Climate Agenda

Lord Frost Excerpts

Thursday 24th October 2024 Lords Chamber

[Lord Frost (Con)]

My Lords, I thank my noble friend Lord Lilley for securing today’s debate and for his strong support for economic rationality in this area over the years since he voted against the Climate Change Act in 2008.

I draw noble Lords’ attention to my statement of interests in the register: I am a trustee of the Global Warming Policy Foundation. It is one of the few organisations that tries to keep the debate alive on this issue, so it is very good that we have today’s debate.

Today’s debate is a very good sign; I think the net zero consensus is beginning to crumble. In my view, we are not in a climate emergency. Climate change is a challenge we can meet; it is not one that requires us to upend our entire economy and way of life.

This debate is supposed to be about the economy and I want to focus on that. For too long, many people have claimed that net zero is good for growth and prosperity, and we have heard that today. I am sorry, but I believe this is nonsense and I am going to show why.

One reason why I am confident that our current approach is harmful is that it requires many normally sensible people, and perhaps some who are not quite so sensible, to believe in a whole series of economic fallacies for the policy to work. I shall briefly set out some of them. The first is the broken window fallacy. We are supposed to believe the Skidmore report that net zero will make us richer. Of course, spending trillions of pounds on a new energy system has some economic spin-offs and it does get you an asset, just like repairing a broken window funds the glazier and gets you a window back—but your wealth is just the same. In fact, what we are doing today is creating a reduction in wealth: the new asset is worse than the old one. The replacement of the current grid with rickety and expensive renewables is not an improvement; it is a massive reduction in productive capacity—malinvestment of the worst kind. Just think of all the genuinely productive projects that could be funded with the trillions that we are going to spend over the years and how much real wealth could have been created.

The second fallacy is that it is all going to be all right on the night. This is a belief that one day we will just solve the problems—that we will solve the storage problem with hydrogen, hydro, batteries or whatever. It is the view that interconnectors will always work well, that they will never export when they are supposed to import, and that those to whom we are connected will never think their interests come first. I learned from the vaccines saga and France’s threats to Jersey in 2021 that we cannot rely even on our closest friends when the chips are down. This policy is making us deeply insecure.

The third fallacy is that of self-deception, most obviously on prices and costs. In the real world, renewables are simply not getting cheaper and some are eye-wateringly expensive. The existing CfD-funded offshore wind farms have cost over £150 per megawatt hour in current prices this financial year so far. The new projects awarded in AR6 will cost more than £80 per megawatt hour, when, as my noble friend Lord Lilley pointed out, the market price is around £60. And those figures for renewables ignore the subsidy; they ignore the need for back-up and storage. A child can see, surely, that it is not cheaper to build a renewables grid, plus all the back-up, than just to build effective back-up and forget about the renewables.

The fourth fallacy is that jobs are a benefit, not a cost. Net zero proponents paint this glowing picture of hundreds of thousands of new, green jobs. But, if the energy system requires many more people than now, how is that making the country more productive? If you believe that, you must think that we could make ourselves wealthier by sending everyone back into the fields to work the land. We want the fewest and most highly productive jobs possible, like those we already have in the oil and gas industry—jobs which this Government are gradually extinguishing.

The fifth fallacy is that of the infinite availability of resources. In this world, in the net zero world, there is always lots of capital waiting to be used; we always have enough workers; there are no linkages or timing problems for proper sequencing; foreigners are always willing to lend to the UK; and UK consumers are always happy to save instead of consuming. Massive projects, such as insulating every home in the UK or doubling the capacity of the energy grid, can be undertaken apparently without any resource constraints or knock-on effects in the wider economy. To put it charitably, that is not a realistic depiction of the world in which we live.

Finally, there is the industrial policy fallacy. It is the view that the Government know best and that they can pick the technologies, the subsidies and the targets to get us to net zero: the ineffective boilers and heat pumps, the expensive EVs, the windmills—the technology that was last cutting edge in this country under Henry II. I think we can be confident that any project pursued in this way is going to be a drag on the economy; all economic theory tells us so.

I believe in the long-standing Conservative principles—seemingly so uncertainly held in much of my party nowadays—of economic freedom, decentralised decision-taking, incentives for entrepreneurs, and economic experimentation. Yet the net-zero approach that we have chosen is requiring us to junk all that in favour of greater control and restrictions, with Soviet-style production targets—policies that we believe are wrong in any area, except when it comes to net zero. I urge my colleagues on these Benches who support net zero to reflect that, if you are a Conservative and your policy forces you to implement socialism, just maybe it is a bad policy.

The truth is that all this can have only one consequence for the economy, which is to make it less productive and slower growing, as it increasingly is. The only way out is to unwind, invest in productive energy—gas and nuclear, and lots of it—stop picking winners and roll back the subsidies, letting the market decide. I would have more sympathy with net-zero proponents if, as some have been today, they were honest about this. If they said, “This is going to cost you, but we have to do it anyway”, at least it would focus minds and we could have a real debate about whether the ends justify the means and not the fantasy debate that we are currently in, where everything is for the best and everything will turn out right. On net zero, we need a bit more Hayek and a bit less Candide.