The Labour government wants to cut UK greenhouse gas emissions to 87% below 1990 levels by 2040, which it says will deliver £865bn in economic benefits.
The target has been set out in draft legislation for the seventh “carbon budget”, a legally binding limit on emissions during the five-year period from 2038-2042.
The government says this would protect billpayers from “fossil-fuel shocks”, boost energy security, improve quality of life and help tackle climate change, by getting the country on track for net-zero by 2050.
The UK would need to invest around £880bn over 25 years to meet the budget, but doing so would yield benefits worth £1,620bn, according to a government impact assessment.
Pointedly, the government presents these benefits and costs relative to a policy of “no net-zero”, as the opposition Conservatives and hard-right Reform UK have both pledged to abandon the 2050 goal.
The 137-page impact assessment mentions energy security more than 30 times and says the seventh carbon budget would help save £445bn up to 2050 from ever decreasing fossil-fuel imports.
Moreover, the assessment is based on fossil-fuel price projections published in 2024, before the cost of oil and gas surged earlier this year after the effective closure of the strait of Hormuz.
The document says that the UK’s climate goals would be even more beneficial – worth £1,035bn, relative to “no net-zero” – if the country is exposed to “persistently high fossil-fuel prices”.
The seventh carbon budget must be approved by parliament before the end of June and the government must then publish a plan to meet it “as soon as reasonably practicable”.
What is the UK’s seventh ‘carbon budget’?
The UK’s efforts to tackle and respond to global warming are governed by the Climate Change Act, which was passed with near-unanimous cross-party support in 2008, by 463 votes to five.
In 2019, the then-Conservative government amended the Act to set a long-term goal for cutting emissions to 100% below 1990 levels by 2050, known as the net-zero target.
(The Intergovernmental Panel on Climate Change (IPCC) has affirmed that reaching net-zero is the only way to stop global warming from getting worse – and that emissions would need to reach net-zero by 2050 globally to have a chance of limiting the rise in temperatures to 1.5C.)
To stay on track for the 2050 target, the act requires the government to set a series of “carbon budgets”. These are binding limits on the UK’s emissions covering successive five-year periods.
The UK met its first three carbon budgets, covering 2008-2022. It is currently just over half way through the fourth “carbon budget”, covering 2023-2027.
Under the act, the government is required to set the level of the seventh carbon budget, covering 2038-2042, by the end of June this year.
Before setting the budget, the government must take advice from the Climate Change Committee (CCC). In turn, this advice must take into account a range of factors, including the latest scientific evidence, technological trends, the state of the economy and public finances.
No government has ever gone against the advice of the CCC when setting carbon budgets. However, the government could have chosen not to do so, if it had explained why.
What target is the government aiming for?
The CCC recommended last year that the UK should aim to cut its emissions to 87% below 1990 levels under the seventh carbon budget for 2038-2042 – equivalent to a three-quarters reduction on current levels.
The government has followed this advice, setting a draft seventh carbon budget of 535m tonnes of carbon dioxide equivalent (MtCO2e), some 107MtCO2e per year.
The proposed 2040 target is shown in the figure below, alongside previously legislated budgets and the UK’s international climate pledges for 2030 and 2035 under the Paris Agreement.
In a written statement to parliament, energy secretary Ed Miliband said the target would reduce the UK’s exposure to “volatile international fossil-fuel markets and protect bill-payers”, as well as delivering benefits for jobs, growth, health and the natural environment. Miliband wrote:
“Against the backdrop of heightened geopolitical instability, including the ongoing crisis in the Middle East and its implications for global energy markets, the case for setting a clear and credible long-term pathway for the UK on clean energy and climate action is stronger than ever.”
Echoing a 2023 review commissioned by the then-Conservative government, Miliband also wrote that “clean energy and climate action is the economic opportunity of the 21st century”.
(On the day of the draft budget, the Guardian reported findings that the UK’s “net-zero economy” was worth “more than £100bn a year”, according to consultancy CBI Economics.)
The impact assessment sets out the climate-change “case for action”. It says the “science is clear” that the UK is becoming wetter and warmer, with increasing floods, droughts, heatwaves and wildfires. This is “unequivocally” due to human-caused greenhouse gas emissions. It continues:
“Without action, climate change will continue to endanger the UK’s food and water security, exacerbate global population displacement and pose national security risks.”
The document adds that the Office for Budget Responsibility (OBR) found the “costs of climate damage are getting higher, while the cost of the net-zero transition is getting lower”.
In its impact assessment, the government also outlines a less ambitious goal to cut emissions to 83% below 1990 levels by 2040 and a tighter target for 89%.
In what may be an attempt to pre-empt future legal challenges (see: What happens next?), the government outlines why it is not choosing to pursue either greater or lesser ambition for 2040.
It says the low end of ambition “increases the risk of underinvestment”, while the highest target could face “deliverability risks [that] may undermine [the UK’s] credibility”.
Note that the sixth and seventh budgets were set in line with the net-zero target, whereas previous budgets were set on a pathway to 80% by 2050 – hence, the step change in the figure above.
The sixth and later carbon budgets include the UK’s share of emissions from international aviation and shipping. These emissions relate to journeys that start or finish at UK ports and airports. Draft legislation to make this change was laid in parliament earlier this year.
The UK’s legally binding climate goals do not include the “imported” emissions associated with the production of goods and services in other countries. Among other reasons, this is because the UK does not have legal jurisdiction over activities taking place outside its borders.
The UK’s imported emissions were growing until around 2008, but have remained relatively flat since then. This means that the UK’s overall “carbon footprint”, including imported emissions, has been falling by a similar amount as the territorial emissions within its own borders.
How could the UK meet the seventh carbon budget?
To date, UK emissions cuts have largely come from the power sector, as the country has stopped burning coal to generate electricity and shifted from gas towards clean power.
In order to meet the seventh carbon budget, the UK will need to cut emissions across the economy. According to the CCC’s advice, the biggest contributions would come from electrifying transport, heat and industry, driven by a massively expanded supply of clean electricity.
It said at the time of its advice:
“In many key areas, the best way forward is now clear. Electrification and low-carbon electricity supply make up the largest share of emissions reductions in our pathway.”
This would mean shifting to electric vehicles (EVs), electric heat pumps and electrified industrial processes on a massive scale, reducing the need for fossil fuels.
Since electrified technologies are far more efficient than those based on fossil-fuel combustion, this shift would also dramatically cut the need for oil and gas imports, the CCC said.
In broad terms, the government backs a similar path to cutting UK emissions through mass electrification. In its release on the seventh carbon budget, it says:
“Half of the UK’s recessions since 1970 have been caused by fossil-fuel shocks. The government is investing in renewable and nuclear energy to get the UK off the rollercoaster of fossil-fuel prices…By 2050, the UK could cut its reliance on fossil fuels from around three quarters of our energy today to around 15%, while avoiding around £445bn in fossil-fuel spending over the next 25 years.”
In its “delivery plan” for the sixth carbon budget, covering 2033-2037, it said roughly a third of UK homes should have heat pumps by 2035 and around half of cars on the road should be EVs.
There is one key difference between the CCC’s suggested approach to meeting the UK’s carbon budgets and that of the government. Specifically, the CCC suggested there would be an important role for behaviour change in relation to diets and efforts to limit the rise in the number of flights.
In contrast, the government has placed much less emphasis on these areas. This means that it relies to a greater extent on expensive technologies that can remove CO2 from the atmosphere.
Despite this context, some right-leaning newspapers have misleadingly focused their coverage on the perceived need to alter diets to meet the seventh carbon budget.
What are the benefits and costs of reaching this target?
The government says that the proposed seventh carbon budget would “deliver the benefits of clean energy and climate action for jobs and growth, health and our natural environment”, as well as aligning with the 1.5C target of the Paris Agreement to “avoid climate disaster”.
Overall, it says that the net-zero target for 2050 “continues to represent value for money, with strong net benefits relative to alternative pathways”.
The detailed impact assessment sets out the benefits and costs of meeting the proposed seventh carbon budget in monetary terms, in line with Treasury guidance under the “green book”.
The results are presented in terms of “net present value” (NPV). This takes into account the human preference for enjoying benefits today, rather than in the future. When measuring NPV, future costs and benefits are “discounted”, to reflect their lower value in the present moment.
Specifically, meeting the proposed seventh carbon budget would have net benefits worth £865bn to the UK, relative to a world where the net-zero target is abandoned and existing technology continues to be used. For example, in this “no net-zero” alternative, gas boilers and petrol cars would be replaced like-for-like when they reach the end of their life.
It says that a lower bill for fossil fuels is a “major component” of the net benefits, with savings reaching £445bn over 25 years if the seventh carbon budget is met, relative to “no net-zero”.
The “vast majority” of these savings result from electrification – in other words, swapping those boilers and petrol cars for heat pumps and EVs.
However, the largest benefit of the proposed budget comes from avoided climate-change damages, which amount to £1,495bn over 25 years, according to the document. This benefit relates to lower UK emissions limiting climate impacts, such as extreme heat and flooding.
The government also acknowledges that significant investments would be required to meet the seventh carbon budget. It puts the cost of these investments at £880bn over 25 years, including financing, relative to the alternative of “no net-zero”.
These benefits and costs of the proposed budget are shown in the figure below. In aggregate, these add up to the headline net benefits of £865bn over 25 years.
In addition to the “no net-zero” baseline, the impact assessment compares the proposed budget with a continuation of current policies. The results are directionally similar to, but slightly lower than, the net benefits relative to “no net-zero”.
The document also considers a range of “sensitivities” to explore the impact of higher or lower technology costs and fossil-fuel prices, as well as to consider alternative pathways that use less carbon capture and storage (CCS), fewer EVs or a reduced number of heat pumps.
Finally, the impact assessment also considers the ongoing benefits and costs of meeting the seventh carbon budget when looking out to 2060.
This roughly doubles the net benefits of meeting the target from £865bn by 2050 to £1,520bn by 2060, because the upfront investments yield ongoing savings, such as lower fossil-fuel bills.
Notably, the impact assessment is based on fossil-fuel price projections published in 2024, when the average cost of wholesale gas was around 80p per therm.
These projections envisaged gas prices of 75p/therm in 2025, falling to 70p by 2030. A “high” case, explored in the impact assessment, had prices of up to around 110p/therm.
In reality, prices climbed to around 85p/therm in 2025 and gas is currently trading at 115p, having reached as high as 150p/therm in the immediate aftermath of the US-Israel attack on Iran in February. This was still well below the 640p peak seen during the global energy crisis in 2022.
In the “high” case for fossil-fuel prices – in which prices are below current levels – the net benefit of the seventh carbon budget climbs to £1,035bn over 25 years.
The impact assessment does not consider the potential for “feedback and system loops, which have potential to decrease costs faster than estimated”.
What happens next?
Under the Climate Change Act, there is a deadline of 30 June 2026 to legislate for the seventh carbon budget, subject to parliamentary approval.
In setting out the draft target, the UK government has already taken into account the views of the devolved administrations for Scotland, Wales and Northern Ireland. The impact assessment notes that none of them had made “representations” on the level of the seventh carbon budget.
The draft carbon budget legislation is subject to the “affirmative procedure”, which means it must be debated and voted through by both houses of parliament.
For the sixth carbon budget, which was legislated under the then-Conservative government in 2021, this vote took place during the “committee stage”.
The government statement says that its delivery plan for the sixth carbon budget, published in October 2025, will “drive substantial abatement into the carbon budget seven period”. It adds:
“These policies will continue to deliver the bulk of emissions savings needed for carbon budget seven. This provides a strong and credible starting point…reducing delivery risk and giving confidence that the transition can be delivered in an affordable and manageable way.”
Specifically, the impact assessment says that the existing CB6 delivery plan “would get the UK to 84% emissions reduction” by 2040, only just shy of the proposed 87% target.
The government commits to publishing a new delivery plan for the seventh carbon budget “as soon as reasonably practical”, in line with the wording with the Climate Change Act. It says:
“This statutory sequencing recognises the time needed to develop and agree an ambitious and robust package of policies to deliver the target.”
The impact assessment notes that the delivery plan will determine how the UK meets the seventh carbon budget, as well as the implications for different regions and sectors of the UK economy.
Two earlier delivery plans, published by previous Conservative governments, were subject to successful legal challenge in the High Court. These cases, brought by groups including Friends of the Earth and ClientEarth, resulted in the latest delivery plan, published last October.
A separate group, calling itself “Carbon Reckoning”, is attempting to crowdfund a fresh legal challenge to the government’s plans for the seventh carbon budget. In late May 2026, it wrote to Miliband arguing that the 87% by 2040 target “fails to comply with international obligations”.
The post Q&A: How UK’s seventh carbon budget will deliver ‘£865bn’ in economic benefits appeared first on Carbon Brief.
Q&A: How UK’s seventh carbon budget will deliver ‘£865bn’ in economic benefits
Transitioning to sustainable practices could boost resilience to compounding geopolitical and climate threats, experts say.
The worldwide fallout from the U.S. war in Iran isn’t limited to gas prices.
Ocean and coastal creatures are being put at risk by the spills, noise, dredging and shipping associated with new offshore oil and gas infrastructure, says a new report by a group of environmental NGOs.
The report by a group of twelve environmental groups analysed planned new offshore oil and gas blocks covering 430,000 square kilometres – an area the size of Sweden – in 11 countries.
Blocks in countries such as Kenya, Indonesia and Australia overlap with some of the planet’s hotspots for marine biodiversity, home to mangroves, coral reefs, sea turtles, sharks and whales.
Oil and gas expansion is advancing in spite of the legal protections already in place, the report says, with a third of the area being licensed overlapping with marine and coastal protected areas.
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“It is alarming to see the research findings and the sheer scale of fossil fuel expansion trajectories threatening the health and future of our shared ocean,” said Tyson Miller, Executive Director of Earth Insight, one of the environmental NGOs involved in the report.
At the first conference on Transitioning Away from Fossil Fuels in Santa Marta, around 60 countries floated the idea of creating “fossil-fuel-free zones”, which would seek to place limits on coal, oil and gas in areas where development would lead to severe social and environmental harm.
As part of the landmark Kunming-Montreal biodiversity deal, governments have also pledged to protect 30% of the planet’s land and marine ecosystems by 2030. This could be used as an opportunity to limit oil and gas expansion in sensitive areas, Miller said.
The report says the findings “reinforce the need for governments, financial institutions and companies to stop funding and supporting offshore oil and gas expansion”, and calls for the creation of fossil-fuel-free zones in “high-value marine and coastal areas”.
Oil bidding in biodiversity hotspots
As one of the case studies, Kenya — which is set to host the Our Ocean Conference in Mombasa later this month — has opened 50 offshore oil and gas blocks for bidding in the Lamu Basin, one of East Africa’s marine biodiversity hotspots.
These blocks overlap with all the region’s mangroves and coral reefs, the report says, which provide nursery habitats for fish, sea turtles and the vulnerable dugong.
These ecosystems are already under severe stress from climate change-related ocean heating and increased water acidity and could now face seismic surveys, offshore drilling, dredging, increased shipping traffic, oil spills, chemical discharge and underwater noise pollution.
The government estimates that oil production will start by 2026, aligning with “global best practices”, and has said the Lamu basin has vast “untapped potential”. The country is expected to open bidding for the first 10 blocks by September.
Muturi wa Kamau, network coordinator for the Kenya Oil and Gas Working Group, said in a statement that the country “is preparing to open ecologically sensitive areas for fossil fuel exploration” while positioning itself as a leader in ocean diplomacy.
“The question is: at what cost are we willing to risk these fragile ecosystems and the livelihoods of coastal communities who have depended on them for generations?” Kamau said.
Australia’s Otway Basin
After a four-year pause, Australia — which will act as co-presidency of the COP31 climate summit — resumed offshore exploration in the Otway basin last year, with American energy firm ConocoPhillips among the operators approved for exploratory drilling off the country’s southern coast.
The sites under exploration are as close as one kilometre from a series of marine reserves known as sanctuaries for pygmy blue whales, who travel thousands of kilometres to reproduce in those waters. Orange roughy, a deep-sea fish that can live for over 140 years, may also be harmed.
In total, the report analysed new LNG export projects in Argentina, Alaska, Mexico and Tanzania, as well as expanded offshore oil and gas licensing in Australia, Cameroon, Indonesia, Jamaica, Kenya, Norway, and Trinidad and Tobago.
The post Planned offshore oil and gas expansion threatens key marine ecosystems, report appeared first on Climate Home News.
Planned offshore oil and gas expansion threatens key marine ecosystems, report
As competition for minerals needed to produce clean energy technologies intensifies, a growing number of countries have resorted to an age-old mechanism to cope with the threat of scarcity: stockpiling.
The world’s biggest economies are racing to shore up reserves of cobalt, lithium, graphite and rare earths, which are needed to produce batteries, electric vehicles, wind turbines and electric systems to wean the global economy off fossil fuels. The same minerals are also increasingly sought after to manufacture military hardware and chips for AI, adding further pressure on supplies.
But the cutthroat scramble to build up reserves threatens to drive up the costs of the energy transition by intensifying competition and pushing up prices of key materials needed to produce clean energy technologies, research published today has found.
“If you undermine the financial viability of [clean energy] projects through higher raw material costs, you’re going to delay their roll-out,” co-author Hugh Miller, the critical minerals lead at the Centre for Economic Transition Expertise at the London School of Economics and Political Science, told Climate Home News.
Stockpiling “is happening, whether we like it or not”, said Miller. “But if we’re going to do it, we need to have it in a coordinated manner that means we don’t have massive market volatility and adverse implications from every country trying to go at it alone,” he added.
The rise of stockpiles
A growing number of governments have adopted national stockpiling programmes in response to heightened geopolitical tensions around mineral supply chains.
Earlier this year, US President Donald Trump announced the establishment of a critical mineral reserve known as “Project Vault” to protect American businesses from shortages after China imposed export restrictions on rare earth supplies.
Beijing suspended the measures until November as part of a trade truce with Washington but the episode spooked Western governments and exposed how strategic materials can be weaponised to achieve geopolitical objectives.
Australia, China, the EU and India have also announced measures to create strategic mineral reserves. Japan and South Korea already have long-standing mineral stockpiling programmes.
“Legitimate concerns”
“There are legitimate concerns with regards to potential global shortages of these minerals,” said Miller, citing rapidly rising and concurrent mineral demand for the energy transition, AI, data centres, and military technologies, combined with underinvestment in new supplies for some minerals, such as copper.
While stockpiling can serve as an emergency response mechanism during acute shortages, it does nothing to address the underlying concentration risks in mineral supply chains. The Democratic Republic of Congo holds around 70% of the world’s cobalt reserves, for example, while China dominates the processing of 19 out of 20 minerals deemed critical by a large number of nations.
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Uncoordinated stockpiling programmes risk heightening the price volatility they are designed to hedge against, according to the report.
Researchers found that if Australia, China, the EU, India, Japan, South Korea and the US simultaneously built reserves of minerals to cover six months of imports, the aggregate stockpile demand could represent up to 34% of global annual cobalt supply and over 10% of global lithium, graphite and copper supply. That could cause a shock to the market, triggering the shortages and price spikes they are trying to avoid.
Miller said it was unlikely that every country would stockpile at that rate, but aggregate stockpiling demand of just 5% of global mineral supply would have an impact on prices.
Coordinating stockpiles: a role for the IEA?
Researchers found that avoiding the negative impacts of stockpiling requires global coordination over how mineral stocks are accumulated and released – a mechanism which already exists for other commodities, including oil.
Coordination should include agreed rules for countries to build up their stocks over a slow and staggered timeline and pre-agreed conditions for releasing reserves to provide market predictability and reduce the risk of price spikes.
The International Energy Agency (IEA), which was established after the 1970s oil crisis to coordinate emergency oil stock releases among member countries, is best placed to oversee such a mechanism, they say.
Earlier this year, IEA member countries called on the agency to strengthen its work on critical minerals, including by providing support to countries “that choose to establish and expand critical minerals stockpiling systems”.
But Miller and his co-author Pau Morandi, a policy fellow at the Centre for Economic Transition Expertise, argue that members should go one step further and mandate the IEA to coordinate the security of supplies, rather than only helping individual governments.
The IEA has been contacted for comment.
A call to action for the G7
Miller said he hoped the research could be picked up by the G7 group of wealthy countries, which could lead on mandating the IEA to take on this coordination role.
France, which is presiding over the group this year and is hosting leaders in Evian on the shores of Lake Geneva in mid-June, has made strengthening the resilience of critical minerals value chains a priority.
In a communique last month, finance ministers agreed to “deepen and expand our cooperation among G7 members and with like-minded partners” to strengthen and diversify critical mineral supply chains and to continue discussions “on how to best organise analytical cooperation”.
Sebastien Treyer, executive director of the Paris-based Institute for Sustainable Development and International Relations (IDDRI), said he hoped the G7 leaders’ summit can help move the discussion on critical minerals towards greater international cooperation to secure the resources the world needs to build a clean economy.
From inclusive and mutually beneficial partnerships to mine resources to stockpiling minerals, “we need to coordinate more like a trade organisation than something that is about securing supply,” he said.
The post The scramble to stockpile critical minerals could drive up energy transition costs appeared first on Climate Home News.
The scramble to stockpile critical minerals could drive up energy transition costs
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