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.  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,  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  which allows them to increase prices.  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.  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,  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and battery production will make electric cars the rational choice for consumers due to superior efficiency compared to outdated petrol and diesel counterparts.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.  This means that as China’s middle-class grows,  the demand for electric vehicles in China will increase.  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,  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,  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,  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.  This is significant for the UK as Post-Brexit, there have been talks of CANZUK, which has been endorsed by the PM.  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,  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.
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