When the Committee on Climate Change (CCC) launched its report on the feasibility of entirely decarbonising the UK economy, we were told the expense involved was manageable. The CCC’s chief executive Chris Stark explained that the project ‘carried a cost – of one to two per cent of GDP – which was affordable’. His claims were noted approvingly by MPs during debates in Parliament on whether to enshrine a ‘net zero’ emissions target in law. While others complained about the lack of a clear cost-benefit case, CCC chairman Lord Deben put aside these concerns. He told the Lords: ‘the report has been recognised universally as the most seriously presented, costed effort…’ A recent leader in The Spectator said the CCC had been ‘admirably candid.’ If only.
The truth is that the CCC has not given a full estimate of its net-zero target. The only fact it has offered is that the cost would be one to two of GDP in the year 2050. It makes no statement about the cost before then. We only know this because of a response to a Freedom of Information request. So how much it will cost to get to net zero? Contrary to what The Spectator assured its readers, we still don’t know. In other words, it has not actually prepared a costing of the net zero project at all. This is an extraordinary admission given what Lord Deben said in the Lords debate.
Not long ago, another CCC member, the director of the Institute for Fiscal Studies, Paul Johnson, told The Week in Westminster that ‘the cost of getting to net zero by 2050 will be in the order of one to two per cent national income, each year between now and then’.
But how can this possibly be when no estimates have been prepared for all those intervening years? As Mr Johnson is not saying, and the CCC refuse to comment – or reveal the calculations behind the one to two per cent figure they quote so frequently – it is hard to have much confidence that the decision to go net zero is well founded.
We are embarked on a journey towards an economic revolution, some might argue to economic disaster. Yet those in charge don’t even seem to ask any basic questions about how much it’s all going to cost.
The Treasury itself has yet to complete an assessment. A leak to the FT last summer cited a letter from Philip Hammond (when he was chancellor) to the effect that the ‘CCC has estimated that reaching net zero will cost £50bn a year, but the department for Business, Energy and Industrial strategy puts the figure at £70bn’. Hammond was quoted as saying ‘on the basis of these estimates, the total cost of transitioning to a zero-carbon economy is likely to be well in excess of a trillion pounds.’ It could, of course, be far more. But we don’t know because none of the government departments involved have published a definitive statement on costs. Even the CCC haven’t done the sums.
The Commons Treasury Select Committee, meanwhile, decided to hold an inquiry into the economic opportunities of net zero; the bill to be paid at the end is apparently of little interest. Ofgem, allegedly the voice of the consumer in energy matters, has given no specific cost either, instead turning itself into a sort of corporate cheerleader for the net zero project. A joint report from the Royal Academy of Engineering and Royal Society looks remarkably like the CCC’s – lots of buzzwords, precious little engineering and hardly any mention of specific costs.
Only Conservative MP Christopher Chope has looked to get to the bottom of the matter, launching a private members bill to force an independent review of the costs. Its chances of becoming law are slim of course.
In the meantime, however, outsiders can come up with their own figures. My colleagues at the Global Warming Policy Foundation (GWPF) have made a start, looking at National Grid’s plans for delivering a (near) zero-carbon electricity grid. National Grid, like everyone else, doesn’t cost these so-called ‘Future Energy Scenarios’, but the authors of the GWPF paper have done so, and reckon the bill will come in at around £1.4 trillion. And that is just the cost of the generating equipment – government levies and so on are extra. It amounts to around £50,000 per household, to be paid through soaring electricity bills, higher taxes, and higher prices for goods and services.
Decarbonising housing looks as though it will involve costs of similar magnitude. Professor Michael Kelly’s report for the GWPF suggests that dealing with the problem through deep insulation programmes is a fool’s errand. In his pessimistic view, this might cost £6 trillion.
Taking a more optimistic view of what might be achieved through economies of scale and so on still leaves the country having to find £2 trillion. It’s therefore probable that more modest levels of insulation will be installed – perhaps only a few tens of thousands of pounds worth per home – in combination with a switch from gas central heating to heat pumps. But while heat pumps can significantly reduce energy demand, they are much more expensive to buy than gas boilers, and the efficiency gains will be wiped out by electricity price rises. Oh yes, and they don’t work very well in cold weather. The result is that homeowners will need to find around another £1 trillion, just to insulate and switch to heat pumps; all this at the same time as having to fund the decarbonised electricity system.
This is just the beginning. Major emitting sectors like industry and transport would need vast expenditure too, were net zero to be achieved. The total cost, according to my research, could certainly reach at least £3 trillion.
Got something to add? Join the discussion and comment below.