Britain’s drive to reach net zero could cost far more than official estimates suggest, with new analysis warning that the real costs will fall heavily on energy-intensive sectors such as agriculture and the wider rural economy.
The Institute for Economic Affairs (IEA) report claims the cost of the UK’s net zero commitments has been consistently underestimated by public authorities, raising concerns about how the transition will be funded and who will ultimately bear the cost.
In ‘The Cost of Net Zero’, energy analyst David Tarver examines official forecasts made by the Commission on Climate Change, the National Energy System Operator, the Treasury and the Office for Budget Responsibility.
The paper argues that headline estimates have fallen significantly not because net zero has become cheaper, but because methodologies have changed and assumptions about technology costs and financing have become increasingly unrealistic.
The Committee on Climate Change now estimates that reaching net zero between 2025 and 2050 will cost £108 billion, a downward revision from its previous forecast of more than £1 trillion.
Tarver said the reduction was driven by a shift away from measuring total costs, comparing spending to a hypothetical baseline scenario, alongside assumptions that the costs of renewable energy, heat pumps and electric vehicles would fall sharply and that borrowing rates would be below market levels.
In contrast, National Energy System Operator modeling suggests the total cash cost of the transition is £7.6 trillion. If we include the carbon cost of emissions, that figure rises to more than £9 trillion.
The paper warns that even these numbers may be underestimates, especially given the impact of recent difficulties in delivering offshore wind projects and rising financing costs.
For farmers, the analysis raises questions about future energy prices, grid charges and the cost of complying with decarbonization policies, at a time when many businesses are already facing rising electricity costs for grain drying, cold storage, irrigation and livestock pens.
The debate comes as UK agriculture continues to pursue its own climate change ambitions. In 2019, the NFU committed to achieving net-zero greenhouse gas emissions across UK agriculture by 2040, 10 years ahead of the national target.
The union has previously said that achieving this will depend on increased productivity, innovation and sustained investment, as well as supportive policy frameworks and realistic assumptions about costs.
The IEA document also highlights concerns that optimistic assumptions about renewable energy costs could increase pressure for large-scale development in rural areas, including solar and wind projects on productive agricultural land, as policymakers seek to meet targets at pace.
An example is offshore wind, where the CCC assumes a project cost of £1,500 per kilowatt to be delivered in 2030. Hornsea 3, due to come online in 2028, is expected to cost between £10bn and £11bn, which equates to around £3,682 per kilowatt.
There are also questions about the cost of solar power, with recent UK projects being delivered for nearly £1,000 per kilowatt, well ahead of official forecasts for it to fall to just over £400 per kilowatt by 2030.
Mr Tarver has warned that presenting misleadingly low figures risks silencing serious national debate about what he describes as one of the most expensive policy programs in British history.
He said: “The analysis of the various public bodies responsible for calculating the cost of net zero is completely untrue.”
“They are making fanciful assumptions about the costs of renewable energy and low-carbon technologies. The true cost of net zero is much higher than we are led to believe.”
“Net zero is already one of the most economically damaging policies in modern British history,” said Frost, director of the Institute of Economic Research.
He said the study showed the public sector was relying on “fanciful numbers” and warned that the policy “much needs a proper rethink before it further annihilates British industry and leaves British households permanently exposed to unreliable supply and high bills”.
Agribusinesses, which are at the heart of rural economies, have already experienced sharp increases in energy costs in recent years, along with increased pressure to invest in low-carbon technologies and infrastructure.
Claire Coutinho, the shadow energy secretary, said: “It is incredible that none of our ‘independent’ energy agencies can publish accurate figures on how much net zero will cost this country.”
The IEA argues that without transparent accounting, net-zero policies risk further burdening sectors such as agriculture, which are expected to adapt, invest and decarbonise while managing rising costs and continued volatility across supply chains.
