Net Zero: Cost, Costs, and More Costs

Getting accurate estimates of the costs of going "Net-Zero" from the governments and global institutions that adopted the policy has been a difficult task from the first. That would have been so even if they had been honest and transparent in their accounting. Moving economies from dependence on cheap reliable fossil fuels to reliance on electrification fueled by renewables (i.e. wind and sun) would require massive expenditures on almost every aspect of life.

It also has the potential to be very alarming. If voters learn that the policy will result in higher fuel prices, higher taxes, and the need for them to spend large capital sums to transform their household economies by, for instance, replacing gas-fueled heaters and petrol-driven cars with electricity-fueled ground storage heaters and EVs, they may take fright and decide that the game isn't worth the dim flourescent bulb. Managing voters' opinions has therefore become an important element in the policy. It has to be "sold."

As it happens, the United Kingdom -- which has reduced carbon emissions more substantially than any other country -- has also put together the strongest political coalition in support of the Net-Zero policy. All the political parties represented in Parliament back it. So, overwhelmingly, does the media. So do all the major cultural institutions such as the BBC. Even bodies apparently remote from politics such as the National Trust (which looks after Britain's stately homes) are keen to be seen as relevant to the cause. When the Climate Change Act setting out legally-binding targets for carbon emissions reduction was passed, only five MPs voted against it.

That legislation created a climate change committee, rooted in parliament but independent of the government, and gave it the task of holding ministers to account over whether they have met the carbon reduction targets written into law. Its sixth annual report was issued at the end of last year. And it offers a very useful glimpse into the lifestyle changes and probable costs of the Net-Zero policy which most governments and agencies have been reluctant to publish or discuss in detail.

No, ministers

That's understandable. When wind and sun still contribute only a measly 1.5 percent of global energy consumption, as Matt Ridley pointed out recently, it's hard to estimate the costs of expanding that share to the 94 percent now contributed by fossil fuels of one kind or another. But the costs won't be small. And there will be a great many of them spreading into every area of life since the mere act of living consumes energy and is sensitive to its cost.

To prevent this article becoming an encyclopaedia, I'll examine only three kinds of cost: lifestyle costs, economic costs, and political costs. I have to admit that the committee's report is relatively honest about the lifestyle consequences of net-zero, though it wraps up its admissions in honeyed phrases. Here, for instance, is its cheerful summary of how "we" will reduce demand for carbon-intensive activities:

The U.K. wastes fewer resources and reduces its reliance on high-carbon goods . . . Diets change, reducing our consumption of high-carbon meat and dairy products by 20 percent by 2030, with further reductions in later years. There are fewer car miles travelled and demand for flights grows more slowly. These changes bring striking positive benefits for health and well-being.

And here's my grouchy response to it:

But what if our diets don’t change voluntarily? Or consumers don’t actually like the new low carbon foods predicted here? Or they want to use their cars and fly on vacation more often than the planners predict? Those "striking positive benefits for health and well-being" sound alarmingly like the medical authoritarianism currently running our lives in the fight against Covid-19. Will doctors and other planners change their presciptions if we don't like the medicine? Or will they ration the foods, car trips, and vacations that the consumers (who are also voters) are determined to enjoy?

My sarcasm notwithstanding, these recommended (a.k.a. imposed) lifestyle choices imply heavy economic costs as industry and agriculture change what they now produce in response to market demand to quite different goods and activities prescribed by ministers and civil servants. The U.K.'s decision to prohibit the sale of petrol-driven automobiles from 2030 in order to require a switch to electric vehicles will force both the taxpayer to finance the electrification of the entire country and the driver to buy a much more expensive car.

When we see the scale of this economic and industrial transformation, it's plain that it's a very expensive project indeed. As I pointed out last month, even the committee chairman concedes that if it is to make us richer rather than poorer, then "[l]ow carbon investment must scale up to £50 billion each year to deliver Net-Zero." Not to worry, however, because he also assures us that "our central estimate for costs is now below 1 percent of GDP throughout the next 30 years."

But these estimates were immediately challenged by Dr. John Constable, energy editor of the Global Warming Policy Foundation, as "entirely divorced from reality":

Some of them are out by several hundred percent, meaning that the claim that we can decarbonise painlessly doesn’t stand up to even cursory scrutiny. Offshore wind is twice as expensive to build as the CCC assumes, and two to four times more expensive to operate. The resulting electricity will be many, many times more expensive than they claim, making the use of heat pumps and Electric Vehicles utterly unaffordable.

So the estimate that net-zero costs will be less than 1 percent of GDP annually for the next thirty years is a fanciful one. Almost all other estimates are higher, some several-fold. Net-zero is a plan fueled not by fossil deposits but by optimism.

And that takes us to the third cost: political costs. These are obvious. Everyone has accepted at the back of their minds that there'll be a price to be paid by governments in power when the higher taxes and energy prices fall due. But that won't be tomorrow or, with luck, before the next election. So MPs never seem to have done the calculation of how heavy the political costs might be -- until last week when the Onward think-tank in London produced an analysis of the political impact of net-zero and discovered that it would be formidably high.

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In particular the carbon-intensive industries most reliant on fossil fuels are concentrated in the Midlands and North of England -- the very regions where Boris Johnson broke Labour's "Red Wall" and won a slew of traditionally Labour sets to swell his parliamentary majority to eighty seats. Johnson has since acknowledged that he had only "borrowed" those voters and would have to justify their trust in him by leveling up their economic prosperity to that of Britain's booming South-East.

What the Onward report suggests is that Johnson's green industrial revolution risks pushing the poorer regions further down the prosperity index rather than levelling them up. Boris Johnson's green agenda is completely at variance with its post-Brexit policy of an infrastructure build-up to as well as being economically regressive

Consider, now, the report's analysis of how this will impact the seats won in 2019 as summarized by the Telegraph:

Some of the biggest concentrations of polluting jobs are in Conservative-won seats West Bromwich West, with 59pc, as well as Hyndburn in Lancashire and Stoke-on-Trent North with 55pc each, according to the Road to Zero report.

The East Midlands has the highest share of jobs in high-emitting industries at 42pc compared to London, the lowest, with 23pc.

The research suggests that up to 10m jobs could need to be replaced, or see workers retrained, as the UK aims to achieve “net zero” carbon emissions by 2050.

What makes this report so interesting is that Onward, a progressive Tory think tank, and the GWPF, a Thatcherite one, now agree on at least one aspect of the net zero policy: It's a political suicide note.

'The Hidden Costs of Net Zero'

In last week’s column I argued that in dealing with the threats of climate change, our best approach would be to forget labels like "climate denialism” and “climate alarmism,” make a fair accounting of the problems, and set about tackling them practically. When I advocated this approach of “climate practicality,” I was thinking in Big Picture terms: How best should we allocate scarce resources between adapting to climate change and seeking to mitigate it, for instance? Or between generating energy mainly from fossil fuels, as now, or from “renewables,” or from going nuclear? Where will our money get the best results?

Answering those Big Picture questions is obviously necessary, indeed unavoidable, but it’s also very difficult to answer them well, i.e, convincingly, because they contain so many variables. It’s somewhat easier (though still hard) to examine the practicality of specific policies from the standpoint not only of governments which propose and implement them but also of the ordinary citizens who have to live with their impact.

That’s done with deep practical expertise and occasional dry wit in a new monograph from the Global Warming Policy Foundation titled ReWiring the UK: the Hidden Costs of Net Zero by Mike Travers, a distinguished engineer with wide experience in that most practical of disciplines.

I am sure every one of us in the UK supports cutting waste, not polluting the oceans with plastic, collecting our rubbish (though people are still throwing tons of waste out of car windows), reducing discharges of all types into our fragile atmosphere and still maintaining a reasonable lifestyle. To do this we need to plan, engineer and build in a sensible way. What we cannot afford to do is inflate electricity prices and other costs: this will simply result in manufacturing industry leaving the country and the export of our carbon dioxide emissions.

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Travers starts with the problem, which is that electricity prices have been rising sharply in the U.K.: “[B]usinesses and consumers have been facing steadily increasing electricity bills for the last 12 years. Average domestic prices have risen from 6p to 16p per unit. That is more than 150 percent in twelve years, faster than any other commodity. This is partly the result of poor planning of the system.”

And why is that? Travers first gives vent to an understandable professional pique that “[e]ngineers have long since lost control of the electrical supply, and the regulators, accountants, and lawyers who now hold sway have conspired to prevent sensible improvements to the system.”

His second explanation, however, goes to the nub of the problem, which is that rising electricity prices stem mainly from government policies to “decarbonize the economy’” (i.e. the hidden costs of the monograph’s title), as the country switches from gas turbines to the much more expensive wind turbines to generate electcicity and move towards net zero carbon emissions.

As we head towards a fully decarbonised grid, the expense will become truly astronomical. We even have to pay windfarms to switch off. These so-called ‘constraint payments’ reached £140 million in 2019.

Rising electricity prices from decarbonization are a major problem, especially so when consumers are facing harder times as the cumulative impact of Covid-19 and the lockdowns kicks in, but they are far from the only negative results. For the U.K. government, though headed by an easy-going optimististic prime minister in Boris Johnson, is committed to requiring ordinary Brits to make major changes in their life-styles that will mean imposing heavier costs on them as both consumers, electricity users, and taxpayers. For instance, the government has already announced that it is making a transition to electric cars compulsory by 2035—and that regulation will include hybrid cars. Nor is it likely to be only such regulation. Brits will also be required to install in their homes such other devices as heat pumps and electric vehicle charging points.

The cost of installing EV charging points alone will be a considerable one. Travers estimates that it will be of the order of 31 billion pounds. But that’s small beer compared to the overall losses from the installation and use of all the additional electric devices needed for decarbonization (italics mine):

The extra demand for electricity will overwhelm most domestic fuses, thus requiring homeowners to install new ones, as well as circuit-breakers and new distribution boards. Most will also have to rewire between their main fuse and the distribution network. In urban areas, where most electrical cabling is underground, this will involve paying for a trench to be dug between the home and the feeder circuits in the street. In addition, increased demand along a street will mean that the distribution network will need to be upgraded too. This will involve installing larger cables and replacing distribution transformers with larger ones. Most urban streets will need to be dug up. The cost to the country of rewiring alone will probably exceed £200 billion, or over £7,000 per household. This figure excludes the cost of new equipment, such as EV chargers, heat pumps and electric showers.

That’s the total impact on householders. It’s alarming. But the details of how many of these centrally-imposed regulations will impact the individual householder is where Travers shines. Here he is, for instance, on heat pumps:

The best alternative is a ground-source heat pump (GSHP), which extracts heat from the earth, using a network of buried pipes. However, that requires a lot of space, so they are really only an option for people who own significant plots of land or can afford the alternative of drilling a borehole. The total cost in a new house for installing a GSHP is likely to be £18,000, or four times the present cost of an oil or gas heating system. The alternative is an air-source heat pump (ASHP), which might cost £10,000, gives energy gains rather less than GSHPs, and suffers from major reductions in efficiency in cold weather.

Even an attentive reader of the serious press would not guess one tenth of the upheavals and cost additions that electric vehicles and heat pumps alone by themselves are likely to cause the Brits—and thus to government ministers when voters realize that what these high-sounding moral principles will mean in practice.

If Ministers pay heed to Travers on the costs and practicality of their policies, they will reconsider de-carbonization and look instead at going nuclear or choosing adaptation over mitigation. But practicality and government live increasingly separate lives—the former in this world, the latter in Utopia. And a reconciliation between them is probably a catastrophe away.