Why are we arguing about the cost of net zero when facing mass extinction?
Chaitanya leads NEF’s work on the Green New Deal, just transition and other environmental programmes
Cross-posted from New Economics Foundation
This week’s report from the Intergovernmental Panel on Climate Change (IPCC) couldn’t have been starker: act now on the climate crisis or we slip into an irreversible cycle of extreme weather events that are more severe and frequent as the years go by. We’ve already heated the globe by a mere 1.1 degree and the impacts are now evident to the world, from wildfires in Greece and Algeria, to flooding in London and Turkey. When the pandemic broke out, the chancellor promised to do “whatever it takes” to tackle the Covid-19 — but when it comes to the climate emergency, the disproportionate focus is instead on how much it will cost the UK to get to net-zero greenhouse gas emissions.
According to the Climate Change Committee (CCC), the annual capital cost of getting to net zero would average out to £44bn every year and would total nearly £1.4tn by 2050. Crudely extrapolated, this amounts to £1,600 a household. These numbers are just modelled estimates but they have unfortunately become prime fodder for climate deniers who bandy them about. This generates false headlines and inaccurate reporting that are already delaying urgent action on the climate crisis, including a new crop of backbench MPs who have vowed to fight these ‘unreasonable’ costs.
In recent interviews with business minister Kwasi Kwarteng and Rishi Sunak, both were questioned on the costs of net zero and who will pay for it. While it’s heartening to see heat pumps and electric vehicles being discussed in the media, these interviews are primarily set up to highlight how these expenses are excessive and would fall to the poorest in society. Unfortunately, both ministers failed to put it squarely to their interrogators that the cost of ignoring the climate is far higher and would put the vulnerable in our society at most risk.
The models behind the CCC’s £1.4tn figure assume that, as investment moves away from fossil fuels and towards more expensive low-carbon technologies, the costs of energy, transport and other services will rise. This means households will have less disposable income to spend, potentially reducing our gross domestic product (GDP). But despite this, the CCC’s analysis reveals that such investment in decarbonisation would have a negligibly small and potentially even positive impact on GDP by the middle of the century.
The reason for this is that running low-carbon technologies is considerably cheaper than using fossil fuels. Despite the upfront costs, for instance, it is four times cheaper to drive an electric car that is being charged at home than a petrol car. It also costs less to maintain and repair an electric vehicle, while reducing our dependence on oil imports from volatile markets. The CCC estimates that across the economy, the savings from EVs will surpass the upfront costs before the end of this decade. We can expect similar drops in the costs of currently less well-adopted technologies such as heat pumps, installations of which are projected to double year-on-year for the next six years.
In fact, the running costs of cleaner technologies are so low that even this year they are £4bn cheaper to run compared to fossil fuels — and that difference will rise to almost £40bn by 2050. In other words, we already have technologies that are far more efficient, less polluting, and cheaper to run than their current fossil-fuel incumbents.
It’s by no means a foregone conclusion that the costs of net zero will fall on the poorest. In fact, policy-makers have a large suite of options to completely avoid such an outcome. The real challenge today is to ensure people are actively encouraged to make low-carbon choices while having access to cheap finance, loans and grants from the government and private institutions to overcome the barrier of high costs.
Falling costs of green tech aside, it is mind boggling to me that we talk about the costs of net zero without mentioning the costs of letting climate change run amok. In 2020, the top 10 climate change induced disasters cost a total of £95bn, killing thousands and displacing millions, often in some of the poorest parts of the world. These costs are escalating every year.
For the UK, the cost of reaching net zero is roughly 1 – 2% of GDP by 2050. But if the globe carries on with business-as-usual and fails to limit global heating, it could set the UK economy back by almost 9% by the middle of the century, nearly six times the cost of cutting our emissions. The UK recognising its historical, moral and economic responsibility to cut emissions is vital if we want to avoid a scenario where everybody in the UK is left poorer and more vulnerable to our changing climate.
When it comes to replacing old dirty technologies, the task ahead is daunting but in fact pales in comparison to what we achieved just a few decades ago. Between 1967 and 1977, the UK undertook a massive programme of modifying or changing nearly 40m appliances (boilers, fires, hobs and ovens) belonging to 14m households, modernising them to rely on the newly discovered North Sea natural gas instead of the more polluting manufactured gas made from coal. Today, just over 44m gas-based appliances operate in our homes and we have given ourselves the next two decades to modernise them with cleaner alternatives.
Paying a small fraction of our GDP to mitigate the ongoing mass extinction of our world’s species should be an absolute no-brainer. We can’t keep quibbling about the costs of tackling these challenges. But for that to happen we need our political leaders to really grasp and publicly communicate the implications of not acting swiftly — and use the full might of the government and the financial sector’s firepower to get to net zero.