Why the Treasury isn’t talking about the cost of decarbonising transport

posted on 20th October 2021 by Eddie Saunders
Why the Treasury isn’t talking about the cost of decarbonising transport

Jonathan Edwards, Transportation Market Leader – EMEA, GHD:

“The release of the Net Zero Review Final Report by HM Treasury provides limited analysis and insight into the implications and impact decarbonisation will have on the UK transport market.

“Much like the lack of a total figure for decarbonisation, there is very little detail on the cost of decarbonising transport and the consequences of this significant cost on our rail, highways, aviation and shipping industries.

“In the report, private vehicle ownership and electric vehicles are evaluated and there is an appreciation that there is significant uncertainty over the model of car use and ownership in the future, which will affect the degree to which motorists are exposed to the transition.

“But what is not reasonably evaluated is the actual cost to decarbonise the movement of people and goods into and across the UK and the true cost on us all.

“Decarbonising transport in the UK – the largest contributing sector to domestic greenhouse gas (GHG) emissions – will determine our success in meeting carbon emission goals.

“Calculating a total cost for this may be difficult but any conservative estimate should reasonably put that figure as hundreds of billions of pounds.

“So, it is understandable why HMT has decided against any attempt to accurately determine and detail the cost – it would likely have raised a number of uncomfortable and difficult questions, with the loudest being how will it be funded and who carries the responsibility for the cost?

“Whilst the Treasury accepts “higher levels of investment will be required to adapt infrastructure, businesses, homes and transport for an economy powered by clean energy rather than fossil fuel”, I don’t think we’ve even begun to appreciate or communicate the scale of investment required and the difficulties we face in raising the necessary capital.

“Government commitments such as £950 million to futureproof grid capacity to enable the private sector to rollout rapid charging hubs at motorway and key A-Road service areas” and “£2.4 billion to accelerate decarbonisation in surface transport” will barely scratch the surface.

“For example, how do we fund the mass electrification of our rail network, approximately 62% of current routes? The Network Rail Traction Decarbonisation Network Strategy puts electrification capital costs, in 2020 prices, in a bracket of £1m to £2.5m per single track kilometre (STK).

“We currently need approximately 11,700 additional STKs of electrification for long-distance high-speed passenger and freight services. Do the maths – it is a staggering figure and represents just one element of the cost of decarbonisation for rail alone.

“Similar figures can be calculated across all other sectors of the UK’s transport network and it will all need funding – and at a time when the government is grappling with replacing lost tax revenues, £37 billion a year from fuel duty, and many areas of the market are still trying to recover post pandemic.

“We predict that a likely outcome will be an increase in ticket prices. However, there is a limit to the revenue this can generate and it will be a hugely unpopular move when value for money is already considered low in sectors such as rail.

“This is certainly not ideal at a time when we greatly need to encourage passengers back onto public transport. If anything, we would like to see a freeze in rail fares in order to encourage people back to the network, which is crucial for meeting our long-term decarbonisation goals and getting people out of petrol and diesel cars.

“In order to succeed, the government will need to utilise and maximise a range of levers, including changes to taxation and regulation, wider roll-out of carbon pricing, reviews of public spending, and the enablement of private investment and the role of the private sector.

“It is unclear how this will be led when we anticipate cuts to public spending, including at the Department for Transport, through the Spending Review and a Budget that will be unlike previous years.

“I’ve recently advocated a range of options the government can use to better set the UK on its journey to net zero for transport based around a framework of integration, incentivisation and transparency.

“On this occasion, however, the Treasury has evaded the option for full transparency because ultimately decarbonisation comes at a cost – an eyewatering cost that very few want to put in a report.

“However, the UK public needs to realise that this cost will fundamentally be borne by us all as passengers on public and private transport, in the goods we buy and the taxes we pay”.