Governor says climate change and initiatives to tackle it risk damaging the economy

Net zero policies are slowing the global economy, Andrew Bailey has warned.

Both climate change and initiatives to tackle it are among the main factors dragging down growth, the Governor of the Bank of England said in a speech. The Telegraph has the story.

Mr Bailey said “headwinds” facing the world economy included “climate-related economic shocks and the consequences of the policies chosen to tackle these shocks”.

Britain’s main policy for tackling climate change is the drive to net zero, which has had sweeping consequences for the economy.

The cost of switching to electricity and levies on fossil fuels have been blamed for the UK’s extraordinarily high energy prices and the shutdown of heavy industry.

Mr Bailey’s comments are likely to fuel debate about the speed and cost of reaching net zero, as Labour races to decarbonise Britain’s electricity network by 2030. Critics say the artificial deadline is creating unnecessary costs for the households and businesses, calling for slower reforms.

The Climate Change Commission estimates reaching net zero by 2050 will involve a net cost of £4bn per year – around £100bn in total.

The Institute of Economic Affairs said the cost of net zero in the UK could be more than £7.6tn.

Mr Bailey has acknowledged some of these costs previously. In 2021, he said shifting from coal to less polluting fuels may result in “permanent higher level of prices”.

But the Governor has also argued that the costs of failing to act on the climate may be even larger than net zero.

In 2020, he said climate change is “even bigger and more complex” than the Covid pandemic or the financial crisis, and the following year he argued that “ignoring [the effects of climate change] is not an answer. Indeed, the longer we wait, the greater the costs of adjustment”.

In his speech this week, the Governor said net zero and climate change were one of several factors dragging on global growth.

Read the full story here.

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