Cambridge Econometrics collaborated with the UK Corporate Leaders Group on a report exploring solutions to the UK’s cost-of-living crisis while advancing the transition to a low-carbon economy.

The report revealed that policies which seek to simultaneously address the cost-of-living crisis whilst reducing emissions had long-term benefits for the economy, environment and society.

Our global macroeconomic model E3ME was used to determine the macroeconomic and distributional outcomes of three different policy packages to support UK households with the 2022 cost-of-living crisis.

The policy packages costed the same to implement, but differed in type of measure, focus on low-income and vulnerable households, and how well they address climate change and the need to transition to net zero emissions:

1.  A climate positive package: Measures include targeted support for low-income, vulnerable households in the short term, and in the medium- to long-term a focus on increased uptake of energy efficiency and low carbon heating measures plus investment in public transport.
2.  Neutral policy package: Measures include the short-term measures already announced to address the cost-of-living crisis in March 2022 (this includes the Energy Bills Rebate package plus elements of the 2022 Spring Statement). The medium- to long-term measures include government investments with no preference for the climate outcomes.
3.  Climate negative package: Short-term and medium- to long-term measures in this package lead to environmental outcomes that could be seen to contradict the net zero target.