Did Rachel Reeves deliver a net zero Budget?

The UK’s recent Budget included a series of measures which have prompted debate over its impact on achieving net zero.

While Rachel Reeves announced significant investments in green energy, hydrogen projects and electric vehicle incentives, a number of her decisions have raised concerns about the effectiveness of the UK’s environmental sector.

While Wednesday’s Budget announced a £40bn tax raise, billions of pounds are set to be invested in the environment.

Hydrogen and clean energy investment

Notably, Reeves pledged to pour £2bn in hydrogen schemes in the UK – and changes to the windfall tax on North Sea oil and gas firms.

Hydrogen is considered to be essential in decarbonising industries which are difficult to electrify, such as manufacturing processes or heavy transport.

Sector leaders see this investment as vital in reinforcing the UK’s leadership in clean energy and creating a stable market for hydrogen-based solutions, which could accelerate the transition to net zero.

Other green investments in the Budget focused on clean energy sources such as carbon capture and storage (CCS), nuclear, and green hydrogen.

These allocations support the UK’s long-term environmental goals by aiming to diversify energy sources, reducing reliance on fossil fuels.

The government’s promise of a 35 per cent capital uptick on renewable energy projects is also expected to channel significant private sector investment into sustainable energy infrastructure.

Fuel duty freeze

Reeves’ decision to freeze fuel duty was met with strong criticism due to its environmental consequences.

Analysis from Carbon Brief indicated that this freeze has contributed to a seven per cent increase in greenhouse gas emissions since 2010.

Critics argued the decision undermines climate commitments, especially as the cost of public transport continues to rise annually.

Posting on X, Paul Johnson from the Institute for Fiscal Studies said: “For goodness sake… the government is supposed to care about climate change”.

Given that fuel duty has now been frozen for 15 years, many see this policy as inconsistent with the urgency of the UK’s net zero targets.

Agricultural and food resilience funding

The Budget left funding for food resilience and farming payments uncertain, an issue that environmentalists and farming advocates are keeping a close eye on.

Any cuts to these sectors would affect farmers’ ability to support biodiversity and nature restoration on their lands, as key components of the UK’s environmental targets.

Without strong financial support, some worry that the UK could fall behind on its crucial nature restoration goals.

Former Liberal Democrats leader Tim Farron said: “The Conservatives utterly failed our farmers; Labour had the chance to do right by them but have let them down.”

Electric vehicles support

The Budget also reaffirmed the government’s commitment to phasing out diesel and petrol vehicles, due to its implementation of electric vehicle (EV) incentives.

These include a freeze on the first-year tax rate for zero-emission vehicles for the next five years, and an added £200m for EV charging infrastructure.

Yet, Wednesday’s announcement increased vehicle excise duty for plug-in hybrids, which aligns them more closely with traditional engine vehicles, discouraging hybrid vehicle adoption.

What’s missing?

While the Budget included many positive steps towards net zero, industry leaders argue that its achievement will require clearer, long-term transition plans and policy coordination across all government departments.

The World Business Council for Sustainable Development (WBCSD)’s senior director, Jennie Dodson, said: “The Business Breakthrough Barometer shows that nine in ten businesses are ready to invest more in the clean energy transition if governments implement policies to address barriers to scale deployment.

“Countries that are creating those conditions, such as the US with the Inflation Reduction Act, are attracting significant investment in climate goals and strengthening long-term growth.”

She added: “The Budget saw the UK government announce new investment and market opportunities in the power, industrial and hydrogen sectors.

“If they now set long-term transition plans and provide clarity on the policies to address all sectors’ barriers, this will likely unlock large-scale investment and help to restore Britain’s international leadership on climate change.”

Policy contradictions, such as the fuel duty freeze and uncertainty around farming subsidies, dampen some of the budget’s environmental impact.

The government is required to put in place additional measures, collaboration and perhaps more action to meet the increasing scale of climate change.