As the energy crisis hits pockets, we need to protect our future economy
Against the backdrop of the cost of living crisis, there is a growing vocal minority in the Conservative Party calling for the Prime Minister to slow down on decarbonising the British economy.
The Net Zero Scrutiny Group of backbench MPs in parliament have started to grumble that the government’s net zero plans will cost too much and are a cause of rising bills. Net zero plans are an easy scapegoat for the current crisis, but in truth, it’s our failure to ensure our economy is shockproofed against an energy crunch. Rising inflation means households are already squeezed for cash and aren’t in a position to fork out money to insulate their homes properly or install heat-pumps, but that’s a different thing from net zero being the cause of their woes. The only way to help dig Britons out of the cost of living crisis is by overall economic growth: companies at the cutting edge of net zero are an integral part of this equation.
The UK’s low carbon and renewable energy businesses export more than £7bn worth of goods and services today but the market is projected to be worth up to £1.8tn by 2030 and over £3tn by 2050. The question is not whether our economy needs to adapt, but whether we can adapt faster and reap the benefits sooner.
Currently, in the Conservative party, those calling for a slow down to net zero plans are those most fervently in favour of a private-sector led free market economy. But by investing in decarbonising our economy, and encouraging innovation on our own shores, British customers will have access to lower energy prices and clean technologies in the future. It’s not about unnecessary intervention or forcing people to take on costs they can’t stomach, but instead, laying the groundwork for an economy which will have long-term protection against rising living costs.
Innovative green firms, or “climate-techs”, represent a major slice of this economic opportunity. $222bn was invested in climate-techs between 2013 and the first half of 2021, with a 210 per cent growth in investment year on year. There are now 78 climate-tech unicorns, valued at over $1bn each. After the Bay Area in California, London was the most active climate tech hub, with firms and investment capital flocking to the UK because of the unique opportunity that net zero innovation offers here.
There is potential for the “climate-tech” sector to grow across the length and breadth of the country. From Edinburgh tidal energy startup Nova Energy, to Brighton based decentralised energy startup Emergent Energy. From smart heating firm Wonderwall in Manchester, to climate risk analytics firm Cervest in London. Most of these firms are setting up shop outside of London, seeking out the UK’s natural assets including its coastline, tidal lagoons and wind, helping to level up communities as they grow.
Firms in the UK have so far thrived with governmental support through initiatives like InnovateUK grants and competitions, Net Zero Innovation Portfolio support and the contracts for difference regime in energy. The last of these has facilitated such a dramatic decline in the cost of wind energy that it could be half the cost of gas by 2025.
Curtailing policies like these now would lead these entrepreneurs and investors to go elsewhere, crippling our future competitive advantage.
These foundations should be built on, not eroded away. The government should double down on support for green skills development. Once technologies have developed, the government can step away and leave the market to it.
In his 2022 letter to CEOs, Blackrock’s Larry Fink said that “the next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators.” The market is signalling that the climate-tech sector today is the economy of tomorrow. The Conservative party would do well to heed its call and prevent the cost of living crisis of the future, as well as today’s.