The Association for Renewable Energy and Clean Technology (REA) has urged the UK Treasury to examine the historic cost track record of renewables and clean technologies in studies of the investment required to hit the country’s net-zero targets.
The call follows publication of the Treasury’s interim report on the Net Zero Review, with the final report due to be published in Spring 2021.
REA chief executive Nina Skorupska said: “It is vital that we understand the benefits the UK’s path to net zero will have for our economy, as well as how we overcome the challenges along the way.
“We, therefore, welcome HM Treasury’s work in this area, as well as its recognition that the transition is essential to the UK’s long-term prosperity.
“It is also important to note the disclosure of the links between tax revenue and sectors linked to fossil fuel usage which can and will change.
“While there is uncertainty about the overall cost of the UK’s energy transition, we would urge Treasury to look at the historic performance of the renewables and clean technologies sectors, as well as the appetite from the industry to go further.
“As noted in the Interim Report, government will play a key role in reducing this uncertainty and bringing down capital costs, alongside industry innovations.”
She added that short-term changes to tax revenues must not stop the UK’s energy transition.
“We must look to the social, economic and environmental benefits of such a change, Skorupska said.
“We will work closely with Treasury to ensure the government can continue to support the greening of our energy supply and the wider economy that we so desperately need.”
The interim report noted that the combined effect of UK and global climate action on UK economic growth is likely to be relatively small.
It said that the costs of the transition to net zero are uncertain and depend on policy choices.
“They are affected by a range of factors, including the precise path of the transition, changes in behaviour and the rate at which technology costs fall and efficiency gains are made, all of which are subject to significant uncertainty,” the report said.
Government needs to use a mix of policy levers to address multiple market failures and support decarbonisation, the report added.
Well-designed policy can reduce costs and risk for investors, support innovation and the deployment of new technologies, it said.
Treasure said the risk of carbon leakage will increase with efforts to reduce emissions.
Households will be exposed to the transition through consumption, labour market participation and asset holdings and so government needs to consider these patterns of exposure in designing policies for the transition, the report said.