Private investment needs to increase by two-thirds for the UK to reach net zero by 2050, researchers have said.
The Government must provide the right incentives to attract investors to create “a virtuous circle that stimulates further innovation and technological advancements”, according to a report released by trade association Energy UK in partnership with Oxford Economics on Friday.
In the Path to Prosperity paper, researchers forecast how different scenarios for reaching net zero could benefit or negatively impact the economy in the long-term.
They found that the most ambitious scenario – referred to as Net Zero Transformation – will deliver the greatest benefits in terms of boosting the economy.
They said the UK Gross Domestic Product (GDP) could be 6.4% or £240 billion higher by 2050 compared to the baseline scenario, which reflects the current state of play.
The researchers also found that under the current policies the UK is unlikely to achieve its climate goals.
But they said that bolstering investment could lead to lower costs and increased productivity, giving the example of how costs in solar and offshore wind have fallen in recent years in the UK.
The Net Zero Transformation scenario would also see private investment boosted by £165 billion and 226,000 extra jobs created as sectors such as manufacturing, construction, automotive and the supply chain, electricity generation, transmission and distribution all grow their gross added value to the UK’s GDP, the report said.
However, the report warns that delaying action until the 2030s would lead to much lower private sector investment in the long run as well as a fall in economic output and employment compared with the baseline scenario.
The paper comes as the latest in a series, which has so far highlighted the need for the UK to incentivise investment in clean energy in the face of growing global competition.
The Biden administration in the US passed the Inflation Reduction Act last year, which offers government subsidies to support clean energy technologies, green jobs and infrastructure.
The move prompted the European Union to respond with its own Green Deal Industrial Plan.
Oxford Economics researchers found that the UK is currently forecast to have the slowest growth in low carbon electricity generation of the world’s eight largest economies between now and the end of the decade – with the low levels of expected investment a significant factor in this outlook.
Energy UK’s deputy chief executive Dhara Vyas, said: “As this report again underlines, attracting investment is the key to reaching net zero in a way that maximises the benefits to our economy in terms of growth, productivity and job creation.
“Committing fully to the transition will reap rewards by incentivising private investment – so reducing the amount needed from the public purse – and creating a virtuous circle which will drive further innovation and technological advances to bring costs down further.
“Far from being a burden on the economy, a proactive and ambitious approach will boost incomes, expenditure, profits and tax receipts over the long term – all of which will leave more money for Government spending on other priorities like health and education.
“In contrast, delaying action would mean blunter and more stringent measures further down the line that would have the opposite effect on the economy.
“This report shows that we can’t afford not to seize the opportunities offered by transforming to a net-zero economy.”
The PA news agency has contacted the Department for Energy Security and Net Zero for comment.