No Net Zero?

Plus: Interest rates, the black market, & equal pay.

In today’s newsletter:

• Kemi Badenoch’s speech on Net Zero.

• How big is the tobacco black market?

• The Bank of England’s decision to hold interest rates.

• Pay gap reporting measures.

and more….

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In 1972 Maurice Strong the first director of the United Nations Environment Programme stated that the world “had just 10 years to avoid catastrophe”. In 1989 his successor Mostafa Tolba raised the estimate to 18 years for “an environmental catastrophe as irreversible as any nuclear holocaust”. You may detect from your peaceful enjoyment of reading this on your smart phone, on dry land, unmolested by fallout or mutants driving sand buggies, that both were incorrect. In that context there is little new in the zeal with which the United Kingdom has gripped the challenge of climate change over the last 30 years. From Kyoto to ‘Net Zero by 2050’ we have taken the science of global warming seriously, but by acting unseriously, declaring emergencies and setting implausible policy aims, backed up by complex plans and compromised institutions embedding environmental goals in policy and law.

What’s changed is that people can see it isn’t working and is making us less well off, which in the long run limits our capacity to do anything, including innovating for a cleaner greener world. Net Zero plans mean net zero prospects of delivering those aims, alongside everything else. The green growth paradox, that alternatives to polluting technologies tomorrow, require using polluting technologies today, speaks against trying to move away from the latter too quickly. Wind farms need steel, nuclear power needs concrete, solar power needs glass, and everyone needs chemicals. Energy intensive industries cannot yet be run competitively without fossil fuels. The denial of trade-offs in climate and environmental policy is a dangerous game and leads to bat tunnels and projects twelve years in development being blocked for failing to predict their impact on emissions in 2100.

The speech by leader of the Opposition Kemi Badenoch this week, ending the Parliamentary consensus on Net Zero by 2050, makes it clear this message is getting through. She was being cautious, seeking to consult widely before committing to new policy, but the narrative shift is important, particularly the nod to the importance of markets in delivering change. Although this should be self-evident, 20 years ago we had some of the cheapest and cleanest energy in the world after privatisation drove the ‘dash for gas’. However, all of that Thatcherite wisdom was unlearnt, and we ended up with price controls, picking winners, hyper-regulation, bailouts on bills, supertaxes, micro-plans, and macro-bans. We seemed more concerned by plastic straws and heat pumps than whether Europe was becoming dangerously dependent on Russia and China for both our current and future energy needs.

Her nudge on the tiller is also reflected in internal debates in the Government. There is talk of a reshuffle and a reprioritisation of ambitions from climate change to growth. The Conservatives moving into this space will encourage Reform to raise their game on ideas, after a rocky effort last month that appeared to be more about preventing and taxing things than creating the conditions for affordable abundance by exploiting the “treasure beneath our feet”. The anti-capitalist left will probably still be predicting the end of the world by teatime and arguing over whether nuclear power is good or evil, but the public want reassurance that they can afford to heat their homes.

The IEA has been writing about these matters for some time and will be doing more. Soon, we will be launching a new programme that will seek to bring together thought leaders, opinion formers and stakeholders in the energy and climate space to meet this challenge and conceptualise a different future. One in which energy choices are driven by consumer and industrial demand, while better environmental choice are encouraged through markets and prices not plans and bans. If you might be interested in supporting or contributing to work like this we would welcome hearing from you.

Andy Mayer

COO and Energy Analyst

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P.S. The best way to never miss out on IEA work, get access to exclusive content, and support our research and educational programmes is to become a paid IEA Insider.

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IEA Podcast: Executive Director Tom Clougherty, Editorial Director Kristian Niemietz, and Communications Manager Reem Ibrahim discuss the abandonment of ‘woke’, Kemi Badenoch’s Net Zero speech, and the Government’s welfare reforms, IEA YouTube

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The black market for tobacco is out of control

• Legal tobacco sales have nearly halved since 2021 despite little change in the number of smokers

• The number of cigarettes bought on the legal market fell by 45.5% between 2021 and 2024

• In the same period the number of smokers declined by just 0.5%

• The only plausible explanation for this is that there has been rapid growth in tobacco sales on the black market. This should be a wake up call for the Government

Read coverage in The Daily Express

See the full analysis on IEA Insider:

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Bank of England holds tight in a fog of uncertainty

Responding to the Bank of England's decision to hold interest rates at 4.5% Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:

"The Bank of England’s decision to leave UK interest rates on hold this week was widely expected and consistent with the MPC’s “gradual and careful approach”. There can be good times to surprise the markets, but this probably was not one of them.

"The MPC, like most businesses, investors, and households, is grappling with multiple uncertainties both at home and abroad. The big unknowns include the continuing fallout from last October’s Budget and from President Trump’s tariff wars, as well as what the Chancellor will announce next week.

"The MPC’s dilemma is whether to pay more attention to the downside risks to growth or the upside risks to inflation. The MPC can and should be willing to look past a temporary increase in inflation if underlying price pressures are easing. Moreover, growth in money and credit remains subdued, and interest rates are still above a ‘neutral’ level. As such, there was a strong case for a further cut today.

"Nonetheless, it would be harsh to criticise the majority on the MPC for opting to wait for the Bank’s next economic forecasts in May. But a cut then is still not guaranteed, especially as most of the key April data will not be available until after the meeting.

"In the meantime, anyone looking for a confidence boost from today’s announcement was almost bound to be disappointed. The Bank does not have much of a clue about what happens next either."

Read in The Telegraph

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News, Views & Upcoming Events

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Ministers to force firms to reveal ethnicity pay gap - Reem Ibrahim criticises Government plans to lay more burdens on business in The Times

But Reem Ibrahim, from the free market think tank the Institute of Economic Affairs, said if the government was serious about achieving economic growth they should not be imposing “yet more burdens on businesses”.

She said: “Pay is decided by a whole host of factors, including experience, qualifications and type of work.

“Mandatory pay gap reporting fails to take into account these key differentials, leading to the assumption that any ‘pay gap’ is caused by discrimination.

“Firms will then attempt to manipulate the published figures to cast themselves in a better light, resulting in a whole host of negative consequences on the very people the government intend to protect.”

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Editorial and Research Fellow Len Shackleton lamented the Government’s lack of ambition on welfare reforms in The Independent

“Professor Len Shackleton, research fellow at the Institute of Economic Affairs, said the announcement would “upset” disability campaigners and Labour’s backbenchers, but “will do nothing much to reform benefits or save significant amounts of money”.

“Eligibility for PIP certainly needs to be narrowed but it remains to be seen just how this will be accomplished. It certainly makes sense to have a common fitness to work test for PIP and universal credit, but this test needs to be much tougher – and assessed in person – than either of the existing measures,” he said.”

See also The Telegraph, CityAM, and GuidoFawkes

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Strategic Partnerships Manager Matthew Bowles wrote about what London could learn from New York in stopping crime in CapX

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