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Treasury compelled to release ‘Net Zero’ cost calculations

| and Matt Ridley

Back in June 2019, in a speech in the House of Lords, Matt Ridley demanded answers about the staggering cost of Net Zero. Finally, the Government is being forced to reveal its calculations.

Last year Guido reported the news that the Government was refusing to publish the “over 220,000 specified data points… organised over 100 Excel workbooks” it had produced on calculating the cost of a net zero carbon dioxide emissions by 2050 policy. The work, completed in 2019 prompted then Chancellor Philip Hammond to write a letter to Theresa May citing the greater than £1 trillion cost of Net Zero. Despite Hammond explaining it would leave certain industries “economically uncompetitive”, the policy was rushed through with next to no debate in the dying days of the May administration…

Yet now the Information Commissioner’s Office has finally ruled that the Treasury needs to release the underlying cost calculations. It was ruled that the public interest was not given sufficient weight in the Treasury’s original decision to withhold. In a lengthy contemplation of the case, the Information Commissioner’s decision notice, seen by Guido, finally concludes that “the public interest favours disclosure” of the cost calculation. The Treasury has 28 days to appeal or put up…

Andrew Montford, Global Warming Policy Forum, which won the decision says:

“This is a major embarrassment for the Treasury. It appears that it cobbled together a few numbers on the back of an envelope, and simply emailed them off to the Prime Minister without a blush. After Parliament’s decision to adopt the Net Zero target without any meaningful scrutiny, and without consideration of the economic and engineering implications, it is becoming clear that the whole project is misgovernance on a historic scale.”

trillion-pounds is completely off the scale…

It has been a long fight, but hopefully we will now get some answers. Matt Ridley, The Viscount Ridley, first raised this issue back in the House of Lords in June 2019. Now is a good time to revisit his fantastic speech, which raises many pertinent questions – few of which, if any, have been answered by the Government:

My Lords, I declare my interests in coal but also in renewable energy—wind and wood in particular. I am genuinely shocked by the casual way in which the other place nodded through this statutory instrument on Monday, committing future generations to vast expenditure to achieve a goal that we have no idea how to reach technologically without ruining the British economy and the British landscape. We are assured without any evidence that this measure will have,

“no significant … impact on business”—

but where is the cost-benefit analysis on which this claim is based? Where is the impact assessment? They do not exist. We are told that the Treasury will run exercises in costing the proposals after we have agreed them, but that is irrational. Who among us in our private life says, “Yes, we’ll sign a contract to buy a house, and only after the ink on the purchase is dry will we try to find out the price of the house”?

We are faced with a measure which is likely to cost at least £1 trillion on top of the £15 billion a year that we are now spending on subsidies to renewable energy. Let us remind ourselves just how big a sum £1 trillion is. If you spent a pound a second, it would take you 30,000 years to get through £1 trillion. You would have had to start before the peak of the last Ice Age, when woolly mammoths and Neanderthals roamed across the tundra where we now sit. Now we are talking about spending £1,000 a second for the next 30 years.

The Committee on Climate Change says that the cost will be even higher. It assumes that UK GDP will have almost doubled, from about £2 trillion to about £3.9 trillion a year by 2050, and that we will have been spending 1% to 2% of GDP every year between now and then. That means that we will have spent between £30 billion and £60 billion a year for 30 years: a total of £900 billion to £1.8 trillion. That number has been described in this debate as “manageable” and “affordable” by the noble Lord, Lord Grantchester. It has been described as “nickel and dime” by the noble Baroness, Lady Worthington. But hang on a minute—where does the Committee on Climate Change get the estimate of 1% to 2% of GDP?

On behalf of the Global Warming Policy Foundation, to which I am proud to be an unpaid scientific advisory panel member, Andrew Montford has been trying to find out how the CCC reached this cost estimate—and he has got nowhere. He has been referred to many documents which repeat or otherwise restate this number, but none that actually calculates it. He has referred to a statement that gives 1.3% of GDP as an estimate of the sum of the resource cost, yet there is no breakdown of the resource cost. My noble friend Lord Deben says that it is all set out in detail. In fact, it is not: it is impossible to get at how this calculation was arrived at.

It is important to note, by the way, that this £900 billion to £1.8 trillion is arrived at by comparing hypothetical policy scenarios anyway. This allows the Committee on Climate Change to soften the overall cost of decarbonisation by netting off energy efficiency savings. But these would be pursued anyway, so it is not right to do that. The CCC also ignores the deadweight losses from taxes and subsidies, which are likely to be a significant extra cost.

Let me give your Lordships an example of just how much of an underestimate the 1% to 2% of GDP might prove to be. Take hydrogen. The Committee on Climate Change places great emphasis on hydrogen: it mentions its importance in electricity, in heating, in buildings and in industry. It thinks that we will need to burn about 8 billion kilograms of hydrogen a year by 2050. It estimates that 80% of this hydrogen will have to come from reformed natural gas. So, when process losses are taken into account, we would actually end up by significantly increasing both our fossil fuel consumption and, of course, our emissions—all of which would make carbon capture and storage absolutely indispensable to this net zero ambition, as I and others have said in the past. Where are the constructive plans to do this at a reasonable cost? Silence.

If the environmental movement is really serious about zero emissions, it must embrace either nuclear power or carbon capture. Renewables and behaviour change will not work. One is physically impossible, because of low energy density, and the other is politically impossible. Most British homes are heated with gas. To replace that with electricity and bring all British homes up to the most energy-efficient standard would cost around £2 trillion, according to the Energy Technologies Institute. That is £2 trillion on homes alone.

What will be achieved by all this spending? We will not prevent floods, storms or drought: they will always happen. We will still have to deal with flooding, even if we get emissions to zero. Nor is the purpose of these plans to bring down global emissions. We have no hope of that—we are 1% of global emissions and others are glad to export to us from their low energy cost economies. So we would mainly be exporting our emissions and living the good, green life on China’s fossil fuels. The only remaining purpose of this measure—and we have heard it again and again here today—is to set an example to the world, to be the shining city of virtue on a hill. Who are we kidding? When the Prime Minister goes to the G20 meeting this weekend and asks others to follow suit, she will get very few takers. Japan has just announced another 20 gigawatts of coal-fired power stations. The EU has already rejected this very target since this instrument was tabled. America, Australia, Brazil, China, India—none of them will pay the slightest attention to what we do here today. This is not soft power, it is soft in the head.

There are real environmental problems in this world: the overfishing of the oceans, plastic pollution, invasive alien species, and the conservation of the curlew and the red squirrel in my part of the world. These are urgent and important. They need money, but it will be a pittance compared with the sums we are talking about. Yet they are starved even of that pittance because of the coalition of preachers and profiteers who have climbed on the climate bandwagon and demanded a limitless budget.

We need to look at these costs alongside the cost of doing nothing—that is, the cost of damage by climate change. This is called the social cost of carbon and is an estimate of the total harm done by emissions now and brought forward from the future. That metric is not mentioned in this order or in the Committee on Climate Change’s report. The best guess in the current scientific literature is that the social cost of carbon is about $45 per tonne, which is roughly the number that the Obama Administration were using. Can my noble friend give us his department’s estimate of the social cost of carbon? What is his department’s estimate of the abatement cost per tonne of the net zero ambition?

Once we know those numbers, we can know whether we are getting value for money with this expenditure. Otherwise, we might be committing to a climate policy that is actually more harmful and costly to human and planetary well-being than climate change itself—which would surely be irrational. I fear that hasty and ill-supported commitment making of this kind is the sort of thing that provokes judicial review. The Government should pause, think this through and do a proper cost-benefit analysis before they commit to this policy.