Environmental Economics: A Tool to Save the UK Economy

An economy with a strong green industry: it may be one of the few ways the UK could save itself from the projected economic decline caused by Brexit and may revive certain areas in the economy. Despite American conservative political commentators such as Justin Haskins describing moves such as the Green New Deal as ‘economically destructive’, in actual fact initiatives to turn an economy into one which specialises in green manufacturing may highly benefit many firms in this field due to the rising global demand. The rising global demand could stimulate economies in areas of the UK which have been stripped of its main source of industry, such as coal-mining. Andrew Bailey, current Governor of the Bank of England wrote in the Guardian in June 2020 that the crisis offers us an opportunity to rebuild our economy in order to withstand a climate crisis, which cannot be more true considering that we are also currently going through the transition process of leaving the EU at the moment.

One of the greatest problems of leaving the European Union is the fact that the United Kingdom does not exactly specialize in any goods in comparison to other EU nations such as France and Germany. One of the United Kingdom’s main exports is manufactured goods, and the country produces 1.8% of the global manufacturing output. However Germany produces 5.8% of global output and France produces 1.9%. The UK has been able to remain competitive in industries such as the manufacturing one because it offered lower costs of production, as seen with a low corporation tax of 19% (whilst Germany’s is 29.65%). Once the United Kingdom leaves the Customs Union, meaning they face an external tariff when trading with EU member states, the UK may no longer be able to offer low cost production to EU member states, and so member states may turn to other member states who produce similar goods. However, if the UK decides to become one of the first economies to specialise in green manufacturing, EU member states are more likely to continue to trade with the UK due to them being a sole producer of green capital goods on mass. The fact that demand for eco-friendly goods is growing within the EU population consumers will still invest in these UK exports despite the higher costs caused by the tariff. 

Since the start of 2019, there has been a massive increase in the demand globally to save the environment. This was seen during the September Climate Strikes, where almost 7.6 million people across the globe, a lot of them coming from rich OECD nations, went onto the streets of their local cities to demand that those who held positions of power take more action towards saving the environment. The strikes have therefore encouraged more people to become more eco-friendly, meaning more firms are trying to accommodate to this new eco-friendly global demand, with electric-car sales going up by 220% in 2019 and Carlsberg beer company revealing the first prototype for beer bottles made from paper in order to meet the demands of the market. With it being evident that there is a growing demand for more environmentally friendly goods, the UK economy could largely benefit from playing a large part in green manufacturing, as more people see renewable goods as a better substitute to non-renewable ones, and so firms are likely to maximise their profits by manufacturing goods made with renewable resources. The more profits these firms make, the more likely they are going to benefit from economies of scale, meaning the average cost of production decreases as the size of the firm expands, and so firms are likely to have the capacity to employ more workers, especially in more deprived parts of the UK with no major industry.

An introduction of a green industrial sector in the economy is an opportunity to support less economically developed parts of the UK, such as Cannock, Staffordshire, where a part of my family comes from. Like a lot of towns in the north of both England and Wales, Cannock once had a thriving coal-mining industry, which was producing 5 million tons of coal a year by 1933, but that was only short lived. In 1969, the National Union of Mineworkers had been able to increase workers wages through the use of strikes, which became one of the factors which would eventually cause the coalfields to close, as it became considerably cheaper to import coal from places such as Argentina. Therefore, Cannock eventually closed its last coal pit, Littleton Colliery, in 1993 and the town has lacked a strong source of employment since. Despite the UK economy becoming a more service-based economy, especially within finance, IT, and education,  those in Cannock are less likely to be able to enter the service industry due to lower education attainment, with only 16.7% in the area obtaining a bachelor’s degree in 2010, compared to the UK average of 32.9%. However, a green secondary manufacturing industry may become a viable option for places such as Cannock if the manufacturing took place there, with it offering work for those who do not obtain a high level of qualifications, which is also work that currently has growing demand from consumers and therefore the workers can stimulate the local economy with fairly high wages. The cost of educating a local workforce may not become a massive burden, considering that nearly 40% of the current Cannock population is trained for elementary occupation roles, and so the cost of education may only focus on adapting workers to a slightly new role. Even though this article has largely focused on Cannock, green industry is likely to have a similar impact on towns in similar situations, such as those surrounding the South Yorkshire Coalfield.    

Overall, we can see that green industry in the UK is likely to benefit its economy, especially in areas where it tends to be not as strong, such as Cannock. The growing sales in renewable goods across the world shows that there is a growing demand for a greener economy, which the UK could take advantage of if it hosted the largest firms producing renewable goods. As the United Kingdom finishes its transitional process out of the European Union by December 2020, an economy which specialises in green resources may make it possible for EU member states to want to keep trading with the United Kingdom.

Luke Allen