The Seventh Carbon Budget: What Businesses Should Expect

What is a carbon budget?

A carbon budget is a limit on the total amount of greenhouse gases the UK can emit over a certain time period. Carbon budgets are set 12 years in advance under the Climate Change Act 2008. The Climate Change Committee (CCC) advises the Government on the appropriate level of each budget, which is then brought before parliament for approval.

These budgets cover the whole economy, including energy, transport, industry, buildings and agriculture, and are in place to help the UK steadily reduce emissions and meet long-term climate goals.

Figure 1. UK greenhouse gas emissions have roughly halved since 1990 and the first three carbon budgets have been achieved; the proposed Seventh Carbon Budget (CB7) would set the UK’s next legally binding emissions limit for 2038–2042.

Source: Department for Energy Security and Net Zero (DESNZ) (2024) Provisional UK greenhouse gas emissions national statistics 2023; DESNZ (2024) Final UK greenhouse gas emissions national statistics: 1990 to 2022; UK Parliament (2026) Setting the Seventh Carbon Budget, Written Statement HCWS75.

Why does the the Seventh Carbon Budget matter now? 

The UK’s Seventh Carbon Budget covers the period 2038-2042. This may appear to be a long-range policy milestone, sitting beyond the current reporting cycles, near-term procurement decisions and many existing corporate investment plans, yet its complications are already relevant to corporate decision making.

Decisions being made today will shape emissions, costs and operational resilience well into the 2030s. Capital investment, fleet replacement, building upgrades, energy contracts and supplier arrangements can all create commitments that extend into, or influence performance during, the Seventh Carbon Budget period.

CB7 should therefore be viewed as more than a long-range policy milestone. It provides a reference point for corporate planning in a market where lower-carbon operations, credible transition plans and climate-aware procurement are becoming increasingly important to competitiveness, risk management and long-term business resilience. 

What happens next? 

The Seventh Carbon Budget still needs to complete the parliamentary process before it is set in law. Under the Climate Change Act, the Government is required to set the budget by the end of June 2026. 

Further policy and delivery detail is expected after approval. In the meantime, CB7 gives boards and leadership teams a useful basis for assessing where decisions being taken now could create future carbon exposure, cost pressure or transition risk. It also provides a clear indication of the direction of travel for future policy, regulation and investment, particularly in areas like energy, transport, buildings and industrial decarbonisation.

Organisations that act early are likely to be better placed to manage transition risks, respond to future policy changes and avoid costly adjustments later.

How can McGrady Clarke help?

The Seventh Carbon Budget may target 2038–2042, but the decisions that shape compliance, resilience and competitiveness are being made today.

McGrady Clarke helps organisations understand their carbon footprint, identify transition risks and assess how future policy and market changes could affect their operations. By combining carbon management with practical business planning, we support informed decision-making that strengthens both sustainability performance and long-term commercial resilience.

Contact our team to discuss how your organisation can prepare for a lower-carbon future.