Retaining economic value from net-zero leadership: the UK’s next green transition test

By Dr David Leal-Ayala

The UK shows the world that it is possible to expand its economy while lowering carbon emissions. Since 1990, the country has almost doubled its GDP while reducing territorial greenhouse-gas emissions by more than half. This success did not happen by accident. It reflects a powerful mix of policy, investment, and innovation.

But the next phase of the journey will be harder: the low-hanging fruit – cleaning up power generation – is largely gone, given that most progress to date can be attributed to a decline in coal use and an increase in renewable electricity generation (IEA, 2024). Now the challenge is to decarbonise the cars we drive, the homes we heat, and the farms that feed us. At the same time, the UK has the opportunity to ensure that the green technologies invented here deliver economic value to the country, creating jobs and industries for the future.

This blog builds on the UK Innovation Report 2025, using its findings to explore the challenge now facing the UK: how to boost economic value at home while delivering on net zero commitments.

Achievements so far: decoupling carbon emissions from economic growth

The UK has already achieved its first three legally binding carbon budgets under the Climate Change Act. More than half of the emissions reductions during this period came from the energy supply sector: phasing out coal, investing in renewables, and improving efficiency.

But the next three budgets will require action in new areas:

• Transport: the largest emitting sector, responsible for over one-third of domestic energy-related emissions (IEA, 2024).
• Buildings: energy consumption in buildings still accounts for over a quarter of the UK’s energy emissions (IEA, 2024).
• Industry: a key part of the UK economy accounting for roughly 14% of emissions (IEA, 2024).
• Agriculture: responsible for about 12% of territorial emissions, largely from livestock, agricultural soils, stationary combustion sources and off-road machinery (DEFRA, 2024).

These changes impact daily life much more directly than the closure of a coal plant. They require not only new technologies but also new behaviours, incentives, and infrastructures.

Leading investor in low-carbon research and development

Public investment is one of the strongest signals of national commitment to clean innovation. Data from the International Energy Agency shows that the UK was ranked among the top six countries worldwide for public spending on low-carbon and renewable energy research and development (R&D) between 2013 and 2023:

• In 2023, the UK’s public R&D budget in low-carbon and renewable energy technologies reached US$1.8 billion. This placed it behind the USA (US$10.3bn), France (US$4bn), and Japan (US$2.9bn), but ahead of Germany (US$1.5bn) and Canada (US$1.4bn).
• Among low-carbon technology categories, the UK’s largest allocation went to nuclear power technologies, followed by energy efficiency and renewables. Smaller but important shares were directed to cross-cutting energy research, hydrogen and fuel cells, and energy storage.
• This profile contrasts with that of other leading economies: the USA prioritises cross-cutting research, Germany focuses on hydrogen, while France and Japan lean heavily on nuclear energy.

The UK’s approach reflects its established strengths in nuclear and offshore wind, alongside a growing commitment to efficiency and renewable deployment, positioning it to maintain competitiveness while progressing towards net zero.

Highly specialised innovator within environment-related technology domains

Turning investment into inventions is critical. Patent data from the OECD show that between 2010 and 2021 the UK ranked seventh worldwide in environment-related patent applications, behind Japan, the USA, Korea, China, Germany, and France, but ahead of Taiwan, Canada, and Italy.

What sets the UK apart is its relative specialisation in specific technologies, measured by the Relative Specialisation Index (RSI – defined as a country’s share of patent families in a particular field of technology as a fraction of that country’s share of patent families in all fields of technology):

• Highest globally in offshore wind power and greener buildings.
• Consistently strong in advanced nuclear, greener vehicles, and carbon capture, usage and storage (CCUS).
• Moderate activity in flood and coastal defence and low-carbon hydrogen power, suggesting emerging opportunities.

This demonstrates that the UK generates both globally significant inventions and highly specialised innovations. The challenge is to ensure that these technologies are scaled and manufactured domestically, capturing both economic and environmental value.

The challenge: retaining the value of green innovation investments in the UK

The UK’s history demonstrates it can develop world-leading green technologies, but turning them into commercially successful products and capturing value has often been more challenging. Examples such as offshore wind, where domestic innovation may have been captured by foreign-owned developers, highlight that the risk of emerging technologies being scaled up or manufactured abroad means jobs, supply chains, and profits flow elsewhere (EuroNews, 2023).

Several factors may contribute to this challenge:

• Foreign ownership of patents: multinationals may develop inventions in the UK but choose to commercialise them closer to their main production bases.
• Scale-up barriers: domestic clean-tech firms face difficulties accessing finance, infrastructure, and workforce skills to grow within the UK, making relocation an attractive option.
• Policy signals: while strong on research, UK policies on procurement, manufacturing incentives, and long-term certainty may be less robust than those of competitors.

This “invented here, made elsewhere” pattern is not inevitable, but without coordinated effort, it risks repeating across emerging technologies such as green hydrogen and advanced nuclear. Maintaining the economic value of green innovation in the UK will be as important as the innovation itself.

From innovation to impact: the UK’s green future

The UK has already proved that cutting emissions and growing the economy are not mutually exclusive. It has invested heavily in low-carbon R&D and demonstrated global leadership in specialised areas of green innovation. The story so far is one of success. The story to come will depend on how effectively the UK can convert innovation into impact, not only reducing emissions further, but also sustaining prosperity and competitiveness in the decades ahead.

Delivering this vision will require bold choices in policy, partnerships, and investment, underpinned by clear evidence of where the UK stands today. The latest ONS data shows that the UK’s low-carbon and renewable energy economy (LCREE) supported over 314,000 full-time equivalent jobs in 2023, an 11.5% increase on the previous year, and generated £67.5 billion in turnover. Most of these jobs were in energy efficiency products (accounting for nearly half of LCREE employment), while the largest turnover came from low-carbon electricity (£25.8 billion, 38% of the total). These figures highlight both the strength of existing sectors and the urgency of scaling new ones if innovation is to deliver broad economic returns.

To convert innovation into large-scale impact, the UK must deploy key policy levers: mission-oriented industrial strategies that link net-zero goals with domestic manufacturing growth (such as hydrogen, offshore wind, and battery manufacturing); tax incentives and R&D support to de-risk innovation; and strategic use of public procurement to create stable demand for low-carbon products and services (e.g. heat pumps).

The UK’s Modern Industrial Strategy (2025) explicitly positions Clean Energy and Advanced Manufacturing among the eight high-growth sectors critical to productivity and resilience. It commits to lowering industrial electricity costs and accelerating grid connections, while using instruments such as a UK Carbon Border Adjustment Mechanism to secure domestic competitiveness. At the same time, an increase in public R&D funding, reaching £22.6 billion annually by 2029/30, aims to accelerate technologies such as next-generation batteries, small modular reactors, and carbon capture clusters. These commitments are meant not only to decarbonise but also to strengthen supply chains, attract investment, and retain skilled jobs in the UK.

Finally, success should be measured not just by falling emissions but by clear indicators of economic value: a rising share of UK exports in clean technologies, expansion of domestic green manufacturing and high-quality jobs, growing investment in net-zero innovation, and a stronger regional spread of industries. Importantly, future ONS LCREE data should show upward trends in both turnover and employment across priority sectors – proof that innovation is creating prosperity at home while advancing the net-zero transition.

This article draws from Section 5 of the UK Innovation Report 2025.

For data and more analysis on the UK’s competitive advantage in industrial innovation, see the full UK Innovation Report 2025 produced by Cambridge Industrial Innovation Policy.