Researchers from the University of Exeter have analysed the impacts of the low-carbon transition in power, transport and heating on UK productivity

With renewable energy now cheaper than fossil fuels in most of the world – and still getting cheaper – the findings show three industries – power, transport and heating - directly benefit UK productivity. The research team warn that this depends on cheaper energy prices being passed on to consumers, not kept as profits by energy companies.

The study is published to coincide with the launch of the Exeter Climate Policy unit which advises policymakers on reaching a low-carbon future.

“The power, transport and heating industries are not themselves leading sources of productivity growth in the UK,” explained Dr Jean-Francois Mercure, who leads the Exeter Climate Policy. “However, if these energy services become any cheaper, every other sector across the entire economy can operate more cheaply, freeing up unspent income for other things, causing economic growth.”

Commenting on whether cheaper energy production necessarily results in cheaper energy for businesses and households, Dr Mercure said: “This is not always the case currently. “For example, as long as the cost of gas is used to set electricity prices, the benefits of cheaper solar and wind energy will continue to be captured as profits by producers, the grid operator or electricity distributors, whose shareholders may keep it as wealth and not necessarily spend it back again.”

The study analyses the UK economy from now to 2035, but the findings are relevant to other nations that import substantial fossil-fuel energy.

Dimitri Zenghelis, from the University of Cambridge, said: “The paper makes the case not just for climate policies, but for smart economic policy more broadly. “We provide compelling evidence to show how this is a global race for competitive advantage that the UK economy can’t afford to sit out.

“For an energy importer like the UK, the clean transition is a win-win. Even fossil fuel exporters can benefit, though it’s time to diversify fast.”