Green Grants, Murky Motives: How Taxpayer Billions Are Funding Foreign Polluters in the Name of Net Zero

While the government continues to declare green grants as crucial to Britain’s net-zero ambitions, taxpayer funds are quietly flowing to multinational polluters with troubling environmental pasts.

The UK government has been touting green grants as a cornerstone of its latest industrial decarbonisation objective and at the beginning of the year it announced a £51.9 million allocation to 25 businesses for industrial emission-cutting projects through the government’s Industrial Energy Transformation Fund (IETF) as part of a goal to accelerate the path to net zero. The grants were intended to spur private-sector decarbonisation while driving economic growth, yet there are questions to be answered over how transparently this green funding has been handled, and whether political or corporate interests could be unduly benefiting, further damaging the credibility of Britain’s net-zero strategy.

The announcement of Phase 3 of the IETF scheme, which includes £185m of additional funding, highlights that there is a clear top-level political commitment to this initiative, yet basic details about the green grant awards remain frustratingly opaque. Unsurprisingly, ministers have spotlighted success stories, from heat pumps at Heinz’s Wigan bean factory to carbon capture at a Welsh cement plant, aiming to prove that the fund is catalysing a cleaner industrial future. However, behind the press-release optimism, there are troubling concerns, with grant beneficiaries having chequered environmental records, foreign multinationals dominating funding rounds, and unanswered questions about whether recipients have actually delivered on their stated promises.

Big Grants, Bigger Polluters

Following the government’s announcement of £51.9 million in new IETF grants, the list of initial companies selected spanned brewers, food processors, cement and glass makers, and even an oil refinery. Yet, behind this diverse list of exciting grant recipients are numerous multinationals whose global operations have been exposed for their history of environmental harm or climate double-speak. A prime example of this is Nestlé, whose UK arm won funding for a coffee factory upgrade in Derbyshire, with a grant of around £787k to help retrofit an evaporator at their Tutbury plant with more efficient technology. This is despite the fact that the company has been widely criticised as a top polluter, being named one of the world’s three worst plastic polluters globally. In a 2020 report, it was found that Nestlé had been making public pledges to reduce plastic waste while lobbying behind the scenes to block reforms, with the report highlighting that it had repeatedly broken or delayed sustainability targets. Despite a documented record of undermining environmental goals elsewhere and practices that contribute heavily to plastic pollution and waste, Nestlé was still deemed eligible for a taxpayer-funded green grant to subsidise its environmental efforts.

Perhaps the most glaring example of this policy to reality disconnect comes from Essar Oil UK, the operator of the Stanlow oil refinery in Cheshire, which secured roughly £2.3 million across two IETF grants for projects at Stanlow. One project is a carbon capture unit expected to trap 95% of CO₂ from a major refinery unit, and another will retrofit dozens of furnaces to burn hydrogen, cutting emissions by a further 560,000 tonnes. Together, these projects aim to slash nearly 70% of Stanlow’s emissions, a seemingly transformative leap on paper, and a commendable grant award. Yet, Essar’s broader behaviour should have raised red flags during the grant application process, as financially, the firm was reported to be on the brink of collapse in 2021, owing HMRC £770 million in unpaid VAT, resulting in the government giving Essar a special phased tax deal. By giving taxpayer-funded green grants to an oil company that required tax payment support, it's questionable whether Essar’s carbon-capture venture will truly serve UK climate goals or simply enable the refinery to extend its fossil-fuel operations under the guise of so-called ‘decarbonised’ oil.

Similar questions should also be asked of Novelis, the aluminium recycler that was awarded the single biggest grant to date, nearly £14 million for a recycling furnace expansion in Warrington, doubling its capacity to recycle cans. However, Novelis is actually the subsidiary of Indian metals giant Hindalco, part of the Aditya Birla group, which has its own contentious environmental legacy, with Hindalco accused of illegal mining without proper clearances, and is listed in a corruption case over alleged bribery to obtain environmental permits for coal mining. It is therefore odd that the UK is subsidising a ‘green’ upgrade for a foreign-owned plant while the owner has reportedly flouted environmental rules elsewhere. Novelis, being in recycling, continually markets itself with a green image, yet this taxpayer grant effectively offsets costs that Hindalco would or should bear as part of cleaning up its supply chain. Worse still, Novelis had already planned the £63 million Warrington expansion, which is being funded as part of the grant, so the government money really just sweetened an investment that was going ahead regardless.

Outcomes Remain Unclear and Unproven

Beyond the list of questionable recipients, another point of contention is whether the IETF’s funded projects are actually achieving their environmental objectives. Currently, phases 1 and 2 of the IETF are largely completed on paper, yet many projects actually remain in progress, with hard data on outcomes being sparse. Under scheme rules, projects from Phase 2 were expected to finish by March 2025, and Phase 3 projects by March 2028, yet as of early 2025, only a handful of the earlier projects have reported tangible results. For example, Hanson Cement, part of German giant Heidelberg Materials, was awarded £5.6 million towards a new carbon capture initiative in North Wales, however, this will take many years to build and will report captured CO₂ annually once operational, but it certainly isn’t there yet. This has been the case with many of the projects, ranging from new heat recovery systems, heat pumps, and fuel-switching retrofits, which all entail significant construction or installation lead times. Despite this, government announcements have frequently celebrated projected carbon savings, but there has been no public accounting of actual emissions reduced to date, nor of how many projects have actually been finished in line with expected schedules.

Another aspect to consider is whether the taxpayer-funded projects actually yield carbon reductions beyond what would have happened anyway, and from the initial applications, this is questionable. As mentioned previously, Novelis’s expansion was already in the pipeline before the grant, and although the company did say that the funding enabled the project to go ahead at that scale, it’s debatable whether a $16 billion-revenue multinational needed taxpayer money to double a recycling line, especially given its clear commercial benefits. Similarly, Nestlé’s coffee plant upgrade replaces decades-old equipment with modern equivalents, but surely a highly profitable company of Nestlé’s size would have eventually completed this regardless, if they believe it could significantly improve energy efficiency.

This isn’t to say that the IETF projects lack merit, but instead, that from a value-for-money perspective, public funds might sometimes be subsidising upgrades that firms could and would have financed themselves. Taxpayer investment should be used to trigger decarbonisation that wouldn’t have happened without it, but the risk is that the IETF has transformed into a form of corporate welfare for projects that deliver private returns with public funds. Unsurprisingly, an evaluation of the first IETF funding round found that there was reduced interest in the project until grants were introduced, compared to other forms of non-financial support. This clearly shows that corporate interest in the fund aligned far more with financial opportunity, rather than pure climate urgency, with ‘free’ government money driving their decision to get involved.

Britain Funding Foreign Interests

A striking feature of the IETF roster is just how many recipients are foreign-owned multinationals, even just focusing on the companies already listed in this article, Nestlé and Heinz are Swiss and US-owned respectively, Novelis is the North American arm of India’s Hindalco, and the Ruia brothers of India own Essar Oil UK. This trend continues throughout the list of grant recipients, with UK-owned companies tending to be much smaller grant recipients. It is therefore more challenging to see how these UK taxpayer-funded upgrades to a multinational’s infrastructure will yield lasting domestic benefits, or if instead it will simply improve the balance sheets of firms whose profits ultimately flow overseas. Furthermore, there have been countless instances of a foreign parent company using perfectly legal accounting strategies to reduce corporation tax within the UK, and given that the IETF does not appear to require any profit-sharing or reinvestment guarantees, it is not particularly far-fetched to imagine a scenario where taxpayer funds are effectively subsidising the decarbonisation efforts of firms, while getting little back in tax receipts.

To add insult to injury, there is also the small matter of the total hypocrisy surrounding the parent companies of many grant winners, and their wider climate antics. Currently, the IETF’s eligibility criteria focus on the project’s merits and the site’s energy use, not the parent company’s behaviour or its global climate conduct. As a consequence, a subsidiary of a company facing environmental lawsuits or even criminal fines abroad seemingly faces no barrier to receiving UK grants, so long as the UK project itself is sound. This exact situation arose with Holcim Group, the parent company of Aggregate Industries, which has paid fines for pollution and environmental violations, yet was a grant recipient in Phase 1. Additionally, Hindalco, the parent company of Novelis, which received funding in Phase 2, has been implicated in illegal mining and environmental damage in India. Another staggering example of this is with Essar, which is using UK grants to cut emissions at Stanlow, while simultaneously the Essar Group is expanding petrochemical projects in India. As a consequence, if one arm of a conglomerate reduces emissions while another increases them, the global climate gains are nullified, but UK taxpayer funding has still been used nonetheless.

Restoring Trust in Climate Funding

As climate funding becomes an increasingly important aspect of government policy, it is important that taxpayer funds are used effectively and in the best interest of the electorate. The Industrial Energy Transformation Fund, by design, is aiming to do a great deal of good through its attempt to ‘re-green’ industrial Britain in partnership with business. Furthermore, its achievements to date include catalysing major recycling and carbon-capture initiatives that could cut hundreds of thousands of tonnes of emissions. Yet, the fund’s credibility remains fragile, as handing out public money to companies that simultaneously pollute or shirk sustainability elsewhere undermines the entire purpose of the scheme. If the UK government is essentially paying polluters to pollute a bit less, it must ensure that this is truly in service of the public good, not just corporate greenwashing, and furthermore, that this is actually a productive use of taxpayer funds.

For Phase 3, the government should consider incorporating greater transparency and accountability measures, such as publishing the carbon savings achieved by each completed project, enforcing clawbacks on non-delivery, and possibly barring companies from new grants if they are found to be violating environmental laws or failing to meet climate commitments further afield. Ultimately, public trust in green funding is at stake, and if the UK government wishes to champion its net-zero investments as core areas of public policy, it is essential that the Industrial Energy Transformation Fund delivers not just carbon savings, but also ethical and public accountability, along with considerable value for money for the British taxpayer.