The cost-of-net-zero crisis: How can business help the Government balance the competing energy agendas?

In October 2021, the UK Government published its Net Zero Strategy. Setting out policies and proposals for decarbonising all sectors of the UK economy, it was a clear step on the way to achieving net zero greenhouse gas emissions by 2050. It was followed by another pivotal green moment, as governments, policymakers and businesses descended on Glasgow for COP26 in November.

It was clear that the Government was determined to make achieving net zero one of its defining policies. 2022, however, has seen the conversation switch to how the UK can secure energy independence and security, as the invasion of Ukraine has caused Governments to suddenly reconsider their energy supplies.

The Government’s British Energy Security Strategy is the first step in responding to the question of energy security; it is an ambitious plan to quickly expand domestic nuclear, wind, solar, hydrogen, oil and gas. But while it gives with one hand it takes with the other. Renewed investment in North Sea oil and gas, and potentially in controversial extraction methods, including fracking, undermine the commitment to net zero made just six months ago. As a result, the Government can expect further criticism that it is not doing enough to achieve its climate ambitions.

The pressures surrounding energy security have come amidst reports that the annual cost of achieving net zero will be £6.8 trillion until 2050 and as some Government backbenchers begin to argue that the cost is too high, particularly in the context of a cost-of-living crisis.

In March, the Public Accounts Committee criticised the Government for having “no clear plan for how the transition to net zero will be funded” or “how it will replace income from taxes such as fuel duty”, and “no reliable estimate of what the process of implementing the net zero policy is actually likely to cost British consumers, households, businesses or government itself”.

The local elections in May will be the first test of public sentiment on this issue, albeit any insight will likely be muddied by the continuing ramifications of ‘party-gate’. In particular, analysts will be looking to the ‘red-wall’ seats in northern England – winning these long-standing Labour seats in 2019 provided the basis of Boris Johnson’s landslide election victory, but it is these communities that will be hit hardest by the cost-of-living crisis.

The Government is facing a balancing act on energy, between security, the cost-of-living crisis and net zero – not to forget the intricacies of domestic and internal Conservative politics.

But how can businesses assist government and ensure that the policies which emerge balance these competing agendas?

Be vocal if you can offer a solution that helps the Conservatives navigate this agenda

There is a not insubstantial risk of the green agenda becoming the ‘new Brexit’ – an issue that divides the Conservative Party and begins to sap the Government’s authority.

The Net Zero Scrutiny Group of 58 Tory MPs says that while it accepts the fundamental facts of the climate emergency and the need to reduce emissions, the Government’s net zero plans would impoverish working people, “making them colder and poorer”.

Meanwhile, the Conservative Environment Network, which promotes decarbonisation, has a membership of 133 MPs.

Businesses that have insight or ideas for navigating the competing demands of decarbonisation and the cost-of-living crisis should be taking those suggestions to Government now.

The fear of division within the Party, continuing criticism from external sources such as the Public Accounts Committee, and potential electoral punishment from hard hit voters, will make ministers and officials receptive to any ideas that could help them find a path in these politically and economically treacherous times.

The deal on net zero is not quite done. As the Government battles with rising energy costs, the implementation of the British Energy Security Strategy, and criticisms of its economic response in the Spring Statement, its commitment to net zero remains finely balanced.

Now is the time for businesses to step in and refocus minds.

If you would like to discuss how your business should look to engage with Government on achieving net zero, do not hesitate to get in touch with the Brands2Life Public Affairs team. Email [email protected] to arrange an informal conversation.

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