UK climate policy and regulation tracker

Jeremy Hunt describes himself as a ‘green Tory’. Yet, the chancellor’s Spring Budget, announced in early March, offered very little to support the UK’s green economy. Described by many as one of the least green budgets of recent years, measures outlined – or not – “will do little to attract investment,” according to Alasdair Johnstone from the Energy and Climate Intelligence Unit. The fact that the net zero economy grew 9% while the rest of the economy remained stagnant in the last 12 months, points to a missed opportunity.

Included in the budget was £120m to be spent on emerging low-carbon technologies, £270m to support zero-carbon aviation and road vehicles, a £1.5bn extension to the windfall tax on North Sea oil and gas up to 2029, and more cash for offshore wind developers.

Absent from the budget was any detail to support the Government’s proposal for a carbon tariff on imports. The so-called Caron Border Adjustment Mechanism (CBAM) is designed to level the playing field for UK firms that spend money on cutting carbon by penalising imports from countries with high emissions. Businesses remain largely in the dark as to what happens next with CBAM, if anything.

The decision to delay the introduction of the UK Deposit Return Scheme (DRS) has become symbolic of a Government failing to give any confidence to companies looking to invest in sustainability. The DRS, which could have a huge impact on UK recycling rates, will not now come into play until at least 2028, nearly a decade after the idea was first floated. According to reports, the delay is a result of disgruntlements between devolved governments as to whether glass should be included alongside plastic in the scheme.

With UK policymakers stalling efforts to speed up the low-carbon transition, UK firms still need to keep an eye on what’s happening across borders. With new EU regulations coming into force this year – including the Corporate Sustainability Due Diligence Directive (CSDDD) – many companies are making moves to stay ahead of the curve, particularly when it comes to enhanced reporting demands. The CSDDD is designed to hold large businesses to account for violations of human rights and environmental standards in their value chains. It will establish a new due diligence duty for all big firms, plus mandate corporate climate transition plans aligned with the Paris Agreement’s 1.5C pathway.

While the details are still being thrashed out, UK auditors are doing their best to help UK firms improve their ESG reporting and performance. The Chartered Institute of Internal Auditors for the UK and Ireland is revamping the profession’s code of practice. The idea is that internal auditors should not be able to deem risks relating to climate change and other environmental sustainability issues beyond their remit. They should also enhance risk considerations relating to social issues, including reputational risk from the poor treatment of customers and communities.