Net Zero Advocates Are Living in Cloud Cuckoo Land

There is an old Scottish proverb which runs as follows: “If wishes were horses, beggars would ride.” This came to my mind after seeing the brief note in the Daily Sceptic about the apparent award of a £70 billion contract linked to Net Zero projects by a small company in Stevenage to another small company in Cornwall. Even if there is a typo in quantifying the money involved, £70 million would still be a serious sum of money. However, we are not dealing with real money but some indicator of “value”, probably more in the eye of the provider than of any of the supposed beneficiaries. This is where the important story lies, in the bizarre incentives that exist in a world of bureaucracies committed to vague and ill-considered targets dealing with entrepreneurial types who have lots of sales panache but limited technical competence.

My background stimulated my interest in this story. Among other things, I manage companies which operate broadband networks in Scotland. Quite separately, I have published a lot on the economics of climate change and renewable energy, while in the past I managed large energy and infrastructure projects. I would not claim a total value of £70 billion but the total amount of real money at stake in these projects was more than £20 billion. Such sums may seem like funny money but they are not unrealistic when dealing with a large sector in a large country. That experience gives a clue to the lesson that we need to learn.

The company which supposedly awarded the £70 billion contract provides networking and other broadband services to schools. They seem like many other small IT companies in the area with, apparently, limited and not especially sophisticated skills. Managing high performance networks is a very specialized business quite separate from the management of IT facilities run over such networks. The consequence is that local authorities, private companies and other organisations often employ a hierarchy of sub-contractors to provide and maintain networks, IT and network services.

This hierarchical structure applies similarly when dealing with large infrastructure and energy programs. Even with decades of experience, the reality of such programs is littered with grotesque cost over-runs and failures to deliver what is promised. Politicians, bureaucrats and private sector managers do not have the incentives or the skills to deliver what is promised on time and within budget. The combination of project hype and poor management mean that the outcome is all too often an expensive disappointment.
Now, consider Net Zero as such a program. It is based, from beginning to end, on wishful thinking – that costs will fall rapidly, that new technologies will transform sectors within years rather than decades. There are thousands of companies – and academics – who claim that everything will be different in some way or other if only they are given lots of money. Anyone who takes a cautious view based on what we can do now and what it will cost knows that the goal is not feasible within the timescale promised and that the costs may be ruinous. But that is not the right answer, so instead we have “If wishes were horses…”

The public sector and large companies provide dozens of examples of how this works. In the last decade the public has been deluged with propaganda for Zero Waste – recycling all garbage rather than sending it to landfills. What could be wrong with that? But suppose you are a harried manager in a local authority which is setting up a recycling scheme but has no idea what to do with the stuff that will be collected. You go to some conferences and come across a group with some very pretty slides and a plausible story about how they are going to sort recycled waste to make plastic bags or packaging materials and send the rest to an energy-from-waste project (aka an incinerator). The council is persuaded to invest in the scheme and seemingly your problem is solved. However, two years later it comes out that the sorting facility doesn’t work, there is no market for the recycled plastics, the incinerator couldn’t get planning permission, and all of the “recycled” waste is being shipped to West Africa or Vietnam.

Such cases are not rare. They happen all of the time because developing and implementing new technologies or ways of working is expensive, time consuming and very prone to failure. Venture capitalists, whose primary skill is to assess risk, expect that only 1 in 10 of their investments will really pay off and that may take 10 or 15 years. Why should bureaucrats with less experience and skill expect to do any better? Yet politicians, urged on by lobby groups, set Net Zero time scales of five-to-10 years for changes that, on a realistic assessment, might take two, three or four decades.

The whole field is riven by conflicts of interest and the absence of any serious penalties for failure. There is a tendency to assume that if the goal is worthy we need not explore who really benefits in too much detail. Yet the truth is that governments, in particular, are very bad at managing large projects and programs. The reason is that it is difficult, tedious and often unrewarding work, none of which fits well with a political and administrative culture that is focused on hype and short-term goals. Whether it is the PPE saga or Test and Trace or HS2 or NHS IT contracts or any of the other blunders of our Government, the one thing we should have learned by now is that major Net Zero projects will not be delivered on time or on budget.

With Net Zero the situation is even worse because nobody knows what they are doing but there is a lot of ignorant money seeking a home. Local authorities, private companies and other organisations want their share of this money. The result will be a few successes, a larger number of partial or complete failures and a vast amount of money wasted. That is routine in venture capital and technology R&D. It is less acceptable when the money comes from taxpayers and is, in practice, diverted from more immediate ways in which the well-being of the population or the environment could be improved.

It is a sad reflection of the current media environment that anyone who challenges either the goal of Net Zero or the means to achieve it is likely to be labelled a “climate change denier”. Hence, I will be blunt: that is defamatory codswallop. Thirty years ago I was co-author of one of the first international analyses of climate change. I have written as much or more about global adaptation to climate change as anyone. Our difficulty is that the policies followed to date have been a spectacular failure and nothing which Britain or Europe can do will change what is already baked in for 2050. In these circumstances, it is worth asking whether throwing billions of pounds at an “If wishes were horses …” program is a sensible use of public or private money.

Gordon Hughes is a former Professor of Economics at Edinburgh University and was a senior adviser on energy and environmental policy at the World Bank until 2001.