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Green economy?

It is ‘wishful thinking’ that the UK will benefit disproportionately from new environmentally oriented policies, most of which create few jobs, says Professor Michael Pollitt of Cambridge Judge Business School.

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Professor Michael Pollitt

New environmental initiatives geared toward offshore wind, hydrogen and green manufacturing will not create many new jobs in the UK, Michael Pollitt, Professor of Business Economics at Cambridge Judge Business School says in a recent podcast.

There’s no getting away from the fact that many of the decarbonisation investments that are often talked about aren’t particularly job creating,” says Professor Michael Pollitt in The Science & Policy Podcast of the Centre for Science & Policy (CSaP) at the University of Cambridge, hosted by CSaP Executive Director Dr Rob Doubleday.

The podcast was recorded in October a few weeks before the UK government’s £12 billion ‘Green Industrial Revolution’ was announced on 18 November by UK Prime Minister Boris Johnson, which includes new investment in nuclear, hydrogen and offshore wind power, and an end to new petrol and diesel car sales at an earlier date of 2030.

“Talking about these things as if they are job creating is actually to miss the point of them,” Michael says in the podcast. “They are primarily environmental investments, they’re not primarily job creating, and the other thing to mention about them from a UK point of view is that many of these big decarbonisation investments will involve us importing a lot of capital equipment from abroad.”

“That may be perfectly economically sensible, but of course what will people in the UK actually be doing? Well they’re going to all be working in services and doing the sort of tertiary jobs that we specialise in in the UK. So, people have a very confused view of the nature of the UK economy, they have a very confused view about how economics works, and also the nature of the decarbonisation investments we have to make.”

In order to shift to a net-zero carbon world, society will need to move away from fossil fuel-linked production and consumption, and toward an economy more geared toward personal services, entertainment and more ‘tertiary consumption’, Michael says.

“So, if that’s what’s happening at the world level, I think the UK is going to be sort of at the vanguard of that. And yeah, there will be niche industries here and there supporting the green system, but in aggregate these industries might be quite small and there’s no reason why they will be disproportionately in the UK”, because much manufacturing for such green industries will be in Asia or, for some high-tech manufacturing, in countries like Germany.

“The UK is not well-positioned to benefit from those sort of high-tech manufacturing jobs in aggregate,” Michael said. “We’re a big economy, no doubt there will be some successful companies, but I’m not sure they’ll be significant in the overall structure of the UK economy, and it’s wishful thinking to think that suddenly our positioning in this industry is going to improve relative to other countries already better positioned than us.”

He said that the UK economy could instead benefit from “more thinking about how we can do more with less”, given that consultancy, a strong sector in Britain, will be important in advising companies and governments how to move to a decarbonised world.

Michael also addressed some of these issues in a recent webinar as part of the University of Cambridge Alumni Festival 2020, entitled “Promoting green growth: a guaranteed route to recovery or a route to value destruction?”

Drawing on a recent working paper he co-authored at the Centre for Energy Policy Research Group at Cambridge Judge – “The productivity puzzle in network industries: evidence from the energy sector” – Michael said green growth “lacks a theoretical underpinning” to the current macroeconomic issues posed by the pandemic-linked economic downturn. Clean growth is “no doubt a good thing”, he said, but is not a route to rapid economic recovery from COVID-19.

‘Value’ destruction in the medium term seems a likely result of a serious climate policy. This is due to lower stock market valuations of oil and gas companies and lower rates of return more generally in a more energy efficient and more circular economy. Michael added that “this is not necessarily such a bad thing” given the current concentration of wealth and the need to address inequality.