The Treasury’s £1 trillion estimate for the cost of decarbonising the UK has been branded as “misleading” by the head of the statutory climate change watchdog.
Chris Stark, chief executive of the Committee on Climate Change (CCC), was quizzed this morning by the Treasury select committee as part of its inquiry into the UK’s drive to cut carbon emissions to ‘net zero’ by 2050, which was signed into law last week.
Chancellor of the Exchequer Phillip Hammond previously warned in a leaked letter that meeting the 2050 target would cost the UK £1 trillion.
The CCC estimated in its report recommending the net-zero goal, published in early May, that hitting it would cost between one and two per cent of GDP per annum by 2050.
But calculating a “big number” like the Treasury had done, did not take into account the uncertainty surrounding the decarbonisation process after 2030, said Stark: “It is not sensible to roll up costs to get to that big number because it is misleading.”
He added that the way the Treasury had presented the figure had given the impression that it would be public spending, whereas the “vast majority” of the cost would be met from private investment.
Stark also said the long term financial security, which the Hinkley Point C nuclear project has enjoyed through the 35 year Contract for Difference signed with EDF, could cut the costs of decarbonisation if it were applied more widely.
“If the government were willing to put in place the kind of long-term policies that have driven that investment in other sectors, you would very quickly see private finance flowing to other and competing priorities for decarbonisation.
“If that were to happen I am very confident that meeting net zero would be a lot cheaper.”
And it is important over the next 12-18 months for the government to put in place ambitious plans for decarbonisation, he said: “It is likely that costs will be lower, especially if steps are put in place.”
Stark added that the UK could no longer afford to rely on the power sector, which has achieved the bulk of emission reductions so far, to achieve future cuts.
“This will need to run like a stick of rock through every department in Whitehall. We cannot keep relying on what has been successful – continuing falls in emissions from one sector. They are going to run out of road soon
Sagarika Chatterjee, director of climate change for the Principles for Responsible Investment forum, said investors want the Treasury to take prompt steps in order to minimise the risk of an “abrupt transition”.
Nick Robins, sustainable finance professor at the London School of Economics, called for a reframing of the government fiscal rules to take into account investment in decarbonisation. He said: “For too long this has been seen as a cost. We may need some rethinking of models and how we treat debt on government balance sheets.”
Last week, BEIS select committee chair Rachel Reeves also queried how the Treasury had arrived at the £1 trillion figure.