James Kirkup

The gas crisis shows how important net zero is

And the free market is the best way to get to it

The gas crisis shows how important net zero is
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This gas crisis has hit Britain because we rely too much on gas. That’s not a reason to abandon net zero. It’s a reason to do it.

Gas prices are soaring, energy companies are failing. A few people are blaming government environmental policies for that. Their apparent hope is that Boris Johnson proves wobbly on green causes and backs away from net zero.

I think they’re wrong, both about the policy and about the politics.

Start with the policy. The net zero decarbonisation of the UK economy isn’t the cause of the gas price crisis. It’s the solution.

Wholesale gas prices are soaring in Europe for several reasons: higher global demand, lower supply from Russia, and yes, some green-related factors including less electricity generation from renewables (the wind hasn’t been blowing as much as normal) and EU carbon pricing.

This creates a problem for most European countries, but the UK is hit especially hard. Despite great advances in renewable electricity generation and the almost-complete phasing out of coal-burned power, the UK is still heavily dependent on gas. More than 80 per cent of UK homes are heated with gas. And we import around 60 per cent of all the gas we burn, partly because we don’t have much capacity to store the stuff as a hedge against price rises.

When it comes to domestic consumers (also known as “voters”), the international gas market is pretty directly connected to their household finances. About a third of your gas bill reflects wholesale prices. Around a quarter goes to pay for network costs, paying for the pipes and other stuff that actually gets gas to your home. Then around 15 per cent is environmental and social levies – not just supporting renewable energy, but subsidising low-income households.

These last two items on that list haven’t changed much recently. The first has.

How to respond? Well, anyone who hopes or expects Boris Johnson to abandon net zero in response is heading for disappointment, and doesn't understand the issue here.

Especially when it comes to heating our homes. “Heat and Buildings”, as it’s known in Whitehall, is one of the hardest bits of decarbonisation: how to get Britain to burn less carbon-emitting stuff to stay warm?

The answers are prosaic: heat pumps and insulation. Fit more of those to several million homes and you make a serious dent on Britain’s gas-dependency problem. Of course, delivering that is politically tricky, since it involves making changes to lots of homes, changes that someone has to pay for.

Hence the repeated delay to the government’s Heat and Buildings Strategy, one of several key documents that ministers pretty much have to publish in October before the COP26 climate conference in Glasgow. That strategy will set out how the government proposes to get heat pumps and lagging into a lot of homes in a relatively short time.

The Tory rows over net zero probably aren’t as big as they look in the newspapers. The sceptics are a pretty small minority among Conservative MPs, most of whom support the transition. This group includes Boris Johnson, of course. People who’ve spoken to him privately about his priorities and future legacy report that he sees net zero as his long-term focus. He may well have had doubts in the past, but his speech to the UN this week was that of a politician burning his boats and giving himself no room to retreat on the environment.

At the risk of psychoanalysis, there is certainly a key line in that speech:

And our grandchildren will know that we are the culprits and that we were warned and they will know that it was this generation that came centre stage to speak and act on behalf of posterity and that we missed our cue and they will ask what kind of people we were to be so selfish and so short-sighted.

All politicians think about how they will be remembered, and Boris Johnson more than most. He once said he quit newspapers for politics “because they don’t put up statues of journalists”. David Cameron took the short-term option on green policy, but my bet is on Boris Johnson taking a longer view and sticking with Net Zero.

He won’t be short of friends in his party, either. Backers of his green rebirth will also come from a wider spread within the party than the museli-munching One Nation lot. For example, Andrea Leadsom – a staunch Brexiteer and champion of the family – once questioned whether climate change is real. Now she says she knows it is, and that governments must act.

This week, Leadsom spoke to the Energy and Climate Intelligence Unit about net zero. It’s worth a watch for anyone interested in either climate policy or Tory politics, because she articulates what amounts to the free market case for net zero: given the right clarity and incentives from government, the market will deliver the answers to problems like domestic heat; and the costs of taking such action will be offset by the wider economic gains, not to mention smaller than the costs of inaction.

Here’s a sample quote:

The growth of the green economy will outstrip the broader economy. That is good news for the UK Exchequer. Good news for jobs and growth.

In other words, Leadsom’s name joins those of staunch red-meat Tories such as Michael Howard, Kwasi Kwarteng and Ben Houchen who see net zero as net positive for the UK economy. A lot has changed in the past decade.

Perhaps the gas crisis and this winter’s cost of living squeeze will persuade some observers that there’s a question mark over net zero. But look a bit closer and you’ll see that the wind is only blowing in one direction.