The Bennett Institute's Dimitri Zenghelis was part of the Advisory Group to the Committee on Climate Change, who informed the recommendation on the costs and benefits of net zero.
The report from the advisary group emphasises the need to recognise greenhouse gas mitigation expenditures as investments, both in new industrial activities, and in achieving the benefits of a stable climate. Like all investments, these may not have instant returns, but rightly directed and incentivised can make the best possible economic, societal and environmental returns over a longer time horizon.
The Advisory Group recognises the need to deal with uncertainty, irreversible tipping points and thresholds both with regards the climate science and society’s propensity to lock in to future technologies and behaviours. It stressed the application to this scenario of Romer’s ‘conditional optimism’, which suggests “that policy choices are even more important than traditional theory suggests.” It makes the point that policy-makers’ ability to guide future outcomes in the desired direction influences the path towards the net zero carbon target. The decarbonisation process can be steered and anticipated to some extent, as “the cost of decarbonisation in decades to come will be a function of the action and investment taken today.” The authors further note:
“The correct answer to the question ‘what will it cost?’ is therefore what economists call endogenous; it depends on what is done now.”
The action taken, the policies set and the investments made all play a highly influential role in another aspect of the route towards a zero carbon target; they contribute to forming and adjusting expectations. Further investment in research, innovation, and in mass renewable technology will be stimulated by credible signals given to innovators and investors. And these investments should bring technology and infrastructure costs further down.
In addition to these possible cost reductions, though, the report indicates that earlier economic predictions of decarbonisation costs continue to be overly pessimistic, and draws our attention to the real rapidity with which costs of renewable energy technology have fallen. There is no reason to ignore the potential of achieving a net zero carbon target based on these incentives for action.
Further incentives for the zero carbon mitigation action include the co-benefits that could be enjoyed from achieving this target, where gains can be foreseen across multiple policy areas. One such example is reduced air pollution, an additional, non-greenhouse gas benefit for human health and the environment more broadly, which should be considered in the cost-benefit evaluation of greenhouse gas emission reduction.
The expected net benefits of a net zero target, in terms of both climate damages and reducing the costs of decarbonisation, on balance outweigh those of an 80% decarbonisation target preciously because of the target’s impact on guiding the UK economy along a path that manages the low carbon transition by starting the process in sufficient time. Above all, the net zero mark removes uncertainty and curbs the potential for lobbying of sectors for greater proportions of the remaining 20% emissions allowance.
The pressing feeling of urgency surrounding climate action should not spur us into unrealistic ambitions, and the Advisory Group conclude that, alongside the thought that strong mitigation action is preferable to not acting, a credible date to set for achieving a net zero carbon target is 2050. By this time, government should have worked towards building the appropriate infrastructure for a ‘decarbonised UK’, by encouraging mass deployment of low carbon technologies and incentivising sustainable production and consumption chains. Through ‘conditional optimism’, UK government action via its policy, including stable long-term direction with clear governance, and the use of markets to find the best solutions, is in line for reaching the desirable zero carbon target.