What next for the Government’s Net Zero Strategy?

Early last week, as the UK faced its hottest ever day on record, the High Court handed down an historic judgment in the case of (1) Friends of the Earth Limited (ii) ClientEarth (iii) Good Law Project and Joanna Wheatley v Secretary of State for Business, Energy and Industrial Strategy [2022] EWHC 1831 (Admin), ruling that the Government’s Net Zero Strategy (the ‘NZS’) is in breach of the Climate Change Act 2008 (the ‘Act’).

‘Climate change is a global problem’ – so begins Mr Justice Holgate’s judgment. It is against this backdrop that the NGOs Friends of the Earth Limited, ClientEarth, and the Good Law Project (together the ‘Claimants’) commenced proceedings against the Secretary of State for Business, Energy & Industrial Strategy (the ‘SoS’) in respect of the Government’s much-vaunted NZS.

As summarised in Mr Justice Holgate’s judgment, the Act ‘established a framework by which the UK may progress towards meeting its 2050 net zero target’. Section 1 of the Act, as amended, sets out the Government’s obligation to ensure that ‘the net UK carbon account for the year 2050 is at least 100% lower than the 1990 baseline’ for CO₂ and other GHGs. Section 4 of the Act imposes a duty on the SoS to set an amount for the net UK carbon account, also known as the carbon budget, for successive five-year periods.

Carbon Budget 6 (‘CB6’), for the period 2033-2037, came into force on 24 June 2021. CB6 is the first carbon budget to be based on the revised net zero target set out in section 1 of the Act – the previous carbon budgets were based on the former 80% target for 2050. CB6 is also the first carbon budget to include emissions from international aviation and shipping attributable to the UK. It is therefore common ground that the target in CB6 is substantially more challenging than the targets in the previous carbon budgets.

Following the setting of CB6, the SoS laid the NZS before Parliament on 19 October 2021. The NZS, purported to ‘[set] out how the UK will deliver on its commitment to reach net zero emissions by 2050’. Published in the run up to COP26, the NZS proclaimed that the UK was ‘the first major economy to create a legally binding target to bring greenhouse gas emissions to net zero by 2050’.

The Claim:

The Claimants applied for judicial review of the UK government’s decisions on 17 October 2021 to:

• approve the proposals and policies as set out in the NZS and prepared under s13 of the Act, which imposes a duty on the SoS to ‘prepare such proposals and policies’ as he considers will enable the carbon budgets which have been set under the Act to be met; and
• publish the NZS as a report under s14 of the Act, which provides that ‘as soon as reasonably practicable’ after setting a carbon budget, the SoS must lay before Parliament a report setting out proposals and policies for meeting the current and future ‘budgetary periods’ up to and including that budget.

In short, the Claimants alleged that the NZS failed to explain how ‘the proposals and policies within the NZS will enable the carbon budgets to be met’.

The Claimants argued that, on a proper interpretation of s13 of the Act, the SoS was not entitled to conclude that the proposals and policies in the NZS would enable CB6 to be met in circumstances where the quantified effects of those measures were estimated to deliver only 95% of the emissions reductions required to meet CB6 and that, through insufficiencies in the briefing material with which he was supplied, the SoS failed to take into account ‘obviously material’ considerations, including the timescales over which such proposals and policies were expected to take effect and how the 5% shortfall for CB6 would be met.

The Claimants further argued that the SoS failed to include in the NZS the information legally required to discharge his reporting obligations under s14 of the Act, including an explanation for his conclusion that the proposals and policies within the NZS would enable the CB6 to be met.

The Claimants did not, however, ask the Court to quash the NZS – as observed by Mr Justice Holgate, the Claimants ‘acknowledge that much of the content of the NZS is commendable’. Instead, the Claimants asked the Court to order that the NZS be revised and reissued.

The Decision:

Mr Justice Holgate observed that ‘[t]he explanation in the NZS of […] the delivery pathways is far from clear’.

Whilst Mr Justice Holgate considered that the NZS did address the timescales over which the proposals and policies are expected to take effect, he found that, in breach of the SoS’s obligations under s13 of the Act, the NZS did not adequately consider the contributions to emissions reductions that would be made by individual policies to achieve CB6.

In relation to s14 of the Act, Mr Justice Holgate concluded that the NZS failed to include information on the quantitative contributions that individual proposals and policies (or interrelated groups of proposals and policies) were expected to make to meet CB6. Mr Justice Holgate further noted that the NZS failed to explain: (i) that the quantitative analysis carried out by the Department for Business, Energy & Industrial Strategy (which related solely to quantifiable policies with a direct effect on emissions) predicted that those policies would achieve 95%, not 100%, of the reduction required for CB6; and (ii) how the 5% shortfall would be made up.

It was held that such matters were ‘obviously material’ and that consideration of the same was required to enable the SoS to discharge his obligations under the Act.

Mr Justice Holgate therefore ordered the Government to produce a revised report which is compliant with s14 of the Act by no later than 31 March 2023.

What next for the Net Zero Strategy?

The High Court’s ruling exposes both the Government’s shortcomings in setting the NZS and, as observed by Friends of the Earth post-judgment, demonstrates that the Act has teeth and that it can be used to hold the Government to account.

It remains to be seen what steps the Government will take to ensure compliance with the Act, especially whilst we await the outcome of the Conservative leadership contest and in circumstances where the remaining candidates appear to be indicating some backtracking on the Government’s commitment to achieve net zero by 2050.

In any event, given its impact on all sectors of the economy, the revised NZS will no doubt be the subject of further detailed scrutiny, as well as potentially further challenges in the event that it fails to adequate set out how the Government intends to meet its target to achieve net zero by 2050.

Following the judgment, on 26 July 2022, Greenpeace announced that they were taking the Government to court to overturn their approval of Shell’s new gas field, Jackdaw. These cases make clear that action is required to limit the worst effects of climate change and that governments will be held to account for their decisions in respect of climate change commitments.

As we have already seen with the derivative claim against Shell and others, the rise of ESG also means that it is not just governments but corporations that face the risk of litigation where their actions do not live up to their climate commitments.