Next month, the 2021 United Nations Climate Change Conference, also known as COP26, will get under way, setting the climate agenda for decades to come, and ahead of the summit, Western leaders have been scrambling to make promises to reach net zero carbon emissions by 2050.
Some economists, however, are warning that in the pledge-making rush, political leaders are making promises they’re unlikely to be able to keep without major economic damage and are not being honest with voters about the huge transformation that’s going to be needed, and the large costs involved, most of which are likely to be shouldered by taxpayers and households.
One hundred and twenty-nine countries and 400 cities have promised to reach net zero emissions by 2050 or before. To meet their goals, policymakers will have to take drastic action and climate action activists hope they will agree on radical plans at the international climate talks in Glasgow next month.
The International Energy Agency has said all new crude oil, natural gas and coal projects will have to be shelved, if the world is to keep the global temperature rise within 2°C compared with the pre-industrial level. Climate scientists say that goal has to be met to stave off the more catastrophic impacts of global warming.
British economist Liam Halligan, among others, questions whether meeting ambitious carbon removal targets are possible without derailing economies already struggling to regain footing in the wake of a pandemic that has disrupted supply chains, roiled energy markets and boosted inflation.
Turbulence on the global energy market, which is seeing the price of natural gas and oil soar, is giving a taste of the wrenching costs consumers and governments will face to make good on net zero promises, he says. “The West will be begging for more fossil fuel while virtue signaling at COP26,” he said in a recent commentary published in the British newspaper, The Telegraph.
Booming consumer demand for goods as economic recovery gets under way is largely responsible for unprecedented energy price increases, but the start of the transition away from coal and natural gas to renewable power generation sources is also contributing, cautions Halligan.
Last week, Britain’s energy regulator, the Office of Gas and Electricity Markets, or Ofgem, said 23% of what households are paying now for electricity goes toward energy transition costs. In Britain, electricity prices throughout September were three times higher than at any time in the last decade and households are likely to see their overall energy costs, including what they pay for natural gas heating and fuel for their cars, increase.
Analysts are warning that British households face a winter of higher bills. Britain’s energy industry is also now warning of a rising risk of winter blackouts.
Spain has warned the European Commission that emission reduction measures “may not stand a sustained period of abusive electricity prices.”
Rising prices are coming at a delicate time for governments as they plan to speed their net zero transition to post-fossil energy generation, which they say will eventually see cheaper prices. Consumers and voters, though, won’t see the benefits of cheaper post-fossil energy for some time — now they’re just seeing higher costs caused by the energy squeeze compounded in some cases by carbon and green taxes.
Policymakers face a trade-off between the high upfront cost of moving quickly toward net zero carbon targets, and the long-term damage to economic growth caused by climate change, if they delay action, say analysts.
Earlier this year the research firm Oxford Economics warned about a disorderly and costly transition to a low-carbon future, but it said in a report that the economic impact of future climate change would be worse and would severely impact livelihoods in a large number of countries — some catastrophically so.
The research firm found that 3 degrees Celsius of warming by 2100 has the potential to reduce the level of global GDP in 2100 by 21%.
Even so, central European countries are already pushing back on European Union plans for a set of new green policies, which will raise consumer bills, and are urging caution. Last week, several of the poorer EU member states, including Poland and Slovakia, opposed proposals put forward by the European Commission to introduce new taxes on polluting fuels and to impose a 2035 deadline to ban the sale of new cars with combustion engines.
Energy prices are expected to rise further in the EU as the cost of carbon permits under the bloc’s carbon emissions trading scheme continues to rise. The rapid rise in energy costs is exacerbating inflation across central Europe.
In September, Poland’s annual inflation rate rose to 5.8%, the highest in two decades, and the country’s central bank last week increased interest rates for the first time in nine years, a move that could retard the country’s post-pandemic recovery.
Hungarian Prime Minister Viktor Orban last week blamed EU green policies for energy price increases. “The price projections for the whole green program proved to be a mistake, and that is why Europe is suffering high energy prices,” Orban said in a video post on his Facebook page.
A handful of national leaders have been critical of what they see as a rush to net zero and a failure, they say, to evaluate the costs associated with energy transition.
Australian Prime Minister Scott Morrison has declined to set net zero emissions or other climate change targets. He’s considering skipping COP26, say Australian officials.