40 Centre for Economics and Business Research 7. Conclusion This report has assessed the economic impacts of the government’s stated plans of banning the sale of fossil fuel vehicles from 2030 onwards. The clear message deriving from the analysis is that this decision represents ‘poor’ value for money as associated costs are five times the estimated benefits. The analysis implies that even when the full benefits of the contribution of the ban to achieving the goal of Net Zero are priced in, the costs still far outweigh these benefits. The central benefit-cost ratio estimate is 0.19, meaning that the costs of the forthcoming bans internal combustion engine vehicles are estimated to be just over five times higher than the benefits. The net present value is negative £226 billion; with this representing an estimated net cost per household of £14,700 (£27,400 in undiscounted figures). The main source of estimated benefits stems from lower emissions at the tailpipe. However, the extent to which these emissions are clean is heavily dependent on cleanliness of the National Grid’s energy supply. To make this source fully zero emission will may prove to be prohibitively expensive in the long run. In present value terms, the estimated impact of the bans on Fuel Duty and VAT revenues between now and 2050 is £76.8 billion. This represents a huge hole in public finances which will need to be addressed. This is equivalent to the Income Tax, Employees' NICs, and Employers' NICs revenue raised on an additional 414,000 UK full-time workers on median earnings over the same time period. This social cost-benefit analysis indicates that the key costs to society including significantly increased waiting times as charging electric vehicles will take a lot more time than refuelling ICE vehicles at petrol pumps. Moreover, it is likely that drivers will have to pay a lot more for new vehicles, especially given the expectation of shortages of key raw materials that are essential for building EVs. There will also be huge costs required to rapidly reorient the National Grid to generate sufficient renewable energy, in a smart way, to supply energy for EVs. The more rapidly these demands increase, the more costly it is likely to the economy. The government itself will face a significant fall in tax revenue and the average household will face significant personal costs, both in terms of direct monetary outgoings but also in much more lost time. Even without a ban, there will be significant falls in carbon emissions as EVs are likely to gain significant traction over time without significant regulation, and petrol and diesel vehicles will become more fuel-efficient. As such, this report focuses on the marginal costs and benefits of the increased speed of the transition caused by the forthcoming regulatory change. The analysis has been undertaken in a way that is consistent with the government’s analytical methodological guidance. This indicates that this is a decision that should be reconsidered so not to yield impacts that are, in net, detrimental to the economy and society more generally. The environmental benefits of the ban, in so far as it helps the government meet Net Zero, are fully captured in the estimated benefits. This has allowed this study to weigh up those assessed implied environmental and health benefits against other factors that determine the welfare of UK citizens. Whilst there may remain strategic reasons for implementing the ban, such as demonstrating the UK’s commitment to achieving Net Zero by 2050, this regulatory policy should be seen primarily as one that reduces the welfare of UK citizens.
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