Northern Powerhouse Partnership: Financing the transition to Net Zero in the North of England
While transitioning to a Net Zero economy is expected to be challenging, it will also create significant economic opportunities in the North of England by attracting new businesses and investments, boosting productivity, and generating new jobs.
In this context, transitioning to a Net Zero economy is not only an opportunity to reduce carbon emissions, but also a means to address economic disparities between the North and the regions of London and the South East. To realise these benefits, it is essential to unlock large-scale investments in the region.
Cambridge Econometrics’ analysis for the Northern Powerhouse Partnership explored the roles of the public and private sectors in financing the transition to Net Zero in the North of England. The project estimates that the public budget will need to account for roughly 30% of the investments required to put the UK on a path to Net Zero, while private funds are expected to cover approximately the remaining 70%. Although the focus of this study is on the North of England, the researched public-private investment splits also represent the division of investments in the UK as a whole.
Our approach
Overall investments were evaluated based on figures from the UK Government’s “Build Back Greener” Net Zero plan for each component of Net Zero. These figures were distributed over a 25-year period, including a suitable ramp-up phase. Drawing on historical data and trends, Cambridge Econometrics estimated the likely investment allocation for the North of England and identified the relevant economic sectors. The proportion of public and private investments was assessed building upon evidence from a comprehensive literature review, with Cambridge Econometrics providing a critical interpretation of the findings.
Key findings and insights
Of the £10bn energy investments allocated to the North of England, £3bn is public investment (primarily in direct funding of renewable energy generation and supporting low-income households in the energy transition) and £7bn is private investments.
Of the £3bn investments in the built environment sector allocated to the North of England, £0.8bn is public investment (primarily in supporting low-income households in the transition to green buildings) and £3.2bn is private investments.
Of the £4bn investments in the transport sector allocated to the North of England, £1.2bn will be covered by public investments (primarily in supporting low-income households in the transition and upgrading the required transport infrastructure at the required scale and pace) and £2.8bn by private funds.
Of the £4bn pa industry investments allocated in the North of England, £0.8bn would come from public funding and £3.2bn from private sector (primarily to funding publicly owned CCUS and hydrogen infrastructure and grants/tax incentives to accelerate fuel switching).
In the land use sector, of the £1bn pa investments in the North, £0.5bn would be public investment (primarily in directly funding of environmental restoration and grants to encourage sustainable agricultural practices) and around £0.5bn would be covered by the private sector.
Find out more here – Net Zero by 2050: 1 Plan. 2 Objectives. How green growth can build the Northern Powerhouse. – Northern Powerhouse Partnership