Soaring power prices have fermented opposition to net-zero targets, so can lower energy bills and climate mitigation be compatible?
The UK is in the grip of a fierce cost-of-living crisis. In May, the country’s inflation rate hit a 40-year high of 9%, and although the current crisis is global, the UK has been particularly hard hit.
Skyrocketing energy prices are coalescing with a yawning supply-chain shortage and deepening food insecurity, all of which is intimately connected to the war in Ukraine and two years of pandemic insecurity, as well as Brexit and recent tax hikes.
As reported in the Guardian, the cost of basic goods and services for the average two-child family has risen by £400 ($695) a month, and two weeks ago a top energy boss warned that nearly 40% of UK households could face fuel poverty by October.
Amid this escalating situation, there have been calls for the scaling back of decarbonisation policies, to ease the burden of fuelling the nation.
But is climate-saving policy incompatible with an economic crisis? Or can climate mitigation go hand-in-hand with the alleviation of poverty?
And if the UK, often seen as a bastion of relative climate wisdom among more oil-dependent Western countries, sees its climate action eroded, what will that mean for the rest of the world?
The UK’s climate policy as it stands is, at least in relative terms, an ambitious commitment to net zero by 2050. But the crisis has shifted Prime Minister Boris Johnson’s focus towards ramping up North Sea oil and gas production, a move intended to reduce energy reliance on Russia, even as he reaffirms his climate commitments.
In late May, the UK government announced a £15bn support package to cut household energy bills. The package will be part funded by a temporary levy on existing oil and gas firms, whose profits have soared thanks to the crisis. At the same time, however, the package also introduces a new investment allowance to encourage companies to conduct oil and gas extraction in the UK.
Bob Ward, policy and communications director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science (LSE), says it’s too early to tell what material impact the current crisis will have on the UK’s climate-mitigation efforts. But he notes that the looming possibility of a recession “may lead the government and consumers to reduce investments required to accelerate action”.
Ward also believes the narrative may be co-opted by climate sceptics.
“This may be a bigger risk if misinformation campaigns successfully fool consumers and policymakers into wrongly believing that the current crisis is caused by climate policies,” he says.
Such machinations are already whirring away, from claims by Net Zero Watch (a campaign by a prominent UK climate-sceptic think tank), to former Brexit party leader Nigel Farage’s new ‘Power not Poverty’ campaign, which calls for a referendum on net zero.
In contrast, a 2022 analysis by CarbonBrief suggests the UK’s energy bills are actually nearly £2.5 billion higher than they would have been had certain climate policies not been scrapped by government over the past decade.
Analysts also point out that even as a quarter of the UK’s electricity is generated by renewables, fossil fuels (namely gas), which are the most expensive generator in the grid, are setting the price of energy.
Fergus Green is a lecturer in political theory and public policy at UCL, who specialises in climate policy. He says that while commentators are calling for expanded oil and gas exploration, such a move would have no immediate effect on energy prices.
“The fossil-fuel industry is using the current cost-of-living crisis to say what we need to do is explore more and drill more oil and gas,” he says. But “new oil and gas projects will take years to be up and running, so they’re not going to do anything to relieve the current crisis.
“What they will do is keep the economy wedded to oil and gas in the longer term, which we know is volatile.”
Sam Fankhauser, a professor of climate change economics at the Smith School of Enterprise and the Environment, Oxford, UK, agrees.
“These things would take years to come on stream,” he says. “There is a real risk therefore that they would become stranded assets, i.e. they come on stream just as we get out of fossil fuels.”
As for ramping up extraction from existing assets?
“It’s fine to pump more oil and gas in the short-run from existing wells,” Fankhauser says. “But… the total carbon budget is fixed, so what we emit extra now will have to be saved later.
“So, the implication is, we will have to accelerate the zero-carbon transition. Policymakers have to decide whether that is an attractive trade-off.”
The UK’s Climate Change Committee, the country’s independent statutory body on climate change, warned in a recent letter to Business Secretary Kwasi Karteng that increases in UK extraction of oil and gas would have, at most, a “marginal effect” on prices.
Many energy experts argue that a renewable economy, by contrast, would be more price-stable and cost-effective in the long term. Of the wind, solar and other renewables that came on stream globally in 2020, 62% were cheaper than fossil fuels, according to a report by IRENA.
And according to Sugandha Srivastav, also a research associate at the Smith School, renewable electricity is inherently more reliable, from an international point of view.
“While the fuel source for oil and gas is controlled by OPEC [Organization of the Petroleum Exporting Countries], the ‘fuel’ for renewable energy is free, abundant and relatively predictable,” she says.
Ward adds that “production of oil and natural gas in the North Sea is declining, as it is a mature basin”.
“The long-term clean-energy security solution is to push on with the net-zero agenda, and be serious about replacing all new cars with EVs, going renewable, pushing hydrogen,” says Fankhauser. “This will reduce our vulnerability to fossil-fuel price spikes and dependence on countries producing fossil fuels.”
But while building up the renewable economy should bolster energy security and climate efforts in the long-term, the immediate struggle is deeply real. So, can short-term policies alleviate the cost crisis and protect Britain’s climate commitments?
“The best way to help consumers and businesses that are suffering from rises in energy prices is to improve energy efficiency,” Ward points out.
“Energy-efficiency measures [like loft and wall insulation] can be implemented relatively swiftly and save money immediately,” adds Fankhauser. “Onshore wind has a decent pipeline that just awaits regulatory unblocking; electric vehicles are cleaner already with the current electricity-generation mix and as cheap to run.
“But they need upfront capital, so we need a financing solution.”
In fact, initiatives to improve housing insulation are a core part of the UK’s net-zero strategy – about 15% of the UK’s total emissions come from private homes, mostly from boilers burning gas for hot water and heating.
This is a key concern for Australia, too. Australia’s energy-efficiency ranking has dived over the last decade in comparison with other nations. It ranked 18th out of 25 nations in the 2022 ACEEE energy efficiency scorecard – the UK, by comparison, ranked 2nd.
And while the UK is one of the nations hardest hit by the energy crisis thus far, the same pressures are swelling around the world, including in Australia. On May 26, the Australian Energy Regulator lifted standard power prices by as much as 20% for some customers.
I ask Green whether he thinks the upswell of anti-net-zero sentiment spurred on by this crisis in the UK will be mirrored in other nations.
“I think there are forces that will use the cost-of-living pressures to argue against the climate agenda,” Green says. “But in places like Australia, the US, Canada, those forces are already very active.
“In the UK, those forces have been relatively quiet historically, but they’re mobilising now. So, I think this is going to grow in the UK from a relatively low base, whereas in other countries it might grow, but they’ve already had this sentiment.”
How a newly minted Australian Labor government will balance the cost-of-living squeeze with the climate mandate it has received remains to be seen. But in perhaps a foretaste of what’s to come, incoming energy minister Chris Bowen recently blamed the crisis, at least in part, on the outgoing government’s failure to bolster renewables in the system.
In a speech at the Net Zero Delivery Summit in London in early May, the UN climate envoy and former Bank of England governor Mark Carney issued a stark warning against allowing the energy crisis to erode climate efforts. “We know the climate doesn’t care why emissions happen, only how much occur,” he said. “The more we emit now, the more radical action will be needed later.”
Amalyah Hart has a BA (Hons) in Archaeology and Anthropology from the University of Oxford and an MA in Journalism from the University of Melbourne.