Starmer’s climate legacy: Key policy changes for net zero

Starmer government sets 81% emissions cut target by 2035

The Labour government announced a legally binding climate target in November 2024 that will reshape how UK businesses plan their operations. Prime Minister Keir Starmer committed the UK to reducing greenhouse gas emissions by 81% by 2035, measured against 1990 levels. This exceeds the previous Conservative target of 78% and represents one of the most ambitious national climate commitments globally.

The new target excludes international aviation and shipping emissions. However, it covers all other sectors of the UK economy. Businesses now face a condensed timeline to deliver substantial carbon reductions. For many SMEs, this means earlier investment in low-carbon equipment, energy efficiency measures, and supply chain changes than previously anticipated.

This announcement arrived alongside several major energy policy shifts since Labour took office in July 2024. Together, these changes affect procurement criteria, compliance requirements, and commercial risk across multiple sectors. Understanding what has changed and what it means for your business requires looking at the practical detail behind the headlines.

Clean Power 2030 drives electricity sector transformation

The government’s Clean Power 2030 mission aims to decarbonise UK electricity supply within six years. This policy shifts the entire energy system away from fossil fuel generation. Consequently, businesses can expect cleaner grid electricity but also changes to supply contracts, pricing structures, and network infrastructure.

Several specific measures support this timeline. First, the government lifted restrictions on onshore wind projects that had effectively blocked development since 2015. Planning rules now allow new wind farms in suitable locations across England. Second, Labour ended new licensing for North Sea oil and gas exploration. Existing licences remain valid, but no additional extraction projects will receive approval.

Perhaps most visibly, the UK closed its last coal-fired power station in September 2024. Britain became the first G7 economy to completely phase out coal generation. This milestone marks the end of a fuel source that powered UK industry for over a century. The closure also removes a significant portion of grid emissions but increases reliance on gas, nuclear, and renewable sources.

For manufacturers and energy-intensive businesses, these changes have direct implications. Electricity pricing will increasingly reflect renewable generation patterns rather than fossil fuel costs. Peak demand pricing may shift as wind and solar output varies by time and season. Additionally, businesses with legacy energy contracts may see different terms when they renew.

Great British Energy launches with £8.3 billion investment

Labour created Great British Energy as a publicly owned clean energy company. The government allocated £8.3 billion to invest in wind, solar, and other low-carbon projects across the UK. This represents the largest single investment in clean energy infrastructure in British history.

The company operates differently from traditional energy suppliers. Rather than selling electricity to consumers, it invests in generation capacity and enables project development. Great British Energy partners with private developers, local authorities, and community groups to build new renewable installations. The aim is to accelerate deployment beyond what private investment alone would deliver.

This approach affects the commercial landscape for energy projects. Businesses developing renewable capacity may find new funding sources and partnership opportunities through Great British Energy. Similarly, companies seeking long-term power purchase agreements might negotiate directly with publicly backed projects rather than solely relying on market suppliers.

The government expects this investment to create thousands of jobs in manufacturing, installation, and maintenance of renewable equipment. For supply chain businesses, this signals growing demand for components, specialist services, and technical expertise related to clean energy infrastructure.

Offshore wind capacity set to quadruple by 2030

The government committed to quadrupling offshore wind capacity, tripling solar power, and doubling onshore wind by 2030. These targets require rapid expansion of manufacturing, installation, and grid connection infrastructure. Meeting them will test supply chains, planning systems, and workforce availability across the energy sector.

One major announcement involved £1 billion for a wind turbine manufacturing facility in Hull. This investment should create approximately 1,300 jobs and establish UK-based production capacity for offshore wind components. Previously, Britain imported most turbine equipment from European and Asian manufacturers.

For businesses in coastal regions, this expansion brings both opportunities and practical challenges. Construction activity, port upgrades, and increased marine traffic will affect local operations. Meanwhile, companies in engineering, fabrication, and specialist maritime services may see growing contract opportunities as the sector scales up.

The grid infrastructure must also expand to handle increased renewable capacity. National Grid faces significant investment requirements to connect new wind farms and manage variable power flows. These upgrades may cause temporary disruptions but should improve grid resilience and capacity over time.

Electric vehicle mandate receives flexibility adjustments

The government introduced changes to electric vehicle sales mandates that affect automotive manufacturers. Under the revised rules, elite British carmakers like Aston Martin and McLaren can continue selling petrol and diesel vehicles beyond 2030 under certain conditions. This adjustment followed industry pressure about the viability of rapid EV transitions for low-volume specialist manufacturers.

Starmer described the approach as pragmatic, acknowledging that different parts of the automotive sector face different technological and commercial realities. Mass-market manufacturers still face strict EV sales quotas, but niche producers gained additional flexibility. The change reflects broader government messaging about balancing climate ambition with economic competitiveness.

For fleet operators and businesses managing vehicle procurement, the EV transition timeline remains largely unchanged. Most commercial vehicles must shift to electric power within the decade. However, the flexibility granted to specialist manufacturers may affect resale values, parts availability, and service networks for certain vehicle categories.

This policy adjustment also signals how the government might handle similar sector-specific challenges in other industries. When technological transitions prove difficult for particular business models, targeted flexibility may emerge rather than universal deadline extensions.

Key policy changes affecting UK businesses

• The UK must cut emissions by 81% by 2035 compared to 1990 levels, creating a compressed timeline for business carbon reduction.
• Clean Power 2030 will decarbonise electricity supply within six years, changing energy costs and contract structures.
• New onshore wind projects can proceed following the removal of planning restrictions that blocked development since 2015.
• Great British Energy will invest £8.3 billion in renewable projects, creating new partnership and funding opportunities.
• Offshore wind capacity will quadruple by 2030, requiring major supply chain expansion and grid infrastructure upgrades.
• The UK became the first G7 nation to completely phase out coal power in September 2024.

Internal tensions emerge over climate policy direction

Reports suggest significant disagreement within government circles about the pace and scope of environmental policy. Senior advisers skeptical of aggressive climate action have allegedly influenced policy decisions, diluting some proposals and steering Labour toward more cautious positions. These tensions reveal the political complexity of delivering rapid decarbonisation while managing economic concerns.

Several high-profile decisions illustrate this pattern. Labour scrapped its £28 billion annual green investment pledge before entering government. The party argued fiscal constraints made the commitment unaffordable, though critics contend this undermined the scale of climate action needed. Similarly, the government continues fossil fuel subsidies worth approximately £17.5 billion annually, despite commitments to phase out support for oil and gas.

The Rosebank oil field decision further highlighted these contradictions. After courts declared initial approval unlawful due to inadequate climate impact assessment, the government reconsidered the project rather than blocking it outright. Additionally, expansions at Heathrow and Gatwick airports received approval, increasing future aviation emissions even as other sectors face tightening restrictions.

For businesses, these inconsistencies create uncertainty about long-term policy direction. Companies making major capital investments need confidence that regulations will remain stable and predictable. When government signals conflict between climate rhetoric and actual decisions, planning becomes more difficult and risk premiums increase.

What businesses should consider in response

The 81% emissions reduction target by 2035 compresses the timeline for carbon reduction across all sectors. Businesses should review their current emissions footprint and compare it against this trajectory. Waiting until closer to the deadline will likely mean rushed implementation, higher costs, and limited supplier availability.

Energy procurement strategies need reassessment in light of Clean Power 2030. Companies with long-term contracts expiring soon should evaluate whether fixed-price deals or renewable-linked agreements offer better value. As the grid becomes cleaner, the carbon intensity of purchased electricity will fall automatically. However, pricing volatility may increase as renewable generation depends on weather conditions.

Supply chain emissions will receive growing scrutiny. The 81% target covers most business activities, pushing companies to address Scope 3 emissions from suppliers and distribution. This means procurement teams will need carbon data from vendors. SMEs supplying larger companies or public sector contracts should expect more detailed emissions reporting requirements.

Compliance obligations are tightening across multiple areas simultaneously. Carbon reporting, energy efficiency standards, and waste regulations all face stricter enforcement and expanded scope. Businesses should audit their current compliance status and identify gaps before deadlines approach. Retrofitting compliance after the fact typically costs more than building it into operations from the start.

Transport and logistics will undergo significant change as the EV transition accelerates. Companies operating vehicle fleets should model the financial impact of switching to electric. Charging infrastructure, vehicle range, and total cost of ownership all factor into this analysis. Additionally, businesses relying on road freight should anticipate changes in haulage costs as carriers transition their fleets.

Training and skills development will become increasingly important as technologies and practices evolve. Employees need understanding of new equipment, energy management systems, and reporting requirements. Businesses that invest in workforce capability now will adapt more smoothly than those delaying until change becomes mandatory.

Where to find detailed guidance and support

The Department for Energy Security and Net Zero publishes detailed policy documents and consultation responses on the government website. Their clean power mission page outlines specific targets, timelines, and implementation plans for the electricity sector transformation.

Great British Energy maintains information about funding opportunities, project partnerships, and regional initiatives. Businesses interested in renewable energy development or procurement can find application processes and eligibility criteria through their official channels.

The Environment Agency provides emissions reporting guidance for regulated industries. Their website includes technical standards, calculation methodologies, and compliance deadlines that businesses must follow under environmental permits.

For companies navigating carbon reduction planning and net zero compliance, our net zero program helps SMEs develop practical decarbonisation strategies aligned with regulatory requirements. Additionally, our compliance support services assist businesses in meeting ESG reporting obligations and preparing for tightening environmental regulations.