What is decarbonisation?

Net Zero/0, Decarbonisation, Carbon Neutral, Carbon Footprint ......

In June 2019 the UK Government committed the UK to a 100% reduction of net greenhouse gas emissions by 2050 compared to 1990 levels. This commitment, backed by legislation, is known as the net zero target.

Greenhouse gases – let sunlight pass through the atmosphere but stop the heat from the sunlight going back out into space. Without them the earth would be -18 °C, but over time, they have increased significantly, this has led to increased trapped heat which has contributed to global warming which creates a change in our climate.

People often use the terms ‘carbon neutral’ and ‘net zero’ as though they’re the same thing, but there is an important difference.

Carbon Neutral: Making or resulting in no net release of carbon dioxide into the atmosphere, especially as a result of carbon offsetting. There will always be unavoidable carbon emissions, unavoidable carbon emissions produced are offset by planting trees, carbon capture or supporting renewable energy programmes. Whilst this can speed up the reduction in carbon emission levels in the short term, an important part of the transition. Carbon offsetting is an immediate and effective action that supports the decarbonisation journey.

Net Zero: There is no universally accepted definition for the term ‘net zero’. The UN Net Zero Coalition states “net zero means cutting carbon emissions to a small amount of residual emissions that can be absorbed and durably stored by nature and other carbon dioxide removal measures, leaving zero in the atmosphere”. This may be considered Carbon Net Zero.

Net zero greenhouse gasses refers to all greenhouse gases being emitted into the atmosphere, such as methane (CH4), nitrous oxide (N2O) and other hydrofluorocarbons, and the UN High Level Expert Group have recommended “Targets must account for all greenhouse gas emissions (based on internationally approved measures of warming effects) and include separate targets for material non-CO2 greenhouse gas emissions (e.g. fossil methane and biogenic methane)”.

We encourage all our members to commit to an achievable Net Zero objective with declared milestones and to identify a suitable change plan.

As explained above, net zero is all about helping to reduce to zero (compared to 1990 levels) the greenhouse gases already in the Earth’s atmosphere, meaning carbon removal will also be required.

These Net Zero Guidelines set a common path by:

defining “net zero” and its related terms, such as greenhouse gas removals, offsetting, and value chain. The guidelines clarify differences in scope between direct emissions, indirect emissions from purchased energy, and other indirect emissions arising from an organization’s activities;
setting high-level principles for all actors wanting to achieve climate neutrality;
offering guidance on actions to achieve net zero as soon as possible and by 2050 at the very latest;
providing transparent communication, credible claims, and consistent reporting on emissions, reductions, and removals.

The Guidelines build on momentum of current voluntary initiatives and help increase their impact. Globally accepted “net zero” claims are easier to compare. They create an ambition loop that can be supported through internationally accepted regulations

Find out more – ISO Net Zero Guidelines

The UK’s 2050 Net Zero target follows years of national and international activity to tackle climate change:

November 2008 – The UK Parliament approves the Climate Change Act, a law committing the UK to an 80% reduction of net greenhouse gases by 2050 compared to 1990 levels.
December 2015 – At the 21st UN Climate Change Conference of the Parties (COP21), 196 countries adopt the Paris Agreement, aiming to limit global warming to (ideally) 1.5ºC compared to pre-industrial levels.
October 2018 – The Intergovernmental Panel on Climate Change (IPCC) publishes a report stating that global greenhouse gas emissions need to reach net zero by around 2050 for there to be any possibility of meeting the Paris Agreement’s 1.5ºC target.
May 2019 – The Climate Change Committee (CCC) recommends a UK net zero target of 2050, a 2045 target for Scotland, and a 95% reduction target for Wales.
June 2019 – The UK Government amends the Climate Change Act (2008), legally committing the UK to a 100% reduction in greenhouse gases by 2050 from 1990 levels.
April 2021 – In its Sixth Carbon Budget, the UK Government commits to a target to reduce emissions by 78% by 2035, compared to 1990 levels; this was legislated in June 2021 as the Carbon Budget Order 2021.
March 2023 – The UK Government publishes its Carbon Budget Delivery Plan, setting out policies, timescales and delivery risks for Carbon Budgets 4 to 6 (2023 to 2037).
October 2025 – The Department for Energy Security and Net Zero (DESNZ) publishes the Carbon Budget and Growth Delivery Plan (CBGDP), updating and replacing the 2023 Carbon Budget Delivery Plan as the government’s cross-government policy package for meeting Carbon Budgets 4, 5 and 6 (up to 2037).
June 2026 – The Government lays the draft Carbon Budget 7 Order, setting the Seventh Carbon Budget (CB7), covering 2038 to 2042, at 535 MtCO2e – equivalent to an 87% reduction in emissions from 1990 levels. The Climate Change Act 2008 requires CB7 to be set in law by 30 June 2026. A delivery plan for CB7 will follow once the budget is approved by Parliament.

The UK is currently within the Fourth Carbon Budget (2023 to 2027) and remains on track to meet it. Across the first three carbon budgets, the UK over-achieved its emissions reductions.

In the last few years, there has been unprecedented action for climate change, including international student strikes, climate protests and a strengthening of environmental regulations.

For businesses, the physical risks from climate change itself, in addition to the risks from societal responses to the climate emergency, have made climate change an issue that cannot be ignored.

The government has set out the national targets for reducing carbon emissions in legislation, what we see will now be an increasing number of new rules and regulations in order to ensure that the government are able to meet these legal targets.

Increasing government regulations

The UK government’s response to the climate emergency was to set a net zero emissions target by 2050.

To meet the target consecutive governments have increased taxes to stimulate change and are likely to continue doing so: Environmental taxes, reliefs and schemes for businesses: Overview, consecutive governments have increased a number of environmental taxes, and several rates have risen further for 2026 to 2027.

Environmental taxes raised £54.3 billion in the UK in 2024, a decrease of 0.5% from £54.6 billion in 2023, and now represent 1.9% of GDP – the lowest proportion since records began in 1997. Energy taxes accounted for 74.4% of total environmental tax revenue in 2024, followed by transport (23.3%) and pollution or resource taxes, which include Landfill Tax and Plastic Packaging Tax (2.3%, £1.2 billion).

Source: ONS, UK environmental taxes: 2024.

While overall environmental tax revenue fell slightly at headline level (reflecting frozen Fuel Duty and lower Emissions Trading Scheme and Climate Change Levy income), the rates of several individual taxes relevant to members have risen significantly for 2026 to 2027:

Landfill Tax – significant increase

From 1 April 2026, the standard rate increases to £130.75 per tonne and the lower rate to £8.65 per tonne, up from £102.10 and £3.25 respectively in April 2023. The lower rate has more than doubled over that period.

Source: GOV.UK, Landfill Tax: increase in rates from 1 April 2026.

Plastic Packaging Tax – increase

From 1 April 2026, the rate for packaging containing less than 30% recycled plastic increases to £228.82 per tonne, up from £223.69. From April 2027, pre-consumer waste will no longer count towards the 30% recycled content threshold, and a Mass Balance Approach for chemically recycled plastic is being introduced; technical consultations on both are expected through 2026.

Source: ERP, Plastic Packaging Tax changes in 2026; HMRC.

Aggregates Levy – increase, and now devolved in Scotland

From 1 April 2026, the rate increases in line with RPI to £2.16 per tonne, up from £2.08. From the same date, the Aggregates Levy no longer applies in Scotland, where it has been replaced by the devolved Scottish Aggregates Tax administered by Revenue Scotland; the UK Aggregates Levy continues to apply in England, Wales and Northern Ireland.

Source: Addleshaw Goddard, Aggregates Levy: What do you need to know? (2026); GOV.UK.

Climate Change Levy – frozen, with a new relief scheme from 2027

The Carbon Price Support element of the Climate Change Levy (CCL) was frozen from 1 April 2025 to maintain a carbon price of £18 per tonne of CO2 in Great Britain. A new six-year Climate Change Agreement scheme will give energy-intensive firms that meet agreed energy efficiency or emissions targets access to reduced CCL rates from 1 July 2027 to 31 March 2033.

Source: Deloitte TaxScape, Climate change levy.

Carbon Border Adjustment Mechanism (CBAM)

UK CBAM

UK CBAM will commence on 1 January 2027. Primary legislation is now in place via the Finance Act 2026, with secondary legislation consulted on in two stages during February and April 2026; final secondary legislation is expected later in 2026. UK CBAM will apply to imports in the aluminium, cement, fertiliser, hydrogen and iron & steel sectors; glass and ceramics remain excluded from scope. The inclusion of indirect emissions within UK CBAM has been delayed until 2029 at the earliest. CBAM rates will be calculated and published quarterly from 1 January 2027, with an illustrative example rate due in Autumn 2026.

Source: GOV.UK, Carbon Border Adjustment Mechanism (CBAM): Policy Summary; House of Commons Library briefing CBP-9935.

EU CBAM

The EU CBAM transitional (reporting-only) phase ended on 31 December 2025. The definitive regime entered into force on 1 January 2026: EU importers must now purchase and surrender CBAM certificates to cover the emissions embedded in imported goods, in addition to reporting. By 7 January 2026, over 4,100 economic operators had obtained authorised CBAM declarant status across the EU, and more than 1.65 million tonnes of CBAM goods had been declared in the first reporting week. On 17 December 2025, the European Commission published a proposal for a new Regulation strengthening EU CBAM, including extending it to specific downstream goods; this remains under consultation.

Source: European Commission, Taxation and Customs Union – CBAM; business.gov.uk.

Countries all around the world are now taking action

Scotland, Sweden, and Germany have legally binding net zero targets for 2045. France, Denmark, Spain, Hungary, and Luxembourg have set their net zero targets for 2050. Japan, Korea, Canada, and New Zealand have passed laws committing them to achieving net zero by 2050, while Ireland, Chile and Fiji have proposed legislation.

In addition to the cost of domestic regulations, businesses that export goods or services will need to account for the tougher environmental regulations in their target markets, such as the EU Carbon Border Adjustment Mechanism.

Pressure from main contractors on the supply chain

Leading UK businesses such as BP, Ericsson, IKEA, BT Group, British Airways, Unilever, Shell, and Sainsbury’s are already committed to reducing their greenhouse gas emissions, with many setting targets to reach net zero across their supply chains (Scope 3 emissions). These commitments are increasingly built into procurement processes and requests for proposals, with purchasers requiring suppliers to deliver the same goods or services with lower associated emissions.

Pressure from the banks

Most financial institutions are now committed to ensuring they do not directly or indirectly finance activities that have a negative impact on the environment. These commitments continue to affect the ease with which businesses can access trade finance and insurance products.

Pressure from employees

Sustainability remains a significant factor in employee expectations. Deloitte research finds that 69% of employees want their employer to invest in sustainability efforts such as reducing carbon emissions, using renewable energy, and reducing waste, and 27% say their employer’s stance on sustainability would factor into a decision to accept a job offer.

Source: Deloitte (cited in Arbor.eco, 80+ Sustainability Statistics for 2026). Note: this updates the figure previously sourced from HR Magazine; the original HR Magazine article could not be located in an updated form.

Changing consumer behaviour

Companies continue to face growing pressure from customers to reduce their environmental impact, and consumers increasingly want to understand the impact of the choices they make rather than relying on general claims of good practice.

PwC’s 2024 Voice of the Consumer Survey (over 20,000 consumers, 31 countries) found that 80% of consumers say they are willing to pay more for sustainably produced goods, though PwC notes this stated willingness may not fully translate into actual spend given inflation and cost-of-living pressures.
McKinsey and NielsenIQ research on US consumer packaged goods found that products carrying ESG-related claims achieved 1.7 percentage points higher sales growth than products without such claims.
Deloitte’s ConsumerSignals research found that 46% of consumers across 23 countries purchased at least one sustainable good or service in a given month, with 27% willing to pay a premium for sustainability.

Source: PwC, 2024 Voice of the Consumer Survey; McKinsey & Company; Deloitte ConsumerSignals. Note: these are the most current equivalents available for the figures previously sourced from McKinsey and Forbes; the original specific Forbes article could not be located in an updated form.

Footnote

[1] UK environmental taxes: 2024 – Office for National Statistics (ons.gov.uk).