Net-zero-aligned investment in the UK for jobs and growth after COVID-19
The UK’s future economic, social and environmental prosperity will be shaped by how it deals with, and recovers from, the impact of COVID-19. In our new paper we focus on a series of proactive, coordinated, net-zero-emissions-aligned investments that the UK can place at the heart of its plan for recovery.
Job opportunities in a sustainable economy
We highlight six areas that present opportunities. Investments in these areas can deliver economic and societal benefits in the short term via generating employment, with sectors such as clean automotive, hydrogen and carbon capture, utilisation and storage (CCUS), renewable energy and housing energy efficiency each having the capability to generate tens of thousands of high wage jobs. And in the medium to long run, there are several high-value, complex net-zero-aligned products that are relatively close to the UK’s existing capabilities and can drive growth opportunities.
- Energy efficiency in buildings – Studies on investments in energy efficiency show that spending in this policy area creates more jobs than does investment in fossil fuel industries. The recovery programme can complement policies and investment related to achieving the short-run objective of implementing energy efficiency measures with policies and investment to direct innovation and skills development towards addressing longer-term, strategic challenges such as the supply of zero-carbon heat to buildings. This could sustain jobs into the medium to longer term.
- Natural capital projects – In the short-run, there could be jobs in the creation, maintenance and restoration of ecosystems, parks and urban green space and sustainable drainage systems, while in the longer term more investment could be made in services such as ecotourism and agroforestry. However, the impact of natural capital investments on employment is understudied and should be addressed by future robust evaluations.
- Active travel equipment and infrastructure, such as bicycles and cycle lanes – Constructing and operating walking and cycling infrastructure schemes, traffic calming and on-street cycle hire can generate jobs in the short term, and in the longer term investment could be made in the production and R&D related to bicycle components and so on. A study by Sustrans of the Linking Communities (2012–13) programme in England, which created and upgraded traffic calmed and traffic-free walking and cycling routes, estimates that it generated 6.9 FTE jobs per £1 million of investment.
- Renewable power generation and distribution – Creating renewable energy infrastructure has been shown to be particularly labour-intensive. The UK Energy Research Centre has shown that, in the short term, investing in new renewable generation capacity or greater energy efficiency creates more jobs than investing in an equivalent level of fossil-fuel-fired generation, the magnitude of the difference being of the order of 1 job per annual GWh produced. And with regard to generating medium to longer term growth opportunities, our research indicates that the UK currently appears to have a comparative advantage over other countries in producing the clutches and shafts used in wind turbines.
- Electric vehicle (EV) production and charging infrastructure – We have shown in previous research that scaling up the EV market in road transport should be a priority action on the road to net-zero. In addition to jobs being created in the short term in the construction and operation of charging infrastructure, in the longer term the UK can invest in production of and R&D related to EV raw materials (e.g. lithium), component production and assembly and charging infrastructure.
- Carbon capture, utilisation and storage (CCUS) and hydrogen production – There are number of large, high-emitting industrial facilities (chemicals, iron and cement) in the UK that are suitable for CCUS and hydrogen trials at scale, which could be a driver of short-run jobs in the recovery. In the medium to long run, jobs may lie in the production of and R&D related to steam reformers, hydrogen electrolysis production, hydrogen storage and transmission equipment and more.
Investments in these assets, technologies and capabilities are widely recognised as aligning with the critical decarbonisation actions that need to be taken by the UK to get on track for reaching net-zero emissions by 2050. They are also consistent with those outlined by the Committee on Climate Change.
The strategic investments in these areas can also build capacity for the economy of the future. Such investments, made alongside others such as 5G networks and superfast broadband, innovation and skills more broadly, are also crucial for achieving innovation-led sustainable growth via the production of zero-carbon goods and services for domestic consumption and export. Moreover, they will deliver a series of co-benefits, including cleaner air and smarter and more liveable cities and hence improve resilience, inclusion and ultimately living standards and well-being.
Consideration must be given to the gender dimensions of new jobs created by the recovery package. Many of the short-run employment opportunities associated with net-zero-aligned investments are related to manual labour. Based on current labour market structures, jobs in zero-carbon infrastructure construction would most likely be male-dominated. Yet women tend to work more in sectors where jobs are at risk from the current crisis. Given evidence indicating that the skills for critical net-zero-relevant activities, such as housing energy efficiency retrofits, can be learned on the job, it will be important to ensure that job creation in the recovery does not follow pre-existing trends rooted in the existing skills and gender dimensions of the UK workforce. This provides a key opportunity for the UK to ‘build back better’ from both an environmental and social perspective.
In which geographical regions might the opportunities lie?
Given the UK’s uneven economic performance across and within regions – the target of the Government’s ‘levelling up’ agenda – and the disproportionate impact of COVID-19 on the most vulnerable, the poorest, the youngest, the least educated, and ethnic minorities, it is of critical importance to understand where sustainable jobs could be created.
In examining this question for the different sectors, we find, for example, that there is clear progress to be made in improving energy efficiency across the North of England, in Wales, the South West and parts of the Midlands – and therefore it is reasonable to infer that in these regions lies an opportunity to create associated jobs. Similarly, mapping the density of electric vehicle charging points can indicate areas where there might be additional demand as a rising share of the population transitions to EVs over the coming years. The areas of largest opportunity based on this measure are spread across the Midlands, the East of England and South Wales.
More detailed geospatial analysis of this nature is needed, in particular accounting also for the labour intensity of different types of activity. However, our indicative analysis does suggest that net-zero-aligned investments have the potential to create a balanced mix of job opportunities in regions across the UK and this work could help inform regional growth plans in the development of Local Industrial Strategies.
What can the Government do?
The UK has made a strong start along the road to net-zero, setting out commitments to energy efficiency in buildings and offshore wind, but a step-change is needed given the scale of the challenge. In order to capture the benefits we highlight in our report, the Government can:
- Place net-zero-aligned investments at the heart of the UK’s recovery plan.
- Draw on diverse economic evidence to design recovery policies and investments seeking to create and sustain jobs, allowing for where in the UK jobs might be created in the short run, and sustained into the longer run, based on comparative advantage in production and innovation.
- Ensure robust monitoring and evaluation for investments made in the recovery package, to expand the evidence base and inform future policy.
- Complement net-zero-aligned investments with targeted re-skilling for those displaced in the current crisis and those that will be displaced by ongoing technological change and the zero-carbon transition.
- Accompany strategic investments with strengthened policies, institutions and regulation to direct private sector investment towards achieving societal goals such as net-zero, starting with a robust, net-zero-aligned carbon price, a National Investment Bank to help leverage sustainable private sector investments, and a relaunched, long-term Industrial Strategy with sustainability at its core.
Read the report Jobs for a strong and sustainable recovery from COVID-19, by Sam Unsworth, Pia Andres, Giorgia Cecchinato, Penny Mealy, Charlotte Taylor and Anna Valero, with a foreword by Nicholas Stern, published jointly with the LSE Centre for Economic Performance.