The Climate Change Committee estimates gross investment of £26 billion per year is still Britain’s cheapest option, while the OBR has predicted astronomical economic costs due to geopolitical instability.
According to a new report by the UK’s advisory body on emissions targets, a fossil fuel ‘shock’ at the same level as 2022 — when Russia launched a full-scale invasion of Ukraine — would be more costly than the combined spend on getting Britain to net zero by 2050.
The analysis looks at a number of scenarios, and in each the conclusion was the same. Continued reliance on fossil fuels places our country’s economy at severe risk of fallout from major geopolitical upheavals.
Crunching the numbers more, every pound spent on net zero delivers between 2.2 and 4.1 times the benefits. Savings from a reduction in climate damages accounts for most of this — cutting costs by up to £130 billion within the next 25 years.
Losses through energy systems are also halved with renewables. £60 billion currently disappears via our existing energy mix, but this would fall to £30 billion by fully transitioning to clean sources. Meanwhile, co-benefits including more active travel and healthier lifestyles, could safeguard between £2 and £8 billion.
‘There has been a lot of public interest in the cost of transitioning to a low carbon economy. Going through an economic transition is exciting, but a sense of uncertainty about the future is completely reasonable,’ explains Nigel Topping CMG, Chair of the Climate Change Committee.
‘As such, it’s important that decision makers and commentators are using accurate information to inform debates,’ he continues. ‘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 US-Israel launch of major military operations against Iran in late-February has already had a huge impact on wholesale energy and fuel costs. Although it is not clear exactly how this will play out at the petrol pumps, in business and domestic utility bills when compared with the Ukraine war, the longer this latest conflict continues the higher the cost will be.
Earlier this month, Chancellor Rachel Reeves delivered her spring budget which had largely been prepared prior to the beginning of air strikes in Iran and the blockade of the Strait of Hormuz, a vital oil and gas logistics route. At the same time, the Office for Budget Responsibility was already assessing the impact of ‘further instability in the Middle East’ before American and Israeli jets, drones and missiles took to the skies.
Both Reeves’ budget, and the OBR’s analysis, were therefore stillborn as neither had enough time to take into account the reality of further military escalation in the region. Still, using a model based on crude oil reaching $134 per barrel, the OBR warned of significant fiscal repercussions for Britain. Like borrowing an extra £180 billion and the economy winding up 1.5% smaller than it would be by 2030. And inflation peaking at around 7%.
On an individual level, this would lead to a spike in food and energy prices for people. A scenario which is particularly concerning given a Freedom of Information request by heat pump manufacture Aira has revealed a big rise in NHS hospital admissions in the months and years following Russia’s invasion of Ukraine. Bills increased due to relative scarcity of gas in particular, and there was a 66% jump in the number of ward beds occupied by people with pneumonia, 45% more hypothermia cases, and a 33% leap in other cold-weather illnesses.
‘Households are still struggling with the cost of living and energy prices remain about a third higher than before Putin’s war in Ukraine. This is leaving too many families trapped in fuel poverty – living in Dickensian cold, damp homes,’ says Pippa Healing’s, MP for South Cambridgeshire and Liberal Democrat spokesperson for Energy Security and Net Zero.
‘The Government must take urgent steps to bring down bills and boost living standards by fully funding and immediately removing the biggest green levy from people’s electricity bills, halving energy bills by 2035 by breaking the link between electricity and gas prices; and implementing an emergency Home Upgrade Programme,’ she continues. ‘This will protect families from volatile fossil fuel costs and make homes cheaper to both keep warm in the winter and cool in summer.’
In the past week or so, US President Donald Trump has been trying to calm the energy markets, including demanding navy support in Hormuz from allies including the UK, which would only increase national spend on the conflict. At the moment, no friendly nation is rushing to intervene in a desperate bid to stay out of the war. This means at the time of writing oil is trading at $102.14 per barrel, more than 40% up on the same period last year. Britain’s gas supply stands at £133 per therm wholesale. The OBR’s worst case scenario isn’t far from reality.
At the beginning of this year, the Joint Intelligence Committee — which oversees national security agencies MI5 and MI6 — published a report which showed the climate crisis will lead to, and in turn will itself be exacerbated by — falling global stability in the coming decades. This only adds to mounting evidence in support of uncoupling ourselves from a fossil fuel market which is inherently vulnerable to geopolitics.
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