The Medici Code – Essay 6: ‘Clean growth and sustainability in the white paper’ by Grace Newcombe, lead clean growth researcher

The Medici Code – Essay 6:  ‘Clean growth and sustainability in the white paper’ by Grace Newcombe, lead clean growth researcher

Since it was elected in 2019, the government has declared two key ambitions. Firstly, a more economically balanced country, underscored by the rebranding of the Department for Levelling Up, Housing and Communities, and the Levelling Up White Paper. And secondly, tackling climate change as the UK became the first major economy to set a legally binding Net Zero target in 2019 followed by green announcements such as the Ten Point Plan for a Green Industrial Revolution and the Net Zero Strategy.

Both are huge challenges in their own regard, yet the realisation of how these two issues interact and overlap is dawning. Many of the carbon-intensive sectors of the economy where decarbonisation looks most daunting are concentrated in exactly the sorts of localities that the government wants to level up. To treat net zero and levelling up as two supplementary agendas will result in them fortifying each other. Failing to do so, risks these monumental challenges working in competition.

Striving for net zero and a clean economy presents an opportunity to bring jobs, growth and consideration towards parts of the country that have been ‘left behind’ in these areas. However, government policies and decision-making over the next few years will determine success in this space; the right policies and incentives must be set to enable both agendas to thrive. In this way, the transition to net zero will be beneficial for the whole country, but particularly for those areas in greatest need of levelling up.

Thus, net zero and levelling up go hand in hand – for either one to succeed the other cannot be ignored. Yet there is a distinct absence of clean growth and sustainability throughout the Levelling Up White Paper. Out of the 332-page report, net zero is mentioned just over 60 times. The dedicated net zero section consists of 3 pages, two of which are entirely pictures while the “green industrial revolution and transition to net zero” came second bottom of the list of 16 priorities. Only three months after COP26 in Glasgow where decarbonisation was front and centre this was very disappointing.

Arguably the strongest element of the white paper is the new devolution deals and potential for more mayors. It is no coincidence that areas that have high profile mayors – Teeside, West Midlands, Manchester – feature more in the national conversation and are more successful in attracting big projects both public and private. Additionally, around three-quarters of local authorities have declared climate emergencies, and many have been working with residents to develop climate plans. Devolving more powers to let people decide the direction their regions should take is expedient. Plus, the paper acknowledges both the risks and opportunities created by a net zero transition, identifying the transformative effect of a green industrial revolution in terms of skills and employment.

Examining the links between net zero and levelling up

Key linkages between net zero and levelling up are identified. But this is as far as it goes. There is very little else to be said in terms of concrete policies to pave the way for such a transition. That is the overarching problem with this white paper: the ambition is identified but how the government will deliver on any of its promises is unclear.

Below is a list of key areas for levelling up and decarbonising the economy that should have been addressed in the white paper:

  1. Support investment in clean R&D
  2. Broaden carbon pricing to more of the economy
  3. Use carbon revenues to help local areas with the economic transition
  4. Reform skills provision to accelerate the transition to a green collar workforce
  5. Reform housing provision and conditions to improve energy efficiency
  6. Improve transport connectivity and decarbonisation to encourage modal shift

It is worth examining these areas and how they might fit in with levelling up, especially given the lack of detail in the paper itself on these points.

Support investment in clean R&D

Reaching net zero depends on replacing dirty fossil fuels and the technology that uses them with cleaner alternatives – switching petrol cars for electric vehicles, or coal-fired power stations for offshore wind turbines.  New technology will need to be developed and existing clean technology made cheaper and better to be adopted by a mass market. This is crucial for net zero in relation to levelling up. Clean technologies need to be more accessible and affordable for all households, including those in more economically deprived areas of the country.

The white paper refers to investment in R&D and innovation, specifically with Innovation Accelerator Programmes overseen by Innovate UK and UK Research and Innovation (UKRI). The programmes are focused on Greater Manchester, the West Midlands, and the Glasgow City Region. Together, these areas will get £100m funding and must each develop R&D cluster plans. At present it is unclear whether this funding covers clean technology and innovation however the potential for allocation as such is there. Many of the UK’s leading universities are in and around these areas; areas close to where the government is most keen to level-up. Much R&D is undertaken at universities and, if we assume this would be the case, these areas could benefit from positive economic spill overs.

For a geographical rebalancing of innovation and R&D, new investment is needed and not just a repackaging of old money. To simply take money from prosperous parts of the UK, which often have a pedigree in clean innovation, and invest it in other localities will do a disservice to accelerating progress towards net zero.

Extend carbon pricing to more of the economy

Instruments such as carbon pricing or emissions trading schemes are regarded as attractive mechanisms to ensure economies decarbonise in a cost-effective way. The Treasury noted, in the Final Report of the Net Zero Review, how such policies ‘can support the reorientation of the economy in an efficient way’.

Carbon pricing is when a premium is attached to carbon emission production, through using fossil fuels to generate electricity or power, for instance. This acts as an incentive for users to reduce their demand for them and to switch to cleaner fuels. Additionally, this stimulates business opportunities for clean technology companies that are critical to a just net zero transition. There will be opportunities in this space across the country but many of them will be found in areas that the government seeks to level up. This is due to their geographical features such as the proximity to the North Sea for renewables, or lithium deposits for EVs.

Both the Energy White Paper and the Net Zero Strategy explained how the UK Emissions Trading System (ETS) would allow for a rolling out of carbon pricing to more of the economy to incentivise abatement across the industry. By expanding the reach of the UK ETS to include agriculture, transport and heating, fewer industries would be given a free pass with the emissions they generate. Plus, this would generate a significant amount of revenue for the Treasury which should be used to offset any extra costs for the least affluent areas of the country, thus ensuring levelling up.

The Levelling Up White Paper refers to setting carbon budgets but makes no mention of fiscal instruments to both incentivise decarbonisation and raise revenue for a net zero transition. While such announcements were always unlikely as such policy would primarily sit with the Treasury, the white paper was supposed to cut across all departments. A mention would have shown acknowledgement of carbon pricing, to tie in with previous net zero and energy strategies, at the very least.

Using carbon revenues to help local areas with the economic transition

Despite the complementary nature of net zero and levelling up – in that the areas where green investment and innovation will happen are likely to be those that already have existing industries – this will not always be aligned. It needs to be ensured that no communities are left behind by a transition to net zero. People in regions most in need of levelling up are more likely to be concerned that their jobs will not exist anymore after the net zero transition[1]. This needs to be addressed in policymaking to avoid it endangering support for decarbonisation.

If stronger climate policies are to be put in place, such as expanding the UK ETS, then the revenues from such policies designed to reduce emissions should be allocated towards mitigating any potential negative effects. This could be by helping firms to capture the full economic potential of transitioning to a cleaner economy, funding new educational institutions, or distributing them to local authorities for economic development funds.

Reform skills provision to accelerate the transition to a green collar workforce

The transition to net zero will require a rapid development of new roles and industries, and decarbonisation of existing industries, opening up thousands of jobs. As previously mentioned, many of these should be in the parts of the country where the government is keen to level up.

For this to be achieved, much more needs to be done in terms of adult learning, technical education and perhaps most importantly apprenticeships as a way to build green skills. This is an area that is key to levelling up economic opportunities, particularly outside of London and the South East where economies are less service-based. For workers in industries which will need to cease to exist, such as coal mining, there has to be a pragmatic offer for retraining and adult learning with a specific focus on green skills and green jobs.

In the 1980s, the handling of the economic upheaval was criticised because of the lack of support with regards to education, skills and training to equip displaced workers for new emerging job opportunities. It was hoped that the Levelling Up White Paper would have addressed this issue.

Once again, the Levelling Up White paper falls short of identifying methods of green skills provision. The paper dwelt on some of the risks to jobs from the shift away from high-carbon industries but seemed to lack commitments connecting skills to net zero and crafting a green future. The government could have used the white paper to kickstart a green industrial revolution throughout the UK. But by placing such a revolution at the bottom of its priority list, it has not.

Councils have a deep understanding of the needs of their areas and challenges which put them in a unique position to bring employers and colleges together to deliver local green jobs at pace. With the government failing to commit to any long-term funding to support this, together with a genuine devolution of power, the green skills revolution will be patchy with many parts of the country predictably left behind.

“Reform housing provision to improve energy efficiency”

Poor quality housing is a significant barrier to levelling up and can pose real problems for individuals and communities, with energy efficiency, fuel poverty and poor health all interlinked.  Improving energy efficiency through retrofitting our existing housing stock is key to both levelling up and reaching net zero. Energy efficiency improvements reduce household energy bills, resulting in a sustained boost to the economy and consumption through increased disposable incomes in the long term. Retrofitting homes would also create skilled employment opportunities. Some regions in the UK such as the North East and West Midlands have both a high volume of energy inefficient homes and high levels of unemployment[2]. By investing in energy efficiency, local jobs for local people will be created across the country and frequently, to risk repetition, in areas that are most in need of levelling up.

Positively, the white paper recognises the issues of poor-quality housing, stating that it will seek to address the problem through upcoming plans to reform the planning system and support greater retrofitting.

However, it lacked significant details on how the widespread retrofitting that is required would be achieved, where the funding would come from and nothing on the environmental sustainability of new builds. Given that the most energy-leaking housing stock in western Europe is in the north of England, and that energy bills across the country are soaring, the failure to reflect any coherent plan does not point to a successful retrofitting revolution for both energy efficiency and levelling up.

Improve transport connectivity and decarbonisation to encourage modal shift

In 2020, the Ten Point Plan promised £2bn for active travel and £3bn for public transport. The Government also then published its Transport Decarbonisation Plan which contained new commitments on low-carbon HGVs and aviation but seemed a little light on information regarding buses and rail. The government has been criticised for focusing too heavily on individual EV ownership and not enough on high-quality local public transport when planning to reach net zero.

Transport is frequently a contentious issue with rising rail fares alongside funding cuts to the rail and bus network. Public transport has over the years become more expensive, less convenient, less reliable, and less attractive to those who can afford to drive.

Public transport plays a key role in connecting and transforming our towns and cities, boosting economic recovery from the pandemic, and delivering more education and job opportunities. The Levelling Up White Paper declares a “national mission” to ensure that by 2030 public transport connectivity across the UK is “significantly closer to the standards of London” including improved services, integrated ticketing, and simpler fares. Thus, it does link to the National Bus Strategy, the Transport Decarbonisation Plan, the Integrated Rail Plan and the transport settlements in eight city regions outside London as existing evidence of its commitment to addressing regional transport inequalities and delivering the levelling up agenda.

This is a positive step-change for the general fare-paying public and will hopefully encourage greater use of public transport over private vehicles. The white paper also goes on to promise a shift in power from Whitehall to local leaders in a ‘devolution revolution’. This is important, as devolution in transport can bring about tangible improvements to local transport and to the everyday lives of ordinary people. Devolution of more powers and funding will ensure more and better public transport services, improved fares and ticketing options and thus cheaper and more convenient travel.

However, there is, in fact, very little detail as to how the government will achieve this national mission. The question of funding looms large as we know that there isn’t a lot of money around in the Treasury and that what does exist has already been allocated in the Spending Review. Additionally, only last month we heard that funding had been slashed in half – from £3bn to £1.4bn – for the government’s Bus Back Better strategy. These funding pressures will require difficult allocation decisions that may jeopardise the ability to be able to deliver green, reliable, and affordable transport networks.

Funding: the missing element

Funding pressures will have a knock-on effect for both existing and prospective net zero strategies. As previously mentioned, no new funding has been announced. The funding detailed in the white paper for the set of missions for addressing regional inequalities involves a vertiginous array of separate pots of money, some of which had already been announced: £26bn in capital investment for the net zero transition, £5bn for buses and active travel, and £3.8bn for skills training were all in the 2021 Autumn Budget. Rishi Sunak has been reiterating that all the money for the next three years has already been allocated. But failing to supplement this funding leaves both the UK’s climate targets and levelling-up agenda in doubt.

This begs two key questions: firstly, can the UK really improve inequalities and work towards net zero without big spending, and secondly, are the Treasury behind either agendum? To bring about any sizeable change, it is going to cost money. Germany, for example, has spent €2tn on reunification since 1990 and they still haven’t finished. But of course, the levelling up agenda, and indeed the net zero agenda, should go beyond the current spending review period. This white paper would have been an opportunity to outline what funding could be available beyond 2025. The fact that it didn’t even mention climate change in the announcement accompanying the launch of the levelling up proposals, and that the net zero transition is so low on the list of priorities reduces the chances for regional clean growth investment and dashes hopes for a green recovery from the pandemic.

This leads to one of the biggest problems with the white paper which, aside from funding, is that spectacularly little reference was made to achieving net zero and clean growth goals. It, therefore, failed to provide indications as to how the necessary just transition will be undertaken. In doing so, this white paper fails to marry the government’s climate change responsibilities and existing green strategies with the levelling-up agenda. Net zero objectives could have directed investment towards specific regions and structured support for education and skills, while reassuring local authorities, private businesses, and individuals that the government is firmly behind achieving net zero.

As we have seen, an overlapping policy challenge presents itself. The fact that the geographic focus of both the levelling up agenda and net zero coincide significantly should have been seen as an opportunity for the government to simultaneously decarbonise and renew these areas. But that opportunity hasn’t been grasped.

Levelling up simply won’t happen without a major shift in policy, a shift that needs to be cleaner and directed towards net zero. Rather than makeshift devolution deals and new centrally controlled funding pots, a fundamental transfer of powers from Whitehall to local governments over transport, housing, skills, employment and business support, and climate change is needed. And with that must come a boost of investment after decades of cuts to council budgets to bring together the government’s goal of net zero and levelling up. Investing in our communities would create green jobs, boost green industries, and enable places to revive their communities as they rapidly decarbonise. There is no path to net zero without public investment.



Grace Newcombe, Clean Growth Lead Researcher, Localis