budget, which covers the period 2023-2027. 

On February 26, 2025, the UK's independent Climate Change Committee ("the Committee") published its report on the UK's Seventh Carbon Budget ("the Budget"). This statutory report provides advice to the UK government and sets out the recommended level of GHG emissions that the UK should aim for over the five-year period from 2038 to 2042, as well as a pathway to achieve net zero emissions by 2050. 

The Committee recommends that the Budget be set at 535 metric tons of carbon dioxide equivalent, including emissions from international aviation and shipping. This target is designed to ensure that the UK remains on track to meet its net zero emissions goal. 

The Committee estimates that adhering to its recommendations will result in net costs of approximately 0.2% of UK gross domestic product per year on average, with upfront investments primarily coming from the private sector. The recommendations align with the UK's revised nationally determined contribution under the Paris Agreement, which targets an 81% reduction in emissions by 2035.

The Committee has outlined 43 specific recommendations to achieve the Budget, focusing on several key areas, including: 

• Removing renewable policy levies from electricity bills to make low-carbon electricity technologies more affordable for consumers. This is expected to incentivize the adoption of electric vehicles ("EVs") and heat pumps. 
• Eliminating obstacles in planning, consenting, and regulatory funding to support the installation of EV charging points, new grid connections, and the rapid deployment of low-carbon technologies. 
• Clearer support for appropriate new technologies and definitive timelines for phasing out old ones.  
• Clarity on the balance between government support and market mechanisms such as the UK Emissions Trading Scheme and the carbon border adjustment mechanism to help businesses transition to low-carbon operations. 
• The importance of developing a skilled workforce to support the low-carbon transition. This includes implementing an engagement strategy to provide clear information to households and businesses about the role they can play in achieving emissions targets. 

The Budget report recommends that the Budget be achieved by pursuing a "Balanced Pathway" that incorporates five key routes to delivering the targets through a combination of electrification, low-carbon fuels, carbon capture and storage ("CCS"), nature-based measures, engineered removals, and low-carbon choices: 

• Electricity: It is anticipated that electrification will account for 60% of emissions reductions by 2040. UK-based renewables are to provide the majority of electricity. This will replace oil and gas across most of the economy, including electric vehicles, heat pumps, and industrial processes. However, this will require twice as much electricity by 2040 as currently generated today.  
• Low-carbon fuels and CCS: Hydrogen, bioenergy, and sustainable aviation and shipping fuels are to play a role in sectors where electrification is not feasible or optimal. CCS is to be used to capture and store emissions from fossil fuel and bioenergy use, as well as from direct air capture technologies. 
• Nature: Land use changes, such as woodland creation, peatland restoration, and energy crops are to increase the carbon sequestration capacity of the UK's natural environment, while also delivering benefits for biodiversity, water quality, and flood management. 
• Engineered removals: Removals are needed to balance residual emissions, principally from aviation. By 2040, both bioenergy with CCS and direct air capture are to be deployed.  
• Demand: Measures are to be introduced to reduce the demand for high-carbon activities, such as home insulation, more efficient use of resources, reductions in commercial, household, and food waste, and more efficient technologies in aviation and shipping. This is to be coupled with infrastructure enabling public transport, cycling, or walking instead of private vehicle use, and a continuation of existing trends, including greater choice of plant-based foods to foster a reduction in meat and dairy consumption.  

The Budget requirement for a transition to a low-carbon economy will require substantial investments in infrastructure and new technologies. The private sector is expected to play a crucial role in providing the upfront investment needed, but it is anticipated that the private sector will benefit from lower energy costs and improved energy security as the UK shifts toward more efficient, low-carbon technologies. Businesses in high-carbon industries will need to adapt to new regulations and market conditions, which may involve significant changes to their operations and business models. 

To successfully navigate the transition to a low-carbon economy, businesses should consider prioritizing investments in energy-efficient technologies and remaining engaged with government and regulatory bodies to stay informed about new policies and regulations. This will help them anticipate changes and adapt their strategies accordingly.

Philippa Prendergast-Coates, a trainee solicitor in Jones Day's London Office, assisted with the preparation of this article.