08What needs to change?

Progress on carbon emissions targets is unlikely to be ‘place blind’. If the UK is to meet its target of net zero emissions, then it is likely that cities and large towns will drive this transition in the next period as they have greater potential for doing this than other areas. Some cities could even be carbon negative, offsetting the emissions that cannot be cut elsewhere. This has important implications in terms of policy.

For the years to come, the priority will be to phase out carbon-intensive activities, to incentivise the take-up of low-carbon solutions and to improve energy efficiency. A large part of this will be driven by national government interventions: net zero is a national pledge, so it is up to the national government to develop plans and deliver the necessary tools and funding to meet that objective. As such, much action on climate change will happen ‘to’ cities (such as changes in electricity generation) rather than being directly driven by them.

But in the areas of transport and domestic emissions, there is more direct action to be taken. Alongside national government intervention, local policy-makers have the power to bring about change directly to their local area, through their approach to planning and discouraging car usage, for example. But this is currently hampered by a lack of powers and resources, a local government structure that prevents the integration of transport and spatial planning strategy, and a dysfunctional planning system.

The rest of this section summarises what needs to change in cities and large towns if the UK is to achieve net zero emissions by the middle of the century.

1. Spatial planning: devolve more powers at the local level and achieve greater benefits by integrating transport and housing plans

Local governments currently have a number of planning powers that can be used to cut carbon emissions. They can encourage walking and cycling by pedestrianising roads and repurposing space that is currently allocated for cars – for instance on-street parking. Publicly owned car parks in cities could be demolished and replaced with residential development (either built by the local council or sold to developers) – to disincentivise drivers and cut carbon through increased density.

But this will not be enough. To fully realise the benefits of density, more structural changes need to happen:

a. Changes to governance structures

The current structure of local government does not give mayors and local leaders the institutional capacity to deliver the changes needed in transport, housing and spatial planning policy. This is in part because the powers they have are often fragmented: for example, the current two-tier system is highly inefficient, as district councils are the local planning authority and county councils are the local transport authority. This makes it difficult to coordinate and plan at scale.

This local government fragmentation and the current state of devolution of powers mean that cities and large towns often have too few levers to pull. They often lack statutory powers to act. On transport, for instance, cities and large towns today have low levels of control over the infrastructure, services and funding for public transport. A large majority of cities have few or no powers over public transport journeys and the revenues it can generate. In cities like Birmingham, transport authorities control less than a 10th of all public transport commutes, as infrastructure outside the light rail transit system is not covered by their remit.⁵⁰ This in turn has implications on how cities are spatially planned: only the Mayor of London has powers to create a statutory spatial plan that integrates transport and spatial planning. This allows, for instance, the creation of a tool called Public Transport Accessibility Level, used to optimise residential density according to public transport provision.

This needs to change. If cities and large towns are to reduce our carbon footprint by planning more intelligently, powers and resources must be sit with a single authority that covers transport and housing so it can plan new developments alongside the existing public transport network, and vice-versa. This would involve:

1. In mayoral combined authorities, making organisational changes to move powers down from Whitehall and up from local authorities, so all mayors have the same statutory spatial planning powers as the Mayor of London.
2. Outside of unitary authorities, replacing the two-tier local government system with a single-tier system where powers over transport and planning are joined.

b. Changes to the UK’s approach to development

Reform of the planning system

In its current state, the discretionary planning system prevents efficient land use outcomes by making it harder, riskier and therefore costlier for developers to identify opportunities in existing built-up areas and on brownfield land. Densifying existing built-up areas, often on land that has not been allocated for development in the local plan (‘windfall sites’) is a lengthy and costly process that requires developers to purchase and assemble small plots of land, with no guarantee of planning permission. The result is that in many cities and large towns, most new residential development occurs where land is cheaper and land ownership is simpler, on the outskirts of cities – often ‘leapfrogging’ green areas into car-dependent estates.

Many of these issues could be avoided by a shift towards a flexible zoning system: not only would it shorten the process and accelerate the construction of new homes (that tend to have a lower carbon footprint because they are more energy efficient), it would also incentivise suburban densification by reducing risk for developers and allowing them to capture value uplift in land closer to city centres. Land would be allocated much more efficiently as a result. It would be up to local planning authorities to use the zoning system to locate ‘medium to high’ residential developments near train stations for instance, and prioritise development on inner city brownfield land.

Direct incentives to build on brownfield land

In addition to changes to the planning system, other mechanisms have the potential to incentivise the development on brownfield land. The Brownfield Land Release Fund announced last December is a welcome initiative, as it allocates £100 million funding to councils (and an additional £67 million for the West Midlands and Greater Manchester combined authorities as part of the Brownfield Fund) to prioritise housing development on previously-used land. It should be extended, to allow a maximum number of local councils to successfully bid for funding to help make brownfield development relatively more attractive compared to greenfield development.

2. Transport: Move away from car dependency and incentivise the take up of low-carbon solutions

Emissions from road transport, and cars in particular, are a good example of a negative externality: the cost of driving and parking a polluting car is too low compared with the environmental costs that are then passed on to society. Drivers lack incentives to switch to cleaner vehicles and other transport modes, and the clean alternatives such as zero-emissions vehicles remain too expensive.

This will involve a number of nationally driven interventions: the Government must deliver on its pledge to phase out petrol and diesel cars by 2030. The upcoming Transport Decarbonisation Plan, delayed until summer 2021, must set out an intermediate milestone for 2025, as there is a risk that most of the remaining carbon budget that can be allocated to car emissions will be used before the ban kicks in. The recent commitment to £1.3 billion funding for EV charging infrastructure is welcome news, but more must be allocated to help people become less dependent on cars.

Alongside national government intervention, cities should use the powers they have to support active travel, encourage public transport use and disincentivise car use. This can be done by:

• Adopting schemes like Clean Air Zones (CAZs) which charge the most polluting vehicles in the central zone of a city. These are expected to be particularly effective at addressing the residual, short car journeys that could easily be switched to other modes.⁵¹ In London, the CAZ-style scheme introduced two years ago, set to be expanded in October 2021, has brought about significant air pollution and carbon emissions reductions.⁵² Other schemes like Workplace Parking Levies and Park and Ride must also be considered.
• Using the 2017 Bus Act powers to introduce bus franchising, as Greater Manchester intends to do. This would give city leaders powers to control bus routes, make them more reliable, bring down costs for passengers through a simpler ticketing and fare system, and clean up the fleet. The Government should also extend these powers to other areas outside mayoral combined authorities.
• Investing in active travel alternatives. This includes making the measures that were put in place during the pandemic permanent (such as the pedestrianisation of central areas or pop-up cycle lanes) where they have had a positive impact.
• Encouraging people to return to public transport and restore confidence in mass transit which may have been eroded by the pandemic, for instance via a large public awareness campaign.
• Investing in public transport infrastructure to expand the network. All cities must improve the efficiency of their public transport systems, but additional infrastructure is needed in particular in already strong and growing city centres where systems are already at capacity and journey times are slow, for example in Manchester, Birmingham and Leeds. The Transforming Cities Fund goes is a welcome initiative, but in many places further investment will be required. The National Infrastructure Commission recommended a £31 billion investment for new transport infrastructure in cities outside London up to 2040. This should be allocated in priority to large cities like Manchester and Birmingham. This, combined with policies that increase the cost of driving, is likely to reduce congestion, increase the passenger capacity and make journeys faster and more reliable.

3. Existing homes: accelerate the retrofit agenda

A significant proportion of all carbon emissions comes from homes. This means the net zero target is unlikely to be met until most of the 11.3 million inefficient properties are upgraded to EPC band C or above – a challenge that is predominantly in cities.

This will require significant investment from the Government and should include:

• Reintroducing the Green Homes Grant scheme, a £2 billion programme which offered households grants up to £5,000 (£10,000 for low-income households) to install energy efficiency measures in order to cut both energy bills and domestic carbon emissions. The scheme was scrapped in March 2021, just six months after it was launched, and only about 49,000 efficiency measures have been installed. The main issue was the way the scheme was designed. Short timescales (the budget was meant to be entirely spent between September 2020 and March 2021) meant that the industry was not ready to deliver at scale nor willing to invest given the absence of policy certainty in the long run. The upcoming Heat and Building Strategy needs to establish a clear strategy to decarbonise homes, and address the shortcomings of the Green Homes Grant scheme, by providing a long-term, more stable framework.
• Reforming residential taxes by adjusting property tax to the EPC of the dwelling to reflect its energy consumption. This is because subsidies alone will not be enough to incentivise homeowners to retrofit, as in most cases they will not cover the full installation costs of the measures needed. Such a ‘green offset’ could also provide more systematic incentives for homeowners to retrofit their property.⁵³ Other tax measures, including VAT cut on renovation and low-carbon installations, should also be considered.
• Bringing forward the Future Homes Standards regulation (now delayed to 2025), in order to ensure new homes are compliant with stricter energy efficiency standards and will not have to be retrofitted in the future.

Local authorities will also have a role to play: the £500 million Green Homes Grant Local Authority Delivery has not been scrapped, and must be used to install low-carbon heating and retrofit homes with an EPC below E for low-income households. Local planning authorities can also use building regulations and trading standards to impose higher standards on energy efficiency and carbon emissions- either at the building design stage before homes are granted planning permission, or for properties that are under their direct control, such as public buildings and council housing.