Blog | Karen Turner and Donna Sutherland | September 2026
The UK has made remarkable progress in cutting greenhouse gas emissions, but progress has been uneven. Between 1990 and 2024, total domestic emissions fell by 53%, while domestic transport emissions fell by only 11%. Transport is now the UK’s largest-emitting domestic sector.
Electrification can and should do much of the work for cars and vans. However, focusing on rules associated with new vehicle sales only addresses part of the challenge. It does not change the millions of existing vehicles already on the road, which will take years to turn over, nor does it address aviation, shipping or heavy freight. The remaining challenge is therefore not mainly technological; it is about how the cost of change is shared, and who carries it.
The question that should be answered first: who pays, how and when?
Electricity offers a warning
Electricity decarbonisation has been a major environmental success. However, the approach to financing that part of the transition offers an important lesson.
Some renewable support, network and wider system costs have been recovered through electricity bills. Centre for Energy Policy research shows why the funding mechanism matters: placing additional net-zero costs on electricity can be regressive and may weaken the case for electrifying heat, transport and industry.
The British Industry Supercharger provides a useful example. Protecting energy-intensive industries from internationally uncompetitive electricity prices may be necessary. However, the Government’s own assessment of the original package recognised that support for eligible firms would increase costs for other customers.
Relieving one group of a system cost does not make that cost disappear. It simply changes where, how and from whom, it is recovered.
If cost allocation is treated as an afterthought, a decarbonisation policy that achieves its emissions targets can still create unintended economic and distributional consequences.
Effective demand-side policy has two jobs
The first is to make the required outcome happen. A mandate requiring every supplier to meet the same progressively tighter standard can do that. Compliance becomes part of operating in the market rather than an act of corporate goodwill. Notwithstanding that, a mandate answers only how the transition happens. It does not answer who pays.
If lower-carbon fuels cost more, those additional costs must ultimately be borne by someone: consumers, producers, taxpayers, shareholders, government revenues, users of the fossil fuel being displaced, or some combination. And the first person charged is not necessarily the person who ultimately pays. Freight costs can appear in food and goods prices; aviation costs affect passengers and connectivity; electricity costs flow through supply chains.
As CEP’s “Horse and Cart” research argues, we need to understand who pays, how and when before assessing the wider economic and distributional effects.
A consumer price cap is not, by itself, the answer either. It limits what reaches the end user; it does not remove the underlying cost. Good policy must be transparent about where the remaining cost goes.
Electricity and transport cannot be designed in silos
Electric vehicles need affordable electricity. Hydrogen and synthetic low-carbon fuels require large quantities of it. Industry is also being asked to electrify, while the power system needs major investment in generation and networks.
We cannot design electricity policy that raises the cost of power and separately design transport policy on the assumption that cheap electricity will enable the transition. Ofgem’s review of how energy-system costs are allocated and recovered reflects this wider challenge. If domestic electricity remains comparatively expensive, businesses may increasingly rely on imports, hardly the answer for national resilience.
In developing my Blend and Decline paper, I have been testing one possible whole-system response. One element is private-wire electricity: co-locating dedicated renewable generation with low-carbon fuel production and supplying the plant directly. Where a wind farm is built specifically for an electrolyser, the grid is not the primary source of production electricity. As a result, the project does not incur the full range of costs associated with grid-supplied power.
The whole-system architecture goes wider than electricity supply. It links long-term demand to domestic production, dedicated renewables, hub infrastructure and sustainable carbon feedstocks. It also addresses the existing vehicle fleet and hard-to-electrify aviation, shipping and freight, while seeking to retain industrial sites, skills and supply chains. Together, these are conditions for a transition that is investable, secure and deliverable.
Two tensions in this approach should be highlighted. First, affordable private-wire electricity remains an assumption to test: if it cannot be delivered at scale, the pathway and funding model should adapt rather than pass uncapped costs to consumers. Second, if a levy on declining fossil-fuel use funds the transition, its revenue base will decline too. Any funding requirement must be designed to decline at a compatible rate and stay solvent throughout. Neither tension argues against acting. Both argue for deciding who pays, how and when across the whole system before the architecture is locked in.
Put “who pays” at the start
Before major transport-decarbonisation measures are introduced, policymakers should:
- Identify who pays, how and when – including indirect costs passed through the economy.
- Assess how costs fall across different groups, including by income, geography and access to alternatives.
- Model electricity, transport and industry as connected systems, rather than separate policy silos.
- Define affordability limits and failure conditions in advance, so policy can adapt if its assumptions prove wrong.
The lesson from electricity is not that decarbonisation was wrong. It is that the economics and distributional impacts of the transition need to be designed as carefully as the engineering.
As transport becomes the next major decarbonisation challenge, “who pays?” cannot be the question asked afterwards.
It has to be where we start.