As the UK moves towards its net zero emissions target, leading economists are cautioning that the transition will come with a hefty price tag, far surpassing public estimations. Testifying before the Lords Economic Affairs Committee, experts emphasized the necessity of the net zero transition while underscoring the financial burden it entails.
Olivier Blanchard, a senior fellow at the Peterson Institute for International Economics, stressed that while the transition is imperative, its costs are significantly underestimated by the public. He highlighted the need for clear communication about the financial implications, stating, “The public does not believe, or has not been made to understand, that it is going to be costly for them. It is going to be costly and that message has to be sent out.”
Blanchard further noted that financing the transition may require increased debt, with the primary deficit potentially needing to be larger in the coming years. He suggested that at least a 0.5% increase in deficit spending might be necessary in the short term.
Echoing Blanchard’s concerns, Sir Dieter Helm, an economics professor at Oxford University, emphasized the fallacy of expecting the net zero transition to pay for itself. Helm warned against burdening future generations with the costs of replacing the current polluting system, labeling it “intergenerationally wrong.”
Helm also criticized the Office for Budget Responsibility (OBR) and other institutions for underestimating the costs associated with new technologies, leading to significant errors in cost projections.
The testimony before the Lords committee underscores the urgent need for a realistic assessment of the financial challenges associated with achieving net zero emissions. While the transition is vital for addressing climate change, policymakers and the public alike must be prepared to shoulder the substantial costs involved.
