The Bennett Institute’s Dimitri Zenghelis published a letter in the Financial Times correcting Chancellor Philip Hammond's statement that the cost of transitioning to a net-zero-carbon economy in the UK will exceed a trillion pounds by 2050.
Dimitri’s full letter reads:
“Chancellor Philip Hammond’s assertion that the cost of transitioning to a net-zero-carbon economy in the UK will exceed a trillion pounds by 2050 is simply incorrect. The evidence for this has been set out clearly by the Advisory Group on Costs and Benefits of Net Zero, a panel of experts on which I served alongside a senior economist from Shell International and the chief economist of the Confederation of British Industry.
The government can reduce costs by working in partnership with business to develop and deploy the required new technologies at the necessary speed, while working with the capital replacement and depreciation cycle to avoid locking into high-carbon inefficient infrastructure. Instead, by sowing early uncertainty, the Chancellor’s comments have already undermined this objective and raised the policy risk premium associated with decarbonisation investments.
Government support has driven innovation in renewable technologies in recent years. As a result, the cost of energy generated by solar photovoltaics has fallen tenfold over the past decade. Renewable energy is now cheaper than fossil fuel-based energy in large parts of the world. This is why investment in renewable energy generation has outstripped investment in coal, oil and gas power stations in recent years.
There has been no appreciable difference in rates of economic growth between those countries that have reduced emissions substantially and those that have not. Yet those in the former are in a stronger position to benefit from the global transition to a net-zero emissions economy in years to come, with the evidence showing the UK economy is well-placed to reap these rewards.
There is now an economic and commercial case for strong action. This is reflected in the fact that share prices for renewable goods and services have outperformed carbon-intensive sectors worldwide, as investors attach growing risk to businesses that are not viable in a low-carbon future.
There are great possibilities for British industries and influence as the UK redefines its place in the world. Strategic growth strategies that harness the potential for discovery, innovation and growth should drive policy, not narrow backward-looking ‘incrementalism’.
The Committee on Climate Change is right. Ambitious and early action, targeting net-zero emissions by mid-century, is the surest way to secure a productive, competitive and decarbonised UK economy.
Dimitri Zenghelis
Project Leader, The Wealth Economy”
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
