Carbon Budget 7: The Industrial Strategy Signal Business Can’t Ignore
The policy signal that matters more than the Net Zero rhetoric
Reflections on the ‘no‑regrets’ opportunities business can’t afford to miss.
Net Zero may feel like it’s falling out of fashion politically, but last week the Government voted overwhelmingly to pass the 7th Carbon Budget into law.
The political rhetoric at home and across the pond is that it’s expensive, unnecessary and stifling growth. The recent Tory victory in the Aberdeen by-election could have been seen as a referendum on Net Zero; however, I would perhaps more accurately describe it as a referendum on Energy Policy and the associated shifts in industrialisation (or, in the case of the oil and gas industry, de-industrialisation). Back in the dim and distant past, I was taught at school about the end of oil & gas reserves. That reality hasn’t changed; we’ve just not articulated what comes next – particularly to those communities who are experts in the current markets. We can’t just cancel Net Zero and expect that reality to go away.
Carbon Budget 7 will shape investment decisions, regulatory expectations and market signals for the next decade — whether or not anyone calls it ‘Net Zero’.
So what are the ‘no regrets’ markets — the areas that deliver economic and energy security benefits regardless of the political branding? We are, after all, an industry which loves certainty and steady markets in order to invest and develop the technology, skills and capacity to deliver. Undoubtedly, there are elements (as with any programme) that are less economically attractive, and perhaps we can view them with a little more scepticism and slightly lower confidence. I’d be wary if your long-term growth plans centre on carbon capture & storage, for example.
But there is reason to be positive: the underlying benefits of the Net Zero transition are still ultimately the right things to pursue for the country, reducing UK bill payers’ exposure to fossil fuel shocks, supporting economic growth and helping deliver the UK’s legally binding carbon targets. Indeed, these were the benefits, listed in this order, that our current (at the time of writing) SoS set out when he laid the bill before parliament.
“Carbon Budget 7 will shape investment decisions, regulatory expectations and market signals for the next decade — whether or not anyone calls it ‘Net Zero’.”
So, what are the ‘no regrets’ markets which deliver on the benefits if not under a Net Zero Banner?
Local generation & storage, likely to only be strengthened further by a Burnham devolution-heavy premiership. Renewables, albeit the manufacturing supply chain here has not been UK business friendly, but the associated infrastructure and services might open up opportunities. Alternative fuels are, in my view, significantly underrated. Think of the next generation of oil refineries — hybrid chemical processing plants producing hydrogen, SAF or e‑diesel. The UK has limited recent experience delivering these assets, which creates a risk that European or US EPCs will dominate unless we position or partner early. Alternative nuclear technologies, GBE-N has quietly put out a sponsorship framework to invite developers of alternative nuclear technologies to join the Government pipeline. Rolls-Royce is undoubtedly in pole position, but our evidence shows we will need far more than one fleet of SMRs to meet our energy demands in future.
And so back to Aberdeen, where the prospect of North Sea Oil might well get revisited, if the timescales and economics stack up, or at least an investment in supporting those communities of experts to transition themselves into one of the ‘no regrets’ markets outlined above. For businesses, the question is how to support these communities into the next wave of industrial opportunity — and how to position early in the markets that will define the transition.
Built Confidence Ltd. is a specialist strategy consultancy supporting projects, programmes and businesses in their formative stages — helping them move from concept to credible delivery.
Hannah Vickers is the Managing Director of Built Confidence and the Construction Leadership Council member for Net Zero & Productivity. She was previously an advisor in HM Treasury.
