UK Budget 2025 quietly rewires energy prices, EV taxes and North Sea policy. Here’s what it really means for green technology, businesses and your bills.
Most companies planning their 2025–2030 sustainability strategy are staring at the same problem: decarbonise fast, keep costs under control and somehow make the numbers work. The UK’s 2025 Budget quietly rewires a lot of those numbers.
From cheaper electricity to a pay‑per‑mile tax on electric vehicles and a new approach to the North Sea, this budget isn’t just an accounting exercise. It reshapes the economic signals that drive investment in green technology, smart energy systems and low‑carbon transport.
This matters because policy either accelerates or stalls green innovation. If you’re building or buying clean tech – from heat pumps to EV fleets to AI‑optimised energy systems – you now operate under a different set of rules.
Below, I’ll break down the key climate and energy moves in the UK Budget 2025, and what they actually mean for households, businesses and anyone betting on green technology.
1. Cheaper Electricity: A Quiet Boost for Electrification
The budget’s biggest climate win is simple: electricity gets cheaper.
From April 2026, dual‑fuel households are expected to see energy bills fall by about £134 per year on average for three years. That’s not life‑changing on its own, but the mechanism behind it matters a lot for the green transition.
What’s changing on bills
Two core moves drive the reduction:
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End of the Energy Company Obligation (ECO)
The current ECO scheme, which funds energy‑efficiency upgrades in fuel‑poor homes via a levy on bills, ends at the close of this financial year. Removing this levy cuts bills by around £63 per year for a typical household. -
Shifting the Renewables Obligation (RO) off bills
For three years from April 2026, the Treasury will cover three‑quarters of the RO cost for households. This takes another £70 per year off the average bill.
Combined, Carbon Brief’s analysis suggests these changes cut the unit cost of domestic electricity by about 4p per kWh, from around 28p to 23p – roughly a 16% drop.
Here’s the thing about that 4p: it changes the economics of electrification. Heat pumps, EVs, induction hobs, smart hot‑water tanks – all become more attractive when power is cheaper relative to gas.
What this means for green technology
For anyone working in or buying green tech, lower electricity prices are a structural boost:
- Heat pumps become easier to justify versus gas boilers, especially in well‑insulated homes.
- EV charging at home remains much cheaper than petrol or diesel per mile, even after new taxes (more on that in a moment).
- Smart home energy systems – battery storage, time‑of‑use tariffs, AI‑driven optimisation – have a better payback as the share of costs that’s controllable (per‑kWh price) shrinks.
- Electric industrial processes (e.g. electric arc furnaces, electric boilers, data centres) become more competitive against gas.
I’m strongly in favour of this direction: if you want people and businesses to choose green technology, you can’t keep pricing clean electricity as a luxury good while artificially cheap gas stays the default.
The efficiency trade‑off: ECO out, Warm Homes Plan in
Scrapping ECO would be a terrible idea if nothing replaced it. Upgrading homes is one of the cheapest ways to cut emissions and bills. The reality is more nuanced.
The budget:
- Ends ECO, which cost about £1.7bn per year and has been criticised for poor delivery and quality issues.
- Injects an extra £1.5bn into the upcoming Warm Homes Plan to take over energy‑efficiency support.
Policy experts have long argued that area‑by‑area, government‑led retrofit programmes are more efficient than supplier‑led, levy‑funded schemes. If the Warm Homes Plan is designed and delivered well – with digital building passports, smart targeting of fuel‑poor homes and performance‑based payments – this could actually improve outcomes while still cutting bills.
From a green technology perspective, the opportunity is clear:
- Retrofit firms, heat‑pump installers and smart‑home solution providers should be gearing up for publicly funded, large‑scale upgrade programmes rather than fragmented one‑off jobs.
- AI and data platforms that can identify priority homes, predict savings and verify performance will be in high demand.
2. Electric Vehicles: Pay‑Per‑Mile, But Still Cheaper Than Petrol
EV policy in this budget is a mix of carrot and stick: a new mileage‑based tax on one side, stronger purchase and ownership incentives on the other.
The new electric vehicle excise duty (eVED)
From April 2028, the UK introduces a pay‑per‑mile charge for electric vehicles:
- 3p per mile for battery electric vehicles
- 1.5p per mile for plug‑in hybrids
The government expects the average EV driver to pay around £240 per year, roughly half the effective fuel‑duty cost per mile paid by petrol or diesel drivers today.
There are two key design choices I’m glad to see:
- No tracking requirement – drivers won’t need GPS trackers or to report when or where they drive. This keeps the system simple and avoids a privacy backlash.
- Revenue ring‑fenced in practice – eVED revenue will help fund £2bn per year in local road maintenance by 2029–30, which is at least a clear public benefit.
Yes, this will make EVs a bit more expensive to run. The Office for Budget Responsibility expects around 440,000 fewer EV sales versus its previous forecast, although new support measures should offset about 320,000 of that impact.
But the reality? EVs are still cheaper to own and run than comparable petrol cars. Even after a 3p per‑mile charge, analysis suggests EV drivers can save roughly £1,000 per year on running costs compared with petrol.
New support for EV drivers and manufacturers
Alongside eVED, the budget adds more firepower on the incentive side:
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Electric car grant extended and expanded
An extra £1.3bn goes into the EV grant scheme, extended to 2029–30, keeping upfront prices lower. -
Luxury threshold lifted
The price at which EVs attract the “expensive car supplement” rises from £40,000 to £50,000 from April 2026. That makes higher‑spec family EVs and some vans more tax‑efficient. -
Benefit‑in‑kind (BIK) stability
The planned sharp increases in BIK for EV company cars are delayed until 2030, keeping 2% BIK rates in place for longer. This is huge for fleet electrification. -
Drive35 R&D programme extended
Another £1.5bn goes into the Drive35 programme for EV innovation out to 2035, taking total funding to £4bn over the next decade. -
Charging infrastructure uplift
An additional £100m for public charging infrastructure, plus business rates relief for eligible chargepoints and support for local authorities to roll out chargers.
For fleet operators and businesses:
- Total cost of ownership for EVs remains very attractive, especially with low BIK for salary‑sacrifice schemes.
- Planning tools and AI‑driven telematics will need to factor in 3p per‑mile tax assumptions in long‑term modelling from 2028 onwards.
- The grant and tax environment is now clearer to 2030, which de‑risks bulk procurement and lease deals.
If you’re selling EVs, charging tech, fleet‑management software or grid‑aware smart charging, the signal is: electrification is still the direction of travel, just now with a more sustainable tax base.
3. Fuel Duty and the Road to Fairer Pricing
The budget freezes fuel duty again until September 2026, then gradually rolls back the temporary 5p cut by March 2027 and links fuel duty to inflation from April 2027 onwards.
This isn’t ambitious climate policy, but it does three things:
- Ends the political fantasy that fuel duty can be frozen forever
- Starts to align fossil fuel use with its real economic and environmental cost
- Makes the introduction of eVED look more balanced and credible
The Office for Budget Responsibility estimates that 16 years of freezes and cuts will have cost the Treasury £120bn by 2026–27 compared with simply uprating fuel duty with inflation since 2010. Much of that implicit subsidy has flowed to higher‑income drivers.
As more people switch to EVs, fuel‑duty revenue is projected to halve in real terms by the 2030s and fall close to zero by 2050. A mileage‑based system was always coming; this budget just confirms the timeline.
From a green technology angle, this matters because:
- Digital mobility platforms – car‑sharing, on‑demand shuttles, micromobility – become more attractive as private car use faces more consistent taxation.
- Smart routing and telematics that reduce miles driven gain direct cash value under pay‑per‑mile regimes.
- Companies building AI tools to optimise fleet utilisation will have a very clear value proposition when every mile has a known tax cost.
4. North Sea Oil, Jobs and the Transition Story
On the North Sea, the budget tries to walk a tightrope: acknowledge climate science, honour a pledge of no new oil and gas licences, and still manage a politically sensitive transition for workers and regions.
Transitional energy certificates: a narrow opening
The new North Sea future plan:
- Reaffirms Labour’s commitment not to issue new oil and gas exploration licences.
- Introduces “transitional energy certificates” allowing new drilling on or near existing fields, so long as it doesn’t require new exploration.
Independent analysis suggests this back‑door route only accesses relatively small extra volumes – tens of millions of barrels, versus hundreds of millions in fields like Rosebank. So this is a limited extension of the basin’s life, not a reset of UK fossil strategy.
More importantly for green technology, the plan:
- Reshapes the mandate of the North Sea Transition Authority to balance economic value, net‑zero goals and regional benefits.
- Creates a North Sea jobs service to help oil and gas workers shift into clean energy, defence and advanced manufacturing.
That last point is crucial. The bottleneck in many green sectors – offshore wind, grid upgrades, energy‑efficient construction, advanced manufacturing – isn’t capital, it’s skilled labour. Redirecting North Sea skills into renewables and clean tech is one of the smartest uses of industrial policy the UK has.
If you operate in offshore wind, grid services, marine energy or clean manufacturing, treat this as a signal to:
- Build targeted recruitment and training offers for ex‑oil and gas workers.
- Use digital platforms and AI tools to accelerate skills matching and competency mapping between fossil and clean roles.
5. Nuclear, Green Finance, Critical Minerals and Rail
The rest of the budget rounds out the energy and climate picture with moves in nuclear, finance, minerals and transport.
Nuclear and green finance
The government doubles down on nuclear as a long‑term clean power source:
- £14.2bn investment in Sizewell C continues under a regulated asset base (RAB) model, with costs partly recovered via energy bills.
- Nuclear is now included in the UK’s updated green financing framework, meaning it can be funded via green bonds and similar instruments.
- A forthcoming nuclear regulation implementation plan aims to deliver “safe and efficient” project approvals within two years.
Agree or disagree with the nuclear bet, the direction is clear: nuclear is now officially part of the UK’s green finance toolkit.
For green‑tech investors and founders, this has two knock‑on effects:
- Green capital is less constrained to intermittent renewables; baseload and firm low‑carbon power now sit under the same “green” umbrella.
- There’s more room for hybrid clean‑energy portfolios – solar, wind, storage, demand‑side response and nuclear – all financed within a single climate‑aligned mandate.
Critical minerals and regional clean‑tech hubs
The budget also supports:
- A low‑carbon industrial centre in Grangemouth (Scotland) with £14.5m in funding.
- Expanded backing for critical minerals, renewable energy and marine innovation in Cornwall, building on last week’s critical minerals strategy.
For green technology companies, this is a clear nudge:
- Secure, local supplies of lithium, tin and tungsten in places like Cornwall support UK and EU ambitions for domestic battery and electronics supply chains.
- Regional specialisation – Grangemouth in low‑carbon industry, Cornwall in minerals and marine tech – creates ecosystems where startups, OEMs and researchers can cluster and share infrastructure.
Rail fare freeze and modal shift
A one‑year rail fare freeze is a small but welcome step. On expensive routes, commuters could save over £300 per year.
Is that enough to create a massive modal shift from cars to trains? No. But it does send a basic signal that public transport shouldn’t keep getting more expensive while road use is protected. For urban planners and smart‑city technologists, this strengthens the case for:
- Integrated mobility‑as‑a‑service platforms that combine rail, bus, shared cars and micromobility.
- AI tools that optimise timetables and capacity as demand patterns evolve.
How Businesses Should Respond to the 2025 Budget
If you work in green technology, energy or sustainability, this budget isn’t just background noise. It directly affects pricing models, product roadmaps and investment cases.
A few practical moves to consider:
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Re‑run your 5–10 year models with new energy price assumptions.
Lower electricity prices and future per‑mile EV taxes change payback periods for heat pumps, EV fleets, storage and building optimisation. -
Position your offer around “electrify and optimise”.
The policy direction is clear: more electrification, cheaper power, fairer fossil pricing. AI‑driven optimisation of when and how customers use electricity is now a core value proposition. -
Prepare for public‑funded retrofit and infrastructure waves.
The Warm Homes Plan, EV infrastructure funding and regional industrial hubs will favour players who can deliver at scale, with data‑backed results. -
Lean into workforce transition.
North Sea workers moving into clean energy will need training, digital tools and clear career paths. There’s a real opportunity to build platforms and services that make this transition work for people, not just balance sheets.
The UK Budget 2025 doesn’t settle every climate question. But it does push the system in the right direction: electricity cheaper, incentives clearer, and the long‑term shift from fossil to clean tech baked deeper into the tax base.
If your business is serious about green technology, now’s the time to align your strategy with these signals – not wait for the next election cycle to spell them out again.