Net Zero Needs Further Action, Says NAO

A new National Audit Office (NAO) report highlights that further action is needed by the UK Government to strengthen governance and delivery mechanisms, if it is to secure value for money for its £4.2bn of innovation spending in pursuit of net zero.

The NAO’s latest study investigates whether the government is set up to deliver value for money from its approach to investment in research and innovation to deliver net zero. It found that government had made some important progress in recent years.

In October 2021, the then Department for Business, Energy and Industrial Strategy (BEIS) published the government’s Net Zero Research and Innovation Framework, (the Framework). This provided stakeholders with a clear steer on the main innovation priorities and timescales. It identified 31 challenges areas across seven categories, ranging from decarbonising aviation to sustainable food and biomass production.

In March 2023, the newly created Department for Energy Security and Net Zero (DESNZ) published government’s Delivery Plan which sets out for the first time the landscape of public support for net zero research and innovation. This is made up of approximately £4.5bn up to 2025, comprising £4.2bn from the latest Spending Review and £0.26bn from the Office of Gas and Electricity Markets (Ofgem).

However, the NAO found that government has more to do to ensure value for money from this investment. They report that complexity of public sector funding from 2022 to 2025 will make it hard for DESNZ and the Innovation Delivery Board to track spending. There are 115 government programmes providing funds for net zero research and innovation, delivered across eight public bodies. Many programmes pre-date the Delivery Plan and range in size from £0.35mn to £685mn.

DESNZ estimates that new low carbon investment in 2022 in the UK was £23 billion. It expects this will need to increase two to three times that level by the late 2020s and 2030s. The government expects most of this increase will need to come from the private sector. The government is currently not able to estimate what the present level of private capital investment in net zero is, but it has commissioned an external project to develop its approach to tracking flows of net zero investment.

DESNZ, with other departments, has started monitoring progress systematically across the Framework but is still to define what outcomes it is seeking to deliver and what level of risk it will tolerate.

The NAO recommends by October 2023, DESNZ should set out who is responsible for providing stewardship and overseeing cross-government delivery in each of the seven categories within the Framework, and how it will encourage action if progress is not on track against intended outcomes. It also recommends that the Net Zero Innovation Board should specify the desired outcomes for each of the challenge areas in the Framework, and define what level of failure is tolerable. This should include publishing update reports against the output and outcome targets for each challenge – for example, the potential for reductions in carbon emissions and the amount of private investment.

Read the full NAO report here

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