The green transition will boost productivity across the UK economy, new research suggests.
Researchers analysed the impacts of the low-carbon transition in power, transport and heating.
With renewable energy now cheaper than fossil fuels in most of the world – and still getting cheaper – the findings show these three industries benefit directly from the transition.
But the far larger knock-on effect is an economy-wide productivity boost, as all businesses gain from cheaper power, transport and heating.
The research team – led by the universities of Exeter and Manchester – warn that this boost depends on cheaper energy prices being passed on to consumers, not kept as profits by energy companies.
The study is published to coincide with the launch of Exeter Climate Policy, which advises policymakers on reaching a low-carbon future.
"The power, transport and heating industries are not themselves leading sources of productivity growth in the UK," said Dr Jean-Francois Mercure, who leads Exeter Climate Policy.
"However, if these energy services become any cheaper, every other sector across the entire economy can operate more cheaply, freeing unspent income free for other things, causing economic growth."
Commenting on whether cheaper energy production necessarily results in cheaper energy for businesses and households, Dr Mercure said: "This is not always the case currently.
"For example, as long as the cost of gas is used to set electricity prices, the benefits of cheaper solar and wind energy will continue to be captured as profits by producers, the grid operator or electricity distributors, whose shareholders may keep it as wealth and not necessarily spend it back again."
Global race
The study analyses the UK economy from now to 2035.
The findings are relevant to other nations that import substantial fossil-fuel energy. However, for large fossil fuel producers, economic losses could exceed the gains.
Dimitri Zenghelis, from the University of Cambridge, said: "The paper makes the case not just for climate policies, but for smart economic policy more broadly.
"We provide compelling evidence to show how this is a global race for competitive advantage that the UK can't afford to sit out.
"For an energy importer like the UK, the clean transition is a win-win. Even fossil fuel exporters can benefit, though it's time to diversify fast."
Economist and co-author Hector Pollitt said: "It's time to move on from the old way of thinking.
"The story that there must be a trade-off between reducing emissions and growing our economy was never true – the UK's offshore wind industry proves that.
"Technology drives productivity growth and green technology is no exception."
The research was supported by The Productivity Institute, funded by the UK Economic and Social Research Council.
The paper, published in the journal Climate Policy, is entitled: "The effects of low-carbon transitions on labour productivity: Analysing UK electricity, heat, and mobility with a techno-economic simulation model."
New Exeter unit will help policymakers navigate green transition
Exeter Climate Policy (ECP) officially launches today during Exeter Climate Forum – a week-long gathering of researchers, policymakers and business leaders.
Based at the University of Exeter, ECP offers independent economic analysis to help governments and finance ministers create policies that are resilient, effective, and country-specific.
"Our mission is to give policymakers a place to go for this essential analysis," said Professor Jean-Francois Mercure, ECP's Director, and Assistant Director of the Global Systems Institute .
"For each country, the low-carbon future looks different, constrained by local resources, political realities, changing tides, debt burdens, existing inequalities and economic structures.
"To move forward, governments need access to climate-economic models that are tailored to their region and the specific problems they face, to visualise how different policy options could play out in practice."
The ECP team are experienced in deploying these models and working with international policy partners, including the UK Government, the European Commission, the Ministry of Finance of Brazil, and the World Bank.
Taking a collaborative and independent approach, they can work with governments to co-create tools and policy interventions they need.
Professor Lisa Roberts, President and Vice-Chancellor of the University of Exeter, said: "One of the core priorities in our Strategy 2030 is to lead meaningful action against the climate emergency and ecological crisis.
"Policymakers around the world have committed to cut their carbon emissions, and are under pressure to deliver, both for their own populations and for the whole planet.
"Working with policymakers, Exeter Climate Policy will provide practical policy design for effective decarbonisation, economic transformation, and a zero-carbon future that is fair and resilient.
"We have the right expertise for this, and I look forward to seeing our University play a leading role in driving down global carbon emissions."
ECP offers to support evidence-based policy debates without adopting any prior political position.
It is supported by Green Futures Solutions , the University of Exeter's initiative for connecting business with climate expertise, insights, and solutions to drive sustainable change.
