The Debate: Are growth and net zero incompatible?
Are growth and net zero really star-crossed lovers, or can they find a happy marriage? We get two writers to hash it out in this week’s Debate
Yes: Using more to produce less creates a green growth paradox
Growth is simple, it’s either inventing new stuff or providing old stuff using fewer inputs. Net zero conversely is a political target that requires the UK to emit zero greenhouse gases (mostly CO2), on balance, from all economic activity by 2050.
To achieve this first requires the decarbonisation of our energy system, currently 75 per cent dependent on fossil fuels (mostly oil and gas), given energy is the primary input to all other activities. The government’s preferred path is using technologies like renewables (mainly offshore wind) that use more inputs (mostly land and grid infrastructure) to produce less energy, less reliably, meaning a costly dual energy system to provide back-up. It has wiser ambitions to expand nuclear power, but this is much longer term.
The new stuff then isn’t new – it provides old energy services such as heat, power, and transport in a different way. Nor is it efficient, using more resources to produce less energy means everything costs more, including in renewables supply chains (for example concrete, cables, and steel), creating a ‘green growth paradox’. The best illustration of which is perhaps carbon capture and storage, that renders uncompetitive any process to which it is applied. The things required to achieve net zero make net zero less likely.
The solution is technology we don’t yet have, delivered at a pace no one can predict, which is the normal process of innovation, perhaps nudged by a competitive, i.e. low carbon price. Net zero ignores this reality, preferring instead a central planning delusion through five-year targets and climate regulations that obstruct building anything anywhere, while making anything that can be built more expensive, further damaging growth.
Net zero will make our lives poorer, colder and more controlled until we ditch it, leaving markets to drive innovation and change.
Andy Mayer is COO at the Institute of Economic Affairs
No: Without net zero, climate change will have a disastrous effect on GDP
Net zero can – and must – go hand in hand with growth.
Without net zero, climate change or another fossil fuel price spike will have a disastrous effect on our long-term GDP. And without growth, we will not have the resources to invest in clean technologies.
But, to marry net zero with growth in the near term, we need to take a low-cost, market-led approach to reducing emissions that keeps down costs for businesses.
Having halved our emissions since 1990 while growing the economy by 80 per cent, the UK has shown that clean growth is possible. Green industries are worth £74bn to our economy and grew by nine per cent in 2023. Commercialising innovative clean technologies offers some of our best prospects both for future growth and limiting global temperature rises.
Look to Teesside for a tangible example of how the UK’s industrial heartlands can be revitalised by a market-led approach to net zero. Thanks to low-tax freeports, investment in sectors such as carbon capture and offshore wind has poured into the former steelworks site in Redcar, bringing opportunity and good jobs back to the area.
But the Labour government’s statist approach to net zero – symbolised by GB Energy and its centrally-planned 2030 clean power mission – risks damaging growth by pushing up energy costs for businesses.
In fairness they have announced a handful of pro-growth climate policies by reforming environmental regulations and planning rules. But these positive steps risk being betrayed by Labour ministers’ high-tax, high-regulation instincts.
Only by removing the barriers to private investment in clean technologies and injecting market forces into the energy transition will we achieve faster economic growth and decarbonisation together.
Sam Hall is the director at the Conservative Environment Network
The Verdict: A happy marriage requires compromise
With Valentine’s Day on the approach, it’s only natural to turn our attention to CityAM’s favourite star-crossed lovers: growth and net zero. But are they really destined to destroy one another?
Mr Mayer says a resounding yes, arguing the green growth agenda creates a central paradox (asking us to use more to produce less) while climate regulations have made building new projects (essential to growth) more expensive and harder to do (ahem, HS2’s £100m bat tunnel).
But Mr Hall provides a convincing rebuttal, arguing that not only is net zero compatible with growth, it is in fact essential to it. One needn’t look far to see that the effects of climate change are expensive. In the UK, the could rise by 42 per cent by 2050 due to climate change, according to one estimate.
That businesses can’t afford to stump up the costs of net zero without incentives, however, is where both our combatants agree. Removing the barriers that are currently preventing businesses from innovating in green technology is a win-win. Happy marriages, after all, are all about compromise.