The net zero policy agenda has long been frustrated by vested interests in numerous sectors, including business and financial actors crucial to national growth strategies. The agenda, however, has recently been given impetus by the combination of technological innovations and evolving perceptions of future competitiveness in corporate boardrooms and governments across the global economy. The various strategies borne from this interplay have served to instigate and accelerate systemic changes to production in the energy, manufacturing and automotive sectors particularly. These emerging shifts promote industrial decarbonisation, but there is a sting in the tail. These shifts carry a series of risks to employment in regions of the UK economy that requires the attention of policy-makers.

Challenges of transition

The reorientation of production – such as the shift to electric vehicles, green hydrogen, solar PV, wind energy technology and heat pumps – are vital to net zero transitions, but each entails large-scale shifts toward alternative types of facilities, supply chains, infrastructure, expertise and energy usage. This could prompt the relocation of production, investment and jobs. It is already the case, for example, that automotive companies are shifting manufacturing to industrial sites in China where technical knowledge and cheap labour are abundant, effectively replacing the manufacturing of cars in Europe. Equally, the manufacturing of green hydrogen and solar PV are also being pioneered in areas where labour regulations and costs are less onerous. This presents clear conflicts between corporate strategies of transition and the interests of workers’ unions.

These disruptions to patterns of employment are being re-shaped and escalated by the intensifying global ‘arms race’ on subsidies for low-carbon production. The long series of investments made by the Chinese state have effectively secured a host of competitive advantages in low-carbon manufacturing, but the $369bn mobilised by Biden’s Inflation Reduction Act for companies based in the US is seen as a key moment in the geopolitical competition to tempt companies to relocate their operations and jobs. The anxiety this created in Europe forced the EU to unveil a policy of ‘matching aid’ last year, which offer European companies equal subsidies to those offered elsewhere, and was utilised by for the first time in early 2024 to prevent Swedish batter company Northvolt from capitalising on US subsidies. Volkswagen and Tesla have already paused plans to develop battery cells in Europe due to the offer of subsidies in the US, and other major employers are also likely to be reassessing corporate strategies as firms seek to use their leverage to capture subsidies to invest in green hydrogen, electric batteries, carbon capture and storage, renewable energy industries, and other products perceived to be central to low-carbon value chains.

In the context of these emerging economic and political shifts, net zero transitions represent a phase of capitalist restructuring with geographically uneven but potentially dire consequences for some countries and regions in the global economy. This reconfiguration of production and the ‘global division of labour’ could potentially lead to localised issues of ‘green deindustrialisation’ and structural unemployment.

The domestic impact

The risks facing each region of the UK economy remain unclear, but localised tensions and conflicts are already emerging. There is nothing predetermined about these trends, but the transition to net zero in the UK could be turbulent. At the very least, the threats to domestic employment presents a grave threat to notions of a Just Transition in the UK. For some regions, this will add to historical scars of deindustrialisation, and the legacies of unemployment, economic stagnation and regional inequality that it left behind.

The UK government have thus far been slow to respond to these risks. The domestic net zero policy agenda itself has been characterised by political posturing, policy U-turns and institutional conflicts more than the policy action required to avert climate catastrophe, which has left the UK at a competitive disadvantage to rival economies, and its inclination to protect workers from the forces of globalisation has historically been weak. In the next decade, however, UK policy-makers must confront these challenges, build coalitions with affected stakeholders, and devise the policies that affords the UK a position in emerging global value chains. Promoting decent work and the levelling up agenda in this context relies on strategic, long-term, joined-up and effective state action.

Complicating the issue is that the failure to promote systemic change would also have adverse economic consequences for UK employment, insofar as key industries face being left behind if they fail to shore up their competitiveness in the putative low-carbon economy. This renders ‘climate delayism’ harmful to key sectors in the UK economy as well as the environment.

Interventions for ‘levelling up’

It is critical that we better understand into the regions at greatest risk of ‘green deindustrialisation’ and job losses as a result of the low-carbon transition, but there is a palpable need for place-based economic policy interventions in order to counteract these risks. In all probability, these economic trends will also generate political conflicts that result in industrial unrest and undermine support for major parties in their existing electoral heartlands, with far right parties eager to capitalise on discontent. As such, those within the British state will increasingly need to grapple with the socio-economic effects of the net zero transition and contemplate a policy response that navigates the trade-offs.

Taking lessons from ‘what works’ elsewhere, this could include a combination of carefully sequenced regional industrial policies, education and skills policies, regulations, carbon taxes, community wealth building, and the strengthening of welfare provision in order to ensure a transition that avoids exacerbating existing inequalities. Chris Skidmore and IPPR have already identified areas where industrial policies could secure new competitive advantages and ‘green-collar’ jobs for the UK,  and the challenge for the next government will be to develop a policy package that seizes these opportunities. We’re unlikely to see these issues receive major attention ahead of the next General Election, but these market forces will fundamentally re-shape the UK economy in the next decade and likely compound any attempts to ‘level up’.