Can we still afford net zero?

Delivering net zero remains a stated government priority. The environmental imperatives are clear, but as the cost of delivery by 2050 becomes apparent (an estimated £1.4 trillion according to the Office for Budget Responsibility), questions are being asked about the feasibility of the transition. Is the government providing a suitable policy framework for delivery? How will it play out against the competing demands of the cost-of-living agenda and energy security? Are the necessary steps politically feasible?

In October, against the backdrop of a turbulent Conservative party conference, The Spectator hosted a roundtable event to begin to answer some of these questions. Sponsored by Aecom, a leading infrastructure consultancy, and chaired by Spectator editor Fraser Nelson and economics editor Kate Andrews, the event brought together industry leaders and policy experts to find out whether net zero can succeed in a challenging economic and political climate.

Colin Wood, chief executive of Aecom for Europe and India, kicked off the discussion. He described the challenge of delivering on net zero against a backdrop of government uncertainty: ‘From a company perspective, we are absolutely committed to bringing the best of Aecom globally to whatever the government wants to do. The problem is we lack direction from the government.’ Wood noted this lack of direction was a chronic issue which forced industry to steer the agenda: ‘In the absence of government direction, industries are coming together and looking to take a lead.’

There was general agreement that the urgent need to deliver net zero was at odds with the sometimes-inconsistent tone of the government. Peter Foster, public policy editor of the Financial Times, felt that short-term thinking had become entrenched in government policymaking. He made the economic case that ‘the OBR believes it’s going to cost £1.4 trillion to deliver net zero by 2050, but if you delay it by ten years, you’re going to double the cost of doing it’. This escalating cost was not being translated into long-term strategic planning, he said. ‘When you talk to people in Whitehall, all you have is short-termism.’

This frustration – short-term policy thinking for long-term environmental challenges – came up repeatedly. Neil Macdonald, regional director for Aecom in the Midlands, noted the conflict between policy aspirations and immediate financial challenges. ‘There is no doubt we’re in a challenging economic climate,’ he said, yet net zero makes both environmental and economic sense in the long run. ‘You’re not going to get a return in two or three years, but ten or 15 years down the line you start to get that pay-off.’

Dave Beddell, Aecom’s director of growth for Europe and India agreed that there needs to be greater transparency when talking about net zero. Emphasizing that the topic needs to be more prominent, especially when discussing procurement with public sector clients, he said: ‘We have to be bolder and more transparent about what it is that we want from our public spending. There’s a disconnect in what we expect as outcomes and what we expect the supply chain to form against.’ Dave argued that the supply chain was ready and willing to form around a net zero agenda, but key principles were missing: ‘There are two core catalysts industry needs to respond to effectively. First of all, we need confidence that scheme objectives are aligned with government strategy. Secondly, we need transparency around the rules of engagement and how clients will differentiate capabilities against these objectives.’ Government policy had so far failed to deliver on these points.

The journalists in the room traced this disconnect back to a lack of political frankness in the debate on net zero. Andrews argued that financial markets needed a clearer picture of how the agenda would fit into public finances, referencing Kwasi Kwarteng’s ill-fated mini-Budget by adding: ‘We’re already looking at massive holes in the public finances, and the markets are punishing us for it.’ She pointed to the burden on taxpayers and ongoing geopolitical uncertainty as factors which could undermine the net zero agenda.

Nelson agreed that the associated costs, in the context of the broader strain on public finances, will make political delivery challenging: ‘These difficult questions are being avoided. When they home in on the very large price – which politicians do not think the public is willing to pay – they run into opposition with the cost-of-living agenda and energy security. That leads to uncertainty where net zero conflicts with what is politically sellable.’

James Kirkup, director of the Social Market Foundation thinktank, agreed that the political challenges of delivering a net zero agenda are likely to worsen as we move forward, and the practical aspects of decarbonisation start to bite: ‘There has not been political honesty. We’ve gone through the politically easy bit. The decarbonisation done so far has been relatively painless. We’re now getting into the hard stuff.’

The group then looked at what can be done to support delivery. Laura Shoaf, chief executive of the West Midlands Combined Authority, asked whether the emphasis on national government solutions was the correct approach. She pointed to the success of decarbonisation efforts which had been delivered at a regional level: ‘We now have Coventry as an all-electric bus city. We’ve got the biggest hydrogen project in Europe coming into the West Midlands. Regional government has a role to play.’ Shoaf argued that regional administrations can be more closely accountable to their electorate and may be better placed to identify and deliver priorities. They can ‘implement decisions around what kind of buses we’re going to buy; what kind of infrastructure we’re going to build; what kind of housing retrofit we want’.

Henry Brooks, managing director of the Tatton Group, was supportive of this locally driven approach to implementing net zero as a way of spearheading growth. He noted there is often a delicate balance between the need for urgent delivery and what is politically acceptable: ‘The problem can be going too hard too fast. Twenty pounds for a clean air zone can be too much for a lot of people.’ A more gradual approach may be more successful: ‘If you introduce slowly, you transition people away from not paying for their externalities. If you start small, it’s more deliverable.’

Despite the political turmoil which unfolded at the conference, there was optimism that the right balance could be struck. But key aspects of net zero policy – supply chain confidence, the balance between national and regional government and frank public debate about the associated costs – need to be addressed to ensure successful delivery.