U.K.’s $904 Billion Climate Push to Bring Bigger Economic Boost

The U.K. estimated that delivering on its ambitious targets to slash greenhouse gas emissions by the middle of the century will cost 651 billion pounds ($904 billion), but the benefits of protecting the environment will be far greater.

The government’s official impact assessment of a target to cut emissions by 78% by 2035 indicates that action will generate a boost to the economy of about 918 billion pounds. That’s due to the environmental value of the carbon emissions eliminated, cuts in fuel use and the improvement in air quality.

Prime Minister Boris Johnson, hosting a crucial round of international talks on global warming later this year, has adopted the most far-reaching program to slash fossil-fuel emissions blamed for damaging the atmosphere. Legislation aimed at shifting the U.K. toward cleaner forms of energy is aimed at generating momentum worldwide in the battle to protect the planet from runaway temperature increases.

U.K.’s $904 Billion Climate Push to Bring Bigger Economic Boost

The estimates from the U.K. accompany pledges made by the U.S., China, Japan and Canada at a two-day climate summit hosted by President Joe Biden.

The British analysis is important because it suggests that even while planning to spend billions of pounds on new technologies such as carbon capture and storage to fight climate change, the government sees net benefits totaling more than 250 billion pounds over the next three decades.

“The large majority of costs are the additional capital costs (and associated financing) of low carbon technologies,” according to the assessment. “Decarbonization would likely add upward pressure to electricity prices and heating costs.”

Policy Uncertainty

While both the costs and benefits were couched as stretching over the 30-year period between 2020 and 2050, they’re associated with meeting the U.K.’s sixth so-called carbon budget. That sets a ceiling on how much the country can emit for the five years 2033 through 2037. The level was recommended by the government advisers, the Climate Change Committee.

“We estimate that the cost of meeting the CCC’s recommended sixth carbon budget level will be equivalent to 1.6% of GDP in 2035,” according to the analysis.

The analysis wasn’t prescriptive about what policies the government should pursue to meet its target. The U.K. has already cut emissions by 44% since 1990, according to the 2019 data, the most recent available.

Efforts to date have focused on cleaning up utilities by encouraging offshore wind and solar farms and phasing out coal as a fuel to generate electricity. That leaves emissions reductions to be tapped from making buildings and transportation greener.

“The appraisal does not assume specific policy choices,” according to the impact assessment. “There is a high degree of uncertainty around what policies will be used to meet the sixth carbon budget, and what their costs and benefits will be.”

Energy Shift

The long-term goals will require a rapid shift in how the country gets its energy. By 2050, Britain will need to double its current electricity generation to meet the demand of a transport sector dominated by electric vehicles and to provide the low-carbon heating required for every home.

The growth in electricity output will mostly have to come from zero-carbon sources. The U.K. forecasts that at least 95% of power generation will be low-carbon by 2035, with three-quarters coming from variable renewable sources such as wind farms and solar parks.

Hydrogen will be an increasing source of low-carbon energy for sectors that are hard to electrify, according to the assessment. It’s unclear how the clean-burning fuel will be made, though most of will likely come from natural gas using technology that captures and stores the emissions created in the production process.

©2021 Bloomberg L.P.

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