Nonsense on stilts: Policy Exchange's numbers don't add up, again.

Simon Bullock

25 January 2012

After two new reports on the environment last week, Policy Exchange now seem to be competing with Lord Lawson's Global Warming Policy Foundation to see who can get the most scare stories about the cost of tackling climate change into the Daily Mail.

Last week Chris Huhne stuck the boot into their first report on the costs of renewables. He called it "nonsense on stilts" and full of "A-level howlers".

Mark Lynas's blog last week looks at one example of this - the cherry picking of top-end estimates of the costs of offshore renewables.

This blog looks at another reason why Policy Exchange's numbers are wild overestimates. Their "greening the economy" report says the cost to the UK economy of the EU 2020 renewables target is £66 billion. This figure is repeated in an article for Conservative Home. But it's out of date and a huge overestimate. Here's why.

Policy Exchange reference this figure to a 2008 Government report, which says there is a cost to the UK economy of going for renewables, because fossil fuelled energy would be cheaper. But this report is based on estimates of fossil fuel prices of oil at $70 a barrel in 2020.

Oil is $110 a barrel today. The Government has updated its 2020 projections for fossil fuel prices - and has new central 2020 estimates of gas at 68p a therm and oil at $118 a barrel, compared with 50p and $75 in the out-of-date report Policy Exchange cite [1].

This has a major impact on the $66 billion figure. The graph below takes the Government's analysis for costs of the renewables strategy with different fossil fuel prices:

Source, Table 4 of DECC, 2009

The graph shows that with a more realistic price for oil in 2020, like $120, the net cost would be far lower, around half. The Government have also updated their figures on carbon prices, which would bring the total figure down a further £5 billion. On top of that, Policy Exchange don't make clear that the total figure is summed over 20 years to 2030 , so the cost overall looks to work out at well under £2 billion a year. 

As Carbon Brief note, Policy Exchange say they want to see policies that ""command sustained public support over the long-term timescales needed to address climate change".

If Policy Exchange are serious about this then they need to stop using inflated, out-of-date and scaremongering figures about the costs of renewables.

Notes:

 [1] The figures were 46p and $70 - but in 2007 prices. The values above are converted into 2010 prices to be consistent with DECC's new fossil fuel price figures.