Cost of net zero: comment & analysis

“This is disingenuous. The Conservative Government brought forward the net zero climate target, which is backed by the clear majority of the British public. Most of the investment into new clean industries required will come from the private sector, that means billions of pounds of investment coming into the UK economy stimulated by a much smaller amount of Government investment, spread out over thirty years. This will help the UK move off gas which as everyone who has paid an energy bill in the last two years knows has driven up costs to unprecedented levels with prices set to spike again ahead of the winter.

“Remember, the North Sea was producing gas all throughout the gas crisis yet people’s bills still hit record levels, because the price is largely dictated by international markets which themselves are dictated by geopolitical events such as Putin’s invasion of Ukraine. The gas crisis has cost us at least an extra £75bn on buying gas over the past few years, and triggered further inflation across the economy. Net zero is all about getting off gas. Recent U-turns on net zero policy, leaving people more dependent on gas and oil, are likely to cost people more in higher bills, not save them money as has been claimed.

“Parts of the current political debate misrepresent the facts. The maths shows that building out offshore wind farms will generate much more useful British energy, powering many more homes, than any new drilling in the North Sea might. National Grid is confident of running a 100% clean energy grid.

“The North Sea is inevitably running out of gas and oil, so the choice is clear, either you shift to renewables, EVs and electric heat pumps or you become ever more dependent on foreign imports and volatile international gas and oil markets.”

Background:

• The Office of Budget Responsibility (OBR) said in their Fiscal Risks report in 2021, that reaching net zero by 2050 would require around £1.3 trillion of investment; alongside savings of around £1 trillion delivered by moving away from fossil fuels, the OBR the said that the “net cost to the state is £344 billion in real terms. But spread across three decades, this represents an average of just 0.4 per cent of GDP a year.” The OBR has also said that delaying the net zero transition by 10 years would double overall costs.

• The Climate Change Committee (CCC) also stated in response to the Prime Minister’s net zero speech last September: “The cancellation of some Net Zero measures is likely to increase both energy bills and motoring costs for households – households who are also facing increasing impacts from climate change.”

• Analysis by CBI Economics and The Data City found that the UK’s net zero economy grew 9% in 2023, and that the total gross value added (GVA) by businesses involved in the net zero economy now stands at £74 billion.

• The costs of decarbonising the grid by 2030 (Labour) and by 2035 (Conservatives) are similar. Policy Exchange/Aurora Energy Researchfound that meeting Labour’s target would require “total additional investment of £116bn over next 11 years”, whereas meeting the Conservatives’ target would require “total additional investment of £104.6bn over next 11 years”. That is a difference between the two plans of around £1 billion per year, which based on OBR projections, would be less than 0.1% of the UK’s total expenditure for 2024-25 (£1,226 billion).

• ECIU analysis found that the gas crisis has cost us at least an extra £75bn on buying gas over the past few years, and triggered further inflation across the economy.

For further information or if you have any questions about this briefing, please contact George Smeeton, Head of Communications, ECIU, Tel: +44 (0)7894 571 153, email: george.smeeton@eciu.net.