Does the UK Get the Green Light on Sustainable Development?

by Noor Sayyeda

by Dylan Remmer-Riley

by Charlie Collins

Does the UK Get the Green Light on Sustainable Development?

by Noor Sayyeda

The recently instated US Inflation Reduction Act has served as a wake-up call for the UK and the EU to step up their industry policy in preparation for a net zero transition In addition to the cost-of-living crisis, the UK should also seek to prioritise the imperative move towards investment in renewable technology by moving away from controversial extraction methods such as fracking and towards cleaner sources of energy. The Spring Budget presented by Jeremy Hunt included £20 billion towards nuclear energy and carbon capture, but many critics noted cheaper and cleaner solutions available, such as onshore wind; something the budget neglected to include. A member of the Ashden climate change charity, Cara Jenkinson, emphasized that £20 billion could have been spent retrofitting millions of houses and generating 200,000 jobs. The interim CEO of UK100, Jason Torrance, additionally stated that long-term solutions are necessary, such as investment in renewable energy sources.

Worryingly enough growth has been stagnant for 15 years and not investing enough in green technology means neglecting the future, which requires more energy security and efficient solutions. A recent speech by the Confederation of British Industry (CBI) director revealed that the UK is falling rapidly behind the Americans and Europeans For instance, the UK lost £4 3 bn in greentechnology market share in the last two years, while the US embraced green growth opportunities by introducing incentives for green manufacturing and heavily investing in climate-related projects as part of its Inflation Reduction Act. Furthermore, the Skidmore report (2022) scrutinized UK green policies illustrating how the deployment of green technologies is held back by "a lack of long-term thinking" and "uncertainty over the length of funding commitments"

Can the UK level up?

An interesting response the UK could consider is levelling up. Levelling up is deemed a place-based economic policy aimed at boosting economic growth in areas that lag behind – something British politicians have been pushing for quite some time As part of the COVID-19 green recovery package, the UK, like France, focused on supporting existing sectors For the UK, this included allocating the largest amount of funds to railway infrastructure and in northern England, hydrogen support has been promoted to help coastal industry hubs reduce carbon emissions in accordance with the country's regional development strategy. (Geels, Pereira & Pinkse, 2021).

Overall, however, most sectors have staggered spending timeframes which means that even levelling-up may not play a key role in the allocation of green spending. It was found in a report by the Bennett Institute of Public Policy (2023) that the UK has demonstrated no sustained interest in national or regional industrial policy in both controls of state aid and offering of domestic subsidies. Thus, the UK’s lack of action in combining economic prosperity with fighting climate change is heavily contrasted with the efforts of the US and the EU, who are competing to offer subsidies for new green industries and jobs. As such, the UK risks being left behind in implementing its levelling up policies as well as in the fight to combat climate change

While the UK could put more effort into investing in a greener future, some countries hold a comparative advantage Diversified solar manufacturing capacity is dominated by China and there are some areas where the EU and the US are more suited to subsidies in production that can create more resilient supply chains and cheaper prices than the UK. (Bell Torsten, The Financial times, 2022)

What's next for the UK?

Going forward, some opportunities that lie ahead for the UK include wind, nuclear and grid flexibility in electricity supply. It is true that the UK does not possess comparative advantages on a range of goods and technologies related to zero-emission vehicles or grid flexibility, but we can make use of our digital strengths, for example through the development of autonomous vehicles and smart grids. (The Economy 2030 Enquiry, 2022). Most importantly, investment challenges must be overcome; the government needs to develop investable business models and de-risk emerging sectors such as hydrogen and greenhouse gas removals, particularly in commercially maturing sectors.

This could potentially spur investment into clean technology where the share of venture capital investment has fallen from over 10 per cent in the early 2010s to under 1 per cent in 2020. (The Economy 2030 Enquiry).

References:

UK Faces Recession and Lost Decade Without Growth Plan, CBI Says (2022) - https://www bloomberg com/news/articles/2022-12-05/uk-facesrecession-and-lost-decade-without-growth-plan-cbi-says

Curran, B., Martin, R., Muller, S., Nguyen-Tien, V., Oliveira-Cunha, J., Serin, E., Shah, A., Valero, A., Verhoeven, D., Curran, B., Martin, R., Muller, S., Nguyen-Tien, V. and Oliveira-Cunha, J. (2022). Growing clean Identifying and investing in sustainable growth opportunities across the UK [online] Available at: https://economy2030 resolutionfoundation org/wpcontent/uploads/2022/05/Growing clean report pdf

US-Europe trade tensions heat up over green subsidies (2023) Financial Times- https://www.ft.com/content/0f8bf631-f24c-48da-905f-e37f8dc5d5f8

UK Government (2023) Net Zero Review: UK could do more to reap economic benefits of green growth

Knights, J (2023) The UK needs to invest in its green economy now [online] Elite Business Magazinehttps://elitebusinessmagazine co uk/analysis/item/the-uk-needs-to-investin-its-green-economy-now

Pereira, J. Pinkse (2021) Public investments in COVID-19 green recovery packages

Leam, R. (2023). Why the EU should not worry about US industrial subsidies – but the UK should [onli Bennett Institute for Public Policyhttps://www bennettinstitute cam ac uk/blog/industrial-subsidies/

What Britain should learn from Biden’s IRA plan (2023) Financial Timeshttps://www ft com/content/faebb418-a0d7-4cd0-927e-b4f34deab951