Time for Judicial Review of 7th Carbon Budget?

The Government is recommending approval CB7 but its impact assessment is fatally flawed.

Introduction

Carbon budgets are produced every five years by the Climate Change Committee (CCC)and they set the UK’s emissions targets twelve years in advance. The CCC published the 7^th Carbon Budget (CB7), covering the period 2038-2042, in February 2025 and the Government has to approve or reject it by 30^th June 2026. CB7 sets a legally binding goal to cut emissions by 87% compared to 1990 levels by 2040.

The Government have accepted the CCC’s recommendations and has confirmed it will adopt CB7. Legislation in the form of a Statutory Instrument was laid before Parliament to approve CB7 on 2 June and will be debated later this month. The Impact Assessment (IA) justifying the Government’s position was buried in the resources section of the website and is available for download on the link below.

7th Carbon Budget Impact Assessment

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Analysis of the original carbon budget has demonstrated significant errors on many levels. Unfortunately the IA has introduced even more flaws so it is time to consider whether a fair judicial review would find it lawful to approve the 7th Carbon Budget.

What is Wrong with CB7?

On Eigen Values, we have criticised CB7 on many occasions. First on the list for scrutiny was the CCC’s assumption about the cost of renewables, the hockey stick forecasts for deployment of renewable capacity and the take up of low-carbon technology. Secondly, they repeated the same methodological error from CB6 about the length of any dunkelflaute period and therefore understated storage requirements. Finally, after the CCC released their methodology report, further errors were identified.

The Government has not been explicit about the technology costs it has used in the IA saying only that cost assumptions “have been aligned as closely as possible with the latest internal evidence from power technology experts and commissioned industry research.” The implication is they have overridden the CCC and used higher costs from their Generation Cost 2025 report. However, there are several parts of the IA that could be strongly challenged up to and possibly including Judicial Review. These are:

• Irrational choice of policy option

• Circular carbon costs and benefits

• Mismatched carbon costs and benefits

• UK action not reducing global emissions

• Reliance on unproven technologies

• Inadequate analysis of impact on families and businesses.

Irrational Choice of Policy Option

The cost-benefit analysis of CB7 in the IA analyses three options. Option 1, termed the Looser Option, targets a lower reduction in emissions of 84% from 1990 levels to 645MtCO₂e. Option 2 is the CCC recommended option which targets an 87% reduction to 535MtCO₂e. Option 3 is the Tighter Option that requires a 88% emissions reduction to 490MtCO₂e which they say is broadly commensurate with the EU’s 2040 target to reduce emissions by 90%.

The cost-benefit analysis considers options against two baselines: the UK TIMES Energy and Emissions Projections and a no Net Zero baseline. Figure 1 below reproduces the results of the cost benefit analysis versus the no Net Zero baseline (p48 of the IA).

Figure 1 - CB7 Cost Benefit Analysis vs No Net Zero Baseline

The costs and benefits are expressed as Net Present Values (NPV), meaning that both costs and benefits in future years are discounted back to the present to reflect the time value of money. The NPV of Option 1 is calculated at £905bn, with a benefit-cost ratio (BCR) of 2.3, meaning that benefits outweigh costs by a factor of 2.3. The NPV (and BCR) for Options 2 and 3 are £865bn (2.1) and £780bn (1.9), respectively. In other words, the Looser Option 1, costs less, delivers a higher NPV and a better BCR than both the recommended and tighter options.

Despite Option 1 being more cost effective, Ed Miliband has chosen Option 2 by invoking vague, unquantified transformational change benefits. It may be possible to challenge this decision in a judicial review on the grounds of rationality – the Wednesbury unreasonableness test. The Minister cannot rationally decide to recommend Option 2 when his own quantified evidence in the IA favours a different option.

Circular Carbon Costs and Benefits

Figure 1 shows the vast majority of the alleged benefits of CB7 for all three options is ‘Carbon Savings’. The recommended Option 2 with an NPV of £865bn relies on £1,495bn of benefits from carbon savings. These savings are calculated by using carbon values derived from the Government’s Green Book supplementary guidance. The Table 3 of the workbook shows carbon values in 2050 ranging from £199/tCO₂e in the low scenario to £596/tCO₂e for the high scenario. The IA updates these to 2025 prices to £226-£679/tCO₂e.

Guidance (para 3.33) on valuing greenhouse gas emissions says the Government “adopts a target consistent approach, based on estimates of the abatement costs that will need to be incurred in order to meet specific emissions reduction targets.” In other words, if removing carbon from a particular activity is expensive, then they adopt a high price of carbon to make the abatement activity look economic. This creates circularity where higher and higher carbon prices can be used to justify ever more expensive abatement technologies. This also means that in future years, the easier to remove carbon is valued at a higher price and vast benefits can be claimed from the earlier removals.

It may be possible to challenge this decision in a judicial review on the grounds of irrationality because of circular reasoning. The Green Book (para 2.1) requires robust evidence and analysis and also says there is a duty to provide objective, honest and impartial advice. Using target-derived prices to justify the target itself renders the cost-benefit analysis defective and undermines Miliband’s claim the IA represents a “reasonable view of the likely costs, benefits and impact.”

Mismatched Carbon Costs and Benefits

All of the costs of CB7 fall on UK bill- and tax-payers while the alleged benefits are spread globally. The recommended Option 2 identifies capital and finance costs with a NPV of £880bn plus another £565bn of operational costs (excluding the £445bn of fossil fuel savings). The vast bulk of the £1,620bn of benefits, some £1,495bn are attributed to carbon savings.

The costs are real cash outlays (insofar as the costs can be believed), yet the carbon saving benefits are purely notional estimates of the cost of carbon required to make abatement look attractive. This is a category error comparing real costs with notional savings.

According to the IA, the carbon costs saved “represent the social value of an additional tonne of CO₂e abated”. However, the atmosphere is global, so any alleged emissions savings are felt globally. This means that any alleged climate damage avoided by removing part of the UK’s 0.8% of global emissions are felt worldwide. The IA does not test who receives the alleged benefits versus who bears the cost.

It may be possible to challenge this decision in a judicial review on the grounds of failure to take into account relevant considerations. The Green Book (para 6.23) explicitly requires consideration of “who receives the social benefits of a proposal and who bears the social costs.” Para 6.6 also says proposals “should consider proportionately the social costs, social benefits and risks that a proposal might bring about for UK society.” It may also be possible to challenge under the grounds of rationality because the IA systematically overstates the benefits to the UK.

UK Action Not Reducing Global Emissions

The underlying purpose of UK Net Zero is to be part of a global effort to reduce emissions. However, the IA relies on territorial emissions and effectively assumes every UK tonne abated results in a global saving. However, despite huge reductions in UK territorial emissions, global emissions have continued to rise as shown in Figure 2 (from Our World in Data).

Figure 2 - Annual CO2 Emissions World and UK

In reality, UK consumption emissions have fallen far more slowly and the UK’s share of global emissions has fallen as total global emissions have risen. Effectively, the UK has made energy and electricity expensive which has resulted in the offshoring of energy intensive industries and importing the emissions instead. The further dramatic reductions mandated by CB7 will likely intensify this process and result in a much lower net reduction in emissions.

It may be possible to challenge this decision in a judicial review on the grounds of failure to take into account relevant considerations. The Climate Change Act (section 10) explicitly requires consideration of “economic circumstances, and in particular the likely impact of the decision on the economy and the competitiveness of particular sectors of the economy”. It may also be possible to challenge under the grounds of rationality because the claimed global benefits are overstated or illusory.

Reliance on Unproven Technologies

The core pathway in the IA (para 169) calls for 80MtCO₂e per year of carbon dioxide to be captured and stored (CCUS) by 2050. Their pathway 2 calls for a minimum of 70MtCO₂e per year of removals by 2050. In Table 13 they state that 19-31MtCO₂e of engineered removals will come from Direct Air Capture (DACCS) and 20-61 MtCO₂e will be stored from Bio Energy with Carbon Capture and Storage (BECCS). They go on to state that their model cannot reach Net Zero by 2050 without these technologies and that CCUS will be “critical” to meet CB7 (para 218).

The Government target contrasts with the CCC’s Carbon Budget (Table 7.12.1) estimate of 35.8MtCO₂e of engineered removals by 2050. The Government has effectively called for more than twice the amount of CCUS than the CCC. By 2040, the CCC assumes BECCS will account for 89% of engineered removals. The CCC also calls for 22% of engineered removals to come from DACCS by 2050 which is even harder to achieve than removing carbon from the exhaust stream of a power plant.

Perversely, in the Government calculations, deploying less CCUS technology costs more, presumably because less carbon is removed so the assumed high costs of stored carbon cannot be claimed as a benefit.

There are several problems with both the Government’s and the CCC’s approach to CCUS. First, Drax recently announced that its BECCS project was unlikely to proceed and wrote off the spending to date of £47.6m. Many other CCUS projects across the world have recently been cancelled for example the H2 Teesside blue hydrogen project, the Heidelberg CCS project and dozens of projects (mainly CCS) have been cancelled by the US Government because they are not economically viable.

Second, there are very few DACCS projects operating globally and those that exist are tiny. The flagship Icelandic Climeworks Mammoth project has allegedly failed to capture enough carbon to cover its own emissions. Even Climeworks’ earlier, smaller Orca plant has never consistently met its carbon removal capacity.

Third, the IA itself says the greenhouse gas removals (GGR) sector, which relies on CCUS “will require continued and further innovation and deployment incentives to help technologies reach technology maturity, reduce costs and deploy at pace and at scale.” In other words the technology is expensive, immature and unproven at the scale required.

It may be possible to challenge this decision in a judicial review on the grounds of irrationality. A legally binding carbon budget surely cannot be set on the basis of technologies the IA itself acknowledges are high risk, expensive and unproven at the required scale.

Inadequate Analysis of Impact on Families and Businesses

Section 10 of the Climate Change Act covers the matters that both the Secretary of State and the CCC must take into account when setting the carbon budget. These include the likely impact on the economy, the competitiveness of particular parts of the economy and both fiscal and social circumstances.

The distributional analysis contained in Annex 3 of the IA admits that a fully quantified analysis has been deferred because approving the carbon budget is only a “level-setting” decision. The IA does flag potential risks from fuel poverty, the impact of scarce or expensive energy on economic activity, the trade balance and regional imbalances but provides no numbers. The IA defers full policy appraisal to a later delivery plan yet still asks for Parliamentary approval of the Minister’s “reasonable view” now.

It may be possible to challenge CB7 in a judicial review on the basis of a breach of the public sector equality duty (Equality Act 2010). This requires rigorous consideration of impacts on protected groups. It could be argued that a high-level decision locking in tighter ambition without quantified distributional impacts is unlawful, especially when the IA itself flags the risk of uneven burdens without mitigations in place.

Benefits and Drawbacks of Judicial Review of CB7

There are several benefits of challenging CB7 in the courts. First, a judicial review by opposition political parties such as Conservatives, Reform or Restore would be tangible action to demonstrate they are serious about ending Net Zero. Second, judicial review would show leadership on the idea of reversing economic decline. Third, such a move would send a shockwave through the green-industrial-complex, damaging investor confidence and so slow down spending on grid integration and renewables projects. This would make it easier for a new centre-right government to reverse Net Zero. Finally, a successful court challenge may well make it easier to challenge earlier carbon budgets that have made similar errors.

The downside of course is that any challenge to CB7 would be met by ferocious opposition. The courts may be reluctant to interfere in high-level climate policy decisions and defer to ministers. A well-resourced government would likely argue that any flaws are matters for political or parliamentary accountability, not the courtroom. Finally, if the judicial review fails it might embolden Miliband to double down on his existing plans.

Conclusions

It is clear there is a great deal of fanciful thinking in the CB7 impact assessment. The Government has attempted to skate over the cost problems in the CCC’s work and introduced additional flaws into the carbon budget.

It appears as though Ed Miliband has made an irrational choice of policy option in direct contradiction of the quantitative evidence in his own IA. The evidence itself is flawed because it relies on a circular argument of ever higher carbon costs driving higher alleged benefits. In addition, the costs of CB7 all fall on UK bill- and tax-payers but the alleged benefits accrue globally, creating a mismatch. It is not even certain the claimed carbon reductions will result in reduced global emissions which is the supposed objective of the whole Net Zero project. The IA also relies upon even more extensive use of expensive and unproven carbon capture technologies than recommended by the CCC. Finally, the IA has ducked the question about how CB7 will affect families and businesses by providing only a qualitative analysis of the impact.

It surely questionable whether a legally binding carbon budget can be approved based on such dodgy foundations. Collectively, these points demonstrate that Ed Miliband’s declaration that the IA represents “a reasonable view of the likely costs, benefits and impact” is probably unlawful. It is surely time to put Ed Miliband in the dock and test his arguments in a fair judicial review.

Opposition parties, think-tanks and concerned groups should urgently seek specialist legal advice on how to proceed. The shockwave that would be sent through the green industrial complex would likely slow down spending and make the task of reversing Net Zero easier for an incoming centre-right government later this decade. The next steps would be to seek legal opinion; gain cross-party, industry and potentially union support and finally influence popular opinion through the media.

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