The UK should have a clear lead on green growth, but lack of investment means it’s in danger of falling behind its competitors.
When it comes to green growth, the UK has a natural advantage. Its geographical location makes it perfect for picking some of the best opportunities for renewable resources, and its innovation and skills add valuable strength. Yet it’s in danger of falling behind in the race for green growth.
France and Germany have committed two and four times as much as much spend on the green economy as the UK respectively. And the US’s $370bn commitment over the next 10 years via the Inflation Reduction Act is unprecedented when it comes to energy and climate funding.
The Spring Budget was an opportunity to regain that competitive edge and give the UK the much-needed extra legs to keep up with and take the lead from its nearest rivals. And although we didn't hear much beyond announcements around carbon capture and nuclear, we are expecting to hear more from the government on its net zero, energy security and green finance strategies by the end of the month.
Catalysing investment is crucial not only for net zero, but for building a secure and affordable energy future for the UK. The opportunities on offer by winning that dash to net zero will also provide the boost to the economy that it so desperately needs.
The CBI has identified three key ways where action is required to bring the UK back as a frontrunner. So as a reminder of what we asked for from the Budget - which remain as relevant as ever ahead of the government's "green moment" - these include:
Providing policy clarity to unlock investment
From legislating the business models for scaling up the UK hydrogen economy, to launching the second phase of its work to support investment in carbon, capture, usage, and storage projects and outlining a price stability mechanism for sustainable aviation fuels. The government has plenty of options to provide clarity. Meanwhile, delivering an ambitious, updated Green Finance Strategy in the first half of 2023 will encourage private sector investment in net zero.
Rebuilding stability and confidence in the tax system
Changes to the tax regime midway through investment cycles and the lack of investment allowances for low carbon generation has undermined the UK’s historic fiscal stability. This has had a marked impact on the private sector’s confidence to invest in low carbon technologies. For the UK to remain a competitive player in the race to clean energy, and to bolster the resilience of the UK’s energy system, action must be taken to rebuild confidence to avoid an investment hiatus.
Targeted support to incentivise demand
Creating effective markets requires both supply and demand measures. Government has an opportunity to play an important role in providing targeted financial support to make up for the shortfall, particularly where incentives are lacking, or where costs remain prohibitive such as supporting households and businesses to improve their energy efficiency. Reducing VAT on electric vehicle charging will speed up the uptake in zero emission vehicles too.
Update: 'Green Day' on 30 March saw the government shift up a gear, as they moved to boost energy security, reduce household bills and re-establish the UK's credentials as a leader in green technologies. Businesses now have some more certainty around technologies, planning and regulation, plus a greater sense of urgency on the delivery of net zero programmes. But, as ever, there is still more to do. If you're a member, find out more about what the Green Day announcements mean for your business.
