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What policies should the UK government introduce to tackle climate change?

Author: Hubert Kucharski

Disclaimer: This article has been entered as an academic essay part of the FCDO Essay Competition which has now concluded

Lithium-ion batteries have grown in demand recently due to the increasing popularity of the electric car market. [1] The essay below will show how public-private cooperation through subsidies of these batteries will help the UK reduce emissions from its highest polluting sector, transport, [2] and how this intervention can potentially decrease emissions worldwide to slow down the effects of climate change.


A government subsidy or other form of incentive to encourage the production of lithium-ion batteries will increase supply. Subsidies reduce costs for firms, thus decreasing the barrier for entry into the electric car market, meaning more firms can enter the market to compete with Tesla, which currently has a monopoly [3] which allows them to increase prices. [4] A subsidy will benefit consumers as a reduction in monopoly power will decrease the price of electric vehicles, additionally, a competitive market that has numerous firms participating will advance innovation, speeding up technological breakthroughs in battery capacity, solving the issue of long charging times of electric vehicles. [5] Hence, innovation will increase mileage for electric-car batteries, increasing the utility of electric vehicles. Therefore, if the production of batteries is incentivised within the UK before the 2030 legislation concerning the purchasing of petrol and diesel cars, [6] the levels of innovation that will occur in the electric car market and battery production will make electric cars the rational choice for consumers due to superior efficiency compared to outdated petrol and diesel counterparts.


This paired with increased output due to the subsidy will allow excess production to be sold overseas to nations such as China, the world's largest polluter. [7] This means that as China’s middle-class grows, [8] the demand for electric vehicles in China will increase. [9] Therefore, the UK’s production of lithium-ion batteries will make electric vehicles cheaper for Chinese consumers through external economies of scale, thus, Chinese consumers will begin to purchase electric vehicles, decreasing emissions from transport in China as the nation becomes a consumption-led economy, [10] illustrating how subsidies revolving around battery production will decrease emissions from both the UK’s transport sectors and the global economy helping to slow down the effects of climate change.


However, battery development requires engineers, hence the Yorkshire and Humber regions, which have highly skilled underemployed or unemployed individuals, [11] will make perfect enterprise zones as the readily available skilled labour decreases training costs for lithium-ion battery manufacturers thus reducing risk. This combined with the decreased operating costs associated with government subsidies will encourage firms like GM, which have announced plans of expanding into electric vehicle production, [12] to expand into the market. This means a subsidy or other forms of public-private cooperation will lead to decreased risk for private business. Hence, government intervention can incentivise private firms as they will have increased potential to make higher profits if they are to produce electric vehicles. Therefore, because the risk of setting up in the UK is lower, battery and car manufacturers will have increased incentives to set up in the UK due to reduced costs, illustrating why government intervention will be an effective measure in establishing a new specialised industry to supply lithium-ion batteries. Furthermore, to produce lithium-ion batteries, the UK needs a supply of lithium. Luckily for the UK, Australia is the largest producer of lithium. [13] This is significant for the UK as Post-Brexit, there have been talks of CANZUK, which has been endorsed by the PM. [14] Therefore, the development of a specialised industry based on manufacturing lithium-ion batteries is a vital stepping stone for the formation of such an agreement as the UK will have to rely on Australia’s lithium exports to produce lithium-ion batteries. Australia will largely benefit from CANZUK too as their trade will begin to decentralise, enabling the nation to have a much more stable and sustainable demand for exports as uncertainty around China grows, [15] illustrating why such an agreement may be possible in future as both nations benefit.


Currently, the UK is behind in lithium-ion battery production compared to similar economies16, however, the information provided in this proposal gives one clear conclusion, and that is that the UK is the perfect candidate regarding the production of lithium-ion batteries due to the availability of highly skilled labour. Therefore, this combined with the UK’s international relations means that if government schemes are executed correctly to organise production and achieve specialisation, the UK will overtake these nations despite their headstarts. Thus, due to the UK’s great potential of establishing this industry and the fact that this would cut domestic and international emissions, the government encouragement of lithium-ion battery production makes it the most logical next step for the UK economy's efforts of reducing carbon emissions and slowing the effects of climate change.

 

Bibliography:

[1] Statista. 2020. “Infographic: High Demand for Lithium-Ion Batteries.” Statista Infographics. December 8, 2020. https://www.statista.com/chart/23808/lithium-ion-battery-demand/.


[2] Department for Business, Energy & Industrial Strategy. 2021. “Energy Trends about This Release Information on Energy Production, Trade, and Consumption in the UK for Total Energy and by Specific Fuels.” https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/972779/Energy_Trends_March_2021.pdf.


[3] DeBord, Matthew. 2018. “Tesla Has Achieved Something That Nobody in the Auto Industry Thought Was Possible.” Business Insider. December 22, 2018. https://www.businessinsider.com/tesla-monopoly-electric-car-market-2018-12?r=US&IR=T.

[4] ———. 2020. “Tesla’s Cars Are Too Expensive, and Elon Musk Knows It — Here’s Why That Could Be a Big Problem for the Electric-Vehicle Leader.” Business Insider. September 6, 2020. https://www.businessinsider.com/teslas-are-too-expensive-why-that-could-be-a-problem-2020-9?r=US&IR=T.


[5] Disdale, James. 2021. “How Long Does It Take to Charge an Electric Car?” Autocar. March 9, 2021. https://www.autocar.co.uk/car-news/advice-electric-cars/how-long-does-it-take-charge-electric-car.

Financial Times. 2019. “Subscribe to Read | Financial Times.” Www.ft.com. August 25, 2019. https://www.ft.com/content/b28e7aba-c4f2-11e9-a8e9-296ca66511c9.


[6] Harrabin, Roger. 2020. “Ban on New Petrol and Diesel Cars in UK from 2030 under PM’s Green Plan.” BBC News, November 17, 2020, sec. Science & Environment. https://www.bbc.co.uk/news/science-environment-54981425.


[7] BBC. 2021. “Report: China Emissions Exceed All Developed Nations Combined.” BBC News, May 7, 2021, sec. Asia. https://www.bbc.co.uk/news/world-asia-57018837#:~:text=China%20emits%20more%20greenhouse%20gas.


[8] Cheng, Evelyn. 2019. “China’s Giant Middle Class Is Still Growing and Companies from Walmart to Start-Ups Are Trying to Cash In.” CNBC. CNBC. September 30, 2019. https://www.cnbc.com/2019/09/30/chinas-giant-middle-class-is-still-growing-and-companies-want-in.html.


[9] Sun, Abigail. 2021. “Why China’s Electric Vehicle Market Is Racing Ahead.” Why China’s Electric Vehicle Market Is at Full Throttle. March 15, 2021. https://www.schroders.com/en/uk/private-investor/insights/markets/why-chinas-electric-vehicle-market-is-at-full-throttle/.


[10] Jiu, Yan, and World Bank. 2013. China 2030 : Building a Modern, Harmonious, and Creative Society. Washington, D.C.: World Bank.


[11] Billington, Polly. 2021. “How Green Jobs Can Drive North’s Skills Revival – Polly Billington.” Www.yorkshirepost.co.uk. April 30, 2021. https://www.yorkshirepost.co.uk/news/opinion/columnists/how-green-jobs-can-drive-norths-skills-revival-polly-billington-3219318.


[12] General Motors. 2018. “Committing to an All-Electric Future | General Motors.” Gm.com. 2018. https://www.gm.com/commitments/electrification.html.


[13] Statista. 2021. “Global Lithium Mine Production Top Countries 2019.” Statista. February 2021. https://www.statista.com/statistics/268789/countries-with-the-largest-production-output-of-lithium/.


[14] Bet, Martina. 2021. “Brexit Britain Invited to Form CANZUK Super Alliance: ‘Nothing like EU.’” Express.co.uk. February 11, 2021. https://www.express.co.uk/news/uk/1396736/brexit-news-uk-eu-canzuk-australia-new-zealand-canada-spt.


[15] Jun, Xie, and Yin Yeping. 2021. “Iron Ore Price Soars as China-Australia Trade Uncertainties Linger - Global Times.” Www.globaltimes.cn. May 10, 2021. https://www.globaltimes.cn/page/202105/1223082.shtml.

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