Plenty of noise was made this week about the Office for Budget Responsibility’s (OBR) ‘Fiscal Risks Report‘, which outlined the potential costs of the government’s transition to net zero by 2050: £1.4 trillion over 30 years, three-quarters of which would be borne by households and private businesses. If that weren’t staggering enough, the Global Warming Policy Forum (GWPF) has found that the OBR’s projections still didn’t sufficiently capture the indirect economic effects of the transition, and that their analysis depends on a series of “optimistic assumptions“. In other words: it may well be even worse…
Most of the OBR’s cost assumptions are built on the estimates of the Climate Change Committee, whose figures appear rosy at the best of times: even their most pessimistic projection expects 75% of electricity to come from renewables by 2035, with over 70% of households using hydrogen for heating within a similar window. And all this is assuming the economy doesn’t stagnate or contract.
The GWPF report adds:
“It is no exaggeration to say that everything in both the CCC’s and the OBR’s cost assessment depends on their optimistic assumption that the cost of renewable electricity will drop significantly.”
“[The] indirect economic effects, correctly identified but not adequately examined by the OBR, will be severely negative for the economy as a whole and the public finances, with stuttering economic activity and stagnant or even falling tax receipts.”
The net zero timeframe target was unrealistic even before the pandemic; now, given the precarity of the post-Covid economy, it’s starting to look a bit ridiculous.