‘A wholesale rewiring of the economy’ – UK pledges 87% emissions cut by 2040

The UK government has pledged to reduce the nation's carbon emissions by nearly 90% by 2040, committing to accelerate the energy transition in a move that would require fundamental economic changes, industry experts say.

Today, the UK government doubled down on its commitment to tackling climate change, with Secretary of State for Energy Security and Net Zero Ed Miliband making the announcement before the House of Commons as part of the UK's 7th Carbon Budget.

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The targets are aligned with independent advice from the Climate Change Committee (CCC) and aim to reduce the UK's exposure to volatile international fossil fuel markets.

"Against the backdrop of heightened geopolitical instability, including the ongoing crisis in the Middle East and its implications for global energy markets, the case for setting a clear and credible long-term pathway for the UK on clean energy and climate action is stronger than ever," Miliband said.

His statement comes a week after former British Prime Minister Tony Blair criticised his plans for decarbonisation, describing Miliband's net zero plans as a "quixotic fantasy."

However, the war in Iran appears to have impacted attitudes in the financial industry. According to a survey conducted by the UK Sustainable Investment and Finance Association last month, 78% of investors now believe that investing in renewable energy is "less risky" than commitments to oil and gas.

Welcoming the government's renewed commitment, James Alexander, CEO of the UK Sustainable Investment and Finance Association, said: "Investors need certainty to allocate billions of pounds of capital to major low-carbon industries, and the carbon budget is an important demonstration of the UK's ongoing commitment to decarbonisation."

At the same time, Nimoy Kher, managing associate at law firm Sharpe Pritchard, emphasised that the scale of changes required should not be underestimated: "An 87% emissions cut by 2040 will require a wholesale rewiring of the economy – more clean power, more grid, more storage, more electrified transport and heat, and new models for industrial decarbonisation."

"The Seventh Carbon Budget is a clear signal to market stakeholders that the UK's decarbonisation pathway remains legally anchored, notwithstanding the political noise around net zero," Kher added. "But the market will not respond to targets alone. Our clients will need bankable revenue and financing models, greater cost predictability, faster consenting, and clearer grid access in a manner that supports investment."

"The target confirms the scale of the opportunity – the challenge now is creating the conditions for capital to flow into deliverable projects."

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