Climate change: Can the UK afford its net zero policies?

As the cost of living soars, are UK plans to cut greenhouse gas emissions too expensive?

A small but vocal group of Conservative MPs are arguing that, with energy prices soaring, the government should reconsider how to achieve what is known as “net zero” by 2050.

The group made a number of key arguments. So what are they saying, and what does the data tell us?

Three years ago, the net-zero target was signed into UK law with the support of MPs from all sides.

Broadly speaking, it is a commitment to transforming the way our economy works. Net zero means not increasing the amount of greenhouse gases in the atmosphere. To achieve it, emissions must be reduced as much as possible and the remaining emissions offset.

There is consensus among the world’s scientists that this is vital if we are to have any chance of keeping global temperature rise at manageable levels.

The Net Zero Scrutiny Group is made up of around 20 Conservative MPs and peers and was founded last summer by prominent Eurosceptics Craig Mackinlay and Steve Baker.

In a letter published in the Telegraph in January, the group argued that while rising global gas prices were contributing to the crisis, the UK government was allowing energy prices to rise “faster than any other competitive country” through “taxes and environmental levies”.

In the weeks that followed, well-meaning newspapers continued to publish articles questioning the logic behind the net-zero strategy.

The NZSG argues that the price of reaching net zero is too high, the plans too hasty and the UK in 2022 is unable to afford it.

“It would be more sensible to ‘backload’ Net Zero closer to 2050 than ‘frontload’ now, as we are trying to do,” Mr Mackinlay told BBC News in an email.

That contradicts the Treasury Department’s Office for Business Responsibility, which says that delaying crucial action on climate change by 10 years could double the overall cost.

The NZSG says it doesn’t question the science of climate change.

But some of its members have close ties to think tanks that have long challenged the scientific consensus on global warming and the need and cost of addressing it.

Mr Mackinlay told the BBC that the group’s role was to ‘review energy security, affordability and practicality’ and to focus on ‘energy security, affordability and practicality; are the weak protected and is there a better way?”

Carbon Brief analysis shows that 87% of the increase that will appear in the typical UK energy bill this April is due to the massive rise in global wholesale gas prices. Most of the remainder of the increase will come from costs associated with gas suppliers going out of business.

This breakdown from energy regulator Ofgem shows how the ‘green’ part of your bill is included in what is known as policy costs and has remained relatively stable. This levy is spent on a mix of social and environmental policies, and includes things like supporting energy efficiency in low-income households. For customers paying for gas and electricity together in a dual-fuel deal, that policy cost will drop from £159 (12% of the bill) to £153 (8%) in April.

The economics of generating electricity have changed dramatically over the past decade. Technological advances and economies of scale have resulted in renewable energy moving from heavily subsidized to the cheapest option for new projects. In 2020, a record 43.1% of UK electricity came from renewable sources.

The costs of different forms of energy can be compared with the so-called “levelized costs”, which take into account the costs for the construction and operation of a power plant and its operating life.

It also begs the question, how is Britain supposed to keep the lights on when the wind isn’t blowing and the sun isn’t shining? The technology to store enough electricity is still lacking. Most agree that at least in the medium term there must be a backup such as nuclear or gas if the output of renewable energy falls.

This has led to calls from the Net Zero Scrutiny Group and others to extract more gas domestically and use it as a “transition” fuel while nuclear capacity is rebuilt.

A particular focus of the NZSG was the push to restart fracking for shale gas.

Fracking is a method of extracting gas by injecting a mixture of water and chemicals into underground rocks at high pressure. After several small tremors and widespread local opposition, a moratorium on fracking was introduced in the UK in 2019.

Fracking advocates in Britain look enviously at the United States. A fracking boom there has led to a huge increase in gas supply and prices are comparatively low. But the UK and US physical geography and market conditions are very different. America is largely isolated from the global gas markets, the UK is very closely connected.

“The UK operates in a global, interconnected gas market, where it competes with other European countries for pipeline gas from the North Sea and for LNG (liquefied natural gas),” says Carbon Brief’s Simon Evans.

“Domestically produced gas would be fed into that market and, barring export controls, would be sold to the highest bidder in the market.”

The NZSG’s Craig Mackinlay agrees the UK would still be priced internationally, but argues that a domestic fracking industry would bring “huge benefits”, helping “level up” and reducing the reliance on gas from “hostile regimes” like Russia.

There are differing estimates of how much shale gas could be extracted and how many jobs it would actually create, but this analysis from the London School of Economics suggests fracking advocates are overly optimistic.

The biggest obstacle facing frackers seems to be public opinion. Local opposition led to the fracking ban and a recent poll put support for fracking at just 19%.

The numbers are huge. In July last year, the UK’s Office for Budget Responsibility calculated the government’s Balanced Net Zero Pathway and came up with a figure of £1.4 trillion (in 2019 prices).

But that £1.4 trillion cost will be spread over three decades. Combined with savings from things like more energy efficient buildings and vehicles, the net cost to the state will be £344bn in real terms by 2050, according to the OBR. This corresponds to an average of 0.4% of GDP per year. In comparison, defense spending accounts for around 2.1% of UK GDP.

The UK government’s latest report on the risks of climate change warns that, based on a conservative estimate of a 2°C temperature rise by 2100, flooding for non-residential buildings across the UK is expected to decrease by 27% by 2050 and by 40% by 2080 will increase. At 4°C this increases to 44% and 75% respectively.

The report estimates that the costs across eight risk factor areas, which include things like food supply and human health, could exceed £1bn a year in one of the optimistic scenarios of a rise of less than 2C by 2050.

Two prominent studies predict losses of between 7% and 23% of global GDP by the end of this century if emissions are not cut quickly, as rising temperatures lead to falls in both labor and agricultural productivity.