There is much talk about the scale and pace of change that is needed to move towards net zero in Wales. The changes are equally important for a prosperous economy as well as a green economy, as we discussed in our evidence paper for the Senedd’s Economy, Trade and Rural Affairs Committee.
There are important fundamentals for economic prosperity that still need to be achieved and these should be situated within a vision of a green economy that is enabled by a just transition.
Realising economic opportunities from decarbonisation requires solutions to many of the same challenges that are faced in efforts to maximise productivity and reduce inequality. Fundamentals for economic prosperity include: stable and well-functioning economic institutions, networks and financial institutions; supportive infrastructure; and critically, leadership and a pool of skilled labour. When these mutually supporting features are in place, the investment and innovation needed to develop the green economy is facilitated.
Despite some key policy levers being reserved to the UK government and the UK’s regional institutions lacking the decision-making powers, budgetary capacity and institutional capabilities to make transformative policy interventions, there are still significant things that can be done in Wales. The Welsh Government has considerable powers in the policy areas of education and skills. These are important drivers of productivity which will play a critical role in growing the green economy as adjustments in skill sets will be needed in many jobs, not just those seen as technical roles directly within green sectors. As part of this, changes to the education and skills system will be critical alongside long-term support to ensure learning is lifelong.
In addition to the leverage to coordinate investment in skills, the Welsh Government also has policy levers for transport, R&D, working places, and developing clusters with supportive supply chains; all essential components of a successful transition to net zero. These should be underpinned by a vision of economic development for Wales to build investor confidence. Understanding how different sectors can mutually support one another, considering areas of comparative advantage and opportunities for regional collaboration and innovation will further strengthen this.
Wales has established a good legislative foundation to support a just transition including: the Well-being of Future Generations Act to provide the overarching framework; the Social Partnership to bring partners together; Corporate Joint Committees to enable regional collaboration; and the Commission for Tertiary Education and Research (CTER) to facilitate the tertiary education sector’s response to the substantial demand for reskilling. The ongoing challenge for all of these is building the capacity for implementation.
The Welsh Government and regional organisations have the potential to encourage investment in rural or deindustrialised parts of Wales by providing a policy environment that is stable in the longer term, and ensuring that the skilled workforce is supported by reliable transport links. Such policies provide opportunities for new industry and ancillary industries and services to emerge.
Lessons from industrial transitions from other countries show how collaborative approaches can help to develop a shared vision for dealing with the adjustments that are necessary to transition to net zero. In particular, partnerships between national governments, local authorities, public services, trades unions, communities and businesses are key to ensuring that policies are well targeted and achieve their aims.
Building this capacity requires consistent investment and financing. In the context of the Welsh Government’s limited capacity to borrow for investment, finding new and innovative sources of finance will be critical. This is as true for local authorities who need to progress towards net zero as it is for the private sector to grow and thrive in a green economy.
At WCPP we are developing the new phase of our Environment and Net Zero priority area to provide supporting evidence to help Welsh Government and public services policy makers address some of these challenges.