Thursday 7 December 2023

We will have to rethink decision-making for net zero, says leading economist

We will have to rethink decision-making for net zero, says leading economist

Net zero investment is nowhere close to what it should be.

This is what Vicky Pryce, Chief Economic Adviser and board member at the Centre for Economics and Business Research (CEBR) told us in this week’s Net Hero Podcast.

‘The general prognosis is that unless we spend between £300 billion and £500 billion a year, globally, on doing something about both mitigating and also adapting to climate change, then we're not going to get anywhere. And we’re nowhere near that.

‘And because of COVID, because of the energy crisis, the debt to GDP ratio in most countries has increased very significantly.

‘So is there going to be enough headroom? But also the costs of nuclear, for example, or offshore wind has gone up. So whatever you were expecting to pay then, the costs are rocketing.

‘So there are serious concerns about whether some of the things we were hoping to reduce, [such as] our reliance on fossil fuels, may just not happen or not prove as effective as we want to.’

She said that the government needs to help consumers in switching to sustainable technologies.

‘When you realise that doing something good costs you quite a lot because, yes, you're going to get some benefits over the longer term but what you have to fork out in the short term is quite a lot.

‘So the government needs to intervene and support it and there is a lot of interest in getting that government help.

‘Now, we've seen a programme, for example, in Germany that started, which is a little bit like our green installation thing here, which ran out of money immediately because everyone applied for it.

‘It suggests that people want it, they would like to do something about it. If they get the help, they will do it.

‘But if you're constrained, you have a cost of living crisis, the last thing you can do for the short term is spend money on something which might have an impact in the future. So it needs to be made more [cost effective] and I'm afraid the cost to the government is going to remain quite high in terms of supporting those activities.’

Vicky told us that the working class has been suffering the most with the energy crisis.

‘The pain has been felt at the lower end of the income scale. But of course the government does subsidise and does, through the benefit system, support those at the lower income brackets.

‘But here in the UK, we seem to pay a higher price for electricity. We have a very weird system in terms of how we price it.

‘Also, energy costs for businesses are considerably higher here than is the case in Europe and certainly considerably higher than the US, where they are basically self-sufficient.

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Written by

Garima Satija

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