What We Talk About When We Talk About a Green Deal: Post-Brexit Britain

In the second article of his four-part series, Nicholas Trickett discusses a Green Deal through the lens of a post-Brexit Britain. 

As much as we’d love to escape it, the green deal is going to have to cope with Brexit. Whereas energy security in a world of petroleum has entailed ensuring access to oil and gas, renewable energy, green transport, and the technologies needed to improve energy efficiency depend on global value chains. Rejoining the EU is off the table, and at this point, it seems appropriate to begin preparing policy ideas assuming that a hard Brexit will take place, and adjusting as needed based on political developments.

The UK won’t have too big a problem with wind power supply chains as it’s the world’s largest market for offshore wind, accounting for over a third of installed capacity globally and leading the pipeline for future installed capacity by a wide margin. For that reason, manufacturers and service providers have a sizeable market to serve and the wind power sector can source components domestically due to existing competitive advantage, industrial capacity, and know-how.

Solar power is a different story. As of 2018, there were an estimated 3.6 million jobs globally employed by the solar industry, with most of those jobs concentrated in manufacturing. 85% of those jobs were in Asia, with the entirety of Europe accounting for a mere 3.2%. If the UK wants affordable, widely-used solar power, it’s got to reach trade agreements with Asian suppliers – China is out front by a wide margin – build up domestic manufacturing capabilities, or both.

Without a combination of state aid and creative trade policy – dropping import tariffs for relevant components is most important for domestic demand, not exports – state spending on solar power will provide more stimulus for foreign manufacturers than the British economy. Policymakers are going to have to develop a new niche for the UK within global value chains. 

Electric vehicles face similar issues. China has created an increasingly competitive EV sector now attracting attention from European automotive firms looking at sourcing their battery production there. As of 2018, China accounted for 45% of global EV deployment, over a million more vehicles than in Europe. The IEA projects its share of the global market to grow to 57% by 2030. What’s worse, none of Europe’s lithium battery gigafactories are, so far, located in the UK and Tesla seems likelier to put a research facility with limited manufacturing capability rather than a full-on factory in country with trade uncertainty come January.

Making the British market attractive for these industries should be the highest priority. Domestic demand is best suited to support the expansion of manufacturing capacity for EVs, photovoltaics, and related technologies. For EVs specifically, Labour should consider pushing for an aggressive timeline mandating early retirements of ICE vehicles and provide equity back as well as cheap credit or grants to consumers to buy domestically-manufactured electrics. A significant increase of investment into charging station capacity using small-scale solar and wind as well as the national grid would also help.

Mandating state spending isn’t enough. Enforcing obsolescence and providing equity returns for consumers can absorb losses from asset depreciation – cars lose their value fast – and reinforce existing trends among investors that see renewables and non-fossil fuel investments as safer and better for returns than oil and gas. Such policies benefit domestic firms, accelerate changing consumer preferences, and jumpstart producer transitions while also raising private-sector interest in investment into charging infrastructure by creating a captive market.

For both solar and EVs, import dependence for components or finished products undermines economic stimulus. Without concomitant policies boosting domestic production, much of whatever’s spent on a green deal will benefit others. But for many of the associated industrial jobs to last, Labour needs a parallel export strategy at a time when trade policy is massively uncertain. Unilateral changes to state aid and tariffs are a start, but a policy beyond reaching a better trade deal with the EU is needed.

Letting the Conservatives own Brexit is smart politics. When your opponent is in the act of harming himself, you’d best let him get on with it. That’s not enough, though. Opening car plants won’t bring new jobs, it’ll stave off losses already looming. Other technologies and parts will be sorely needed during the next stage of the UK’s energy transition, but external demand is what sustains new sectors. Orthodoxies about trade must be challenged if the Labour party’s wants to deliver a true, sustainable green deal. There’s far more at stake than chlorinated chicken.

Nicholas Trickett is a political risk analyst and writer with extensive experience covering energy and trade politics and political economy in Russia and Eurasia, including a stint as an energy consultant. He holds an MA in Russia and Eurasia regional studies from the European University in St. Petersburg and an MSc in international political economy from the London School of Economics and Political Science.
He tweets at @ntrickett16
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