Clean Growth Gap Summary

Paper 1: How low carbon energy investment can transform the UK

The first paper in the series, ‘How low-carbon energy investment can transform the UK’, launched the project and highlighted the challenges in attracting the huge amount of private sector investment required to fund the energy transition.

Paper 2: Funding the Future – the UK’s energy transition in a global context

The second paper, ‘Funding The Future’, examined in-depth the scale of support that is available for clean investment around the world, including in the USA, EU and China, and how it compares to the UK. It also set out what strengths the UK should build on as it enters the next phase of the energy transition, such as its existing skills, R&D sectors, access to capital through the City of London, and mature policy frameworks such as the Contracts for Difference scheme. This paper specifically looked at how the USA’s Inflation Reduction Act had influenced world markets and the competition for capital.

Paper 3: Path to Prosperity

The third paper, ‘Path to Prosperity’, looked at four different scenarios for reaching Net Zero, ranging from the current state of play (baseline), to a scenario where many policies are delayed, and then a more ambitious scenario than at present. This looked at what would happen under the scenarios where Government policy can either help stimulate investment, innovation and technological advances or, in contrast, where delayed action and reduced ambition has the opposite effect. 

Paper 4: Community Capital

The fourth paper, ‘Community Capital’, looked at how different regions of the UK could benefit from the energy transition by building on existing strengths in industry and manufacturing, as well as leveraging geographic advantages.

Paper 5: Accelerating Action

The final paper, ‘Accelerating Action’, looked at how the UK can attract the investment needed to maintain its world-leading role in clean energy, and ensure a secure, homegrown energy supply in years to come.        

With an estimated 70% of the funding required for the Net Zero transformation likely to come from the private sector, the report highlighted seven actions the UK should take to attract this investment.

Key stats from the series of reports:

• The UK’s energy sector has mainly driven the halving of the country’s emissions since 1990.
• The decarbonising of the sector has generated £54.4 billion in annual turnover, and employed 247,000 workers.
• The UK, however, is due to be bottom of the eight largest economies in terms of forecast growth in low-carbon sectors.
• The South-West and West Midlands – both areas that currently have a GDP per head below the national average – could be the biggest beneficiaries from the most rapid transition to Net Zero, thanks to the specialism of their manufacturing sectors.
• Under the most ambitious scenario, the GDP of each area of the UK would be 5.4%-7.5% greater in 2050 than under the current trajectory – which would amount to a boost of £141 billion for regions outside London and the South-East.
• Even in regions with the biggest challenges in terms of moving from fossil fuel industries, such as Scotland and the North-East, GDP is still expected to grow by over 5% under the most ambitious pathway
• UK GDP could be 6.4% or £240 billion higher by 2050 under the most ambitious scenario. Under the ambitious scenario, private investment would be boosted by £165 billion and 226,000 extra jobs created     

The final seven recommendations for the Government were:

• Change investment incentives in the tax system so they match the specific characteristics and requirements of low-carbon projects.
• Amend the current Electricity Generation Levy to address the disadvantage clean energy projects receive in comparison to oil and gas and the barrier it provides to new projects.
• Ensure the CfD scheme reflects economic realities to avoid any repeat of the last auction round.                 
• Understand the importance of a stable and predictable environment for investors and how proposed reforms, indecision and ill-advised rhetoric can adversely affect this.
• Tackle delays caused to the rollout of necessary infrastructure and new projects caused by restrictive and outdated planning guidance.
• Speed up the grid connections process so that new projects can come online quicker.
• As a stable and predictable carbon price is a vital incentive to invest in clean energy, link the UK Emissions Trading Scheme (ETS) with the EU ETS and take other measures to address recent volatility.