Autumn Budget 2025 – energy, transport & sustainability

Yesterday, Chancellor Rachel Reeves unveiled this Government’s second Autumn Budget, in the context of increasing pressure to deliver on Labour's pledges to stimulate growth and alleviate cost-of-living burdens.  

Growth-driving measures, including support for early stage and fast-growing tech companies, were announced by the Chancellor in the hope that they would offset further tax rises and increased costs, such as a threshold freeze for a further three years on National Insurance Contributions (NICs) from employers.  

You can read techUK’s full response here.  

A variety of announcements on energy, transport, and sustainability were also included in the Budget, with mixed consequences for the tech sector. 

Energy 

Energy bills  

The Chancellor devoted a significant portion of her Statement to detailing new action on reducing sky-high energy bills for households, which she emphasised must be tackled at the source. Notably, her messaging focused on energy security and addressing fuel poverty, rather than decarbonisation or Clean Power 2030 specifically.  

Key measures announced were: 

• The Energy Company Obligation (ECO) scheme, which was dedicated to increasing energy efficiency but ultimately added £1.7bn to bills each year, has been scrapped. 

• 75% of the domestic costs of a legacy renewables subsidy, Renewables Obligation (RO), will now be moved from energy bills to general taxation, at least up until 2028/29. 

• Combined, these two measures will see a £150 reduction per in average household bills by April next year. According to Treasury figures, £88 of this comes from shifting RO, £59 from scrapping ECO, and a further £7 from not paying VAT on these measures. 

• This levy reform brings the Government halfway to its objective of cutting bills by £300. It also represents a shift in the way energy is priced, rebalancing bills in favour of electricity over gas. Savings will be even greater for higher users of electricity, for example those with heat pumps instead of gas boilers. 

An additional £1.5bn of funding has also been allocated for the Warm Homes Plan, which will include energy-efficiency upgrades for low-income households and is due to be published soon, having been delayed. The Boiler Upgrade Scheme, aimed at decarbonising heat, has been retained despite concerns that it would be scrapped.     

Fuel duty has once again been frozen for a minimum of five months, after which it will go up with inflation – ending 15 years of freezes. 

Nuclear power  

In keeping with the Government’s pledge to be “builders not blockers”, the Chancellor reaffirmed their commitment to streamlining planning processes and cutting the red tape that currently holds back investment in nuclear power. These announcements confirm the Government’s adoption of the recent recommendations provided by the Nuclear Regulatory Taskforce, led by John Fingleton. The Government will publish a full implementation plan in the next three months, to be implemented within 2 years.   

Alongside this, the Government has now added nuclear energy to the list of eligible expenditure in its updated Green Financing Framework. This comes after the recent confirmation of Wylfa in North Wales as the location for the country’s first small modular nuclear reactors.  

Energy and digital infrastructure 

The Chancellor reiterated her intention to deliver on the Government’s modern Industrial Strategy commitments to reduce electricity prices for strategically-important industries. Measures include a recent uplift in price relief from 60% to 90% for certain energy-intensive industries through the Network Charging Compensation Scheme, as part of the British Industry Supercharger. Coupled with this is the recently-announced, larger-scale British Industrial Competitiveness Scheme, which will reduce costs for frontier IS-8 sectors and on which DBT is currently consulting. Crucially, neither scheme currently provides support for digital infrastructure.  

Working closely with NESO and Ofgem, the Government is also taking steps to expedite and simplify the grid connections process – delays to which act as a major barrier to critical national infrastructure such as data centres. These reforms include: 

• Creating new mechanisms via the Planning and Infrastructure Bill to reallocate released capacity and reserve future capacity for strategically-important demand projects, including data centres. 

• Ensuring viable projects progress in the demand queue by exploring enhanced entry and membership requirements with Ofgem.  

• Looking at opportunities for self-build for high voltage grid infrastructure. 

• Eliminating speculative demand in the grid connection queue. To support this, DSIT will publish a strategic plan for data centres. We are engaging with DSIT on this and have intel that the plan could be published in March. 

Oil and gas  

The oil and gas sector was dealt multiple blows in this Budget. Contrary to media speculation, the Chancellor held firm on the Government’s promise to prevent the exploration of new oil and gas fields. That said, the introduction of Transitional Energy Certificates is aimed at ensuring existing fields can be managed for their full lifespan. The Government has also published the North Sea Future Plan, which establishes a new North Sea Jobs Service – offering support for the current workforce.  

Another widely-anticipated reform that did not take transpire was the scrapping of the Carbon Price Support – essentially a carbon tax on the fossil fuel industry. Instead, the Government is freezing rates at a level equivalent to £18 per tonne of CO2 in 2027-28. The Energy Profits Levy is also to remain in place until 2030, with tax receipts from oil and gas companies forecast to drop significantly as prices fall. 

Carbon border adjustment mechanism (CBAM) 

Indirect emissions associated with the production of CBAM goods will be removed from the scope of CBAM on 1 January 2027 and will be delayed from being in scope until 2029 at the earliest. This is intended to reflect continued support for the Energy Intensive Industries (EII) Compensation Scheme.   

Primary legislation for CBAM will be included in the Finance Bill 2025-26.  

Transport  

Electric Vehicles 

• Electric Vehicle Excise Duty (eVED) is being introduced from April 2028. It will be a new mileage charge for electric and plug-in hybrid cars – charging £0.03 per mile for battery electric cars and £0.015 per mile for plug-in hybrid cars. The Government has published a consultation which provides further detail on how eVED will work and seeks views on its implementation, but is expected to apply alongside VED on EVs.  

• The Electric Car Grant launched in July (designed to help derivers switch to EVs) will receive £1.3bn funding and be extended to 2029. The Government is also increasing the threshold at which motorists with new EVs must pay the VED Expensive Car Supplement from £40,000 to £50,000. The DRIVE35 programme (supporting the development of UK capability in next generation, zero emission automotive technology) will be increased by £1.5bn to 2035. 

• There will be an additional £100m in EV charging infrastructure, along with a consultation on permitted development rights for cross-pavement EV charging. There will be a 10-year 100% business rates relief for eligible EV charge points and EV-only forecourts. 

Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme from 2 January 2026, except where these are supplied in conjunction with certain other travel services. This will make fares subject to the standard 20% rate and is expected to raise around £700m a year.  

Other measures include freezing all regulated rail fares in England for one year (the first such freeze in 30 years) and continuing the £2bn investment in Transport for City Regions. 

Sustainability 

Nature 

The main announcements for nature are largely centred around planning – some of the £48 million additional funding for the planning system will be allocated for improvements to the performance and speed of environmental regulators, with extra resources for priority projects and delivery of the Nature Restoration Fund’s Environmental Delivery Plans. 

Additionally, DEFRA will receive funding to provide public bodies with grants to remediate land where landfill tax is an “unaffordable blocker”, with the intention of increasing the available land for development and lead to a net increase in remediation-associated landfill tax receipts. This is confirmation of the Government backtracking on earlier proposals to implement a single rate of landfill tax. 

They also plan to reinvest water company fines in projects to clean up rivers, lakes, and seas.  

Waste 

The Government intends to extend tax conditionality to the waste sector; draft legislation will be published for a technical consultation in 2026. 

Looking to improve the packaging Extended Producer Responsibility (pEPR), they will be consulting in early 2026 on proposals to measure the performance and effectiveness of local authorities’ use of pEPR fees and appointing a Producer Responsibility Organisation by March 2026 to “give industry a central role” in operating the scheme. They will also be consulting on reforms to the Packaging Waste Recycling Note system but have not given a specific timeline for this.   

Plastic 

The Plastic Packaging Tax (PPT) rate for 2026-27 will increase in line with CPI inflation.  

New legislation via the Finance Bill 2025-26 will allow for a “mass balance approach” to be used to attribute chemically recycled plastic for the purposes of the Plastic Packaging Tax and remove pre-consumer waste as a source of recycled content from 1 April 2027.   

The Government will also consult in early 2026 on the introduction of mandatory certification for mechanically recycled plastic packaging for businesses to claim an exemption from PPT.  

The techUK View   

The significant focus on reducing energy bills and expediting grid connections is welcome, as two of the most significant barriers to building the infrastructure required for digital transformation. This levy reform – scrapping ECO and shifting RO to general taxation – is a step in the right direction but further action is needed to make the UK competitive on a global scale. It does not provide any support on energy bills for digital infrastructure, thereby neglecting a key pillar of the Industrial Strategy. Neither does it tackle growing transmission charges, the enormous bill for grid buildout or the costs associated with the ongoing CfD AR7, which will see a record-breaking strike price. It is positive that higher users of electricity – a sector that is decarbonising at pace – receive bigger cost savings, but this now needs to be applied to those in industry who want to benefit from clean, cheap power.  

With imminent announcements expected including Ofgem’s end-to-end review and final price determination for the 2030 transmission build, techUK will evaluate the implications of these and continue to work with stakeholders such as DESNZ, NESO and DSIT to ensure the views and experiences of industry are reflected. 

On transport, it is understandable and right that the tax system begins to shift the burden from ICE vehicles to EVs over time as the market situation changes, and this may also encourage modal-shift. However, with EVs now coming under VED and electricity prices already high, the Government must be careful not to price consumers out of being able to make the choice to adopt cleaner, tech-driven transportation. Measures to extend the Electric Car Grant and DRIVE35, and boost charging infrastructure will help balance these negative measures out, and we strongly encourage the Government to look for solutions developed by the UK tech sector to deliver these reforms successfully. 

Finally, the Government risks reducing public usage of PHV journeys with a sharp jump in fare VAT. techUK will work with the sector, monitor impact, and engage with policymakers as this measure beds in.