REVEALED - HOW THE GOVERNMENT WORKED OUT THE COST OF NET ZERO CARBON EMISSIONS IN THE UK

Surprisingly HM Treasury did not appeal against the decision of the Information Commissioner ordering them to reveal their estimate of the total cost of the UK reaching net zero CO2 emissions by 2050 and so they have now released their calculations.  These do seem to be vague to say the least, but they are the only figures they have released. Presumably they are the basis for the most expensive policy, apart from going to war, that any government has introduced.

The graph below shows how the total cost, represented by the area under the line, accumulates with years along the bottom and the cost (in £billions) along the side,

 

Along with the graph, below is the just released email giving the rest of the explanation that lead the Treasury to their conclusion of the total cost of £1 trillion. Note that CX is shorthand for the Chancellor of the Exchequer. CCC is the Climate Change Committee which advises the government on how to achieve net zero. BEIS is the Business, Energy and Industrial Strategy department of the UK.

Although there is no details of the underlying assumptions on which the figures are based there is no reason to think that this is an over-estimate. On the contrary as you can see from the piece in bold type these costs will continue beyond 2050 giving a final figure well over the £trillion mark. 

Date of email:12 June 2019  
 
CX also asked for an explanation of the £1 trillion cost figure – see below. 
 
•  You asked how HMT came to the £1 trillion cost figure for net zero. 
•  The CCC estimate that meeting net zero will cost £50bn annually in 2050. BEIS 
estimates put the figure at £70bn per annum. We consider the BEIS figure to be 
more realistic. 
•  These are net costs: gross costs would be even higher but are partially offset by 
cost savings in certain sectors, such as buildings (through energy efficiency), power 
(through cheap renewables) and road transport (where EVs will become cheaper 
than petrol/diesel cars during the 2020s). However, these figures do not capture 
the wider co-benefits of decarbonisation, such as better air quality. 
•  We do not know the profile of these costs, although the CCC argue that the UK 
should frontload its decarbonisation trajectory. On the assumption that the UK 
currently spends c. £15bn p.a. on decarbonisation, and that we adopt a straight 
line cost trajectory to 2050, spending would rise from £15bn to £50/70bn p.a. over 
the next 30 years.  
•  This equates to £975bn of total costs using the CCC figures (green area in the 
graph below) and £1,275bn using the BEIS estimates (green and blue areas). Costs 
will also continue on an ongoing basis post 2050. A number of commentators have 
acknowledged that costs are likely to be around the £1 trillion mark e.g. BBC 
editorial, Lord Adair Turner (former CCC Chair). 
•  No10 and BEIS have distanced themselves from the £1 trillion figure. We have 
suggested using the following public lines. 
 
Does this mean that HMT has signed up to the costs of £1 trillion of meeting net zero? 
•  All experts have stated that a move to a net zero economy will generate significant 
costs and challenges, as well as benefits. The Committee on Climate Change say 
this will cost £50bn annually in 2050.  
•  But what is important is that we consider how to pay for this without pushing 
costs unfairly onto households and businesses, or damaging the economy.  
•  That is why I have accepted the CCC’s recommendation to conduct a review into 

the costs of decarbonisation. 

You can read the full released document at this link: IC 46878 R8K0 Decision Notice HMT Response.pdf (whatdotheyknow.com)