Millions of British households are set to be lumbered with the growing costs of Boris Johnson’s determination to make Britain carbon-neutral in the next 30 years.
Economists are warning that taxes and consumer prices are likely to rise to cover the Government’s estimated £1trillion bill after the Prime Minister published the most detailed proposals yet for how the country will achieve Net Zero in the fight against climate change.
As well as clean flights, a shift to electric cars by 2035, and gas boilers out by 2030, there will be a focus on encouraging homeowners to be more environmentally-conscious. That could include incentivising mortgage lenders to prioritise properties with better energy ratings.
The Government says that switching from fossil fuels to clean energy, including wind, new nuclear and emerging hydrogen technology, can ease the reliance on imports and protect families from price spikes. It says 440,000 ‘well-paid’ jobs can be created over the next decade.
Downing Street argues that the economic cost of inaction on climate change far outweighs the financial impacts of making the UK economy carbon neutral over the next three decades.
However, there are growing concerns from the Tory backbenches at the consequences of the push – which economists say is likely to cost £1trillion. The Treasury did not attempt to calculate the cost of Net Zero in its stark 135-page audit published on Tuesday.
Chancellor Rishi Sunak’s officials also warned that making Britain green will have ‘material fiscal consequences’. The Treasury said it expects inflation and higher taxes, estimated that carbon reduction targets will cost £60billion in capital costs alone, and warned that jobs in some industries could be lost abroad if other countries did not move at the same pace as the UK.
So what will YOU need to do to your house to achieve Net Zero? And what will it cost?
In a foreword, to the government document – titled Net Zero Strategy: Build Back Greener – Boris Johnson said the UK would ‘lead the charge’
Boris Johnson wants to push Britain towards new sources of energy for homes, including hydrogen, left, and ground source heat pumps, right
GETTING HEAT PUMPS & HYDROGEN BOILERS
Under the Prime Minister’s Net Zero drive, gas boilers in new homes will be banned from 2025. By 2050, all households should be using a low-carbon alternative – meaning that heat pumps, whether air or ground-sourced, are likely to be the common alternative.
Ground source heat pumps use pipes buried in the garden to extract heat from the ground, which can then heat radiators, warm air heating systems and hot water.
They circulate a mixture of water and antifreeze around a ground loop pipe. Heat from the ground is absorbed into the fluid and then passes through a heat exchanger.
Right now, the cost of installing them can range from £14,000 to £19,000 depending on the length of the loop, and running costs will depend on the size of the home and its insulation. However, some households can receive quarterly payments over seven years under the Government’s Renewable Heat Incentive, which will effectively cover much of the cost.
To get your heat pump working optimally, you may need to install bigger radiators, underfloor heating and other insulation, which could prove disruptive.
Under the Prime Minister’s Net Zero drive, gas boilers in new homes will be banned from 2025. By 2050, all households should be using a low-carbon alternative – meaning that heat pumps, whether air or ground-sourced, are likely to be the common alternative
Ground source heat pumps circulate a mixture of water and antifreeze around a ground loop pipe. Heat from the ground is absorbed into the fluid and then passes through a heat exchanger, and running costs will depend on the size of the home
Users may be able to receive payments for the heat they generate through the Government’s renewable heat incentive. The systems normally come with a two or three year warranty – and work for at least 20 years, with a professional check every three to five years.
Air source heat pumps absorb heat from the outside air at low temperature into a fluid to heat your house and hot water. They can still extract heat when it is as cold as 5F, with the fluid passing through a compressor which warms it up and transfers it into a heating circuit.
They extract renewable heat from the environment, meaning the heat output is greater than the electricity input – and they are therefore seen as energy efficient.
There are two types, which are air-to-water and air-to-air, and installing a system costs £9,000 to £11,000, depending on the size of your home and its insulation.
A typical three-bedroom home is said to be able to save £2,755 in ten years by using this instead of a gas boiler.
Air source heat pumps absorb heat from the outside air at low temperature into a fluid to heat your house and hot water. They extract renewable heat from the environment, meaning the heat output is greater than the electricity input
A hydrogen boiler is potentially a less intrusive and cheaper option than a heat pump. However, hydrogen is not yet ready for use in homes, and it’s unclear when it will be, on what scale and at what price.
An analysis by MailOnline found that estimates range from £1,500 to £5,000.
The main benefit of hydrogen is that produces no carbon dioxide at the point of use, and can be manufactured from either water using electricity as a renewable energy source, or from natural gas accompanied by carbon capture and storage.
The boiler is constructed and works in mostly the same way as an existing condensing boiler, with Worcester Bosch – which is producing a prototype – saying converting a hydrogen-ready boiler from natural gas to hydrogen will take a trained engineer around an hour.
This graphic from the Government’s Hy4Heat innovation programme shows how hydrogen homes would be powered
GETTING ELECTRIC CAR CHARGER INSTALLED
Under the Government’s Net Zero proposals, officials want to ban petrol and diesel cars – vehicles with internal-combustion engines – and force them to buy electric vehicles by 2035.
Installing a charger at home could cost people up to £1,000, with Government grants covering up to £350. This is expected to fall to around £680 by 2040.
Drivers can get up to £2,500 towards the cost of a new electric car, with ministers confirming they will press ahead with plans to force mortgage lenders to include the energy performance of homes in their calculations.
However, Treasury analysis published on Tuesday pointed out that government subsidies such as those for electric cars tend to favour the wealthy, while piling on costs for poorer families.
‘Policies to support the adoption of EVs may disproportionately benefit higher income groups, and the costs of any policies that affect the remaining drivers may fall disproportionately on low-income groups,’ the Treasury’s Net Zero review warns. ‘This could create a trade-off in some areas between incentivising decarbonisation and minimising distributional impacts.’
Officials predict that higher income households are more likely to buy new vehicles, and so take up EVs sooner, while low-income households are likely to be the slowest to adopt EVs as they are the least likely to purchase new cars.
Boris Johnson charges an electric van during a visit to a British Gas training academy in Leicestershire
Though those in higher income groups are more likely to be early adopters, and consequently take on higher costs, while low-income households are expected to continue running ICE vehicles for longer. However, the Net Zero review warns that as ICE ownership declines, the availability and price of petrol and diesel refuelling is likely to change.
‘These changes – assuming all else being equal – are likely to be disproportionately felt by lower income households as well as those who choose to delay switching to EVs voluntarily,’ the review states.
The Treasury also admits that the total cost of EV ownership is unknowable, and will depend on future government policy and factors such as the price of the vehicle, access to finance, usage, maintenance costs, and the cost of charging.
The document adds that with many households, and disproportionately lower income households, purchasing cars on the second-hand car market, ‘understanding how prices on the second-hand EV market will evolve is even more challenging, given that it is a new market’.
Households with cars with internal-combustible engines will be required to shift to electric vehicles by 2035, under the Government’s Net Zero proposals. Installing a charger at home could cost people up to £1,000, with Government grants covering up to £350. This is expected to fall to around £680 by 2040
GETTING YOUR HOME RETROFITTED
The Government wants to improve insulation in social housing and for those in fuel poverty, and wants as many homes as possible to achieve EPC band C – the third most efficient – by 2035.
New homes already have to be built so they use low-carbon heating and are energy efficient, but the Government plans to introduce even higher standards from June 2022 which it says will result in a 31 per cent reduction in carbon emissions compared with current new homes.
The government is also planning to consult on whether it is ‘appropriate’ to prevent new build homes from being connected to the gas grid in England from 2025.
To reach the Government’s target of the majority of homes rated as EPC C by 2035, and 2030 in the private sector, changes will be needed including double or triple glazing, solid or cavity wall insulation and underfloor heating.
According to the Climate Change Committee, the quango formed to advise on tackling and preparing for climate change, semi-detached households can cost £8,590 for external wall insulation, up to £2,480 for cavity wall insulation and £740 for loft insulation.
In the Treasury’s Net Zero review published on Tuesday, they estimated that in non-standard dwellings – anything with walls built from materials other than brick or stone and roofs made of slate or tile – retrofitting costs may be significantly higher.
For example, the current cost estimate for cavity wall insulation of a medium-sized semi-detached houses is £590, but for non-standard dwellings, it can cost £8,430 for partially filled cavity walls and £7,980 for metal or timber framed cavity walls.
According to the Climate Change Committee, the quango formed to advise on tackling and preparing for climate change, semi-detached households can cost £8,590 for external wall insulation, up to £2,480 for cavity wall insulation and £740 for loft insulation
The review warns that listed or historic dwellings and buildings in conservation areas are also more challenging to retrofit and that the costs of retrofitting ‘are likely to be higher than average in order to achieve the same level of energy efficiency’.
Households living in properties 201 sq m or larger could be almost three times as exposed to the Net Zero transition than households living in properties under 50 sq m, Treasury officials also warned.
They also said the average detached home is likely to require double the investment of an average high-rise flat, while households in London could pay more than households in the North East due to variation in wall type and existing wall insulation provision.
Only 23 per cent of London dwellings have insulated walls, compared to 73 per cent in the North East.
THIRTY-YEAR IMPACT ON HOUSEHOLDS
In a stark Net Zero review, the Treasury said it cannot forecast the full cost to households over the next 30 years but warned that making Britain green will have ‘material fiscal consequences’.
‘It is not possible to forecast how individual households will be affected over the course of an economic transition that is expected to take thirty years to complete,’ the document warns, adding there is ‘significant uncertainty over the precise mix of technologies and their costs’.
Officials also warn that the ‘costs and benefits of the transition will pass through to households through the labour market, prices and asset values’, but that these costs ‘will not fall evenly across households’.
In the Net Zero review, the Treasury says it cannot forecast the full cost to households over the next 30 years but warns that making Britain green will have ‘material fiscal consequences’
Real wages and labour market opportunities in firms that emit carbon in their production processes will decline in the next 30 years ‘to the extent that decarbonisation reduces worker productivity’, Mr Sunak’s department warns. The sounding alarm comes while Downing Street makes assurances that going green will create more job opportunities.
The Treasury also expects energy, fuel and food prices to rise in the form of ‘regulation, taxation or abatement activity’ as a result of decarbonisation.
And in the shift away from fossil fuel, officials are warning households and businesses of new taxes in the coming years to fill the vacuum left by the drying up of receipts from fuel duty and vehicle excise duty, which raised £37billion last year.
The transition to electric vehicles would ultimately create a temporary tax vacuum equivalent to 1.5 per cent of GDP by the 2040s which could only be partially filled by carbon taxes, meaning that new revenue-raising measures would be needed.
The Treasury adds that the alternative – using borrowing to pay for the costs – would be unfair to future generations and would not be fiscally sustainable following the impact of Covid restrictions on the economy.
‘The transition to Net Zero will mean changes in the way businesses run and people live in England, Scotland, Wales and Northern Ireland by 2050, which will be different for everyone based on their individual circumstances,’ the Net Zero review goes on.
‘Some of these changes are known, but there remain areas of significant uncertainty over a 30-year transition, with major system-wide decisions to be taken over the next decade on the UK’s future energy mix and the role of negative emission technologies in achieving Net Zero.’
A Treasury spokeswoman told MailOnline: ‘Tackling climate change is essential for our long-term prosperity and today the government announced an ambitious plan setting out our vision for decarbonising across the economy in 2050 while securing 440,000 well-paid jobs and unlocking billions in private investment. The cost of inaction is far greater than the cost of action.
‘As part of that plan, the Net Zero Review looks at the potential costs and benefits for businesses and consumers of the transition to a net zero economy, to ensure that our approach can make the most of the opportunities the transition brings, and support households and businesses where needed.’