Britain must launch a new green strategy to prevent business investment from haemorrhaging to the US as a result of Joe Biden’s huge green stimulus package, the boss of the UK’s largest employers group has urged.
Tony Danker, director-general of the CBI, warned that the world had entered a subsidy arms race which could damage UK investment in green technologies if the government did not intervene.
“I am genuinely worried that the current government is losing a race for green growth,” he told the Financial Times in an interview. “It’s become a subsidy arms race. We need to come up with our own strategy.”
Brussels last week pledged to make “unprecedented” investments in clean technologies in an effort to counter the US’s $369bn Inflation Reduction Act. The groundbreaking legislation threatens to lure companies across the Atlantic by offering what business leaders recently called “huge” spending commitments.
Danker called for a package involving both deregulation and state funding to allow the UK to “outsmart” rather than “outspend” other countries. Without it, the UK was already falling behind rival leading nations in investing in green technology that would be crucial for the future, he said.
“I hear from companies based in the UK that investment in green growth is shifting to other markets. The investment dollars are beginning to shift. And I don’t see enough urgency and boldness from the government in responding,” the CBI chief said.
There is a risk of the EU “beating us to it”, he added.
In the past two years the UK has lost market share equivalent to the potential value of £4.3bn by 2030 in battery production and hydrogen alone, according to CBI research.
Danker said “Competitors across Europe, Asia and the US are making their move — and going hell for leather; we seem to be second guessing ourselves.”
He warned that there “has been very little coming from the government, in terms of new proposals in the last six to nine months, and exactly the time that the Americans and the Europeans are going bigger and faster”.
The CBI wants regulatory changes, including pursuing politically unpopular measures to free up planning in order to allow easier building of infrastructure such as on- and offshore wind farms, as well as using public money to kick-start private sector investment.
Danker wants a new contract for difference (CFD) scheme — of the sort already used for offshore wind, solar and nuclear — applied to promising technologies such as hydrogen, carbon capture and sustainable aviation fuels, alongside public funds made available for promising new areas to support private sector ventures yet to make a profit.
He pointed to areas that needed state subsidies “where either the technology is immature, or the prizes are far off” such as hydrogen and advanced electric vehicles.
“We think 50 per cent of the prizes in green can be dealt with regulation. 50 per cent will require some money,” he said.
CFDs can incentivise investment in renewable energy by providing developers with protection from volatile wholesale prices, for example.
Danker said that although he “absolutely” sympathises with the argument that Britain cannot compete with the scale of the US subsidies, “this isn’t going to cost nothing”.
“If you’re saying you’re not going to outspend them, then I’m afraid you do need to outsmart them,” he argued. If the UK “cannot compete with US and EU subsidies [then] it must be smart and strategic”.
The government said: “The UK is leading the world on tackling climate change while also developing green jobs for the future . . . Our plans for net zero and energy security will support up to 480,000 jobs in 2030.
“We are driving an unprecedented £100bn of private sector investment by 2030, backed by around £30bn in funding from the government since March 2021 to achieve our aims.”