Liz Truss must choose between astronomical borrowing and reducing energy costs
London, 8 September: The Prime Minister must take urgent steps to reduce the astronomical cost of her borrowing plans to limit consumer energy bills (which could cost £130-170 billion), or face potentially disastrous increases in public debt.
Net Zero Watch is today publishing a concise statement of the measures that Liz Truss can take to bring energy prices down in the short term, thus preventing an economic meltdown.
Net Zero Watch Director, Dr Benny Peiser said:
The choice is clear. Liz Truss can save the economy, or she can shuffle the deckchairs once again”.
The policies recommended are unapologetically radical. The current crisis is the result of two decades of deeply misconceived energy policy and undoing these errors will take many years, with much harm and damage now inevitable.
The situation can only begin to improve if radical measures are applied immediately. Any attempt to maintain Net Zero “business as usual” will only prolong the agony and result in still deeper problems.
Amongst the measures Net Zero Watch believes to be mandatory are:
1. Suspension of the UK Emissions Trading Scheme.
2. Restriction of trade over the gas and electricity interconnectors to the EU to emergency aid and system balancing only.
3. Reduction of the value of the Renewable Obligation certificate to zero (subsidy is unnecessary at current high market prices).
Together with other suspensions, such as subsidies to EVs and heat pumps, these policy changes could deliver savings in the region of £1500 per household in the coming winter, and a further £1200 in the winter of 2023/24.
This will reduce the cost of the Government’s plans by up to £70bn.
The government should also pay for replacement of the gas turbines in the UK’s power stations to improve the efficiency of the electricity industry, give a green light to shale gas drilling, and enable the securing of longer-term gas supply contracts by publicly recognising the centrality of natural gas to the UK energy system until such time as new nuclear can diversify supply.
The plan is authored by energy economist Professor Gordon Hughes and Net Zero Watch’s deputy director Andrew Montford.
Professor Hughes said:
The time for conventional wisdom is over – radical measures are required to avoid disaster. We must get energy prices down rather than pushing the costs onto future generations.”
Andrew Montford said:
Unless the new Prime Minister bites the bullet and undertakes the reforms described here the current crisis will rapidly become a catastrophe. The situation is now desperate. Radical action is mandatory.”
Net Zero Watch director Dr Benny Peiser said:
We have given Liz Truss a clear plan to dramatically reduce energy bills. But it remains to be seen whether her ministers and MPs will back the necessary policy changes. There is a serious risk that many will prefer to sticking with the Net Zero status quo rather than prevent the economy from falling into chaos.”
Gordon Hughes and Andrew Montford: Fixing the energy price crisis (pdf)