A new report out today from Cambridge Econometrics in collaboration with Pr. Paul Ekins of University College London, shows that meeting the UK climate targets recommended by the independent Committee on Climate Change (CCC) makes clear economic sense for the UK.
Reducing the UK’s carbon emissions in line with these budgets would, by 2030, increase UK GDP by 1.1% in net terms, result in at least 190,000 additional jobs being created across the UK economy and mean that households are financially better off compared to a scenario where little is done to reduce emissions.
The report, commissioned by WWF-UK and based on Cambridge Econometrics’ rigorous modelling of the UK economy, compares a scenario where the UK meets the first four carbon budgets recommended by the CCC (which requires a cut in emissions of around 60% by 2030 compared to 1990 levels) with a scenario where the UK does little to reduce its emissions.
The report finds that the investment in low-carbon infrastructure required to meet the first four carbon budgets would:
• Increase UK GDP by at least 1.1% in net terms and create an additional 190,000 net jobs by 2030;
• Make households better off financially by increasing the real annual income in the average household by £565 (€707) by 2030;
• Improve the UK’s energy security and make energy bills less volatile by significantly reducing the UK’s consumption of fossil fuels and reducing imports of oil and gas by £8.5bn (€10.6bn)/year by 2030;
• Increase Government revenues by £5.7bn (€7.1bn)/year by 2030 thanks to a stronger economy which increases VAT and income tax revenues;
• Improve air quality, with the reduction in emissions from road transport alone meaning that healthcare expenditure could be reduced by £96m (€120m) to £288m (€361m) annually by 2030.
The report finds in particular that households will be financially better off, as higher levels of employment and higher wages that arise as a result of meeting the carbon budgets will more than outweigh the effect of slightly higher energy bills and product prices required to fund the investment in low-carbon infrastructure. The savings from energy efficiency measures in homes, the lower average running costs of cars and slightly lower food prices also help limit consumer expenditure on energy, transport and food.
Paul Ekins, Professor of Resources and Environmental Policy at UCL, said: “This report reflects a robust piece of work carried out by some of the UK’s best macro-economic modellers, using one of the UK’s most scientifically validated models. Its results are very interesting, suggesting that by 2030 the UK can be made better off in terms of GDP and employment by meeting the carbon reduction targets recommended by the Committee on Climate Change and accepted by the Government, than if it had not tried to do so.”
The report is based on conservative assumptions. It doesn’t assume for example that the UK will be exporting low-carbon goods and services. If export opportunities did arise, meeting the carbon budgets could result in greater economic benefits for the UK.
Paul Ekins added: “Other benefits include greater energy security, through lower fossil fuel imports, and reduced air pollution from industry and vehicles. These are policy objectives worth pursuing vigorously. The Government’s task now is to generate through its policies the investor confidence that will enable these projections to be turned into reality.”
The report makes clear that long-term policies must be introduced to attract the significant investments needed in low-carbon infrastructure and that Government policies will have an important role to play in ensuring that the costs and benefits of climate change policies are shared evenly across society.
Nick Molho, Head of Climate and Energy Policy at WWF-UK said: “Economists and business leaders have long stressed that minimising the impacts of climate change on our infrastructure is crucial to guaranteeing the future health of our economy. But this report goes a step further and shows that building a low-carbon economy would, in itself, produce net economic benefits for the UK.”
“Meeting our carbon budgets and doing so in a way that maximises economic benefits for the UK and provides the necessary support to vulnerable parts of society should be a priority for the next Government.”
Jason Anderson, Head of EU Climate and Energy Policy at WWF European Policy Office said: “This study adds to the mounting evidence of the economic benefits of climate action to Europe and its Member States. Perhaps most notable is that the model conservatively assumes stagnant international action, whilst EU carbon prices jump to nearly ten times their current value by 2030. Even then the picture is positive, including in energy intensive industries, which find new opportunities to supply low-carbon sectors.”
“As EU leaders prepare to take decisions on the Union’s 2030 climate and energy framework, they must look to this kind of evidence to break away from outdated notions on how to foster economic development.”