Green growth and net zero policy in the UK: Some conceptual and measurement issues

This paper examines how the likelihood of a transition to net zero could play out on the UK's total factor productivity growth over the longer term. It does this in the context of a potential trade-off between net zero goals and productivity growth. We begin by discussing the concept of green growth and a green industrial revolution, and then relate the green economy to the circular economy, as well as GDP measurement and how this relates to productivity growth under climate policies. We use a simulation method for the projected growth under net zero of the electricity sector in Great Britain to provide a context on the consequences of increasing input growth as output growth declines, and the result shows that the 2020s are challenging decades as productivity declines by −3.24 % p.a. in the electricity sector due to the combination of high input and low output growth. However, our findings reveal that the 2030s and 2040s look more promising, with productivity growth of 3 % p.a. and 1.6 % p.a. respectively as electrification increases and fossil fuel and labour inputs decline. Overall, the analysis offers a glimpse of just how challenging raising even maintaining the level of TFP will be in that sector in the earlier years out to 2050. • We discuss some of the fundamental issues related to the future growth of productivity under net zero climate change policies. • We show how challenging it is for an advanced economy with a net zero target to grow total factor productivity. • We illustrate how GDP measurement relates to productivity growth under climate policies. • We use a worked example of the projected growth under net zero of the electricity sector in Great Britain. • We suggest that politicians should be careful not to suggest that net zero will accelerate productivity growth in the economy.