Business faces £370bn bill for climate change

Tricia Holly Davis
British business faces a £370 billion bill by 2020 to meet the cost of fighting climate change, according to estimates to be published ahead of December’s Copenhagen climate-change summit.
The amount would mainly cover the cost of building renewable-energy capacity, smart grids and high-speed rail links. About £40 billion would finance upgrades to Britain’s water distribution and treatment networks.
This is only part of the picture, said the report’s author, Andrew Raingold of Aldersgate Group, a coalition of business and environmental groups.
“These are conservative estimates and don’t include the costs attached to deploying low-carbon vehicles and supporting infrastructure such as charging stations. This could add another few billion to businesses’ total liability,” he said.

Raingold points to a recent analysis by the Policy Exchange, a think tank, which estimates that the UK will need to spend £50 billion every year for 10 years on low-carbon energy and transport to curb greenhouse-gas emissions. This is more than twice the amount Ofgem, the energy regulator, has said is necessary to meet the government’s target of cutting emissions 34% by 2020.
Various estimates on the costs of cutting carbon out of the economy have been published recently.
The reports are being deployed by industry on one side and governments on the other as they attempt to hammer out a new pollution-cutting agreement at the Copenhagen summit.
All sides agree it will be monumentally expensive. They differ on who should pay for it. Raingold said: “Businesses will end up footing the vast majority of the costs of combating climate change because the Treasury doesn’t have the money.”
Governments and many experts argue that the economic impact of a warmer climate and the costs industry will bear if the carbon price increases will be much greater if businesses do nothing. “There is actually a big opportunity to make money if we don’t drag our feet,” said Sir Brian Hoskins of the Committee on Climate Change, the government ’s green watchdog. It estimates that climate change will cost the UK economy 1% of GDP by 2050.
Last week the Worldwide Fund for Nature said global investment of $1 trillion a year was needed across a range of low-carbon technologies, at least for the next decade, and that it would largely have to come from the private sector.
“The upside of flooding the market with so much capital is you cut the cost of green technology, so clean energy becomes competitively priced with fossil fuels,” said Karl Mallon, lead researcher on the Worldwide Fund for Nature report.
Alice Chapple of Forum for the Future, an environmental think tank, said: “To get this level of investment from business, particularly in a recession, is going to require a variety of incentives, removal of fossilfuel subsidies and agreements between governments and business to share the risks of developing new technologies.”
Keith Clarke, chief executive of the Atkins technology consultancy, said: “Businesses can’t afford to not invest in climate change. But the real question is not about how much, it’s about reaching the right agreements to decarbonise our economy and secure investment.”
Today Britain’s low-carbon market is worth £100 billion, with green manufacturing accounting for 30% of that. The government has forecast the market will grow to £150 billion in five years. Even if that forecast is accurate, the UK could still face a substantial funding gap up to 2020.
By then, there must be a fivefold increase in renewable electricity, and 10% of all energy used for road transport must come from renewable sources.
“I doubt the funding will be found,” said Dan Lewis at the Economic Research Council. “The current system is too biased in favour of making a quick buck on intermittent power rather than developing low-carbon technologies, which require much longer time horizons to merit investment.”