Net-zero investments could ‘level up’ underperforming parts of the UK

The Climate Change Committee has forecast that net-zero investment will need to rise from £13.5bn this year to £50bn by 2030 and that around 85 per cent of decarbonisation between 2020 and 2035 will involve low-carbon technologies, either alone or with behavioural change.

While the UK is not yet a “green tech superpower”, the report states, it does have a comparative advantage over other advanced economies in several key technologies such as tidal power, offshore wind, and carbon capture and storage.

The report finds that areas outside London and the South East also have the greatest potential for a green expansion of the economy, with the areas with the highest share of green patents being the Tees Valley and Durham, and Derbyshire and Nottinghamshire.

These areas underperform, productivity-wise, compared to the rest of the UK, but are the most likely to gain from the expansion of clean technologies where the UK already performs well.

“A successful net-zero investment strategy that targets these sectors could play a key role in supporting the government’s levelling-up strategy, too,” the authors said.

The report notes that while the UK leads as a centre of green finance, it cannot expect the private sector alone to provide the scale of investment required by the government’s net zero ambitions.

Emerging technologies with high growth potential can benefit from the fact that the UK is well-placed as a hub of venture capital investment, currently ranked first in Europe.

However, the authors caution that to date, clean tech has constituted a small share of this investment, a trend that will need to be reversed.

Anna Valero, senior policy fellow at the LSE, said: “The scale of additional investment needed to make our net-zero ambition a reality has led some to focus excessively on costs, while others to see it as the silver bullet that solves all our economic woes.

“In reality, smart net-zero investment should be embedded in a wider economic strategy, especially as it could have the additional benefit of bolstering the government’s ‘levelling-up’ agenda.

“Britain already has some key clean tech strengths from tidal and offshore wind, to carbon capture and green finance. Furthermore, much of the related technological potential is located in traditionally low-productivity areas like the East Midlands and North-East. The government should prioritise leveraging these strengths as it aligns its ambitious net-zero agenda with a new economic strategy for the 2020s.”

A survey of manufacturers last month found that nearly a third are “not yet convinced” by the government’s levelling-up agenda and have thus far seen no tangible benefits to their business.