Climate Change: Economic Impact

Treasury – in the House of Commons at on 5 September 2023.

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Photo of Nadia Whittome Nadia Whittome Labour, Nottingham East

What assessment he has made with Cabinet colleagues of the potential impact of climate change on the economy.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The Treasury’s 2021 net zero review noted that unmitigated climate change damage has been estimated to be the equivalent of losing between 5% and 20% of global GDP each year. The costs of global inaction significantly outweigh the costs of action, and McKinsey estimates that there is a global market opportunity for British businesses worth £1 trillion.

Photo of Nadia Whittome Nadia Whittome Labour, Nottingham East

A recent report from Carbon Tracker found a huge disconnect between what scientists expect from climate change and what our financial system is prepared for, with flawed economic modelling leading pension funds and others to seriously underestimate the risks. Meanwhile, Energy UK warns that we are lagging behind on green energy investments. Surely the Minister agrees that to revive our economy and avert climate catastrophe we must rapidly phase out fossil fuels and invest in a green new deal to reach net zero.

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

It is important to point out that we are the fastest decarbonising economy in the G7. Since 1990, we have decarbonised by 48% while growing our economy by 65%, but the hon. Lady is right: this will take a balanced approach involving both public spending and private investment, including pension fund investment. The recent pension fund reforms, for example, should unlock some new assets for green infrastructure.

Photo of Wera Hobhouse Wera Hobhouse Liberal Democrat Spokesperson (Transport), Liberal Democrat Shadow Leader of the House of Commons, Liberal Democrat Spokesperson (Energy and Climate Change)

I agree with the question about the Carbon Tracker report. It has found that policy decisions are being based on 1990s literature. That is 30 years old. Will the Chancellor review the data and the thinking that the Government are using to make sure that all strands are in line with the climate science of the 21st century?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

The data that I look at shows that last year 40% of our electricity was generated from renewables. That is an amazing achievement, but we are alive and present when it comes to decarbonising our economy. We have great plans and we are building on our great track record. We will continue to do that.

Photo of Steve Tuckwell Steve Tuckwell Conservative, Uxbridge and South Ruislip

Thank you, Mr Speaker. Does my hon. Friend agree with my Uxbridge and South Ruislip constituents that Mayor Khan’s ultra low emission zone expansion hits families and businesses without any significant environmental benefit?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

Let me welcome my hon. Friend to his place. He has wasted no time whatsoever in advocating for his constituents against a Labour tax that is hitting households and businesses in his constituency and throughout the south-east. It is a massive tax bombshell at a time when families just do not need it. It is simply not right, and we would urge the Leader of the Opposition to tell his Mayor of London to stop it.

Photo of Richard Fuller Richard Fuller Conservative, North East Bedfordshire

The shadow Chancellor has said that she will not rule out mandating the use of pension fund money for the pet schemes that the Labour party thinks will achieve net zero, putting at risk the savings of many pensioners in this country. What does my hon. Friend think the impact of that will be on the British economy?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

Pension funds have a fiduciary responsibility to deliver a financial return but also to be mindful of the values of their pensioners. I have every confidence that pension funds will continue to invest in line with the risk that is presented by climate.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury), Shadow Minister (Women's Health and Mental Health)

This Tory Government effectively banned new onshore wind, which is vital for net zero, energy security and getting bills down. We now learn this could change because one fine group of Tory rebels is shouting louder than another group of Tory rebels. There is no leadership, just a Government led by their Back Benchers. Can we finally get an answer from the Government on whether they will dither and delay or join Labour in leading the way and acting on onshore wind?

Photo of Gareth Davies Gareth Davies The Exchequer Secretary

Onshore wind has an important part to play, and we are already deploying 14 GW of energy from onshore wind. The cost of onshore wind has come down significantly. It is one of our cheapest energy sources. The hon. Lady does not have long to wait for the Energy Bill, which we are considering later today.