Boris Johnson today unveiled his plan for turning Britain green by 2050 - but was warned by the Treasury that taxes and consumer costs could rise to cover the estimated £1trillion bill.
The PM has published the most detailed proposals yet for how the country will achieve the Net Zero ambition and contribute to the fight against climate change, rejecting alarm at the potential costs to families and businesses hit hard by the Covid pandemic.
But the Treasury is already warning that the sprint to go green has a hefty price tag - and could lead to inflation and higher taxes. It estimates that carbon reduction targets will cost £60billion a year in capital costs alone.
Heating bills are likely to rise - possibly by more than 50 per cent - as households are forced to ditch gas boilers. The Treasury also warned that, with fuel duty alone raising more than £30 billion a year, new taxes such as road pricing would soon have to replace existing levies on carbon - a move currently being resisted by the PM.
Meanwhile, first-time buyers of poorly-insulated homes may struggle to get a mortgage under government proposals to make the housing stock greener, as mortgage lenders would have to disclose the energy performance of properties in their portfolio - and set themselves voluntary targets to improve the insulation of their houses.
And official plans to replace traditional gas boilers with heat pumps came under fire as critics said a £5,000 grant for homeowners to install air or ground heat pumps are little more than a 'middle-class bung' for people who were going to switch to the technology anyway.
The Treasury did not attempt to calculate the total cost of the PM's Net Zero plans. But Paul Johnson, director of the Institute for Fiscal Studies, said the final bill would be 'well over £1 trillion', spread over the next 30 years.
He told BBC Radio 4's PM programme: 'What is interesting is that the Treasury's view is that most of that won't come from us the taxpayer, it will come via us as consumers or from industry though private investment. But this is a manageable cost because £1trillion is a lot, but over 30 years, and given the amount we invest in all sorts of things in any case, it is manageable. But it is a pretty substantial sum over that period.'
Mr Sunak hopes that most of the cost of turning Britain's economy green will be funded by the private sector. But the Treasury said 'additional taxes' would be needed if the Government is required to directly fund the transition to a greener economy.
The new strategy aims to turn Britain carbon neutral by 2050, making this country a world leader in the fight against climate change. It will involve massive investment in technologies like wind and nuclear to replace existing fossil fuel power stations.
But families will also have to pay to switch to greener fuels at home. The Government wants traditional gas boilers to be phased out from 2035. Petrol and diesel cars will be phased out from 2030.
In other developments:New guidance for banks could make it harder for people with poorly insulated homes to get a mortgage; Ministers ducked a decision on whether to press ahead with a major new nuclear power station at Sizewell C in Suffolk; The Government announced an extra £620million to drive sales of electric vehicles, despite Treasury warnings the subsidies were likely to disproportionately benefit the well-off; A further £625million has been set aside for planting trees and restoring peat bogs to soak up carbon; Ministers confirmed plans to put new 'green levies' on gas bills 'when the current gas spike subsides'; Cyclists will get a boost, with thousands of miles of new bike lanes and plans for more 'low-traffic neighbourhoods' where cars are excluded; Ministers want Britain to become a world leader in developing 'alternative proteins' to encourage people to eat less meat; China gave a boost to the PM's hopes for a successful Cop26 climate summit in Glasgow next month, saying it viewed the event as 'deeply significant'; Critics warned that new £5,000 grants to encourage people to install heat pumps would only cover the installation of around 30,000 a year.
Unveiling a new 'Net Zero' strategy, Boris Johnson said Britain would 'lead the charge' against climate change. And he said that leading the world in cutting emissions could create hundreds of thousands of jobs. But Chancellor Rishi Sunak is already warning that the sprint to go green has a hefty price tag - and could lead to inflation and higher taxes
The Net Zero plan sets out a pathway for how various elements need to reduce their carbon emissions over the coming years
In a foreword, to the government document - titled Net Zero Strategy: Build Back Greener - Boris Johnson said the UK would 'lead the charge'
Boris Johnson wants to push Britain towards new sources of energy for homes, including hydrogen, left, and ground source heat pumps, right
GETTING YOUR HOME RETROFITTED
To reach the Government's target of the majority of homes rated as EPC C by 2035, and 2030 in the private sector, changes will be needed including double or triple glazing, solid or cavity wall insulation and underfloor heating.
According to the Climate Change Committee, the quango formed to advise on tackling and preparing for climate change, semi-detached households can cost £8,590 for external wall insulation, up to £2,480 for cavity wall insulation and £740 for loft insulation.
In the Treasury's Net Zero review published on Tuesday, they estimated that in non-standard dwellings - anything with walls built from materials other than brick or stone and roofs made of slate or tile - retrofitting costs may be significantly higher.
For example, the current cost estimate for cavity wall insulation of a medium-sized semi-detached houses is £590, but for non-standard dwellings, it can cost £8,430 for partially filled cavity walls and £7,980 for metal or timber framed cavity walls.
The review warns that listed or historic dwellings and buildings in conservation areas are also more challenging to retrofit and that the costs of retrofitting 'are likely to be higher than average in order to achieve the same level of energy efficiency'.
Households living in properties 201 sq m or larger could be almost three times as exposed to the Net Zero transition than households living in properties under 50 sq m, Treasury officials also warned.
They also said the average detached home is likely to require double the investment of an average high-rise flat, while households in London could pay more than households in the North East due to variation in wall type and existing wall insulation provision.
Only 23 per cent of London dwellings have insulated walls, compared to 73 per cent in the North East.
GETTING HEAT PUMPS
Under the Prime Minister's Net Zero drive, gas boilers in new homes will be banned from 2025. By 2050, all households should be using a low-carbon alternative - meaning that heat pumps, whether air or ground-sourced, are likely to be the common alternative.
Ground source heat pumps use pipes buried in the garden to extract heat from the ground, which can then heat radiators, warm air heating systems and hot water.
They circulate a mixture of water and antifreeze around a ground loop pipe. Heat from the ground is absorbed into the fluid and then passes through a heat exchanger.
Right now, the cost of installing them can range from £14,000 to £19,000 depending on the length of the loop, and running costs will depend on the size of the home and its insulation. However, some households can receive quarterly payments over seven years under the Government's Renewable Heat Incentive, which will effectively cover much of the cost.
To get your heat pump working optimally, you may need to install bigger radiators, underfloor heating and other insulation, which could prove disruptive.
Users may be able to receive payments for the heat they generate through the Government's renewable heat incentive. The systems normally come with a two or three year warranty - and work for at least 20 years, with a professional check every three to five years.
Air source heat pumps absorb heat from the outside air at low temperature into a fluid to heat your house and hot water. They can still extract heat when it is as cold as 5F, with the fluid passing through a compressor which warms it up and transfers it into a heating circuit.
They extract renewable heat from the environment, meaning the heat output is greater than the electricity input – and they are therefore seen as energy efficient.
There are two types, which are air-to-water and air-to-air, and installing a system costs £9,000 to £11,000, depending on the size of your home and its insulation.
A typical three-bedroom home is said to be able to save £2,755 in ten years by using this instead of a gas boiler.
GETTING HYDROGEN BOILERS
A hydrogen boiler is potentially a less intrusive and cheaper option than a heat pump. However, hydrogen is not yet ready for use in homes, and it's unclear when it will be, on what scale and at what price.
An analysis by MailOnline found that estimates range from £1,500 to £5,000.
The main benefit of hydrogen is that produces no carbon dioxide at the point of use, and can be manufactured from either water using electricity as a renewable energy source, or from natural gas accompanied by carbon capture and storage.
The boiler is constructed and works in mostly the same way as an existing condensing boiler, with Worcester Bosch - which is producing a prototype - saying converting a hydrogen-ready boiler from natural gas to hydrogen will take a trained engineer around an hour.
GETTING ELECTRIC CAR CHARGER INSTALLED
Households with cars with internal-combustion engines will be required to shift to electric vehicles by 2035, under the Government's Net Zero proposals.
Installing a charger at home could cost people up to £1,000, with Government grants covering up to £350. This is expected to fall to around £680 by 2040.
Drivers can get up to £2,500 towards the cost of a new electric car, with ministers confirming they will press ahead with plans to force mortgage lenders to include the energy performance of homes in their calculations.
However, Treasury analysis published on Tuesday pointed out that government subsidies such as those for electric cars tend to favour the wealthy, while piling on costs for poorer families.
'Policies to support the adoption of EVs may disproportionately benefit higher income groups, and the costs of any policies that affect the remaining drivers may fall disproportionately on low-income groups,' the Treasury's Net Zero review warns. 'This could create a trade-off in some areas between incentivising decarbonisation and minimising distributional impacts.'
Officials predict that higher income households are more likely to buy new vehicles, and so take up EVs sooner, while low-income households are likely to be the slowest to adopt EVs as they are the least likely to purchase new cars.
Though those in higher income groups are more likely to be early adopters, and consequently take on higher costs, while low-income households are expected to continue running ICE vehicles for longer. However, the Net Zero review warns that as ICE ownership declines, the availability and price of petrol and diesel refuelling is likely to change.
'These changes - assuming all else being equal - are likely to be disproportionately felt by lower income households as well as those who choose to delay switching to EVs voluntarily,' the review states.
The Treasury also admits that the total cost of EV ownership is unknowable, and will depend on future government policy and factors such as the price of the vehicle, access to finance, usage, maintenance costs, and the cost of charging.
The document adds that with many households, and disproportionately lower income households, purchasing cars on the second-hand car market, 'understanding how prices on the second-hand EV market will evolve is even more challenging, given that it is a new market'.
Mr Johnson yesterday insisted the plan would benefit both the UK and the planet in the long run.
He said no-one would be forced to rip out their old boiler or sell their petrol car.
Defending the decision to go faster than bigger polluters like China, he said: 'History has never been made by those who sit at the back of the class.'
He added: 'The UK's path to ending our contribution to climate change will be paved with well-paid jobs, billions in investment and thriving green industries, powering our green industrial revolution across the country.
'By moving first and taking bold action, we will build a defining competitive edge in electric vehicles, offshore wind, carbon capture technology and more, whilst supporting people and businesses along the way.'
In a 135-page Net Zero Review, the Treasury acknowledged the need for the world to tackle climate change.
It said that left 'unmitigated', climate change would cause massive damage to the economy. The cost of 'global inaction' would 'significantly outweigh the costs of action,' the document said.
But it also warned that leading the charge against climate change could have major costs for UK taxpayers.
'If there is to be additional public investment to support decarbonisation, it may need to be funded through additional taxes or reprioritised from other areas of government spending,' the Treasury said.
Rejecting the case for higher borrowing, it said: 'Seeking to pass the costs onto future taxpayers through borrowing would deviate from the polluter pays principle, would not be consistent with intergenerational fairness nor fiscal sustainability, and could blunt incentives. This could also push up the economic cost of the transition.'
The Treasury also warned that the Net Zero drive would place 'upwards pressure on consumer prices of goods and services that are more carbon-intensive and can weaken the profitability of the companies that produce them'.
And it warned that jobs in some industries could be lost abroad if the rest of the world did not move at the same pace.
Labour climate spokesman Ed Miliband said the PM's strategy had been 'torpedoed by the Treasury'.
He added: 'Once again, it has failed to recognise that the prudent, responsible choice is to sufficiently invest in a green transition.'
The strategy received a cautious welcome from environmentalists.
But business groups and senior Tories called for a more honest discussion about the costs involved.
Gavin Barwell, a former No 10 chief of staff under Theresa May, took a swipe at the PM, saying: 'I'm strongly in favour of more rapid action to decarbonise our economy, but I do wish politicians of all persuasions would stop pretending there is no upfront cost and it is one big job creation scheme.'
Craig Mackinlay, founder of the Net Zero Watch group of Tory MPs, described the plans as a 'largely uncosted wish list'.
He added: 'I am most uncomfortable for the lower paid who will bear the cost of much of this greenwash in higher bills and taxes whilst the wealthier will bank their contribution towards their five figure heat pump.
'While the big global emitters of CO2 pay lip service to net zero, we're seemingly on a path to bankruptcy with multi-trillion pound dreams.'
Matthew Fell, policy director at the CBI, said the new strategy 'fills in some of the blanks' in the government's green agenda.
But he said the country needed 'an honest conversation... about how we pay to go green'.
The independent Climate Change Committee's chief executive Chris Stark described the strategy as a 'substantial step forward' that laid out the Government's ambitions.
Katie White, from conservation charity WWF, said: 'We are finally seeing the UK Government set out a positive vision for net zero, sending a clear signal to every sector of the economy on their role, but we are still lacking the full suite of policies and increased funding to close the gap between climate promises and action.'
But environmental group Friends of the Earth criticised the strategy as 'riddled with holes and omissions'.
Official plans to replace traditional gas boilers with heat pumps came under fire yesterday.
Critics said a £5,000 grant for homeowners to install air or ground heat pumps are little more than a 'middle-class bung' for people who were going to switch to the technology anyway.
But they will not help poorer households as they barely cover half the costs of switching to even the cheapest option, while the overall £450million pot will only fund a fraction of the cost of making all UK homes much more energy efficient.
The drive to low-carbon domestic heating forms part of the Government's aim of the UK producing net zero greenhouse gases by 2050.
The £5,000 grant, to be available from next April, will fund only half the typical £10,000 cost of an air source heat pump, which looks like an air conditioning unit on the outside of a house.
But installing a ground source pump in a garden – either laid horizontally below a lawn or bored vertically into soil – can cost up to £20,000.
Both work by extracting heat from the outside environment and produce up to 40 per cent less greenhouse gas. But they may also need larger radiators, underfloor heating and extra insulation to work efficiently in heating a house.
The costs of such a 'green' system compares to the £2-3,000 bill for buying and fitting a typical 'combi' gas boiler.
These will no longer be available to buy after 2035 and old ones that stop working after this will have to be replaced by a low-carbon alternative.
The £450million available would only pay for 30,000 heat pumps a year, a fraction of what is needed to convert 20million UK homes to low-carbon heat.
About 15 per cent of the UK's greenhouse gases come from heating our homes. The Government has said it needs to convert 600,000 homes to heat pumps by 2028 if it is to meet its net zero target.
In a foreword to the Net Zero Strategy, the Prime Minister said: 'For years, going green was inextricably bound up with a sense that we have to sacrifice the things we love. But this strategy shows how we can build back greener without so much as a hair shirt in sight.'
In further comments in The Sun he wrote: 'While we're going to have to make some pretty major changes to the way we heat our homes, the Greenshirts of the Boiler Police are not going to kick in your door with their sandal-clad feet and seize, at carrot-point, your trusty old combi.'
The strategy has been released as the UK hosts the UN Cop26 climate summit at the end of the month.
Patrick Hall, of think-tank Bright Blue, said the insufficient costing of the scheme appears to show the Treasury had won in the 'tug of war' with No 10 and the Business, Energy and Industrial Strategy department.
Mike Foster, of trade body Energy and Utilities Alliance, said the limited funding 'suggests the Chancellor is putting the brakes on the Prime Minister's flight of green fantasy'.
He added: 'The £5,000 grant only pays half the cost of a heat pump, so those in fuel poverty will see no warmth from the Government's generosity.
Boris Johnson unveiled his plan for turning Britain green by 2050 - but was warned by the Treasury that making the change to Net Zero probably means tax and price rises and he must not borrow to pay for it
Boris Johnson chatted to the Microsoft billionaire on stage as he asked industry leaders to commit funding to decarbonising the world economy - insisting 'green is good, green is right'
One Treasury chart flagged the huge range of possible outcomes from the Net Zero process - suggesting that heating, power and transport costs could rise from around £2,400 a year now to around £2,600 in 2050
The Treasury assessment includes a chart showing how the heat pump costs can vary massively between properties
Boris Johnson's plan to offer £5,000 grants to families to replace gas boilers with greener heat pumps was slammed by experts today, amid claims they are only suitable for a 'small percentage' of UK properties.
Households will be offered the grants from April 2022 in a bid to encourage the shift to low-carbon heating systems, costing taxpayers in England and Wales at least £450million. But the funding will cover just 90,000 heat pump installations over three years, far short of the Prime Minister's goal of 600,000 installations a year by 2028.
One expert said the plan was 'misleading' and dismissed suggestions by the Government that 'all homes can have heat pumps to replace gas boilers, when in fact only a small percentage of UK homes are suitable for them'.
It comes after a report in April claimed that heat pumps would be impractical for between 37 and 54 per cent of UK homes currently using gas. The study, published by the Energy and Utilities Alliance in partnership with Leeds Beckett University, said there were 'limiting factors' in 8-12million homes out of the 22.7million properties analysed.
They include homes built with solid brick walls or uninsulated, and space-constrained properties such as flats and mid-terrace buildings, as well as high rise buildings.
Meanwhile energy chiefs have criticised the way the grants scheme has been drawn up as they warned only wealthier families will be able to benefit. They said that 'the only people who can afford to take advantage are those who can put the other £5,000 in' to meet the estimated £10,000 cost of installing a heat pump.
'Instead, it is middle-class bung for people who were probably going to fit a heat pump anyway.
'For the same amount of money, £150million a year, half a million homes could have loft insulation fitted, saving each household £135 a year and removing 290,000 tons of carbon emissions each year.
'Instead, removing 30,000 gas boilers, replacing them with the subsidised heat pumps will remove only 48,000 tons of carbon each year.'
Defending the policy, energy minister Greg Hands told the Commons: 'We are not saying this is a scheme that is going to provide a heat pump for every house.'
He added the Government was not 'replacing everybody's gas boiler, but actually by the Government sending a signal kick-starting that market, showing a signal that we want the private sector to respond positively.'
It comes as it was revealed that buyers of poorly-insulated homes may struggle to get a mortgage under government proposals to make the housing stock greener, it was revealed yesterday.
Mortgage lenders would have to disclose the energy performance of properties in their portfolio – and set themselves voluntary targets to improve the insulation of their houses.
Ministers hope that the move would encourage buyers to make their homes more energy efficient. But those that cannot afford to do this could struggle to remortgage or sell.
The plan states lenders' properties should aim to reach an