The Climate Change Committee (CCC) has just published its annual progress report for 2026, assessing the UK’s progress towards net zero and setting out recommendations for government action. Several of its proposals could have significant implications for energy costs, industrial decarbonisation and fleet management.
Here is Sustainable Energy First’s analysis of the key recommendations and what they could mean for UK businesses.
Headline recommendation: cheaper electricity
Electrification is key to achieving our carbon targets, but it’s not happening fast enough. Even before the UK signed the net zero pledge in 2019, the CCC was urging the government to speed up electrification.
As we explained in our article on UK gas dependence: “There’s no point having the greenest electricity on earth if we’re still burning gas in our boilers and petrol in our cars.”
The CCC progress report recommends a simple financial incentive: make electricity cheaper, or at least as it compares to gas. Since a significant part of your energy bill comes from non-commodity charges, the Climate Change Committee is suggesting that government remove those charges. So electricity bills would just consist of the wholesale price of the power, making them much lower. This could be huge news for businesses struggling with high electricity bills.
Higher gas prices?
However, the non-commodity charges that the CCC is proposing we take off electricity bills are there to fund essential infrastructure. They pay for maintaining the grid and creating new generation capacity, which we need to make energy cheaper in the long run. This all still has to be paid for, even if government chooses to take the burden off electricity users.
One possible move would be to shift the charges onto gas bills. This would further alter the unfavourable ratio of electricity to gas prices that the CCC identifies as a barrier to electrification. But the CCC report doesn’t go as far as directly recommending this. It’s more likely that government will find other ways to fund the essential work.
Recommendation: deliver on industrial electrification
Electrification of industrial processes is the main way to bring down industrial emissions. But according to the CCC report, it’s happening too slowly. The Climate Change Committee calls on government to deliver a plan for speeding it up.
This means making electrification the “economically rational choice” for more businesses. In other words, targeting the ratio of electricity to gas prices.
The report commends the British Industry Supercharger for altering this ratio, but it only applies to around 586 energy-intensive businesses. The report finds that the coming British Industrial Competitiveness Scheme will change the ratio to 3.5:1 for around 10,000 eligible businesses. This committee doesn’t believe that this is enough of a reduction to encourage electrification.
The report calls for the government to replace the former Industrial Energy Transformation Fund with a new source of support or business model that will allow the step-change needed in industrial electrification.
Recommendation: support EVs, not PHEVs
Surface transport is currently the UK’s highest emitting sector, but the CCC’s confidence in government policy has grown somewhat. Emissions increased in 2025 thanks to growing mileage, but they’re still lower than in 2008.
At a glance: the CCC’s verdict on government surface transport measures
Government measure | CCC verdict |
Zero-emission vehicle mandate (ZEV), which requires manufacturers to produce a growing percentage of EVs | ✅ “Effective in driving investment and increasing the choice and affordability of electric cars on the market.” |
Weakening of ZEV incentives after its introduction | ❌Undermines the effectiveness of the scheme |
Waiving additional benefit-in-kind liabilities for PHEV (plug-in hybrid) company cars | ❌ “Will risk increased PHEV sales at the expense of EVs” |
It recommends that the government:
- doesn’t water down the ZEV mandate any further
- ensures that company car and vehicle taxes reflect the real emissions impact of PHEVs versus EVs
In practice, this would mean making EVs more affordable as a company car option.
Electric van uptake behind schedule
Electric vans aren’t being adopted as quickly as the government originally planned for, but sales are growing. This is partly driven by the ZEV mandate and the plug-in van grant, but the report says more help could be needed.
The extra weight of a van’s battery can push it into a stricter category for the purposes of commercial vehicle regulations, compared to a very similar diesel van. The CCC suggests changing the rules (around tacograph requirements and so on) to put electric vans on a par with similar-sized diesel equivalents. This could be good news for businesses electrifying their van fleet.
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