Net Zero – What’s new for local authorities?

Steve Gummer and Sophie Drysdale look at two major climate publications: the Heat and Buildings Strategy and the Net Zero Strategy.

This week central government released two major climate publications: the Heat and Buildings Strategy and the Net Zero Strategy.

Both documents contain a myriad of policies and approaches. Both documents are hundreds of pages long.

The Heat and Buildings Strategy and the Net Zero Strategy contain opportunities and challenges for local government. Opportunities present themselves in the form of grant funding and new powers. Challenges present themselves through new obligations and burdens.

It is critical for local authorities to understand these strategies and know exactly what funding is available. In the Net Zero Strategy, local authorities are identified as integral actors in the battle for net zero, with HMG estimating that 82% of all UK emissions are within the scope of influence of local authorities.

Local government is already at the forefront of the fight against climate change. But it can be challenging to stay on top of the emerging obligations and opportunities. We will provide more in-depth analysis of these strategies in the coming weeks but set out the highlights in this article.

A key part of the support we offer to our local authority clients is helping them understand the obligations they face and the funds and grants for which they may be eligible. Below we set out for local authorities the key funds (of which not all are directly available to local authorities, but all could be enabled by or potentially influence policy making of local authorities) and local authority issues arising from these two new strategies:

HEAT AND BUILDINGS STRATEGY

Funds (including extensions of pre-existing funds)

• Boiler Upgrade Scheme – £5,000 grant (fund of £450 million 2022/23- 2024/25) – for households and small businesses to switch to an air source heat pump.
• Boiler Upgrade Scheme – £6,000 grant (fund of £450 million 2022/23- 2024/25) – for households and small businesses to switch to a ground source heat pump.
• Public Sector Decarbonisation Scheme – further £1,425 million funding 2022/23- 2024/25 – for public sector organisations to decarbonise public sector buildings in England and reserved public services across the UK.
  Public Sector Low Carbon Skills Fund – £32 million fund 2020/21 (supporting the delivery of the Public Sector Decarbonisation Scheme) – for public sector organisations to access the expert skills required to identify, develop and deliver decarbonisation projects.
• Public Sector Low Carbon Skills Fund – further £15 million funding 2021/22 (supporting the delivery of the Public Sector Decarbonisation Scheme) – for public sector organisations to develop heat decarbonisation plans for their estates.
• Home Upgrade Grant – further £950 million funding 2022/23- 2024/25 – for low-income households living in off-gas-grid homes in England to deliver energy efficiency upgrades and low-carbon heating.
  Social Housing Decarbonisation Fund – further £800 million funding 2022/23- 2024/25 – for registered providers of social housing in England (including private and local authority providers) to deliver energy performance improvements and low-carbon heating in social housing.
• Heat Network Transformation Programme – further £338 million funding 2022/23- 2024/25 – to scale up low-carbon heat network deployment and to enable local areas to deploy heat network zoning, which will create a step change in low-carbon heat network market growth.
• Green Heat Network Fund – at least £270 million funding 2022- 2025 (part of the Heat Network Transformation Programme) – to incentivise the heat network market to adopt low-carbon heat sources and develop low-carbon heat networks in England.
• Heat Networks Investment Project – continued funding though the Heat Network Transformation Programme – grant and loan investments to fund the development and construction of heat networks which supply both domestic and non-domestic customers in England and Wales.
• Heat Network Efficiency Scheme – continued funding though the Heat Network Transformation Programme – to part-fund operational performance improvements and emission reduction in existing systems and enable the transition of these systems to lower carbon heat sources.
• Net Zero Innovation Portfolio – £1 billion fund (2021- 2025) – for projects designed to accelerate the commercialisation of innovative, low-carbon technologies, systems and business models.
• Heat Pump Ready programme – £60 million funding (part of the Net Zero Innovation Portfolio) – for the development of innovative solutions to improve deployment, tools and technologies across the heat pump sector, supporting the government’s target of 600,000 installations a year by 2028.
• Local Authority Delivery (LAD) scheme – further £200 million funding for Phase 3 (LAD3) – for local authorities to support low-income households in their area in the most inefficient homes that are on-the-gas grid in England with energy efficiency and low-carbon heating upgrades (households can benefit from energy efficiency and low-carbon heating improvements of up to £10,000).

Local authority opportunities, challenges and obligations

• Local Authority Delivery (LAD) scheme – extended, so it continues to support consumers in 2021 – funding for local authorities throughout England to support low-income households in their area with energy efficiency and low-carbon heating upgrades.
• Energy Company Obligation (ECO) scheme – introduced 2013 – currently an obligation on larger energy suppliers to provide energy efficiency and heating measures for fuel poor consumers across Great Britain. Eligible households can save up to £300 on energy bills. Households are eligible if they receive certain benefits, live in the least efficient social housing or are referred by their local authority.
• Social Housing Decarbonisation Fund – further £800 million funding 2022/23- 2024/25 – for registered providers of social housing in England (including private and local authority providers) to deliver energy performance improvements and low-carbon heating in social housing
• Sustainable Warmth competition – launched 16 June 2021, with delivery continuing through to March 2023 – brings together two fuel poverty schemes (LAD3 and Home Upgrade Grant Phase 1) into a single funding opportunity for local authorities. Local authorities can continue to target low-income households living in inefficient properties through the £200 million LAD Phase 3 focused on gas fuelled homes and the £150 million Home Upgrade Grant for off-gas-grid properties.
• Local Net Zero Programme – BEIS-funded – supports local authorities, local partners, and communities across England in delivering Net Zero and clean growth. Funds a range of measures designed to build local capacity and capability, and encourage joined up working between local areas, investors and central government. For example, five Local Net Zero Hubs have been established across England to provide access to expertise to help develop and secure investment in low-carbon projects. These Hubs work with local partners and local authorities in their region to identify a pipeline of low-carbon projects and provide practical support for the initial stages of project development through a range of good practice guidance and resources. The Net Zero Strategy announced the continuation of the Local Net Zero Programme.
• Proposal to introduce zoning for district heating – the Energy White Paper committed to introducing heat network ‘zoning’ in England by 2025 – proposals involve central and local government working together with industry and local stakeholders to identify and designate areas within which heat networks are the lowest cost, low-carbon solution for decarbonising heating. This will help heat network developers to accelerate deployment of heat networks where they are most appropriate and help deliver heat networks’ contribution to our Net Zero commitments.
• The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 –from April 2020, all privately-rented homes in England and Wales which are required to have an EPC must have a minimum of EPC band E, unless a valid exemption has been registered. BEIS has provided significant additional support (including in the form of funding) to local authorities to ensure compliance and enforcement of these regulations. Many local authorities require selective licences to homes to be rented which can be a means of enforcement.

NET ZERO STRATEGY

Funds (including extensions of pre-existing funds)

• Industrial Decarbonisation and Hydrogen Revenue Support (IDHRS) scheme – £140 million funding – for the allocation of the new hydrogen and industrial carbon capture business models to electrolytic and CCUS-enabled projects.
  CCS Infrastructure Fund – £1 billion – to provide industry with the certainty required to deploy CCUS (carbon capture, usage and storage) at pace and at scale and will form part of a package of government support.
• Industrial Energy Transformation Fund – £315 million funding (£289 million for England, Wales and Northern Ireland, £26 million for Scotland) – for industrial sectors and the communities they employ to support the installation of energy efficiency and on-site decarbonisation measures.
• Future Nuclear Enabling Fund – £120 million funding – provides targeted support for barriers to entry in relation to options for future nuclear technologies, including Small Modular Reactors (SMRs) and potentially Advanced Modular Reactors (AMRs). Further details will be published in 2022.
• Farming Investment Fund and the Farming Innovation Programme – supports low-carbon farming and agricultural innovation to invest in equipment, technology, and infrastructure to improve profitability, benefit the environment and support emissions reductions.
• Nature for Climate Fund – further £124 million funding – for peat restoration, woodland creation and management, enabling more opportunities for farmers and landowners to support Net Zero through land use change.
  Sustainable Aviation Fuels (SAF) – £180 million funding – for the development of SAF plants, to enable the delivery of 10% SAF by 2030.
• Net Zero Hydrogen Fund – £240 million funding, intended to launch in early 2022 – to support commercial deployment of new low-carbon hydrogen production projects in the early 2020s by helping address barriers related to commercial risk and high upfront costs relative to fossil fuel alternatives, unlocking private sector investment in projects.
• Biodegradable waste – £295 million of capital funding – for local authorities in England to prepare to implement free separate food waste collections for all households from 2025, in an effort to eliminate biodegradable municipal waste to landfill from 2028.
• Contract for Difference – £200 million funding for offshore wind and £24 million for floating offshore wind.
• EV Infrastructure – further £620 million funding – for zero emission vehicle grants and EV Infrastructure, with a focus on local on street residential charging and targeted plug-in vehicle grants.
• November 2020 Spending Review – £17.5 billion (up to 2024) – for renewals, upgrades, and enhancements of the existing rail network.
• Automotive Transformation Fund – further £350 million funding – to support the electrification of UK vehicles and their supply chains.
• Energy Transition Fund (Scotland) – £62 million funding – to support Scotland’s energy sector and the North East, over the next five years, to make progress on energy transition as Scotland moves toward a net zero society by 2045.
• Emerging Energy Technologies Fund (Scotland) – £180 million funding over five years – to accelerate low carbon infrastructure projects that will be essential to deliver net zero.

Local authority opportunities, challenges and obligations

Chapter 4v (Local Climate Action) of the Net Zero Strategy provides considerable commentary on the role of local authorities in supporting decarbonisation and regeneration in our local areas and communities. We set out some of the key points below:

HMG considers that devolved, local, and regional authorities’ legal powers, assets, access to targeted funding, local knowledge, and relationships with stakeholders enables them to drive local progress towards net zero. Local government drives action directly, and through communicating with, and inspiring action by, local businesses, communities, and civil society.

Local leaders are well placed to engage with all parts of their communities and to understand local policy, political, social and economic nuances relevant to climate action. Local government decides how best to serve communities and is best placed to integrate activity on the ground so that action on climate change also delivers wider benefits – for fuel poor households, the local economy, the environment and biodiversity, as well as the provision of green jobs and skills.

The challenge

• Significant regional variations in the level of emissions and some of the hardest hit local economies that face multiple development and growth challenges are proportionally home to a greater number of lower skilled workers. Many of these areas are also where high-carbon industries are located.
• There are key challenges for rural communities – increased age of housing means it is more difficult and expensive to introduce energy efficiency measures and a greater reliance on cars. But there are unique opportunities for rural areas – e.g., through access to sustainable biomass.
• There are challenges for coastal communities – vulnerable to more frequent flooding, rises in sea level, and accelerated coastal erosion which have the potential to affect public services and infrastructure. But there are unique opportunities for coastal communities – e.g., though tidal energy or industrial scale water source heat pumps.
• There are no net zero statutory targets on local authorities in the UK – it is very difficult to create a uniform requirement that reflects the diversity of barriers and opportunities. However, it is important to ensure local leaders across the board are supported by enhancing the capacity and capability of local areas to deliver net zero, coordinating engagement with local authorities, and clarifying expectations at a national level to accelerate local progress towards net zero.

The goal

• HMG states that local government is key to integrating delivery at a local and regional level to deliver more cost-effective routes to net zero and derive local co-benefits that embed climate action in the heart of local places and services. The goal is to:
  
  • create a strong partnership working between central, devolved, and local government, increase the co-ordination and better support all levels of government to utilise the influences available to them; and
  • empower local leaders to take action to reduce emissions, including building back greener.
• HMG emphasises the importance of community empowerment, engagement, and action in supporting the UK’s transition to net zero and enabling communities to access the benefits that it brings, from greener jobs to improved health. Communities are especially well placed to help raise awareness and engage people in adopting net zero behaviours.

Funding

• HMG states that there are 22 dedicated grant schemes for net zero work from central to local government.
• HMG also stresses the role of the UK Infrastructure Bank (UKIB) in lending to local authorities for strategic and high value projects and investing in projects alongside the private sector, crowding in private sector capital. With the objectives of helping to tackle climate change, meeting the UK’s net zero emissions targets, and supporting regional and local economic growth across the UK, the UKIB will offer loans to local authorities for high value and strategic projects of at least £5 million.

Working with local communities

• HMG states that working with local communities is critical. Communities benefit from strong relationships and ties to their areas and local authorities; these can be key to reducing emissions across the economy and making sure people stay engaged in the process. Where local authorities and communities work together effectively, HMG has already seen significant improvements in both delivery and in wider public engagement.
• HMG highlights the important role of communities in the transition to net zero recognised through the introduction of UK-wide growth funding schemes, such as the Community Renewal Fund, the Levelling Up Fund, and the Towns Fund, enabling local areas to tackle net zero goals in ways that best suit their needs.

Steve Gummer is a Partner and Sophie Drysdale is a Trainee Solicitor at Sharpe Pritchard LLP.

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