Sam Hall is the Director of the Conservative Environment Network.
Last week marked two years since MPs unanimously put into law a target to achieve net zero greenhouse gas emissions by 2050. Since then, the target has been reaffirmed in the Conservatives’ election-winning manifesto, a raft of carbon-cutting, job-creating policy measures have been implemented, and many other large economies have followed the UK’s lead in setting net zero targets.
Our main challenge now is not the overall cost of the target, which is both affordable and dwarfed by the many benefits, but ensuring fairness in how costs are allocated.
While it is certainly true that net zero will require significant new investment in clean infrastructure and technologies, these investments will bring wide economic benefits, notably a net increase in employment, and will cost less as a share of GDP than the damage caused by unchecked climate change.
As we accelerate emission cuts over the next few years to achieve the UK’s more stringent targets for 2030, this will trigger additional investment in building retrofits, renewable energy, and transport infrastructure, which will ease post-Covid unemployment.
Thanks to the ingenuity of British scientists, engineers, and entrepreneurs in developing new technologies and making existing technologies better and cheaper, the overall costs of net zero are being revised downwards all the time. And since clean technologies like electric cars and heat pumps are much more energy efficient than the fossil fuelled equivalents, there are likely to be significant fuel savings for consumers in the long term.
More important than the overall costs is how they will be distributed across society and the economy. Many of net zero’s critics highlight the impact of net zero on the poorest as one of their chief concerns. They are right to make this a priority, although fortunately so far negative distributional effects have been minimal. According to the Climate Change Committee, household energy bills have remained flat since the passage of the 2008 Climate Change Act. But we need to ensure that forthcoming technology changes aren’t regressive either.
This distributional analysis is one of the main focuses of the Treasury’s net zero review, which is currently being finalised on Whitehall. But as well as identifying potential regressive effects, the Treasury must also provide policy solutions. To do this, they can look to a number of excellent recent centre-right think tank proposals on how to drive forward net zero in a way that both enhances fairness, and boosts jobs and the economy.
Take critical clean technologies like carbon capture or low-carbon hydrogen, which due to a lack of scale remain expensive, yet are a promising source of green jobs. When commercialising these nascent industries, we should follow Onward’s recommendation and avoid subsidising them through energy bills, since low-income households spend a greater share of their income on energy.
The government was right recently to cut subsidies for more expensive electric vehicles (EVs), lowering the cap for the Plug-in Car Grant so that vehicles with a sticker price of more than £35,000 were ineligible. Ministers should also consider Bright Blue’s recent call to subsidise second-hand EVs, so that low-income people can benefit from this government funding pot too, and access these cheaper-to-run vehicles.
Similarly, as more people switch to EVs and need affordable overnight charging, we should protect people without private driveaways from paying extortionate prices to use on-street charge points. Policy Exchange has proposed a system of price caps for charge point operators in receipt of public funding.
Fairness is particularly important in the drive to retrofit Britain’s homes for net zero, given the scale of investment required. As Bim Afolami has advocated on this site and Simon Clarke more recently, the Treasury should offer vouchers for the most expensive types of insulation, such as solid wall insulation, and heat pumps. Even though a home’s running costs will be lower after it’s been retrofitted, the upfront costs are often a barrier to people installing these home energy improvements.
Finally, if the Treasury does extend carbon pricing to more of the economy, as is rumoured, it should consider giving some of the money back, in the form of a carbon dividend, to low-income households, as the Centre for Policy Studies has argued.
Once these investments have been made and these technologies adopted, our society will be fairer. People on lower incomes who typically live by busy roads will be less exposed to harmful air pollution. The fuel poor, who live in draughty homes, will spend less on their energy bills each month, while avoiding cold-related ill-health.
And if we replace Fuel Duty with dynamic, congestion-sensitive road pricing, driving will be cheaper for people living in rural areas and towns, who after all have few alternative transport options compared to city dwellers. But to realise these benefits, the government needs to help people make the necessary investments.
If we were to pursue the alternative approach of not mitigating climate change, unfairnesses in society would be exacerbated. Low-income households, for example, are disproportionately exposed to flood risk and to the health impacts of heatwaves, according to the CCC, and due to a lack of savings, they are more financially vulnerable to climate-related hazards. Similarly workers in traditional fossil fuelled industries – concentrated in ‘red wall’ constituencies – would have less opportunity to transition into new green industries and could end up in ‘stranded jobs’ as other countries switch to clean energy.
Some will argue that, in the face of these challenges, we should just abandon net zero, but that would be economically foolish, diplomatically isolating, electorally damaging, and much more besides. Others will argue that it’s not the government’s job to intervene to tackle inequality. But since the government isn’t a passive observer of this technological change, it can and should make sure it doesn’t adversely affect the least well-off and instead reduces their cost of living and makes their lives more convenient.
Now that our climate targets are becoming embedded, net zero politics is entering a new phase. Now is the time to put fairness at the heart of our net zero strategy.