So far this year has felt like one big wrangle over the costs of the energy transition. Accusations of dodgy assumptions, comparing apples and lemons and hidden subsidies are flying backwards and forwards. Possibly the most silly was the inflated costs of Net Zero released by the Institute for Economic Affairs (most famous as the brains behind the Liz Truss mini-budget), which assumed that fossil fuels, internal combustion engines, gas boilers, power stations etc would cost precisely nothing for the next 25 years (where’s my free Lamborghini?). But the biggest controversy is externalities – costs caused by climate impact but borne by someone else.

Anti-renewables voices dismiss these out of hand, but they are all too real. Famously, there are no climate change deniers in the insurance industry (Tenbury Wells has been dubbed Britain’s first uninsurable town), we are already seeing impacts on food prices, and I won’t be investing in the skiing industry anytime soon. I suspect the motivation for discounting such costs are down to a combination of 1. they destroy any perceived economic benefit of fossil fuels, 2. old school climate change denial, and 3. the ‘rugged individualism’ (read ‘selfishness’) of such people and their paymasters. But someone picks up the bill at the end of the day.

This myopia can occur at the organisational as well as a national level. In one of my clients, we found that the policy costs of fossil fuels (notably the EU Emissions Trading Scheme) were not being factored into investment appraisals. This meant high carbon capital options were being seriously underpriced and had an unfair advantage, locking the business into paying higher than necessary costs for decades. My main contact, the Director of Sustainability, managed to persuade the company to change the methodology, so the direct cost benefits of going low carbon were factored in, and decisions started to go ‘his way’ by default.

It gets even more complicated when indirect costs and benefits are considered. While renewables are increasingly competitive on a narrow economic basis, they come into their own when it comes to winning new business (or not losing out to lower carbon competitors) and recruiting and retaining the best employees, who like to work for green companies. The financial benefits of such factors are very hard to quantify on a spreadsheet, but that doesn’t mean they aren’t substantial.

Any cost benefit analysis is only as good as the scope and quality of the information you put into it. Just because we traditionally leave the difficult bits out, doesn’t mean we should – they can make all the difference.