Net Zero Review: The growth opportunity of the 21st century?

It has been presented as the UK’s single greatest economic opportunity, a powerful recipe for growth and sustainability. But will the Net Zero Review have an impact? And what are the practical implications for businesses?

by | 23 Mar, 2023

Windmills during cloudy day
  • Chris Skidmore has released the Net Zero Review to mixed commentary.
  • The report highlights potential economic opportunity in a robust strategy for net zero.
  • It sets out 10 priority missions alongside key actions, recognising the criticality of investment and innovation within the private sector to bring low-carbon technology to the mass market.

When The Rt Hon Chris Skidmore, former energy minister and soon-to-be-former Conservative MP, released the 323-page Net Zero Review that is so indelibly connected with his name, it was defined by some as a slap in the face of the party he was leaving.

The Guardian called it a “stinging broadside” and said the review “argues that the Conservatives have failed on nearly every aspect of net zero policy”.

In that same Guardian article, Polly Billington, chief executive of local government leadership group UK100, was reported as saying, “From a former Tory Minister, this is a very significant, clear-eyed analysis of what is missing from government policy”.

Only days earlier, Skidmore himself had told reporters, “If the Conservative party does not get behind net zero, then they will lose votes … I think unless the Conservatives are serious about net zero and delivering on climate action, you have a perfect storm of potentially Conservative seats being lost either to Liberal Democrats in the blue wall or to Labour in the ‘red wall’.”

The document has undoubtedly been politicised – experts and industry leaders we reached out to for this article told us as much, declining to comment – and that politicisation could work against its success. This is despite the fact that many industry groups and environmental bodies have supported and celebrated the Net Zero Review as thorough and all-encompassing.

Professor Stern, for instance, from The Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, said, “Chris Skidmore and his team deserve great credit for carrying out a rigorous, robust, and inclusive review of the evidence on the economics of the UK’s net-zero transition.”

Stern continued: “In particular, the review has argued convincingly that the transition to a net-zero economy is the growth opportunity of the 21st century, and the UK is well placed to benefit from the increasing demand for net-zero goods and services, if it makes the right public and private investments.”

The review highlights, Stern said, the critical importance of the creation of an investment environment, led by government – any government – that encourages confidence through clarity, consistency and continuity of policy.

“I hope the Prime Minister and his government will respond to the review with the urgency and scale required to prevent this enormous economic opportunity from slipping through our fingers,” he said.

“This transition, and the investment and innovation it embodies, are at the core of the UK’s growth story for the coming decade.”

At the core is opportunity

Indeed, as Stern pointed out, the report highlights the enormous potential economic opportunity in correctly designing a strategy for net-zero success.

Skidmore’s report makes this point loud and clear: “Net zero is creating a new era of opportunity, but government, industry, and individuals need to act to make the most of the opportunities, reduce costs, and ensure we deliver successfully.”

It goes on to say, “The evidence presented to the Review has shown that the pace of recent change has created a rush of economic opportunity at a massive, global scale. With more than 90% of global GDP covered by a net-zero target there is now huge global momentum to reach net zero and capture the economic opportunities. This is driven by businesses of all sizes who have recognised that net zero can help them grow.”

McKinsey, the report says, estimates a global market opportunity of £1 trillion and 480,000 jobs for British businesses by 2030.

As other territories begin to stake their claims over certain aspects of the net-zero economy – Australia for rooftop solar and renewable energy production and export, China for EV adoption, the USA and China for nuclear energy technology, among others – the UK can do the same in several other areas including finance, offshore wind and carbon capture, utilisation and storage (CCUS).

“In the UK, CCUS is in its infancy, but if it can mature at pace it will play a key role in supporting ambitious 2050 net-zero targets – and establish the UK as a global hub for a game-changing technology,” a 2020 report from Wood Mackenzie told us. “Technological innovation is the key that will unlock challenging economics and help to establish a feasible commercial model.”

On the finance front, the report said the UK should focus on becoming “the most competitive financial centre” in terms of funding capital for the net-zero transition occurring globally. But speed is of the essence, it insisted.

“It is clear we are in an international race for capital, skills, and the industries of the future,” the report said, more than two years ago.

“We must act quickly, and in collaboration with our international partners, to cement the UK as a prime destination for international capital and unlock export opportunities for British businesses around the globe. Failing to do so will mean missed opportunities.”

What’s covered in the Net Zero Review?

From households to multinational businesses and everything in between, the Net Zero Review contains recommendations.

The 10 priority missions for public and private action encompass:

  • The grid and other energy infrastructure
  • Solar on residential rooftops and solar farms
  • Onshore wind farms to complement offshore farms
  • A new approach to nuclear
  • Energy strategies for industry
  • Circular economy stimulation
  • Unblocking the government planning system
  • Boosting household energy efficiency
  • Nature and habitat restoration
  • R&D and technology roadmap

Importantly, from the point of view of IFA members, the Net Zero Review recognises the criticality of investment and innovation within the private sector to bring low-carbon technology to the mass market.

  • For businesses large and small, the Review specifically recommends:
  • Reviewing incentives for investment: Review how HM Treasury incentivises investment in decarbonisation, including via the tax system and capital allowances.
  • Protecting industries from environmental undercutting: Progress with the consultation on carbon leakage measures and speed up decision-making to enable government to implement effective future carbon leakage mitigations from 2026.
  • Providing a forward look on the UK Emissions Trading Scheme (ETS), which was established in 2021 to replace the UK’s prior participation in the EU ETS since 2005: To provide businesses with certainty and increase the incentives to invest in new, green technologies, the government should work within the UK ETS Authority to develop a pathway for the UK ETS until 2040.
  • Building the skills needed for the transition: Drive forward delivery of the Green Jobs Taskforce recommendations and the commitments from the Net Zero Strategy, reporting regularly on progress starting by mid-2023.
  • Helping SMEs upskill: Launch a ‘Help to Grow Green’ campaign, offering information, resources and vouchers for SMEs to plan and invest in the transition.

What does this mean for accountants and their clients right now?

The Review lists 25 key actions for 2025.

They include:

  • A review of how regulation should change for emerging net-zero technologies to enable their rapid and safe introduction, to support the net-zero transition and boost growth
  • A review of how policy incentivises investment in decarbonisation, including via the tax system and capital allowances
  • A clear, robust and ambitious approach to disclosure, standard setting and scaling up green finance
  • A new forum to coordinate across all regulators on the signals they are sending to businesses and investors across sectors about the net-zero transition
  • An overarching financing strategy covering how existing future government spending, policies and regulation will scale up private finance to deliver the UK’s net zero-enabled growth and energy security ambitions

Such an all-encompassing vision requires support from all political bodies, not just from the party of the day, to ensure its longevity and success.

The next few months will likely reveal whether that level of support is in place and, therefore, whether these opportunities will be realised.

 

Share This