Green Policy Snapshot: Labour Government’s First Year

Power

In 2023, 60% of Britain’s electricity was generated from low carbon sources. The government has set the ambitious mission to deliver at least 95% of electricity from clean sources by 2030. Success will require significant private investment and overcoming existing delivery constraints, including accelerating the planning system, grid infrastructure and supply chains, transmission and interconnection capacity, and easing cross-border electricity contracting. Many sectors of the economy are dependent on power decarbonisation to achieve their own carbon reduction targets, meaning that progress on this goal is vital to unlock decarbonisation across the economy. In the recent Spending Review, government fully backed its clean power mission, with the Department for Energy Security and Net Zero receiving a settlement with 16% growth rate.

Policy developments from the first year of this government

• Clean Power 2030: the government published the Clean Power Action Plan (December 2024), drawing on advice from NESO. The Plan sets out the path to meet the government’s clean power target, and identifies priority actions for the government to enable industry and investors to accelerate delivery, including:
  • Connections queue reform by NESO, approved by Ofgem in April 2025 with reorganisation of the queue starting in the summer (see NESO’s timeline for changes to the queue).
  • Facilitating the development of clean energy infrastructure through planning reform, as proposed in the Planning and Infrastructure Bill and updated National Policy Statements (consultation closed on 29 May 2025). Judicial review has also been streamlined for NSIPs, with just one review (as opposed to three) as recommended by Lord Banner KC’s Independent review into legal challenges against NSIPs.
  • Removing the de facto ban on onshore wind and reintroducing onshore wind over 100 MW into the Nationally Significant Infrastructure Planning (NSIP) regime.
  • Support for skills in the energy sector, with the new Office for Clean Energy Skills, skills passport and upcoming Clean Energy Workforce Strategy (see Skills section for more information).
• Great British Energy (GBE), a publicly-owned energy company headquartered in Aberdeen, was established with the Great British Energy Act (May 2025) to invest and own clean energy projects. GBE will also develop the Local Power Plan, to help roll out community energy. The 2025 Spending Review confirmed £8.3bn backing for Great British Energy and Great British Energy – Nuclear. The company’s first investments include rooftop solar panels on around 200 schools and 200 NHS sites, and £300mn for offshore wind supply chains.
• National Energy System Operator (NESO) was formally established, with the responsibility to strategically plan and oversee the electricity and gas networks. NESO has also been commissioned to produce the Strategic Spatial Energy Plan (SSEP) and the Centralised Strategic Network Plan (CSNP). Regional Energy System Plans (RESPs) will enable the coordination of the development of the energy system at a regional level.
• The Modern Industrial Strategy (June 2025) includes a focus on clean energy technologies as one of the eight growth-driving sectors, with the aim to maximise the benefits and opportunities for UK supply chains. See the Aldersgate Group response to the Green Paper.
• Solar panels: the Future Homes Standards, expected in the autumn, will require all new-build homes to have rooftop solar panels as default. The government is also consulting on the use of solar energy in car parks across England, Wales and Northern Ireland.
• Nuclear: Changes to planning rules were announced in February to ease new nuclear build processes, and John Fingleton CBE was appointed to lead the Prime Minister’s Nuclear Regulatory Taskforce to speed up new nuclear plants (April 2025). The Spending Review also committed £14.2bn for Sizewell C nuclear power station, £2.5bn for Small Modular Reactors, and over £2.5bn for nuclear fusion. Great British Energy – Nuclear and the National Wealth Fund are due to publish a new framework assessing nuclear power proposals exploring potential investment opportunities with DESNZ.
• Floating offshore wind: Spending Review confirmed £80mn for port investment to support floating offshore wind deployment in Port Talbot, subject to final due diligence.
• Allocation Round 7 (AR7) and the Clean Industry Bonus (CIB): £200mn in funding is available for offshore wind projects bidding in AR7 to support investment in UK supply chains and sustainable manufacturing. AR 7 is due to open in summer 2025 and the government has confirmed the same legacy or transitional arrangements as existing agreements will be given, to provide investor confidence in the context of the yet-to-be-announced decision on the review of electricity market arrangements (REMA). The government announced in the Modern Industrial Strategy that expansion of the CIB is being considered for hydrogen and onshore wind, as well as new criteria on workforce protection and skills.
• North Sea transition: the government consulted on building the North Sea’s energy future, including hydrogen, carbon capture and wind (closed 30 April 2025). The proposals seek to offer oil and gas industry long-term certainty on the fiscal landscape by ending the Energy Profits Levy and consulting on a new regime.
• Community benefits: the government is considering mandating community benefits for low-carbon energy infrastructure (May 2025). This follows an earlier commitment to cut up to £250 a year for a decade off the energy bills of households near new or upgraded pylons.

Expected future developments and other manifesto commitments

• Review of electricity market arrangements (REMA): following two consultations under the previous government, plans for future electricity market arrangements are due to be announced. See the Aldersgate Group response to the second REMA consultation.
• The government committed in their manifesto to maintaining a “strategic reserve” of gas power stations to guarantee security of supply and to ban fracking.

Remaining gaps

• Clarity on how energy bills will be reduced for both households and businesses. See Aldersgate Group response to the ESNZ Select Committee inquiry on the cost on energy.
• Plans to address issues with GB-EU energy trading.
• Detailed understanding of supply chain risks and opportunities.
• Further work on distribution networks and the connections process for energy users, including industrial sites. See the Aldersgate Group briefing and inquiry response.
• Support for greater circularity.
• Understanding and mitigation of risks linked to climate change, such as increased extreme weather and flooding.

Aldersgate Group recommendations

With ambitious clean power targets, the government will need to ensure that the Clean Power Action Plan is effectively implemented, with barriers removed to accelerate the deployment of clean energy technologies. Joining up policy with industrial strategy and planning reform will also be crucial to ensure that the clean energy transition is achieved with increased investment in UK supply chains, creating new jobs and wider socio-economic benefits, and contributes to environmental improvement.

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Industry

UK heavy industry and its wider supply chain are vital to the economy, contributing £152bn in Gross Value Added (GVA) in 2023 and supporting over 1.4mn jobs. The sector accounts for around 21% of UK exports, in line with the global average of 22%. Demand for low-carbon industrial products is rising both domestically and internationally. The UK is the world’s eighth-largest exporter of green industrial goods, and the UK’s net zero economy grew by 10% last year.

Despite progress – industrial emissions have fallen 63% since 1990 – industry remains the UK’s third-largest emitting sector, responsible for 12% of total greenhouse gas emissions in 2023 (51.8 MtCO2e). Energy-intensive industry output is now at a 35-year low, according to new ONS data. Fierce international competition persists, and while successive governments have introduced strategies to boost industrial competitiveness and decarbonisation, a clearer strategic vision, stronger incentives, and enabling policies are urgently needed to secure long-term investment in a thriving low-carbon industrial ecosystem.

Policy developments from the first year of this government

Industrial decarbonisation

• Carbon Border Adjustment Mechanism (CBAM): In April 2025 the government published draft primary legislation for the UK CBAM for consultation. A CBAM Policy Update was published which provides an overview of the scope and design of the CBAM.
• UK Emission Trading Scheme (ETS): Several consultations have been published, including Extending the UK ETS Cap Beyond 2030 (see Aldersgate Group response) and free allocation and carbon leakage (see Aldersgate Group response). A response to the consultation on Technical and operational amendments to the UK ETS was published in January 2025.
• ETS linkage: In May 2025, it was announced that EU and UK would start negotiating to link their ETS schemes. An agreement was published outlining the initial starting point for negotiations including points on likely mutual CBAM exemptions, emissions ambition and governance. (See the Aldersgate Group insight published ahead of the summit)
• Carbon Capture Usage Storage (CCUS): In October 2024, the UK government pledged to invest up to £21.7bn over 25 years for the development of the first two CCUS clusters, HyNet and East Coast Cluster (ECC), as part of “Track-1” of the Cluster Sequencing Programme. In December 2024 the ECC had reached Financial Close. Projects within the ECC cluster are set to begin construction from mid-2025 and become operational by 2028. In April 2025 the government awarded energy company Eni supply chain contracts for their Liverpool Bay Carbon Capture and Storage Project, spanning North Wales and the North West of England. As part of the Spending Review (SR) the government announced £9.4bn in capital budgets over the SR period to support the expansion of the two track 1 CCUS clusters (this is the first tranche of the £21.7bn previously committed to). The SR also confirmed Viking and Acorn as the next two projects to be developed (the Track-2 CCUS clusters), the provision of development funding to advance delivery was announced and it was confirmed that a final investment decision will be taken later in the Parliament, subject to project readiness and affordability.
• Hydrogen: In April 2025 the Government announced 27 hydrogen projects selected for the next stage of the Second Hydrogen Allocation Round (HAR2). This follows the update to the Hydrogen Strategy in December 2024 which summarised progress in 2025 and future opportunities.
• Research and development: As part of the Spending Review, £3bn funding was announced over 2026-30 for R&D and capital funding for the advanced manufacturing sector, to drive investment and particularly support the supply chains of zero emission vehicles, batteries and ultra-low and zero-carbon emission aircraft.
• Sustainable Industrial Futures: due to start in July 2025, this is funding delivered through UKRI focused on tackling challenges to enable the transition of UK industrial and manufacturing processes to net zero.
• As part of the Plan for Change in January 2025, 25 industrial businesses were awarded £51.9mn for innovative emissions-cutting projects.
• The government is consulting on a policy framework to grow the marker for low carbon industrial products (closing 15 September 2025).

Industrial Strategy

• The Modern Industrial Strategy (published June 2025) includes a focus on clean energy technologies, life sciences and advanced manufacturing as growth-driving sectors. The strategy aims to capture benefits and opportunities of the transition to net zero across these sectors and highlights the underpinning role of some foundation industrial sectors, critical to economic security. The government has also set out its proposal to address high industrial energy prices, with an increase to the British Industry Supercharger in 2026 (with the Network Charging Compensation at 90%, up from 60% currently), support for the development of Corporate Power Purchase Agreements, and upcoming consultation on a new British Industrial Competitiveness Scheme to be introduced from 2027.
• The National Wealth Fund (NWF): Launched in October 2024, the Fund is focused on catalytic higher risk investment and will be closely linked to the industrial strategy. The NWF’s funding allocation has £2.5bn for the steel industry, £1.8bn to upgrade ports and supply chains, £1.5bn for new gigafactories, £1bn to accelerate carbon capture deployment, and £500mn for green hydrogen manufacturing. R&D spending will rise to £22.6bn per year by end of Spending Review period to drive forward innovation, particularly in automotive, aerospace and life sciences.
• Freeports: The SR provided further announcements for Freeports and Investment Zones. This included approval of the Celtic Freeport, focused on hydrogen, sustainable fuels, carbon capture and cleaner steel, which will receive £25mn in government funding.

Steel

• Steel Strategy: The government consulted on the Steel Strategy: the plan for steel (February 2025) and how tosupport the sector to best exploit available opportunities to deliver long-term growth.
• British Steel: In April the Government used emergency legislation to give the government the power to instruct British Steel to keep the plant open. The Scunthorpe blast furnaces, are the last two operating in the UK.
• In June 2025 Network Rail and British Steel announced a new 5-year supply contract, worth more than £500mn, which will see British Steel’s Scunthorpe site supply between 70,00-80,000 tonnes of rail per year.

Future developments and manifesto commitments

• An updated Industrial Decarbonisation Strategy is expected in late 2025 or early 2026. The SR announced that alongside the publication of its carbon budget and growth delivery plan, the government will publish plans to decarbonise industry in October 2025.
• Industry Minister, Sarah Jones MP has committed to update stakeholders as soon as possible on the future of the Industrial Energy Transformation Fund.
• Following the government’s response to the consultation on Enabling industrial electrification, next steps identified the need for ‘targeted intervention’ to address barriers and ensure electrification is on a level playing field with other decarbonisation options. Further policy announcements on supporting industrial electrification are expected.
• The government will review the Energy-Intensive Industries Compensation Scheme at the end of 2025 and set out plans for support when the UK CBAM is introduced in 2027. The government will also consult on the new British Industrial Competitiveness Scheme and the development of the CPPA market.
• The Steel Strategy is expected in Spring/Summer 2025. The Chancellor has emphasised the government’s intention to link public infrastructure projects and steel made in Britain. A long-term plan is also expected for the British Steel plant in Scunthorpe.
• Expansion of the Track 1 clusters for CCUS is expected, along with further decisions for continued CCUS deployment, including for Track-2 clusters.
• Hydrogen Strategy is due to be refreshed.
• Government is due to respond to ETS consultations on the scope expansion to waste, integrating greenhouse gas removals , free allocation review - carbon leakage and future markets policy.
• Summer 2025 consultation expected on reforms to industrial permitting, with implementation of the measures expected in Autumn 2025.

Remaining gaps

• Understanding of, planning for and implementation of greater industrial symbiosis, which involves the exchange of waste and by-products between companies to create mutual benefits, reduce waste, and keep resources in productive use for longer.
• Understanding of and planning for industrial flexibility and demand side response for electricity use.
• Understanding and awareness of climate risks (e.g. water insecurity) for industrial sites and plans to ensure resilience is built in.

Aldersgate Group recommendations

The Aldersgate Group has called for the government to place decarbonisation at the heart of Industrial Strategy and futureproof growth through the modern industrial strategy. A whole value chain approach, with a clear vision for the foundation industries, would help design targeted policy interventions to capture the growth benefits and high-quality jobs that can be created for the future environmentally sustainable and resilient economy.

The government should commission a supply chain, skills capacity and economic opportunity assessment to identify the UK’s capability gaps and competitive industrial strengths to further inform the implementation of the industrial strategy and industrial decarbonisation strategy. Action is also needed to tackle high industrial electricity prices. Ahead of the SR Aldersgate Group collaborated on a letter sent to the Chancellor which recommended moving legacy policy costs from electricity bills, alongside targeted industrial electrification support.

The renewal of the industrial decarbonisation strategy must provide clear guidance and lay the groundwork for adequate incentives and enabling policy to drive forward investment in industrial decarbonisation. Our recent report maps the existing the policy landscape and identifies gaps. The government will also need to ensure the development of the distribution electricity networks is taking account of increased industrial electricity demand as industry electrifies. Our recent brief highlighted potential future network constraints.

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Built Environment

The built environment contributes 25% of the UK’s total emissions, with 19% coming from operational emissions needed to heat, cool and power buildings. While there has been a gradual reduction in emissions from buildings, the CCC’s Seventh Carbon Budget advice highlights that further progress will be needed, particularly on the rollout of heat pumps and increasing energy efficiency in households. To deliver the UK’s net zero target, it is imperative that policy measures are introduced to improve energy efficiency and address issues such as embodied carbon and circularity in the construction sector. Retrofit to reduce energy use can also help to address the cost-of-living crisis, currently exacerbated by high energy prices and energy inefficient housing. This needs to be done through the Warm Homes Plan, as well as by ensuring that reforms to accelerate building and infrastructure delivery are low carbon and futureproofed against impacts of climate change.

Policy developments from the first year of this government

Planning reform

• The Planning and Infrastructure Bill: introduced into Parliament, which looks to speed up development and unlock energy infrastructure delivery, as well as reform environmental protection in the built environment. See the Aldersgate Group submission to the Bill Committee.
• Exemptions to BNG: Announced that smaller housebuilders will be subject to simpler planning rules, including more streamlined planning process and eased Biodiversity Net Gain requirement. Proposals also suggest the introduction of a “medium site” category for development, and that more land will be released to SMEs from Homes England.
• The National Planning Policy Framework: amended on 12 December 2024 to aim for sustainable growth in the planning system. This also included the reintroduction of national housing targets: ‘golden rules’ for development to increase affordable homes, increase access to green spaces and put infrastructure in place. See the Aldersgate Group response to the consultation on proposed reforms.

House building

• The government is committed to building 5mn new homes over this Parliament.
• Warm Homes: Social Housing Fund and Warm Homes: Local Grant: £1.8bn has been committed, of which the Warm Homes: Social Housing Fund will deliver up to £1.29bn of funding to 144 projects across England with the Warm Homes: Local Grant allocating £500mn to 73 projects across 270 local authorities over the next 3 years.
• Local Growth Plans: a new statutory requirement introduced for Local Growth Plans covering towns and cities across the country.
• Nutrient neutrality: Announced plans to address its role in housebuilding without weakening environmental protections.
• The Local Nutrient Mitigation Fund: introduced to boost sustainable housebuildingthrough locally led schemes, such as creating new wetlands and upgrading septic tanks.
• Brownfield land: Committed to prioritise its use and release lower quality “grey belt” land for building.

Warm Homes Plan

• Government is setting out plans to work with the private sector, including banks and building societies, to provide further private finance to accelerate home upgrades and low carbon heating. See the Aldersgate Group insight blog on the importance of the Warm Homes Plan to lower household energy bills.
• Energy efficiency: government has consulted on raising minimum energy efficiency standards in privately rented homes in England and Wales by 2030 (closed in May 2025) and on changes to Energy Performance Certificates (EPCs), Display Energy Certificates (DECs), and air conditioning inspection reports (ACIRs) (closed February 2025).
• Heat pumps: the government has removed the 1-meter rule for planning applications related to air source heat pumps, launched a public awareness campaign on heat pumps and boosted the budget for the Boiler Upgrade Scheme to support more households in switching to a heat pump. The government also consulted on amendments to the existing Boiler Upgrade Scheme (BUS), which provides grants to support property owners in transitioning to low carbon heating systems, and to certification requirements for BUS and other clean heat schemes.
• Winter fuel payments: further changes were made at Spending Review in June 2025 to broaden access.
• Clean Heat Market Mechanism: new changes introduced from 1 April 2025 are intended to ensure manufacturers have the time they need to scale up supply chains, making heat pumps an even more attractive choice for households.
• Social institutions such as schools, care homes and hospitals have been given extra help to make energy saving upgrades such as heat pumps, solar panels, insulation and double glazing in local community buildings.

Infrastructure delivery

• The government has committed to making 150 decisions on major economic infrastructure applications over this Parliament.
• 10 Year Infrastructure Strategy published in June 2025 sets out the government’s long-term plan for economic, housing and social infrastructure to drive growth.
• National Infrastructure and Service Transformation Authority (NISTA): created to advise on infrastructure delivery and improvement. NISTA combines the function of the National Infrastructure Commission and the Infrastructure and Projects Authority, and sits within HM Treasury and Cabinet Office.

Expected future developments and other manifesto commitments

• Future Homes Standard will be published in autumn 2025, with confirmation that most new homes will have solar panels included as a Functional Requirement.
• A Leasehold and Commonhold Reform Bill and the English Devolution Bill are due to be introduced to Parliament.
• Responses are expected to the EPC Reform and MEES consultations.
• Further details will be provided on low-interest loans to support investment in energy efficiency measures.
• A permanent, UK-wide Mortgage Guarantee Scheme will be launched in July 2025 to ensure the consistent availability of mortgages for buyers with small deposits
• Further detail is due on collaboration with banks and building societies to expand offering of green financial products (mentioned in the manifesto and in the Financing Growth Plan from Feb 2024)

Remaining gaps

• Policy developments to support retrofit of commercial buildings.
• Further policy support for the development of financial products to mobilise green finance for home improvements, support for consumers to facilitate the transition to low carbon forms of heating (such as certification), addressing skills gaps and supply chains to meet demand, measures to increase energy efficiency and circularity in the built environment.
• Government response to the consultation on the Home Energy Model: replacement for the Standard Assessment Procedure (SAP).
• Greater understanding and plans to address climate adaptation in the built environment.

Aldersgate Group recommendations and upcoming work

As the government moves forward with an ambitious building agenda, it will be crucial to ensure that new buildings are fit for the future and work in tandem with environmental improvement. The Warm Homes Plan also offers a significant opportunity to help bring household energy bills down, addressing rising fuel poverty in the UK. Success of the Plan will require expansion of supply chains and the workforce, as well as offering clear information for households and consumers to adopt new low-carbon options. Upcoming Aldersgate Group work will explore the pathways available to grow the workforce for heat pumps.

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Transport

Carbon emissions from transport remain the highest among all UK sectors. As such, a step change in emissions reduction across surface transport is needed. The majority of surface transport emissions come from cars (59%), with Heavy Goods Vehicles (HGVs) and vans for transporting goods accounting for a joint 37% of emissions. Currently, 89% of all goods in the UK are transported directly by road, and Heavy Goods Vehicles (HGVs) are almost all diesel powered. As plans for decarbonising cars are well understood, focus in that sector must be on delivery. Commercial transport is further behind, and more clarity is needed to accelerate the transition.

Policy developments from the first year of this government

• Modern Industrial Strategy: automotive, batteries and aerospace are included in the advanced manufacturing sector plan. The sector plan highlights interventions relevant to the net zero transition of the transport sector, including electric vehicles, batteries, and more sustainable air travel.
• 10 Year Infrastructure Strategy: transport infrastructure is included alongside other economic infrastructure, with long-term investment in road and rail maintenance, investment in city region transport infrastructure, and confirmed commitments to HS2, East West Rail and the Lower Thames Crossing.
• Electric vehicles: The government partially restored the Zero Emission Vehicle Mandate to its original timeframe, with a 2030 phase-out date for the sale of petrol and diesel vehicles, 2035 for hybrid vehicles, and greater flexibility for small and micro-manufacturers (April 2025).
• Chargepoints: New measures will cut red tape around the installation of electric vehicle chargepoints (May 2025). At Spending Review, HM Treasury committed £2.6bn of capital investment to support the decarbonisation of transport, including £1.4bn to support the uptake of electric vehicles, including vans and HGVs, and £400m to support the rollout of charging infrastructure.
• Gigafactories: The National Wealth Fund and UK Export Finance will provide financial guarantees to unlock £680m in financing to cover construction and operation of the new AESC car battery manufacturing plant in Sunderland (May 2025).
• Rail: The government moved the Passenger Railway Services (Public Ownership) Act into law in November 2024. South Western Rail was taken into public ownership in May 2025.
• Commercial vehicles & heavy goods vehicles (HGVs): The plug-in van grant has been extended for another year. Department for Transport is also supporting “changeovers” with £4,000 for black cab drivers to switch to electric models, a £500 grant for electric motorbikes and the plug-in wheelchair accessible vehicle grant increasing to £50,000. The Freight Innovation Fund Accelerator Programme, with £7m government investment and matched funding by the private sector, is supporting innovation in freight.
• Buses: Bus Services (No.2) Bill was introduced in Parliament to give local authorities greater powers over bus services. This is being supported by £750m a year to help bring forward franchising pilots. The £3 bus fare cap is extended until March 2027 at Spending Review 2025, and the DfT has committed £37.8m to 319 new zero-emission buses.
• Aviation: The Sustainable Aviation Fuel (SAF) Mandate has come into force. The government is pursuing airport expansion with planning approval for the expansion of Luton Airport, and support for the expansion of Heathrow Airport, London Stansted Airport and the reopening of the Doncaster Sheffield Airport.
• Maritime: The Maritime Decarbonisation Strategy was published in March 2025, and lays out plans to bring the sector under the Emissions Trading Scheme (ETS). The government is consulting on energy needs at ports (closing 24 June 2025) and decarbonisation of smaller vessels (closing 25 July 2025). The Maritime Minister also announced the locations that would receive supportive funding to become the world’s first ‘green shipping corridors’ between the UK and Europe.

Expected future developments and other manifesto commitments

• Secondary legislation will prescribe gigafactories into the Nationally Significant Infrastructure Project (NSIP) consenting regime. The government is also pursuing its commitment to part-financing gigafactories, with the backing of the Sunderland gigafactory progressing.
• Manifesto commitment to develop a long-term strategy for transport, ensuring transport infrastructure can be delivered efficiently and on time; an internal review of the DfT capital spend portfolio review commissioned by the Secretary of State.
• Labour’s pre-election Plan for the Automotive Sector proposed establishing a Supply Chains Taskforce and setting new binding targets and delegated responsibility to accelerate the roll-out of EV chargepoints.

Remaining gaps

• Introduce a duty to promote and grow the use of rail freight.
• Development of a suitable replacement for fuel duty and vehicle excise duty.
• Provide policy clarity to enable the decarbonisation of HGVs, recognising that in the long term, all HGVs need to be electrified.
• Measures to accelerate the electrification of rail, including “Infill” sections.
• Support for the development of a second-hand electric vehicle market and ensuring price parity between VAT charged for electricity at home and at public charge points.

Aldersgate Group recommendations

The government should take a place-based approach to the decarbonisation of transport, reflecting the widely varying transport needs and conditions in different parts of the UK. Join-up with other key policy areas will be crucial to ensure transport can decarbonise with access to electricity and low-carbon fuels– this includes the Strategic Spatial Energy Plan and changes to the connections process for distribution networks.

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Nature

The UK is one of the most nature-depleted countries globally, with limited progress towards environmental improvement goals. The Office for Environmental Protection (OEP)’s 2025 progress report found that the UK is still largely off-track to achieve its environmental targets. The CCC’s Progress on Adapting to Climate Change published in April 2025, also concluded that the UK’s progress on nature, land and food either demonstrated no change or a regression from 2023.

The Green Finance Institute has found that nature degradation could cause UK GDP to be 6% lower than it would have been otherwise by the 2030s. Businesses, increasingly motivated by regulation, customer demand, and economic risks, can lead the way in restoring biodiversity, improving resilience and capitalising on new markets, such as carbon credits and ecosystem services.

Policy developments from the first year of this government

Nature and development

• Planning and Infrastructure Bill: The government is proposing a new strategic approach to the mitigation of environmental impact of development, with the aim of speeding up development and achieving a win-win for nature. This includes the creation of the Nature Restoration Fund. The Bill is expected to pass into law in the autumn.
• Biodiversity Net Gain (BNG): The government is consulting on removing BNG rules for minor, medium and brownfield developments, and on BNG for Nationally Significant Infrastructure Projects (closing on 24 July 2025).

Land and agricultural policy

• Land Use Framework (LUF): The government consulted on principles and proposed changes to land use in England (closed April 2025). The consultation was accompanied by a comprehensive technical annex and targets for land use change. See the Aldersgate Group response and briefing.
• In January, Defra announced its plans to publish a 25-year Farming Roadmap. The announcement included a commitment to sustainable food production and supporting farmers to restore nature.
• Environmental Land Management Schemes (ELMS): the first half of the year saw the closure and then reopening of the uncapped Sustainable Farming Incentive (SFI). The Spending Review announced £2bn for ELMS by 2028-29 as part of the Farming and Countryside Programme (£2.3bn) – a significant increase compared to the £800mn budget for 2023-24.

Environment improvement and regulation

• New funding for nature in the June Spending Review was limited, with the Department for Environment, Food and Rural Affairs’ spending reducing by 1.8% in real terms. The settlement included £400mn for nature schemes, allocated outside the Farming and Countryside programme.
• A rapid review of the Environmental Improvement Plan (EIP) was announced in July 2024 with an interim statement in January 2025. The review has looked as how the EIP23 is performing and is identifying key areas for improvement. The revised plan is due in summer 2025.
• The Corry Review examined Defra’s regulatory landscape and its effectiveness in driving both economic growth and nature recovery. The final report makes 29 recommendations, and next steps on delivery are still to follow.
• Regulatory Innovation Office: created by the Department for Science, Innovation and Technology, the Office will help tackle regulatory barriers in transformative innovation. This includes Round 2 of the Engineering Biology Sandbox Fund, which will inform new regulatory processes for cell-cultivated products, such as lab-grown meat.
• Modern Industrial Strategy: agri-tech is sector of focus in the advanced manufacturing sector plan. The government has highlighted interventions aimed at strengthening private investment into the sector and increasing automation in farming. This includes £200 for the Farming Innovation Programme (FIP) and support for the Accelerating Development of Practices and Technologies (ADOPT) Fund, innovative SMEs and farmers to trail new technologies.

Water

• The Cunliffe review is examining the water sector regulatory system, and published an interim report in June 2025. The final report is due in the summer.
• Ofwat has laid out plans for the Price Review (2025-2029) – PR24. This should spur investment in water infrastructure; however, several water companies have appealed against Ofwat’s final determination of their expenditure allowances, which blocks extra bill rises within the review period.
• Underperforming water companies are now banned from awarding bonuses to senior staff, under new measured in the Water (Special Measures) Act (June 2025).
• Flooding: Defra announced £2.65bn for flood schemes across the country in March 2025. Overall, the Spending Review in June 2025 includes £4.2bn for flood protection over three years, with potential for nature-based solutions.

Expected future developments and other manifesto commitments

• Farming Profitability Review: Baroness Batters will provide recommendations to the Secretary of State on farm profitability, expected in October.
• The first operational land use framework, Cunliffe review final report and Environmental Improvement Plan are all expected to be published in the summer. The government is also expected to provide an update on manifesto commitments for National River Walks, National Forests and the restoration of wetlands and peatbogs in the updated EIP.
• Further information and details on the government’s new deal for farmers and ELMS.
• The first iteration of the 25 Year Farming Roadmap is slated to be published in the second half of 2025. A forthcoming Food Strategy was announced in March, with a focus on food security, nutrition and protecting the planet.

Remaining gaps

• Clarity on how evolving spatial initiatives will work alongside each other and in tandem with nature recovery targets. This includes a plan to meet the “30x30” target.
• Policy frameworks and progress for climate adaptation.
• Provide adequate and efficient resourcing for regulators.

Aldersgate Group recommendations and upcoming work

The Aldersgate Group has set out why nature matters for business and called on the government to align policy and regulation to better enable business action for nature recovery. Upcoming work will explore what the Nature Restoration Fund could look like for success and how catchment-based approaches could support delivery across sectors.

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Circular Economy

An effective and expanded circular economy could create over 450,000 jobs by 2035, including in regions where there is persistent unemployment. Keeping products and resources in use for as long as possible has the potential to lower production costs, increase supply security, and secure long-term competitiveness. The 2018 Resources and Waste Strategy built a positive overarching vision, but progress and implementation has been slow. According to the 2024 OEP progress report, changes in overall recycling rates were limited or non-existent and waste disposal via incineration increased.

Policy developments from the first year of this government

• Working towards its goal of a zero-waste economy, the government has established a new Circular Economy Taskforce to advise on the development of the Circular Economy Strategy for England.
• The government has progressed with the introduction of Extended Producer Responsibility (EPR) for packaging in 2025. Some organisations and businesses will have to pay a fee from 2025 to local authorities, covering waste management costs.
• The sale and supply of single-use vapes was banned in England from 1 June 2025.
• The Spending Review included funding for local authorities to implement Simpler Recycling under the collection and packaging waste reforms. An equity investment from the NWF was also announced, with £43.5mn investment invested in a sustainable packaging company to build its first commercial-scale manufacturing facility near Glasgow.

Expected future developments and other manifesto commitments

• The Circular Economy Strategy is due to be published in Autumn 2025. It will include sector roadmaps and wider policy measures, with a focus on five priority sectors: textiles, transport, construction, agri-food, chemicals and plastics.
• A new Critical Minerals Strategy is expected to be published in 2025. The strategy is expected to focus on supply chain resilience and opportunities for job creation and growth.
• The Deposit Return Scheme (DRS) is expected to launch in 2027. New legislation for England and Northern Ireland has come into force and enables the appointment of the not-for-profit industry-led scheme administrator. Scotland is progressing its own regulations.

Remaining gaps

• Policy support and clarity to enable the reduction of material use, including R&D, standards and regulation, recycling and waste infrastructure, and encourage uptake of new behaviours, products and services.

Aldersgate Group recommendations and upcoming work

The Aldersgate Group continues to call for the government to increase its ambition on circular economy and progress policy to enable greater uptake of circular economy practices. Our recent briefings on placing decarbonisation at the heart of industrial strategy and futureproofing growth through the modern industrial strategy highlighted opportunities to embed circularity with a whole-value chain approach to industrial strategy. The Aldersgate Group, in collaboration with IEEP UK, is due to publish a report looking at the UK and EU legislative landscape for circular economy and implications for businesses.

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Green Finance

Delivering the government’s clean power mission, and wider climate and environmental targets, hinges on mobilising significant sums of private sector investment. The government’s mission to achieve clean power by 2030 alone requires an estimated £40bn investment per year over 2025-2030.

The UK’s world-leading financial sector is well-placed to help facilitate this transition. Delivering on the UK’s ambitious sustainable finance framework will be critical to maintaining the UK’s global leadership on sustainable finance, attracting private capital, and securing the economic rewards of the net zero transition.

Policy developments from the first year of this government

• Sustainable finance framework: The Chancellor’s Mansion House 2024 speech announced a framework, including consultations on regulation, the launch of the Transition Finance Council with the City of London Corporation, integrity principles for voluntary carbon and nature markets, and draft legislation to bring ESG rating providers into regulation. Climate change was reinstated as a priority for the Bank of England’s Financial Policy Committee.
• International alignment: The Technical Advisory Committee (TAC) recommended the UK endorsement of IFRS S1 and IFRS S2 with minimal amendments (December 2024).
• Modern Industrial Strategy: Financial services was included as one of the UK’s eight growth-driving sectors, with sustainable finance identified as a frontier industry. Further details are expected at Mansion House 2025.
• Green finance regulation: The government announced a package of consultations (closing 17 September 2025), including: (1) how best to take forward the manifesto commitment to mandate companies to develop and implement credible 1.5C-aligned transition plans; (2) the new UK Sustainability Reporting Standards; and (3) the development of a voluntary registration regime for providers of assurance of sustainability reporting.
• Finance for nature: The government is consulting on voluntary carbon and nature markets (closing 10 July 2025) and expanding the role of the private sector in nature recovery (closing 7 August 2025). The government has also reconfirmed Defra’s £30mn investment in the Big Nature Impact Fund (12 June 2025).
• National Wealth Fund: Established in October 2024 to replace the UK Infrastructure Bank (UKIB) with an additional £5.8bn of capitalisation. The government published a Statement of Strategic Priorities (March 2025) confirming the NWF’s strategic objectives and priority sectors.

Expected future developments and other manifesto commitments

• Financial Services Growth and Competitiveness Strategy is due to be published alongside the Chancellor’s Mansion House address on 15 July. This follows a consultation in early 2025, which included a section on sustainable finance. See Aldersgate Group response here.
• Final legislation is expected in the first half of 2025 to provide regulatory oversight of ESG rating provision.
• Government response to the UK Green Taxonomy consultation (closed February 2025) is expected with decision on next steps. See Aldersgate Group response here.
• Legislation is expected to broaden the National Wealth Fund’s legislative mandate. The National Wealth Fund will also publish a Strategic Plan in early summer.

Remaining gaps

• Measures to mobilise capital at the scale required to close the adaptation and resilience finance gap.

Aldersgate Group recommendations

The Aldersgate Group recommends the government continues its work to deliver the sustainable finance framework announced at Mansion House 2024. This includes mandating transition plan disclosures for large UK companies, adopting the ISSB’s sustainability standards, and coming to a decision on a UK Green Taxonomy. An upcoming Aldersgate Group briefing provides an overview of the National Wealth Fund and sets out actions for the government and the Fund to ensure its success.

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Skills

Achieving the UK’s climate and nature targets depends on developing a workforce with the necessary skills and capabilities. However, green skills shortages are emerging and deepening across the economy, posing a significant barrier to progress. For example, National Grid has estimated that the UK’s energy sector needs to recruit 117,000 workers over this decade to achieve the pace of change required.

Addressing this challenge requires coordinated action between government, businesses, training providers, and trade unions to rapidly reskills existing workers and train new entrants to the labour market. This workforce transition must be just and inclusive, ensuring that workers in sectors expected to phase down are supported and ensuring access to good-quality jobs for all.

Policy developments from the first year of this government

• Office for Clean Energy Jobs: Established within DESNZ to focus on the skills needed to meet the government’s Clean Energy Mission. An initial workforce assessment was published alongside the Clean Power Action Plan (March 2025).
• Skills England: Launched to coordinate government, businesses, training providers, and unions on skills policy. It has published assessments of the skills needs in the economy (September 2024) and in ten priority sectors, including those including in the industrial strategy (June 2025). As part of this, Skills England is considering the share of demand for skills across other sectors.
• Clean energy skills passport: Launched in collaboration with industry and the Scottish Government to help oil and gas workers identify training and job opportunities in the offshore wind sector. The government committed to explore extending to skills passport to offshore wind in the Modern Industrial Strategy.
• Immigration skills charge: Raised the immigration skills charge by 32% to encourage domestic workforce investment. The Immigration White Paper (May 2025) has proposed linking skills and training requirements to the immigration system to reduce reliance.
• Apprenticeship reforms: The government has reduced the minimum apprenticeship duration to eight months; scrapped English and maths functional skills exit requirements for adult apprenticeships; and created new Foundation Apprenticeships.
• Growth and Skills Levy: The new Levy will allow employers to fund Foundational Apprenticeships and short courses. From January 2026, employers will not be able to use apprenticeship funds for new Level 7 apprenticeships for learners aged 22 and older.
• Public investment in skills: At the Spending Review, the Chancellor announced an additional £1.2bn of investment per year by 2028-9. The Modern Industrial Strategy separately announced £100 million of investment over three years to increase the pipeline of engineering skills through further and higher education and apprenticeships.

Expected future developments and other manifesto commitments

• Post-16 skills strategy, as promised in the manifesto, will be published later in the year and is expected to set out the role of providers and how students can move between institutions.
• Clean Energy Workforce Strategy is expected to be published later this year by DESNZ.
• Consultation expected on subject content of the new Natural History GCSE.
• Skills England Bill and English Devolution Bill, expected to be brought before Parliament, will give local leaders greater powers on skills policy.

Remaining gaps

• Greater clarity needed on how Skills England, the Office for Clean Energy Jobs, relevant government departments, and various workforce forums will coordinate and work together.

Aldersgate Group recommendations

Translating the net zero transition into high quality jobs across is crucial to its success. The government must develop a national net zero workforce strategy, identifying skills gaps, future demand and policies needed to ensure the UK has a workforce fit for an environmentally sustainable future. This strategy must include support for workers in sectors expected to phase down as a result of the transition, to retrain and secure high-quality jobs in low-carbon industries. The Aldersgate Group has set out recommendations for the clean energy workforce and apprenticeship reforms. Upcoming work will explore workforce needs and pathways for the decarbonisation of domestic buildings.

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