£3 trillion is £100,000 per household – we may have to spend double that. A switch to a command economy would also mean losing our freedom.
Politicians can be divided into those who like to spend big (and posture), and those who know what a dangerous course that is.
The Prime Minister might well complain about being labelled one of the big spenders; it is, after all, hardly his fault that his time in office has coincided with a pandemic. He would surely argue that the bill for keeping the country on its feet – around £350 billion – was a case of spending through necessity.
However, the bill that will result from Boris Johnson’s plans for another a major cut in greenhouse gas emissions cannot be waved away so easily. Quite what it will cost is unclear, but we can get some sense of the scale of what is planned from recent work on the costs of total decarbonisation of the economy. When the Government announced its net-zero plan 18 months ago, it was on the back of a recommendation from the Committee on Climate Change, which said that the cost was modest, amounting to only £50 billion in 2050. Unfortunately, they later admitted that they hadn’t actually calculated the cost of getting us to net-zero at all. Some time next year, they be appearing before the Information Tribunal to explain their refusal to release the calculations they used to persuade the Government that decarbonisation could be done on the cheap.
The Treasury and BEIS have bandied around their own estimates of the bill, with figures of £1 or £1.5 trillion quoted in the press. However, like the CCC, they too have refused to reveal their calculations to scrutiny. Despite the lack of clarity, numbers of this magnitude seem to have gained a certain currency in Whitehall. A report from the National Audit Office, published this week, speaks of having to spend “hundreds of billions”.
Apart from the secrecy over a matter of vital public concern, even a brief consideration of what needs to be done shows that all of the Whitehall estimates are so absurdly low as to smack of an almost complete lack of numeracy, or worse, a complete lack of honesty, among senior civil servants. It is simply impossible that decarbonisation can be achieved for a few hundred billion, or even a trillion pounds. Take domestic heating, for example. The cheapest way to achieve decarbonisation will be through use of air-source heat pumps, which will cost over £10,000 each to install. Putting them into 35 million homes by 2050 will therefore cost at least £350 billion – another pandemic’s worth of spending. Upgrading the electricity distribution network to deliver the extra demand will cost another £200 billion, more than the annual cost of the NHS.
So if we are spending £550 billion installing heat pumps alone, it’s fairly obvious that decarbonising the whole economy is going to come with a bill that is at least order of magnitude higher. And as if to confirm this idea, earlier this week, National Grid published the first serious official attempt to cost the project, putting the figure at around £3 trillion.
It is noteworthy that the underlying calculations for this estimate also remain unpublished, but £3 trillion may be the correct order of magnitude. However, the figure is obviously wildly understated, because of some absurd input assumptions, such as the cost of building offshore windfarms – the core of a decarbonised power system. The Grid assumes that these will set us back just half what they actually cost according to published financial accounts. Looking forward, they say the cost will fall still further, while windfarm developers are reporting that there are no cost reductions on the horizon.
It seems clear then, that net-zero is going to be much more expensive than the Grid says. My own work at GWPF suggests that we are going to be spending £3 trillion on electrification of heating and private cars alone between now and 2050. We will probably spend nearly the same amount again on decarbonising electricity generation, and then there is industry and agriculture and freight and air transport and trains and shipping to come.
It’s hard to comprehend numbers of such magnitude, but £3 trillion amounts to £100,000 per household, and we could easily end up spending double that amount. So you can get a sense of the pain that is coming. And remember, this is only the capital cost. Householders will also have to swallow a doubling of the cost of motoring and a tripling of domestic fuel bills. The price of everything will soar.