Net Zero funding: Letter to the UK Government

To: Claire Coutinho MP, Secretary of State for Energy Security & Net Zero
From:  Màiri McAllan, Cabinet Secretary for Wellbeing Economy, Net Zero and Energy

Ahead of the Spring Budget, I urge the UK Government to announce substantial additional investment in delivery of net zero and in particular on energy and green investment. Net zero is our greatest challenge, heavily underlined by the recent confirmation that the world’s global temperature pushed past the internationally agreed 1.5c warming threshold for a 12-month period. Significant additional funding is essential right now to address the need to urgently accelerate decarbonisation across the economy. Net Zero is also a significant economic opportunity for Scotland, that could be missed due to the inaction of the UK Government. We cannot afford another repetition of the Prime Minister’s announcement on 20 September, which sent a damaging statement to citizens and businesses alike on the seriousness of the UK Government’s net zero ambitions.

I would in particular highlight the following:
The UK Government’s failure to protect and deliver an inflation-proof capital budget has resulted in nearly a 10% real-terms cut in the Scottish Government's capital funding over the medium-term between 2023-24 and 2027-28. I urge the UK Government to reconsider its approach and deliver a Spring Budget that will enable meaningful investment in Scotland and a just transition for all its people.

I urge you to set out in full the selection criteria, funding details and timescales for both the ‘anchor phase’ and the ‘buildout’ of the Acorn Carbon Capture Transport and Storage Project. This should include the a clear commitment to match the ambitions of the range of emitter projects in the Scottish Cluster, in order to provide clarity for Scottish industry, confidence for investors and opportunities for our workforce, I call on the UK Government to reform the Transmission Network Use of System charging regime to ensure it does not act as a drag on investment in our future energy system. More widely, I look forward to continue working in collaboration with you and other partners on the acceleration of transmission infrastructure deployment. As part of this, we need to expedite the review of consenting. The Transmission Acceleration Action Plan and Connections Action Plan must be implemented rapidly, and in full.

In addition, I urge the UK Government to accelerate the development of an appropriate market support mechanism for Long Duration Energy Storage, and particularly Pumped Hydro Storage, so that these projects can deploy at speed. I would also ask you to provide vital clarity on the design of the Clean Heat Market Mechanism, further to recent reports suggesting planned changes which I believe would be damaging to the intent and effectiveness of that legislation.

I welcome plans to invest £960m in green industries through the Green Industries Growth Accelerator (GIGA). Significant growth in the sectors GIGA is supporting, including Carbon Capture and hydrogen, is vital to provide the best pathway to net zero by 2045. The funding is essential to support these sectors to deliver a climate friendly energy system that delivers affordable, resilient and clean energy supplies for Scotland's households, business and communities. It is vital that Scotland's needs are considered as part of the design of the funds, and industries in Scotland have a fair opportunity to access this funding. I look forward to ongoing engagement between our officials as plans for GIGA develop.

There remains a vital need for additional targeted support for those that need it the most. I urge you to develop and introduce a social tariff scheme to provide a much-needed safety net for priority consumers, and to review urgently the support needed for businesses who are continuing to struggle with bills that are too high.

While these actions will reduce the impact of fuel poverty in the short-term, market-wide reform is needed to reduce costs, including by restructuring the wholesale electricity market so that volatile global gas no longer sets the price of electricity. This will help enable the shift to climate friendly heating, transport and industrial systems, which will rely on electricity rather than fossil fuels.

In addition to these interventions, I repeat my calls for serious engagement on actions that are currently reserved to the UK Government and which we require action on to enable Scotland, and other parts of the UK, to decarbonise to meet statutory targets and the UK’s Nationally Determined Contribution which exceeds the ambition contained in the Carbon Budget. My letter of 26 October 2023 outlines the action required and I would welcome the opportunity to discuss these as a matter of urgency.