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Methodology note

Scrap net-zero subsidies: calculation note

Assumptions behind the Scrap net-zero subsidies scenario. Implementation detail is incomplete, so uncertainty is explicit.

View main policy page: Scrap net-zero subsidies

Central fiscal result

-GBP 3.0bn - Net fiscal impact in 2027-28

Low case: -GBP 12.0bn. High case: +GBP 10.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Renewable subsidies and selected climate schemes are cancelled.
  • Domestic fossil-fuel licensing is expanded.
  • Existing contract compensation is included in the high case.
  • Climate-damage costs are outside the fiscal score.

Affected population

  • Affected units are households, energy firms, investors and supply chains.
  • Bill-payers may see levy cuts if pass-through occurs.
  • Renewables, retrofit and grid sectors face lower demand.
  • Fossil-fuel producers may gain licences.

Gross impact

  • Reform claimed GBP 30bn annual saving.
  • Central fiscal saving is only GBP 3bn after contract and levy caveats.
  • Low case saves GBP 12bn if schemes are cancelled.
  • High case costs GBP 10bn from compensation and instability.

Fiscal build-up, central case

  • Scheme and levy savings: -GBP 8.0bn
  • Contract compensation and transition: +GBP 3.0bn
  • Replacement energy-security spending: +GBP 2.0bn
  • Lost tax and investment effects: +GBP 0.0bn

Central net impact: -GBP 3.0bn in 2027-28.

Behaviour and pass-through

  • Low case assumes schemes can be cancelled with limited compensation.
  • Central case assumes many costs sit on bills or contracts.
  • High case assumes compensation and financing costs exceed savings.
  • Short-run bill relief may increase energy demand.

Phasing

  • 2026-27: -GBP 1.0bn. Preparation or partial implementation.
  • 2027-28: -GBP 3.0bn. Main scenario year.
  • 2028-29: -GBP 4.0bn. Behaviour and pass-through develop.
  • 2029-30: -GBP 5.0bn. Steady-state uncertainty persists.

Main source groups

  • S1: Reform page and Contract define net-zero repeal direction.
  • S2: Ofgem price-cap data anchor household bill context.
  • S3: Stern Review frames long-run climate costs.
  • S4: Carbon-tax and climate-economics studies inform emissions and external-cost risks.
  • S5: No official contract schedule was found.