Net zero investment has the potential to drive economic growth and help the government with its levelling-up agenda in poorer, low productivity areas of the UK, a study has found.
The report, titled Growing clean and published on Monday by the Resolution Foundation and London School of Economics, said green investment could contribute to the UK’s future prosperity and help reduce regional inequalities.
Based on an analysis of patent data, it showed that the highest share of green patents were in lower productivity areas such as the Tees Valley and Durham, Derbyshire and Nottinghamshire. This is despite innovation overall being concentrated in richer areas including Oxford, Cambridge and London.
The study, funded by the Nuffield Foundation, reported that less productive regions tended to be more specialised in producing clean goods and services as they had a higher proportion of green businesses, on average, than other areas.
“This analysis suggests that doubling down on net zero capabilities in the UK as part of a co-ordinated growth policy could be consistent with both driving growth and also addressing regional disparities in economic activity,” it stated.
The UK is not yet a green tech superpower as it ranks just 14th on patenting in clean technologies overall, the study added. However, the country enjoys a comparative advantage over other advanced economies in several key technologies — notably tidal power, offshore wind and carbon capture and storage — as well as in green finance.
For some of these technologies, particularly tidal and offshore wind energy, the report estimated much higher returns than in other sectors.
The report is published as the Centre for Policy Studies, a UK think-tank, found in a focus group of business leaders that while Britain remained an attractive destination for investment, it was losing ground to its European counterparts, many of whom did a better job of welcoming businesses to their shores.
The investment needs for net zero are large and require big economy-wide changes. The Climate Change Committee estimated that an additional £13.5bn of investment will be needed in 2022, rising to more than £50bn a year by 2030, to meet the UK’s net zero goals. Net zero refers to the ambition of not adding to the amount of greenhouse gases in the atmosphere by 2050.
The report by the Resolution Foundation and LSE warned that the required innovation will not happen at the necessary scale and pace without incentives, regulation, government spending and participation from civil society. It urged the government to use a co-ordinated and system-wide approach that should focus on encouraging growth in the sectors where the UK already has a comparative advantage.
“Britain already has some key clean tech strengths from tidal and offshore wind, to carbon capture and green finance,” said Anna Valero, senior policy fellow at the Centre for Economic Performance at the LSE.
With much of the related technological potential located in traditionally low-productivity areas such as the East Midlands and north-east England, “the government should prioritise leveraging these strengths as it aligns its ambitious net zero agenda with a new economic strategy for the 2020s”.