Scaling back efforts to combat climate change will come at a price

As mentioned in EiD last week, the UK government is re-thinking its climate change initiatives and giving more emphasis to energy supply options such as shale gas and nuclear energy expansion. Pilita Clark writes in the Financial Times about a new report from the Committee on Climate Change, an independent, statutory body established under the Climate Change Act 2008, that weakening the commitment will actually lead to serious costs to the economy.

Cost savings fear if greenhouse gas targets are scaled back

Watering down the UK’s efforts to tackle global warming would risk wiping out at least £100bn in cost savings even if shale gas production takes off, the government’s chief climate change advisers have calculated.

In a fresh sign of the looming coalition battle over how fast to cut greenhouse gas emissions, a Committee on Climate Change report said there was no reason to ditch plans committing the UK to halve its emissions from 1990 levels by 2025.

“Clearly it is the most cost-effective way to proceed,” said Lord Deben, chairman of the committee, established to advise ministers on how best to meet emission limits set under the 2008 Climate Change Act passed by the previous Labour government.

David Kennedy, the committee’s chief executive, said the £100bn saving estimate, which covers the years to 2050, was based on calculating the cost of putting emissions cuts on hold in the 2020s and picking up the pace of reductions again in the 2030s.

“If you follow that path, what you’re saying is we are committed then to rebuilding our energy system over a very short space of time, say 20 years, and doing that with industries that we haven’t developed to be able to produce low carbon goods and services,” he said.

The emission limits for the mid-2020s, known as the fourth “carbon budget”, were first set in 2011 and are supported by the Liberal Democrats. However, some Conservative party MPs fear they could threaten plans by the chancellor, George Osborne, to promote a UK shale gas industry and build dozens of new natural gas power plants.

Gas plants are cleaner than coal-fired power stations but emit far more of the greenhouse gases scientists say cause global warming than wind farms or other sources of renewable energy.

Critics argue the cost of supporting clean energy and other green measures, due to rise to £7.6bn a year by the end of this decade, also makes the UK less competitive than rival economies abroad.

Low carbon policies are expected to add about £100 to annual household energy bills by 2020 but some energy-intensive industries say green taxes are pushing them to a crisis point.

Ministers have agreed to review whether emissions should be cut more slowly next year, but the Climate Change Act says this can only happen if there have been “significant changes affecting the basis on which the previous decision was made”.

The Committee on Climate Change, which is required to advise on any amendments but cannot veto them, said it had found no such changes “and therefore the budget should not and cannot be changed under the terms of the Act”.

It said there was “no evidence of significant industry relocation” as a result of low carbon policies and reducing emissions in the 2020s offered “significant cost savings” compared with delaying reductions until the 2030s.

“We estimate that the saving could be over £100bn in present value terms under central assumptions about fossil fuel and carbon prices, allowing for the expected impacts of shale gas,” it said in its report published on Wednesday.

Savings could be as high as £200bn by 2050 if fossil fuel prices rise sharply, it said, adding planned emission reductions would only prove very costly if the world backed off efforts to tackle global warming and fossil fuel prices fell to much lower levels than they are now, which it said was “counter to expectations”.