The UK’s new Labour government must urgently reinstate the net-zero plans shelved by its predecessor in order to “limit the damage” caused by Conservative policy rollbacks, according to official advisors at the Climate Change Committee (CCC).
In its latest annual progress report, the CCC issues some frank words about the “confusing and inconsistent” behaviour of the previous government.
The Conservatives only brought in “credible” policies to cover one-third of the emissions cuts required to hit the UK’s 2030 climate target, the committee finds.
Despite being “insufficient”, the CCC notes that this is a slight improvement on last year. Since then, a requirement for carmakers to sell electric models and a deal to help decarbonise heavy industry both boosted the credibility of the UK’s climate strategy, it says.
Nevertheless, the committee criticises former prime minister Rishi Sunak’s decision to roll back key net-zero policies, notably delaying bans on the sale of new gas boilers and non-electric cars. It says that, contrary to his claims, there was “no evidence” the delays would save people money.
The committee points to a general need to scale up emissions cuts across the economy. It says almost none of the UK government efforts to scale up low-carbon technologies or invest in nature-based solutions are on track.
With this in mind, the progress report lays out a selection of “priority” actions that the new Labour government should take to “make up lost ground” so the UK can achieve its climate goals.
- New government
- Policy gap
- Road transport
- Buildings
- Industry
- Fossil fuels and hydrogen
- Electricity
- Agriculture and land use
- Aviation and shipping
- CO2 removal
- Waste and F-gases
- Adaptation
New government
A lot has changed in UK climate politics since the CCC’s last annual progress report was published in June 2023.
Earlier this month, Labour won a landslide election victory ending 14 years of Conservative rule. The party triumphed with a manifesto full of climate-related policies, including a pledge to decarbonise the nation’s electricity supplies by 2030.
Under the Conservatives, the CCC had issued a series of progress reports in which it warned, again and again, that the UK was not on track to meet its future climate goals.
Rather than heeding these warnings, the government led by Sunak announced a rollback of net-zero policies last September, citing “unacceptable costs” for British people. This included delaying the phaseout of both gas boilers and petrol and diesel cars.
The CCC’s latest report acknowledges some positive progress made under Sunak’s leadership. However, it is also quite critical of the outgoing Conservative government, which it says “undermined” the government’s own climate efforts with “confusing and inconsistent messaging and actions”. The report states:
“[The previous government] claimed to be acting in the long-term interests of the country, but there was no evidence backing the claim that dialling back ambition would reduce costs to citizens.”
The new report was prepared before the election, but it says the new government must “act fast to hit the country’s commitments”. It highlights the reinstatement of the weakened net-zero policies as a priority, noting that “damage can be limited”, if the government does so “quickly”.
Interim CCC chair Prof Piers Forster told journalists in a briefing that the new Labour government, which has hired former CCC chief executive Chris Stark to lead its clean power by 2030 “Mission Control”, has already made some progress. He said:
“They’ve done some quite good things in their first 10 days…They have concentrated their announcements on decarbonising energy.”
However, to achieve the UK’s broader climate goals, he added that the new government would “have to go much wider than energy”, with efforts to cut emissions “right across the economy”.
In the coming months, the Labour government must produce a new net-zero strategy, following a second successful legal challenge, which concluded that the existing UK plan was not credible.
It is also obliged to produce a new international climate pledge (nationally determined contribution, NDC) under the Paris Agreement, laying out the UK’s ambition for cutting emissions out to 2035.
The government will also have to legislate in 2025 for the seventh carbon budget, covering 2038-2042, following advice from the CCC due early next year. The CCC describes the seventh carbon budget period as a “stepping stone” on the path to net-zero by 2050.
(See Carbon Brief’s “Interactive: Labour government’s in-tray for climate change, energy and nature”.)
Policy gap
UK greenhouse gas emissions have been falling steadily for years, largely driven by the phaseout of coal and the growth of renewable power. Last year was no exception, the CCC says – confirming Carbon Brief analysis published in March.
The nation’s emissions dropped by 5.4% from 415m tonnes of carbon dioxide equivalent (MtCO2e) in 2022 to 393MtCO2e in 2023, excluding emissions from international aviation and shipping.
This marked an increase in the rate of emissions cuts, resulting predominantly from a fall in gas demand that “may in part reflect continuing high gas prices”, as well as a return to normal levels of imports of clean electricity from overseas.
The UK also comfortably achieved its third carbon budget, which ran for the period 2018 to 2022, the CCC confirms. It notes that, rather than due to deliberate climate policy, this can partly be attributed to the UK’s “lower-than-expected GDP”, which, in turn, is linked to the economic impact of Brexit and the Covid-19 pandemic.
However, for years the CCC has been warning of a looming gap between the government’s net-zero policies and its future emissions targets.
Only one third of the emissions reductions required to achieve the UK’s 2030 NDC goal under the Paris Agreement of cutting emissions 68% by 2030 are covered by plans the CCC deems “credible”.
There is an even larger credibility gap on the sixth carbon budget for 2033-2037, with only a quarter of the cuts needed covered by “credible” policies.
The chart below shows the distance between these credible policies (dark blue) and the “delivery pathway” that the government has set out for achieving its net-zero target (red).
Policies with “some” (light blue) or “significant” risk (purple) close part of the gap to getting on track, but around one fifth of the emissions cuts needed are either covered by plans that are “completely insufficient” or have no plans in place at all.
The CCC notes a “slight improvement” in credible policies, which only covered a quarter of the 2030 emissions cuts last year. This is due primarily to the introduction of the zero-emission vehicle mandate and a deal for the electrification of heavy industry.
This is illustrated in the figure below, which shows the change in expected emissions in 2030 based only on “credible” policies. The dots on the left show what the CCC expected in its 2023 progress report, while those on the right show its latest estimates.
While the committee now expects emissions from road transport and industry to be slightly lower, the outlook for some sectors – notably buildings – has worsened following the Conservatives’ rollback of net-zero policies.
One of the ways in which the committee monitors government progress towards net-zero is with 28 “key indicators”. Of the 22 that have a fixed benchmark or target, only five are currently on track, including a reduction in distances driven by cars and a drop in battery prices.
None of the CCC’s 12 indicators for the uptake of low-carbon technologies and nature-based solutions are classed as “on track”, except for the expansion of public electric vehicle charging stations.
The CCC also set out 27 specific “priority recommendations” in last year’s progress report for the previous government to implement.
It says only two of these recommendations have seen “good progress” over the past year and 12 have seen no progress at all. Nine of the priorities where no progress was seen were the responsibility of the Department for Energy Security and Net Zero (DESNZ), which oversees most of the policies in question.
Progress was also “too slow” in the devolved administrations of Scotland, Wales and Northern Ireland, the CCC notes, with limited headway on their priority recommendations.
While there are “almost” enough credible policies in place to achieve the upcoming fourth carbon budget, between 2023 and 2027, the CCC warns that this should not lead to complacency.
Both the fourth and fifth budgets are relatively unambitious because they were set before the UK had a net-zero target, when the goal was an 80% cut in emissions by 2050. Both must be overachieved in order to remain on a “sensible path” to net-zero, it says.
The emissions drop in 2023 of 22.3MtCO2e was much higher than the average annual emissions cut seen in the seven years prior to this, which was 13.8 MtCO2e each year. The CCC notes that “a similar pace of reduction will need to be maintained throughout the rest of the decade” in order to meet future climate targets.
However, while emissions cuts to date have been dominated by the electricity system, other sectors will need to start contributing in the coming years.
As the chart below shows, three quarters of the emissions cuts over the next three carbon budgets are expected to come from transport, buildings and other sectors.
The CCC sets out various “priority actions” across the report in order to “make up lost ground” and get the UK back on track for its climate targets.
These include sector-specific targets, described in the sections below. They also include broader goals, such as making planning policy consistent with net-zero, publishing a just transition plan for workers and improving public engagement on low-carbon choices.
Road transport
Despite an increase in the miles driven on UK roads last year, emissions from cars and other road transport fell by 0.9%, according to the progress report.
The CCC says this marks the “first time that the uptake of electric vehicles has had a meaningful impact on the direction of emissions trends”. At least one million UK cars – 2.8% of the total fleet – are now electric.
In addition, the CCC notes that the number of miles being driven in cars remains roughly 6% below pre-Covid levels, indicating a persistent shift in travel patterns following the pandemic. (This is not the case for vans, which are being driven 11% more miles than before.)
Yet transport remains the largest source of emissions in the UK economy. The CCC stresses that emissions from cars, vans and trucks will have to drop four times faster than the 2023 rate each year this decade, in order to meet the country’s climate targets.
The report recommends various policies to achieve this. It welcomes the zero-emission vehicle mandate – which sets targets for car manufacturers to sell a certain share of electric models – as one of the few recent successes of the previous government.
However, it says that electric cars’ market share did not grow in 2023, after years of having exceeded the CCC’s expectations. It also notes that electric van sales have been stalling.
With this in mind, the CCC’s “priorities” for the Labour government includes a reinstatement of the 2030 phaseout date for petrol and diesel cars, after Sunak’s government delayed this to 2035. (Labour pledged to do so in its election manifesto.)
It also says ministers should remove planning barriers for electric vehicle chargers and develop new policies to promote electric van uptake.
The report welcomes the rapid drop in electric-vehicle battery prices, which have fallen far ahead of the CCC’s expectations, as the chart below shows. Their continued decline will play a “key role” in making these vehicles “more cost-effective”, it says.
Finally, the CCC recommends that the UK and devolved governments should publish various plans to guide local authorities in setting out local transport strategies, promote charging infrastructure and reduce the use of cars.
Buildings
In 2023, emissions from buildings fell by 7.2% due to reduced demand for gas. This continued a trend seen in 2022, which was driven in part by mild winter months and high fuel prices leading to behavioural change, such as people using their heating less.
However between 2015 and 2022, the average reduction in emissions in the buildings sector was below the pace needed for the rest of the decade to reach 2030 targets, the CCC says.
The reductions over the last two years were also not driven by sustained programmes to scale up low-carbon technologies, such as heat pumps, which the CCC says will be needed for “deeper decarbonisation of the economy”.
As such, progress must now be sped up, enabled by programmes of support to roll-out key technologies over the next seven years, the CCC says.
In 2023, the number of heat pumps installed only increased by 4% compared to the previous year, up from 58,000 to 60,000.
This indicator is “significantly off track” from the rate the CCC says is required. Installation rates in residential buildings will need to increase tenfold from 2023 levels by 2028 to meet the government’s 600,000 a year target.
However, the committee says there have been some “promising signs” in the first few months of 2024.
Applications under the Boiler Upgrade Scheme – which provides financial support for switching from a gas boiler to a heat pump – rose 62% in the first four months of the year compared to the same period in 2023. This follows a decision by the Conservative government to increase the grants available under the scheme from £5,000 to £7,500.
Meanwhile, measures to improve the energy efficiency of buildings are “moving in the wrong direction”. Rates of home insulation fell in 2023, having already been “significantly off track” in 2022, the CCC states.
Overall, the CCC’s assessment of policies to decarbonise buildings for the 2030 NDC has worsened over the last year. It points to the Conservative government’s decision to delay the phaseout of fossil-fuelled boilers, abandon plans to enforce energy efficiency improvements in rental properties and push back the introduction of the “clean heat market mechanism”.
The committee recommends reversing recent policy rollbacks as a priority. It also says the government should introduce a comprehensive programme to decarbonise public sector buildings, remove planning barriers for heat pumps and make electricity cheaper to support the electrification of home heating. (See: Electricity.)
Broadly, one of the priorities set out by the CCC is rolling out heat pumps faster, supported by strong and credible signals that policies such as the Boiler Upgrade Scheme will continue to be fully funded.
Additionally, the committee says the government should “narrow the scope” of the strategic decision on hydrogen for heat, ahead of its current deadline in 2026. The government has been set to make a decision on what the role of hydrogen will be within the heating system in Britain, however, multiple pilot schemes have now closed bringing the role of the technology into question. Ahead of this decision, the CCC suggests “prohibiting connections to the gas grid for new buildings from 2025”.
Industry
Emissions from industry fell by 8.1% in 2023. These reductions were largely the result of site closures in the chemicals sector, with high gas prices potentially a contributing factor, the CCC says. There was also a reduction in emissions in the iron and steel sector.
As with buildings, the sector’s annual emissions reductions over the previous seven years were not at a sufficient pace to achieve the UK’s 2030 climate target, the report says.
Moreover, last year’s fall was not the result of sustained decarbonisation action. The CCC says emissions cuts will need to speed up, supported not by factory closures but by the rollout of low-carbon technologies.
Between 2008 and 2022, direct industrial and fuel supply emissions fell from 140.8MtCO2e to 87.1MtCO2e, as shown in the chart below. This was “considerably faster” than the CCC expected in its 2008 advice.
This was mostly due to a fall in emissions-intensive industries’ outputs, in particular for steel and chemicals. The overall demand for steel saw a “big drop” from 2008 to 2009, and the sector has shrunk due to a lack of competitiveness internationally.
Additionally the EU emissions trading scheme (ETS) contributed significantly to abatement by encouraging further emissions reductions, the CCC notes.
The share of industrial energy use that comes from electricity has stayed relatively consistent, at 26%, since 2020. However, the CCC expects this to increase, as various industries electrify their processes to reduce emissions. As an indicator therefore, industrial electrification is off track, the report adds.
Risks to the decarbonisation of industry include British Steel’s plan to replace its blast furnace in Scunthorpe with two electric arc furnaces (EAF), which is dependent on as-yet unapproved government support.
The CCC notes that the previous government’s £500m deal with Tata Steel to shift production at its Port Talbot site to EAFs has lowered the risk of industry missing its decarbonisation targets.
However, this transition will mean up to 2,800 job losses. The CCC notes that it has “long been clear that the site would need to adapt to remain competitive, for economic reasons largely unrelated to decarbonisation, yet successive governments have failed to develop a long-term economic strategy to develop alternative high-quality employment in the area”.
It further advises that the government should be more proactive and ambitious when it comes to engaging with communities affected by the transition to net-zero. Not doing so risks long-term harm to communities, which could undermine support for net-zero.
The CCC says there has been progress with tightening the cap under the UK’s emissions trading system (UK ETS), which includes industry. However, it notes that the cap is still far looser than in the “central” trajectory in the government’s net-zero strategy. This means that other parts of the economy will need to cut emissions more quickly in order to keep the UK on track overall.
The new UK ETS cap is expected to lead to higher production costs, the CCC notes. While some industries will be protected if the government introduces a carbon border adjustment mechanism (CBAM) in 2027 as planned, this “could lead to offshoring in the absence of further supporting policy to develop alternative low-carbon options”, the report notes..
It says priorities for the new Labour government to tackle industry emissions therefore include strengthening the UK ETS to ensure that its price is sufficient to drive decarbonisation and implementing a CBAM effectively to protect against offshoring.
It also says the government should act to make electricity cheaper, develop policies to address barriers to industrial electrification and implement resource efficiency plans.
Fossil fuels and hydrogen
The CCC also weighs in on the question of whether the UK should continue to exploit its domestic fossil fuel resources, including those in the North Sea.
Specifically, it says that UK policy should be aligned with the COP28 deal on “transitioning away” from fossil fuels, as well as the guiding principle for international climate action of “common but differentiated responsibilities”. It says:
“As a developed country with a binding commitment to transition to net-zero, the UK should reassess whether further exploration for new sources of fossil fuels is aligned to the UNFCCC principle of common but differentiated responsibility and the global stocktake.”
The outgoing Conservative government had argued that domestic fossil fuels bolstered energy security, attempting to make this into a “wedge issue” with the now-ruling Labour Party, which ran on a pledge to end new licensing for North Sea oil and gas extraction.
To drive this point home, the Conservatives had introduced an offshore petroleum licensing bill that would have required the North Sea Transition Authority to run annual licensing rounds for new exploration. (The Conservatives failed to pass the bill before the election.)
In contrast, the CCC report notes that one of the key reasons why UK energy bills have remained so high during and after the global energy crisis is due to the country’s dependence on fossil fuels. This dependence will be reduced in the shift to net-zero, it notes.
The shift to domestic renewables will also bolster energy security, the CCC says:
“British-based renewable energy is the cheapest and fastest way to reduce vulnerability to volatile global fossil fuel markets. The faster we get off fossil fuels, the more secure we become.”
One “welcome” point of progress has been that in February 2024, the UK formally withdrew from the controversial Energy Charter Treaty, which provides protection to companies investing in fossil fuel developments, the CCC notes.
Beyond fossil fuels, the UK government has continued to target a strategic role for hydrogen. It published a hydrogen production delivery roadmap, a transport and storage networks pathway, and a business model for the first hydrogen allocation round in December 2023.
As a priority, the government should also publish a “strategic spatial energy plan” and identify low-regret infrastructure investments, including for hydrogen infrastructure that can proceed now, the committee says.
Electricity
Emissions from the electricity system fell by 22.2% in 2023. This large drop reflects falling gas generation as part of the longer-term rise of renewables, combined with a return to the UK’s normal status as a net electricity importer.
Electricity generation is the only sector to have sustained emissions cuts in line with the 2030 target over multiple years, the CCC notes.
With electrification of the economy a key enabler for wider emissions cuts, one of the CCC’s priority actions for the remainder of 2024 is for the government to make electricity cheaper, by removing policy costs from electricity bills.
This would support industrial electrification, the uptake of electric cars and ensure lower running costs of heat pumps compared to fossil fuel boilers, it says.
Electricity decarbonisation to date has been aided by massive cost reductions for technologies including wind and solar power, the CCC says. It adds that lower costs lay the groundwork for continued rapid uptake of low-carbon technologies.
Indeed, it says that renewable energy will need to be built even faster than it has been to date. Annual installation of offshore wind will need to more than treble, onshore wind more than double and solar increase five-fold between 2023 and 2035.
For example, the UK had 15 gigawatts (GW) of offshore wind at the end of 2023 and will need to add more than 5GW every year to reach 50GW by 2030. This is more than three times the rate added over the past three years.
The technology hit a stalling point in 2023, when no offshore wind was contracted in the contracts for difference (CfD) scheme due to failure to respond to supply chain cost increases.
The CCC says it has “some confidence” that contracts coming through under the CfD scheme will lead to capacity increases, “but these are not enough and significant additional capacity beyond this will be required”.
The CCC “welcomes” updates to the next CfD auction, including the 66% increase in the maximum price for offshore wind and an increase in the notional “budget” that includes £800m for the technology
Onshore wind capacity in 2023 was 15GW, however only 0.5GW of new capacity was installed last year. This was considerably below the peak of 1.8GW in 2017.
Total solar capacity was 16GW in 2023. For the UK to achieve the previous government’s ambition of hitting 70GW of capacity by 2035, more than 4GW would need to be installed each year, the CCC notes – more than five times the average amount added over the past three years.
Within its first week, the new Labour government has moved to make the development of renewables easier, including removing the de facto ban on onshore wind in England and approving three major solar farms.
Other key areas of development have been “positive steps” made by the previous government around whole-system strategic planning of the future energy system, the report says.
The CCC calls for rapid decisions to be made following the second consultation on the “review of electricity market arrangements”, which was published in March,.
The government should publish a strategy for the full decarbonisation of electricity by 2035 at the latest, the CCC recommends. (The report was prepared prior to the election. The new Labour government is targeting clean power by 2030.)
This strategy should cover the strategic and policy requirements, milestones and timeline for delivery, as well as contingencies addressing key risks, the CCC suggests.
Additionally, the government should ensure electricity network capacity is growing to meet requirements. This should include fully implementing the “connections action plan” and “transmission acceleration action plan” at pace.
Agriculture and land use
Agriculture and land use are the source of some major gaps in the previous government’s net-zero plans, the CCC states.
Emissions from agriculture have remained virtually unchanged for nearly two decades. Planting trees and restoring peatland could absorb some of the emissions from high-emitting sectors, but efforts to expand these activities have faltered.
The UK has committed to cut its methane emissions 30% from 2020 levels by 2030. In order to do this, the pace of reductions compared to recent years would need to double over this decade.
Cattle and sheep produce around half of the UK’s methane emissions. Given the slow rate of change over recent years, the rate of methane cuts from agriculture would need to increase roughly eightfold in order to meet the UK’s methane target by 2030.
The CCC notes that livestock numbers fell between 2017 and 2020, but since then the trend has remained flat. It notes that there has been a small amount of progress in the promotion of methane-suppressing feed products for livestock.
The committee also points out that the Welsh government has paused its plans to reduce emissions from farming “following substantial resistance”. It warns that any delay to its sustainable farming scheme “could have significant impacts”.
The report says both the UK government and devolved governments should prioritise funding and support to ensure the UK-wide tree planting target of 30,000 hectares per year by the 2024-25 period is met.
It also says there should be a “delivery mechanism” for peatland restoration, which is supposed to reach 32,000 hectares per year by 2026, but is not on track to do so. (The CCC notes that even this target is “significantly less ambitious” than its own recommendation.)
The final priority highlighted for the sector by the CCC is the publication of the long-awaited land-use framework. This plan has been repeatedly delayed, and could help to align the sector with other issues such as using land to build energy infrastructure or adapt to climate change.
Aviation and shipping
Aviation was the only sector that saw a substantial leap in emissions in 2023. They rose by 15.5% as demand “continued to rebound from the pandemic”, and the CCC says there is “a risk” that demand for flights may rise higher than pre-Covid levels next year.
The government’s pathway to net-zero allows for some growth in both aviation and shipping emissions out to 2030. (While domestic journeys are included, international aviation and shipping are not part of the 2030 NDC target. However, they will feature in the UK’s carbon budgets from the sixth period onwards.)
The CCC says more detail of policies for curbing aviation emissions was provided last year – specifically the sustainable aviation fuel (SAF) mandate. However, it says “delivery concerns” mean this sector continues to “attract some risks”.
It notes that the SAF targets the previous government set were “ambitious”, but cautions that the volume of SAFs available to meet this target is “highly uncertain”.
The CCC has frequently highlighted the need to manage demand for flights as well as implementing technological solutions to decarbonise travel. As recent Carbon Brief analysis demonstrates, any emissions cuts from the SAF mandate in the coming years will be entirely wiped out by the expected rise in demand for flights.
In the new report, the committee says a priority for the Labour government should be pausing any new airport expansions until there is a UK-wide “capacity management framework” in place.
This would assess aviation emissions and ensure there is no overall expansion “unless the carbon intensity of aviation is outperforming the government’s emissions reduction pathway”.
Shipping, which accounts for one of the smallest shares of annual emissions, is not highlighted as a priority area for the new government.
CO2 removal
The CCC says the previous Conservative government’s plans to develop technologies that remove CO2 from the atmosphere are “behind schedule”.
This makes the ambition to remove at least 5MtCO2 per year by 2030 – which is required to meet the UK’s NDC target under current plans – “increasingly challenging”, according to the committee.
Moreover, despite the publication of some business models for the sector, all of the government’s plans carry “significant risk”, the CCC warns. This is notable, as the removals sector is expected to contribute 11% of emissions cuts by the end of the sixth carbon budget in 2037.
The key priority the report highlights for the new Labour government is finalising business models for engineered CO2 removals and “opening these to the market to enable projects to get underway”.
A related piece of advice highlighted by the CCC is that the government should publish guidance for businesses on how to use carbon offsets. It says firms should only use them to claim “net-zero” once nearly all their emissions are cut, and “the remaining emissions are neutralised by high-quality permanent removals”.
Waste and F-gases
The CCC says there has been “very little progress” in cutting waste emissions. It highlights insufficient progress in capturing methane from landfills, recycling and composting.
Waste is largely a devolved issue and the CCC makes recommendations to the governments of Scotland, Wales and Northern Ireland accordingly.
The key priority that the report highlights for the new Labour government for this sector is the need to address rising emissions from waste-to-energy facilities, which have “substantially increased”. It calls for a “moratorium” on new plants until there is a government review of capacity needs and how these facilities align with climate plans.
Fluorinated gases (F-gases), which make up a tiny fraction of UK emission, are subject to steadily declining quotas for importers and producers of the devices that emit them. They are not targeted as a priority in the new report.
Adaptation
The previous Conservative government published its third National Adaptation Plan (NAP3) in 2023, covering the period out to 2028. This is the nation’s statutory plan to ensure the UK is prepared for a warmer world.
It has faced intense criticism from the CCC, and campaigners have taken the government to court, citing the plan’s failure to adequately protect people from climate change.
In its new report, the CCC says NAP3 “lacks the pace and ambition to address growing climate risks which we are already experiencing”. It says the plan needs “clear objectives and targets”, and this should include stronger links with the next spending review.
The report also says the government should reorganise so that adaptation “becomes a fundamental aspect and is embedded in other national policy objectives” across departments. This includes prioritising it in other national priorities, including nature restoration, infrastructure development, economic growth and health.
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CCC: Labour must ‘make up lost ground’ to hit UK climate goals
In 2026, the dangers of fossil fuel dependence have been laid bare like never before. The illegal invasion of Iran has brought pain and destruction to millions across the Middle East and triggered a global energy crisis impacting us all. Communities in the Pacific have been hit especially hard by rising fuel prices, and Australians have seen their cost-of-living woes deepen.
Such moments of crisis and upheaval can lead to positive transformation. But only when leaders act with courage and foresight.
There is no clearer statement of a government’s plans and priorities for the nation than its budget — how it plans to raise money, and what services, communities, and industries it will invest in.
As we count down the days to the 2026-27 Federal Budget, will the Albanese Government deliver a budget for our times? One that starts breaking the shackles of fossil fuels, accelerates the shift to clean energy, protects nature, and sees us work together with other countries towards a safer future for all? Or one that doubles down on coal and gas, locks in more climate chaos, and keeps us beholden to the whims of tyrants and billionaires.
Here’s what we think the moment demands, and what we’ll be looking out for when Treasurer Jim Chalmers steps up to the dispatch box on 12 May.
1. Stop fuelling the fire
2. Make big polluters pay
3. Support everyone to be part of the solution
4. Build the industries of the future
5. Build community resilience
6. Be a better neighbour
7. Protect nature
1. Stop fuelling the fire
In mid-April, Pacific governments and civil society met to redouble their efforts towards a Fossil Fuel Free Pacific. Moving beyond coal, oil and gas is fundamental to limiting warming to 1.5°C — a survival line for vulnerable communities and ecosystems. And as our Head of Pacific, Shiva Gounden, explained, it is “also a path of liberation that frees us from expensive, extractive and polluting fossil fuel imports and uplifts our communities”.
Pacific countries are at the forefront of growing global momentum towards a just transition away from fossil fuels, and it is way past time for Australia to get with the program. It is no longer a question of whether fossil fuel extraction will end, but whether that end will be appropriately managed and see communities supported through the transition, or whether it will be chaotic and disruptive.
So will this budget support the transition away from fossil fuels, or will it continue to prop up coal and gas?
When it comes to sensible moves the government can make right now, one stands out as a genuine low hanging fruit. Mining companies get a full rebate of the excise (or tax) that the rest of us pay on diesel fuel. This lowers their operating costs and acts as a large, ongoing subsidy on fossil fuel production — to the tune of $11 billion a year!
Greenpeace has long called for coal and gas companies to be removed from this outdated scheme, and for the billions in savings to be used to support the clean energy transition and to assist communities with adapting to the impacts of climate change. Will we see the government finally make this long overdue change, or will it once again cave to the fossil fuel lobby?
2. Make big polluters pay
While our communities continue to suffer the escalating costs of climate-fuelled disasters, our Government continues to support a massive expansion of Australia’s export gas industry. Gas is a dangerous fossil fuel, with every tonne of Australian gas adding to the global heating that endangers us all.
Moreover, companies like Santos and Woodside pay very little tax for the privilege of digging up and selling Australians’ natural endowment of fossil gas. Remarkably, the Government currently raises more tax from beer than from the Petroleum Resource Rent Tax (PRRT) — the main tax on gas profits.
Momentum has been building to replace or supplement the PRRT with a 25% tax on gas exports. This could raise up to $17 billion a year — funds that, like savings from removing the diesel tax rebate for coal and gas companies, could be spent on supporting the clean energy transition and assisting communities with adapting to worsening fires, floods, heatwaves and other impacts of climate change.
As politicians arrive in Canberra for budget week, they will be confronted by billboards calling for a fair tax on gas exports. The push now has the support of dozens of organisations and a growing number of politicians. Let’s hope the Treasurer seizes this rare window for reform.
3. Support everyone to be part of the solution
As the price of petrol and diesel rises, electric vehicles (EVs) are helping people cut fuel use and save money. However, while EV sales have jumped since the invasion of Iran sent fuel prices rising, they still only make up a fraction of total new car sales. This budget should help more Australians switch to electric vehicles and, even more importantly, enable more Australians to get around by bike, on foot, and on public transport. This means maintaining the EV discount, investing in public and active transport, and removing tax breaks for fuel-hungry utes and vans.
Millions of Australians already enjoy the cost-saving benefits of rooftop solar, batteries, and getting off gas. This budget should enable more households, and in particular those on lower incomes, to access these benefits. This means maintaining the Cheaper Home Batteries Program, and building on the Household Energy Upgrades Fund.
4. Build the industries of the future
If we’re to transition away from fossil fuels, we need to be building the clean industries of the future.
No state is more pivotal to Australia’s energy and industrial transformation than Western Australia. The state has unrivaled potential for renewable energy development and for replacing fossil fuel exports with clean exports like green iron. Such industries offer Western Australia the promise of a vibrant economic future, and for Australia to play an outsized positive role in the world’s efforts to reduce emissions.
However, realising this potential will require focussed support from the Federal Government. Among other measures, Greenpeace has recommended establishing the Australasian Green Iron Corporation as a joint venture between the Australian and Western Australian governments, a key trading partner, a major iron ore miner and steel makers. This would unite these central players around the complex task of building a large-scale green iron industry, and unleash Western Australia’s potential as a green industrial powerhouse.
5. Build community resilience
Believe it or not, our Government continues to spend far more on subsidising fossil fuel production — and on clearing up after climate-fuelled disasters — than it does on helping communities and industries reduce disaster costs through practical, proven methods for building their resilience.
Last year, the Government estimated that the cost of recovery from disasters like the devastating 2022 east coast floods on 2019-20 fires will rise to $13.5 billion. For contrast, the Government’s Disaster Ready Fund – the main national source of funding for disaster resilience – invests just $200 million a year in grants to support disaster preparedness and resilience building. This is despite the Government’s own National Emergency Management Agency (NEMA) estimating that for every dollar spent on disaster risk reduction, there is a $9.60 return on investment.
By redirecting funds currently spent on subsidising fossil fuel production, the Government can both stop incentivising climate destruction in the first place, and ensure that Australian communities and industries are better protected from worsening climate extremes.
No communities have more to lose from climate damage, or carry more knowledge of practical solutions, than Aboriginal and Torres Strait Islander peoples. The budget should include a dedicated First Nations climate adaptation fund, ensuring First Nations communities can develop solutions on their own terms, and access the support they need with adapting to extreme heat, coastal erosion and other escalating challenges.
6. Be a better neighbour
The global response to climate change depends on the adequate flow of support from developed economies like Australia to lower income nations with shifting to clean energy, adapting to the impacts of climate change, and addressing loss and damage.
Such support is vital to building trust and cooperation, reducing global emissions, and supporting regional and global security by enabling countries to transition away from fossil fuels and build greater resilience.
Despite its central leadership role in this year’s global climate negotiations, our Government is yet to announce its contribution to international climate finance for 2025-2030. Greenpeace recommends a commitment of $11 billion for this five year period, which is aligned with the global goal under the Paris Agreement to triple international climate finance from current levels.
This new commitment should include additional funding to address loss and damage from climate change and a substantial contribution to the Pacific Resilience Facility, ensuring support is accessible to countries and communities that need it most. It should also see Australia get firmly behind the vision of a Fossil Fuel Free Pacific.
7. Protect nature
There is no safe planet without protection of the ecosystems and biodiversity that sustain us and regulate our climate.
Last year the Parliament passed important and long overdue reforms to our national environment laws to ensure better protection for our forests and other critical ecosystems. However, the Government will need to provide sufficient funding to ensure the effective implementation of these reforms.
Greenpeace has recommended $500 million over four years to establish the National Environment Agency — the body responsible for enforcing and monitoring the new laws — and a further $50 million to Environment Information Australia for providing critical information and tools.
Further resourcing will also be required to fulfil the crucial goal of fully protecting 30% of Australian land and seas by 2030. This should include $1 billion towards ending deforestation by enabling farmers and loggers to retool away from destructive practices, $2 billion a year for restoring degraded lands, $5 billion for purchasing and creating new protected areas, and $200 million for expanding domestic and international marine protected areas.
Conclusion
This is not the first time that conflict overseas has triggered an energy crisis, or that a budget has been preceded by a summer of extreme weather disasters, highlighting the urgent need to phase out fossil fuels. What’s different in 2026 is the availability of solutions. Renewable energy is now cheaper and more accessible than ever before. Global momentum is firmly behind the transition away from fossil fuels. The Albanese Government, with its overwhelming majority, has the chance to set our nation up for the future, or keep us stranded in the past. Let’s hope it makes some smart choices.
The 2026 budget test: Will Australia break free from fossil fuels?
Anne Jellema is Executive Director of 350.org.
The war on Iran and Lebanon is a deeply unjust and devastating conflict, killing civilians at home, destroying lives, and at the same time sending shockwaves through the global economy. We, at 350.org, have calculated, drawing on price forecasts from the International Monetary Fund (IMF) and Goldman Sachs, just how much that volatility is costing us.
Even under the IMF’s baseline scenario – a de facto “best case” scenario with a near-term end to the war and related supply chain disruptions – oil and gas price spikes are projected to cost households and businesses globally more than $600 billion by the end of the year. Under the IMF’s “adverse scenario”, with prolonged conflict and sustained price pressures, we estimate those additional costs could exceed $1 trillion, even after accounting for reduced demand.
Which is why we urgently need a power shift. Governments are under growing pressure to respond to rising fuel and food costs and deepening energy poverty. And it’s becoming clearer to both voters and elected officials that fossil dependence is not only expensive and risky, but unnecessary.
People who can are voting with their wallets: sales of solar panels and electric vehicles are increasing sharply in many countries. But the working people who have nothing to spare, ironically, are the ones stuck with using oil and gas that is either exorbitantly expensive or simply impossible to get.
Drain on households and economies
In India, street food vendors can’t get cooking gas and in the Philippines, fishermen can’t afford to take their boats to sea. A quarter of British people say that rising energy tariffs will leave them completely unable to pay their bills. This is the moment for a global push to bring abundant and affordable clean energy to all.
In April, we released Out of Pocket, our new research report on how fossil fuels are draining households and economies. We were surprised by the scale of what we found. For decades, governments have reassured people that energy price spikes are unfortunate but unavoidable – the result of distant conflicts, market forces or geopolitical shocks beyond anyone’s control. But the numbers tell a different story.
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Santa Marta: Ministers grapple with practicalities of fossil fuel phase-out
Around 60 governments that want to make progress on transitioning away from coal, oil and gas are meeting in Colombia to work out how they can do it an equitable way -
Why the transition beyond fossil fuels depends on cities and collective action
Cities will help identify concrete pathways for an equitable shift to clean energy at the Santa Marta conference, with C40 members aiming to halve their fossil fuel use by 2030
What we are living through today is not an energy crisis. It is a fossil fuel crisis. In just the first 50 days of the Middle East conflict, soaring oil and gas prices have siphoned an estimated $158 billion–$166 billion from households and businesses worldwide. That is money extracted directly from people’s pockets and transferred, almost instantly, into fossil fuel company balance sheets. And this figure only captures the immediate impact of price spikes, not the permanent economic drain of fossil dependence. Fossil fuels don’t just cost us once, they cost us over and over again.
First, through our bills. Every time there is a war, an embargo or a supply disruption, fossil fuel prices surge. For ordinary people, this means higher costs for energy, transport and food. Many Global South countries have little or no fiscal space to buffer the shock; instead, workers and families pay the price.
Second, through our taxes. Governments around the world continue to pour vast sums of public money into fossil fuel subsidies. These are often justified as a way to protect the most vulnerable at the petrol pump or in their homes. But in reality, the benefits are overwhelmingly captured by wealthier households and corporations. The poorest 20% receive just a fraction of this support, while public finances are drained.
Third, through climate impacts. New research across more than 24,000 global locations gives a granular account of the true costs of extreme heat, sea level rise and falling agricultural yields. Using this data to update IMF modelling of the social cost of carbon, we found that fossil fuel impacts on health and livelihoods amount to over $9 trillion a year. This is the biggest subsidy of all, because these massive and mounting costs are not charged to Big Oil – they are paid for by governments and households, with the poorest shouldering the lion’s share.
Massive transfer of wealth to fossil fuel industry
Adding up direct subsidies, tax breaks and the unpaid bill for climate damages, the total transfer of wealth from the public to the fossil fuel industry amounts to $12 trillion even in a “normal” year without a global oil shock. That’s more than 50% higher than the IMF has previously estimated, and equivalent to a staggering $23 million a minute.
The fossil fuel industry has become extraordinarily adept at profiting from instability. When conflict drives up prices, companies do not lose, they gain. In the current crisis, oil producers and commodity traders are on track to secure tens of billions of dollars in additional windfall profits, even as households face rising bills and governments struggle to manage the fallout.
Fossil fuel crisis offers chance to speed up energy transition, ministers say
This growing disconnect is impossible to ignore. Investors are advised to buy into fossil fuel firms precisely because of their ability to generate profits in times of crisis. Meanwhile, ordinary people are told to tighten their belts.
In 2026, unlike during the oil shocks of the 1970s, clean energy is no longer a distant alternative. Now, even more than when gas prices spiked due to Russia’s invasion of Ukraine in 2022, renewables are often the cheapest option available. Solar and wind can be deployed quickly, at scale, and without the volatility that defines fossil fuel markets.
How to transition from dirty to clean energy
The solutions are clear. Governments must implement permanent windfall taxes on fossil fuel companies to ensure that extraordinary profits generated during crises are redirected to support households. These revenues can be used to reduce energy bills, invest in public services, and accelerate the rollout of clean energy.
Second, we must shift subsidies away from fossil fuels and towards renewable solutions, particularly those that can be deployed quickly and equitably, such as rooftop and community solar. This is not just about cutting emissions. It is about building a more stable, fair and resilient energy system.
Finally, we need binding plans to phase out fossil fuels altogether, replacing them with homegrown renewable energy that can shield economies from future shocks. Because what the current crisis has made clear is this: as long as we remain dependent on fossil fuels, we remain vulnerable – to conflict, to price volatility and to the escalating impacts of climate change.
The true price of fossil fuels is no longer hidden. It is visible in rising bills, strained public finances and communities pushed to the brink. And it is being paid, every day, by ordinary people around the world.
It’s time for the great power shift.
Full details on the methodology used for this report are available here.
The Great Power Shift is a new campaign by 350.org global campaign to pressure governments to bring down energy bills for good by ending fossil fuel dependence and investing in clean, affordable energy for all
The post What fossil fuels really cost us in a world at war appeared first on Climate Home News.
Computer models that use artificial intelligence (AI) cannot forecast record-breaking weather as well as traditional climate models, according to a new study.
It is well established that AI climate models have surpassed traditional, physics-based climate models for some aspects of weather forecasting.
However, new research published in Science Advances finds that AI models still “underperform” in forecasting record-breaking extreme weather events.
The authors tested how well both AI and traditional weather models could simulate thousands of record-breaking hot, cold and windy events that were recorded in 2018 and 2020.
They find that AI models underestimate both the frequency and intensity of record-breaking events.
A study author tells Carbon Brief that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI weather forecasts
Extreme weather events, such as floods, heatwaves and storms, drive hundreds of billions of dollars in damages every year through the destruction of cropland, impacts on infrastructure and the loss of human life.
Many governments have developed early warning systems to prepare the general public and mobilise disaster response teams for imminent extreme weather events. These systems have been shown to minimise damages and save lives.
For decades, scientists have used numerical weather prediction models to simulate the weather days, or weeks, in advance.
These models rely on a series of complex equations that reproduce processes in the atmosphere and ocean. The equations are rooted in fundamental laws of physics, based on decades of research by climate scientists. As a result, these models are referred to as “physics-based” models.
However, AI-based climate models are gaining popularity as an alternative for weather forecasting.
Instead of using physics, these models use a statistical approach. Scientists present AI models with a large batch of historical weather data, known as training data, which teaches the model to recognise patterns and make predictions.
To produce a new forecast, the AI model draws on this bank of knowledge and follows the patterns that it knows.
There are many advantages to AI weather forecasts. For example, they use less computing power than physics-based models, because they do not have to run thousands of mathematical equations.
Furthermore, many AI models have been found to perform better than traditional physics-based models at weather forecasts.
However, these models also have drawbacks.
Study author Prof Sebastian Engelke, a professor at the research institute for statistics and information science at the University of Geneva, tells Carbon Brief that AI models “depend strongly on the training data” and are “relatively constrained to the range of this dataset”.
In other words, AI models struggle to simulate brand new weather patterns, instead tending forecast events of a similar strength to those seen before. As a result, it is unclear whether AI models can simulate unprecedented, record-breaking extreme events that, by definition, have never been seen before.
Record-breaking extremes
Extreme weather events are becoming more intense and frequent as the climate warms. Record-shattering extremes – those that break existing records by large margins – are also becoming more regular.
For example, during a 2021 heatwave in north-western US and Canada, local temperature records were broken by up to 5C. According to one study, the heatwave would have been “impossible” without human-caused climate change.
The new study explores how accurately AI and physics-based models can forecast such record-breaking extremes.
First, the authors identified every heat, cold and wind event in 2018 and 2020 that broke a record previously set between 1979 and 2017. (They chose these years due to data availability.) The authors use ERA5 reanalysis data to identify these records.
This produced a large sample size of record-breaking events. For the year 2020, the authors identified around 160,000 heat, 33,000 cold and 53,000 wind records, spread across different seasons and world regions.
For their traditional, physics-based model, the authors selected the High RESolution forecast model from the Integrated Forecasting System of the European Centre for Medium-Range Weather Forecasts. This is “widely considered as the leading physics-based numerical weather prediction model”, according to the paper.
They also selected three “leading” AI weather models – the GraphCast model from Google Deepmind, Pangu-Weather developed by Huawei Cloud and the Fuxi model, developed by a team from Shanghai.
The authors then assessed how accurately each model could forecast the extremes observed in the year 2020.
Dr Zhongwei Zhang is the lead author on the study and a researcher at Karlsruhe Institute of Technology. He tells Carbon Brief that many AI weather forecast models were built for “general weather conditions”, as they use all historical weather data to train the models. Meanwhile, forecasting extremes is considered a “secondary task” by the models.
The authors explored a range of different “lead times” – in other words, how far into the future the model is forecasting. For example, a lead time of two days could mean the model uses the weather conditions at midnight on 1 January to simulate weather conditions at midnight on 3 January.
The plot below shows how accurately the models forecasted all extreme events (left) and heat extremes (right) under different lead times. This is measured using “root mean square error” – a metric of how accurate a model is, where a lower value indicates lower error and higher accuracy.
The chart on the left shows how two of the AI models (blue and green) performed better than the physics-based model (black) when forecasting all weather across the year 2020.
However, the chart on the right illustrates how the physics-based model (black) performed better than all three AI models (blue, red and green) when it came to forecasting heat extremes.
The authors note that the performance gap between AI and physics-based models is widest for lower lead times, indicating that AI models have greater difficulty making predictions in the near future.
They find similar results for cold and wind records.
In addition, the authors find that AI models generally “underpredict” temperature during heat records and “overpredict” during cold records.
The study finds that the larger the margin that the record is broken by, the less well the AI model predicts the intensity of the event.
‘Warning shot’
Study author Prof Erich Fischer is a climate scientist at ETH Zurich and a Carbon Brief contributing editor. He tells Carbon Brief that the result is “not unexpected”.
He adds that the analysis is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
The analysis, he continues, is a “warning shot” against replacing traditional models with AI models for weather forecasting “too quickly”.
AI models are likely to continue to improve, but scientists should “not yet” fully replace traditional forecasting models with AI ones, according to Fischer.
He explains that accurate forecasts are “most needed” in the runup to potential record-breaking extremes, because they are the trigger for early warning systems that help minimise damages caused by extreme weather.
Leonardo Olivetti is a PhD student at Uppsala University, who has published work on AI weather forecasting and was not involved in the study.
He tells Carbon Brief that “many other studies” have identified issues with using AI models for “extremes”, but this paper is novel for its specific focus on extremes.
Olivetti notes that AI models are already used alongside physics-based models at “some of the major weather forecasting centres around the world”. However, the study results suggest “caution against relying too heavily on these [AI] models”, he says.
Prof Martin Schultz, a professor in computational earth system science at the University of Cologne who was not involved in the study, tells Carbon Brief that the results of the analysis are “very interesting, but not too surprising”.
He adds that the study “justifies the continued use of classical numerical weather models in operational forecasts, in spite of their tremendous computational costs”.
Advances in forecasting
The field of AI weather forecasting is evolving rapidly.
Olivetti notes that the three AI models tested in the study are an “older generation” of AI models. In the last two years, newer “probabilistic” forecast models have emerged that “claim to better capture extremes”, he explains.
The three AI models used in the analysis are “deterministic”, meaning that they only simulate one possible future outcome.
In contrast, study author Engelke tells Carbon Brief that probabilistic models “create several possible future states of the weather” and are therefore more likely to capture record-breaking extremes.
Engelke says it is “important” to evaluate the newer generation of models for their ability to forecast weather extremes.
He adds that this paper has set out a “protocol” for testing the ability of AI models to predict unprecedented extreme events, which he hopes other researchers will go on to use.
The study says that another “promising direction” for future research is to develop models that combine aspects of traditional, physics-based weather forecasts with AI models.
Engelke says this approach would be “best of both worlds”, as it would combine the ability of physics-based models to simulate record-breaking weather with the computational efficiency of AI models.
Dr Kyle Hilburn, a research scientist at Colorado State University, notes that the study does not address extreme rainfall, which he says “presents challenges for both modelling and observing”. This, he says, is an “important” area for future research.
The post Traditional models still ‘outperform AI’ for extreme weather forecasts appeared first on Carbon Brief.
Traditional models still ‘outperform AI’ for extreme weather forecasts
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