December 1, 2022 - 7:00am

Earlier this month, world leaders gathered in Egypt for the COP27 summit to discuss issues surrounding climate change. At the conference there was much talk of so-called Net Zero: the idea that we should reach a point where the amount of greenhouse gases being pumped into the atmosphere is cancelled out by the amount of greenhouse gases the atmosphere can absorb.

Numerous world leaders are targeting Net Zero by 2050, which would require enormous changes in the way we live and consume. For example, as part of these plans, leaders want to phase out vehicles that use fossil fuels, meaning none can be sold after 2038. Given how reliant we are on these vehicles for both personal transport and supply chains, this would mean huge disruptions to the way we live — and, potentially, to our standard of living.

Net Zero policies are enormously popular with the media and political elites, but this enthusiasm seems to have, thus far, shielded the idea from scrutiny. That looks set to change. A poll run by YouGov shows that 44% of the British public support “holding a national referendum to decide whether or not the UK pursues a net zero carbon policy”. Only 27% opposed. Excluding the “don’t knows”, 62% of voters support such a referendum.

Discussions of such a referendum are taking place against an unprecedented energy crisis. And while the immediate cause for the crisis is the war in Ukraine and the associated sanctions we have imposed on Russia, the reason that we are so reliant on foreign gas imports is because we have ceased using domestically sourced coal. Some of this coal has been replaced with renewables, but renewables tend to be unreliable and contingent on the weather. As a result, energy grids like Britain’s that rely heavily on them always require large amounts of natural gas as a supplement.

As the problem worsens, expect this to be more widely discussed. Already we see #netexit trending on Twitter, referring to the need for a referendum on the policy. Such a vote would be a godsend for populist politicians and commentators, who would have ample opportunity to skewer previously unchallenged experts.

Scratch the surface and it is easy to see the problems with the Net Zero narrative. Take the example of a ban on fossil fuel vehicles. Net Zero’s proponents assure us that these will be replaced with electric vehicles. Since many of us have been exposed to Teslas and their various clones, this seems intuitively plausible. But a dig into the data suggests otherwise.

The chart below shows the amount of copper, nickel, cobalt, and lithium that would be required to achieve Net Zero goals. While the targets for copper and nickel may be somewhat feasible, the targets for cobalt and especially lithium look far from realistic. Indeed, even with the very limited numbers of electric vehicles currently being produced, the price of lithium has risen from 35,000 CNY per ton in 2020 to around 580,000 today — an increase of around 1,560%.

Sources: IEA; Schwerhoff and Stuermer (2020); US Geological Survey; IMF staff calculations.

It is calculated that, if we pursue Net Zero policies, the amount of lithium mined in 2032 will be more than the amount mined in the seven years between 2015-2022. The Belgian research university KU Leuven studied the issue of lithium supply and concluded that there is “not enough lithium to meet Europe’s Net Zero goals”. 

As the energy crisis worsens, and rabble-rousers push the #netexit line, expect a huge public debate on this issue. When that happens, it is likely that many Net Zero proponents, who have never been challenged on matters of substance, will not come across as especially convincingly. 2023 could be the year of #netexit, and it could well start here in Britain.

Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics