Single fossil fuel price spike would outstrip net zero cost – climate advisers

A single major fossil fuel price spike would outstrip the cost of a shift to a “net zero” society, independent climate advisers have said.

But shifting to clean energy reduces exposure to fossil fuel shocks, the Climate Change Committee said, significantly reducing the impact on bills and the economy of future price spikes.

Analysis from the committee also found the costs of investing in clean tech to cut climate-warming emissions to zero overall by 2050 would be outweighed by the financial benefits of avoiding damage from extreme weather, more efficient energy systems and improvements to health.

The analysis was published after oil prices soared to four-year highs of more than 100 US dollars a barrel earlier this week as a result of the US-Israel war with Iran which has disrupted global flows of oil and gas, prompting fears over impacts on fuel bills, petrol pump prices and inflation.

The UK has a legally binding target to cut climate-warming emissions to zero overall – known as net zero – by 2050, slashing use of polluting fossil fuels in favour of clean tech, as well as planting trees and changing diets.

But the latest fossil fuel volatility comes amid a crumbling political consensus over climate action in the UK, with Reform and the Tories promising to row back on net zero even as Labour pursues clean energy targets in a bid to deliver cuts to bills and energy security.

Nigel Topping, chairman of the CCC, said: “In light of current world events, it’s more important than ever for the UK to move away from being reliant on volatile foreign fossil fuels, to clean, domestic, less wasteful energy.”

The overall net cost of the route to net zero for the UK is likely to be £4 billion a year between 2025 and 2050, around 0.2% of expected annual GDP, totalling £108 billion overall, the committee said.

There will need to be an average £26 billion a year in extra investment, with much of the costs coming upfront, while an average £22 billion a year in savings will be delivered by more efficient systems and technology and low-cost renewables.

Meanwhile, a single fossil fuel spike in 2040, on the scale of the 2022 energy crisis following Russia’s invasion of Ukraine, would have direct costs of £222 billion to consumers, businesses and the Treasury if there had been no further efforts to cut emissions from current levels, the analysis found.

But the same fossil fuel price spike would cost the UK far less – £63 billion – if the country had pushed on with the move to heat pumps, renewables and EVs.

Average energy bills would increase by just 4% in a fossil fuel shock if the UK was using more green technology and was less reliant on oil and gas for heating, electricity and transport, but would soar 59% without that shift.

As a result of savings delivered by a clean energy transition in a fossil fuel price spike, the CCC’s analysis finds that a single shock on the scale of 2022 over the 26 years to 2050 would reduce the net cost of net zero from an annual average 0.2% of GDP to zero.

Benefits

The CCC’s latest assessment shows the costs of investing to meet the net zero target are outweighed by the benefits.

It says that every £1 spent on moving the UK to clean technology to replace fossil fuels, such as offshore wind, electric vehicles and heat pumps, would deliver benefits of £2-£4.

Benefits include avoiding damage from extreme weather, with savings of £40 billion to £130 billion in 2050, and halving energy losses from the system, from £60 billion a year today to £30 billion in a more efficient net zero system.

The improvements to health from cleaner air, better insulated homes, more active travel and healthier diets are estimated to provide £2 billion to £8 billion in net benefits by 2050.

The Government is to set out its plan later this year for the “carbon budget” for emissions cuts needed between 2038 and 2042 to stay on track to net zero, drawing on advice from the CCC.

Energy Secretary Ed Miliband said: “As global fossil fuel markets once again show their volatility, the only way to make Britain energy secure is with clean homegrown power.

“It is highly significant that the CCC has found that the transition to net zero is cheaper for our national economy than the entire cost of the last gas price crisis, and can protect families from future fossil fuel price shocks.

“This is further proof that those who oppose our mission for clean energy would abandon the pursuit of national energy security, lower bills and protecting our children and grandchildren.”

Rick Parfett, WWF’s head of climate policy, said: “For the cost of just one more oil and gas price spike, we can protect households from soaring bills for good, by insulating our homes and using clean British energy.

“Our dependence on oil and gas imports is not just an economic catastrophe – it’s a national security concern too, and devastating for nature.

“The Government must accelerate the transition, crowding in private investment and putting pounds back in the pockets of hardworking households.”

Price spikes

Dhara Vyas, chief executive of industry body Energy UK, said it was still too early to tell how the current situation in the Middle East would feed through to energy bills in the UK – and it was hoped it would not lead to a repeat of the record price spikes in the previous crisis.

“But it is another sharp reminder of our vulnerability to geopolitical developments.

“That this is happening so soon after the last crisis demonstrates the importance of reducing our reliance on gas and fast-tracking our journey to become a country – and an economy – powered by our own sources of clean electricity.” she said.