Delivering modern, reliable, and clean infrastructure can both drive economic growth and deliver on the UK’s net zero and nature targets, but only if the government rapidly sets out a clear plan to ramp up public and private investment in power grids, green heating, public transport, and climate resilience over the next three decades, government advisors have warned.
The National Infrastructure Commission (NIC) today stressed that both economic growth and climate targets were achievable and affordable for the country, but only if the right policy steps are taken by the government to unlock tens of billions of pounds additional investment to transform the UK’s ageing infrastructure.
Around £20bn to £35bn of investment is needed from the private sector each year between 2025 and 2050 in order to deliver the increased renewable electricity capacity, greater grid flexibility, and new hydrogen and carbon capture and storage facilities required to decarbonise the power system, according to the report.
Moreover, it estimated that around £28bn a year of public investment is needed to improve public transport and tackle congestion – particularly in urban areas – so as to boost regional growth and drive down emissions.
And with most of the UK’s existing infrastructure expected to still be operating in 2055, the report argues that up to £1.5bn of public investment and £12bn of private investment is needed each year through to 2050 in order to upgrade assets to improve their climate resilience.
The findings are at the heart of the NIC’s five-yearly review of the UK’s infrastructure needs for the next 30 years, which includes a “comprehensive” assessment of the costs and investments needed to boost regional growth and meet legally-binding net zero goals.
The report is upfront about the need for “significant” public and private investment in new infrastructure if the UK is to rebalance its economic geography, meet climate obligations, improve resilience and enhance the natural environment, estimating that such spending needs to rise tens of billions over the next three decades – a challenge made more acute by intensifying global competition to attract infrastructure investors.
As such, the NIC argued that a “new approach” is needed to unlock such investment, characterised by clearer planning and a raft of decisive policy actions from government, many of which it said needed to be enacted in the coming months.
Specifically, the report called on Ministers to rule out hydrogen for heating and introduce a more ambitious national domestic heat pump and energy efficiency programme, noting that around seven million buildings in England alone need to transition to green heating by 2035 to deliver on the UK’s Sixth Carbon Budget.
It called for a “bold, comprehensive and fully costed programme” of government subsidy support for green heating and insulation. Around £1.3bn per year should be provided to cover the full cost of home heat pumps for lower income households, while another £1.9bn in annual subsidy support should be provided to allow for £7,000 grants towards the cost of heat pump installations, and £3.2bn should be earmarked for decarbonising the public sector estate and social housing with insulation and electric heating, the NIC calculated.
It also called for increased investment to boost power grid flexibility, fresh powers to allow local leaders to tackle car traffic in urban centres, and more work to build out water supply infrastructure and tackle leaks.
Other recommendations in the wide ranging report include calls for urgent reforms to drive up recycling rates towards the UK’s target of 65 per cent by 2035, the confirmation of the proposed ban on hard to recycle plastics, and a commitment to phasing out energy from waste plants that are not fitted with carbon capture capability.
The NIC argued that its proposals would help to both drive economic growth and push down costs for consumers by reducing their reliance on expensive fossil fuels. It calculated that the average households could save as much as £1,000 a year by the mid-2030s as a result of an accelerated transition towards net zero emissions.
The NIC said its recommendations would need “an ambitious and sustained programme of policy change with clear direction”, and that realising the benefits would “require a significant increase in overall investment in economic infrastructure”.
But it stressed that “these investments are vital to the challenges ahead”. “Making them now should lead to lower overall costs for households and businesses for the long term,” it added.
Overall, the report calculates UK infrastructure investment needs to increase from an average of around £55bn a year over the last decade – which accounts for around 10 per cent of total investment in the UK – to around £70bn to £80bn annually in the 2030s and £60bn to £70bn in the 2040s, in order to both meet the UK’s climate goals and deliver interconnected growth across the country.
That includes a rise from around £20bn annual public infrastructure investment over the past decade to around £30bn over the coming two decades – which is in line with recent government commitments through to 2035 – according to the NIC.
Private infrastructure investment, meanwhile, needs to increase from £30bn to £40bn over the past decade to £40bn to £50bn in the 2030s and 2040s, which it said could be unlocked with clear long-term plans, greater policy stability, pro-investment regulations, and reforms to speed up planning processes.
The NIC’s claims that investing in more climate resilient infrastructure to accelerate the net zero transition could save households thousands of pounds, appear to run contrary to some of the recent rhetoric from the Prime Minister Rishi Sunak, who has announced a flurry of green policy changes while characterising the net zero transition as a potentially costly exercise for many households.
Sunak has repeatedly argued that his decisions to scrap energy efficiency standards for landlords, delay phase out dates for new fossil fuel car sales, and weaken plans to replace fossil gas boilers were designed to avoid imposing additional costs on households already facing high inflation and energy bills.
The Climate Change Committee had already last week warned that recent green policy changes from the government would make it “harder” to achieve net zero in the UK, and that several of the recent policy changes – particularly for energy efficiency standards and other efforts that could sustain reliance on fossil fuel energy for longer in the UK – risk heaping higher costs onto households.
And today another of the government’s independent advisory bodies – the NIC – appears to echo many of the CCC’s recommendations, in calling for a clearer policy plan and greater investment in upgrading UK infrastructure to support net zero, both to drive down emissions and boost the economy.
Sir John Armit, chair of the NIC, described today’s report as “probably the most comprehensive assessment yet of the infrastructure costs associated with supporting regional growth and reaching net zero”, adding that its conclusion was clear that delivering climate and nature-friendly infrastructure could boost the UK economy.
“The good news is that modern, reliable infrastructure can support economic growth, help tackle climate change and enhance the natural environment,” he said.
“We stand at a pivotal moment in time, with the opportunity to make a major difference to this country’s future. But we need to get on with it.
“People often talk about infrastructure as the backbone of our economy: what our infrastructure needs now is the collective mettle to turn commitments into action that will reap rewards for decades to come.”
The government is expected to respond formally to the NIC’s assessment within 12 months and in a statement it welcomed the NIC’s assessment, which it said would inform its long-term ambitions to boost growth and deliver net zero.
“Delivering high quality infrastructure is the foundation of our future growth,” it said. “Our Network North plan will deliver the transport that matters most to people and we’re adopting a fairer and more pragmatic approach to meeting net zero that supports households and families to make greener choices whilst easing the burdens on working people. We are delivering over £600bn of planned public sector investment in infrastructure, R&D and defence over the next five years, including an unprecedented package to improve connections in our city regions and billions to decarbonise buildings.”
Joe Dillon, a research at climate think tank E3G, hailed the NIC’s assessment, which he said should provide “an invaluable roadmap” for the UK government to develop a new net zero investment plan to attract much needed private backing for clean energy infrastructure.
“Infrastructure upgrades should be a top priority for the government to protect UK households from current and future bill shocks and inflation,” he said.
“Ramping up private investment will require a step change in the government’s approach. Whilst leading investors are desperate for more green investment options, financial institutions need clarity, consistency and policy stability from the UK government. Committing to the NIC’s proposals will go a long way to increase investor confidence and make the UK more competitive.”
Dr Janet Young, director general at the Institution of Civil Engineers (ICE), said today’s NIC report “reinforces the central role that infrastructure plays in meeting the big challenge that the UK faces – namely, regional inequalities, decarbonising society, and improving climate resiliency”.
“If the UK continues its stop/start approach to infrastructure planning and fails to commit to long-term goals, it will not only miss the much-needed opportunity to attract private investment to deliver needed projects, the problems being faced by the public will get bigger,” she warned.
The report comes on the same day as a separate analysis from the Social Market Foundation think tank, which argues that the government’s recent decision to dilute plans to phase out gas boilers would undermine investment in the domestic heat pump supply chain and ultimately drive up costs for consumers.
“The government’s recent delaying of key net zero initiatives will mean that British households’ energy bills will be determined by Putin’s war or supply chain shocks,” said Niamh O Regan, researcher at the Social Market Foundation. “It will also mean that the British heat pump industry forgoes a chance to grab the growing global demand for low carbon heating. Unless the government starts investing today in the technology and the workforce needed to realise savings from transitioning to low carbon heating, British consumers, workers and manufacturers will be worse off.”
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