The Committee for Climate Change and NESO have similar estimates for the annual cost for Net Zero to be in the range of £40-50bn per year.
Around 25% of energy used goes to homes, so the 30 million UK homes would be on the hook for approximately £375 each, tipping the annual cost from around £1,700 over £2,000. The other 75% of costs will be borne by businesses, industry, and transport, but ultimately people will still pick up the bill so people could see a further £1,125 as a higher cost of living.
UK average earnings per household are £34,000, which equates to £28,000 take home pay. In monthly terms this is £2,300, of which about £140 currently goes on energy, increasing to £170 under these Net Zero assumptions. The other costs to people of £1,125 equate to £94 per month bringing the average cost of Net Zero per house to £124 per month.
As ever this increase is not evenly distributed and the less well off will feel this far harder, fuel poverty is likely to increase, and more will have to decide when to heat their homes.
The impact on business competitiveness must be considered. If business energy costs increase by 22% like household costs, then we could see UK businesses closing and jobs being lost.
These rising costs could contribute to inflation, as energy makes up 10% of the economy. A 20% increase in energy prices might push inflation up by around 2 percentage points. This is likely to be reflected in interest rates which could stay higher for longer.
No wonder that many are questioning whether we are trying to do this too quickly and whether the plans that we have are too expensive and anyway might be unachievable in the proposed timelines.
But…
Relying on fossil fuels could prove even more expensive and volatile in the long run. The longer we delay action, the higher the cost. While Net Zero seems expensive today, technological advancements could make it more affordable. The key question is whether politicians will be honest about both the costs of action and inaction.
