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Unlocking economic gains by investing in the UK’s most promising green innovations
Global markets for green innovations will grow significantly as the world transitions to a low carbon economy. Innovations that are pivotal to achieving climate targets include low carbon technologies such as electric vehicles and carbon capture and storage, as well as critical services such as green financing and civil engineering.
The United Kingdom is well positioned to be a leader in the ongoing transition to a low carbon economy. Identifying which innovations offer the strongest opportunities for success in the UK is key to unlocking the economic potential of green investments.
The Challenge
Our client, The Tony Blair Institute provides policy and strategy advice to policymakers who are tasked with deciding where the UK government should channel its green investments and other mechanisms of support.
The primary challenge was to identify the green investments where the UK is best positioned to capture a sizeable share of the projected global market growth. The Tony Blair Institute aimed to understand how these promising innovations could contribute to the UK economy over the coming decades, including the regional employment impacts. The Tony Blair Institute were also interested in exploring the impact of different levels of government investment on the progression of the innovations, and the economic trajectory of the UK.
Predicting the success of different innovations is difficult. The Tony Blair Institute required a thorough, evidence-based study to understand the UK’s green competitive landscape and innovation potential. Our analysis was to be used as the technical basis for an industrial strategy report written by the Tony Blair Institute for the UK government.
The Solution
Oxford Economics developed an approach to meet this challenge, in collaboration with the Tony Blair Institute. Our analysis involved:
- Assessing the potential of global markets for 25 long-listed green innovations out to 2050.
- Identifying priority green innovations for the UK based on a novel methodology.
- Estimating regional jobs and growth impacts of green innovations under two scenarios, drawing on the UK Impact Model.
- Assessing the macroeconomic implications of investing in priority green innovations under different policy scenarios, drawing on the Global Climate Service modelling suite.
- Designing experimental analysis to estimate the payback on government investments in different green innovations and the potential to accelerate the development of low-maturity technologies.
We developed a novel framework to identify priority green innovations. We combined our assessment of global markets with in-depth assessments of the UK’s market potential to quantify the Potential Value to the UK, under Business-as-Usual and optimistic Peak Potential scenarios. We then undertook a comprehensive qualitative review of evidence of the competitive landscape. The results of this framework, set out below, was a set of 11 innovations for which the UK has a strong competitive advantage.
Framework to identify priority green innovations for the UK
We assessed the economic growth and employment impacts of the 11 priority innovations across the UK’s regions. For example, the graph below shows how the jobs associated with priority innovations are projected to be distributed across the country in 2050 under a Peak Potential scenario. In addition, we developed macroeconomic scenarios that demonstrated the economy-wide benefits of supporting green innovations, while our experimental analysis provided actionable insights on the returns to investments in different industries.
Jobs in priority green innovations in Peak Potential scenario, 2050
The Result
We worked closely with the Tony Blair Institute to ensure our analysis would provide the evidence needed for innovative, actionable policy advice. Our study helped to:
- Identify key areas of high-growth potential in the green economy, driven by economic evidence rather than political considerations.
- Demonstrate the impacts of government investments, highlighting the key role for support to enable global competitiveness.
- Provide novel, exploratory analysis for areas for future study.
The Tony Blair Institute used our report in their policy paper Making UK Industrial Strategy Work: A Hard-Headed Approach Guided by Green Industry, which was featured in various media publications and will serve as an evidence base for the UK’s ongoing industrial strategy discussions.
When tackling a policy issue as cross-cutting and complex as industrial strategy TBI needed an economics partner that could not only produce robust independent evidence, but who could work with us iteratively to push the frontier of knowledge to help us develop novel policy recommendations. Oxford Economics rose to this challenging brief with enthusiasm and professionalism – delivering high-quality content in a project that was well-managed from start to finish.
Director, Economic Policy, Tony Blair Institute.
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