Autumn Budget 2025: a Sustainability Stocktake

A Budget always feels like a tightrope walk for the Government these days. But this year it is walking a particularly fine line between boosting growth, keeping manifesto promises, meeting fiscal rules, managing the politics and calming the markets. That makes this a really interesting juncture to consider just how committed the Government is – amidst these challenges - to progressing climate action at both a public and private level, so as to meet its ambitious 2030 clean energy, and longer-term 2050 net zero, targets, and the commitments made to making the UK a "clean energy superpower". The answer, unfortunately, is inconclusive.

In this briefing we consider the key measures in the Budget on climate change and other green issues; and consider the implications for the UK's sustainability agenda. For a full breakdown of the Budget, see our dedicated Autumn Budget 2025 website.

The Budget did not exactly unleash a whole new set of climate-related proposals. And whilst no-one expected it to, the tone is nonetheless telling. When announcing the Budget in the House of Commons, Rachel Reeves made almost no mention of the sustainability agenda - just the briefest of mentions of renewable energy investment in the context of cutting bills, and a targeted jab at Green Party policies as only leading to an increased deficit and rate of inflation.

But read between the fiscal green lines in the Budget itself and there are some clues as to where priorities lie:

1. Government is clearly now laser-focused on the hot potato of the (direct) cost to the public of Net Zero. For example, the Budget makes a change to the 'Renewables Obligation' funding; essentially, moving certain green levies relating to existing renewable projects from consumer energy bills to being a (largely) Government-funded cost. (Rather more controversially, and in a move which threatens to further undo investor confidence, the Government is separately consulting on retrospectively reducing the level of underlying support to generators through changes to indexation, as discussed in our article.) Politics, and the increase in challenges from Reform and the Conservatives on the costs to voters of Net Zero, is clearly at front of mind.
   
   
2. Secondly, EVs will continue to be supported – with welcome and much-needed funding to charging infrastructure confirmed – but will (like renewable energy generation) increasingly have to pay their own way. This is seen with the introduction of the new vehicle tax for EVs of 3p per mile ("pay-per-mile" charging). Whether that is a retroactive step for the environment more generally is arguable: in the context of the planned mandatory phase-out of fossil fuel vehicles, there is an argument that taxes on increasingly prevalent EVs are appropriate – noting the road and tyre wear of these heavier vehicles has been shown to be a significant contributor to local air pollution.
   
   
3. Thirdly, whilst the dials have been no more than tweaked around green financing, and stimulation of investment into clean energy in particular, no news is sometimes good news when it comes to climate. We talked in our recent Energy & Infrastructure Spotlight about the Government's (rather unclear) plans for Great British Energy, and its £8.3 billion earmarked for clean power investment. There were concerns this funding may be reduced or redirected, but that doesn't seem to have come to pass. Likewise, the Government is largely holding firm on its policies against new oil and gas exploration. A strategy paper released with the Budget confirmed that it remains the case that new North Sea oil and gas exploration will not be allowed, although tiebacks of new projects linked to existing fields will be permitted. Lower taxes for fossil fuel companies struggling to protect workers from the industry’s declining production were also not included in the Budget – albeit, if anything, this only adds further impetus to calls for more efforts to stimulate a green economy and just transition, to provide alternative jobs.

More stark is a lack of focus on nature, with, for example, no specific new proposals around funding for nature- and biodiversity- focused projects. Here we see a more sharp-edged tension between the sustainability and growth agendas. This is brought into focus by the plans for housebuilding and infrastructure development, which underpins the Planning & Infrastructure Bill currently going through the legislative process. That Bill has been criticised for allowing nature safeguards to be overridden in the interests of development. Indeed, it is telling that the Office for Budget Responsibility's November 2025 forecast models an increase in housebuilding and consequent economic boost thanks to the Bill, but notes that certain amendments being proposed to add environmental protections to it pose 'downside' risks to its forecasts - through limiting the release of land for development.

For now, therefore, whilst the UK Government seems to remain committed to striking a different path to the 'Drill, Baby, Drill' rhetoric of the Donald Trump White House, 'Build, Baby, Build' seems likely to remain on the agenda.

From a sustainability perspective, it feels like we are entering a key phase of the current administration. The Government has been working hard to balance shorter-term economic and political health interests with longer-term climate goals and commitments. The Budget demonstrates a conservatism that results from this. But it is running out of road. The increasingly apparent challenge of the Clean Power 2030 agenda and delivering on the Government's international stance on climate change (as voiced at COP 30) can only be maintained alongside a more fiscally conservative and pragmatic set of domestic policies for so long. We should not underestimate some of the work done on the background plumbing – in particular grid and electricity market reform – but the Government now needs to find a way to turn the taps on. And if it is relying on a flow of private capital to do so, retrospective changes to government renewable support schemes are a questionable way of going about it. Moreover, the hyper-political and localised planning system remains the most pressing challenge for infrastructure development – a solution is still needed, and it doesn't feel like the Planning & Infrastructure Bill is necessarily it. The new proposals around corporate reporting and transition plans may have a key role to play in developing business appetite for the transition, but much will depend on the final shape of these.

We are accordingly entering a crucial (and especially unpredictable) period of decision- and policy-making for Government, and in turn for business decision-making and investment. Looking ahead, and preparing transition and other climate planning, will be more critical than ever. We will be updating on key developments, through our regular ESG Circular and Energy & Infrastructure Newsletter. Feel free to reach out to the contacts below to discuss in the meantime.