The TUC, Trade Unions Congress, has recently reported to the BBC that the UK is supposedly at risk of losing many jobs in renewable energy and other green sectors if carbon targets are not prioritised. The TUC claims that up to 660,000 jobs could be at risk if the UK fails to meet its carbon neutral targets before other nations.
But why is this?
Well it all comes down to comparative advantage, a concept which was popularised by David Ricardo. Comparative advantage refers to the fact that if a nation specialises in a narrow range of goods and services, then the nation will benefit from lower opportunity costs when providing that good or service. In other words, the nation will be able to produce these services more efficiently.
Reason why this is important for nations is because if a country is undercut by its competitors, then the nation will lose trade, because of this, the firms producing these specific goods will lose revenue and profits, thus forcing them to either reduce their operations, change their specialisation, or, in some cases, to completely close. This is evidenced in the case of Japan, a country which before 2012, was a world leader in producing electronic goods and semiconductors.
However, during and post 2012, the Japanese Yen saw an extreme rise in value.
Consequently, as the currency appreciated, Japanese exports became more expensive for foreign buyers.
This increased the costs of purchasing Japanese electronic products so much that some buyers flocked to Taiwan and South Korea to purchase their semiconductors.
Therefore, this gave nations such as Taiwan and South Korea the engine steam necessary to completely overtake Japan in the semiconductor market.
As a result of this, once the Japanese Yen stabilised and recovered, even though Japan used to be a world leader in semiconductors, it still found itself behind Taiwan and South Korea as in the time it took the nation to recover, these two runner ups became comparatively better at producing semiconductors than Japan.
So, the Trade Union argues that if the UK does not spearhead the development of green technology, then the nation will fall behind as European nations such as Germany and France may become comparatively better at producing these products.
Now that we have looked at the economics, it seems like the UK’s target of slashing emissions by 75% by 2035 is a lot more important on an international scale.
However, the Department for Business, Energy and Industrial Strategy (BEIS) says the TUC's claims are untrue and that it does not recognise their logic.
This is because the UK is already implementing many policies to reach this 2035 goal, for example, the UK government has been able to secure Siemens, a German green tech manufacturer to enter the country, at the same time, policies such as banning the sale of new petrol and diesel cars by 2030 will help us reach our climate targets.
Despite this, the trade union proposes that the UK government has to do more.
The union body is calling for an £85bn green recovery package to create 1.2 million green jobs.
Although such a package would be very beneficial in securing our position as a world leader in the development of green technology, which is an important position to have and maintain as if we are comparatively better to other countries in producing green tech, once China and India develop, it is likely that, they will demand green tech. Hence, if the UK is the best at producing these technologies through being the most low cost and efficient option, it is logical to assume that these developing nations will be major buyers of green technology from the UK. However, despite the benefits, a package of this size does have its costs.
One of these costs is the fiscal burden, the current proposal would cost the government £85 billion to implement, which places this plan at half the cost of HS2. This means that, because the government has a limited budget, and, because the UK Public Sector debt is currently at £2.4 trillion, the introduction of such a package would worsen this opportunity cost associated with debt repayments.
Alternatively, the UK government could cut spending in other areas of the economy, such as the Armed Forces, to cut this package.
However, the opportunity cost of reducing jobs in the armed forces may be too costly for the government to continue with implementing this package.
Hence, although prioritising carbon targets is important, it seems like the UK is currently in no position to further invest in green technology, for the time being it may be logical to conclude that the government's current objective is to recover our economy, once this is complete, then the UK can begin prioritising becoming a world leader in green technology.
Written by Hubert Kucharski