Treasury leak exposes rift between Johnson and Snack over the costs of the carbon-neutral economy | green economy

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Secret documents leaked to the Observer reveal an unusual rift between Boris Johnson and his adviser, Rishi Sunak, over the potential economic impacts of moving toward a carbon-neutral economy, with only weeks left before the crucial COP26 climate summit.

As Johnson prepares to put the UK at the head of global efforts to combat climate change and reduce greenhouse gas emissions as host of the Glasgow COP26 meeting, documents show the Treasury is warning of serious economic damage to the British economy and future tax increases if the UK overspends on green investment. or misdirect it.

Environmental experts said the “half-baked” and “one-sided” net-zero treasury review provided only costs of working on emissions, rather than benefits, such as green jobs, lower energy bills and avoiding the catastrophic impact of global warming. They said the review could be a “weapon” by climate change deniers around the world prior to Cop26, undermining Johnson’s attempts to lead climate leadership on the world stage.

Internal Treasury documents say that while there may be economic benefits to British companies from swift and appropriate climate action, there is also a risk that economic activity could shift abroad if companies find that their costs are more than those of their competitors abroad.

The leaked papers are understood to have been produced to accompany a slide presentation that was secretly presented to key groups outside government last month. The documents state: “The investment required to decarbonize the UK economy is uncertain but could help improve the UK’s relatively low levels of investment and increase productivity.

However, more green investment is likely to attract diminishing returns, reducing the positive impact of increased investment on GDP. Some green investments can replace other, more productive investment opportunities. If more productive investments are made early in the transition, these risks may be exacerbated later during the transition.”

On the risks of additional costs to businesses from green initiatives, the documents say: “Climate action in the UK could lead to an offshoring of economic activity if it directly increases costs, and production in countries with less stringent climates has more profitable policies.”

In terms of the financial implications, the documents say the cost of moving toward net zero could mean tax increases due to “the erosion of tax revenue from fossil fuel-related activity.” They say: “The government may need to consider changes to existing taxes and new revenue sources throughout the transition period in order to achieve net zero sustainably, and in line with the government’s fiscal principles.”

Ed Matthew, Campaign Director at E3G Thinktank, said: “For governments looking to Cop26, this seems unprofessional and embarrassing. The UK stands before the world at Cop26 in an effort to spur ambitious action from every country. If the government does not make the strong economic case in favor of work, It will greatly undermine those attempts.”

Rishi Sunak. Photography: Michael Mayhew/Allstar

The Treasury’s approach also contrasts starkly with that of Business Secretary Kwasi Koarting and the analysis of the Office of Budget Responsibility (OBR) in a report published in July of this year.

On the costs of moving to net zero, the Balance Sheet Office said in its report: “Between now and 2050, the financial costs of getting to net zero in the UK may be significant, but they are not exceptional…a disaster, the net financial costs of moving to net zero emissions. Zero by 2050 may be relatively modest.”

The Climate Change Committee, the government’s legal advisor, has also repeatedly said that the costs of action are small and declining, at less than 1% of GDP by 2050, while the costs of inaction are large and escalating.

While there are concerns about how costs could fall on poor households, CCC CEO Chris Stark made it clear that ministers can choose to distribute costs and benefits equitably, by designing green policies.

Sources in Whitehall said Sunak was believed to have been keen to present himself as something of a climate-change skeptic in order to bolster his popularity with Tory members, drawing comparisons to Johnson’s green fervor. “Obviously Rishi sees an interest in showing that he doesn’t feel good about this green stuff. He wants Boris to own the entire agenda.”

A source in the Department for Business, Energy and Industrial Strategy confirmed that the Treasury was “blinding” against several green plans presented by No 10 and Kwarteng. “They are not climate change deniers but they emphasize short-term risks, not long-term needs, which we emphasize.”

Contrary to the Treasury’s warning, Labor at its last party conference committed to investing an additional £28 billion each year until 2030 to secure a “green transition” that creates good jobs with decent wages in the process.

The leak comes as the government prepares to publish the long-awaited Net Zero Strategy, the Heating and Buildings Strategy, which will contain policies to cut emissions and create green jobs, including a ban on the use of new gas boilers from 2035 and granting households to move in. for green heating.

COP26’s head of government, former business minister Alok Sharma, is embarking on a frantic final round of diplomacy, including with Chinese representatives, amid speculation that President Xi Jinping will not attend the talks. The United States and the European Union have also been in talks with major high-emitting countries in recent weeks ahead of Cop26, which opens on October 31.

The Treasury said: “The Government is committed to tackling climate change and the Prime Minister has put in place an ambitious 10-point plan to help us achieve this. The Treasury is playing a critical role in this effort, by allocating £12 billion to fund the scheme, and setting up the UK’s Infrastructure Bank to invest in Net zero, and a commitment to raise £15 billion for projects like zero-emission buses, offshore wind and schemes to decarbonize homes.”

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