2025 UK Spending Review: Major Climate & Energy Updates

Welcome, Net Zero News readers,

In a significant move towards a greener future, UK Chancellor Rachel Reeves has unveiled the first spending review under the current Labour government. This review marks a pivotal moment in the UK’s journey towards achieving net-zero emissions, with substantial funding allocated for nuclear power, energy efficiency, and carbon capture and storage (CCS). Let’s delve into the details of this ambitious spending plan and its implications for the UK’s energy landscape.

Understanding the Spending Review

A spending review is a crucial governmental process that sets the spending limits and priorities for each ministry for the remainder of the parliamentary term. In this instance, the Department of Energy Security and Net Zero (DESNZ) has received one of the most substantial increases in capital spending, signalling the government’s commitment to addressing the climate crisis and enhancing energy security.

Energy Secretary Ed Miliband, who played a pivotal role in negotiating the spending settlement, was reportedly one of the last ministers to agree on the final details. Prior to the announcement, the Times noted that Miliband was considered one of the “biggest winners” from the process.

Key Announcements from the Spending Review

Reeves’ spending review has been viewed positively by experts and media commentators alike, marking a strategic move to boost Labour’s popularity while fulfilling key manifesto commitments, especially those concerning net-zero emissions. Although she did not explicitly mention “net-zero” or “climate change” in her speech, Reeves underscored the importance of achieving energy security through domestic, low-carbon power. The term “clean energy” appeared frequently in the accompanying review document.

Overall, total departmental budgets are set to grow by 2.3% in real terms throughout the spending review period. Notably, DESNZ is anticipated to see a remarkable 16% increase in its overall departmental spending, reaching £12.6 billion by 2028-29. This figure does not include the £14.2 billion investment earmarked for the Sizewell C nuclear power plant, which marks the first state-backed nuclear power station to be developed in decades.

Departmental Spending Breakdown

The spending review details various allocations across different sectors, reflecting a prioritisation of climate action:

• Energy Efficiency: The government has reaffirmed its commitment to invest £13.2 billion in upgrading homes under its “warm homes plan”, aimed at enhancing energy efficiency. This funding will cover the period from 2025-26 to 2029-30, potentially saving households up to £600 per year in energy bills.
• New Nuclear Investments: A significant portion of the funding is dedicated to the Sizewell C nuclear power plant, which is projected to generate enough electricity to power six million homes.
• Carbon Capture and Storage: The spending review allocates £9.4 billion for CCS initiatives, supporting the development of two new clusters: Acorn and Viking, both expected to be operational in the 2030s.
• Transport Infrastructure: The review includes commitments for regional transport projects, with a budget increase for local low-carbon transport options and major rail projects.

Energy Efficiency Initiatives

Prior to the spending review, there was speculation about potential cuts to the “warm homes plan”. However, the review confirmed the full £13.2 billion investment, which seeks to improve the energy efficiency of homes nationwide. This commitment aims to support tens of thousands of jobs and bolster the economy while providing direct benefits to millions of households.

Trade association Energy UK’s chief executive, Dhara Vyas, stated that the funding will result in warmer homes, cleaner air, and reduced energy bills, showcasing how the energy transition can enhance daily life for citizens.

Investments in Energy Infrastructure

The review also outlines a £8.3 billion allocation for Great British Energy (GB Energy), which is part of the government’s strategy to promote clean energy sources. This funding is designed to mobilise private investment and strengthen the UK’s electricity system with homegrown, clean power by 2030.

In addition, the government has earmarked £300 million to bolster offshore wind supply chains and support the development of floating offshore platforms, further enhancing the UK’s position in the global clean energy market.

Nuclear Power Developments

One of the most significant announcements was the £14.2 billion investment for the Sizewell C nuclear power plant, developed in partnership with EDF Energy. This project is expected to create approximately 10,000 jobs during construction, including 1,500 apprenticeships, while contributing significantly to the UK’s energy security and emissions reduction goals.

Energy Secretary Ed Miliband emphasised the necessity of new nuclear power in ensuring lower energy bills and achieving a clean energy future. He stated, “We need new nuclear to deliver a golden age of clean-energy abundance, because that is the only way to protect family finances, take back control of our energy, and tackle the climate crisis.”

Carbon Capture and Storage Initiatives

The UK government has committed to supporting carbon capture and storage projects, with an additional £9.4 billion allocated to enhance the deployment of CCS initiatives. This funding will primarily target the Acorn and Viking clusters, which are expected to be operational by the 2030s.

Despite the enthusiasm surrounding CCS, the government has faced scrutiny regarding its investments in this relatively nascent technology. Critics argue that public funds might be at risk given CCS’s developmental stage.

Transport Infrastructure Investments

In the realm of transport, the spending review outlines a commitment of £31.5 billion for the Department for Transport by 2028-29, with a focus on regional transport projects that can help reduce emissions. Funding for local low-carbon transport options, including electric vehicles and cycling infrastructure, is set to increase significantly.

The review also includes a pledge to “more than double” spending on city region transport, which could facilitate the transition to zero-emission buses, trams, and local rail systems.

Research and Development Funding

Recognising the importance of innovation in achieving net-zero, the government plans to increase research and development (R&D) funding to £22.6 billion per year by 2029-30. This funding will encompass a broad spectrum of initiatives, including clean energy technologies and climate change research.

The government’s new R&D missions accelerator programme aims to leverage private investment, promoting breakthroughs in sectors critical for achieving net-zero targets.

Climate Adaptation Initiatives

Investment in climate adaptation and the natural environment has also been prioritised, with £2.7 billion allocated for sustainable farming and nature recovery initiatives. The government aims to enhance the UK’s resilience to climate change, ensuring that ecosystems remain robust and capable of supporting the economy and food security.

Foreign Aid and Climate Finance

Amidst these ambitious domestic plans, the government has announced cuts to foreign aid spending, which has raised concerns about the UK’s ability to meet its climate finance commitments. The government has pledged £11.6 billion over five years to support climate initiatives in developing countries, but observers express doubt about the feasibility of this commitment given the cutbacks in aid spending.

Responses to the Spending Review

The spending review has sparked a variety of reactions from across the political spectrum. Prime Minister Keir Starmer highlighted the review as a critical step towards national renewal, emphasising the government’s dedication to investing in nuclear power, clean energy, and carbon capture technologies.

Editorials in major newspapers have noted the significance of the funding allocated to green initiatives, drawing clear political lines between Labour and rival parties. The Times welcomed the approval of the Sizewell C project, while commentators have raised concerns about the potential costs associated with new nuclear developments.

Conclusion

The spending review represents a significant commitment by the Labour government to transition towards a greener economy. With substantial investments in energy efficiency, nuclear power, and carbon capture technologies, the review lays the groundwork for a sustainable future. However, as the government moves forward with these plans, it must also address concerns regarding funding allocations and ensure that its ambitious targets are met without compromising international climate commitments.

As we continue to monitor the developments stemming from this spending review, it is vital that we remain engaged and informed, championing the necessary actions to achieve a sustainable and resilient future for all.