The true cost of net zero

Why the government won’t talk about the real costs of decarbonisation

14 August 2021

9:00 AM

14 August 2021

9:00 AM

When Theresa May committed the government to achieving ‘net zero’ carbon emissions by 2050, Sir John Armitt, chair of the National Infrastructure Commission, likened it to President Kennedy’s 1961 promise to put a man on the moon by the end of the 1960s. How we would achieve net zero might not yet be clear, but a combination of ambition and ingenuity would somehow see us through. Still, at least JFK had some idea about the cost and he did not make it a legally binding obligation for the US to visit the moon, thus inviting activists to sue the government if it failed.

Rishi Sunak is now understood to be in rebellion against the costs of net zero — whatever they might be. The Treasury was supposed to have published its assessment in March, but that is yet to see the light of day (one leaked official assessment put it at £1 trillion). Nor has the government yet published its ‘heat and buildings strategy’, which is supposed to lay out its plans for overhauling the country’s heating systems — and, no less importantly, who will pay.

Boris Johnson is getting ready to establish himself as a green prime minister ahead of the coming COP26 climate change summit in Glasgow. Since 2010 Britain has reduced its territorial carbon emissions by 28 per cent, more than any G20 country, when the rest of the G7 managed just 5 per cent. Our progress is less impressive when you count ‘non-territorial’ emissions (e.g. aviation and imports). But the UK has made impressive progress in phasing out coal-fired power stations, which will be gone within three years, and investing in renewable energy instead.

As a result, the UK’s carbon emissions are now lower than at any time since Victorian days. So Britain does have a claim to be an environmental leader. But to go from here to net zero — where carbon emissions are minimised and remaining ones offset by tree-planting or similar activity — by 2050 is a huge and expensive jump.

Tory leaders have a tradition of refusing to level with the public about the cost of their green ideas. It wasn’t long ago that David Cameron’s coalition was claiming that giving up fossil fuels would actually save us money because it would make usless dependent on rocketing oil and gas prices. That argument died with the 2014 oil price crash.

The government Climate Change Committee (CCC) has admitted that yes, there would be a cost to going to net zero of £50 billion a year from 2030 until 2050. That figure was the basis on which MPs approved the net zero pledge. It is astonishing that the biggest change to be inflicted on British society in modern times was not even the subject of a full parliamentary bill, just an order amending an existing piece of legislation.

To put that £50 billion in perspective, it wasn’t so long ago that Sir Kevan Collins quit as a government adviser because he was told that £15 billion was too much to spend repairing the damage lockdown caused on children’s education. Denying nurses a 3 per cent pay rise saved £300 million. This is what net zero could cost in two days.

But might £50 billion be an understatement? The CCC never properly explained its working, and refused to give other details when asked in a Freedom of Information request from Andrew Montford of the Global Warming Policy Forum. Its refusal was taken to the Information Tribunal, which last week ordered that it come clean and produce the full spreadsheets it had used for its calculations.

In the meantime, National Grid has come up with its own estimate. It has published four scenarios in which this could conceivably be achieved by 2050 — using various baskets of measures such as wind and solar energy, efficiency gains, citizens agreeing to travel less and so on. In each case it estimates the cost at around £3 trillion. And that only includes decarbonising energy. It excludes agriculture, rail, aviation, shipping, industrial processes and many other things.

As for decarbonising everything, no one can put a price on it because a lot of the technology needed doesn’t yet exist (or certainly not in commercial form). Take iron and steel production, which currently accounts for 7.2 per cent of global emissions. It is possible to recycle steel using electric arc furnaces, but as for making steel from scratch, from iron ore — which a growing global economy will always need to do — at present the only commercially available way of doing it is using coking coal.

It may be possible in future to produce steel using hydrogen instead of coal as a reducing agent: there have been efforts to do this since the 1950s without commercial success. But no one yet knows at what cost. As for cement — which accounts for 3 per cent of global greenhouse gas emissions — we still have no idea how it can be decarbonised. It is possible, though, to put some figures on the bills which individual households could soon be facing.

If the government adopts the CCC’s proposals, it will mean the sale of new fossil fuel-powered boilers to be phased out entirely in 2033, followed by their compulsory replacement over the following 17 years, either with hydrogen boilers or electric heat pumps. It is not certain, however, that it will be practical to switch homes to hydrogen.

All remaining cast-iron gas pipes, which are unsuitable for hydrogen, will have to be replaced with plastic ones.

Then there is the issue of the hydrogen itself. Installing a hydrogen boiler might cut emissions from a house, but it will not get us nearer the net zero target unless the production of the hydrogen itself is decarbonised. You can’t mine or drill for hydrogen; it doesn’t exist on Earth in its free state. And at the moment, most hydrogen production is ‘brown’ hydrogen — i.e. it is made from hydrocarbons, and releases large quantities of greenhouse gases. The CCC’s strategy depends on being able to produce ‘blue’ hydrogen (where the carbon dioxide produced by the process is captured and stored underground) or ‘green’ hydrogen (where the gas is produced through electrolysis — passing electric current through water).

Efforts are being made to prove these technologies on a commercial scale — Scottish Power has a demonstration project for green hydrogen attached to a wind farm on the Clyde. But as yet, no one has any idea how much the resulting fuel will cost homeowners relative to what they currently pay for their gas. It stands to reason, however, that blue hydrogen would cost significantly more than natural gas — it can’t be cheaper to manufacture a fuel from a fuel than it is to burn the source fuel itself.

That is one reason why the CCC is also hedging on an alternative approach: it envisages the number of heat pumps being installed rising from 38,000 last year to 600,000 a year by 2028. But the Prime Minister himself admitted the flaw: they currently cost around £10,000 to install. As he put it, ‘a lot of money for ordinary people’. Moreover, because these pumps work at lower water temperatures than a traditional heating system, they don’t work well in badly insulated homes, such as the eight million homes in Britain with solid walls, many of them concentrated in former ‘red wall’ seats.

According to the government’s own energy advice quango, the Energy Savings Trust, solid wall insulation for a three-bedroom semi will typically cost £8,200, if fitted internally, and £10,000 if fitted externally — with additional costs if, as can easily happen, poorly executed insulation work exacerbates damp problems. Millions of homeowners, then, could face capital costs of around £20,000 to decarbonise their homes — before we even get round to thinking about the cost of generating the electricity entirely by zero-carbon means.

Like an HS2 on rocket-boosters, the estimated costs of net zero spiral out of control in all manner of ways. Take electric cars. There is a big push in the industry to claim that electric cars are cheaper to run than their petrol equivalents, in spite of their high purchase costs. A study published by the insurer LV= in July, for example, claimed that motorists who opt for an electric car will be better off after driving 45,000 miles, with a battery car costing £1,304 a year to run and a petrol car £2,610.

But that doesn’t reveal the genuine cost of running electric cars because, while domestic electricity attracts VAT at just 5 per cent, around 60 per cent of the cost of a litre of petrol is tax. One has to ask: is the government really going to suffer a collapse in revenue without devising some other means of taxing cars?

Given that Britain accounts for 1 per cent of global carbon emissions (against 29 per cent for China), a net zero Britain will not mean much unless the entire world makes the same legal commitment. There is precious little sign of that, whatever promises Joe Biden or Xi Jinping might appear to make at COP26. Indeed China, India, Saudi Arabia, South Africa and 83 other countries all missed the UN’s deadline for presenting their carbon reduction pledges ahead of COP26.

Less commonly cited than Kennedy’s promise to put a man on the moon is Nasa’s plan, later in the 1960s, to put a man on Mars by 1980. That might turn out to be a more apt comparison for the government’s plans to go net zero by 2050. Many billions will be splashed on trying to get there, with taxpayers picking up the tab. But don’t be surprised if in 2050 we end up looking back and thinking how naive we were to believe that the required technology — and the means of footing the bill — could just be wished into existence.

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