The Spectator

The government’s net zero strategy doesn’t add up

The government’s net zero strategy doesn’t add up
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The commitment to reach ‘net zero’ emissions by 2050 is the most expensive government proposal in modern history. Yet it was rushed through parliament with minimal debate or scrutiny, thanks to a last-minute pledge by Theresa May in 2019, weeks before she left office. She had no credible plan, just a lofty ambition without costings. It has taken the government two-and-a-half years to come up with a proposal — and it is not convincing.

The Net Zero Strategy document published this week opens with the Prime Minister’s trademark optimism. ‘We can build back greener, without so much as a hair shirt in sight,’ he writes. ‘In 2050, we will still be driving cars, flying planes and heating our homes, but our cars will be electric, gliding silently around our cities, our planes will be zero emission, allowing us to fly guilt-free, and our homes will be heated by cheap reliable power drawn from the winds of the North Sea.’

This stands at odds with the Treasury’s Net Zero Review, published on the same day. The difference in tone between the two reviews underlines the chasm between 10 and 11 Downing Street over the likely cost of the transition. The Treasury review states, for example, that ‘policies to support the adoption of electric vehicles may disproportionately benefit higher-income groups, and the costs of any policies that affect the remaining drivers may fall disproportionately on low-income groups’.

While there is still no clear figure for the cost of achieving net zero (previous leaked estimates had put it at £1 trillion) the Treasury review includes a graph which suggests that the additional investment required will hit £60 billion a year by the next decade. Government estimates are notoriously in-accurate — just witness the spiralling costs of HS2. Given the state’s inability to deliver a train line on budget, it is hard to have much faith in its forecasts about developments for which we do not currently have the technology, such as decarbonised steel and cement industries or emission-free planes.

Even if we were to take the Treasury’s figures at face value, it is still far from clear where the burden of the extra costs will fall. The plans announced this week for installing heat pumps offer little guidance, with grants of £5,000 open to a maximum of 90,000 households. Because there are 28 million households in the UK, and the government wants every single one of them to be off the gas grid by 2050, there is a huge question mark over who will pay for this. At a cost of around £10,000, heat pumps remain prohibitively expensive for many households. While it is likely that prices will fall, there is no guarantee they will ever be as cheap and effective as gas boilers. Moreover, the Net Zero Strategy appears to retract some of the faith previously put into hydrogen as an alternative — a decision on whether to promote hydrogen boilers has been put off until 2026.

The legal commitment to net zero remains a huge hostage to fortune, a destination without a plausible roadmap. Unless the government is frank about the costs, it cannot claim to be serious about achieving it. Anyone can promise to abolish child poverty: the job of the politician is to say how it would be done, how much it costs and who pays. Only when this is clear (and approved by voters) can ministers claim to have a plan.

The Prime Minister claims that most of the world has followed Britain’s lead. In fact, only a handful of countries have made a legally binding commitment to net zero. China, which accounts for 27 per cent of global emissions, has set itself targets expressed in terms of per unit of GDP — making it clear that it will not sacrifice economic growth to meet them — and has set 2060 as the deadline. Unless China eliminates emissions, the UK will struggle to make a difference on its own, given we account for only 1 per cent of global emissions.

There is a serious danger that Britain’s carbon targets could have the perverse incentive of driving industry and jobs abroad, reducing our territorial emissions but leading to an increase in overall emissions. Is it really better to close gas-fuelled production here and switch to coal-powered production abroad? The Treasury appears to be aware of that risk, but there is little guidance in the Net Zero Strategy as to how the government intends to avert it. On the contrary, the government floats the idea that green investment will create 440,000 jobs — without even considering the number of existing industrial jobs which are already under threat from high energy prices and levies in the UK.

According to UK Steel, German producers are paying an average of £25 per MWh for their electricity, once taxes and levies are taken into account, compared with £29 in France and £46 in the UK. In coal-powered China, energy costs are lower still. Small wonder, then, that China rather than Britain has captured the market for supplying the UK with wind turbines — with seven out of ten of the world’s largest producers based there.

The legally binding commitment to reach net zero emissions was always a leap in the dark. This week’s Net Zero Strategy has not made matters any clearer.