Why local areas need to be given more power to move to net zero

This post is by Amy Norman, senior researcher at the Social Market Foundation.

Over the next three decades, the pursuit of net zero will transform localities throughout the UK. This will bring opportunities for creating businesses and jobs in new green technologies like hydrogen, carbon capture and renewables on land and at sea. The good news is that many of these projects are already underway, like the recent approval of major decarbonisation plans for six industrial clusters from South Wales to St Fergus.

But there will also be challenges to support workers in carbon intensive industries, where jobs will be lost, to retrain and reskill them for something new. And, for many households, switching to an electric vehicle or replacing their gas boiler will simply be unaffordable.

Local areas, each with their own economy, infrastructure, community and history, will see very different transformations. The opportunities and challenges will not be the same in the South East as they will be in Scotland. And, even within regions, rural and urban communities, will face different experiences, despite being only a short drive apart. This is what the Social Market Foundation’s recent report Zeroing in has found.

These differences between local communities mean that delivering effective policy for a just transition cannot be done entirely from the centre. The knowledge that local authorities, mayoral authorities, Local Enterprise Partnerships (LEPs) and businesses have about their areas means they must play a central role in the transition, but they need to be empowered and supported to do so.

Here are four ways that policy can help:

1. Give local authorities  new revenue and capital raising abilities
In one of the most centralised countries in the developed world, local government in the UK faces specific challenges with raising the funds needed to help local communities decarbonise. While in Germany or Canada you may see a third or half of total tax revenue raised at a sub-national level, in the UK, we leverage just five per cent from our mayoral and local authorities.

Restrictive, short term funding, granted from the centre, doesn’t allow councils to plan ahead and invest in green solutions for their communities. New revenue and capital raising powers for local authorities would enable councils to take action on green skills, transport, local energy and homes.

This may look like a devolved element of income tax or a broader range of local taxes, or even more innovative financing methods, like the local green bonds which have already proved a success in Sweden. A handful of councils in the UK, like West Berkshire Council, have started to roll-out similar green bonds to finance sustainability programmes, although still at a very small scale.

2. Put green priorities at the heart of Apprenticeship Levy reform
In some sectors, many workers will need to reskill or upskill for new green jobs. The specific skillsets required will differ across industries and geographies, but local authorities and businesses are well placed to know and plan for what is needed in their areas. Skills policy in England is a complex landscape with few devolved budgets (most recently the Adult Education Budget). Devolving Apprenticeship Levy funding to combined authorities would help to build a pipeline of skilled workers in line with local needs and timelines. Oversight from LEPs would also give local businesses a voice in how unspent levy funds are allocated to ‘green work’.

Currently, 25 per cent of unspent funds can be transferred between businesses to avoid being recouped by the government. To help smaller businesses meet the training costs, larger businesses should be able to transfer up to 50 per cent of unspent funds for designated ‘green work’ to them.

3. Introduce a Rural Net Zero Strategy
Areas in the North and Midlands are set to see the greatest economic benefits from net zero, as we found in our report. But many of these places are in industrial or urban areas, whereas rural areas will face a more disruptive transition. This is because of their distance from industrial centres, where much of the green work will be, and unique transport challenges. Rural communities are much more reliant on cars to get around but also face difficulties in installing electric vehicle charging points.

The prime minister has referred to net zero as a chance to level up the country. But levelling up within regions and communities will be as important as between regions. A Rural Net Zero Strategy would provide a clear roadmap for local authorities to support rural areas across the areas of homes, climate mitigation, grid capacity, transport and more.

4. Provide tailored support to small and medium sized enterprises (SMEs)
SMEs need help from the government and larger businesses, not only to know how to decarbonise their business, but also to meet the cost of doing so. A Help to Green scheme, modeled on the Help to Grow  programme, should provide industry specific advice and subsidies on the costs of low carbon technologies for SMEs. Businesses should also be encouraged to learn from each other on how to go green through ‘green mentor’ opportunities between larger firms and SMEs, co-ordinated through LEPs.

The transition to net zero will be a golden opportunity for many areas, creating jobs and revitalising local economies. But it will not be without its challenges, jobs in some sectors will be lost along the way, and businesses and households will face at least some costs.

To maximise the opportunities and minimise the disruption for local communities, new policies are needed to empower local and mayoral authorities, and local business groups, to lead this change. Whitehall cannot act alone.

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