(Bloomberg) -- The energy industry has been central to the government’s growth strategy since the July 4 election, but there was little major new funding for the sector in Chancellor Rachel Reeves’s budget on Wednesday.
There was key news on nuclear power, decarbonizing home heating and on carbon prices. But many significant spending decisions for the sector are set to come next year as part of the multi-year spending review expected in the Spring.
Overall the budget for the Department for Energy Security and Net Zero is set to grow 22% annually over the next two years, the biggest increase by far for any government department. It underscores the expected cost of driving decarbonization to fuel the country’s growth and leadership on the fight against climate change.
Already the government has made some significant funding commitments that were reiterated in the budget. That includes a £22 billion ($28.6 billion) investment in carbon capture technology and establishing the state-backed GB Energy.
These were the other key energy-related decisions in the budget:
- Funding for the Sizewell C nuclear plant will be delayed until at least Spring 2025, pushing back expectations that a final investment decision would be made by the end of the year.
- The UK’s Carbon Price Support mechanism will remain at £18 per metric ton. Carbon futures plunged as much as 5.6% on the news, as traders had been expecting measures that would increase prices.
- The UK will introduce a Carbon Border Adjustment from Jan. 1, 2027, to extend the country’s carbon price to some imports. It will cover sectors including aluminum, cement, fertilizer, hydrogen and iron and steel, but exclude glass and ceramics as previously proposed.
- The country will spend £3.4 billion to fund the decarbonization of heating and household energy efficiency over the next three years as part of its Warm Homes plan. That spending will need to be expanded significantly to meet the government’s commitments to increase home heating efficiency.
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