Researchers at the University of Exeter analyzed the impact of low-carbon transitions in electricity, transportation and heating on UK productivity.
Currently, renewable energy is cheaper and still cheaper than most fossil fuels in the world, but the findings show that these three industries directly benefit UK productivity.
The research team warns that this productivity boost depends on consumers taking over cheaper energy prices that are not maintained as profits for energy companies.
The study was published in line with the launch of Exeter climate policy, which advises policymakers to reach a low-carbon future.
Will cheaper energy directly benefit UK productivity?
“The electricity, transportation and heating industries themselves are not responsible for the growth of UK productivity,” explained Dr. Jean-François Mercure, who heads Exeter climate policy.
“But if these energy services get cheaper, all other sectors of the economy can operate cheaper, freeing up unprecedented income for others and triggering economic growth.”
Dr. Mercure commented on whether cheaper energy production inevitably brings cheaper energy for businesses and households.
“For example, as long as the cost of gas is used to set electricity prices, the benefits of cheaper solar and wind energy will continue to be acquired as profits from producers, grid operators or electricity distributors.
Global competition to harvest low carbon energy sources
The study analyzes the UK economy from now until 2035, but the findings relate to other countries that import a significant amount of fossil fuel energy.
Dimitri Zengelis, alumnus from Cambridge University, said:
“We provide compelling evidence that this is a global competition for a competitive advantage that the UK economy cannot afford to sit down.
“For energy importers like the UK, a clean transition is beneficial to both parties. Even fossil fuel exporters can benefit, but it’s time to diversify quickly.”
How Exeter’s climate policy helps you navigate green transitions
Based at the University of Exeter, Exeter Climate Policy (ECP) offers an independent economic analysis that helps governments and finance ministers create resilient, effective and country-specific policies.
“In countries, low-carbon futures look different and are constrained by local resources, political reality, tide changes, debt burdens, existing inequality and economic structure,” Dr. Merkur said.
“To move forward, governments need to access regionally tailored climate economic models and specific issues they face, and visualize how different policy options actually unfold.”
The ECP team has experience deploying these models and collaborating with international policy partners such as the UK government, the European Commission, the Brazilian Treasury Ministry, and the World Bank.
Taking a joint, independent approach allows them to work with governments to co-create the tools and policy interventions they need.
Professor Lisa Roberts, president and vice-president of the University of Exeter, concluded: “In collaboration with policymakers, Exeter’s climate policy will provide practical policy design for effective decarbonization, economic transformation, and an equitable, resilient zero-carbon future.”
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