Ambrose Evans-Pritchard’s £1 Trillion Delusion

By Paul Homewood



Climate obsessed AEP is back again, with a deluded and clownish analysis of the costs of the net zero plan, which also includes some serious factual errors:



If anything can distil the essence of conservative philosophy it is Edmund Burke’s paean to the “great primeval contract of eternal society”.

His Reflections on the French Revolution lay out our obligation to our children’s children through the ages: “a partnership between those who are living, those who have lived before us, and those who have yet to be born.”

I doubt that Burke would have had any difficulty concluding that the risk of runaway global warming today is a threat to this “contract between the generations”.

There were plausible reasons for climate scepticism in the early 2000s during the “hiatus” in surface temperatures – if you overlooked the oceans – but this has since been overwhelmed by the hottest years on record and an avalanche of science. Our knowledge is orders of magnitude greater than fifteen years ago. The weight of evidence points only in one direction.

Theresa May is the authentic Tory in this intra-party fight over climate policy. Her plea for zero emissions by 2050 – the first legally-binding target among major nations – was almost Burkean. She called it the “defining decision of this generation in fulfilling our responsibility to the next”.

Historians might judge this parting shot to matter more than her Brexit travails. It is certainly good diplomacy. The UK led humanity with the first climate law in 2008. It has now beaten Emmanuel Macron’s France to the ultimate pinnacle. Mrs May’s ambition confounds the false global narrative of an island sinking into self-absorbed nostalgia and the swamp of reaction.

It is the Treasury that should be in the dock. Chancellor Hammond’s leaked spoiler is a clutter of absurdities and category errors. It conflates spending with investment to come up with the outlandish tariff of £1 trillion. “It confuses costs that have a payback with those that don’t,” said Michael Liebreich, founder of Bloomberg New Energy Finance.

From what we know it assumes there will be no further falls in the cost of wind, solar, and renewable energy over the next thirty years, no falls in hydrogen costs from electrolysis, and no leaps in plant technology. This takes a brass neck.

Photovoltaic costs have dropped by 83pc since 2010; offshore wind contracts are already coming in at £69 (MWh) for the early 2020s, 40pc lower than original estimates for 2030. LED lighting has jumped from 5pc to 40pc of the world market; electric vehicles have reached 50pc sales penetration in Norway – and this will turn into global cascade once EVs reach purchase cost parity in 2022.

Mr Hammond writes in tones almost of surprise that there will have to be a ban of petrol and diesel cars by 2050 to meet the target. If the Treasury think such cars will still be legal in any European city much after 2030 they are living on another planet.

When the Committee on Climate Change first called for emission cuts of 80pc by 2050 – deemed romantic at the time – it cautiously estimated net investment costs of 1pc to 2pc of GDP each year.

In fact the UK was able to slash its emissions to levels not seen since the 1890s at a “cost” nearer 0.2pc, even using the most primitive form of accounting and ignoring all the co-benefits of better air and better health, and the spin-off growth from green industries.

The Chancellor’s letter oozes mischief. It implies that investing more in energy infrastructure with a positive return takes away from spending on schools, police, and hospitals. “The £1 trillion figure is propaganda, not analysis; you can pluck any number you want,” said Lord Adair Turner, ex-chairman of the CCC.

“It reflects the institutional arrogance of the Treasury. They have this ethos that the rest of the cabinet can’t be trusted and that they are the only custodians of economic rigour but they are not being rigorous at all. Their narrow model does not capture the nature of technological innovation, or even engage with the fundamental point.”

There are echoes of Project Fear in the Treasury method. Remember the 500,000 job losses, the surging Gilt yields, the house price crash, the deep recession, if Britons voted to leave? The Treasury’s computable general equilibrium model was not even internally consistent. It failed to adjust for the macro-economic stimulus of its own predicted fall in sterling. It neglected the monetary shock absorbers of the Bank of England. It was – again – a travesty of static analysis.  

Professor Michael Grubb from University College London said the Treasury has long been out of its depth on energy technology, and has in this case played fast and loose with the concept of net cost. 

“I recall the Treasury’s furious opposition to the UK offshore wind energy programme just five years ago, based on gross cost projections that have turned out to be twice as high as those realised in practice already. When will the Treasury finally acknowledge that it is a victim of economic theories that reflect zero understanding of industrial innovation?” he wrote to the Financial Times.

As of today, Britain can borrow for fifty years at an interest rate of 1.38pc. This is free money. Such is the global misalignment between excess savings and under-investment.

The relevant question is whether climate investment pays a positive return: either directly, or by boosting economic growth in a Keynesian virtuous circle that raises exchequer revenue. If carried out in a downturn with a big output gap there is a turbo-charged multiplier effect, and a global downturn is what we are soon going to get.

In my view the Government should prepare for a green blitz using ear-marked “project bonds” – to keep rating agencies sweet – and damn the deficit torpedoes. Fiscal “sinners” will be the winners of the next phase of global economic history: fiscal “saints” will be the losers; austerity is self-defeating in a slump.

When combined with deft use of tax and regulation policy, “net zero” can help to unlock over £500bn of idle cash sitting in the accounts of UK firms because they cannot find a better return on capital. Mr May’s plan is in this sense a God-given catalyst for the revival of investment. Think of it as economic rearmament, 1938 without spitfires.

It is also how we restore energy independence rather than bleeding a net 2pc of GDP each year in fuel and power imports, often to despotic regimes. Did the Treasury factor in the colossal gain to our balance of payments if the Government goes ahead with the CCC’s plan for 75 gigawatts of offshore wind power and turns Britain into the aoelian Arabia of the northern seas? I doubt it.

Dimitry Zenghelis from the Grantham Institute, who helped draft the CCC report, said the “resource costs” of meeting the zero target depend on how vigorously the policies are pursued and how quickly Britain achieves economies of scale.

Mr Hammond has just made it that much harder. “By sowing early uncertainty, the Chancellor’s comments have, highly regrettably, have raised the policy risk premium attached to decarbonisation investments,” he said.

Mr Zenghelis, ex-Treasury and now apostate, said it is far from clear that there is any net cost for the British economy from the push for zero emissions. The plan may instead be a net accelerant to GDP growth – analogous to the upheavals of steam power, electricity, and digital technology – once you factor in dynamic feedback loop from creating new skills and putting dead savings to work.

Britain is a world player in green finance, bond issuance, and insurance. It has carved out a flourishing niche in green technology. Yes, there is a risk from being too far ahead of the pack. There is an even bigger risk of being the “last mover” trapped in fossil obsolescence.

The Bank for International Settlements issued a stark warning two weeks ago. There is a dawning worry that the industries of coal, oil, gas, cars, ships, and aviation may all have broken business models.

It said climate risk is no longer something in the distant future for financial markets. It has become a “clear and present danger”.

The BIS invoked Gaston Bachelard’s “epistemological break”. It is a posh way of saying non-linear. We are about to jump suddenly into a post-fossil world. The sooner Britain secures a ticket to this new destiny, the better. Brava Theresa.


Let’s go straight to his central claim that Hammond’s claim of a £1 trillion bill is nonsense.

It is not apparent how AEP knows what the Chancellor’s claims are based on, because as far as I know the treasury has not published its calculations.

However, the Committee on Climate Change (CCC) has put an annual cost of £50bn on its plan by 2050. Although they deliberately have not attempted a phasing of this cost, an extrapolation of £1 trillion between now and 2050 is not unreasonable. After all,  the cost of renewable subsidies alone is expected to be £14bn a year by 2023. This figure will undoubtedly remorselessly rise thereafter, as more, heavily subsidised renewable schemes come on stream, not to mention Hinkley Point.

Independent analysts have also suggested the CCC’s estimates are optimistic.

AEP accuses the Chancellor of conflating spending with investment, which has a payback. But the CCC are absolutely clear that they have not done this. Below is what their Net Zero Report actually says:



In other words, capital, running costs and savings are all assessed over the lifetime of the assets.

He also falsely claims that Hammond assumes there will be no reduction in the cost of renewables. But once again, the CCC make it crystal clear that they have assumed such reductions. Indeed they optimistically reckon that overall electricity costs will begin to drop after 2030.

Yet another factual error is AEP’s claim that the UK has already slashed its emissions to levels not seen since the 1890s at a “cost” nearer 0.2pc of GDP. In fact, the official OBR figures show the cost of renewable subsidies this year at £12.2bn, which does not include other related costs such as constructing new transmission lines. That equates to about 0.6%.

He also ignores the fact that most of the emission reductions have been a result of switching from coal to gas power, and offshoring of much of our manufacturing industry to Asia. In other words, little to do with climate policies.


Notably, AEP relies on the opinions of Michael Grubb, Professor of Energy & Climate Change, Dimitry Zenghelis of the Grantham Institute, and Adair Turner, formerly Chairman of the CCC. All three are deeply enmeshed in the climate alarm industry, and certainly cannot be relied upon to offer impartial advice.

Turner, for instance, fatuously  says that the £1 trillion figure is propaganda. Yet he fails to explain that the CCC themselves have come up with similar numbers.


AEP then proceeds to offer his laughable views on macro economics, suggesting that spending all of this money will somehow transform Britain’s economy, creating all sorts of new green jobs. In doing so, he shows that he does not understand that government subsidies don’t create real jobs.

Money spent on “green jobs”, not to mention valuable labour and other resources, simply draws resources away from other areas of the economy, where there may be more usefully employed. Indeed, previous economic analysis has shown that green subsidies actually destroy more jobs than they create.


It is true that interest rates are at historic lows, but surely there are many things that borrowed money could be invested in.

AEP goes on to complain about relying on imports of oil and gas, but there is nothing wrong with world trade. We import things we need, while we export to other countries. In any event, the costs imposed by the Climate Change Act on industry will simply serve to undermine its international competitiveness, and make our balance of payments worse.

It is evident that he has not read the CCC’s report. If he had, he would have discovered that they still expect us to be using almost as much natural gas as we do now. Some will be needed to provide back up power, when the wind does not blow and the sun does not shine. We will also need gas to transform into hydrogen, in order to heat everybody’s houses. To make it “carbon free”, the CCC want to use unproven carbon storage technology. If he really wants to reduce our dependence on overseas supplies of energy, then surely he should be arguing for the exploitation of our shale gas assets.

He rightly points out that the Treasury’s economic modelling has hardly been a success in recent years. But in reality, any economic forecasts more than a year or two in advance must be treated with a huge dose of salt. Not least AEP’s own prediction that this plan will lead us all to the promised land!


Regardless of what the future holds, not to mention AEP’s crackpot economics, what we do know for certain is that the CCC’s net zero plan entails wasting hundreds of billions in the not too distant future.

For instance, decarbonising heating in homes will, according to the CCC themselves, cost the country £28bn a year, or more than £1000 for every home in the country.

Again according to the CCC, households will be expected to spend £10000 or more to install heat pumps as replacements for gas boilers which work perfectly well. They can also expect to see their heating bills double, once natural gas is banned.

As the power grid will not be able to cope with the peak demand for heating in winter, the CCC also say we must also use hydrogen for heating in winter. Yet, to achieve this, the government must spend up to £100 billion in converting household appliances and distribution networks.

None of this expenditure has any payback at all, yet Ambrose Evans Pritchard apparently thinks it is money well spent.



AEP argues that we have a Burkean obligation to the next generation. He actually has it the wrong way round.

What right have we to dictate to our children, or theirs, whether they can use fossil fuels and enjoy the standard of life which we have during our lifetimes? If they decide that there is a better way in future, they are entitled to make that decision for themselves.

After all, just suppose our ancestors had listened to their own St Greta a century ago, and decided to abandon fossil fuels. Where would we be now?


Perhaps I am expecting too much of Ambrose Evans-Pritchard. As one of his commenters put it, he has forecast five of the world’s last two recessions!

It rather sums up his credibility in economic matters.


June 13, 2019 at 04:45PM

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