Now is the time for a low carbon industrial strategy

Posted by Nick Molho on 5th September 2016
First published in: The Economist

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This autumn is likely to witness some of the busiest months in British politics that we have seen in recent years. From deciding how best to approach exit negotiations with the European Union to providing the right stimulus to support the UK’s economy in this period of uncertainty, Theresa May’s government has no shortage of critical issues to grapple with.

The comeback kids

Nevertheless, the continued growth of the low carbon economy should form part of the government’s early priorities. With around 96,500 businesses active in the UK’s low carbon and renewable energy economy, the sector directly generated a turnover in excess of £46bn in 2014 alone and is becoming an increasingly important part of the UK’s economy. Critically, part of this low carbon investment is going to areas of Britain that need it the most.

Take the example of the north of England, which, according to a recent report from the Joseph Rowntree Foundation is home to 10 of the 12 cities ranked highest in its index of relative decline. As an upcoming Aldersgate Group report will highlight, 136,000 people are already employed in the north of England’s low carbon economy. This includes projects as varied as the offshore wind blade manufacturing investment by Siemens and Associated British Ports in Hull, Nissan’s electric car and battery plants in Sunderland, Jaguar Land Rover’s investment in aluminium recycling near Liverpool  and the development of a low emission industrial zone in Teesside.

Other parts of the country that have experienced limited economic growth opportunities in recent years are also seeing increased low carbon investment. For instance, MHI Vestas is investing in offshore wind blade manufacturing on the Isle of Wight. Importantly, this investment is taking place in a context where the global low carbon economy is rapidly growing, spurred on by positive political developments.

On the agenda

Just a few days ago, China and the United States – two of the world’s biggest emitters of greenhouse gases – announced that they would ratify the landmark agreement on tackling climate change reached in Paris last December. This was preceded by a record US$285bn invested in clean energy worldwide in 2015, with most leading investors being outside the EU.   

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The creation of a new Department for Business, Energy and Industrial Strategy (BEIS) in the UK, led by Greg Clark, an MP, comes at an opportune time. Two priorities in the BEIS agenda could prove critical to supporting the continued growth of the UK’s low carbon economy.

First is the emissions reduction plan due in the coming months. If done right, the plan should provide enough policy detail to attract the affordable private sector investment that is needed in technologies such as ultra-low emission vehicles, energy efficiency, low carbon heat and offshore wind to meet the UK’s target of cutting emissions by 57% by 2030 under its fifth carbon budget.

The other opportunity resides in the government’s commitment to developing an industrial strategy. This is all the more interesting now that Mr Clark has turned his ministers in BEIS into “local growth champions”, with each minister in charge of building close relationships with local enterprise partnerships (LEPs) in different regions.

Expanding the supply chain

The low carbon economy should form part of this industrial strategy. Specifically, such a strategy should provide the UK with a clear understanding of the areas of the low carbon economy where it is best placed to grow its supply chain, use BEIS’ “local growth champions” to identify how low carbon industries could support growth in areas of the country that most need it and equip the UK with an appropriate skills policy to maximise employment prospects for its workforce.

It is also an opportunity to look at how the UK’s energy intensive industries can best play a role in this growing supply chain. After all, steel is required to manufacture offshore wind turbines, concrete to build their foundations and glass to make homes more energy efficient.

The low carbon economy isn’t a silver bullet for the economic and social challenges facing a post-Brexit Britain but it clearly has an important role to play in delivering the new government’s vision of a Britain that “works for everyone”. What’s more, following the recent support from China and the US behind the Paris climate deal, it is clearly an area where the UK needs to perform well if it is to remain a relevant and competitive player on the global stage. As such, starting work on a low carbon industrial strategy and an ambitious emissions reduction plan should be a key part of the government’s plans for this autumn.

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