Calculating net zero’s boost to the economy

Recent reports have concluded that the transition to cleaner energy is generating jobs and contributing to economic growth. So why would anyone question the government’s commitment to net zero? asks Andrew Warren.

Does your job involve sustainable energy, either saving energy or generating renewables? If so, congratulations. You are a key part of the green economy’s big contribution to the wider UK economy.

Last month, a major new report from the Tony Blair Institute was issued,  arguing  green growth should provide a five per cent boost to GDP, albeit alerting Ministers they will have to take tough decisions to prioritise those sectors where the UK is most competitive.

The report concluded that the net zero transition has the potential to boost UK GDP by up to 5% by 2050, supporting around 1.2 million jobs and establishing the green economy as a critical factor in the country’s long-term competitiveness.

Mind you, you would never believe this if you read some of our scientifically illiterate commentators. Somehow even this report managed to  generate a series of perverse headlines  along the lines of “Ed Miliband’s net zero promises are false, Tony Blair’s think tank warns” (The Telegraph) or “Tony Blair Institute Shreds Red Ed’s Net Zero Growth Promises” (Guido Fawkes). The Daily Express claimed the Blair report reveals that “Ed Miliband’s promises of a Britain basking in the glow of green-powered economic prosperity have been exposed as a fantasy”. Broadcaster Andrew Neil, who used to be a serious figure when Sunday Times editor, took to social media to declare that the report was “devastating… on Ed Miliband’s net zero nonsense”.

Alternative facts

Actually these condemnations are somewhat mild compared with the views currently being expressed by the new American government. The self-styled King of Fracking, Chris Wright, Trump’s energy supremo, revealed to a UK conference last month that the  UK’s net zero push was simply a “sinister tool to shrink human freedom”. Presumably such “sinister” activities are also a keynote of all the 107 governments around the world that have also committed to this goal? Including indeed the USA, right up until Trump’s reappearance?

Noting that the UK’s total energy consumption had fallen by 28% since 2005 (dropping from 10.6 to 7.6 exajoules), Wright somehow managed to conclude that the UK’s economic decline was linked to such policies. Others might also ascribe a great deal of such reductions to the more efficient use of energy.

Certainly, the UK economy may be stuck in the doldrums, with little growth to speak of and a tough looking year ahead as geopolitical tensions and rising fossil fuel costs continue to bite. But for all the economic headwinds, the net zero economy continues to go from strength to strength, bucking wider trends to deliver 10.1% growth in gross value added (GVA) in 2024 alone.

That is the conclusion of new analysis from CBI Economics which offers yet further evidence of how investment in the clean energy transition is both critical to the UK’s future prosperity and security, as well as a means of unlocking multiple environmental and health benefits.

This upbeat assessment confirms the domestic net zero economy delivered £83.1bn in GVA for the UK last year. That includes £28.8bn directly from companies within the net zero sector, plus £54.3bn from their associated supply chain activities and broader economic contributions.

Cross party consensus 

Having seen the net zero economy’s GVA grow three times faster than the wider UK total, GVA growth of just 3.2% last year, it means green and clean industries added £7.7bn to the UK economy during 2024.

Given this knowledge, it is not surprising that there has been a remarkable consistency of support for net zero from all political parties in the House of Commons, the only possible exceptions being the arrival of Nigel Farage. Fortunately, the new Conservative leader Kemi Badenoch has a sound track record on zero carbon.

In December 2020, as exchequer secretary to the Treasury, Badenoch was quoted in the official press release for her government’s first interim Net Zero Review on its “next steps to a green transition”. Badenoch stated: “We are determined to achieve a cleaner, green future, and cutting our emissions to net zero by 2050 is crucial to this. We are already making good progress and have set out billions of pounds in green investment, including decarbonisation and greener homes, electric vehicle charging infrastructure, walking and cycling infrastructure, flood defences and backing enough offshore wind to power every UK home by 2030.”

Cost benefit ratio  

In September  2021, Badenoch told MPs : “We have set out ambitious plans about the net zero target and published the energy White Paper, the industrial decarbonisation strategy, the transport decarbonisation plan, which has not happened anywhere else in the world – we are the first country to do a transport decarbonisation plan – and a hydrogen strategy.”

She even chided a non-Conservative MP who had queried this and, in the same debate, expressed confidence that net zero would cost less than 2% of annual GDP.

This was roughly in line with estimates at the time from the Climate Change Committee (CCC), the government’s advisory body on net zero. In practice, in its new Seventh Carbon Budget, the CCC revises this down: “We estimate that the net costs of net zero will be around 0.2 % of UK GDP per year on average in our pathway,” with most of the investment expected to come from the private sector.

The Office for Budget Responsibility (OBR), the government’s spending watchdog, has warned “the costs of failing to get climate change under control would be much larger than those of bringing emissions down to net zero”.

All this gives further succour to those working to deliver net zero. Badenoch is being proved right on zero carbon, as are all mainstream political parties. And America’s Wright is most definitely, sinisterly wrong. ■