FURTHER PUBLIC FUNDING of the green transition would spur economic growth, reduce the damage caused by climate change and prove overwhelmingly popular with the public, according to a new report from the Institute for Public Policy Research (IPPR).
Despite a darkening economic picture, increased government investment is fiscally responsible as a means to stimulate growth, reduce the costs of importing gas and tackle the growing expense of inaction.
The report finds that investing now to tackle climate change is the most responsible and cost-saving policy for government. The transition to net zero provides an opportunity to boost economic growth from new businesses and jobs which will increase public revenue. A percentage point increase of 0.5 in GDP would loosen the fiscal constraints on government budgets and allow about £12 billion more in public spending. It is estimated that net zero will boost GDP by two per cent by 2030 and three per cent by 2050 through the creation of high value, high skilled new industries and cheaper energy.
Conversely, not acting on climate change is increasingly expensive; flooding alone in the winter of 2019/20 cost the UK economy £333 million, while cleaner air, less pollution and more green spaces would also reduce the burden on the NHS by £2 billion a year.
Even as the cost of living increases, public support for environmental action remains strong. Polling conducted by Opinium shows that a call for a multibillion climate investment package is supported by 68 per cent of the public, with just 21 per cent opposing. Additionally, six in 10 people (59 per cent) support a multibillion package funded by borrowing.
While in the short term the government needs to make investments that avoid contributing to inflation, measures such as investing in clean energy and retrofitting homes to use less energy would have anti-inflationary effects.
The green transition can play a significant role in solving some of the country’s most pressing imminent problems, and the vast majority of the public agree with four in five people seeing investment in renewables as a way out of the current energy crisis.
The IPPR report sets out five principles for responsible public investment in net zero:
- Fair: ensuring spending addresses inequalities and creates a return for the public purse wherever possible.
- Additional: providing added value to the private sector, taking on risk with a longer time horizon to drive new low-carbon markets.
- Phased: increasing year on year, to avoid supply chain constraints and inflationary risk.
- Reforming: paired with industrial strategy to reform the economy and improve productive potential.
- Efficient: meeting multiple objectives across social, economic and environmental goals.
Sam Alvis, Associate Fellow at IPPR, said: “Now is not the time to back away from much needed green investment. As the UK enters recession, it’s even more important for public investment to drive the new, clean infrastructure that we know can generate stronger growth. Rolling out renewable energy, restoring our natural environment or expanding public transport, can all improve our productivity whilst driving down emissions.
“But in a challenging economic environment the government must ensure that its spending goes as far as possible and delivers both economic growth and emissions reductions. Prioritising measures that crowd-in private investment, establishing more independent oversight, and making existing institutions more targeted can all do that.”
Luke Murphy, Associate Director for energy, climate, housing and infrastructure at IPPR, said: “Increasing investment to reach net zero is an economic, environmental, and political necessity. It is not just the environmentally responsible choice; it is fiscally and politically responsible too.
“Green investment is popular, is the best route to a prosperous economy and addressing the cost of living, and will help us address the existential threat of climate change and environmental breakdown. The costs of inaction are far greater and a substantial threat to our economy and way of life.
”But any public investment must be spent wisely and fairly. That’s why we recommend a new Olympic-style delivery body for net zero to maximise the economic and environmental opportunities of the transition, lever in private investment, and improve the everyday lives of people and communities across the country.”
* Read Green investment: The prudent choice for prosperity here.
* Source: Institute for Public Policy Research