Britain’s fiscal watchdog – the Office of Budget Responsibility (OBR) – has some good news. It thinks the cost for the UK of getting to zero carbon could be much less than anticipated:
“While unmitigated climate change would spell disaster, the net fiscal costs of moving to net zero emissions by 2050 could be comparatively modest.”
Under its ‘early action scenario’ government net debt would rise by a mere 20% of GDP in the years to 2050 from the current 105%. That almost seems encouraging when compared with the near-30% of GDP increase responding to the Covid pandemic , and the roughly 50% surge which followed the global financial crisis.
Unfortunately, the details are less encouraging. The Global Warming Policy Forum points out that the OBR modelling relies on “the opaque and tendentious cost estimates of the Climate Change Committee (CCC), which are extremely optimistic about the net cost of low carbon policies and thus project correspondingly unrealistic technology deployment scenarios.”
The Forum goes on to charge the OBR with failing to assess the possibility that the indirect effects “could be significantly negative, causing economic contraction that reduces both income and corporation tax receipts”. Which would presumably worsen that modest debt trajectory.
For ordinary Brits, there is more gloom. The official climate change projections already require depressing lifestyle changes like less travel, smaller houses and a fall in meat and dairy consumption. But to keep the debt increase down to the OBR’s 20% of GDP, the UK government must grasp the “fiscal opportunity” of replacing the tax receipts lost by decarbonising, with new carbon taxes. In other words, the sort of taxes which make up more than half of the cost of petrol will need to be transferred to (currently untaxed and subsidised) lower carbon alternatives.
The really worrying thing about all this would be if Boris and crew actually believe that the costs of getting to zero carbon are “comparatively modest”. Because that makes them more likely to experiment with poorly-designed climate regulations and then get shocked when higher costs – public and private – result.
Current talk is that the government is going to increase the rate of national insurance (which is a tax on British workers’ labour incomes) by 2 percentage points to pay for senior care.
Workers of the world take note – your governments are making some expensive commitments on your behalf.