This article was originally published as an edition of the Green Transition, our weekly newsletter on the economics of net zero. To see more editions and subscribe, click here.
When he was Prime Minister, Boris Johnson caused a minor stir (no pun intended) by suggesting that Margaret Thatcher should be commended for having given Britain a head start on net zero by closing down the coal mines.
It was a characteristically flippant, tongue-in-cheek remark from a PM that had recently scored a historic victory by taking chunks out of Labour’s Red Wall, not least in former coalfield constituencies. But it presaged a debate that has only accelerated since, and one that has now reached fever pitch with the government’s effective nationalisation of the Scunthorpe steelworks to rescue the UK’s virgin steelmaking capabilities: who, or what, killed industrial Britain?
There are, roughly speaking, three schools of thought that have emerged. First, a net zero-sceptic crowd, which now includes Kemi Badenoch, places blame squarely on climate policy, and even on one individual in particular as its lead evangelist: Ed Miliband. That analysis seems a little unfair given that industrial manufacturing’s share of total UK economic output and employment has been in decline since roughly the 1970s, when young Ed was merely a nipper.
But the agenda is being pushed relatively successfully in the right-wing press and broadcast media. It says that climate policies and renewable subsidies are adding costs to energy bills, making the UK uncompetitive for energy-intensive industries like steel, glass, ceramics, chemicals, cement, and much else besides.
Countering this tendency, we have a second school that responds with the following: UK manufacturing and energy-intensive industries are indeed being hampered by sky-high energy costs, this much is true, and agreed by all parties. But, they say, these high costs are a result of Britain’s over-reliance on fossil fuels, specifically gas. Bringing down prices requires a rapid transition to low-carbon, cheaper, home-grown forms of energy production, namely renewables. This is the government’s position.
And gas prices have certainly risen dramatically, particularly since sanctions against Moscow cut off supplies from the world’s biggest natural gas exporter. It is only since Putin’s invasion that UK and European prices have begun to diverge significantly. Yet while this gas price spike has had an adverse impact, the anti-net zero grouping does have a point, in that a significant proportion of customer bills are made up of renewable subsidies, carbon taxes, and grid balancing and transmission costs.
Even net zero advocates admit this much. Shaun Spiers, executive director at the Green Alliance, says “there are policy costs added to bills – the green levy and so on… but it’s important to say in terms of industry costs that the policy cost of industry’s energy bills is lower than it is in, say, Germany”.
Re-wiring Britain’s electricity grid will cost money. We have an over-centralised system set up to accommodate a small number of large, coal-fired power stations. A renewable grid requires a new, more decentralised network, with countless new connections. That won’t come cheaply and is currently being delivered through a combination of public and private investment (which, yes, is linked to your bills).
“There is definitely an initial outlay”, says Spiers. “There is obviously a cost in infrastructure.” But he hastens to add, “there are lots of jobs and growth opportunities one can leverage from that as well”. And that’s the promise of the so-called green industrial revolution: a regional jobs and growth boom with climate policy as the catalyst, as turbines, solar panels, pylons and cables are produced and laid in every corner of the country. Once that grid is in place, bills will start to come down.
So, is net zero destroying British industry? Not really, even though there’s a kernel of truth to claims that climate policy is adding to costs, and that a total re-jig of the UK’s electricity grid will require significant amounts of capital investment.
But what about the other side of the debate? Is our reliance on costly gas imports killing industry? Well, again, not really. This is only part of the story. As mentioned, British heavy industry has been in decline for a long time.
The more complex, nuanced reality goes back to Boris Johnson’s Thatcher jibe. For it was Mrs T who turbocharged the decline of manufacturing Britain, and not, as Johnson jokily claimed, because she was an enthusiastic eco-warrior. It was because she was integral to the formation of a political consensus that her Conservative Party heartily promoted. That consensus basically stated: it doesn’t matter where goods are produced, we should buy them as cheaply as possible; it doesn’t matter who makes things, the market and the price mechanism should dictate our decisions; it doesn’t matter that we’re losing manufacturing jobs, the high-value-added future is in services and the “knowledge economy”, and so why should we subsidise British production when we can import commodities from elsewhere?
And that’s the third school of thought, which the Green Transition is bravely getting behind. It’s not net zero, or even the post-Ukraine gas price spike, that’s killing industrial Britain. It’s an economic philosophy that’s now coming apart at the seams, one that says globalisation is an unalloyed good, that it doesn’t matter if the Chinese own our steel plants or that we rely on the kindness of strangers to keep the lights on. And that’s the philosophy that needs to change.
Content from our partners
Related
