An advisor to President Biden is the latest to call on the U.K. and Europe to follow in the footsteps of the U.S. and increase their investment in green technology. The U.K. and the rest of Europe have been repeatedly criticised over the last year for failing to launch far-reaching climate legislation to back up their aims for a green transition. After the passing of the Inflation Reduction Act (IRA), the most ambitious U.S. climate policy to date, everyone was expecting the U.K. and Europe to announce something similar, but funding for decarbonisation remains limited due to the lack of comprehensive climate policy.
This month, following a tour of several European countries, Heather Boushey, a member of the White House Council of Economic Advisers, called on governments around the world, including that of the U.K., to increase their green investments. She used the U.S. as a success story, suggesting that the public funding provided through the IRA has encouraged private companies to invest heavily in decarbonisation, green energy, and related technologies, thereby driving down inflation.
Boushey stated, "We're working with our friends and allies to incentivise them to do the same - because we all need to make these investments." She explained, "Billions of dollars of investment all around the country - private dollars, in semiconductors and clean energy - has been incentivised by this public spend. Actually, a lot of the public money hasn't even gone out yet and the private sector is swooping in."
The IRA provides $369 billion in clean energy and low-carbon technology funds, to tackle climate change and support a global green transition. Boushey emphasised the "race to the top" in climate investment, encouraging other governments to launch similar climate policies. She also highlighted the importance of providing funding early to ensure energy security in the future and not fall behind. Boushey believes that rather than shying away from spending, green spending could pave the way for more resilient economic growth in future.
Despite this approach by the U.S., not everyone views spending this way. With the general election coming up next year, the U.K.'s Labour Party recently backtracked on its pledge to spend $33.3 billion a year on green jobs and industry if it comes into office. Instead, it has decided to prove its fiscal credibility before ramping up its investments by 2027. In June, the U.K. shadow chancellor Rachel Reeves stated "No plan can be built that is not a rock of economic and fiscal responsibility â¦ I will never play fast and loose with the public finances."
However, an August report from the U.K. Institute for Public Policy Research (IPPR) stated, "Without urgent government action, the UK will remain on the starting blocks of the race to capture the green industries of tomorrow." The report calls for the establishment of a national investment scheme. The IRRP suggests a "Dragons' Den" approach to supporting green business, with the aim of echoing Biden's IRA.
An associate fellow at the IPPR, Simone Gasperin, explained, "The national investment fund is a policy proposal for our time. The UK needs to finance and coordinate strategic industrial policy projects that will deliver a net zero transition through economic prosperity and inclusion. She added, "The cost of inaction on people's livelihoods will be too high, while there are huge opportunities to be captured by the government co-investing with private companies."
But it's not just the U.K. that's been falling behind, as Europe's big promises are not being backed up with action. In June, the European Commission said that it would need more than $762.4 billion a year to meet its energy transition goals. Later that month, an auditor stated that the EU may be at risk of failing to meet its 2030 climate change targets, due to uncertainty over whether sufficient funds are being invested in the low-carbon transition.
The European Court of Auditors (ECA) highlighted a significant gap in financing, stating, "There is no sign of sufficient financing being made available to reach the more ambitious 2030 targets, particularly from the private sector, which is expected to contribute significantly." This sentiment was echoed by the European Climate Neutrality Observatory, which warned that EU finance was "far off track" from climate goals. Estimates by the consulting firm McKinsey suggest that Europe will need around $1.06 trillion a year to meet its climate coals, including achieving net-zero carbon emissions by 2050. While it overachieved its 20 percent emissions cut target for 2020, its goals for 2030 are far more ambitious.
Heather Boushey is just the latest of many to criticise the U.K. and Europe for doing too little to fund the green transition. Despite ambitious climate pledges, Europe faces a significant funding gap for meeting its 2030 climate goals. Meanwhile, the U.K. appears to be doing even less to achieve its pledges, with political parties going back and forth on their funding strategies. Without an IRA-style approach to green funding, the U.K. and Europe could well fall behind in the race to green.
By Felicity Bradstock for Oilprice.com
Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
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