23 January 2024 – The UK economy is in a bit of a pickle. While we have so far avoided a recession, we are not yet out of the woods. And a new study now found that the only way to boost our economy is by investing in a green economy.
An increase in demand after the pandemic and the invasion of Ukraine by Russia have resulted in soaring energy costs. In addition, rising inflation and high interest rates have shrunk household budgets. As a result, the economy slowed down, even stagnated.
And although energy prices have come down, they are still at an elevated level. Consumer spending is still down, even though inflation has slowed, and mortgage rates have declined.
To bring down energy prices and ensure the UK’s energy security, the UK government has decided to focus on the development of new gas and oil fields in the North Sea. As a boost for the economy the PM plans, apparently, to cut taxes to give consumers more spending power.
However, a new study shows that No 10 would be better off investing in a green economy, as this is the only way to boost the economy and grow it.
Energy Security With New Fossil Fuel Developments In North Sea
In the past months, Rishi Sunak has started to roll back on various climate pledges, and at the same time focus on the development of new gas and oil developments in the North Sea.
As justification, the PM has named lowering energy prices for households, avoiding additional costs for families and ensuring energy security for the country. The most recent action taken was the introduction of the Offshore Petroleum Licensing Bill.
However, experts have already pointed out that none of the measures introduced by the government will have the desired effect. Delaying certain climate targets, for example the ban on new petrol and diesel cars and new oil and gas boilers, won’t save households money. In fact, it could actually increase their costs in the long run.
Equally, new oil and gas fields in the North Sea won’t bring down prices or increase the UK’s energy security. Government figures show that the majority of oil and gas produced domestically isn’t used in the UK.
Instead, it’s sold to the highest bidder. This means we will continue to rely on gas and oil imports. On top of that, the amount of new oil and gas still available in the North Sea is low, so won’t last us for very long.
Because fossil fuels are a finite resource, they aren’t a sustainable or long-term solution. All this we already know. But now a new study claims that only investment in a low-carbon economy will get us back on track to a healthy and growing economy.
Green Economy Only Way Forward
A new study by economists from the London School of Economics has now shown that the only way to boost the UK’s economy quickly is by investing in a low-carbon economy.
By pumping public investment in low-carbon energy infrastructure, transport, new technologies and the environment, the study says, the economy would grow rapidly. A yearly investment of £26bn would be needed to see the economy prosper.
It could lead to double that amount in private sector investment, which would lead to a host of positives, including increased productivity, economic growth and a decline in carbon emissions.
These findings are at odds with the government’s spending plans. No 10 is planning to reduce public investment in these areas, which will lead to productivity to stagnate and hold back economic growth.
The paper further states that the tax cuts the government is said to plan will contribute to the stagnation of our economy. The money would be better spent investing in a low-carbon economy, according to the study.
High taxes do constrain private activity, but the evidence shows that in the UK the far bigger constraint is deficient core infrastructure and underinvestment in produced, human, intangible and natural capital.
Dimitri Zenghelis, Lead Author
Our Opinion
We have known for a long time that the transition away from fossil fuels towards a low-carbon economy is necessary if we want to prevent a climate crisis.
But we are often confronted with the immense cost of this transition and get told by governments that it will leave us out of pocket. But this new study clearly shows that investment in a green economy can boost our economy.
And this is good news for everyone, because a strong economy benefits everyone. So by doing the right thing for the planet, we can also do the right thing for the people.
Yet, the government has decided to go in a different direction. Why? I strongly suspect that it’s because of politics and the desire to stay in power.
Labour leader Sir Keir Starmer has pledged £28bn per year to invest in a “green prosperity plan”. This sounds similar to what the study suggests. Although we don’t know the details yet, it does position the Labour Party at one end of the debate.
And Rishi Sunak wants to position his party on the other side to draw a distinct line between the two parties. After all, we are in an election year.
So he is ignoring the science in the hope of getting votes. Such political games are nothing new, but in my opinion the environment, climate change and our future should stand above such games.
This isn’t a question of politics but of the survival of our planet and everything on it.
