HM Treasury has published the Net Zero Review (NZR), which is an analytical report that uses existing data to explore the key issues and trade-offs as the UK decarbonises. This is against a backdrop of uncertainty on technology and costs, as well as changes to the economy over the next thirty years. It focuses on the potential exposure of households and businesses to the transition, and highlights factors to be taken into account in designing policy that will allocate costs over this time horizon.
As highlighted in the NZR, the overall impact is uncertain and challenging to estimate. Existing estimates suggest that the impact on GDP by the end of the transition is likely to be relatively small, and dwarfed by the costs of global inaction. The economic impact will be uneven across the economy. The scale of the change for some businesses, sectors and regions is likely to be substantial.
As the transition will be dynamic and take place over thirty years, it is not possible to forecast impacts on households and assessments of abatement costs in the future are highly speculative. The net zero transition will also entail a number of technology transitions, and there is significant uncertainty in relation to their costs, although technology costs for some green technologies have shown that projected costs have been far higher than actual costs. The eventual impact will therefore depend on policy choices and the way the economy adjusts over time.
The NZR has not sought to duplicate existing analysis and uses the Department for Business, Energy and Industrial Strategy’s (BEIS) analysis on costs and benefits in line with Carbon Budget 6 and the Net Zero Strategy (NZS). In the NZS, BEIS estimate that the net cost, excluding air quality and emissions savings benefits, will be equivalent to 1-2% of GDP in 2050.