There’s a booming global market in low carbon goods and services – but can Britain afford to be left behind?
In her recent speech on the UK Government’s energy policy, Secretary of State Amber Rudd spoke about the UK being a global leader in offshore wind technology. This is welcome recognition of the strides this sector has made in the UK in recent years. But what about the vast market in other low carbon goods and services? Are we really prepared to forgo jobs, growth and export opportunities that would arise from investing in the energy system of the future – not to mention the energy security and low carbon benefits that would come from such a pathway.
Out-performing other sectors
The low carbon economy is growing fast. It is estimated (figure 1) that in 2013 it supported 11,550 businesses, 460,600 jobs, a total turnover of £121.6bn and GVA of £44.9bn. When taken together with the wider environmental goods and services sector, it is already larger than many established parts of the economy. In 2013, it was five times more valuable than Aerospace, over twice the size of Pharmaceuticals, almost twice as big as Chemicals, and about the size of the Food and Drink industry in GVA terms.
So while it is clear there has been good progress in the UK, the sector is still developing and it is hard to imagine why any Government wouldn’t want to support it further. Especially so when considering the size of the global market potential which UK firms could be exploiting. Renewables now make up around half of all new energy infrastructure globally. The INDC’s published by national Governments before the Paris Climate negotiations indicate that this share will only increase. China, for example, has committed to deploy around 72GW of solar power – enough to cover an area the size of London, and 104GW of wind technology- equivalent to 35,000 3MW turbines.
Brazil is in the middle of a macroeconomic crisis, but has still committed to generate 20% of its electricity from non-hydro renewables by 2030- with $53bn of investment in new generation and transmission projects planned over three years.
The UK has an ambitious overall framework in the Climate Change Act. However, a lack of supporting policies for renewable technologies now means the UK may miss its interim EU target of delivering 15% of energy from renewables by 2020, and there are policy gaps for meeting the fourth and fifth carbon budgets. For the first time, the UK dropped out of the top 10 for international attractiveness for renewables investment on E and Y’s respected global rankings because of policy uncertainty. The UK now ranks behind US, China, India, Germany, Japan, Canada, France, Brazil, Chile, and the Netherlands.
Major economies are also realising the value of reducing energy demand. Energy efficiency investment is a straightforward proposition: the technologies are relatively cheap and the savings potentially great. The IEA estimates that energy efficiency measures installed since the 1990’s have avoided around $5.7tr of energy costs.
Worldwide, per capita energy consumption has dropped to levels not seen since the 1980s but income per capita is at its highest level ever and the demand on energy services is increasing. Around 40% of emission reduction needs to come from energy efficiency across all sectors – but in the UK we need to find similar levels of reduction from buildings alone. This is in large part due to the relatively poor quality of our buildings.
In 2011, a piece of research which examined the average “U value” (the measure of how quickly heat is lost from the fabric of a building) of the UK’s buildings, found that we were behind Sweden, Denmark, Czech Republic, Austria, Netherlands, and Slovenia (PDF) for the performance of single family dwellings. This is why the UK also experiences relatively high rates of fuel poverty- and this in turn makes the economic case for acting on energy efficiency even stronger, because action on energy efficiency would avoid the distributed economic costs of fuel poverty such as increased pressure on medical services from respiratory illnesses. The high economic returns from energy efficiency is one reason that many NGOs are calling on Government to make building retrofit a focus area of the new Infrastructure Commission.
A missed opportunity
There is a global economic opportunity to be taken advantage of that has rewarded, and will continue to favour, ambitious early movers. The Energy and Climate Change Select Committee said in 2014 that by not ambitiously investing in onshore wind manufacturing in the UK, the Government missed the opportunity to become a world-leader in the technology, so that we now import the components for our UK wind industry from Denmark and elsewhere.
China, the US, South America, Korea, India and other economies can see the potential opportunity and are spending money to secure it. If our Government is serious about delivering its long term economic plan, it should do the same.