Aviva’s Nick Molho looks at this year’s policy priorities and likely developments for the UK’s low-carbon agenda, and reflects on what it means for investors.
Read this article to understand:
- The four key policy themes to support further low-carbon investment in the UK
- What has been done so far and key next steps
- Why 2026 is all about delivery
Efforts to decarbonise the economy represent an important opportunity for long-term investors to generate attractive risk-adjusted returns if a sufficiently robust public policy framework is in place. They can also support economic growth, supply-chain resilience, and improved energy security in countries like the UK.
Continued progress and delivery are going to be critical if the pipeline for private investors is to grow
In 2025, we witnessed a wide range of policy developments in the UK that could improve the investment context for supply chains across the low-carbon economy, from clean power and electric vehicles to the electrification of energy-intensive industries. However, continued progress and delivery are going to be critical if the pipeline of commercially viable low-carbon projects and opportunities for private investors is to grow.
In this article, we look at policy priorities – and likely policy developments – for the low-carbon agenda in 2026 and how these could stimulate further private investment. In line with Aviva Investors’ 2025 Low Carbon Investment Roadmap report, we consider these next steps across four key policy themes that are critical to unlocking investment at scale.
Overcoming cross-cutting challenges to investment
Over the last year, government policy has sought to tackle a range of cross-cutting barriers to investment in low-carbon infrastructure, through efforts to cut planning delays for large infrastructure projects, by creating a new skills body to tackle skill gaps (Skills England) and announcing plans to link the UK and EU Emissions Trading Scheme.1
Policymakers will need to drive these reforms to completion
Looking ahead, policymakers will need to drive these reforms to completion. For instance, completing and implementing plans to streamline the consenting of Nationally Significant Infrastructure Projects are an important part of making these more attractive to investors.
Likewise, completing arrangements to link the EU and UK Emissions Trading Schemes could, over time, deliver a larger, more liquid, robust, and less volatile carbon price that can support low-carbon investors.
Growing the pipeline of commercially viable clean power projects
In 2024, the National Energy System Operator estimated that some £40 billion of annual investment would be required between 2025 and 2030 to build a clean-power grid in the UK, with investments ranging from network and battery infrastructure to new offshore-wind plants.
In 2025, the government pushed forward reforms to cut new network and generation project delays linked to planning consent and grid connection bottlenecks.2 In a bid to improve the commercial viability of new offshore-wind projects, the Department of Energy Security and Net Zero (DESNZ) increased the strike prices for these projects and extended the length of the underpinning Contracts for Difference from 15 to 20 years.3
These developments are starting to have an impact on the ground. On January 14, 2026, a record 8.4 gigawatts of new offshore-wind projects – enough to power 12 million homes – were awarded contracts as part of the UK’s latest renewables annual Allocation Round 7 (AR7).4 DESNZ estimates this will require around £22 billion of capital investment from the private sector. Enough investment now needs to flow into the underpinning supply chains to ensure these projects are delivered within the target 2028-2031 window.
And to stimulate further investment in the sector, it will be important to implement ongoing grid connection and planning reforms and keep a close eye on the effectiveness and value for money of the new renewable energy auction framework.
Meanwhile, maintaining policy efforts to deliver affordable power prices will be needed to attract private investment in the electrification of other sectors. For instance, the government will be expected to develop a funding plan to support the cut in industrial power prices it announced in the 2025 Industrial Strategy (which are to be effective from 2027) and to progress negotiations for the UK to rejoin the EU Internal Electricity Market. The latter would help unlock cross-border power trading, with the potential to reduce wholesale prices in the UK.
Balancing supply and demand-side policy signals
A key part of attracting long-term private investment in low-carbon supply chains resides in achieving a careful balance between supply-side polices – that help bring new technologies to market – and demand-side policies that stimulate growing demand for low-carbon goods and services. Over the last year, policymakers have aimed to provide more balance in some sectors.
A balance between supply-side and demand-side policies is key in attracting long-term private investment
For example, the supply-side Zero Emissions Vehicles Mandate and Clean Heat Market Mechanism (which require manufacturers to increase the supplies of EVs and heat pumps respectively) now work in sync with demand-side policies such as the Electric Car Grant Scheme and Boiler Upgrade Scheme designed to stimulate demand for those products.
Looking ahead, policymakers will need to maintain a balance in those sectors, while seeking to achieve it elsewhere. In energy-intensive manufacturing sectors such as steel, cement, and chemicals, for example, there is a lack of demand-side policies (such as product standards or low-carbon procurement criteria) to grow long-term market demand for low-carbon products. This undermines the effectiveness of recent supply-side policies seeking to attract investment in technologies to help these sectors decarbonise (such as electrification, hydrogen, and carbon capture).
Targeting public investment where it can have most impact
Over the last year, the government has improved the capitalisation of several public investment institutions and strengthened their mandate to support the development of nascent and / or complex low-carbon projects and supply chains.
The National Wealth Fund (NWF) for example – previously the UK Infrastructure Bank – has seen its capitalisation increase to £27.8 billion, with £5.3 billion dedicated to five low-carbon priority sectors (green steel, green hydrogen, CCS, gigafactories, ports). In its first year as the NWF, it has invested £3.6 billion in 20 projects, including gigafactory and lithium mining projects in the EV supply chain, CO2 pipeline development in the cement sector, and social housing retrofit.5
With a lot of groundwork achieved in 2025, the key for 2026 will be to unlock earmarked public investment at scale to get complex low-carbon projects off the ground. In practice, this means getting two key things right.
First, public investment bodies such as the NWF (which is expected to publish its investment strategy shortly) should continue developing an approach to risk that allows them to support projects private investors are unlikely to support alone. For us, three broad categories of projects meet that definition:
- First-of-a-kind projects with emerging-technology risk (such as a new low-carbon steel or cement plant);
- Logistically complex projects where coordination and aggregation by public bodies can help attract private investors (such as the mass low-carbon retrofit of existing homes); and
- Critical infrastructure that will help multiple sectors decarbonise (such as shared hydrogen or CO2 pipelines in industrial clusters) and/or help grow low-carbon supply chains (such as port modernisation to support floating offshore wind, hydrogen and sustainable shipping supply chains).
Second, the recently created Strategic Public Investment Forum should be used to coordinate and clarify the scope and focus of each public investment institution, in terms of sectors and technological readiness levels. The clearer the role of each institution (and the pathways to communicate with these institutions), the easier it will be for private investors to partner with public investment bodies on new projects.
What’s next?
Over the last year, we have witnessed a significant volume of low-carbon policy developments and overarching strategies that could, over time, have positive knock-on effects on private investment flows towards the sector. 2026 needs to be a year for accelerated policy implementation and delivery on the ground.
