CBI: Spending review can kickstart ‘moon-shoot’ net-zero mission

The CBI has urged Rishi Sunak to create new market subsidy regimes to spur the UK’s fledgling carbon capture, utilisation and storage (CCUS) and hydrogen industries.

In its submission to the Treasury’s spending review, which is due to be unveiled by the chancellor of the exchequer later this autumn, the employers’ body has included a raft of measures to spur economic growth that also delivers the UK’s net-zero goals:

• Introducing new Contracts for Difference (CfD) auctions, which have underpinned the rapid growth of the UK’s offshore wind industry, for hydrogen and nuclear. The CfDs would offer a variable cost for the production of hydrogen and a fixed payment to cover the capital expenditure cost for the construction and operational phases of new nuclear power plants.
• Introducing a privately financed regulated asset base (RAB) model for the transport and storage element of CCUS infrastructure, to provide greater incentives to build and reduce lifetime construction costs of this infrastructure.
• Committing at least £1 billion over the next spending review period to hydrogen testing programmes and demonstration projects involving production, storage and distribution.
• Clarifying the next steps for the plug-in car and van grants

These measures would aid research and innovation, offering opportunities to “build a stronger, resilient and fairer economy delivering sustainable growth and critical to reaching the net-zero target”, says the submission.

The CBI says net zero should be a “moon-shoot” mission, backed by a well-funded British version of the US government’s Advanced Research Projects Agency, which can invest in new and emerging low-carbon technologies.

The net-zero measures are part of a wider package proposed by the CBI to lay the groundwork for the UK’s long-term future in the upcoming spending round.

The submission also calls for a new watchdog to oversee the performance of the UK’s economic regulators in delivering the economy’s strategic goals including the net-zero transition. This could, it suggests, take the form of an expanded role for the National Infrastructure Commission.

And it urges the government avoid a gap in energy efficiency provision once the Green Homes Grant ends in March 2022 with the introduction longer-term grant scheme.

Rain Newton-Smith, CBI chief economist, said: “The spending round provides an opportunity to invest in a long-term vision for the economy, which means moving forward with levelling-up ambitions and working towards a net-zero economy.”