Pursuing net zero is the ‘opportunity of the century’ which will create tens of thousands of well-paid green jobs and slash our energy bills. That is this Labour government’s official line, at least, as it was the last Tory government’s. Now we know, thanks to a leaked study, that is not quite how the Department for Business and Trade sees it. Rather, it seems, net zero threatens the recession of the century.
The Macroeconomic Impacts of the Net Zero Transition, prepared by the Economic and Strategic Analysis team at the Department for Business and Trade in November 2023, warns that net zero targets could provoke an economic shock on the scale of the 1973 oil crisis, which led to global recession and a decade of high inflation. A rapid transition, it forecasts, could take 10 per cent off UK GDP by 2030. It goes on to warn ministers that an abrupt transition ‘creates the potential risk of destabilising the financial system’, thanks to industrial plants and other assets being forcibly retired before their time. ‘The overall impact of the transition to net zero on public finances is likely to be negative,’ it states – coming on a day with yet another dire set of figures on public borrowing.
The report goes on to warn that the worst-hit would be poorer households: ‘This raises questions as to whether the most affected households at the lower end of the income spectrum will be not just willing but in fact able to forego consumption to fund higher investment.’ Public spending will have to be ratcheted up ‘to offset negative impacts on disadvantaged groups’ – putting further strain on the public finances.
The report also claims that eventually net zero will benefit the economy. But this does not detract from the dire consequences it predicts for the short term. What is so remarkable is that the UK government is following a policy of instigating one of the most rapid transitions away from fossil fuels of any country on Earth, telling us that getting ahead of the pack will enrich us and give us an advantage – when its own analysts are warning the opposite.
Why is Ed Miliband determined to decarbonise our electricity grid by 2030, well ahead of other countries which say they are committed to net zero? Why does the government want to ban petrol and diesel cars by 2030, five years ahead even of the EU?
We are told that this will suck investment into Britain and help establish new industries in Britain before they have the chance to become established in other countries. It is patently clear that this is not happening, with China enjoying a boom in jobs in clean energy, for example, while our own manufacturing capacity in wind and solar goes to the wall. The same is true of the electric car industry, which is booming in China but withering in Britain. China has an aspiration to reach net zero by 2060 but has made plain that it will not pursue this at the expense of economic growth. And now it seems that government advisers share the view that an over-hasty pursuit of net zero will undermine the economy.
The leaked report supports the new Conservative policy Kemi Badenoch announced this week, which doesn’t abandon net zero altogether but rather proposes a looser, yet to be defined, target. Predictably enough, however, Miliband has chosen to double down on net zero, giving an interview to the Guardian in which he claims that he is ‘absolutely up for this fight’. Unfortunately, the rest of us can see that the government’s own advisers think it will result in Britain punching itself on the nose.
Comments