Net-zero Emissions Target: Affordability

Lord Ashcombe Excerpts

Thursday 3rd April 2025 Lords Chamber

[Lord Ashcombe (Con)]

My Lords, it is a pleasure to follow my noble friend Lord Sharma. I agree with his last statement, but maybe not everything else. I am grateful to my noble friend Lord Offord for bringing this important debate before the House today, and I look forward to the maiden speech of the noble Lord, Lord Rees of Easton.

The debate is particularly timely given the economic challenges that the UK faces. Growth forecasts have been halved by the OBR and the Bank of England. Economic growth depends on affordable and plentiful energy supply, but energy in the UK is certainly not cheap. Before I continue, I should declare my interest as an insurance broker for the energy industry, predominantly in America.

The UK accounts for only 0.81% of global emissions, as we have heard, according to the International Energy Agency. In contrast, the top three emitters—China, the USA and India—are responsible for over 50% of the world’s emissions yet show little interest in reducing them. China is rapidly building coal-fired power stations, while the US has a clear stance on prioritising oil and gas production over environmental concerns.

The UK’s industrial electricity prices are 62% higher than Germany’s and more than four times the cost of electricity in the USA. This is putting real strain on our economy.

The UK’s energy mix still relies heavily on hydrocarbons, at 72%, with only 8% coming from renewables such as wind, solar and hydro. Nuclear contributes 7% and biomass, for which I have no great love at all, 13%. The goal of achieving net zero is admirable, but at what cost? There is growing concern that the renewable energy sector is receiving a near-unlimited budget while the hydrocarbons sector is increasingly penalised.

How many truly understand their domestic electricity breakdown? It includes the wholesale cost of electricity, network costs and charges for environmental and social programmes. For April to June, the breakdown is wholesale costs of £387, network costs of £544, and environmental and social costs of £168. The domestic customer will be paying a 43% surcharge on the wholesale price to help meet climate change targets.

When combined, according to the OBR, the green levies for all domestic and industrial users are expected to raise £12 billion in 2024-25, £12.9 billion in 2025-26 and £15.2 billion in 2026-27. These are vast sums, yet green energy accounts for only 8% of our country’s energy usage and 37% of the electricity generated.

Lazard’s Levelized Cost of Energy shows that the lowest-cost sources of energy are onshore wind and solar, and combined cycle gas generation. All face significant challenges. Wind is intermittent, the sun does not always shine and geographical and planning constraints limit its potential. Meanwhile, any further licensing of offshore hydrocarbon production is currently under review. There has of course been significant offshore wind expansion, but it has come at significant cost.

North Sea hydrocarbon production is rapidly declining. The NSTA predicts it will halve by 2030. However, estimates by OEUK suggest that 12.5 billion barrels of oil equivalent may remain. The UK oil and gas demand is anticipated to be 13.5 billion to 15 billion barrels of oil equivalent until 2050. In addition, the massive onshore gas potential in the Gainsborough Trough could have a similar impact to shale in the US, increasing tax revenue and reducing import reliance. Importing gas, especially LNG, is far more polluting than producing our own hydrocarbons, as LNG emissions are more than three times higher than domestically produced gas. Some our remaining heavy industries, such as Grangemouth and Scunthorpe steelworks, are under threat. While it may be too late to save some, acting now to encourage the use of our own resources could prevent further damage and even foster advanced industries, such as the energy-hungry AI sector.

It is good that the UK has been an absolute trailblazer in reducing emissions, but it is clear that leading alone is insufficient when the top polluters are unwilling to act. The UK economy is experiencing stagnation, but there is a way forward. We must reduce costs, cut emissions and provide an opportunity for the country to grow, while creating a sense of optimism and prosperity. The key is leveraging our own resources and finding a balanced, practical approach to energy policy that allows for both environmental progress and economic growth.