As well as better economic outcomes, green policies have better environmental outcomes: Resource and energy efficiency improvements in the industrial and buildings sectors would drive a reduction in UK annual CO2 emissions of around 20 MtCO2 in the combined scenario in 2040, a 7% reduction relative to baseline emissions.

Targeting funds in ‘brown’ categories of investment would represent a missed opportunity in environmental terms, as economic gains would be made at the expense of a slight increase in carbon emissions relative to the baseline. Though small, these emissions increases would accumulate over the entire forecast period, and eat into the UK’s limited carbon budget.

There are important distributional and equity impacts, with low-income households seeing greater relative welfare improvements from green policies: The analysis finds that, in particular, policies aimed at improving energy efficiency in buildings would have important distributional impacts in terms of increased welfare, with low-income households seeing greater relative welfare improvements from these policies than high-income households.

Conversely, the welfare outcomes from ‘brown’ investments are more regressive than for the other policies.