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Think Tank Recommends UK Stay Out of Green Subsidy Race

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As the world grapples with unprecedented challenges such as the Covid-19 pandemic, the US-China trade war, and geopolitical conflicts like Russia’s invasion of Ukraine, the United Kingdom finds itself at a crossroads in shaping its green industrial strategy.

A recent report from the conservative-leaning think-tank, Policy Exchange, offers a compelling argument against blindly entering a green industrial subsidy competition with economic powerhouses like the EU and the US. Authored by Sir Geoffrey Owen, the head of industrial policy at Policy Exchange and former editor of The Financial Times, the report advocates for a measured and deliberate approach that prioritizes consistent, predictable policies over impulsive interventionist strategies.

 

The Pitfalls of Blind Mimicry:

 

The report emphasizes that mimicking the interventionist policies of the US and the EU may not be the most prudent path for the UK. With both economic giants investing billions in subsidizing low-carbon industries, the report cautions against attempting to outspend these larger economies. Instead, it recommends adopting horizontal, non-sector-specific measures that support investment across all industries. Sir Owen contends that a shift from the erratic approach characterizing UK industrial policy in recent years is essential for creating an environment where businesses and investors can thrive.

 

Strategic Objectives and Monitoring:

 

The report stresses the need for any sectoral intervention to have clearly defined objectives, whether related to national security, safeguarding critical materials, or promoting decarbonization. It advocates for meticulous monitoring of such interventions to ensure their effectiveness. Moreover, caution is advised when using the term “strategic” as a justification for sectoral intervention, with a call for transparent explanations regarding why one industry is deemed more strategic than another.

 

Competitive Basis for Government Support:

 

A key recommendation of the report is that any government support for specific industries should be provided on a competitive basis. This approach not only fosters healthy competition but also opens opportunities for both new entrants and established producers. The emphasis is on avoiding a costly subsidy race and supporting enabling technologies, such as batteries, in a manner that encourages innovation and market entry.

 

Response from Political Circles:

 

Liberal Democrats’ science and technology spokesperson, Lord Clement-Jones, supports the report’s stance. He emphasizes the importance of avoiding a subsidy race, especially in the face of increasing protectionism. Lord Clement-Jones underscores the need to support enabling technologies while maintaining a competitive environment that allows innovative companies to enter the market.

 

Economic Opportunities at Stake:

 

The report aligns with previous warnings from the Institute for Public Policy Research (IPPR) about the UK missing out on economic opportunities in the global transition to a net-zero carbon future. The absence of a well-defined green industrial strategy is identified as a significant barrier, potentially exposing the UK to a loss of £224 billion by 2050. This underscores the urgency for the UK to craft a strategic and competitive approach to navigate the challenges and opportunities in the green industrial landscape.

 

Conclusion:

 

As the UK charts its course in the evolving landscape of green industrial policies, the Policy Exchange report provides valuable insights. By steering away from blind mimicry, adopting a strategic and competitive approach, and ensuring transparent, well-monitored interventions, the UK can position itself as a leader in sustainable industries. The path forward requires a balance between supporting key sectors and fostering an environment that encourages innovation and healthy competition. In doing so, the UK can not only navigate the challenges posed by global uncertainties but also seize the economic opportunities presented by the transition to a net-zero carbon future.

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