Infrastructure Policy Watch: cost of climate change to UK finances, public views on New Zealand infrastructure
The Office for Budget Responsibility (OBR) in its latest Fiscal Risks Report has forecast the cost to the UK public finances from climate change (physical risks) and the transition to net-zero (transition risks) across a range of different scenarios.
Describing the challenge, the OBR states:
There are many other policy challenges to overcome, so the path to net zero can be expected to involve many policy levers on top of carbon taxes and emissions trading schemes, including bans and other regulations, and public subsidies and investment. These will all have economic and fiscal implications of one sort or another – either directly (via taxes and spending) or indirectly (via wider economic outcomes).
Taking early action to achieve net zero would add 21% of GDP to public sector net debt by 2050, a smaller amount than that added by the Covid-19 pandemic. This amount comes from increased spending on net-zero investment, the loss of tax revenues (such as fuel duty), revenues from tax on carbon and other costs such as increased debt interest payments.