Net Zero, Empty Factories: The West’s Great Act of Economic Self-Harm

There is a peculiar confidence in the modern Western political mind: the belief that if a government announces a sufficiently ambitious target, reality will obediently rearrange itself to accommodate it. Thus, we are presented with great declarations about net zero, carbon neutrality, green transformation and the end of fossil fuels, all delivered with the solemnity of a wartime proclamation. Governments announce dates several decades into the future, ministers speak of historic transitions, corporations publish glossy environmental promises, and citizens are instructed that their lives must change accordingly.

The curious thing is that the atmosphere does not recognise national borders, political speeches or electoral manifestos. Carbon dioxide emitted in Manchester is not more dangerous than carbon dioxide emitted in Mumbai. A tonne of steel produced in Britain does not become environmentally virtuous merely because the factory is located inside a country with an elaborate carbon-accounting system, while a tonne produced in China becomes harmless simply because it arrives in a container ship.

Yet this is increasingly the economic theatre into which Western governments have marched.

The West congratulates itself upon reducing the emissions generated within its own borders while importing an extraordinary quantity of the goods required to maintain its standard of living from countries whose development paths are considerably less restrictive. The factory disappears from the Western landscape, the smokestack disappears from the official national inventory, and the finished product reappears upon the shelves of the Western consumer. The arithmetic looks cleaner. The atmosphere does not necessarily notice the difference.

This is the central absurdity that politicians prefer not to examine.

The question is not whether climate change is real, nor whether reducing emissions is desirable. Those are separate arguments. The more uncomfortable question is whether Western governments have constructed a system in which they impose increasingly expensive constraints upon their own citizens and industries while simultaneously purchasing an enormous proportion of their manufactured goods from economies that are still expanding industrial production, still using coal and still operating on timetables for decarbonisation that extend far beyond those being demanded of Western societies.

And if that is what is happening, one must ask the most unfashionable question in modern politics:

What exactly is the point?

China has committed to peaking carbon dioxide emissions before 2030 and achieving carbon neutrality before 2060. India has committed to net zero by 2070. Those are genuine commitments, and it would be wrong to pretend otherwise. India has also already reached a significant milestone, with non-fossil sources accounting for more than half of its installed electricity-generation capacity in 2025.

But there is a world of difference between announcing a destination and imposing the costs of travelling there.

China's 2060 target is two decades beyond the European Union's 2050 net-zero ambition. India's target is still later. Meanwhile, both countries have enormous developmental requirements, enormous populations and enormous demands for reliable energy. China continues to use coal on a vast scale, even while simultaneously becoming a world leader in renewable energy, electric vehicles, batteries and other clean technologies. Recent Chinese policy continues to describe coal reduction and low-carbon transition as objectives, while the country's industrial economy remains heavily dependent upon energy-intensive manufacturing.

India presents a similar contradiction, although for entirely understandable developmental reasons. It is attempting to expand prosperity for hundreds of millions of people while also pursuing decarbonisation. Its official planning recognises that coal remains part of the energy system for years to come. India's own long-term modelling envisages an enormous expansion of renewable generation and electrification, but also acknowledges the persistence of residual emissions and the continuing importance of managing the transition alongside economic development.

There is therefore no mystery about what is happening. China and India are not necessarily refusing to decarbonise. They are refusing to impoverish their populations in order to satisfy the timetable demanded by wealthier nations that industrialised generations earlier.

That distinction matters.

The West has already consumed much of the cheap energy upon which its prosperity was built. Britain, Germany, France, the United States and other developed economies became wealthy during an age in which coal, oil and gas were not treated as moral contraband. Their factories burned them. Their ships burned them. Their railways burned them. Their power stations burned them. Their homes were heated by them. Their agricultural productivity was transformed by fossil-fuel-based fertilisers and mechanisation.

Having climbed the industrial ladder to prosperity through generations of coal, oil, gas and abundant energy, the West now appears determined to pull that ladder up behind itself, imposing increasingly stringent restrictions upon the very energy sources that once enabled its own industrialisation. Yet China and India are still climbing. Their populations continue to demand greater prosperity, expanding industry, rising living standards and the reliable energy necessary to provide them. They may have adopted long-term net-zero ambitions, but neither has shown the same willingness to accept the immediate economic constraints increasingly imposed upon Western economies. And here the argument becomes considerably more uncomfortable, because the West is effectively demanding that developing powers follow rules which the West itself ignored while it was becoming rich.

Suppose a British or European company closes a carbon-intensive manufacturing facility because the cost of complying with domestic environmental regulation makes production uneconomic. The factory closes. The workers leave. The production does not necessarily disappear. It may simply move elsewhere.

If the replacement goods are manufactured in a jurisdiction where electricity comes partly or substantially from coal, the atmosphere has not been impressed by the administrative achievement. Britain can congratulate itself upon having reduced domestic industrial emissions while importing the product whose manufacture generated emissions elsewhere.

The factory has not vanished. It has merely acquired a foreign postcode.

This is the phenomenon generally described as carbon leakage, and even the European Union acknowledges the problem. The EU's Carbon Border Adjustment Mechanism exists precisely because European policymakers recognise that imposing carbon costs on domestic industry while allowing equivalent carbon-intensive imports to enter without comparable costs can simply move production rather than eliminate emissions. The mechanism, which entered its definitive regime in 2026, currently covers sectors including iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.

But even this raises another question.

Why has it taken so long for Western governments to recognise that economics does not stop at the customs barrier?

For decades, Western consumers have been encouraged to buy inexpensive manufactured goods from abroad. Western industries have increasingly depended upon complex international supply chains. Western governments have celebrated globalisation because it delivered cheap consumer products and restrained domestic inflation. At the same time, environmental policy has made domestic production progressively more expensive.

The result is a magnificent exercise in political bookkeeping. The West imports the goods it has decided are too expensive or too environmentally damaging to manufacture at home, while the emissions generated in producing those goods are recorded in someone else’s national accounts. Western governments then point to the decline in their own domestic emissions as evidence of progress and congratulate themselves upon having achieved another step towards net zero. The carbon, however, has not disappeared; it has merely been emitted somewhere beyond the statistical boundary. The atmosphere receives the invoice regardless of which country’s ledger records it, while Western politicians are left wondering why the industries, they have burdened with ever greater costs are becoming less competitive and increasingly inclined to move elsewhere.

There is a particularly Orwellian quality to this arrangement because the language is designed to make the contradiction invisible. We are not told that production has moved abroad. We are told that the economy is "decarbonising". We are not told that a British or European consumer may be purchasing a product manufactured with electricity generated partly from coal in another country. We are told that the product is part of the global green transition.

The words have been cleaned. The supply chain has not.

The more prosperous Western nations then borrow, spend and consume while increasingly restricting the energy systems upon which their own productive capacity depends. Governments accumulate enormous debts, companies relocate or reduce investment, and consumers continue to demand cheap goods.

One does not have to be an economist to recognise the contradiction. A society cannot indefinitely consume more than it produces, borrow to finance the difference and then expect the countries from which it purchases its goods to preserve its prosperity on its behalf. Sooner or later, somebody must produce the steel, mine the minerals, manufacture the batteries, build the ships, produce the fertiliser, manufacture the machinery and generate the electricity upon which the entire industrial system depends.

None of these things can be conjured into existence by political declarations or removed from the equation by the language of net zero. They require vast quantities of reliable energy, and that energy must ultimately come from somewhere. The uncomfortable truth, therefore, is that modern civilisation is fundamentally an energy system before it is an ideological one; however, elaborate the political doctrine, however ambitious the environmental target and however carefully the statistics are arranged, civilisation remains dependent upon the ability to produce sufficient energy to sustain the industries, infrastructure and living standards upon which modern life depends.

A politician may rename a power station, subsidise a wind farm or unveil another grand hydrogen strategy, but no amount of political rebranding alters the fundamental physical requirement for enormous quantities of reliable energy. Governments may change the language, rewrite the targets and rearrange the statistics, but they cannot repeal the physical realities upon which an industrial civilisation depends. The laws of thermodynamics are not members of any political party, do not respond to ministerial speeches and cannot be persuaded by the rhetoric of climate conferences. They cannot be bribed with subsidies, negotiated with through legislation or instructed to comply with an electoral timetable. They simply remain in force, indifferent to political fashion, and they will continue to impose their requirements whether governments acknowledge them or not.

This is why the Western debate has become increasingly peculiar. Instead of beginning with the fundamental question of how much reliable, affordable energy a modern industrial civilisation actually requires, politicians increasingly begin at the other end of the argument by deciding which forms of energy society should no longer be permitted to use and then attempting to construct an economic and technological system around that decision. Coal must disappear, oil must be abandoned, natural gas must be restricted, and petrol and diesel vehicles must eventually give way to electric alternatives. Homes are expected to move away from conventional heating, industrial processes must be electrified, agriculture must be transformed, buildings must be redesigned, transport must be re-engineered, and consumers must alter their habits accordingly. The entire economy is therefore expected to reorganise itself around a predetermined political destination, regardless of whether the infrastructure, technology or generating capacity required to reach it exists at the necessary scale.

When the resulting electricity system proves inadequate, prohibitively expensive or vulnerable to intermittency, the public is invariably assured that the difficulty is simply another opportunity for innovation. Perhaps it is. Innovation has undoubtedly transformed economies before and may transform them again. But innovation is not the same thing as political optimism, and technological possibilities cannot simply be substituted for functioning infrastructure, reliable supply and economic arithmetic. There is a considerable difference between believing that something may eventually become possible and restructuring an entire industrial economy on the assumption that it already is.

There is also a remarkable double standard in the way industrial expansion is interpreted. When a Western nation closes a coal-fired plant, restricts domestic production or forces an industry towards more expensive forms of energy, the action is celebrated as evidence of environmental progress. Yet when countries such as China and India expand their industrial capacity to meet growing demand for energy, employment and higher living standards, the same process is frequently discussed in entirely different terms. The West appears increasingly willing to judge its own retreat from energy-intensive industry as progress while regarding the continued industrialisation of developing economies as an inconvenient complication. It is a distinction that deserves considerably more scrutiny than it receives.

When a Western country builds a wind farm, it is celebrated as investment in the future. When China builds enormous quantities of solar manufacturing capacity, it is often treated as evidence of Chinese competition. When China builds renewable energy infrastructure, it is simultaneously praised for its green transition and criticised for its continued dependence upon coal.

The contradiction is not entirely Chinese.

It exists in the Western expectation that China should behave like a developing country when economic concessions are requested and like a fully industrialised Western state when environmental obligations are demanded.

China has indeed become extraordinarily important in clean-energy manufacturing. It is producing electric vehicles, batteries, solar panels and other technologies at extraordinary scale. Its recent emissions performance has even shown signs of change: Reuters reported in September 2026 that Chinese carbon dioxide emissions fell year-on-year in the second quarter, with falling oil consumption and rapid growth in electric transport contributing to the decline.

That is worth acknowledging.

But it does not make the Western policy contradiction disappear.

A country can simultaneously be a leader in renewable technology and remain heavily dependent upon fossil fuels. It can build enormous quantities of solar panels while maintaining coal-fired generation. It can export electric vehicles while continuing to operate a huge industrial economy powered partly by coal.

The real question, however, is not whether China is becoming greener, because in several important respects it plainly is. China has invested heavily in renewable energy, electrification and other low-carbon technologies, and its industrial transformation cannot simply be dismissed as an exercise in ignoring environmental concerns. The far more uncomfortable question is whether the West is sacrificing its own economic competitiveness at a faster rate than the rest of the world is actually reducing global emissions. If Western industries are being burdened with increasingly expensive energy, regulation and environmental obligations while production is transferred to countries operating under very different conditions, then the apparent achievement may be less a reduction in global emissions than a redistribution of industrial activity.

That is a very different question from whether China is becoming greener. It is also the question that Western politicians appear remarkably reluctant to answer, perhaps because doing so would require them to confront the possibility that policies presented as environmental triumphs may, in some circumstances, be weakening the very industrial economies expected to finance and sustain the transition. The uncomfortable possibility is that the West may be measuring its own virtue while measuring the world's emissions rather less honestly.

India presents an even more obvious example of the problem because its energy requirements are inseparable from the legitimate ambition to raise living standards. A country containing more than a billion people cannot be expected to approach the energy transition in precisely the same manner as a mature European economy whose population is comparatively wealthy and whose industrialisation occurred generations ago.

India's argument is essentially that development matters.

That argument is not irrational.

Indeed, it raises a question that Western politicians seldom ask aloud: Who decided that the world's poorer nations must accept the energy restrictions that the wealthy nations ignored while becoming wealthy?

If Britain became prosperous while burning coal, why should India be told that coal is morally unacceptable when millions of its citizens still aspire to the material standard of living that Britain achieved through industrialisation?

If Germany built its industrial economy upon cheap energy, why should India be expected to construct an entirely different energy system while simultaneously competing against German and Chinese manufacturers?

If America developed through abundant fossil energy, why should developing countries accept permanent restrictions upon the energy required to industrialise?

There are legitimate answers to these questions. Climate change imposes genuine global costs, and historical responsibility is not the only consideration. But pretending that the questions do not exist is not climate policy. It is political evasion.

And this brings us back to the Western consumer.

The consumer is told to buy an electric vehicle, install expensive technology in the home, reduce consumption, accept higher energy costs and tolerate restrictions upon products once taken for granted.

Yet the same consumer can walk into a shop and find that the clothes, electronics, appliances, machinery and countless other goods upon which modern life depends have been manufactured somewhere else, often in countries where energy systems, environmental regulations and industrial costs bear little resemblance to those imposed at home. The moral burden has been localised, but the industrial system has not. The factory may have disappeared from the Western landscape, but the demand for its products has not disappeared with it, nor has the energy required to manufacture them. What has changed is merely where the emissions are recorded and where the economic consequences are felt.

This is precisely why the debate over net zero requires something considerably more substantial than slogans, targets and carefully constructed political rhetoric. The question should not simply be whether one is for or against net zero, because that reduces an immensely complicated economic, technological and environmental question to the level of a political loyalty test. The adult question is far more demanding: at what economic cost is the policy being pursued, by what mechanism is it supposed to achieve its objectives, what measurable effect will it have upon global rather than merely domestic emissions, and how does that cost compare with what the rest of the industrialised and developing world is actually doing?

Until those questions are answered honestly, reducing emissions within Western borders while importing an increasing proportion of the goods and embedded emissions from elsewhere risks becoming little more than an exercise in statistical virtue, in which the numbers look cleaner precisely because the inconvenient industrial reality has been moved beyond the edge of the ledger.

• Suppose Britain eliminates a certain quantity of domestic industrial emissions but replaces domestic production with imports. How much has global carbon dioxide actually fallen?
• Suppose Germany closes a coal-fired industrial facility and imports the manufactured components from Asia. What happens to the emissions embedded in those components?
• Suppose Europe makes domestic steel progressively more expensive while buying steel from jurisdictions where production remains more carbon intensive. Has the climate been saved, or has European steelmaking simply been made uncompetitive?
• Suppose Western governments borrow hundreds of billions to subsidise the transition. Who ultimately pays the interest?
• Suppose energy prices rise sufficiently to make energy-intensive industries relocate. What happens to employment, tax revenue and strategic resilience?
• Suppose the West becomes dependent upon foreign suppliers for the minerals, batteries, solar panels, turbines and industrial components required for its supposedly sovereign green economy. Has dependency been eliminated, or merely transferred?
• These are not arguments against technological progress.

They are arguments for arithmetic.

And arithmetic has become strangely unfashionable.

The European Union's decision to introduce carbon border adjustment is, in one respect, an admission that the old system was incomplete. If Europe imposes a carbon cost upon domestic industry while imports escape equivalent costs, production can migrate. The EU explicitly identifies this as the problem of carbon leakage.

But the existence of CBAM also demonstrates how difficult the problem really is. Once governments attempt to calculate the embedded carbon of imported goods, they enter a bureaucratic labyrinth of emissions accounting, verification, international trade rules and competing industrial interests. Europe is effectively attempting to impose a carbon accounting system upon the global supply chain.

Perhaps it will work.

Perhaps it will merely produce another magnificent administrative apparatus through which thousands of officials calculate the precise environmental virtue of commodities whose production, transportation and consumption remain part of the same global industrial system.

This is where Western politicians ought to stop congratulating themselves and begin asking the questions that might actually matter.

• Why should a Western steelworker lose his job if the steel is simply produced somewhere else?
• Why should a Western manufacturer close because electricity is too expensive if the finished product returns through the port in a container?
• Why should taxpayers subsidise industries that cannot compete under the imposed energy regime?
• Why should governments accumulate debt to finance a transition without explaining clearly who will ultimately repay it?
• Why should consumers be told that austerity is necessary while governments continue to finance increasingly elaborate subsidies?
• Why should Western economies sacrifice strategic industrial capacity while depending upon countries whose political interests may diverge sharply from their own?

And, above all:

What reduction in global emissions is actually being purchased for every dollar, pound or euro of economic damage inflicted?

That final question should be printed above every climate ministry in the Western world. Because a policy cannot be judged merely by the purity of its intention. It must be judged by its consequences.

There is nothing inherently virtuous about making one's own population poorer if the activity simply moves elsewhere. There is nothing environmentally miraculous about replacing domestic manufacturing with imported manufacturing. There is nothing strategically intelligent about becoming dependent upon foreign industrial capacity while dismantling one's own. And there is certainly nothing economically sophisticated about confusing the disappearance of a factory from a national statistics table with the disappearance of the factory's emissions from the planet.

The great danger is that net zero ceases to be a programme of genuine technological transformation and becomes instead a system of moral accounting, in which governments concern themselves primarily with what happens within their own borders while quietly disregarding what happens beyond them. The citizen is told that his consumption must be reduced, the corporation is instructed to reduce its emissions, and the factory is burdened with ever more demanding requirements to lower its carbon footprint. Yet the underlying demand for goods remains unchanged. The container ships continue to cross the oceans, the warehouses remain stocked, the smartphones remain in our pockets, the refrigerators remain in our kitchens, the cars remain in our driveways, and the steel remains embedded in our buildings. Nothing fundamental has disappeared except, in many cases, the factory that produced these things, which has simply moved beyond the line drawn upon the map.

The result is a peculiar form of environmental bookkeeping in which the West can congratulate itself upon becoming cleaner while simultaneously becoming more dependent upon the industrial capacity of countries whose own transition towards lower emissions will proceed according to their own economic circumstances and political timetables. The production has not ceased; it has merely been relocated. The goods have not vanished; they have travelled farther. The energy has not ceased to be consumed; it has simply been consumed elsewhere. And the emissions have not necessarily been eliminated; they have been transferred to another column in another country's accounts.

Thus, a Western government can announce another reduction in domestic emissions and present it as evidence of historic progress, while its citizens continue to consume the same manufactured goods, increasingly produced overseas. The moral burden has been brought home and placed upon the consumer, the taxpayer and the domestic producer, while the industrial burden has been exported abroad. It is a remarkably convenient arrangement: the West retains the appearance of environmental virtue while relying ever more heavily upon the manufacturing capacity of nations that have neither the same economic constraints nor the same timetable for transforming their energy systems.

The danger, therefore, is not merely that net zero may prove expensive. It is that it may become an elaborate system for confusing where production occurs with whether production occurs at all. If the objective is genuinely to reduce global emissions, then the location of the factory cannot be the principal measure of success. The atmosphere has no interest in national borders, and carbon dioxide does not become less consequential because it was emitted several thousand miles from the consumer who ultimately purchased the product. A policy that drives production from one country to another without materially reducing the emissions associated with that production may satisfy a political statistic, but it has done rather less to solve the problem it was supposedly designed to address.

The West should therefore be very careful before congratulating itself upon a cleaner balance sheet while becoming increasingly dependent upon the industrial economies whose development it cannot control. There is something profoundly contradictory in dismantling productive capacity at home, importing the resulting goods from abroad and then declaring that the disappearance of the domestic emissions constitutes victory. The factory has moved; the consumer remains; the goods still arrive; and the atmosphere, indifferent to the elegance of the accounting, receives the same invoice.

China is not sitting still. India is not sitting still. Both are investing heavily in renewable energy and electrification. China's emissions may even have begun a structural decline in some sectors. India's non-fossil installed capacity has already exceeded an important milestone.

But neither country has accepted the same immediate economic constraints that sections of the Western political establishment increasingly demand of their own populations.

That difference matters.

And perhaps the most important question is therefore not whether China and India are "ignoring" net zero. They are not. The question is why Western governments appear willing to move faster than their principal industrial competitors without first establishing whether doing so will reduce global emissions or simply relocate economic activity.

• If the answer is that the West can transform its economy without sacrificing prosperity, security or industrial capacity, then let the politicians demonstrate it.
• If the answer is that technological progress will eventually make the transition inexpensive, then let them show the calculations.
• If the answer is that carbon border measures will prevent industrial leakage, then let them demonstrate that they will work.
• If the answer is that consumers will willingly bear the cost, then let them put the question honestly before the electorate.
• And if the answer is that the economic pain is unavoidable because the climate requires it, then politicians should have the courage to say what they are actually asking of their citizens.

But they should not tell people that closing their factory has saved the planet when the replacement factory is operating on the other side of the world.

They should not call the disappearance of domestic production "decarbonisation" while importing the same products.

They should not confuse a reduction in national statistics with a reduction in global emissions.

They should not, therefore, demand that citizens accept ever greater taxation, regulation and debt while refusing to explain how such an arrangement can remain economically sustainable over the long term. A government cannot continually increase the cost of energy, constrain domestic production, impose additional obligations upon industry and encourage vast public expenditure while assuming that prosperity will somehow continue unaffected. Eventually the bill must be paid, whether through higher taxes, reduced living standards, increased borrowing or the quiet disappearance of productive industries that can no longer justify remaining where the costs are imposed.

The irony is difficult to escape. The West spent generations teaching much of the world how to industrialise, building its prosperity upon abundant and increasingly efficient sources of energy, expanding manufacturing, developing transport networks and creating the technological foundations of modern civilisation. It now appears increasingly determined to teach itself how to deindustrialise, while assuring its citizens that the process is evidence of moral and environmental progress. Perhaps that is progress. Perhaps it is merely the peculiar vanity of a civilisation wealthy enough to mistake the rearrangement of its accounts for a transformation of physical reality.

For the atmosphere does not read government statistics, recognise national boundaries or award moral credit for having exported an industrial process to another country. It does not care whether a tonne of carbon is emitted in Birmingham, Shanghai or Mumbai, nor does it recognise any special virtue in the nation that closes its own factory and imports the goods from somewhere else. Carbon emitted beyond a national border remains carbon in the atmosphere, regardless of which government records it and which politician claims credit for its absence from the domestic ledger.

There is, in the end, only the physical reality of the carbon, the energy required to produce and transport the goods upon which modern civilisation depends, and the economic system that makes that production possible. Political declarations may alter statistics, regulations may alter incentives and governments may redraw the boundaries of responsibility, but none of them changes the underlying reality. There is only one atmosphere, one interconnected global economy and one world in which the consequences cannot ultimately be outsourced.

That is why the Western politician who stands before the electorate and announces another net-zero target should be asked a very simple question before the applause begins:

If we stop producing it here and buy it from them instead, what exactly have we achieved?

Until there is an honest answer, the danger is that net zero will become less a programme for saving the planet than an elaborate ceremony for making the West poorer while congratulating itself for being virtuous.

By John Shenton

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