The UK’s industrial policy: Untapped green opportunities

The IPCC Climate Change 2023 report has proven to be a stark reminder of what is at stake if we fail to take urgent climate action. In today’s changed economic context, the UK and many other countries must capitalise on their strengths to make a real difference. The cost of not doing so could be significant for the green industry and clean technology space.

Contrary to the opinion of many, the UK has led by example in many ways. We were the first major economy in the world to pass laws to end our contribution to global warming by 2050 and to announce an ambitious plan for a green revolution. This means the UK has progressively been working towards a strategy for net zero to lead the world in response to the climate emergency while turning this mission into the greatest opportunity for jobs and prosperity for our country.

The UK has already taken bold steps towards net-zero, including bringing forward the end of new petrol and diesel car sales to 2030, announcing a ban on halogen lights, and working towards hydrogen and renewable energy. We have committed over £12bn of domestic green investment since March 2020, shown progress in the installation of heat pumps, and have doubled our International Climate Finance commitment to £11.6bn between 2021-2025.

Undoubtedly, changes are underway, and progress is being made. But we cannot be complacent and need to capitalise on the strengths that the country has to offer. This means deriving a competitive advantage from services, research & development, innovation, a skilled workforce, world-class universities and research institutes. So, what more can be done?

Firstly, green technology, including research and development into new options, is a cornerstone of the net zero journey. Therefore, creating the right regulatory frameworks is likely to be just as important in encouraging early-stage investments to ensure that the UK remains economically competitive. The EU has already recognised this with simplified regulation, a key pillar of its Green Industrial Deal. And while the UK government’s Skidmore and Vallance reviews have started, this process with a particular focus on pro-innovation regulatory frameworks, still a lot more can be done.

Secondly, the UK should provide greater clarity on areas of priority and identify specific industries or technologies we need to take the lead on. For example, the UK’s Ten Point Plan focuses on the built environment, and that is why the government aims to increase the number of heat pump installations from 55,000 a year in 2021 to 600,000 a year by 2028. While the intent is great, this is not enough as decarbonisation and energy efficiency do not stop at heating and insulation.

Other improvements need to be considered, not just as efficiencies in themselves, but that they can offer a fast and simple next step to developing whole building approaches for upgrading to low carbon technologies as such LED lighting. For example, ensuring that homes are all converted to LED lighting with controls can yield major savings in carbon and ensure light is provided only where it is needed from a dedicated app or Smart Home control systems.

By making government funds available to cover switching to smart LED systems and highlighting lighting as a named technology, would help accelerate the UK’s economic recovery, reduce carbon, and be a major accelerator to achieving the Ten Point Green Recovery Plan.

Thirdly, the government should further build on the UK’s capability of research and innovation to enable it to play its crucial part in the UK’s transition to net-zero. The Department for Energy Security & Net Zero (DESNZ) and Committee for Climate Control (CCC) agree that innovation is fundamental to the journey to net zero. BEIS, too, identified that net zero would require “a step change” in the rate of new technologies and processes being developed and deployed into the market and adopted by businesses and consumers. The International Energy Agency (IEA) has estimated that nearly half of carbon emission reductions required from the global energy sector for the world to reach net zero will need to come from the technologies still under development.

However, the recent review of the Net Zero Research and Innovation Framework by the National Audit Office shows there is still some work to be done to ensure the government is set up to deliver value for money from its approach to investment in research and innovation to deliver net zero in the UK. To cite a few examples, there remains obscurity on longer-term public sector investment and funding, the support for innovation to work alongside policy teams and industry, and the action that may be needed to de-risk technology deployment and mobilise private sector investment.

The time to act is now

The UK has a strong recent history when it comes to green industry and innovation – from its vision to success in the deployment of offshore wind to success in clean hydrogen. However, the economic landscape is changing, and the UK must look to its strengths and areas of comparative advantage instead of only replicating what others have done. The recommendations above illustrate what more can be done since there is no time to waste.