Victor Ajayi and Michael G. Pollitt are examining how the transition to net zero will impact the United Kingdom’s factor productivity growth in the long term. They are focusing on the electricity industry which is already actively transitioning toward 2050 targets. In addition, the core of green growth involves reducing reliance on fossil fuels and shifting to solar, wind, hydro, and nuclear power.
The International Energy Agency provides insights into the future of the energy sector, especially the impact of a green economy on the labor market. It emphasizes that projects using renewable energy create fewer jobs per unit of energy delivered compared to traditional pollutant energy sources, except for solar power. This implies that the phase-out of nonrenewable energies will lead to job losses. Green industrial policies will further accentuate this phenomenon through supply chain distortion and reduced overall demand. However, the European Commission estimated that transitioning to a circular economy would generate 600 billion euros annually from cost savings for the EU manufacturing sector, giving some breathing space to alleviate this.
To address this issue, increasing resource productivity would bolster economic growth without introducing additional labor and capital inputs within the production process. Technological progress is expected to be the main source of sustained improvements in a country’s economic welfare. In this way, the 2030s and 2040s seem very promising as electrification increases, leading to output growth and the phase-out of fossil fuels.
The measurement of growth through GDP should also be revised. Decarbonizing the economy requires rethinking the traditional concept of driving economic growth by increasing production using more inputs. Otherwise, advanced economies that minimize the environmental impact may struggle to achieve economic growth under conventional measures.
Green growth and net zero policy in the UK: Some conceptual and measurement issues – ScienceDirect
