CBI: £4.3bn opportunity to be squandered by UK’s ‘complacency’ on green technologies

Image: CBI

Danker delivered his first public speech of 2023 on Monday (23 January) at the University College London.

The speech reflected on the economic growth approaches of the three Conservative Prime Ministers the UK has seen within a 12-month period and saw Danker arguing that, while incumbent Rishi Sunak should “comfortably” hit his pledge to grow the economy by 0.1% by the end of 2023, growth could be limited to this level unless he and his Cabinet set their sights higher.

Danker argued that a key lever for delivering growth beyond this level, despite economic headwinds, will be innovation in the fields needed to deliver the UK’s legally binding 2050 net-zero target. He emphasised how, given that net-zero targets from nations and regions now cover 91% of global GDP, the UK is in a global cleantech race that it is not winning.

He said he is “worried” about the UK’s “complacency on green technologies” and found Chris Skidmore’s recent Net-Zero Review “devastating”. The review pointed out more than 120 interventions that the UK Government would need to make to deliver a ‘pro-business, pro-growth’ transition to net-zero, concluding that there is still time to seize this opportunity but that action is needed in the near future. Several recommendations require implementation this year.

“To sum up, the UK is falling behind rapidly – to the Americans and the Europeans, who are outspending and outsmarting us,” said Danker. “We’re behind the Germans on heat pumps, insulation and building retrofits, the French on EV charging infrastructure, and the US on operational carbon capture and storage projects – despite the UK’s North Sea advantage. We’re lagging all three on hydrogen funding.”

Danker added: “We believe the UK could lead the world on green growth as we did in setting net-zero targets. But we’re on the verge of being relegated from the Champions League by the Americans and the Europeans: both in an arms race to win global market share.”

At the World Economic Forum’s annual meeting in Davos last week, European Commission president Ursula von der Leyen confirmed that a new Industrial Plan aligned with the EU’s 2050 climate targets is in development, including new state and private funding designed to rival the US’s Inflation Reduction Act (IRA).

The IRA passed last August and is the biggest single package of spending on low-carbon technologies and activities by any national government. It includes $369bn dedicated to climate action, including subsidies for sectors including existing wind and solar technologies; next-gen renewable energy technologies like floating wind and green hydrogen; electric vehicles; alternative aviation and shipping fuels and low-carbon technologies for ports. There is also funding for upskilling and reskilling workers and making infrastructure more climate-resilient in places frequently affected by extreme weather.

Danker said that while the UK Government has increased cleantech investment, it is “not racing against itself” and should better consider how it can finance its “unique strengths” to compete with the likes of the US and EU. He pointed to a £4.3bn missed opportunity through to 2030 if it does not.

He called for the Conservative Party to replicate the success of offshore wind for existing technologies and interventions, such as energy efficiency and green fiancé. He specifically recommended the use of the Contracts for Difference (CfD) auction process for all clean energy technologies.

He also called for more funding for “immature activities where the market can’t yet act”, such as commercial-scale carbon capture.

Beyond finance

As noted, Danker said other nations are “outsmarting” the UK on cleantech as well as “outspending” it.

Along with increased and more smartly-designed Government funding for green innovation, Danker called for planning reform.

He said: “Put simply, we are world-class at being impossible to get projects going, nationally and locally. From laying connectors to building electric vehicle (EV) charging infrastructure – and that’s before you even get to onshore wind and solar.”

The Energy Transitions Commission (ETC) recently published a briefing stating that in the UK, offshore wind project development timelines have averaged 12 years to date. It sets out “simple” measures that it claims could reduce this average by more than 50%, to 5.5 years.

Danker delivered a scathing conclusion: “I know that subsidies, and planning reform are both anathemas to the Conservative Party. But refusing to budge on either when it comes to green innovation, makes a mockery of the Government’s desire to make the UK the most innovative economy in the world.”

The UK has streamlined the planning process for battery energy storage but is still consulting on measures to make wind deployment more rapid. As usual with the Conservative Party, there is a focus on offshore wind over solar and onshore wind.

In the absence of policy, Danker implored businesses that are able to accelerate their net-zero journeys. He said: “The politicians may be waxing and waning here, but this is a question of corporate strategy. If you’re not racing to a green future, you’re behind.”

Danker also used his speech to emphasise the importance of proper planning to grow the UK’s green skills pipeline and to argue for diverging from EU standards only where “smart and appropriate”.

He said that the Retained EU Law Bill, which will sunset most EU legislation transcribed into UK law during Brexit by the end of this year, is “creating huge uncertainty for firms”. He pointed to a potential erosion of health and safety standards, workers rights and environmental standards if the Bill is “foolishly” rushed through.

The Bill was introduced under Liz Truss. Subsequently, the UK’s post-Brexit environmental watchdog has written to various government departments calling for an environmental non-regression safeguard to be added and an extension of timelines considered.