UK green industry fears threat from US climate bill

The UK’s presence in emerging green industries such as hydrogen, carbon capture, batteries and floating wind turbines is under threat as the US and EU increase incentives for domestic green technology, business leaders and others say. Politicians warn.

Industry groups are urging the Rishi Sunak government to develop more ambitious plans to cut greenhouse gas emissions and develop clean energy production and jobs.

British politicians have also sounded the alarm about a wave of “protectionism” sparked by Biden’s $369 billion environmental bill known as the Inflation Reduction Act. This week, European Commission President Ursula von der Leyen provoked an EU response by suggesting that state subsidy rules on tax credits for green investments would be relaxed.

The UK-based CBI Employers Group said the UK economy was at risk from a global “subsidy arms race” for green growth. Nearly 20,000 businesses within the ‘net-zero economy’ now contribute £71bn to the UK, a report released on Tuesday estimates.

Chris Stark, head of the Climate Change Commission, an independent government adviser, said the US IRA law had “ignited” it. Incentive said, “There’s a lot of interest in people around the boardroom table right now…the risk for us is that capital will flow into the area.”

Shadow Energy Secretary Ed Miliband said the UK needed to keep up with the US and EU, saying: “Instead of standing on the sidelines and squandering the great opportunities we have, the government should should act under the UK’s version of the Inflation Reduction Act.”

Labor has drawn up plans to borrow £28bn a year for a ‘green deal’ that will lead to co-investment of the state with green energy companies. So far, the Sunak government is ideologically opposed to state intervention on that scale.

Conservative MP Chris Skidmore, who recently published a review of Net Zero commissioned by Downing Street, told the FT that Britain would lose if the “wall of international capital” allowed it to go elsewhere, and responded. urged. But he cautioned that Britain should strive to build international supply chains and not put up protectionist walls.

The UK currently generates 38% of its electricity from renewables, mainly thanks to its windy location. Former Prime Minister Boris Johnson touted the future of the country as ‘windy Saudi Arabia’.

But energy industry experts say the UK may fail to develop the next wave of green technology.

Lord Adair Turner, former chairman of the Financial Services Authority and now on the Energy Transition Commission, said entrepreneurs could look across the Atlantic to take advantage of IRA incentives. . “If you have early-stage technology and want to prove it and build a business, now might be the time to think, ‘Let’s go to America,'” he said.

Nick Cooper, CEO of carbon capture and storage developer Storegga, said the UK had become “a less attractive investment destination” in the past 12 months. Britain’s pace has slowed since it hosted her COP26 UN climate summit in Glasgow.

Storegga is now “routing new money and new people to the US instead of hiring and spending people in the UK,” Cooper said.

The prime minister’s spring statement was the government’s last chance to “take a decisive step” behind a net-zero emissions policy, said Ruth Herbert, chief executive of the Carbon Capture and Storage Association. What it shows is that bold economic strategies can actually grab attention and make businesses think about relocating.”

Another industry that is highly susceptible to foreign competition is the manufacture of electric vehicles and batteries. The UK has a goal to phase out new petrol and diesel engine sales by 2030, which will spur EVs in the country.

But Jeff Pratt, managing director of the Coventry-based UK Battery Industrialization Centre, said the UK government has funded a £130m pilot to test battery manufacturing technology. said it was failing to compete with grants that could help transform scientific research into commercial ventures.

“The world has changed,” he said. “The US is investing heavily in electrification and Europe is also considering it. Britain will have to look up again and say ‘What are we going to do?'”

David Bott, chief innovation officer at the Society of Chemical Industry, a trade association, said Germany is increasingly seen as more attractive to chemical companies supplying battery makers.

“For the past 12 years, governments have said they don’t want an industrial strategy driven by free market beliefs, but the rest of the world isn’t playing that game. Invest and get government returns,” Bott said.

The UK’s nascent hydrogen industry also says investment commitments are starting to decline as a result of the IRA package.

Claire Jackson, chief executive of the trade group Hydrogen UK, cited three examples of the UK’s downfall. An international group with operations in North America was asked to justify a new UK investment on its board. Another company dropped a UK project from 1st to 6th on the delivery schedule.

But as the government battles to tackle the UK’s fiscal black hole, some industry and policy experts are advocating a more selective approach to helping the industry.

“For a country like the UK, trying to be a world leader in green hydrogen, wind, solar, batteries and carbon capture is a challenge,” said Chris of Protium, a UK company involved in green hydrogen projects. says Jackson. “We are not going to win the entire energy transition.”

Nevertheless, Ana Musat, executive director of industry group RenewableUK, said tax cuts and investment allowances were needed to persuade companies to continue to invest in the UK.

Ministers are grappling with this challenge, but the Treasury is reluctant to spend more money on early technology. It’s also held back by executives’ view that there is a “dead weight” to investing in , spending money on investments that would have happened anyway.

climate capital

Where climate change meets business, markets and politics. Click here for FT coverage.

Interested in FT’s commitment to environmental sustainability? Learn more about our science-based goals here