The economic impacts of UK labour productivity-enhancing industrial policies and their spillover effects on the energy system

Academic and policy discussions increasingly recognise the wider impacts of energy policy on the macro-economy. For example, recent analyses on energy efficiency policies emphasise the stimulus to economic activity that these typically generate and their potential impacts on distributional issues, while policies aimed at growing the offshore wind sector have associated targets for the economic impacts that could be secured.

However, interaction in the opposite direction, that is the impact of economic policies on the energy system, has been comparatively neglected and, in particular, there has been little system-wide analysis of the spill-over effects from economic policies to the energy system.

The studies that have looked at the impact of economic policies on the energy system have tended to focus upon specific policies that have a high correlation with energy and/or environmental outcomes – for example, the recent debate here in Scotland with regard to Air Departure Tax.

But what about economic policies more broadly? Continue reading

June 18, 2019

The transition to a low carbon energy future and its employment implications

Dr Grant Allan and Dr Andrew Ross
Fraser of Allander Institute, Department of Economics, University of Strathclyde

The low carbon transition calls for ‘system change’ as Greta Thunberg, the 16-year-old Swedish climate activist, puts it so eloquently. Despite of the progress made, e.g. the phasing out of coal, a 100% low-carbon energy future is still a long way off for the UK.
It is clear, however, that changes in energy supply in the coming decades are likely to have major economic implications.

In our research, we examine the scale as well as the skill characteristics of employment related to current energy activities in the UK. This helps to understand the possible employment consequences of this transition.Continue reading

May 21, 2019

The spillover effects of UK trade-enhancing industrial policies on the energy and non-energy systems

Key messages

  • The “spillover” effects of non-energy (primarily economic) policies on the energy system are of considerable interest from a policy perspective. In (The spillover effects of UK trade-enhancing industrial policies on the energy and non-energy systems) we analyse the impacts of export promotion policies – a key element of the UK’s Industrial Strategy – on the energy system and energy policy goals.
  • As the impacts of such policies are, in a large part transmitted via their effects on the economy, we adopt a computable general equilibrium model of the UK (UK-ENVI) that fully captures the interdependence of the energy and economic systems.
  • Our simulation results suggest that an across-the-board stimulus to exports stimulates all major economic indicators, and increases total energy use significantly. The energy intensity of GDP increases – not directly through energy exports – but indirectly through the energy sectors’ linkages to other sectors.
  • Export led growth therefore impacts on energy use – and significantly so. This in turn is likely to have an adverse impact on emission targets.
  • Policy makers should be aware of the fact that a successful implementation of the Industrial Strategy may create significant tensions with the UK’s Clean Growth Strategy, for example, and with the goals of energy policy more generally, in the absence of offsetting policy initiatives.
  • Ultimately, a knowledge of such spillover effects of economic policies on the energy system creates the potential for more effective and efficient policy making.

Continue reading

August 2, 2018