Labour and the Billion-Dollar Question: The Cost of British Decarbonization

Darren Jones, the Shadow Chief Secretary to the Treasury, admitted that the decarbonization of the British economy will cost "hundreds of billions" of pounds in the long term. This prompted criticism from the Conservatives. Speaking at a public event in Bristol, Jones discussed Labour's "Green Prosperity Plan," initially set at £28 billion annually, which has since been cut to £5 billion per year. When asked whether £28 billion annually would suffice to decarbonize the British economy, Jones replied: "No, that is tiny. We need hundreds of billions of pounds." The Labour MP emphasized that he was mainly referring to long-term investments from the private sector, supported by government subsidies. The Conservative Party seized on this comment, with Laura Trott, Chief Secretary to the Treasury, questioning which taxes Labour would raise to fund its green plan. Trott criticized this discrepancy between public portrayal and internal assessment of costs as a matter of trust. Back in 2019, then-Chancellor Philip Hammond warned that the cost of the "Net Zero" goal would exceed £1 trillion. However, the transition to a clean economy requires upfront investments, with later savings. The Office for Budget Responsibility estimated in 2021 that the cost of achieving "Net Zero" by 2050 would be around £1.4 trillion, offset by savings of £1.1 trillion. The Climate Change Committee projected a net benefit of 0.5 percent of GDP by 2035. James Alexander from the UK Sustainable Investment and Finance Association underscored the importance of private investments in this transformation process. These are crucial for a sustainable economy and the creation of new jobs. A report by the Grantham Research Institute at the London School of Economics forecasts that the costs of climate damage without effective decarbonization could rise from the current 1.1 percent of GDP to 3.3 percent by 2050. Bob Ward, Policy Director at the Grantham Research Institute, added that investment in decarbonization is crucial to avoid future damage amounting to billions. A Labour spokesperson stated that their green plan is "fully funded and fully costed," partly through a tax on the oil industry. Labour's "Green Prosperity Plan" includes £23.7 billion in investments in the next parliamentary term, mostly funded by a windfall tax on oil and gas companies and through loans.