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Boris Johnson’s green agenda has been plunged into chaos amid fears that the costs of reaching “net zero” could cripple working class families in newly-won Tory seats.
A Treasury review of the costs of reducing net greenhouse gas emissions to zero by 2050 has been delayed since the spring. There are concerns the analysis highlights that the poorest households will be hit the hardest by the ambition, which will involve policies such as stripping out gas boilers and switching to electric or hydrogen cars.
Rishi Sunak, the Chancellor, is said to be increasingly concerned about a looming crisis over the cost of living for British households, as the country faces the triple threat of rocketing energy bills, the potential for rising prices as a result of inflation, and an as-yet unspecified suite of policies to enable the country to meet the net zero target.
The Treasury review has been held back amid fears that the analysis will lead MPs and the public to the conclusion that Mr Johnson’s net zero strategy would be politically toxic in the Red Wall seats won by the Conservatives in December 2019.
The disclosure comes amid claims of rising tensions between Mr Johnson and the Chancellor, with longstanding friction between Number 10 and Number 11 over the Prime Minister’s spending demands.
On Saturday night it was reported that Mr Johnson had expressed fury over the leak of a letter in which Mr Sunak lobbied for a relaxation of travel restrictions. In a barbed joke, Mr Johnson threatened to demote Mr Sunak to Health Secretary.
The Government had said in December that the review would be published in “spring 2021”. However, it is among several key documents to have been significantly delayed amid wrangling in Whitehall over how to achieve the target without disproportionately “clobbering” the finances of working class families, and plunging the country into hundreds of billions of pounds of further debt.
The issue is likely to be at the centre of Mr Sunak’s autumn spending review, which is expected to decide the overall pots of money available for subsidising green technologies such as hydrogen.
Meanwhile, one adviser of COP26, the climate conference due to be hosted by Mr Johnson in November, said: “I don’t think ministers knew what they were getting in to” when they set targets for the conference, such as securing commitments from attendees that will limit the rise in global temperatures to no more than 1.5C.
One official said: “There was a massive expectation on us as members of the G7 and home of the industrial revolution. Boris was trying to grab as much as he can and to be a mighty great host... But Covid has added massive complications.”
Amid growing disquiet among Tory MPs, a new net zero scrutiny group of backbenchers is being formed to hold ministers to account over the plans. Craig Mackinlay, its chairman, warned that spending vast sums on subsidising green schemes would be seen by the public as “aping” some of Jeremy Corbyn’s pledges at the 2019 election.
He said: “The Conservatives’ strongest hand has always been credibility: credibility to deliver good economics and good governance. To ape the failed policies of an extreme Labour politician does not seem to be the way of electoral success.”
He added: “I’m very pleased the Treasury are actually thinking of this with a financial head on rather than just a warm feeling.”
Downing Street sources insisted that Mr Johnson was “acutely aware” of the need to monitor household finances to ensure that policies aimed at tackling climate change are “affordable for everyone”.
A Whitehall source said: “Obviously, with anything like this, those with less money are going to be disproportionately hit more. That’s common sense. That’s why work is ongoing to ensure the best solutions to ensure we hit 2050 without extraordinary costs to ordinary working class families.”
Insiders said that the “tension” behind the scenes was over the extent to which the Treasury should spend eye-watering sums subsidising green technologies, such as hydrogen and heat pumps – including the question of how many years it would take until taxpayer or consumer subsidies were no longer required.
Last month, Mr Johnson admitted that heat pumps, seen as an alternative to gas boilers, “cost about 10 grand a pop”. He added: “This is a lot of money for ordinary people. We’ve got to make sure that when we embark on this programme, that we have a solution that is affordable and that works for people. We won’t be imposing it until we have been able to create that market.”
There is alarm among some insiders about the amount of progress needed to achieve the net zero target by 2050. On the other hand, Mr Mackinlay’s group believe that, “while something sensible can emerge”, the current approach is “too rapid, too uncosted and too unscientific”.
Number 10 believes that the Government can encourage “early adopters” of such technologies with financial and regulatory incentives, with the hope that prices then fall as the market “takes off”. A similar approach was taken to the wind industry, which has benefited from generous consumer subsidies. “We need to drive down the cost of renewable energy,” a government source said.
But, last week, an industry analysis suggested that most wind farms in Britain will not be economically viable when existing subsidies end, primarily from the 2030s, and many could shut down prematurely without further support.
The Prime Minister believes that, while wind turbines are largely not produced in the UK, if Britain becomes a world leading manufacturer of electric heat pumps and producer of low carbon hydrogen, it can cash in on a “green jobs benefit to the UK as well as reducing emissions”.
Mr Sunak is said to agree on the need to bring down the cost of green technology but wants the private sector to “do most of the heavy lifting”. The free marketeer MP is thought to see interventions designed to encourage the market to bring down costs over time as “the best use of taxpayers’ money”. A source insisted that Mr Johnson was “in the same camp”.
Publication of the Government’s hydrogen strategy has also been delayed, amid wrangling over the costs of the technology. The Department for Business, Energy and Industrial Strategy wants to subsidise the industry in a similar way to wind farms, offering Contracts for Difference, which provide renewable energy firms with a guaranteed price for 15 years.
On Monday, a major report by the Intergovernmental Panel on Climate Change is expected to lay out an alarming assessment of changes to the world’s oceans, ice caps and land.
A government source said that the net zero plans were also important for the UK’s energy security, with a push for home-grown technologies allowing the country to step away from a reliance on energy from abroad. Volatile worldwide gas prices could see direct debit customers pay an extra £139 annually and those on prepaid tariffs charged an additional £153, it emerged on Friday.
Meanwhile, Mr Johnson was reportedly “apoplectic” about the leak of a letter in which Mr Sunak called for an easing of Covid-19 travel restrictions. “Maybe it’s time we looked at Rishi as the next secretary of state for health,” The Sunday Times reported the Prime Minister as having said, in a barbed joke. “He could potentially do a very good job there,” Mr Johnson is said to have added.
A Government spokesman said: “The UK is a world leader in the global effort to tackle climate change, growing our economy by 78 per cent while cutting emissions by 44 per cent over the past three decades and being the first major economy to legislate to reach net zero emissions by 2050.
“And at every step on the path to Net Zero, this government will put affordability and fairness at the heart of our reforms, such as through investing £1.3 billion into keeping bills low, helping make the homes of low income families more energy efficient and cheaper to heat.”