Zoe Alipranti
Senior Policy Programme Manager
New advice from the UK Climate Change Committee (CCC) recommends an 87% cut in emissions by 2040 and has drastically reduced the estimated cost of net zero. We explore how current and expected policy developments can help to meet this ambition.
The UK government should reduce 87% of emissions by 2040 compared to 1990 levels, the CCC advises, as its seventh carbon budget reduces the predicted cost of reaching net zero by more than 70%. Covering the period 2038-2042, the government now has until 30 June 2026 to agree and legislate this seventh budget recommendation.
This emissions figure aligns with the UK’s recent Nationally Determined Contribution (NDC) target to reduce greenhouse gas emissions by 81% by 2035. The CCC budget stresses the role of the private sector and the importance of upfront investment in delivering the net zero transition.
These latest figures are a welcome update, but ambitious targets must be supported by delivery on the ground. With private capital expected to provide most of this investment, the right incentives to redirect financial flows are vital.
CCC analysis predicts a net cost of around £108 billion between now and 2050 to reach net zero, 73% lower than previously thought.
A whole-of-government approach that creates the necessary incentives and price signals to decarbonise the real economy is essential for investors considering decarbonisation, alongside robust disclosure requirements to inform investment decisions and engagement. We explore the groundwork already in place and what more can be done to support the UK’s legally binding objective.
Costs falling
This latest CCC analysis predicts a net cost of around £108 billion between now and 2050 to reach net zero, 73% lower than previously thought in its sixth carbon budget.
Upfront investment unlocks these savings during the seventh carbon budget period, with net costs estimated to be around 0.2% of UK GDP per year on average. This potential should further stress the need to remove barriers that impede investor confidence today.
Electrification will make up 60% of emissions reductions by 2040, the CCC estimates, which includes decarbonising the grid and replacing fossil-fuelled cars and heating systems with electric alternatives. Scaling investment in low-carbon technologies, clean grid capacity, and the transition of heavy-emitting sectors can all deliver benefits, helped by the falling cost of low-carbon technologies.
The UK can strengthen credibility with investors by setting out clear sectoral decarbonisation roadmaps for key sectors.
The findings align with our 2024 UK Call to Action – delivered to the government shortly before the general election – which called for policies and incentives that encourage greater investment in low-carbon energy technologies while reducing barriers to entry.
Sectoral focus
To capitalise on this opportunity, the UK can strengthen credibility with investors by setting out clear sectoral decarbonisation roadmaps for key sectors, informing an economy-wide national transition plan. Doing so can support the UK’s international climate commitment and CCC recommendations.
Encouragingly, the relaunched Net Zero Council will support the development of sector roadmaps. It aims to bring together a range of voices to deepen the partnership between government, the private sector, civil society and local authorities to help the UK become a ‘clean energy superpower.’
Informed by investors, our recent paper on sectoral decarbonisation pathways recommends overlaying them with roadmaps which provide transparency around investment gaps and flows to be most effective. These should be accompanied by targeted policy interventions to incentivise private capital where it’s needed most.
Sectoral decarbonisation roadmaps will also be a focus for the UK Transition Finance Council (TFC) policy workstream. Launched in early 2025, the TFC aims to build on the recommendations of the Transition Finance Market Review, which highlighted that the UK was uniquely placed to become a green finance hub. A separate TFC workstream led by Faith Ward, IIGCC Chair and Chief Responsible Investment Officer at Brunel Pension Partnership, will explore how to scale transition finance and remove existing barriers.
The government’s cross-economy plan, expected later this year, can further lay out the next steps on these roadmaps, demonstrating a clear, coordinated and united approach to net zero.
Milestones ahead
Already, Labour has put in place institutions to accelerate real economy decarbonisation, though questions remain around their operationalisation. Great British Energy and the rebranded National Wealth Fund currently lack the necessary mechanisms to crowd in private finance, and the latter could find its budget stretched as defence spending increases.
However, both institutions can complement decarbonisation efforts if supported by the upcoming Industrial Strategy that sets out the need to pursue competitiveness, growth, and net zero in tandem. This can boost productivity and give investors the certainty they need about the UK’s path to net zero.
A consultation on mandatory transition plans, scheduled for the first half of 2025, could act as a bridge from sustainable finance policies to real-world emissions cuts. It can build on Transition Plan Taskforce (TPT) research and strengthen the UK’s role as a centre for sustainable finance. The recent incorporation of TPT guidance into the International Sustainability Standards Board (ISSB) strengthens the case for TPT-aligned disclosures
Making the components of a comprehensive transition plan clear as we move into the implementation stage will be key, complemented by efforts to complete the UK sustainable finance framework. The main milestone ahead is a consultation on the UK Sustainability Reporting Standards, which draw on disclosure recommendations from the International Financial Reporting Standards (IFRS) S1 and S2.
Robust standards here will reinforce UK leadership on sustainability reporting, enabling investors to make informed, strategic investment decisions, and allow for the interoperability of UK policies with international frameworks.
Making the case
The UK government's 2023 Mission Zero review concluded that net zero is "the economic opportunity of the 21st century." In a period of uncertainty, with a supposed rift between climate policy and growth in some areas, the CCC's recommendations serve as a valuable reminder of this potential.
To that end, we will continue to make the case for enabling, coherent policy frameworks that drive transparency and support real-world decarbonisation, while recognising the financial risks and opportunities of the energy transition.
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