How Net Zero Acceleration Can Transform the UK Economy
According to a recent report by the finance and data science consultancy Oxera, titled “Growth Zero:
Reframing net zero as a driver of growth,” advancing the UK’s net-zero policies could potentially add £765 billion to the economy by 2050. This research highlights the economic benefits of strengthening green policies, which would enable the UK to meet its legally binding decarbonisation targets while simultaneously driving substantial financial gains. The study emphasises the need for immediate and thorough measures to enhance net zero initiatives, as these are vital for both environmental and economic sustainability.
The Four Levers of Growth Zero
The report provided by Oxera identifies four key levers that need to be implemented to reach net zero within the UK and the EU. These levers are based on current or planned policies and measures in both regions.
The Regulation Lever
This lever focuses on the fast phase-out of high-emission sectors by placing strict penalties and bringing forward phase-out dates. By enforcing strict regulations, the UK can significantly reduce its carbon footprint and accelerate the transition to cleaner alternatives.
The Private Sector Innovation Lever
Aimed at jumpstarting green technology, this lever encourages the large-scale deployment of new, green tech-based production capacities. Supporting private sector innovation can lead to breakthroughs in sustainable technologies and drive economic growth.
The Carbon Pricing Lever
Referred to as ‘carbon costs’, this lever involves increasing carbon prices by approximately 30% year-on year in the 2020s, by 8.6% in the 2030s, and by 4-6% in the 2040s. Effective carbon pricing can incentivise businesses to reduce emissions and invest in low-carbon solutions.
The Fiscal Policy Lever
Governments can supercharge subsidies for established low-carbon technologies while increasing taxes on carbon-intensive industries. This lever ensures that financial incentives align with environmental goals, promoting a more sustainable economy.
Long-Term Benefits and Investment Needs
Additional insights from the Grantham Research Institute highlight that although substantial upfront investment is essential to achieve net zero, this investment will provide long-term benefits like improved resilience, productivity, and competitiveness for the UK economy. The Climate Change Committee (CCC), responsible for advising the government on emissions targets, projects that more than £40 billion in additional annual investment will be required by 2025, with this amount increasing to around £50 billion annually from 2030 to 2050. This investment is essential not just for reducing emissions but also for addressing years of public asset underinvestment, tackling biodiversity loss, and building future market capabilities.
The Need for a New Approach
The House of Lords Library’s independent review of the UK’s net-zero strategy shows that, despite the country’s ambitious climate targets, it is not currently on track to fulfil all its commitments. To address this, the review recommends a revised approach, which includes launching ‘mission zero missions’ and implementing 25 short-term policies by 2025. These recommendations aim to provide long-term clarity and support for businesses and investors, ensuring that the UK remains globally competitive and can seize the economic opportunities arising from the green transition.
Economic Potential with Net Zero Initiatives
Overall, accelerating net-zero policies is not just an environmental imperative but a significant economic opportunity for the UK. By implementing the four levers of regulation, private sector innovation, carbon pricing, and fiscal policy, the UK can unlock substantial economic potential while meeting its decarbonisation targets.