Net-zero Emissions Target: Affordability

Lord Stern of Brentford Excerpts

Thursday 3rd April 2025 Lords Chamber

[Lord Stern of Brentford (CB)]

My Lords, the road to net zero is indeed the growth story of the 21st century. The noble Lord, Lord Teverson, rightly reminded us that that was the conclusion of Chris Skidmore’s report. I and many others have argued the same.

The clean is cheaper than the dirty across much of the economy. There is rapid innovation in the new technologies. Better energy efficiency is higher productivity. Cities where you can move and breathe more easily are more productive than those where you cannot. Air pollution kills around 35,000 people a year in the UK and maims and disables many more.

The strong and fruitful investment necessary to realise these gains will itself drive growth and productivity. Our economy desperately needs such investment and the increase in productivity it will bring. With good public policy, most of that investment will be in the private sector. There is no horserace between tackling climate change and generating growth. On the contrary, the former drives the latter.

Let us look at some specifics for the British consumer and dispose of the nonsense that the green transition drives up energy bills. I do not recognise the description given by the noble Lord, Lord Offord. For detail of a more serious analysis, I refer him to the outstanding work of the Energy Transitions Commission, chaired by the noble Lord, Lord Turner, who is here today. All the numbers I use will be referenced from tomorrow on the website of the Grantham Research Institute at the LSE.

An average household today spends around £4,000 a year on energy bills and car running costs. Net-zero measures could save between a quarter and a third of this. Allowing for capital costs, a driver could save up to £400 a year by switching from petrol or diesel to an electric vehicle, an average household could save up to £550 a year through energy efficiency, and installing solar panels could save £300 or so a year. Further, there is substantial scope to cut electricity prices by reducing the overwhelming role of gas in pricing, by spreading transition costs over a longer period and shifting them on to gas, where they should be, and by making markets work better over space and time. The issues here concern affordable finance, facilitating the practicalities of change and lowering the price of electricity as lower-carbon and lower-cost options play an ever-increasing role. These will require clear and strong public policy, but staying with the dirty and costly makes no sense.

Let us look at the job opportunities. Currently, the UK’s low-carbon economy generates more than £80 billion in gross value added per year—close to 3% of GDP. It is projected to grow at 10% year on year, as the noble Lord, Lord Teverson, reminded us, and will likely overtake the important creative and financial services sectors within the next 10 to 15 years. It is a big deal. It already generates around a million jobs, with hotspots in Scotland, Hartlepool, Nottingham, and Redcar and Cleveland. Low-cost, low-carbon energy will be crucial to our future in AI and our competitiveness more generally.

Let us look at energy security and resilience. The UK’s dependence on fossil fuels involves great risk. The 2022 invasion of Ukraine triggered a dramatic spike in natural gas prices, household energy bills more than doubled and many were pushed into poverty. It cost the UK Exchequer around £56 billion in emergency support—close to 2% of GDP. A UK fuelled by wind, solar, hydro and nuclear will have cheaper energy and be much more economically and energy secure.

Let us remember why we must go for net zero. On current policies, the world is heading towards global average temperature increases of 2.5 or 3 degrees centigrade. We are fast approaching 1.5 degrees centigrade and the possibility of tipping points which could make climate change unmanageable. Continuing in this way would likely make many large, heavily populated parts of the world uninhabitable through inundation, intolerable heat, desertification, extreme weather events and disease. We have to keep the science right at the forefront. Hundreds of millions, probably billions, would have to move or perish. We would destroy much of the biodiversity and natural capital on which we depend. The effects would be devastating. Delay is deeply dangerous.

Let us also remember that the UK matters. Although we contribute less than 1% of global emissions, we are rightly seen as a leader. Indeed, we were the first G7 country to commit to net zero by 2050 under Prime Minister Theresa May in 2019. COP 26 in Glasgow—I have been to all the COPs since 2006—in December 2021, under a Conservative Government and led splendidly by the noble Lord, Lord Sharma, who is here today, was a landmark. The Liberal Democrats have long championed the issue and I wrote the Stern review for the UK Treasury 20 years ago as a civil servant under a Labour Government. If we fracture or fail, other countries may back off. Let us not lose the cross-party commitment which is critical for investor confidence and the sustainable prosperity we seek.

The world cannot afford the risks that delay would bring. That is the opposite of realism. The UK cannot afford to pass up the tremendous opportunities that lie in the new growth story of the 21st century.