Recent research indicates that enhancing net zero policies could unlock nearly £765 billion by the time the UK reaches net zero, while accelerating decarbonisation to meet legally binding targets. This insight is presented in Oxera's report, "Growth Zero: Reframing Net Zero as a Driver of Growth," which examines four pivotal strategies for achieving net zero across the UK and the EU: regulation, private sector innovation, carbon pricing, and fiscal policy.
The report outlines the following approaches:
· Regulation: Enforcing stringent penalties on high-emission sectors and advancing the phase-out dates for petrol and diesel vehicles and fossil fuel boilers.
· Private Sector Innovation: Accelerating the deployment of green technologies through enhanced research and development and other interventions.
· Carbon Pricing: Implementing annual price increases averaging 30% in the 2020s, 8.6% in the 2030s, and 4-6% in the 2040s.
· Fiscal Policy: Increasing subsidies for low-carbon technologies while raising taxes on carbon-intensive industries.
According to the report, enhanced net zero policy packages could enable the UK to achieve net zero as early as 2044, generate up to 1.3% additional annual growth, and increase GDP by up to £765 billion. This transition could also support between 213,000 and 309,000 jobs annually in the UK. In the EU, achieving net zero before 2050 could unlock between €5 trillion and €6.1 trillion in growth, supporting 1.2 million to 1.4 million jobs annually.
Oxera’s chair, Dr Luis Corriera da Silva, commented, "The study demonstrates that net zero could catalyse significant growth and job creation for the British economy. However, irrespective of the policy framework chosen, the macroeconomic benefits and costs must be equitably distributed. Business leaders need to be aware of the microeconomic impact of forthcoming net-zero regulations and adjust their business models to capitalise on the opportunities of a low-carbon economy."
Short-termism in the Financial Services Sector
Despite the potential economic benefits of transitioning to a net zero economy, a survey by international law firm Mayer Brown revealed that only 18% of financial institutions and 27% of investment firms have net zero transformation strategies extending beyond the next 12 months. The survey included 90 leaders from banking, insurance, and other financial services companies, and 107 leaders from investment banking, asset management, and private equity firms.
The study found that while 81% of investment firm leaders and 67% of financial institution leaders believe in the necessity of sustainability for future economic success, only a small fraction of finance businesses are adequately transforming. Just 4% of investment firms and 1% of financial institutions outperform the average across seven key dimensions of a future-proofed organisation, including environmental sustainability. Additionally, 52% of financial services firms report being unprepared to navigate the trends of digitisation and decarbonisation in the evolving economy.
Mayer Brown partner Tim Baines remarked, "Businesses face the challenge of balancing short-term financial returns with the increasing need for a longer-term perspective that includes social and environmental factors. This balancing act, compounded by various issues, makes it difficult for some businesses to effectively implement long-term environmental and net zero strategies."
Becoming more sustainable can lead to significant cost savings and unlock substantial economic growth. By adopting net zero policies and leveraging green technologies, businesses can reduce expenses associated with carbon-intensive operations and position themselves for long-term success.
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