Before committing to costs that could add up to £12 trillion, the government should commission a proper independent scientific cost study.
Chancellor Phillip Hammond was slapped down by Downing Street last week for warning that reaching net zero carbon emissions could cost the UK £1 trillion and require cuts to funding for schools, hospitals and the police force. Climate change needs a response, but Mr Hammond is right to highlight the cost – and in fact, he is likely to be underestimating the real price-tag.
Almost all signatories to the Paris Agreement on climate change are failing to live up to their promises. This is nothing new, countries have been failing to deliver ever since the Rio de Janeiro Earth Summit was held back in 1992. Their grand promises always run up against the hard reality that forcing a transition from fossil fuels to alternatives remains incredibly expensive and is the reason why renewable energy has only increased by 1.1 percentage points in that time — from meeting 13.1 per cent of the worlds energy needs in 1992 to 14.2 per cent today.
The UK is, reportedly, already resorting to the use of “creative accounting” as it attempts to meet its current obligation of reducing emissions by 80 per cent by 2050. However, that hasn’t stopped the government considering an even bolder promise: net zero.
This will have no meaningful impact on temperatures because the UK is responsible for just one per cent of global emissions. If it eradicated its entire emissions forever, global temperatures in 2100 would be affected by less than 0.014°C. Yet while the benefits of reaching net zero are negligible, the cost of delivering this pledge would be massive.
The government’s advisers the Committee on Climate Change somehow came up with an astonishingly small cost estimate of just £50 billion a year. Philip Hammond’s calculation is higher at £70 billion per year – but both are drastically lower than international research indicates because higher energy costs mean slightly lower growth.
The UN’s climate scenario modelling shows that reaching net zero carbon around 2050 (a scenario in which we keep temperature rises to 1.5°C) would cost 5.3 per cent of GDP by 2050.
For the UK, that would mean an annual cost of £187 billion by 2050. And that is based on the heroic assumption that for 30 years politicians manage to consistently implement the most efficient policies imaginable, using a single carbon tax, while avoiding any gilets jaunes-style backlash even as the measures force up the cost of living.
Studies show that in the real world where policies are not implemented efficiently, it is more likely the cost would double – meaning £374 billion annually. That’s more than the UK currently spends on health, education, police, courts, defence, environment, housing, recreation and culture.
Evidence from abroad suggests that even this could under-count the true figure. New Zealand (also reliant on “creative accounting” to meet its carbon promises) is similarly contemplating aiming for net zero by 2050. A government-commissioned report established the cost: 16 per cent of GDP. Translated to the UK that would mean £560 billion per year if everything were done efficiently.
Before committing to costs that could add up to £12 trillion, the government should commission a proper independent scientific cost study from somewhere like the Energy Modeling Forum at Stanford University. The costs need to be weighed against the benefits. According to the UN Climate Panel, the impact of global warming by the 2070s will be the equivalent to a 0.2-2 percent loss in average income. The UK is contemplating a cost that could spiral to more than 16 per cent of GDP while having virtually no impact on the problem. Needless to say, this is a bad idea.
The British government needs to adopt a pragmatic, sensible response to climate change instead.