Study finds no evidence that climate change policies are harming the UK’s competitiveness

Posted on 10 May 2016 in Press releases

The proposed Fifth Carbon Budget, which will set a greenhouse gas emissions target for 2030, would not harm the UK’s competitiveness, and could even help deliver long-term economic growth, according to a new report published today (10 May 2016) by the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy at London School of Economics and Political Science.

The Fifth Carbon Budget recommended by the Committee on Climate Change would mean the UK’s national greenhouse gas emissions will be 57 per cent lower on average between 2028 and 2032 compared with 1990.

The authors of the report, Samuela Bassi and Chris Duffy, find no evidence that businesses are less competitive globally as a result of existing policies that aim to reduce the UK’s greenhouse gas emissions, dispelling myths about the negative impacts of climate change policies. In fact, they suggest ambitious and well-designed climate change policies are likely to create opportunities for the majority of British businesses to expand in fast-growing economies around the world.

The report states: “Climate change policies can increase the competitiveness of the UK in the long term by encouraging greater innovation and efficiency. Well-designed climate change policies could offer business opportunities in fast-growing global markets.”

It adds: “The UK is well-positioned to benefit from a global transition to a more resource-efficient and renewable economy, provided flexible structural policies allow it to utilise its comparative advantages”.

The report finds that although the UK has one of the most ambitious plans to reduce national greenhouse gas emissions by 2030, many of the its international competitors have also committed to strong cuts, particularly following the Paris Agreement on climate change.

It states: “The UK is an international leader in cutting greenhouse gas emissions, but is not acting alone. The UK is part of a leading group of nations that is taking policy action on climate change. Also in this group are many of the UK’s major international partners, including France, Germany, Norway, South Korea, Mexico, and China.”

Only a few sectors, accounting for just 4 per cent of GDP, are at risk from significant negative impacts resulting from the more stringent climate change policies that are needed to meet the Fifth Carbon Budget.

The authors point out that discounts and exemptions could help the few sectors that will be negatively affected by the increased costs of fossil fuels associated with strong policies to tackle climate change by reducing emissions. They note that some sectors, including cement producers and steel manufacturers, could be at risk of significant negative impacts from the UK’s climate change policies. These firms currently receive adequate support and some have even profited from overcompensation.

The report states: “Policies to support vulnerable sectors are already in place in the UK, in the form of free emissions trading permits and sector discounts or exemptions from national policies. However, there is evidence to suggest that current measures are often too generous and target too many sectors.”

The report concludes that the UK can benefit from the transition to a low-carbon economy, so long as this structural change is managed properly.

It states: “The UK is well-positioned to benefit from a global transition to a more resource-efficient and renewable economy, provided flexible structural policies allow it to utilise its comparative advantages.”

The report on ‘UK climate change policy: how does it affect competitiveness?’ will be launched at an event held at Portcullis House at 12.30pm on Tuesday 10 May.

For more information about this media release please contact Ben Parfitt b.parfitt@lse.ac.uk or Bob Ward on or r.e.ward@lse.ac.uk

NOTES FOR EDITORS

1. The ESRC Centre for Climate Change Economics and Policy (http://www.cccep.ac.uk/) is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council (http://www.esrc.ac.uk/). The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.

2. The Grantham Research Institute on Climate Change and the Environment (http://www.lse.ac.uk/grantham) was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment (http://www.granthamfoundation.org/).

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