UK government proposes Seventh Carbon Budget – what does this mean?
Every five years, the UK government sets a new legally binding cap on maximum emissions levels for the whole economy, known as the “carbon budget”, with the ultimate aim of achieving net zero by 2050. These ‘budgets’ are set to take effect 12 years in the future, giving time for industry and regulation to adapt.
In 2026, the government has set out its proposed Seventh Carbon Budget (CB7), which would establish a target of approximately 87% emissions reduction for the period 2038-2042. Targets are science-based, and in line with independent advice from the Climate Change Committee (CCC) – advice which successive governments have accepted fully over all previous carbon budgets.
Government messaging has largely been centred around energy, as the government points to the UK's second fossil fuel price shock in five years as further evidence of the need to accelerate the transition to clean, domestic power. In reaction to the proposal, CC Chair Nigel Topping welcomed the government's decision, calling for an acceleration of electrification and, specifically, for electricity to be made cheaper. Environmental Audit Committee Chair Toby Perkins MP welcomed the proposals while urging ministers to ensure that plans for delivering CB7 have fairness at their heart and that public consent is maintained.
In order to make the target legally binding, via secondary legislation under the Climate Change Act 2008, Parliament must approve the budget before 30 June 2026, after which a detailed delivery plan will follow.
Digital tools are key to this transition
According to the government’s impact assessment, the UK would need to invest around £880bn over 25 years to meet the budget, but by doing so this would yield a net benefit of £865bn, with avoided fossil fuel costs alone projected to reach £445bn over that period. Underneath the headline figure, it is clear that achieving this target will not be possible without digital tools, data and technology at the core of the net zero transition.
This investment will take place across huge swathes of the economy and is bult on mass electrification of sectors including transport, heat and industry at scale. Smart grids, energy optimisation, AI, digital twins and smart metering (to name a few) will be central to this decarbonisation effort – essentially making achieving the target possible. Without the underlying digital layer, the physical transition cannot happen efficiently or affordably. The UK's ambition to be a clean energy superpower is really an ambition to be a digital infrastructure superpower too.
Economic opportunity of the net zero sector
This framework is widely credited as a driver of the clean energy industries. The net zero economy supports over one million jobs in the UK, adding £105 billion in gross value added to the UK economy in 2025 alone, as it continues to thrive as one of the UK's fastest-growing economic sectors. Jobs supported by net zero businesses are 48% more productive than the UK average, generating £119,300 in economic value per full-time job and an average wage of £43,142.
For the tech sector, CB7 provides the long-term demand signal that justifies sustained investment in the digital products and services the energy transition requires.
What’s next
A delivery plan setting out how the government intends to meet CB7 will be published after Parliament formally approves the budget, which will be critical for all sectors to understanding specifically how the government intends to reduce emissions. To note, the government published in October 2025 its Carbon Budget and Growth Delivery Plan, its policy framework for how the UK will achieve carbon budgets 4-6, which covers 2023 through to 2037.
techUK will be engaging directly with DESNZ to ensure that digital solutions and the technology sector's enabling role are explicitly recognised within it.
