Net Zero and The Economy 2030 Inquiry
The UK’s commitment to bring all greenhouse gas emissions to net zero by 2050 requires a change that is immense in scale – the transformation of agricultural and industrial processes, shifts in consumption patterns, and an end to the dependence on carbon-based energy that facilitated the birth of an industrial society 250 years ago. And urgency is needed too: two-thirds of the total agricultural and half of surface transport decarbonisation by 2050 needs to happen during the 2020s.
The UK has big advantages here, with recent rapid progress on electricity generation, geographic advantages in wind and tidal power, innovation strengths in some key areas, a cross party consensus on the Net Zero objective, and a strong institutional framework including the independent Climate Change Committee. Until recently, the cost of the Net Zero transition and its impact on jobs were seen as the main barriers to a successful, just, transition. But new evidence points to savings outweighing the costs sooner than might be expected in some areas: by 2025 it will be cheaper to purchase and run an electric rather than petrol or diesel car over the vehicle’s lifetime. Similarly, a broad body of research now points to the potential for many new jobs to be created in the transition. Overall, decarbonisation will bring significant economic, environmental and health co-benefits.
This welcome news, however, should not obscure the very real questions about the timing and distribution of costs, and the disruption that decarbonisation will bring for certain sectors and places. Meeting our international commitments on this front will require policy-driven shifts that go far beyond electricity generation, where a transformation has been achieved without much disruption to most workers or consumers: from now on, changes will intrude far more into citizens’ daily lives. The provision of transport, domestic heating and food choices must swiftly change, but we know far too little about the policy, and political economy, of doing so successfully. This consumption transition needs more attention alongside the current focus on production.
And this is urgent. 60 per cent of fuel supply (oil and gas industries) and half of surface transport decarbonisation by 2050 needs to happen during the 2020s to remain on track for the 2050 Net Zero target. To facilitate this scale of change, governments will have to support investment in a new generation of infrastructure. How this and other infrastructure will be financed is key, but currently highly uncertain, with gross annual UK low-carbon investment needing to increase from £7 billion in 2020 to around £50 billion by 2030 (and remain elevated at near this level until 2050).
There are currently 32 public electric vehicle charging points per constituency. By 2030, this will need to increase twelvefold to 433
The costs of new systems of public infrastructure will be incurred by the public, either as consumers or taxpayers, far before the savings they eventually generate, and sometimes in exchange for what will feel like worse outcomes. Low interest rates make overcoming this mismatch easier, but maintaining popular consent for the transition will mean paying careful attention to managing the costs of disruption, and realising and sharing potential rewards. But none of the difficult policy decisions in this area have yet been taken. We have plans to phase out fossil fuel car sales, but replacing fuel duty will require tax rises equal to the (very significant) ones announced in the 2021 Budget.