Why is a booming Net Zero economy a good idea?
It’s possible that a booming Net Zero economy is actually a bad idea in fact:
The net zero sector is growing three times faster than the overall UK economy, analysis has found, providing high-wage jobs across the country while cutting climate-heating emissions and increasing energy security.
The net zero economy grew by 10% in 2024 and generated £83bn in gross value added (GVA), a measure of how much value companies add through the goods and services they produce.
The analysis, by the Confederation of British Industry (CBI), found that 22,000 net zero businesses, from renewable energy to green finance, employ almost a million people in full-time jobs. The average annual wage in the businesses – £43,000 – was also £5,600 higher than the national average.
A useful - we don’t say the only, but a useful - way of looking at this is that this is an increase in the costs in the economy.
Consider - so, we need food, obviously. So, if the food business was growing (aha, aha) we could say that this is lovely, more people are earning their living growing food. On the other hand we could also say this was a bad idea. More people have to be employed growing our food and we are thus poorer. Because we are diverting scarce economic resources - including that human labour - to growing food rather than all the other things we’d like to have. You know, NHS, ballet, housing, all he other things we might desire to have more of.
The same dual view can be taken about Net Zero. OK, it’s lovely that more are making their living that way - and at those lovely high wages! Also, how awful it is that we’re diverting scarce economic resources to this rather than the more NHS, ballet, housing that we might also desire. Those lovely high wages just being evidence that we’re having to use more more resources to do so.
The usual dividing line between these two observations is who is doing the insisting? If food is getting more expensive, more resources have to be devoted to food, because of government policy, trade restrictions, regulatory burdens and so on then this is the bad type, the swallowing of resources better used elsewhere. If it’s because Britons are finally weaning themselves off a diet of beans on toast then, as this is consumer demand led it’s a good thing.
So, Net Zero is an imposition upon society as a result of some elite virtue signalling? Or it’s a consumer demand the satiation of which is utility enhancing? Views will differ on that. We would add that if it were the second, entirely consumer driven, then there’d not have to be laws, regulations and impositions insisting upon it. For a free market system would deliver that consumer utility unadorned.
As we say, views can differ here. But that “a sector of the economy is growing” is not unalloyed good news. It depends why that sector is growing. The most important differentiation being whether that growth is being forced or demanded?
Tim Worstall