The Government should include fossil fuel pollution from heating in the new post-Brexit emissions trading scheme and create a new market for Greenhouse Gas Removals, according to a new report from Energy Systems Catapult.

The Government should also introduce a new carbon regulator to help verify emission reductions from sectors where emissions are hard to measure, such as agriculture.

The seven recommendations from the net zero innovation and technology centre will help to maintain UK global leadership on climate action, which will be put to the test in two months at COP26 and in the upcoming Net Zero Strategy.

They will also help unlock investment and innovation on the scale needed to meet the net zero targets across all major emitting sectors – travel, heating, manufacturing, power generation, and farming practices.

Energy Systems Catapult carbon policy practice manager, Dr Danial Sturge, said: “In the first two decades of the 21st century the UK has been a leader in the fight to mitigate dangerous climate change. Think of the Stern Review in 2006, the Climate Change Act in 2008, the creation since 2010 of a world-leading offshore wind sector, and the formal adoption of a Net Zero emissions target in 2019.

“Hosting COP26 in 2021 – along with the forthcoming Net Zero Strategy – presents the UK with a new opportunity for global influence, this time as a leader in shaping the markets and policy reforms needed to deliver Net Zero.

“While many countries have followed the UK’s lead in adopting Net Zero emissions targets, few if any have implemented sufficiently robust policies to drive the investment and innovation at anything like the required pace and scale.

“Stable and enduring policies that cover all key emitting economic sectors and reward investment and innovation in reducing emissions will be needed. Aligning market incentives across the economy should be a central part of the UK’s Net Zero Strategy.

“The COP Presidency provides us with a unique position, an opportunity, to move the debate forward and to accelerate global progress. By ramping up our own ambition and implementing approaches such as those discussed in this briefing, the UK can continue to lead by example and provide the framework for UK businesses and innovators to thrive in a global market.”

Energy Systems Catapult research has highlighted how current UK policies create incentives (or ‘effective carbon prices’) that are uneven and too weak to drive change for most emitting activities (see chart below).

Indeed, the relative prices facing many sectors continue to favour high rather than low and zero carbon choices. Notably, current gas and electricity prices drive most consumers to stay with the high carbon status quo of gas boilers for home heating.

The Net Zero Strategy and COP26: An Opportunity for UK Leadership in Net Zero Policymaking

This briefing sets out how the UK can build on its existing regime of carbon targets to create a framework of policies and governance capable of delivering Net Zero.

Ahead of COP26 this autumn, Energy Systems Catapult see an opportunity for the UK to show genuine leadership in Net Zero policymaking. The UK Government can build on its recent 10 Point Plan and sectoral decarbonisation strategies by committing to develop and implement a range of policies and institutions as part of the UK’s long-term Net Zero Strategy, due to be published in the coming weeks.

Energy Systems Catapult’s work on NZCP over the past four years suggests that this strategy should include the following key commitments:

1. Commit to establishing a Carbon Monitoring, Reporting, and Verification and Accounting Regulator, responsible for robust empirical and scientific methods for measuring or accurately estimating emissions, and ensuring emissions reduction actually occurs in line with Carbon Budgets and the Paris Agreement.
2. Commit to expanding the scope of the UK Emissions Trading System to cover heating and road transport emissions, as part of comprehensive policy packages for reaching Net Zero in both sectors.
3. Commit to fully adopting long-term carbon performance standards in the buildings sector by 2035, creating a clear driver for innovative building energy solutions.
4. Commit to adopting a Net Zero emissions by 2035 policy driver for the electricity sector, this could be in the form of an outcome-based decarbonisation policy mandate such as a decarbonisation obligation that compliments the UK ETS.
5. Commit to developing an enduring set of incentives for deep industrial decarbonisation with appropriate mechanisms to mitigate competitiveness impacts, centred on the UK ETS while considering interactions with international trading partners’ carbon policy plans (e.g. Carbon Border Adjustment Mechanism designs).
6. Commit to linking new agricultural reward schemes to the adoption of climate friendly farming practices and land use changes, and to developing a long-term incentive framework for Net Zero land use.
7. Commit to creating a linked Greenhouse Gas Removals Marketplace, initially by establishing a publicly-funded and centrally-accredited system.