Theme 5
Net Zero Innovation
Policy questions and key messages
- Is the UK successfully decoupling economic growth from greenhouse-gas emissions?
- How have the low-carbon and renewable energy economy (LCREE) sectors performed?
- How does the UK’s investment in low-carbon and renewable energy technology research and development (R&D) stand in comparison to other countries?
The UK has successfully decoupled GDP growth from greenhouse-gas (GHG) emissions.
- While the UK’s GDP doubled between 1990 and 2021, the country achieved a 40% reduction in GHG emissions during this period. However, further work is required to achieve the target set by the Climate Change Act, which commits the UK government to reducing GHG emissions by at least 100% of the 1990 levels (net zero) by 2050.
- Only five industries failed to reduce emissions from 1990 to 2021: wholesale and retail trade and repair of motor vehicles; construction; accommodation and food services; administrative and support service activities; and real estate activities.
The UK low-carbon and renewable energy economy (LCREE) has performed strongly since 2019.
- The LCREE economy reported a £54.4 billion turnover in 2021, compared to £45.8 billion in 2019, and over 27,000 and 42,000 more businesses and employees, respectively, in 2021 than in 2019.
- The sectors with the highest turnover in 2021 were: energy-efficient products (£14.01 billion); low-emission vehicles and infrastructure (£8.52 billion); and offshore wind (£8.42 billion).
The UK consistently ranked among the top six countries in public R&D expenditure on low-carbon renewable energy technologies from 2010 to 2022.
- At $1.6 billion, the UK’s public R&D budget in low-carbon and renewable energy technologies in 2022 was lower than Germany ($2 billion), Japan ($3.4 billion), France ($4.9 billion) and the US ($9.6 billion) but higher than Canada ($1.2 billion).
- Among low-carbon technologies, the highest public R&D expenditure in the UK in 2022 was on nuclear power technologies, followed by energy efficiency and renewables.
UK carbon emissions against gross domestic product (GDP)
- The Climate Change Act commits the UK government by law to achieving “net zero”, which is to reduce greenhouse-gas emissions by at least 100% of 1990 levels by 2050.[1]
- Significant progress was made to decouple GDP growth from GHG emissions between 1990 and 2021, resulting in a 40% reduction in emissions during this period, in which GDP nearly doubled.
- In an international context, the UK’s total emissions in 2020 were the 20th largest in the world,[2] while the country ranked 71st in emissions per capita.[3]
Note: Residence-based emissions, sometimes referred to as production emissions, cover emissions by UK residents and UK-registered businesses, whether in the UK or overseas. An important use of this measure is that it enables direct comparison of emissions by sector of UK industry and households, with the main economic indicators including gross value added (GVA). These estimates are part of the UK’s Environmental Accounts and are aligned with the national accounts because they are compiled in accordance with the UN System of Environmental Economic Accounting (SEEA). Following this framework also enables international comparisons.
Note: [1] Climate Change Committee (2024). A legal duty to act.
[2] World Bank (2024). Total greenhouse gas emissions (kt of CO2 equivalent), 2020 figures.
[3] Climate Watch (2024). Historical GHG Emissions. 2020 figures.
UK carbon emissions by industry
- For greenhouse-gas emissions per industry, the sectors with the highest average annual emissions between 1990 and 2021 were: electricity, gas, steam and air conditioning supply; consumer expenditure; manufacturing; transport and storage; water supply, sewerage and waste management; and agriculture, forestry and fishing.
- Between 1990 and 2021, only five industries did not experience a reduction in emissions: wholesale and retail trade and repair of motor vehicles; construction; accommodation and food services; administrative and support service activities; and real estate activities.
- The construction sector and real estate activities recorded the largest increases in emissions, with increments of 76.2% and 40.1%, respectively.
- In contrast, significant emission reductions were observed in sectors such as: mining and quarrying (-66.2%); water supply, sewerage and waste management (-64.7%); public administration and defence (-64.1%); education (-63.6%); and electricity, gas, steam and air conditioning supply (-60.4%).
UK low-carbon and renewable energy economy (LCREE) sector performance
- The overall turnover of the low-carbon and renewable energy economy (LCREE) sectors experienced a positive trend, increasing from £43.7 billion in 2014 to £54.4 billion in 2021.
- The sectors with the highest turnover in 2021 were: energy-efficient products (£14.01 billion); low-emission vehicles and infrastructure (£8.52 billion); offshore wind (£8.42 billion); energy-efficient lighting (£4.09 billion); and bioenergy (£3.94 billion).
- Overall, six sectors showed negative compound annual growth rates between 2014 and 2021: energy-efficient products (-1%); bioenergy (-3%); energy monitoring, saving or control systems (-4%); low-carbon consultancy, advisory and offsetting services (-4%); nuclear power (-5%); and other renewable electricity (-8%).
- In terms of growth, the most significant sectors between 2014 and 2021 were: fuel cells and energy storage systems (21%); renewable combined heat and power (18%); offshore wind (16%); renewable heat (15%); low-emission vehicles and infrastructure (14%); and carbon capture and storage (14%).
Employment and number of businesses in the low-carbon and renewable energy economy (LCREE)
- In 2021 the LCREE sector employed 247,400 people in 90,000 businesses.
- The number of business and employees in the UK LCREE sectors fluctuated significantly between 2014 and 2021.
- There were 3,500 fewer businesses in 2021 than in 2014, a net loss of ~500 businesses per year.
- Despite the loss of businesses, there were 11,500 more jobs in the LCREE sectors in 2021 than in 2014, a net increment of ~1,642 jobs per year.
- LCREE turnover for businesses with 250 or more employees increased from £19.9 billion in 2014 to £28.6 billion in 2021.
- Similarly, LCREE employment for businesses with 250 or more employees increased from 57,900 in 2014 to 80,000 in 2021.
Public R&D spending on low-carbon and renewable energy technologies – total budgets
- The UK was consistently among the top six countries with the highest public R&D expenditure on low-carbon renewable energy technologies between 2010 and 2022 in the research, development and demonstration (RD&D) data set compiled by the International Energy Agency (IEA).
- IEA estimates that in 2022 the UK’s public R&D budget in low-carbon and renewable energy technologies was $1.5 billion, lower than Germany (USD 1.6 billion), Japan (USD 3.2 billion), France (USD 4.8 billion) and the US (USD 9.1 billion) but higher than Canada (USD 1.0 billion).[1]
- Categories in the IEA analysis include: energy efficiency; renewable energy sources; nuclear fission and fusion; hydrogen and fuel cells; other power and storage technologies; and other cross-cutting technologies or research.
[1] Note: Prices are in 2022 USD and purchasing power parity (PPP).
Source: IEA (2023). IEA Energy Technology RD&D Budgets – October 2023.
Public R&D spending on low-carbon and renewable energy technologies – by technology
- Based on the data provided by the International Energy Agency (IEA), the research area that received the highest public R&D expenditure in the UK in 2022 was nuclear power technologies. This was followed by energy efficiency, renewables, other cross-cutting technologies, other power and storage technologies and hydrogen and fuel cells.
- Different specialisations can be observed among top public R&D spenders, based on which research categories observed the highest expenditure:
– The US: other cross-cutting technologies
– France and Germany: hydrogen and fuel cells
– Japan and the UK: nuclear power technologies
– Canada: energy efficiency
Appendix 5.1: Sectoral breakdown for ONS (2023) atmospheric emissions: greenhouse gases by industry and gas
Key definitions – low-carbon and renewable energy economy (LCREE)
