A green transition for UK steel can tackle regional inequality
Public investment in the steel sector would help to secure green jobs but may not be enough to meet the challenges ahead, argues Brendan Curran.
The UK Government is expected to announce a £600 million support package for Tata Steel and British Steel to support their transition to greener methods of production.
Welcomed by business, trade unions and politicians across the political divide, this commitment is a step in the right direction. Using the public purse to support crucial sectors like steel in their transition to net zero makes sense on several fronts. However, it doesn’t quite match the scale of the challenge ahead.
The Government’s investment in the Port Talbot and Scunthorpe steel plants supports the UK’s net zero ambitions and also ensures that those regions, communities and individuals most at risk from the transition are given a chance to benefit from the opportunities of a green transition. It is using public funds to ensure what is known as a ‘just transition’.
As we evolve our economy to respond to the challenges of climate change, we must make sure the impacts on people remain a central consideration. It may seem glaringly obvious, but environmental policy and reform in the past has taken insufficient or no consideration of social impacts.
The introduction of regressive fuel taxes in France, for example, which ignited the ‘gilets jaunes’ protest movement, was designed with climate in mind – but it significantly impacted those on lower incomes and sparked a social backlash.
The current UK Government has been reluctant to use the term ‘just transition’ in relation to their own climate policy – there are zero mentions of it in the Net Zero Strategy – but it has been happy to promote it internationally, like at COP26, and within their development investment programmes. Domestically, the Government has been reluctant to embed worker representation in the transition.
While there has been a lot of discussion around green jobs, the UK should also see the transition as an investment opportunity that can deliver for different regions across the country. Last year we published research highlighting the comparative advantage of certain regions to deliver green technologies. In fact, Lincolnshire – where British Steel have a steel furnace – is a region that stands to benefit from green investment if we can get the policies and investments right.
That promises economic growth, productivity and community regeneration for regions of the UK that have struggled economically in recent decades. A national green investment programme has the potential to deliver on the Government’s ‘levelling up’ agenda to tackle regional inequality. However, without a focus on social impacts, the chances of achieving the transition to net zero are reduced as it runs the risk of alienating people.
The Government can give UK steel necessary funding to accelerate its green transition, but that funding must have come with certain condition. Reports suggest that Government cash is conditional on Tata and British Steel also investing their own funds. This stipulation is important to leverage the necessary private investment to deliver the entire transformation.
But as a public funder, the Government should also stipulate that the companies prioritise a just transition. That would involve Tata and British Steel engaging with trade union and local community representatives, ensuring that workers have opportunities to re-train where possible, and keeping new and existing jobs in the regions that have historically been more reliant on carbon intensive steel production. This approach makes sense for the Government, but also for the businesses as they are investing in the people they need for the green transition.
Inevitably, there is the question of whether this funding is enough to save the UK steel industry from rising carbon credit prices and energy costs, as well as from ever-increasing competition. The answer would seem not: the Tata Group Chair stated a public investment figure of around £1.5bn; the Labour Party have committed to £3 billion of investment in the sector; and an equivalent steel production transitioning plant in Finland received £4 billion of public investment.
To make up the difference, the UK should explore how green bonds could be used to fund the transition across the steel sector and others. The Debt Management Office (DMO) already measure the social co-benefits in their Green Financing Framework for sovereign bond issuances. So why not use the proceeds for transition funding, with a focus on supporting workers and communities?
The Government’s approach to a green transition for UK steel is a step in the right direction, but greater ambition is needed – both in terms of the size of funding and to ensure that local communities and workers are at the forefront of a just and inclusive transition. Otherwise, UK ambitions to deliver on net zero are doomed to fail.
This commentary was first published by Context on 26 January 2023: https://www.context.news/just-transition/opinion/a-green-transition-for-uk-steel-can-tackle-regional-inequality