GRJ0050

Written evidence submitted by Aldersgate Group

BACKGROUND

1. The Aldersgate Group is an alliance of major businesses, academic institutions, professional institutes, and civil society organisations driving action for a sustainable and competitive economy. Our corporate members have a collective turnover in excess of £550bn and believe that ambitious and stable low carbon and environmental policies make clear economic sense for the UK.[1] They have operations across the UK economy and include companies such as Associated British Ports, Aviva Investors, BT, CEMEX, the John Lewis Partnership, Johnson Matthey, Michelin, Siemens, SUEZ, Tesco and Willmott Dixon.

2. We develop independent policy solutions based on research and the expertise and diversity of our members. Through our broad membership, we advocate change that delivers benefits to an ever-growing spectrum of the economy. 

INTRODUCTION

1. The government’s commitment to a green recovery, as well as the public and business support for it, requires not only policies to drive low carbon economic activity but also investment in human capital and skills. The UK is grappling with the short-term economic impacts of the COVID-19 pandemic and at the same time is striving to deliver the ambitious goals of achieving net zero emissions by 2050 and reverse the decline of our natural environment. As the UK economy recovers, it is important to ensure that workers are equipped with the skills necessary to get them back into meaningful employment as quickly as possible, and into jobs coherent with achieving the government’s climate and environmental targets.

2. The good news is that tackling the economic recovery and climate crisis can be done simultaneously. The government can seize the opportunity and implement a government-led strategy which supports businesses and educators to begin improving knowledge and skills at scale and strengthen the supply chains necessary for a low carbon economy. This will create significant net jobs for a green recovery, distributed evenly across the UK and across age, gender and ethnicity, and put the UK on track for long-term sustainable economic growth.

3. The first part of the challenge is the supply side, with a need to have the right skills and knowledge available in the workforce to deliver our climate and environmental objectives. Education providers at all levels need to adapt the curricula in order to ensure that the skills and competencies of their students and graduates are aligned with the requirements of a net zero emissions economy. To do this, the government should publish a world-leading skills strategy to ensure that educators have the flexibility and funding to embed sustainability into the curricula of all subjects and the opportunities to work with businesses across the UK to create routes into employment post-education.

4. Employer demand for these skills needs to match the uplift in supply, so that all sectors of the economy can begin the transition to a low carbon economy in earnest. This means mapping out the changes in practices and business models needed to achieve net zero emissions, across all sectors, as well as recruiting and training the workforce accordingly. To do this, government should send a clear signal to employers by publishing a delivery plan in support of the net zero target, setting out the policy and regulatory framework that will enable all sectors of the economy to cut emissions. This should be developed alongside the updated Industrial Strategy, with stronger coordination between the policy decisions necessary to get to net zero and their social implications, such as the levelling up challenge, the productivity puzzle and the skills deficit. While central government action is important, it will need to be backed up by concrete funding and institutional capacity to devolved powers and funding at the local level to maximise the opportunities afforded by upskilling and reskilling programmes.

THE JOB CREATION POTENTIAL OF A LOW CARBON ECONOMY AND A GREEN RECOVERY

5. First and foremost, it is vital that the UK uses the COVID-19 economic recovery as an opportunity to move forward on decarbonising the economy, as this will create opportunities across the economy in the short- and long-term. Seizing this opportunity to create green jobs will result in significant net gain job creation.

6. Close to half a million people are employed today in the UK’s low carbon economy, with estimates suggesting it could grow four times faster than the rest of the economy[2] and that by 2030 the global market for low carbon goods will be worth more than £1 trillion a year.[3] As markets for low carbon goods grow, so do low carbon service markets: in the 2020s, it is anticipated that the 50% increase in investment in renewables (versus 2012 levels) will likely more than double spending on insurance for the sector.[4] Guaranteeing the provision of skills and supply in this market will ensure sustainable growth can continue in the UK over the coming decades.

7. The government should use the COVID-19 crisis as an opportunity to support businesses in the low carbon market, particularly because employment in fossil fuels was already in sharp decline prior to the crisis.[5] There are a number low-regret policy options available to reduce emissions significantly whilst creating green “shovel-ready” jobs to get people back to work following the COVID-19 crisis. If implemented in a timely manner, these policies can stimulate the supply of low carbon skills for UK businesses. The Aldersgate Group believes some of the sectors which have the biggest potential for economic stimulus and creating green jobs quickly include construction, energy, transport and nature restoration.

8. The construction sector consistently faces skills shortages, with as many as 1 in 5 jobs being persistently hard to fill because employers cannot recruit staff with the right skills.[6]  Furthermore, 22% of the workface are over 50 and coming up to retirement, whilst young people are not entering the sector.[7] Highly-skilled construction workers will be essential over the coming decades to retrofit buildings and improve energy efficiency and install alternative home heating systems to gas. The government should therefore give clear, long-term stability to the sector by rolling out a nationwide retrofit programme by introducing minimum energy efficiency standards to bring new and existing buildings to EPC band C by 2035 (2025 for low-income households) and removing the VAT charged on retrofits to existing homes. In the short term, creating a four-year programme for retrofitting homes in the UK could create half a million jobs.[8] In the long-term it could reduce household carbon emissions by 21% and cut household bills by an average of £418.[9] Doing this will quickly create jobs rooted in local supply chains and provide rapid social benefits[10] and save costs to the NHS arising from cold homes of around £1.36bn per year.[11]

9. The energy sector plays a foundational role in helping other sectors to decarbonise. National Grid estimates that the clean energy transformation can create 400,000 jobs across the country – 260,000 of which would be new jobs.[12] Tens of thousands of jobs will be needed in every region, and they will include civil, mechanical and electrical engineers, data analysts, machine learning experts and skilled tradespeople. The Aldersgate Group welcomes the announcement to bring forward the phaseout date for petrol, diesel and hybrid vehicles to 2030, as even a moderate uptake of around 35% new car sales being EVs by 2030 could create 200,000 permanent jobs in the transport sector, with 57% of these coming from the installation, operation and maintenance of charging points.[13]

10. The government can accelerate innovation and emissions cuts in the energy sector by supporting at-scale trials for key low carbon technologies, such as carbon capture and hydrogen, by crowding in private capital and de-risking investment through the National Infrastructure Bank (NIB). One example of the types of projects the NIB could support is the HyNet project, which trials hydrogen and will create up to 5,000 jobs, deliver clean electricity for industry and heat around 2 million homes, and will need further operational expenditure.[14] Another is the Teesside Collective, which aims to establish Teesside in the North of England as the go-to location for future clean industrial development by creating a Carbon Capture and Storage (CCS) equipped industrial zone. The project will employ 2,400 people and support an additional 3,500 jobs in its UK-based supply chains.[15]

11. The government should also set a robust carbon price trajectory in the 2020s to send a clear market signal for low carbon innovation whilst taking advantage of the drop in oil prices, giving stability to the low carbon sector to boost its supply chain and subsequently create jobs. The government should also align the UK ETS with net zero and set out a clear carbon price escalator over for next three decades and beyond, starting from £40 per tCO2 emitted in the 2020s and rising to £100 per CO2 or more by 2050. Doing this will send clear signals of the cost of emissions to all operating businesses and institutions, and will incentivise further steps towards bringing down their emissions. Furthermore, giving the NIB a clear low carbon mandate and committing it to financing projects which support delivery of net zero will help to crowd private investment into low carbon sectors like hydrogen and CCUS long-term.

12. Finally, there are opportunities to create jobs in nature restoration, which will help the government meet wider environmental ambitions beyond decarbonisation, such as the 25-year environment plan. Doing so would lead to increased physical resilience to flooding or landslides, delivering savings in other sectors. For example, the value provided by coastal wetlands in terms of buffering the effects of storms and flood control has been estimated at £1.5bn annually[16]. Investing in nature restoration will create jobs rapidly across the country as projects are low-tech and require minimal training. Further increases in public and private investment into the natural environment can be encouraged by finalising the passage of the Environment Bill, rapidly introducing a range of natural environment improvement targets under the Environment Bill, and publishing an England Tree Strategy which focuses on tackling the nature and climate crises together. Examples of successful initiatives include Anglian Water’s £5.9 bn investment in community and natural capital projects to boost climate resilience,[17] and RSPB’s Wallasea Island Wild Coast Project which created jobs and improved physical resilience.[18]

13. The economic recovery also offers the chance for mid-career workers to bring their existing soft skillsets, such as collaboration and creativity, to the green sector. This is particularly beneficial for hardest hit sectors like arts and hospitality who are facing reduced prospects in the COVID-19 crisis. The World Economic Forum’s recent study on the future of the new economy highlighted that in the “green economy”, out of the top 10 skills identified, only three are industry specific.[19] The needs for soft skills has also been highlighted by Aldersgate Group members, such as MHI Vestas, as a part of the transition which is just as vital as the technical side.

DELIVERING THE SUPPLY OF LOW CARBON SKILLS

14. As outlined in the introduction, increasing the supply of workers with the knowledge and skills needed to deliver the UK’s climate and environmental targets will offer stability to businesses that are already struggling to recruit people with the specialisms required for the transition to net zero. Increasing the supply will be welcome, as the low carbon transition runs the risk of exacerbating these shortages further without swift intervention. The government can support educators to deliver increase the supply in a number of ways:

15. First and foremost, the government should develop a national low carbon skills strategy that embeds sustainability and net zero delivery across the whole education system. Research conducted by Teach First found only 4% of students feel that they know a lot about climate change, despite 68% of students wanting to learn more about the environment, regardless of their subject.[20] Furthermore, 75% of teachers feel they have not received adequate training to educate students about climate change.[21]

16. Embedding sustainability into all subjects will help to ensure that students working in sectors not typically thought of in net zero delivery will be equipped with the knowledge to further decarbonisation, such as agriculture, engineering, hospitality or media. This could also help to encourage women and people from BAME backgrounds to engage with STEM subjects as it will help to create links between arts and sciences.[22] Another way of increasing diversity in the short term could be through schemes like the Kickstart Scheme.[23] Indeed, while the Aldersgate Group welcomes this initiative, the scheme could be improved to also provide job placements more specifically for people from BAME backgrounds.

17. It is important to ensure that practical qualifications like T-Levels are designed in collaboration with businesses, and that their curricula reflects the future needs of the UK’s economy. A sustainability skills action plans should also be mandatory for all Further Education (FE) and Higher Education (HE) institutions in the first instance, and rolled out to all education providers over time, as previously done for gender equality in universities and colleges.[24] The national government should also update apprenticeship standards to integrate climate and sustainability, and give businesses the flexibility they need to teach their workforce skills that go beyond their organisation’s current remit.

18. Finally, FE and HE institutions all around the UK should be enabled to play a role in developing local skills and deliver green jobs, through collaboration with businesses and investors. Currently, research funding is disproportionally targeted, with the “Golden Triangle” between Oxford, Cambridge and London receiving over 55% of health-related research funding in 2015[25] and 47% of business enterprise R&D.[26] It is therefore essential that businesses and investors are encouraged to create partnerships with universities all around the UK, particularly in the Midlands and the North of England where existing energy and industry hubs offer significant net zero reskilling opportunities.[27]

HOW THE GOVERNMENT CAN HELP SECURE DEMAND FOR SKILLS AND JOBS LONG-TERM

19. To ensure the demand for green skills matches the growing supply of workers, the government will need to ensure it has put in place frameworks, mechanisms and institutions to grow demand for green jobs and skills in the long term, and establish a cyclical growth between workers and positions. As per the advice of the Climate Change Committee, the government should publish a framework for progressing all sectors towards net zero emissions. This will help employers map out the skills and competencies needed to transition their business models and practices, and reduce the risk of seeing progress in some sectors while other lag behind. The updated Industrial Strategy should also focus on greater coordination between decarbonising the economy and its social implications, ensuring that a shift to a low carbon economy does not lead to jobs being offshored, but rather creates opportunities across the country, helps tackle existing skills shortages and boosts UK productivity.

20. As previously mentioned, publishing overarching net zero delivery plan which outlines how skills will be used to deliver other government plans, such as the Energy White Paper and the 10 Point Plan, should be a top priority for the government. The plan should offer clear sectoral pathways, but could also foster the cross-economy collaboration and investment in soft skills needed across all sectors. This could be further supported through the publication of a world-leading Education White Paper, matched by investment in low carbon skills ahead of COP26, to showcase the UK’s achievements in driving a sustainable recovery by investing in social capital to tackle the levelling up challenge. Furthermore, the government should establish a National Skills Commission to encourage the coordination of different government departments and work with businesses, local institutions and the National Infrastructure Bank, to develop the updated National Skills Fund to be introduced later this year.

21. National government investment should be maximised further by allocating sustained and flexible public funding and political autonomy at the local level. Currently, funding is mostly uncoordinated, which has been cited by local authority stakeholders as a key challenge.[28] Local funding would support businesses to develop local skills in partnership with authorities and Local Enterprise Partnerships (LEPs) according to regional specialism, and by mapping out areas where the UK is best placed to develop competitive supply chains. It would further create partnerships between businesses, investors, universities, advanced manufacturing institutes, and government research institutions across the UK to tackle regional inequalities. This has already been successfully demonstrated in Humberside, where Ørsted and Siemens Gamesa worked with the Department for Business, Energy & Industrial Strategy, LEPs, manufacturers, project developers and higher education institutions and drove regeneration, investment in skills and job creation.[29]

22. For further policy recommendations on green jobs and skills, see the Aldersgate Group briefings Seize the moment: building a thriving, inclusive and resilient economy in the aftermath of COVID-19 (published June 2020) and Upskilling the UK Workforce for the 21st Century (published October 2020).

January 2021