£1tn warning over UK emissions target is flawed — but it will hurt

UK chancellor Philip Hammond has come under fire for suggesting in a letter that the cost of committing to reduce UK emissions to net zero by 2050 could come to £1tn.

He has been accused of spouting “innumerate nonsense” and failing to factor in the benefits of pursuing climate action. As for his worries that the bill could lead to cuts in other areas of public spending, critics have been quick to scoff that the costs of decarbonisation are not fiscal but so-called whole economy costs.

But is Mr Hammond wrong to worry? Well, clearly the £1tn figure is little more than a finger-in-the-air guesstimate. It is impossible to know over more than three decades what the bill for such a mammoth undertaking might be. The offsetting costs of inertia are equally hard to quantify.

Before we all get complacent though, remember the scale of the task the UK is contemplating. Getting to net zero requires not only scrapping all internal combustion vehicles and decarbonising energy. There is also housing to ponder. Buildings account for 40 per cent of Britain’s carbon footprint, while less than 1 per cent of the country’s housing stock is replaced each year. So among the many things on the to-do list, you can add potentially retrofitting energy saving features on to the bulk of the UK’s 27m homes. 

How much might that cost? Well, in 2008, the then science minister Paul Drayson launched a pilot scheme to establish what was needed simply to cut housing emissions by 80 per cent. It spent up to £150,000 per dwelling, and managed in some but not all cases to hit the reduction target. Now if we take that cost as a starting point and assume that economies of scale and “learning by doing” could reduce it by three-quarters — to, say, £37,500. Multiply that by 27m and you are already at Mr Hammond’s £1tn.

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Cost, of course, is only one part of the challenge. How is such an undertaking even to be carried through in 30 years? How many workers would be needed? To give a sense of the pressure, that implies retrofitting a city the size of Cambridge in only six weeks.

Would compulsion be necessary? It is certainly hard to see this being done voluntarily. Say you save half a household’s energy bill through these efficiencies, or £1,000, that amounts to an aggregate saving of £27bn. That’s a payback period on the £1tn expenditure of some 37 years — scarcely a commercially attractive proposition. Nor is the public obviously that keen on turning homes into building sites. The government’s much less ambitious “Green Deal” to insulate homes was taken up by almost no one at all.

These same challenges proliferate across the whole economy. While sorting out housing, the UK must also rebuild much of the energy system, install more renewables, construct a new nuclear fleet and commercialise new technologies such as carbon capture and storage that will permit some continuation of energy-intensive industry.

Few parallels present themselves since the second world war of resources being mobilised for such a vast national undertaking. The nearest is perhaps the shift from “town gas” to natural gas in the 1960s and 1970s, when British Gas moved efficiently street by street through the kingdom, installing new connections. Tellingly that was executed by a state monopoly. There were no expensive incentives dangled, nor was the consumer offered any choice.

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There is no certainty by 2050 that the replacement energy system would be competitive with hydrocarbons. We need as yet un-commercialised technologies. If we are to be honest, we should target carbon consumption, creating carbon tariffs to restrain the import of cheap manufactures from higher-emitting countries that do not follow our lead.

Lastly, there is the scale of the investment — Mr Hammond’s concern in his letter. Optimists argue that a green transformation will pay for itself, and we will scarcely notice. A more sober assessment would look at Britain’s low savings rate, and wonder where the cash for this vast wave of investment will come from. One way or another it will come from “forced savings” — either in higher taxes, or elevated future prices for the essential utilities and infrastructure that we use.

The Green MP Caroline Lucas recently rejected the language of sacrifice in the context of decarbonisation. “What’s sacrificing about having cheaper public transport? What’s sacrificing about having every home in Britain properly insulated?” she asked.

But net zero requires a wartime level of national mobilisation, and wars demand renunciation from people. Rather than glossing over the challenges, responsible politicians would at least debate them first.




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