Net Zero Carbon Policy is a new Energy Systems Catapult thought leadership project, focusing on how the UK can build an innovation-friendly, economy-wide framework for Net Zero.

We aim to build on the insights from our Rethinking Decarbonisation Incentives project, to develop credible policy options for an efficient and socially beneficial transition.

In this new report, Accelerating to Net Zero: A Sector Led Approach to an Economy-Wide Carbon Policy Framework, we discuss the role of carbon policy, which we use as a shorthand term for all policies that require or incentivise action to reduce or remove greenhouse gas emissions, including pricing, regulation, subsidies, and standards.

We propose a set of guiding principles for designing and implementing policies to achieve Net Zero. We also explore and make the argument for taking a sector led approach that can accelerate progress during the 2020s from the incomplete and unbalanced pattern of current carbon policies towards a more coherent economy-wide carbon policy framework in the 2030s. Finally, we provide set of recommendations for policymakers.

Key points

The sector led approach that we propose in this report:

• Recognises the importance of sector specific barriers to change.
• Avoids relying on an overarching carbon pricing mechanism.
• Enables carbon policy to be designed at a sectoral level to address sector specific challenges (e.g. mitigating competitiveness impacts in industrial decarbonisation or enabling energy suppliers to create attractive consumer propositions for home energy services and heat decarbonisation).

A sector led approach can also be combined with complementary policies and co-ordination mechanisms (such as infrastructure regulation or multi-vector local energy planning tools) to enable a whole systems approach to the energy transition.