Implications of the New UK Budget on Green Policy

18th of November 2024

By Sanika Lad ( Net Zero Analyst, UCL Green Economy Society) 

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Labour’s 2024 budget, led by Chancellor Rachel Reeves, marks a significant shift in UK fiscal policy, targeting the country's long-standing lag in G7 investment(1). This budget introduces the largest ever tax increase in cash terms and prioritizes boosting green growth to elevate the UK’s standing in the green economy. With targeted investments, it aims to spur economic growth and advance sustainable development(2).

Key Green Initiatives in the Budget 

A pivotal shift in the budget is the adjustment of fiscal rules, allowing the government to account for assets alongside liabilities, which provides room for borrowing up to £50 billion annually for infrastructure projects(3). This move enables greater investment in critical green infrastructure, including gigafactories, hydrogen facilities, and carbon capture projects. The creation of the National Wealth Fund and GB Energy(2) is expected to attract private sector capital, amplifying public investment in the green sector.

Having reclassified nuclear as “environmentally sustainable,” the government has unlocked new investment channels, including a £700 million commitment to the Sizewell C plant, to secure low-carbon energy sources for the future(4). Additionally, £20 billion has been allocated towards carbon capture, aiming to sequester 30 million tonnes of CO₂ annually by 2030, a move projected to support 50,000 jobs and stimulate private investment(4).

Challenges and Criticisms

Although the budget promises substantial green investment, critics highlight gaps in its approach, particularly in energy efficiency and housing retrofits - both of which are easy to abate and crucial to meet national emissions targets. The nuclear emphasis has sparked concerns about waste management, with some viewing it as an imbalance that could overshadow renewables like wind and solar.

Although Labour’s approach to freeze fuel duty may slow transition efforts; this policy successfully acknowledges the reliance of many on affordable fuel for essential needs and instead, targets luxury emissions like private jets. 

Conclusions: 

The 2024 UK budget could indeed be a watershed moment for the country’s commitment to a greener future. By prioritizing infrastructure investment, green technology, and the shift to a low-carbon economy, the budget lays a robust framework for sustainable development. However, the real test will lie in the government’s execution of these policies—driving innovation, easing regulatory bottlenecks, and keeping investor confidence high. With careful implementation, this budget could not only position the UK as a leader in the green economy but also set a benchmark for how countries can balance economic growth with environmental stewardship. The steps taken now will shape the UK's ability to meet its net-zero goals and enhance both resilience and competitiveness on a global scale.

References: 

1. Smith N. Budget to unleash UK’s clean energy revolution [Internet]. E3G. 2024 [cited 2024 Nov 6]. Available from: https://www.e3g.org/news/budget-to-unleash-uk-s-clean-energy-revolution/

2. Business Green. “Invest, invest, invest”: An historic Budget, but is it a turning point for the green economy? [Internet]. Business Green. 2024 [cited 2024 Nov 6]. Available from: https://www.businessgreen.com/blog-post/4374901/invest-invest-invest-historic-budget-point-green-economy

3. Harris L, Mundy S. What the UK Budget means for green growth [Internet]. @FinancialTimes. Financial Times; 2024 [cited 2024 Nov 6]. Available from: https://www.ft.com/content/ba701461-a54f-40db-b229-fa22121a88e7

4. The Growth Company, Green Economy. Green Economy | How the UK Budget Will Impact the Green Economy [Internet]. Green Economy. 2023 [cited 2024 Nov 6]. Available from: https://www.greenintelligence.org.uk/news-and-resources/news/how-the-uk-budget-will-impact-the-green-economy/