By Andrew Hammond*
In the wake of the COP26 climate summit in Glasgow in 2021, Boris Johnson’s UK government claimed that the nation was at the forefront of the global green technology and investment race.
Fast forward to 2023, however, and that proclamation is looking hollower by the day as the government fails to capitalize on the global green economy edge that it may once have had. This is not just a tragedy for the planet but also for the UK economy, as the chancellor prepares his annual budget statement ahead of Wednesday.
At the time of writing, there is a huge new incentive for the UK to up its game and drive this agenda forward. This is because, following the US Inflation Reduction Act and anticipated new counter subsidies from the EU’s Green Deal Industrial Plan for the Net-Zero Age, there are growing concerns from UK business that the nation could miss out on a rising tide of green investment as the global economy grows from about $90 trillion today to a forecast $190 trillion by the mid-21st century when the world may hit net-zero emissions.
It is not just political opponents of the government that are raising concerns. Take the example of the Confederation of British Industry, the self-styled voice of UK big business, which warned in stark terms in January that “the United Kingdom is falling behind rapidly — to the Americans and the Europeans, who are outspending and outsmarting us. We’re behind the Germans on heat pumps, insulation and building retrofits, the French on EV charging infrastructure, and the United States on operational carbon capture and storage projects — despite the UK’s North Sea advantage. We’re lagging all three on hydrogen funding. This is stunning to many who rightly felt clean energy was ours to own. But it has changed in the past two years with lost UK market share in green tech, equivalent to the potential value of £4.3 billion by 2030.”
Other UK industry bodies such as EnergyUK and RenewablesUK have sounded alarm bells too. Yet perhaps the clearest warning came from the government’s very own Skidmore Net-Zero Review, released in January, which highlights that the UK risks losing out on more green investment because of factors including inconsistent decision-making at the top of government and delays to crucial planning decisions at a local level.
These warnings are a far cry from the bold pledges of COP26 when the government proclaimed its intent to be a world leader in carbon emissions reduction. Just before the big summit, a new net-zero strategy was released aiming for a decarbonized economy by 2050.
In so doing, the government aims to provide high-skilled jobs, transition from fossil fuels, secure the UK’s energy supply and use green technology to drive economic growth. For instance, the strategy hopes to create up to 190,000 jobs by 2025, up to 440,000 jobs by 2030, and leverage up to £90 billion of private investment by 2030.
It is this promised vision that is now under threat unless the UK government can step up to the plate. If not, the tragedy is that the full potential of existing investments in recent years may not be realized.
Take the example of wind energy where the high level of wind-power generation capacity already installed means that the UK could be a great proving ground for innovation in power distribution infrastructure, large-scale storage, etc., to balance and manage the intermittent nature of wind power. This may lead to the emergence of differentiated UK-based technology.
However, significant challenges remain and the National Audit Office this week released a major new report warning that the newly formed UK Department of Energy Security and Net-Zero is behind schedule in mapping out how to achieve a rapid expansion of offshore wind. The government is targeting a more-than-tripling of offshore wind capacity to 50GW by 2030 as part of its energy security strategy. The challenge often cited is that the cost of developing wind farms has risen as the price of commodities such as steel and copper has jumped so the next licensing auctions are likely to see higher prices.
Business has many concerns, but with the right ambition and policies, the situation could yet be turned around. The UK’s key strengths in the green economy agenda include flexibility and depth of its financial industry, via the City of London. The energy transition requires much capital and many countries could learn from UK best practice. For instance, the UK also has a good track record in using fintech to support development of innovative green technologies.
In what might be a “last chance saloon” for international climate action, the UK government now needs to step up to the plate and deliver. If it does not, it will not only be letting the UK public down, but also the world at large.
• Andrew Hammond is an associate at LSE IDEAS at the London School of Economics.