Net Zero to Cost Taxpayers £800 Billion, Warns OBR

Britain’s move to a Net Zero economy will cost taxpayers more than £800 billion over the next two decades, the OBR – the UK’s fiscal watchdog – has said. But even this is based on implausibly generous assumptions, say critics. The Telegraph has the story.

The Office for Budget Responsibility (OBR) said Government plans to limit climate change will cost the public purse £30 billion every year until at least 2051, as tax revenue from the sale of petrol and diesel fuel dries up.

This includes nearly £9.9 billion of spending every year on tech investments – for example updating the electricity grid – as well as £20.5 billion in revenue losses from declining fuel duty from petrol cars, as electric vehicles (EV) become more common.

Investments in green technology will initially make up most of the Net Zero cost before lost tax receipts become the bigger factor, the OBR said.

“In the next decade, expenditure accounts for the bulk of the fiscal cost, particularly public investment in residential buildings, removals and surface transport, which start to decline from 2036 to 2037,” it said.

While the sums are significant, the fiscal cost of Net Zero has been revised down from £1.1 trillion since the OBR last reviewed it in 2021. The watchdog said this was because of fuel duty freezes leading to lower lost receipts and a higher-than-expected uptake of EVs.

It also assumes the Government will spend less on the transition after the Climate Change Committee revised down the costs across the whole of the economy.

Worth reading in full.

David Turver criticises the OBR for taking the Climate Change Committee’s figures at face value, pointing out that the CCC makes numerous implausible assumptions that lower the apparent cost of Net Zero.

From the numbers they have published, we know the CCC made some highly implausible assumptions about the shifting the costs of renewables on to gas bills as well as the cost and take-up rates of heat pumps. However, the most obvious egregious errors are in the CCC’s erroneous estimates of the cost of renewables.

The CCC assumes that offshore wind in 2030 will cost less than half the value of contracts awarded for fixed bottom offshore wind in last year’s Allocation Round 6. It totally ignores the need for floating offshore wind that costs six times more than its 2030 estimate. The CCC estimates for the cost of solar for 2030 delivery were less than half the prices awarded in AR6 too. It did not even bother to estimate the cost of onshore wind, despite needing to more than double the installed capacity by 2050.

Also worth reading in full.