New Report Shows The 2030 – 2040 Fossil Fuel Vehicles Ban Is A Huge Cost:Benefit Fail

The highly respected Centre for Economics and Business Research (CEBR) study was commissioned by FairFuelUK, The Alliance of British Drivers (ABD) and The Motorcycle Action Group (MAG).

The key findings are:

• This is a study that uses official government methodology to compare the projected environmental benefits from the proposed bans on the sale of fossil fuel powered vehicles with the likely costs.

• The study shows that the environmental benefits from the proposed bans are dwarfed by the additional costs.

• The study assesses economic impacts over the period 2022 until 2050. 2022 prices are used as a common baseline and all costs and benefits are discounted to a 2022 base year (with selected values also presented on an annual/undiscounted basis).

• Using the government’s values for reduced carbon emissions, the value of the environmental benefits add-up to £76 billion. In contrast, the assessed costs add up to £400 billion. These costs are FIVE times the benefits; even when using the government’s own valuations of the environmental benefits.

• The study shows that the major costs from the proposed ban are likely to be additional costs of:

I. New vehicle purchases of £188 billion (in extra costs).

II. Increased time lost due to waiting whilst recharging EVs, valued at £47 billion.

III. Infrastructure for electricity generation and additional charging points of £99 billion.

Even the overall environmental benefits are rather lower than might be assumed since approximately 50% of any reductions in emissions from usage are likely to be offset by increased emissions in vehicle production.

Furthermore, this analysis does not take account of the likely increased emissions and other social costs from the massive increase in mining likely to be required by EVs. These extra emissions will be transnational in nature, relating to the processing of raw materials and associated shipments across the globe.

Finally, there is likely to be a loss of tax revenue of £5.8 billion per annum (£2.7 billion when discounted to 2022 base year terms), on average, in the scenario of a ban in comparison to a no-ban scenario, as fuel duty and VAT dwindle away. The annual revenue loss is £198 million in 2030 (£150 million when discounted to 2022 base year terms), rising to about £16 billion in 2050 (£6 billion when discounted). We assess that replacing this revenue, for example, would require increasing the rate of VAT or the basic income tax by an increasing amount throughout the period of analysis, peaking at an increase of 0.8% for VAT or 1.1% for the basic rate of income tax in 2050.

From the perspective of the average household, these additional costs over the period 2022 to 2050 amount to a total of £14,700 per household in 2022 terms. Using undiscounted values, this is an impact of £27,400 per household, or just under £1,000 per household per year from 2022 until 2050.

The study also looks at how sensitive the results are to a range of different assumptions. For instance:

• Using a ‘social cost’ valuation of the benefits as proposed in the Stern Report rather than the government’s current valuation approach reduces the assessed NPV (Net Present Value) by £26 billion.

• Assuming that investment could alternatively be made in generating widespread usage of low carbon fuels to replace existing fuels reduces the assessed NPV by £15 billion. It is conventional in policy analysis that where a policy appears to have assessed costs well in excess of the benefits that the policy at the very least needs to be scrutinised extremely closely to see if, on balance, it still makes sense.

We strongly recommend that HMG commissions an independent analysis of the costs and benefits of the proposed policy and compare this to other viable options to see whether it should proceed with the proposed bans.

The full report ‘Economic impacts of the 2030 – 2040 bans on the sale of fossil fuel vehicles’ can be found on the Fair Fuel UK website: https://fairfueluk.com/

ENDS

ISSUE DATE: 11 October 2022 (Embargoed until 00.01 12 October 2022)