This post is by Neal Mehta, managing consultant in the energy and climate team at ICF
For the past five months, colleagues and I have worked on a project for the UK government that was ultimately trying to answer the question: how is the UK best placed to contribute to, and benefit from, the global low carbon transition?
Our answer found favour with the foreign secretary, Boris Johnson, who has been recently championing the UK’s low carbon capabilities. That was good news for us because the work was commissioned by the Cross-Government Prosperity Fund and led by the Foreign and Commonwealth Office (FCO). The prosperity fund is worth £1.3 billion from 2016 to 2021. Its priorities include improving the business climate, operation of markets, energy reform etc. Its aim is to drive “sustainable development in developing countries, and create opportunities for international business, including UK companies.” Our scoping study focused on the development of a potential Energy Transformation Programme, which could be supported through the fund.
As part of the study, we analysed existing data, reviewed low carbon sectors and international plans and consulted over 70 stakeholders from the private sector, government, trade associations and academia. Stakeholder interviews provided a useful insight into UK strengths in energy and low carbon development.
The UK’s leading capability
What emerged in our report was a picture of the UK as a front-runner in the transition to a low carbon economy, due largely to first mover advantage of structural economic changes in the UK, such as electricity and gas market privatisation and reform, as well as ambitious climate policies and targets over the past three decades.
UK companies have leading capabilities in green finance, technical and business services. These are essential to help develop low carbon markets and support clean energy and sustainable infrastructure projects.
Expertise in smart energy is also important, given the anticipated growth of the sector in emerging markets in the short to medium term.
Our report highlights these ‘sweet-spots’ in UK capabilities and market opportunities.
Source: ICF, 2017
Clear benefits for the UK and emerging economies
To estimate the potential commercial benefits, we created a model to quantify UK exports for low carbon related services. This estimated the total size of low carbon markets in nine of the largest emerging markets (China, India, Brazil, Vietnam, Mexico, South Africa, Turkey, Colombia and Indonesia) and, based on existing trade data, the proportion of the markets that may be delivered by UK service exports. It shows that UK market access could be worth £2.5-£3.2 billion by 2020 and possibly £12.5-£16 billion by 2030 across key emerging economies. These figures are based on expected growth in the markets consistent with delivering the low carbon infrastructure planned in each country’s energy and climate commitments and modest ambition to grow the UK share of related financial, technical and professional services, already an export market in which the UK is a world leader, supported by the Prosperity Fund (PF).
Source: ICF, 2017
A sensible strategy through Brexit
This opportunity is being taken seriously. The roundtable on our findings with sustainability experts, hosted by Sir David King, prompted a lively discussion on the UK’s role in supporting the global low carbon development. Focusing on emerging economies is an important part of the ‘through-Brexit’ strategy. At the subsequent reception to honour Sir David King’s contribution to tackling climate change, I heard Boris Johnson championing the low carbon cause (as long as it makes “huge dollops of cash”). This is possibly a unifying goal everyone can agree on. Given the scale of energy and climate work needed in emerging markets, by focusing on much needed infrastructure services, advice and expertise, the UK can support sustainable development goals in emerging countries while improving the UK’s balance of payments. Regardless of Brexit, it’s a strategy that makes sense.