The UK government’s rush to act on Net Zero is resulting in a failure to recognise that there are more (and less) efficient methods to decarbonise the economy. This is leading to some policies which are, at best, excessively costly, and at worst, both costly and environmentally ineffective.
As an economic thought leader, Cebr has always stood fierce on its commitment to independence and academic integrity, and we believe that Net Zero requires the same economic scrutiny as any other policy. Indeed, given the environmental and economic stakes, this scrutiny is crucial.
A prime example of an inefficient policy is the government’s ban on the sale of fossil fuel vehicles, due to come into effect in 2030. Cebr analysis shows that the costs of this measure (including infrastructure and higher vehicle purchase costs) are five times the benefits, even using government valuations for the environmental benefits, and without accounting for the social costs associated with the massive increase in mining of rare earth metals required for EVs. Whilst moving away from fossil fuel vehicles will be crucial for a green energy transition, the government’s hasty approach to implementing it does not stand up to recognised methods of economic scrutiny – and begs the question, why doesn’t conventional policy analysis seem to apply here?
This is not a problem unique to the UK government; similar decarbonisation policies are of course emerging all over the world. Cebr was recently commissioned to investigate the economic and environmental impacts of the Dutch government’s decision to limit flight capacity at the Netherlands’ busiest airport, Amsterdam Schiphol. Our analysis found that, while the monetary benefit of the reduction in CO2e emissions represents a sizeable €1.79 billion, this pales in comparison to the associated reduction in trade and tourism expenditure in the Netherlands; valued at €13.6 billion. As in the case of other similar policies, this implies poor cost-effectiveness. Despite this, governments seem content to turn a blind eye when these policies are in the name of Net Zero.
But the path to Net Zero need not be inefficient; there are clear gaps in the UK’s Net Zero Strategy with potential for cost-effective progress towards a carbon neutral economy. For example, the Climate Change Committee (CCC) in its 2022 Progress Report to Parliament emphasised the need for the government to push harder for energy efficiency in the buildings sector, and particularly in heat pump deployment. Previous Cebr analysis supports the argument for government investment in energy efficiency measures. For instance, we find a relatively high rate of return for the government’s most recent scheme, ECO plus, which makes £1 billion of funding available for 400,000 households to access energy efficiency improvements, such as loft or wall insulation. Likewise, Cebr research for Grundfos identified £3.1 billion worth of savings per year impeded by barriers to implementing low-cost energy efficiency measures, like hydraulic balancing.
One does not need to be an economist to know that resources are limited, and pursuing ineffective policies only serves to divert money and attention away from those activities best placed to have the greatest impact per pound spent.
Crucial, the sooner we collectively acknowledge the inherent trade-offs within Net Zero policies and critically assess their relative effectiveness, the better. Indeed, now is the time for informed, rational decisions – rather than ideologically induced knee-jerk reactions.
For more information contact:
Elle Crossley, Economist – Email: email@example.com – Phone: 020 7324 2840
Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.