Theresa May is about to spend £1 trillion on a pointless policy. This climate madness has to end

Chancellor Phillip Hammond was slapped down by Downing Street last week for warning that reaching net zero carbon emissions could cost the UK £1 trillion and require cuts to funding for schools, hospitals and the police force. Climate change needs a response, but Mr Hammond is right to highlight the cost – and in fact, he is likely to be underestimating the real price-tag.

Almost all signatories to the Paris Agreement on climate change are failing to live up to their promises. This is nothing new, countries have been failing to deliver ever since the Rio de Janeiro Earth Summit was held back in 1992. Their grand promises always run up against the hard reality that forcing a transition from fossil fuels to alternatives remains incredibly expensive and is the reason why renewable energy has only increased by 1.1 percentage points in that time — from meeting 13.1 per cent of the worlds energy needs in 1992 to 14.2 per cent today.

The UK is, reportedly, already resorting to the use of "creative accounting" as it attempts to meet its current obligation of reducing emissions by 80 per cent by 2050. However, that hasn't stopped the government considering an even bolder promise: net zero.

This will have no meaningful impact on temperatures because the UK is responsible for just one per cent of global emissions. If it eradicated its entire emissions forever, global temperatures in 2100 would be affected by less than 0.014°C. Yet while the benefits of reaching net zero are negligible, the cost of delivering this pledge would be massive.

The government’s advisers the Committee on Climate Change somehow came up with an astonishingly small cost estimate of just £50 billion a year. Philip Hammond’s calculation is higher at £70 billion per year – but both are drastically lower than international research indicates, because higher energy costs mean slightly slower growth.

The UN's climate scenario modelling shows that reaching net zero carbon around 2050 (a scenario in which we keep temperature rises to 1.5°C) would cost 5.3 per cent of GDP by 2050.

For the UK, that would mean an annual cost of £187 billion by 2050. And that is based on the heroic assumption that for 30 years politicians manage to consistently implement the most efficient policies imaginable, using a single carbon tax, while avoiding any gilets jaunes-style backlash even as the measures force up the cost of living.

Studies show that in the real world where policies are not implemented efficiently, it is more likely the cost would double – meaning £374 billion annually. That’s more than the UK currently spends on health, education, police, courts, defence, environment, housing, recreation and culture.

Evidence from abroad suggests that even this could under-count the true figure. New Zealand (also reliant on “creative accounting” to meet its carbon promises) is similarly contemplating aiming for net zero by 2050. A government-commissioned report established the cost: 16 per cent of GDP. Translated to the UK that would mean £560 billion per year if everything were done efficiently.

Before committing to costs that could add up to £12 trillion, the government should commission a proper independent scientific cost study from somewhere like the Energy Modeling Forum at Stanford University. The costs need to be weighed against the benefits. According to the UN Climate Panel, the impact of global warming by the 2070s will be the equivalent to a 0.2-2 percent loss in average income.  The UK is contemplating a cost that could spiral to more than 16 per cent of GDP while having virtually no impact on the problem. Needless to say, this is a bad idea.

The British government needs to adopt a pragmatic, sensible response to climate change instead. First, it must acknowledge that the only way to rein in temperature rises is with an approach that gets big emitters like China and India on board.

Second, to avoid generating street protests (as we’ve seen in France) or paving the way for the election of populists who abandon climate policy altogether (as we’ve seen in the Philippines and the US), the UK must avoid causing huge financial pain for the public.

A sensible approach could include a low and rising CO₂ tax – but this will not fix most of the problem. What will fix climate change is innovation that brings the price of zero-CO₂ energy down below that of fossil fuels. That doesn’t mean erecting inefficient solar panels across the roofs of middle class houses today, but investing in R&D to ensure carbon-free energy sources can be developed and brought to market, to outcompete fossil fuels in the medium term. 

If they're cheaper and cleaner then everyone, including China and India, will switch to the greener options. If the newly developed technology is adopted around the world then Britain's progress in these fields would have widespread benefits around the world. This would far outweigh the minuscule impact simply of reducing UK emissions.

On the sidelines of the Paris agreement in 2015, then-Prime Minister David Cameron joined 19 other world leaders and philanthropist Bill Gates in promising to double green energy R&D by 2020. Most rich governments are breaking that pledge but the UK is broadly on-track. It has almost doubled spending since 2015, to a little less than £1 billion.

Research for my think-tank Copenhagen Consensus suggests this needs increasing three-fold again. This would be hundreds of times cheaper than drastic promises to cut carbon, but it would have a much better chance of fixing climate change.

If the UK leads the way in developing cheaper green energy it could help all countries switch to zero-CO₂ energy and solve climate change. But setting an incredibly restrictive target, costing trillions while having zero impact on climate change is simply a vanity project that is destined to fail.

Read the full article
10 Jun 2019

Published by