Opportunities for the UK economy
The UK’s dependence on fossil fuels is now leading to great suffering, with millions being hurtled into fuel poverty across the country. Building a net zero energy system will help to bring down energy bills, strengthen energy security and boost the economy – the cost of energy from new offshore wind farms is now four times cheaper than the equivalent from gas-fired generation. But we do not yet have all the infrastructure in place to deliver long-term energy security and affordability for the UK.
Fortunately, investing in the net zero transition is one of the biggest economic opportunities the UK has ever seen. The UK’s low-carbon industry has grown in value to over £200bn, employing over 1.2 million people. Delivering the UK’s Net Zero Strategy could create 440,000 more sustainable jobs. WWF and Scottish power recently calculated that green home upgrades could save households up to £1,800 a year.
Opportunities for the UK financial sector
Rapid and ambitious net zero reform could also unlock new markets for UK financial and real economy services and products, such as insurance, auditing, and clean tech services. By 2030, the UK’s net zero transition could be worth over £1 trillion to UK businesses. The annual growth rate of low-carbon financial services is forecast to double over the next few years. The sector could generate an export opportunity for the UK of up to £7.5bn per year in 2030, increasing to £17bn per year by 2050.
To maximise these opportunities, the financial services sector will require strong and consistent science-based signals, targeted support, and strategic investment from government. In other words, the UK needs a net zero investment plan.
Towards a net zero investment plan
A net zero investment plan is a crucial missing piece in the UK’s green finance architecture. Developing a plan starts with establishing what investments have been made in the UK’s net zero transition, what investments are still to be made, and how the gap will be bridged in a timely way. This assessment is crucial to ensure that the UK will mobilise finance at the speed and scale required to hit net zero and reap its economic rewards.
With increasing scrutiny and appetite for investment in net zero, the pressure is growing for the UK to set out its plan for financing the net zero transition in the 2022 Green Finance Strategy.
Key elements for a successful plan
E3G’s latest briefing proposed 11 flagship policies for the 2022 Green Finance Strategy. These are critical to ensuring the UK makes the most of the enormous economic opportunities made possible by the net zero transition. Benefits will include creating new global market opportunities for UK firms, advancing energy security through building warmer and more efficient homes, delivering renewable energy capacity across the country, and protecting the environment from further degradation.
At the heart of these proposals is the need to set out an effective net zero investment plan, to include:
- An assessment of existing financial investments and flows in support of the UK’s net zero transition.
- An assessment of the current and projected investment gap in different sectors of the economy.
- Ongoing tracking of investment flows for the UK’s transition, with results published annually. This function should be carried out by an independent body, which could also make policy recommendations to government in light of latest progress.
- A comprehensive plan for financing the UK’s net zero transition, given the investment gaps identified in specific sectors. The plan should make use of all the different levers available to government: it should include direct public investment, action by public financial institutions, policies for the financial sector and the real economy, and regulatory tools.
The UK as a global leader
The UK has an opportunity to take a leading role in a new global green industrial revolution. To do this it needs to be a first mover in transitioning its economy based on robust analysis and a credible plan. The next few months will be crucial to achieving a successful UK Green Finance Strategy. Economic trends are moving quickly. Without a clear plan of action, the UK risks lagging behind the rest of the world.