When Theresa May committed the UK to achieving net zero carbon emissions by 2050, the then prime minister did not say who would be footing the bill.
And two years after the goal was set, that question remains unanswered. As the UK prepares to host the Cop26 climate summit in Glasgow in November, Boris Johnson has said that the transition to a greener economy is not “some expensive politically correct green act of ‘bunny hugging’”, but rather “about growth and jobs”.
Yet calculating the costs of reaching the net zero target “with any accuracy is difficult, given the level of uncertainty around new and emerging technologies, and changes in the economy and people’s behaviour”, says the Institute for Government. Analysis “will undoubtedly change in the wake of the coronavirus pandemic” too, adds the independent think tank, which advises ministers.
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But modelling and forecasts indicate that significant investment is required in the very near future in order to achieve the net zero target.
How much will net zero cost?
The government is required to set five-yearly carbon budgets after taking advice from the Climate Change Committee (CCC), an independent statutory body formed under the Climate Change Act 2008.
The CCC’s Sixth Carbon Budget, published last December, estimated that the total costs of transitioning to net zero emissions would be “below 1% of GDP throughout the next 30 years”. This represents a significant reduction from the 1% to 2% of GDP forecast in the Fifth Carbon Budget, published in 2015.
The CCC’s latest budget also made clear that reaching net zero “will be capital-intensive, with increased upfront spending” required.
According to the report, to reach the 2050 target, the UK’s low carbon investment would need to increase to around £50bn a year by 2030 - roughly five times the level seen in 2020. The advisory body said that “the increase is deliverable, primarily by private companies and individuals, alongside other investment, provided effective policy is put in place”.
However, modelling by the National Grid of four “different pathways” to net zero - ranging from “Steady Progression” to “Leading the Way” - indicates that the cost could be far higher, with a net value of up to £3.2trn by 2050.
But like the CCC, the power giant’s forecasts indicate that immediate increased investment is needed.
The experts argue that as well as benefitting the environment, such investment would make financial sense.
The CCC says an inital increase in spending to hit net zero would yield “ongoing savings in fuel costs”, with the cost of electric vehicle batteries falling by 65% between 2020 and 2050, and the cost of renewable electricity supplies cut by up to 27%.
Indeed, forecasts indicate that savings in operational spending “will start to exceed the annual investment” by 2040, the Financial Times reported in March.
Green energy consultant Josh Buckland told the newspaper that while the challenges involved in transitioning to eco-friendly transport were relatively “solvable”, making UK homes greener would be “far more problematic”, requiring both significant financial investment and “a massive shift in consumer attitudes”.
The CCC says that “against the current backdrop of low investment, low interest and high unemployment”, pumping money into low carbon should have a positive effect on the economy. But how the government conveys that message to the public may prove key to the success of the push to hit net zero.
Who will pay?
CCC boss Chris Stark told business leaders in 2019 that “further progress” in achieving net zero would require a “thorough review” of “how these costs are distributed”.
“We must consider the appropriate balance of 1) cost for the Exchequer, 2) costs on the consumer, and 3) economy-wide costs,” Stark said. “And we must make use of the right tools - carbon pricing, tax, financial incentives, information or regulation.”
Despite such advice, as the FT has noted, the Treasury’s plans for how the cost of reaching net zero will be distributed remain “vague”.
The Spectator columnist Ross Clark last week claimed that Tory leaders have “a tradition of refusing to level with the public about the cost of their green ideas”. And Chancellor Rishi Sunak is “understood to be in rebellion against the costs of net zero - whatever they may be”, he wrote.
One leaked government assessment put the total expenditure at £1trn, according to Clark, who noted that the CCC has been ordered by the Information Tribunal to present the methodology behind its cost calculations, which the advisory body has “never properly explained”.
As the Treasury prepares to publish its next net zero review later this year, recent polling suggests that public attitudes to green investment is shifting. Amid growing concern about the effects of climate change, 27% of almost 1,800 people quizzed by YouGov said they would be willing to support policies tackling climate change even if these measures negatively impacted their personal finances.
The government this week announced proposals that could see three million UK households begin using low-carbon hydrogen instead of fossil fuel gas by 2030. Hydrogen is expected to play a “critical” role in reaching net zero by 2050, the government said.
But “the plans could see bills rise for everyone”, said The Telegraph, even though “hydrogen is likely to play only a niche role in meeting the government’s targets to cut the carbon emissions produced by home heating”.
“Alternative plans could see costs added to general taxation” too, the paper added.
Further costs that could fall on homeowners include measures introduced under the government's heat and buildings strategy, to be published in the autumn.
The government “is expected to lay out a detailed timeline for the removal of boilers from new-build homes and existing housing stock, in order to reduce the environmental impact of domestic heating”, the i news site reported earlier this month.
Replacing gas boilers with electric-powered heat pumps is currently forecast to cost around £10,000 per household. But Business Secretary Kwasi Kwarteng told the BBC’s Today programme that the current prices “don’t reflect the cost of these heat pumps in the future”.
“Once you’ve made a very clear indication as a government that that is the way you want to go, suppliers will invest in producing heat pumps and will be able to produce them at a much cheaper cost, so that the retail price would be considerably lower than £10,000,” he insisted.
However great the bill for all the various measures aimed at achieving net zero - and whoever foots it - the latest report from the Intergovernmental Panel on Climate Change has made clear the cost of not combating humanity's contribution to climate change.
As the CCC's Stark notes, “we can't afford not to do net zero”.
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