If the UK fails to reach net zero emissions and continues to rely on high levels of gas consumption, it could face significant financial consequences, the government’s independent forecaster has warned.
In its recent report, the Office for Budget Responsibility (OBR) presents a scenario where the country’s reliance on gas remains unchanged and recurring global gas price shocks occur every decade, similar to the events of the past year.
In this scenario, if fiscal policy responds to protect households and businesses from the resulting retail price increases, the shocks could cost the Treasury between 2 and 3% of GDP per year.
Taking into account additional debt interest costs and the impact on economic activity, such recurring gas price spikes could add approximately 13% of GDP to public debt by 2050-51, the OBR estimates.
This financial burden is twice as much as the estimated cost of achieving net zero emissions by the middle of the century, the report concludes.