Decarbonisation of the UK economy and green finance inquiry : [Centre for Energy Policy submission to the UK Treasury Committee]

Turner, Karen and Johnson, Gareth (2019) Decarbonisation of the UK economy and green finance inquiry : [Centre for Energy Policy submission to the UK Treasury Committee]. [Report]

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    Abstract

    Generally, the key insight of our research concerns the need to broaden attention from technology and cost considerations associated with low carbon developments. Instead, there is a need to focus on the potential for low carbon initiatives to unlock, sustain and increase value in different parts of the economy as we transition to a low carbon future. For example, our recent EPSRC National Centre for Energy Systems Integration (CESI) research on the impacts of network upgrades to support a projected 20% penetration of EVs by 2030 is likely to have a net positive outcome on the UK economy, including up to 3,000 new jobs across a range of sectors. The main driver may be strong UK supply chain activity driven by powering vehicles with electricity. A second example emerges from recent research funded by Scottish Enterprise, which focussed on how establishing a large-scale CO2 management industry could mean an alternative and new use for the capacity, infrastructure and workforce traditionally associated with Scotland’s oil and gas industry. The shift in this capacity has already begun through the offshore renewables sector. Our initial estimates suggest that by 2030 anywhere up to 45,000 UK jobs could ultimately be associated with Scotland securing 40% of the carbon storage element of a European CO2 management market. By 2050 this could rise to 105,000 jobs, and more as the industry extends to low carbon fuel supply. The particular potential for Scottish capacity in providing CO2 management services combines with the need to consider how industrial decarbonisation can be achieved in a way that allows our high value manufacturing clusters continue to operate (and potentially grow). These are crucial considerations for how the UK may achieve a just and regionally balanced transition. This not only concerns energy intensive industries such as petrochemicals but the supply chains and jobs they support across the UK (e.g. 3 indirect supply chain jobs are supported for every direct job in petrochemicals). •Attention to jobs is crucial in considering a ‘just transition’, which is not just about considering the distribution of impacts; it creates the societal permission from the people of the UK for the chosen approach(es) to delivering net zero ambitions. •The need to carefully consider the role and functioning of green finance also becomes crucially important in a just transition context as it will ultimately be consumers and/or taxpayers who pay for the chosen path and portfolio of activity. Government’s main roles may be in considering how to reduce risk (and thus costs) to actors, playing a role in ensuring appropriate finance mechanisms are available. •All of this must be alongside identification of approaches by which the type of wider economy returns set out above may be maximised. For example, we identify energy efficiency as a key route to generating net economy-wide benefit, but the specific outcomes depend crucially on how actions are financed.