UK net

Britain's Prime Minister Rishi Sunak speaks with attendees as he visits the Great British Beer Festival in London, Britain, August 1, 2023. DANIEL LEAL/Pool via REUTERS

LONDON, Aug 4 (Reuters Breakingviews) - Britain needs a “proportionate and pragmatic” approach to net zero. So says Prime Minister Rishi Sunak, reflecting his view that the UK should not let plans to decarbonise by 2050 swamp citizens with higher costs. Yet official UK figures do not suggest the way to get real on climate change is to go any slower.

Fresh from a surprise local election victory in the London suburbs, which was helped by the Mayor of London’s unpopular plan to extend a low-emission zone for cars, Sunak’s Conservative Party seems to have become fixated on two numbers. One is 1.4 trillion pounds, the UK Office for Budget Responsibility’s estimate for how much it will cost to reduce British net emissions to zero by 2050 – in line with global efforts to restrict global warming to 1.5 degrees Celsius above pre-industrial times. The other is 1%, the approximate amount that Britain’s 450 million tonnes of greenhouse gas emissions contribute to the global total.

Sunak himself has defended Britain’s record on climate and says he cares about reaching its 2050 net-zero target. But amid a cost-of-living crisis, the prime minister’s wager appears to be that Britons won’t accept higher taxes and bills if they sense that bigger emitters like China and the United States are dragging their feet. That’s why ahead of a general election due by January 2025 he has committed to awarding new oil and gas extraction licences in the North Sea, and may also ease off the pace at which landlords and homeowners insulate their homes to make them more energy efficient.

Sunak’s critics could just focus on Britons’ moral responsibility to decarbonise for the sake of future generations. But they can also reasonably argue that the cost of the green transition is far from excessive. The OBR reckons that cumulative savings to the running costs of heating and electric vehicles from binning fossil fuels could amount to over 1 trillion pounds by 2050. As such the net cost of net zero may be more like 344 billion pounds over three decades, or perhaps only 0.4% of GDP per year. After factoring in lost fuel taxes and other levies, the bill could add 469 billion pounds to the UK’s public sector net debt in 2050, or 21% of GDP, the OBR says. By comparison, it expected the pandemic to increase the same measure by 23% of GDP between 2020 and 2022.

These are compelling figures, but they won’t necessarily win over sceptics. Net-zero costs are uncertain, with certain forecasters taking a more pessimistic view on how fast the cost of key pieces of kit like batteries will fall. Political ructions and the balkanisation of global trade could cause the cost of critical raw materials from states like China to jump.

An alternative argument is to take aim at the implicit assumption underpinning the Conservatives’ net-zero “pragmatism” – that things can carry on the same if Britain decarbonises more slowly. True, the price of natural gas, which provides 40% of the UK’s domestic energy consumption, has fallen back from epic 2022 peaks. But the OBR still sees scope for fossil fuel price shocks in future, and views wind and solar power as tangibly cheaper. Similar periodic gas price spikes in future could see Britain intervene to protect households and businesses from shouldering the full costs, as it did last year. That, the OBR reckons, could add around 13% of GDP to public sector net debt by 2050.

The cost of delay could be even higher, however. If the UK drags its feet on net zero, it could then be forced by rising temperatures to slam on the brakes after 2030 by implementing a carbon tax price high enough to compel rapid decarbonisation. The OBR reckons factors like the disorderly imposition of more stringent policies and the higher cost of the transition borne by public spending could increase public sector net debt by the middle of the century by over 40% of GDP.

Given all that, the properly pragmatic approach is for the UK to flag its credentials as a net-zero leader that is decarbonising faster than other G7 states. That will encourage developing countries to cut their emissions too. Policy certainty will meanwhile encourage foreign investors to help pay for Britain’s transition, reducing its exposure to gas price shocks. That could also potentially boost the revenues of UK companies seizing green opportunities by 1 trillion pounds by 2030, McKinsey reckons.

The risk is that Sunak’s dawdling has the opposite effect on the appeal of the UK as an investment destination. Australian billionaire and green hydrogen advocate Andrew Forrest said this week he would pull his investments out of Britain and transfer them to the green subsidy-rich U.S. if the UK backed fossil fuels. According to the Climate Change Committee, which advises the UK government, Britain is already way off its 600,000 annual target for heat pump installation by 2028, and its goal to remove new sales of petrol cars and vans by 2030 is in jeopardy. Meanwhile, the government’s reluctance to let power subsidies keep pace with higher wind turbine costs is in danger of causing energy generators to skip UK offshore wind auctions. Far from taking a decarbonisation breather, true pragmatism would see Sunak get Britain back on track.

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphics.)

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CONTEXT NEWS

Britain on July 31 committed to granting hundreds of licences for North Sea oil and gas extraction as part of efforts to become more energy independent.

On July 24, asked if his government was still fully committed to its targets of ending the sale of petrol and diesel cars by 2030 and reaching net-zero emissions by 2050, Prime Minister Rishi Sunak told reporters: “Of course net zero is important to me ... We’re going to keep making progress towards our net zero ambition.”

“We’re living through a time at the moment where inflation is high that’s having an impact on household and families’ bills. And I don’t want to do anything to add to that,” Sunak said.

“So yes, we’re going to make progress towards net zero but we’re going to do that in a proportionate and pragmatic way that doesn’t unnecessarily give people more hassle and more cost in their life.”

British housing minister Michael Gove warned on July 30 against making tackling climate change “a religious crusade”, days after the Conservatives narrowly won a local election by opposing charges for the most polluting vehicles.

UK energy secretary Grant Shapps said on Aug. 2 that the government remained “absolutely committed” to hitting its net-zero carbon targets by 2050. However he said it would do it “in a pragmatic way”.

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