Instinctif Partners Public Policy

July 1, 2021

Delivering Net Zero: the true cost of progress

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Last week, the Climate Change Committee (CCC) released its 2021 Report to Parliament which provided a comprehensive overview of the UK Government’s progress to date on both reducing carbon emissions and adapting to climate change. The report, as expected, was critical of the Government and its path to Net Zero. While lofty promises relating to the reduction of carbon emissions were welcome in recent years, the CCC makes the point the Government has been too slow to follow its rhetoric and promises with delivery. Speaking at the launch of this year’s report, the CCC’s CEO Chris Stark said the Government is not on track to achieve its carbon reduction goals and warned the UK risks missing its climate targets. Stark said that policies are lacking for four-fifths of the emissions reductions needed to reach the legally binding goal of a 78% cut in CO2 emissions by 2035.

For anyone who has followed the CCC’s work in recent years, the report held few surprises. Indeed, Stark’s comments could have been made at any point over the past three years. Each year since the Government signed the Net Zero by 2050 target into law in 2019, the CCC has consistently said the Government has been too slow in introducing policies to combat climate change and deliver on its obligations.

However, it’s not all doom and gloom. Since the CCC’s establishment in 2008, emissions in the UK have declined, and in the electricity supply and manufacturing and supply sectors, emissions have declined dramatically. The CCC has (rightly) praised this, but they are under no illusion that in areas such as heating, transport and agriculture, the Government has a long way to go. The reality is though, that these sectors are the hardest to decarbonise, both in terms of practicality and cost. While the CCC’s mammoth 536-page document contains a raft of policy suggestions and recommendations, these all come with a price tag and some form of societal disruption, presenting an economic and political challenge for the Government.

While the CCC claims that the economic costs of Net Zero are “very small” and should not be a concern, the view in Westminster is very different. In his recent interview with Andrew Neil, Chancellor Rishi Sunak looked uneasy when grilled on the cost of Net Zero. When it was put to him that former Chancellor Philip Hammond had estimated of the cost of Net Zero being £1 trillion, the usually erudite and confident Chancellor didn’t demur and simply said that advances in technology would drive costs down.

Sunak’s failure to put a figure on the cost of Net Zero underscores the political and economic reality of decarbonising the country’s heating systems for the Government. The Chancellor’s obvious unease over the economics of Net Zero shows why many key policy documents, such as the Heat and Buildings Strategy, Transport Decarbonisation Plan and Net Zero Strategy, have been delayed: Treasury is uneasy with the overall cost of the policy to Government, and the Government is uneasy with the overall cost of the policy to voters. Like many policy areas, Net Zero is a symbol of the ongoing battle between a spendthrift Prime Minister and a Conservative Chancellor who wants to tighten the purse strings.

The Government is clearly committed to Net Zero and the decarbonisation of the economy. The COP26 Summit is seen by the Prime Minister as another opportunity for Global Britain on the world stage. However, like most western economies that have signed up to grandiose climate targets, the UK is finding that talk – unlike the cost of meeting those targets – is cheap.

If Net Zero is to be realized by 2050, the Government, and its policies, needs to be ambitious and bold, but aware of the impact on its voters. Failure to do so and a half-hearted attempt to change behaviors will not only raise the ire of the CCC, but the growing number of voters who want to see Government lead the way on this. The real challenge though remains: who will pay for it? Already a significant challenge, it is made harder given the costs of responding to COVID-19 and a commitment to levelling up and delivering infrastructure across the country. It is also worth remembering that the Conservative Party has a recent history of jettisoning environmental policies in the face of economic challenges. David Cameron worked hard on greening the Tory brand during the early part of his leadership, an early slogan under Cameron was “Vote Blue, Go Green”. It was Cameron who rebranded the party logo into a green tree and who can forget the hug a husky photo op? However, after the financial crisis hit in 2008, green issues dropped down the list of the Party’s priorities as the fiscal challenges took hold.

The Government is betting big on technology driving down the costs of decarbonisation; but it’s a big gamble that could cost them dearly – both in real and political terms. If this doesn’t happen at the pace that the Government hopes (and probably needs to hit key targets along the way), the Government will have to make some tough decisions and face difficult conversations with the electorate. Ultimately, what this means is that the Government is looking for solutions that are not only practical but affordable and keeping fingers and toes crossed they come the UK’s way, soon.

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