Net zero: economy and jobs
The economy in 2050 is going to look very different irrespective of a net zero emissions target, with artificial intelligence, big data, digitisation and ever greater automation transforming the ways in which we create wealth and jobs.
For example, if self-driving cars become the norm, the need for taxi drivers may disappear entirely. But a shift to net zero emissions will be a factor in some sectors of the economy growing faster, some shrinking and some transforming.
Economic growth and tackling climate change
Most of the world’s leading economies, and the UK in particular, have grown strongly in the past 25 years while reducing their greenhouse gas emissions. From 1990-2015, the UK economy has grown by 67%, while emissions have fallen by 42%, according to a government paper. Earlier ECIU research found similar results. By 2019, UK emissions were down 45% on 1990 levels.
The UK has topped (with China in second place) PWC’s Low Carbon Economy Index of countries, having reduced the carbon intensity of its economy by 7.7% in 2016. There are now more than 396,000 jobs in low-carbon businesses and their supply chains, employing people across the UK. The UK’s low-carbon and renewable-energy economy was worth £44.5bn in 2017, up 7% in a year.
The Government sees decarbonisation as an opportunity to boost overall economic growth and launched its Clean Growth Strategy to support this in 2017. This document is expected to be updated during 2020.
The Clean Growth Strategy sees the low-carbon economy growing 11% a year between 2015 and 2030, four times faster than the rest of the economy, while boosting exports by between £60bn and £170bn.
A net zero economy
To reach net zero emissions will require significant investment in current and new clean technologies, and away from fossil fuels. Economies do not stand still and some sectors will benefit while others, like oil and gas extraction, will decline. These changes will have implications for jobs and training. By reaching net zero emissions the risks of climate change and associated negative impacts on the economy will be reduced.
The UK is predicted to be the fastest growing G7 economy out to 2050, although this forecast was made before the onset of the Coronavirus crisis. Analysis suggests the overall impact of policies to restrict global warming to 1.5 degrees, and ultimately move towards net zero emissions, will be positive for the UK economy and jobs.
At the global level researchers have calculated the likely benefits of keeping future temperature rise to 1.5°C to be in the range of tens of trillions of dollars, more than 30 times more than estimates of what it will cost to limit the rise to 1.5°C.
Global trade in low-carbon goods and services could grow from £150bn in 2015 to between £2.8-£5.1 trillion in 2050, by which time UK low-carbon goods exports could be worth more than the UK's entire exports in 2015. Low carbon industries could grow from around 2% of UK Total Output in 2015 to 8% of UK GDP by 2030 and 13% by 2050.
Shifting to net zero emissions could have other economic impacts. Air pollution causes tens of thousands of premature deaths in the UK, more than six million sick days and costs the economy £22.6bn a year. A paper published in The Lancet found that even the current UK target, for an 80% cut in greenhouse gas emissions by 2050, would have a significant impact on ill health and death.
Sectors in transition
A number of sectors, such as power (see briefing) and buildings will undergo significant change under a net zero emissions target, continuing transitions that are already well underway.
The UK car industry could receive a significant boost from the move to electric vehicles. In the UK this could lead to 7,000 to 19,000 additional jobs, however, much will depend on whether the cars are made domestically or imported.
More broadly, net zero implies the move to a more circular economy, where materials are reused rather than wasted. Greater focus on recycling, repairing and renting, could create more than 200,000 jobs in the UK. A number of UK companies, including Jaguar Land Rover and Interserve, are redesigning their products to make them more durable and easier to repair or dismantle for recycling.
Sectors in decline
Fossil fuel industries will decline and are already contracting due to the Government’s decision to phase out coal power stations (coal now employs fewer than 700 people) and dwindling oil and gas reserves in the North Sea. Employment in the oil and gas sector fell by a third between 2014 and 2017.
About 80% of UK GDP comes from services and there are many opportunities in high-value services such as financing low-carbon projects, climate-risk assessments, legal and consulting expertise. The Government has said it wants the UK to develop world leading ‘green finance’ capabilities.
The Government has also said it wants to be a global leader in carbon capture utilisation and storage (CCUS), where carbon dioxide emitted is captured and either used or stored, and announced £800m of support during the 2019 budget. Bio-energy CCS (BECCS) could reduce the cost of meeting the UK’s current 2050 emissions reduction target by up to 1% of GDP and an £8.6m UK research programme is investigating the opportunity around these ‘greenhouse gas removal technologies’ (see briefing on negative emissions).
The Government also sees great potential in hydrogen as a zero carbon fuel and has launched a £20 million ‘Hydrogen Supply programme’ to explore the production of large quantities of the gas for use in heating buildings, in industry, and in transport.
With the decline of some industries (e.g. fossil fuels) government could see a reduction in tax take (e.g. fuel duty) and so may need to alter fiscal policy. The UK already has a carbon floor price which is is a levy paid by electricity generating companies on the emission of carbon dioxide, aimed at encouraging cleaner forms of power generation, but also generating revenue for the Treasury. The idea of an economy-wide carbon tax has been put forward by think tanks, politicians and academics as a way of discouraging emissions and generating revenue. One study suggests this kind of tax could generate tens of billions of pounds in additional revenue (forecast at £690bn for 2017-18) for the Government.