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We must be honest and informed on the costs of achieving Net Zero

Lord Lilley
November 7, 2024

On 24th October an historic debate took place in the House of Lords. For the first time since 2019, when Parliament legally committed Britain to reduce our carbon emissions to Net Zero by 2050, Parliament debated the costs of this incredibly ambitious project. Indeed it was the first debate on the costs for jobs, prosperity and growth of decarbonising our economy since the Climate Change Act went through Parliament in 2008. Nor has any official cost benefit analysis of this project ever been published by the government or its ‘independent’ adviser the Climate Change Committee.

The excuse for silence on this subject has been twofold.

First, enthusiasts for Net Zero assert that the project will be costless: replacing fossil fuels will give us cheap energy, and boost prosperity as it generates new industries exporting green technology worldwide. That would be wonderful – if true. But when something sounds too good to be true, it invariably isn’t true.

I opened the debate by reciting a few facts:- The UK has decarbonised by more than any other major economy. We have more offshore wind than any country but China, plus other renewables. Despite, or because of, that our electricity costs doubled in real terms in the two decades before the Ukraine war (while the cost of gas remained unchanged). And we now have the highest electricity costs in the developed world. Moreover, much of the decline in our reported emissions is the result of driving our energy intensive industries overseas. We have lost, or are losing, most of our aluminium and all our primary steel making; the Grangemouth refinery is becoming an import terminal; other refineries are vulnerable; we have begun to import cement and bricks; and we are stopping North Sea oil and gas exploration.

That reduces Britain’s reported CO2 emissions but does not reduce global emissions at all – often increasing them. Baroness Bennett pointed out that, after allowing for carbon emitted making our imports, our footprint only fell by 19% over two decades.

That reduces Britain’s reported CO2 emissions but does not reduce global emissions at all Quote


Moreover, Ed Miliband’s claim that, on the basis of the recent auction, the cost of offshore wind (£82/MWh) is now the cheapest form of power to build and operate, is simply not true. His own department’s figures show that it costs less than £60/MWh to build and operate a gas generator. Moreover, wind needs back up gas plant for when it doesn’t blow, which needs Carbon Capture and Storage – both of which would only operate part time increasing their unit costs. On top of that is the balancing charge (£4billion last year) the £billions needed to expand the grid.

Significantly, throughout the debate, no-one challenged these facts.

Instead they resorted to the second excuse for ignoring the cost of pursuing Net Zero. If we do nothing, they assert, climate change represents an “existential” threat which dwarfs a doubling of the cost of electricity. This was mentioned seven times during the debate.

I acknowledged that this is a powerful argument. If global warming will set the human race ineluctably and irreversibly on the path to extinction or even immiseration, then almost no cost is too great to avoid it. However, some time ago, I asked Ministers whether they knew of any peer reviewed studies or science documented by the Intergovernmental Panel on Climate Change which predicts that if the world does nothing to reduce CO2 emissions it would lead to the extinction of humanity in the coming centuries. The answer was – there are none. This seemed to disappoint some noble lords!

Other Peers argued, in line with standard economic theory, that we should take into account the “external costs” – the costs burning fossil fuels imposes on everyone else. The normal way of doing so would be to impose a carbon tax equal to the “social cost” of emitting CO2. The US government estimates the social cost of carbon at $51 per ton, equivalent to about £10/MWh – not sufficient to make gas turbines more expensive than offshore wind.

The British government overcomes this inconvenient problem by using a notional “appraisal tax” of nearly £60/MWh – this is simply the tax necessary to render gas uneconomic relative to renewables!

My call for an honest and informed debate on the costs of achieving Net Zero was endorsed from all sides – the Bishops’ bench, cross benchers and Conservatives. Remarkably, the Labour Minister, who summed up very fairly, acknowledged that “I sense, … that some of the political consensus on net zero may be breaking down”. So maybe that debate has at last begun.

Lord Lilley

Baron Lilley, is a British politician and life peer who served as a cabinet minister in the governments of Margaret Thatcher and John Major. As an MP for the Conservative Party, he represented Hitchin and Harpenden from 1997 to 2017 and, prior to boundary changes, St Albans from 1983.

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