“We have just been spectacularly overtaken on green growth – by far and away the biggest innovation opportunity in the 21st century,” Tony Danker, the director-general of the Confederation of British Industry (CBI), said in his first major speech of 2023. Days later Jeremy Hunt, the Chancellor, told Conservatives that cutting inflation was a better route to prosperity than tax cuts. “Enterprise, education, employment and everywhere” would be the four pillars of the Treasury’s strategy. But what will this actually mean in terms of supporting green technology and business?
The UK’s commitment to climate leadership has paid off in the past. Over the last 30-odd years, the country has reduced its emissions by nearly half even as gross domestic product (GDP) rose by nearly 72 per cent in the same period. The UK’s reliance on coal has plummeted in little over ten years, while its offshore wind industry has become world-leading. Around 70 per cent of the companies in the FTSE 100 have joined the UN’s Race to Zero initiative. Lloyds Bank is ending direct financing to new oil and gas projects, while Anglian Water has brought on board the UK’s first fully electric 4-tonne jetting van.
But where the Conservatives once campaigned on the idea of “voting blue to go green”, now the issue has fallen far down the party’s priorities. This includes how we adapt to climate impacts. The latest report from the Climate Change Committee, which advises the government, has warned of “chronic” underspending on adaptation measures, from improving drainage systems to retrofitting homes to cope with extreme heat. Admittedly, times are extraordinarily challenging for Rishi Sunak with a looming recession, post-pandemic recuperation, Brexit realities, Russia’s invasion of Ukraine and the energy and cost-of-living crises but the UK risks leaving its businesses stranded, as they struggle to act on their net-zero commitments and gain the investment needed without many of the right policies in place to support them.
The recent review of the UK’s net-zero plans led by the Tory MP Chris Skidmore laid out the ways that the challenges of the green economy might be met. The overriding message was the need for clarity, certainty and consistency from government. Among the “25 by 2025” key actions proposed, five stand out in committing to create a stable environment for business to plan and invest. These range from reviewing how policy can incentivise investment in decarbonisation and how better regulations can support the dissemination of net-zero technologies, to setting out a clear, robust and ambitious approach to disclosure, standard-setting and the growth of green finance.
The competition, however, already has a head start. The US and EU are providing massive green business incentives through, respectively, the Inflation Reduction Act and a planned Green Deal Industrial Plan. The Inflation Reduction Act leads the way by providing over $360m of federal funding towards clean energy in the form of tax incentives, grants, and loan guarantees. The Green Deal Industrial Plan follows closely behind by including a Net-Zero Industry Act, supported by investment and training support for net-zero industries. This is a clear start of a “global decarbonisation race”, which will be won by the governments and companies with clear net-zero strategies and ambitions.
As Danker explained, it’s no longer enough for the UK to cite its year-on-year increase in investment in climate change action: “We are not racing against ourselves. We’re in a race with our competitors, and this is where the lion’s share of growth for Britain will come – or not – in the years ahead.”
Over the next five to ten years economic competition may well revolve around who is most prepared for the green transition. At the start of January the Prime Minister set out his five-point plan, including a focus on halving the inflation that is mainly to blame for the surge in the cost of living, and growing the economy. Research indicates that if policies tackling the cost-of-living crisis are designed to align with the UK meeting its net-zero target, they will achieve better economic returns in the long run than policies that do not contain decarbonisation measures. Subsidies for energy efficiency and low carbon heating for low-income households would be good examples, and incentives for “able to pay” households to encourage energy efficiency measures and heat pump installation.
For the UK to have a chance in this race, Sunak should immediately begin implementation of the net-zero review’s “25 by 2025” policy recommendations. Going green is good for business, good for growth and increasingly obviously good for security and human well-being. If there was ever a time for proactive climate leadership in the UK to grow the economy, this is it.