More Climate Change Committee Claptrap

The CCC’s latest supplementary analysis of the Seventh Carbon Budget report doubles down on past errors.

Introduction

Earlier this month, the Climate Change Committee (CCC) published a supplementary analysis of the Seventh Carbon Budget (CB7) that was published last year. This month’s new analysis acknowledged their previous work has been challenged (do they mean this Substack, where we looked at their work here, here and here?) and there is public misunderstanding about what their costs mean and their assumptions.

In the accompanying news release Nigel Topping, Chair of the CCC said, “it’s important that decision makers and commentators are using accurate information to inform debates”. So how does the latest analysis measure up? Have the CCC corrected their errors or have they doubled down on claptrap?

CCC Claims

The most prominent claim in the new analysis is that “the total additional cost of a single fossil fuel price spike of 2022 magnitude is likely to be as large as the total net additional cost of meeting the pathway to Net Zero across every year to 2050”.

They also claim that “in all scenarios, achieving Net Zero was found to be a more cost-effective path for the UK economy than continued reliance on fossil fuels, bringing a net benefit to society.”

This new work assesses what they call the “co-impacts” of the Net Zero transition including health benefits from improved air quality and active travel, warmer and less damp homes, and healthier eating habits. They also analyse the benefits from avoided climate change.

Overall Analysis

The CCC analysis calculates the incremental cost of their Balanced Pathway compared to a baseline scenario that assumes no further action on decarbonisation. It is interesting they do not consider a scenario where we unwind Net Zero legislation, eradicate the EV and heat pump mandates, get rid of carbon taxes, abolish renewables subsidies, restart drilling in the North Sea and lift the ban on fracking. In other words, even consideration of a sensible energy policy is beyond their imagination.

The new analysis begins with the original capital and operating cost estimates from CB7 as shown in Figure 1 below.

Figure 1 - Original CB7 Cost Benefit Analysis

We have covered the flaws in this analysis many times. In summary, they assume electricity from renewables costs much less than the contracts awarded in AR7. Offshore wind in AR7 cost about two and a half times that assumed by the CCC and solar about double.

Most of the savings they assume come from surface transport and most of that from operating costs. In other words they assume charging EVs with this “cheap” renewable electricity will be cheaper than filling cars with petrol. But if the electricity is not as cheap as they assume, then the savings will vanish. What happened to accurate information Mr. Topping?

Moreover, their suggested capex savings also look dodgy. In the original CB7 they assumed a EV’s would achieve cost parity with ICE cars between 2026 and 2028. However, the manufacturer’s recommended price of a petrol-powered VW Golf Life 1.5l is £24,470, and the most basic electric VW ID.3 Life costs £32,990 (or £29,990 with subsidy), some 34.8% (22.6%) more than the petrol model and much higher than the expected cost of an EV. Differentials get even wider for higher specification Style models, 42.8% before subsidy and 31.1% after.

The CCC go to great lengths to justify their use of a levelised cost of energy (LCOE) measure instead of, for instance, the Contract for Difference (CfD) strike prices achieved in real commercial auctions. They say their electricity system costs include raw materials, installation and labour, but exclude taxes and subsidies. But of course, intermittent renewables could not survive or even get built without extensive subsidies.

They also make a rather opaque statement about the cost of capital they assume for their electricity system cost estimate:

“Where LCOEs shown in our advice include costs which are not Green Book-aligned (such as hurdle rates), these do not feature in our electricity system costs.”

In its latest Generation Cost Report the Government suggests the hurdle rate for solar and onshore wind is 7.6%, 8.9% for fixed-bottom offshore wind and up to 11.4% for floating offshore wind. The Green Book hurdle rate is 3.5%. It appears the CCC uses the lower Green Book rate for its calculations which will have the impact of considerably reducing the electricity system costs. Another failure to provide accurate information.

They say CfD prices include additional factors such as commercial risk and revenue considerations. In other words, real projects need to factor in real commercial considerations but these factors are ignored by the CCC.

The CCC are using unreasonably low discount rates and ignoring commercial considerations to produce unrealistic estimates of the cost of renewable electricity. In other words, when the real world intrudes on their ivory tower models, they simply ignore it. We can see their original model is simply claptrap.

Supplementary Analysis of Co-Benefits

The new report than goes on to attempt to quantify co-benefits of Net Zero such as cleaner air, reduced noise, warmer and less damp homes, modal shift and reduced driving and what they term healthier diets. These benefits are then partially offset by higher travel time.

While there will no doubt some air quality benefits from phasing out diesel, we should not overlook the fact NOx and particulate emissions were falling well before we embarked on the Net Zero folly (see Figure 2).

Figure 2 - Reduction in NOx and Particulate Emissions UK 1990-2024

The level of emissions is already lower than the Emission Reduction Commitment (ERC) target for 2029 for both measures. Any further reduction will be more difficult to achieve and the incremental benefits will be much smaller than earlier reductions.

It is unclear quite how walking to work in the rain instead of driving will improve health and wellbeing, nor quite how substituting a good steak with insect protein will be more nutritious.

However, the biggest co-benefit they come up with is £2.7 trillion of undiscounted carbon savings over the period 2025-2050 (see Figure 3).

Figure 3 - Total Costs and Benefits of CB7

It is difficult to understand how they produced this analysis with a straight face. First, they claim that we already experience significant economic losses from climate change. Apparently, climate change damages the economy and imposes additional costs on businesses and households. However, one of the sources they used to justify this statement, the NGFS report on long term climate scenarios used the now withdrawn Kotz Nature paper as the basis for its calculations. The CCC seem to be making up claims of climate damage while ignoring the very real damage being wrought by climate change policies delivering the highest industrial electricity prices in the developed world.

The CCC use a Target Consistent approach to carbon costs which results in carbon costs ranging from £281/t in 2025 to a staggering £409/t in 2050. These values are used to calculate when emissions reduction measures become cost effective for inclusion in their Balanced Pathway. In other words, they use absurdly high carbon costs to justify measures that would otherwise not be cost effective, thus imposing further economic damage. This is how they arrive at the cumulative £2.7 trillion in carbon savings by 2050. In effect, they are claiming that Net Zero saves an amount of money they simply made up to make the measures they recommend appear cost effective. It’s an absurd circular argument.

They say that avoiding further climate damage through shared global mitigation actions is the most significant benefit of the Net Zero. The trouble is, despite the CCC claiming that hundreds of countries have committed to reducing emissions, global emissions are in fact rising (see Figure 4) and the UK at 0.8% of the global total is little more than a rounding error. In fact, global emissions rose by more in 2024 than the UK’s total emissions.

Figure 4 - Annual CO2 Emissions (from OWID)

They say that our efforts to reduce emissions will benefit countries beyond the UK, but that the UK will benefit from the considerable efforts of other countries to reduce emissions. Even if we take the CCC’s estimates of the cost of carbon at face value, there is no evidence we are benefitting from others’ emissions reductions, because they simply are not happening. It is simply claptrap for the CCC to claim we will incur carbon reduction benefits amounting to almost the entire GDP of the country between now and 2050.

It is also worth noting that in their discounted savings model, they discount the savings at just 1.5%, thus increasing the present value of those savings, further flattering their overall cost-benefit analysis.

Conclusions

The Climate Change Committee’s original Seventh Carbon Budget was based on fake numbers. They vastly under-estimated the cost of renewables which means their calculated costs of electricity are far too low. This means the capital outlays are too low and the alleged operating cost savings compared to using hydrocarbons are fictitious.

The CCC are simply ignoring inconvenient truths about the commercial risks of building renewables generators because real world contracts are being struck at prices far above their LCOE estimates calculated using models constructed in an ivory tower in la-la land.

Their estimates of co-benefits are at best weak, and at worst simply trying to justify degrading lifestyles through driving less and eating less nutritious food.

The CCC’s estimates of “carbon savings” are simply laughable. They use extremely high costs of carbon to justify implementing otherwise uneconomic emissions saving measures and then claim the carbon saved is a benefit. But the over-stated alleged benefits are spread across the world. With the rest of the world continuing to emit more carbon dioxide, the benefits will not even be realised.

We are being hoodwinked into the huge costs of Net Zero by even more claptrap from the Climate Change Committee. When CB7 is debated in Parliament later this year, it should be rejected out of hand.

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