February 27, 2025 - 7:00am
Green entrepreneurs have pounced on a report published this week by the Confederation of British Industry on the UK’s Net Zero economy, which it claims expanded by roughly 10% last year, far outpacing the anaemic, sub-1% growth of the country as a whole.
At a time when much of the political discourse revolves around the question of whether the green investment favoured by Energy Secretary Ed Miliband is compatible with the sort of economic growth that Chancellor Rachel Reeves desperately craves, this appears to provide helpful ammunition. For its proponents, Net Zero doesn’t just comprise a significant chunk of Britain’s economy: it also sucks in investment and creates a growing number of well-paid jobs.
“If you spend on something and that thing improves productivity, enhances resilience, and provides you with an asset that delivers long term returns, then yes, you can get richer,” says James Murray, editor of Business Green. One envies Murray’s faith in this green wirtschaftswunder, but sadly the CBI report shows no such thing.
The study looks at the gross value added (GVA) thrown off by a self-defined sector which includes everything from nuclear power plants to waste recycling facilities and wind farms. GVA is a crude measure of output, which has little bearing on the underlying sustainability of an investment. Broadly, it shows where investors are staking their money, which isn’t the same as what benefits the broader economy.
For many years, one of the fastest growing sectors in GVA terms was buy-to-let rental. Before 2008, it was the peddling of credit derivatives and other financial products. Neither of these proved sturdy foundations on which to build the British economy.
The study also glosses over the substantial subsidies and support mechanisms that sustain much of this activity, especially the infamous Drax biomass plant and various wind and solar farms. According to Ofgem, roughly 25% of the average electricity bill comprises “environmental and social obligation costs” — levies added on to support one green initiative or another. It is one of the main reasons why UK industrial electricity prices are the highest in the developed world, and domestic ones are in the top five. This is not helped by the sort of electricity capacity the UK is installing, which is mainly intermittent renewables which require expensive backing-up.
The real debate concerns whether this form of green growth is actually worth having. Stratospheric energy costs are now threatening the survival of the dwindling number of energy-intensive industries left in the UK. Port Talbot has shut its steel-making furnaces, and the Grangemouth refinery has closed. The UK’s car industry is back to levels of output last seen in the Fifties. High costs also deter important emerging industries in power-hungry tech and AI, as well as areas such as electric vehicle manufacturing.
Proponents will argue that subsidies are a small price to pay for kickstarting valuable “sunrise” green industries. But where are these industries? Much of the renewable kit that Miliband is thirsting to install will be imported from China, while the cost reduction story — long the strongest argument for renewables deployment — has gone into reverse. The latest wind auctions produced prices of £55-60 per MWh, 40% higher than those from 2019.
Many believe that if the Government embarks on a race to decarbonise electricity by 2030 — which will require installations at seven times the historic annual rate — these costs will further spike up, rather than down.
The economist Dieter Helm has recalled how Tony Blair once told him politics was about substituting the word “and” in place of “or”: the public had to believe you really could have it all. And it would be nice if this were true in the case of the 2030 goal. But sometimes life is about hard choices. There is little doubt that green investment will increase output in that sector, just as increasing the population generally grows GDP.
More important, though, is what happens to the rest of UK industry. Is it really worth staking everything on a loosely-defined Net Zero sector — still just 3% of the economy — if in doing so you imperil everything else?
Jonathan Ford presents the podcast A Long Time in Finance and writes the Business Adventures Substack.
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SubscribeThere’s something very Cnutian about the Uk’s energy policy attempts to roll-back climate change.
With Indonesia producing over 700 million tonnes of coal a year, it is like Canute where other countries are piling on extra tidal waves for him to try to stop.
Yes, except that Cnut knew what he was doing!
If only!
Cnut did not himself believe that he had the power to roll back the tide: he staged the event to emphasise to his courtiers that even kings do not have the power to control nature.
It appears that our modern government does not possess such wisdom.
That heading is something of an understatement in a week when energy bills are slated to increase again, with the adjacent pain of being notified that Thames Water are increasing bills by 37.5% from April. We are the new Germany in more ways than one.
What a mess all this climate change and green energy is.
Back 45 years ago most of the “problems” being supposedly addressed now were being talked about with different language. Over consumption and pollution not global warming. No one was interested (although Margaret Thatcher did try back in the 80’s).
Interest seemed to spike once some people realised there was lots of money to be made.
And pretty much all of the “solutions” cost a lot, a middle class affectation with EV’s, heat pumps, expensive energy, ridiculous green energy infrastructure and the like. Forcing consumers into costly “mitigation” schemes that leave the lower paid etc in an impossible situation (expanding UL:EZ for example, what a virtue signaling mess).
Over population and over consumption are key drivers. Exporting carbon dioxide emissions to give the illusion of lowering emissions, someone else’s problem.
Pollution, in all its guises, is a major problem. Consumption needs reducing, less global container traffic, reduce food miles, less of a throw away society. More creativity. Solar panels in sensible places as happens in some other countries, not on highly productive land. Look at life time costs not just up front. Are wind turbines “climate friendly” once construction, concrete and a short life span are factored in?
Green washing and being virtuous with ones EV’s and heat pumps sounds great but only a few can reasonably afford this route. Of course these people feel they are doing their bit whilst on their fourth foreign holiday of the year!
Rant over, apologies, this whole agenda really annoys me even though I agree with the bottom line premise that humanity is dangerously damaging our wonderful planet.
Well said!
Further to this, about 15% of properties in the UK don’t have main gas. If they are forced to have heat pumps, the floors will have to be ripped up to put in thicker pipes, some pipes will be in the roof space, some will go through the wall cavities. The cost of this plus redecorating could be £80,000 plus. All-electric would be the only real solution and that would be very expensive to run.
93% of people live in conurbations. So, the 7% will need to continue to travel quite large distances. EVs would seem to be the answer for them but at a cost! We now have affordable homes being built locally – with heat pumps and solar panels but miles away from the nearest conurbation. I asked our local councillors if more buses would be running. Answer: “You’ll be lucky!” So more cars for people who can’t afford EVs.
Meanwhile, in the big city (Cardiff), all roads have been split in half for cycle lanes – which almost no-one uses. Road crossings have been repainted in rainbow colours. Electric buses are everywhere. We have had refuse collections reduced, there is more fly tipping everywhere and the council has bought new electric refuse trucks, with a plan to switch all council vans to electric.
Back to the country again. As a retiree, I go for long walks. Suddenly, all around me the existing trees have become rotten and are being cut down for logs. Huge areas of trees are being removed (suddenly rotten). Log fires are roaring and more people are switching. Many people in my area switched to biomass about 10 years ago.
The whole thing is a terrible mess. Mr Miliband does not want to do things correctly, with discussion. He wants it now with the vague promise of ‘green jobs’. Can somebody please tell me what these are? Could I have one? But I would have to work from home because I would have mental problems if I had to travel to work.
Green propaganda is damaging everything.
Plants and trees breathe carbon as you and I breathe oxygen. Rather than trying to live from wind and sun, we could far more cheaply and effectively reforest parts of North America and Asia’s vast plains area.
Arboreal xylem would soak up atmospheric CO2, eventually returning the carbon from fossil fuels back to the earth.
That would be considerably more effective than burning massive amounts of oil to manufacture solar panels, or to erect three hundred foot high windmills.
We won’t run out of oil. There are billions of years of it under the earth and the oceans. There is no more efficient fuel source known to man than 42 gallons of Brent Sweet Crude.
And all of humanity’s huge improvements over the last 140 years, from free market democracies to electricity to modern medicine to abundant food and heated shelter, are all derived from fossil fuels.
They’re a gift from God.
One of my favourite quotes is that “Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.”
The drive for Net Zero in the UK seems to be proceeding down this road with remarkable speed. If things are not yet as bad as in Washington, the ability of corporate lobbyists to hijack well meaning agendas in Whitehall is impressive.
One of the latest examples is the attempt to bounce the Department of Energy and Net Zero into guaranteeing prices for i.e. subsidising long term hydro energy storage projects. Since a cheaper alternative (batteries) is emerging this will result in significant losses to either the taxpayer or, more likely, the energy consumer. By the mid 2030s this will push up still further energy prices.
The tactics deployed to achieve this result will be familiar to students of Washington. In addition to “cultivating” politicians, they have included consultants paid to produce disingenuous reports which studiously ignore the elephant in the room and even – according to Private Eye – infiltrating employees into the senior civil service in an attempt at “agency capture”.
The good news is that, despite initial success, these particular proposals appear to being watered down by the permanent civil service and OFGEM. There are times when the Blob is right and the lobbyist / political class is wrong. It will be interesting to see which group wins in this instance.
“Since a cheaper alternative (batteries) is emerging..” Sadly, despite new news stories almost every week for the last decade or so reporting on new, better, cheaper battery technologies, no viable products actually appear. There is still no alternative to Lithium- based battery tech on the horizon.
Yes, I follow technology websites and we heard about this for the last 10 years and always with caveat “it is 5 years from mass production”.
The same with self driving cars which, according to Elon Musk, should had happened 5 years ago.
What about 5G mobile?
I have two SIM cards and in many parts of London coverage is non existent and overall performance much worse than 4G 5 years ago.
Lithium batteries have been getting cheaper by on average 18% pa. They have also been getting longer lasting and less prone to bursting into flame. As a result, they have already replaced Pumped Hydro as the obvious way to store energy from wind plants for the evening peak in demand. Production by TESLA, BYD etc is increasing dramatically. It is for this category which OFGEM has opposed the subsidies of hydro plants proposed by lobbyists and DENZ ministers.
I agree that we have yet to develop at commercial scale reasonably priced new technology for “long duration energy storage” ie to store energy for days or weeks to cope with intermittent wind shortages but progress is being made. I expect the big surge in R&D in the early 2020s will produce a new generation of batteries by the end of the decade.
Overall, however, if one compares cost projections from ten years ago, lithium batteries have experienced the dramatic trend declines as projected. I agree thee is a lot of hype but it is equally misleading to imply that nothing has changed. There is a big difference between battery based energy storage and e.g, hydrogen or Carbon capture which have yet to come through.
Remember these are 2012 prices:
“The latest wind auctions produced prices of £55-60 per MWh, 40% higher than those from 2019.”
The real price is much higher.
Yes, that’s correct. These are also wholesale prices. Consumers have to pay for distribution and transmission costs as well as the 25% of bills on green levies.
Climate change is a scam. End of. No ifs buts or maybes. CO2 is not a problem ( it is corrolated with global warming periods but causation is the other way round. It is released from oceans in warming periods and shows up with an 800 year lag after warming cycles. See Patrick moore, fake catastrophes and threats of doom. If the climate warms slighly it is not a problem and probably happening as part of a natural cycle. Its an unbelievable scam and we have to wake people up to it
Will Ed Miliband ever pay a price for his mad schemes?
Something fundamentally contrary to the laws of physics and economics is bound to fail, as it has, taking the uk economy with it.