Net zero is set to cost the UK economy billions of pounds more than public officials estimate, a new report has suggested, raising questions over the supposed savings to be made from the energy transition for households and businesses.
A new paper published by the Institute of Economic Affairs, a free market think tank, has raised questions about cost estimates shared by the Climate Change Commission, an independent public body that provides advice on net zero policy to ministers.
Energy analyst David Turner said the cash costs in the years to 2050 could hit a staggering £7.6 trillion, presenting a challenge to the government and private sector companies looking to provide alternatives to fossil fuels.
The cost estimate is taken from analysis of National Energy System Operator (NESO) data as well as independent research around contract valuations, market pricing and sector-specific issues such as in transport.
This compares to a cumulative £108bn cost estimate made by the CCC, or around £4bn a year. This figure accounts for wider savings in operating costs that offset capital investments in areas such as wind and solar farms as well as new heat pumps, though the total was a significant downgrade from a previous estimate of more than £1 trillion.
The CCC also said the private sector can “provide the majority of the required investment” with the “right incentives” while the additional costs of not transitioning could be higher.
Net zero savings estimates are ‘fantasy numbers’
Turner said the CCC and other public bodies including the Treasury and the Office for Budget Responsibility (OBR), which published damning figures on the £800bn taxpayer cost of net zero over 50 years, had not been “truthful” about the true cost of the transition.
“If we are to have a serious debate about net zero, the various public bodies need to be more transparent and, frankly, more honest,” Turner said.
“They have made fantasy assumptions about the cost of renewables and low-carbon technologies.”
Commenting on the report, industrialist Sir Jim Ratcliffe, chairman and founder of INEOS, said:
“Decarbonising Europe by deindustrialisation is idiotic. We lose jobs and security, and the CO2 simply floats back over Europe anyway.
“The solution is to ban carbon tax, provide competitive energy for industry and incentivise growth and clean technology. This is the US approach, where they value industry and its high value employment and they are leaving Europe behind in their dust.”
The paper argues that the CCC presented its figures by “moving the goalposts” by using different cost metrics while “unrealistic assumptions” around the expenditure on offshore wind, electric vehicles and borrowing are below market rates.
It points to the higher costs of solar power plants in Stokeford and Alfreton than estimated by the CCC, as well as higher contract valuations for winfarms than estimated by NESO.
IEA director general Lord Frost said: “Net Zero is already one of the most economically damaging policies in modern British history. We can now see it was sold to the public on the basis of fantasy numbers.”
Tory shadow energy secretary Claire Coutinho also said public bodies were culpable for publishing “wildly optimistic assumptions” and falling for “crippling groupthink” in judging the impacts of net zero.
“The result is the highest electricity prices in the world and our industry fleeing overseas,” Coutinho added.
A Department for Energy Security and Net Zero spokesperson said: “We reject this analysis, which assumes there are no costs associated with staying on the fossil fuel rollercoaster.
“NESO has made clear that driving for clean energy saves money by fundamentally reducing our exposure to fossil fuel markets – its report shows we could save £36bn annually if we hit our 2050 goals compared with a scenario in which we slow down.”
The Treasury and the Office for Budget Responsibility (OBR) have been approached for comment.
By City AM
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