A new model of growth and As a country, we can seize the challenges and development is in our hands, and the UK has the opportunities and deliver a comprehensive strategy. [...] As the world invests I G Patel Professor of Economics and Government at in the clean economy and the technology and the London School of Economics and Political Science science advances, the overwhelming obstacles lie Chair of the Grantham Research Institute on predominantly in economics, politics, and society. [...] Climate Change and the Environment Drawing on a range of academic disciplines including history, geography, international relations, and social psychology, this is the new agenda for economics and the social sciences and the basis for resilient and sustainable investment and policymaking. [...] It examines the • a full and comprehensive understanding of the process of innovation and the reinforcing feedbacks nature of the decarbonisation challenge; and driving technology prices down through increasing returns to production and discovery. [...] Rapid transitions These economies of scale in new technologies and reinforcing feedbacks can make change much faster than expected Central to assessing the risks and opportunities and pose a challenge to empirical analysis based of a clean transition is understanding the process on backwards-looking data, which tends to of innovation overstate the costs of change and understate the and how this pl.
Related Organizations
- Pages
- 128
- Published in
- United Kingdom
Table of Contents
- Contents Contents 3
- Foreword Foreword 8
- Foreword Foreword 9
- Executive Summary 10
- Delivering resilient net zero investment has implications for taxes public-sector spending and debt and cannot be treated as separate to how we approach other societal and economic challenges. 10
- Executive Summary 11
- Creating a strategic framework 14
- The timing of this report reflects that fact that despite the clear ambition from the new government the macroeconomic debate is stuck in a rut. 16
- Introduction Introduction 16
- Introduction Introduction 17
- Two dominant narratives 17
- Structure of this report 19
- Those arguing that clean investment is growth- inhibiting need to clearly set out a counterfactual a high-carbon investment strategy that would be more productive over the coming decades 20
- The UKs economic challenges 20
- 2.1 Policymaker objectives and challenges 21
- The UKs economic challenges 21
- 2.2 The emerging evidence on costs and opportunities 22
- 2.3 The macroeconomics of investment 22
- The world is in the midst of a renewable energy revolution led by wind and solar energy utilising battery storage and far more efficient electricity networks. 26
- Growth and prosperity through a clean transition 26
- 3.1 End of the fossil fuel age 27
- Growth and prosperity through a clean transition 27
- 3.2 Understanding the process of knowledge formation and innovation 28
- Price decline and deployment of clean technologies 28
- Box 1. Economic theory of transitions 30
- Rapid transitions and reinforcing feedbacks 31
- Figure 9 32
- Box 2. Interrelated reinforcing feedbacks which drive structural transitions 33
- Box 3. Norms institutions and behavioural feedbacks 34
- Innovation is path-dependent 36
- The powerful role of expectations and narratives 36
- 3.3 Competitiveness in the green economy 38
- Potential tipping points 38
- Figure 11 38
- Early mover advantage 40
- Box 4. China setting the p ace of the clean transition 42
- Box 5. The political economy of the US Inflation Reduction Act 44
- UK strategy in potential clean sectors 45
- 3.4 Should growth be the objective or is it the problem 49
- Transition risk in a changing world 50
- Transition risk in a changing world 51
- 4.1 A new economic paradigm the end of fossil-fuelled growth 51
- 4.2 Grey in a greening world risks associated with not transitioning to clean 52
- Stranded outmoded assets and the risk of being locked out of clean markets 53
- Moving beyond extraction 55
- Dependency of volatile and costly fossil fuels 55
- Capturing the opportunities of clean growth 56
- 4.3 Risks associated with the transition shifting finance economics and power 57
- The transition must be just 57
- 4.4 Global and geopolitical risk the need for action in a rapidly changing world 57
- Box 6. Businesses are calling out for stable regulation 57
- Climate change 58
- Trade wars and the markets of the future 58
- Artificial intelligence 59
- Weighing up trade-offs and benefits 60
- 4.5 Fiscal policy and public debt management 60
- Paying for investment upfront funding is available 60
- Reforming public sector debt rules to enable investment and build net worth 61
- Falling revenue from other sources 64
- Box 7. Enabling infrastructure investment Germanys KfW 65
- A new economic framework for a new style of growth 66
- A new economic framework for a new style of growth 67
- 5.1 How can economics inform strategic choices 67
- Box 8. East Asian case studies in strategic direction 68
- The key strategic decisions facing HMT 69
- 5.2 All models are wrong but some are useful 70
- The predictable predictive failure of cost-benefit analysis 70
- Insights matter more than prediction 70
- 5.3 Risk-opportunity analysis ROA 71
- Narratives change expectations and create facts 71
- A framework addressing uncertainty and structural change 72
- Capturing a wider set of risks and opportunities 73
- Tools for policymakers 73
- Targeting and tipping interventions 74
- The UK will soon be developing policies that can help meet the upcoming Seventh Carbon Budget 2038-2042. This is an opportunity to demonstrate UK leadership on climate. 80
- Policy recommendations 80
- Policy recommendations 81
- 6.1 Creating a strategic framework to encourage productive investment 81
- Public investment 81
- Fiscal rules 82
- Boosting saving and raising revenues 83
- Devolving power 83
- Supporting RD 84
- Establishing credibility through leadership 86
- 6.2 Getting the economics right 87
- Analytical and modelling approaches to guide policy choice 87
- Enhanced risk management and optionality 88
- Creative destruction and upskilling 89
- 6.3 Getting the institutions right 90
- 6.4 Putting in place the right regulatory signals 91
- Planning 91
- 6.5 Getting the policies right 92
- Electrification 92
- Renewables and heat 92
- Fuel duties 93
- This report concludes that investment in the clean transition needs to be at the heart of the UK productivity and growth strategy over the coming decade. 94
- Conclusion Conclusion 94
- Conclusion Conclusion 95
- A strategy for managing opportunities and risks 95
- Race to supply markets of the 21st century is on 96
- Enabling investment 97
- Understanding innovation and systemic change 99
- Economic models and the role of quantitative and non-quantitative analysis 99
- Leadership and institutions 100
- References References 102
- References References 103
- Annex Annex 118
- Annex Annex 119
- Annex 2 119
- Annex 1 List of Watch fors 119
- Increasing perception of collective efficacy to improve public support for climate policies 120
- Encouraging public acceptance of a climate policy and the role of perceived policy fairness 120
- References 121
- Footnotes 122
