A single fossil fuel price shock like the one seen in 2022 could cost the UK economy as much as the entire transition to net zero out to 2050.
That’s the call from the Climate Change Committee, which says the financial hit from volatile fossil fuel markets can rival the total additional cost of decarbonising the economy.
The findings come in a new report designed to support the CCC’s advice on the UK’s Seventh Carbon Budget.
The committee tested its conclusions on costs and energy security against multiple scenarios.
In every case the analysis found that moving to a low carbon economy is cheaper for the UK than remaining dependent on fossil fuels.
The CCC said the economic damage from just one major fossil fuel price spike similar to the surge triggered by Russia’s invasion of Ukraine could match the total net cost of reaching net zero. All of this being brought sharply into mind now as oil tops $100 a barrel as the Iran war rages on.
That conclusion strengthens the committee’s argument that energy security and climate policy are increasingly intertwined.
Nigel Topping chair of the Climate Change Committee 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 report expands on the committee’s proposed “Balanced Pathway” to net zero which was presented to government earlier this year.
That pathway sets out how the UK could cut emissions while managing costs across households industry and the wider economy.
According to the analysis the benefits of the transition significantly outweigh the costs.
For every £1 spent on reaching net zero the report estimates the UK could see between £2.20 and £4.10 in economic benefits.
The largest gains would come from avoiding climate related damage which the CCC estimates could save between £40 billion and £130 billion by 2050.
The report also highlights improvements in the efficiency of the future energy system.
Energy losses across the system are expected to fall by around half compared with today.
Those losses currently cost the UK economy around £60 billion a year but could drop to roughly £30 billion annually in a net zero energy system.
The committee also pointed to wider health and social benefits.
Cleaner air warmer homes and healthier lifestyles linked to changes in transport and energy use could generate between £2 billion and £8 billion a year in additional benefits by 2050.
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