The eye-watering bill to hit net-zero emissions

The multi-trillion cost of hitting the UK’S climate targets will ultimately be borne by taxpayers and business, writes Rachel Millard

As the Intergovernmental Panel on Climate Change issues its strongest warning yet about global warming, politicians are facing a stark scientific consensus: global temperatures are likely to rise by at least 1.5C within 20 years, unless immediate action is taken to cut emissions.

But with Britain racing to hit Boris Johnson’s target of being carbon net zero by 2050, there is far less agreement about what saving the planet will cost. The country is embarking on its most radical economic overhaul since the industrial revolution, with no business to be left unscathed and trillions of pounds needed for the switch – a bill that will ultimately be borne by taxpayers, employers and consumers.

It is estimated about £50bn of investment will be required each year between 2030 and 2050 but the true cost could be higher still. Here are some of the sectors that face the hardest hits.

Aviation

Air traffic is one of the most difficult markets to decarbonise, with electric batteries not suited for powering heavy loads over huge distances.

In the UK, the industry plans to cut emissions by 15pc by 2030; 40pc by 2040; and 50pc by 2050. Efforts are under way to reduce planes’ weight, improve fuel efficiency and swap diesel for other fuels such as hydrogen, bio-fuels, or synthetic fuel using carbon dioxide sucked from the air.

None of this is cheap. Industry leaders say that $150bn (£108bn) has been invested globally into efficiency research so far this decade.

The Climate Change Committee estimates reaching net zero could require annual bills climbing from £390m in 2035 for efficiency and £470m for sustainable fuels – costs which will come from publicly funded subsidies or passengers. Yet it also believes cost savings from efficiency could hit £2.7bn per year by 2050.

Fossil fuels

Oil and gas producers are under huge pressure to cut down on carbon and methane emissions from their own operations. Companies with an eye on their long-term future are also spending shareholders’ money on a move into renewable energy such as wind and solar panels. About 5pc of international oil companies’ investments are being made in clean energy, according to the International Energy Agency.

Producers in the UK have signed up to a plan to halve their emissions by 2030 and cut them to net zero by 2050.

In October, a report published by the Net Zero Technology Centre estimated it will take £430bn to turn the UK a green energy hub with lower oil and gas production running on clean electricity; new hydrogen production; and carbon capture and wind farms. This could provide a £2.5 trillion boost to the economy overall, the report said.

Automotive industry

Cars were responsible for producing almost 70m tons of carbon dioxide in the UK in 2019, about 15pc of the country’s emissions. The Government plans to ban the sale of new petrol and diesel cars in 2030, forcing an overhaul of production lines and vast investment into electric charging points. This transformation of the grid will be funded by a mix of higher energy bills and subsidies.

UK car manufacturers, which directly employ more than 180,000 people on median wages of £35,000, are also starting to adapt. Nissan and its Chinese battery partner Envision are spending £1bn on making a new electric model and batteries in Sunderland.

Jaguar Land Rover also plans to launch electric models of its Jaguar and Land Rover brands by 2030.

The CCC estimates decarbonising transport will cost about £12bn per year by 2035, including public spending on charging infrastructure and drivers buying electric models.

Electric vehicles are more expensive, with a petrol Vauxhall Corsa starting at £16,000, while the company’s cheapest electric version, the Corsa E, costs £26,400. This price difference is narrowing and the lower running costs of electric models mean that savings should start to outweigh costs from about 2030, with savings of about £20bn per year from 2035.

None the less Carlos Tavares, the boss of Vauxhall owner Stellantis, warned earlier this year that driving could become the preserve of the rich as fossil fuels are banned.

Housing/buildings

In 2019, emissions from buildings – mostly due to heating – hit 87m tons, or 17pc of UK emissions. Of those, about 77pc came from homes, 14pc from commercial buildings and 9pc from public buildings.

Changing this will require huge investment in energy efficiency and replacing natural gas-fired boilers’ with either electric heat pumps, hydrogen boilers or other solutions – a cost again likely to be met with huge sums of public money and bill rises.

The CCC estimates about £360bn will be needed by 2050.

It puts the investment at nearly £10,000 per household and believes energy efficiency will ultimately help lower bills, saving consumers about £400m per year by 2050.

Steel

The manufacturing and construction sectors produced emissions equal to 66m tons of carbon dioxide in 2018, or 12pc of the UK total. Yet replacing blast furnaces and their coking coal with other methods, such as electric arc furnaces that use scrap, or hydrogen, is difficult and expensive.

Steel-specific estimates are hard to come by given the early stage of the technology. The CCC estimates that getting manufacturing and construction to net zero could cost about £1bn per year in 2030, rising to £4bn per year in the 2040s.

Paying for this change could further harm Britain’s last steel plants after decades of being undercut by cheaper rivals if it is mishandled.

However, the CCC says that better energy efficiency should reduce costs by £1bn per year from the late 2020s.

‘Oil producers in the UK have signed up to a plan to halve their emissions by 2030’

‘The boss of Stellantis warned that driving could become the preserve of the rich’