Last year, the Climate Change Committee (CCC) recommended that the UK government submit a new NDC committing the UK to a 68% reduction in greenhouse gas emissions by 2030, compared to 1990 levels. In December, the government did just that, which means we only have 9 years to rearrange our country into the version of itself that’s been promised.
In light of this, business leaders must plan for and embed green ambitions into policies and budgets. This is business-critical; the NDC demonstrates the government’s commitment to transitioning to a Net Zero nation. Soon businesses will have no choice but to get on board.
In this article, I’ll look at how businesses can prepare for the changes coming over the next 9 years, with a particular focus on what to consider when reviewing policies and budgets, and what financial support might be available from the government.
Massive investment is forecast for low-carbon technologies. Businesses should prepare to invest in solutions that emerge; if an existing desire to reduce the company’s carbon footprint doesn’t drive this, society (customers, shareholders, employees, talent) will.
- New and better sustainable packaging solutions are emerging. If your product is packaged, now is the time to start building a roadmap that leads to a zero-waste offering.
- Carbon footprinting tech is emerging. Now is the time to budget for—or begin to prepare your budgets for—an impact assessment and carbon reduction strategy (Pawprint for Business is primed for the latter, in case you were wondering).
- Low carbon heating technologies are gearing up for a national takeover. Now is the time to budget for a heating upgrade. But more on that in point 2...
2. Office upgrades
To incentivise the move from gas to electric, the government is increasing gas and freezing electricity rates from 2022 under the Climate Change Levy (CCL). Furthermore, they’ve added a third flexible allocation of Tariff Guarantees on the Non-Domestic Renewable Heat Incentive scheme (NDRHI). All to encourage businesses to install heat pumps or biomass boilers, which are energy-efficient.
Out in the car park, start thinking about how you can support employees as they transition to EVs over the next decade; WoodMac expects 43% of all passenger vehicles in the UK to have a plug by 2040. In terms of support, the government will provide £500m for electric vehicle charging infrastructure over the next 5 years. As part of this, businesses can apply for the Workplace Charging Scheme, which provides a £350—per socket, up to 40 sockets—towards the installation of EV charge points. This brings us on to...
Unsurprisingly, there’s a lot of governmental support/incentivisation emerging in this space. For example:
- To incentivise businesses to purchase zero CO2 emission vehicles (ZEVs), the government is extending the period first year allowances (FYA) are available to April 2025 and reducing the CO2 thresholds. This reduction will also impact some businesses that hire cars.
- The Plug-in Car Grant, which pays up to £3,000 of the purchase price of a government approved low-emission vehicle and up to £8,000 of a low emissions van, will be extended to 2022-23.
- From the end of October, the Ultra Low Emission Zone (ULEZ) area in London will be expanded to the North and South Circular ring roads. Clean Air Zones (CAZ) will come into force in Bath and Birmingham this year. Wales will publish its Clean Air Zone Framework in spring and Scotland will introduce Low Emission Zones (LEZ) in major cities from 2022.
- From April a nil rate of tax will be applied to zero-emission vans within the van benefit charge. According to Accountancy Daily, this could save businesses an estimated £433 per van in tax in 2021-22.
The upfront cost of low/zero-emission vehicles isn’t small. Businesses should (if they haven’t already) start budgeting for the transition.
Interestingly, on the subject of EVs vs petrol/diesel, our scientific advisor, Mike Berners-Lee says, ‘‘...keep your old car for as long as it is reliable, unless you’re doing high mileage or the fuel consumption is ridiculously poor [then swap to an EV if you can afford to]’. Only half the carbon impact of driving comes out of the exhaust pipe (and a bit from the fuel before it’s burned). The rest comes from the embodied carbon of manufacturing the car.
Nevertheless, driving high emissions vehicles is only going to become more expensive in the coming years. Preparing for the change now is vital.
4. New taxes
I’ve summarised a selection of environmentally-focused tax changes below. For in-depth insight into green tax announcements, take a look at pg. 96 - 98 of the 2020 HM treasury budget. 2021’s budget will be out in early March.
- The UK Emissions Trading Scheme (UK ETS) replaced the EU ETS on 1 January 2021. This scheme will put a cost on carbon pollution and set a cap on the total amount of CO2e that is emitted by certain energy-intensive industries, the power generation sector and aviation. Any changes to current policies will be implemented by latest January 2024, although the government aims to give the industry at least a year’s notice. The Carbon Price Support (CPS) is one in particular that I think businesses should watch—it’s currently frozen at £18t/CO2e through to 2021 but that is inconsistent with the Paris Agreement and the UK’s targets.
- A plastic tax will come into effect across the UK in 2022. It will apply to any plastic packaging that’s produced in, or imported into, the UK that does not contain at least 30% recycled plastic. It will affect UK businesses that produce or import plastic packaging and business customers of producers and importers of plastic packaging.
- To ensure the tax system treats fuels that are used off the gas grid more equitably, the government is freezing LPG at 2019-20 levels until April 2024. Electricity rates for Climate Change Levy (CCL) will be frozen. Check out this multi-sector analysis of the cost difference of CCL rates 2018 – 2022 for more information.
- The Climate Change Agreement Scheme—which enables businesses to reduce their CCL bill in exchange for meeting targets to improve their energy efficiency—has been extended by two years to 2025.
- Air Passenger Duty (APD) rates are increasing on long haul flights by £2 in economy and £4 in premium economy, business and first-class.
5. Green travel incentives
In the CCC’s most recent carbon budget, it’s clear that travel demand must drop by 2030 if we’re going to meet our Net Zero target. Businesses have a responsibility to facilitate this shift, through schemes that encourage low carbon commuting and travel. Some interesting ideas include:
- Monthly loans for, or money towards, public transport season tickets. This will support employees in reducing single-occupancy car commutes—check out Sustrans for more ideas.
- Gamification of (and rewards for) low carbon commuting. With Pawprint for Business, employers will be able to set challenges for their workforce that encourage them to compete against one another (or other teams) for the most carbon saved over a specific period. Ideally, the reward for the winner would be something that’s both coveted and good for the planet!
- EV salary sacrifice—According to Fleetpoint, ‘Employers can actually save money through EV salary sacrifice schemes through lower National Insurance (NI) contributions.’
- EV charging points—As mentioned, financial support is available through the Workplace Charging Scheme
- Journey days—Flying is one of the worst offenders in terms of emissions. Incentivise employees to travel on alternative transport with paid ‘journey days’, which absorb the additional travel time so no annual leave is lost. Climate Perks can help.
- A ‘No flights within X miles’ policy. At Pawprint, we have a ‘No flights within the UK policy’. Why would we waste the carbon when the train does a better job of getting us from A to B (IMO)? Reducing flying is something businesses must lead on—if employees see a commitment like this from the top, it will make them think twice about their own travel choices.
According to research commissioned jointly by the Scottish Government, Defra and the 2020 Climate Group, ‘Low carbon initiatives are most extensive and sustained in their effects when they build on shared values between organisations and employees.’ My recommendation is that you ask your people how they think low carbon travel should be incentivised in your organisation—buy-in will be much higher if people feel included in the decision making.
The next nine years will see rapid scaling of green policies, as the government works to achieve carbon targets. Businesses’ support is vital to success, which means policies and schemes will continue to emerge as a means of streaming action in the right direction.
Being an early mover in the green revolution comes with a host of benefits—altruism need not be the only reason to explore the options I’ve listed above. From increasing investment opportunities to attracting and retaining top talent to winning customer loyalty, you’ve heard them all before. Now it’s time to act.