We’re told that the green economy is a very good thing, growing fast, highly productive and all that:
The UK’s net zero economy grew by 9% in 2023, a report has revealed, in stark contrast to the 0.1% growth seen in the economy overall. Nevertheless, the report pointed out that strong future growth from green businesses was being put at risk by government policy reversals, lack of investment and competition from the EU and US.
Thousands of new green companies were founded in 2023 and overall the sector was responsible for the production of £74bn in goods and services and 765,000 jobs, according to the report by the Energy and Climate Intelligence Unit (ECIU) and the Confederation of British Industry (CBI).
Super, great. But there’s a confusion there. If this is all a very good thing, growing fast, highly productive, then why do we still have those demands for subsidy?
The answer is that the numbers are being tortured. In the actual report itself we’re told:
The net zero economy spans a number of new and emerging sectors, such as renewables, carbon capture, or green finance, as well as more traditional, established sectors, such as manufacturing. The latest CBI Economics analysis shows that these businesses contributed £74 billion in Gross Value Added (GVA) in 2022-23, which is equivalent to 3.8% of the UK economy – larger than the economy of Wales (£66 billion). They also supported 765,700 Full Time Equivalent (FTE) jobs, equal to nearly 3% of total UK employment. Their contributions include the value generated by their own activity (£25 billion) and their employees (218,500 jobs) as well as the wider economic contributions they supported through their expenditure with suppliers and the expenditure of their employees on goods and services. In essence, due to these wider spillover benefits, for every £1 million in GVA contributed by net zero businesses, nearly £2 million more was added through these wider economic contributions.
Ah, no, that’s not the way GVA works.
GVA is attempting to give us something like GDP calculations but for some portion, region or other subset of that national economy. GVA is therefore worked out the same way as GDP but for that subset. This means that what people spend upon housing, clothing, food, as a result of this subset of the economy is not included in the GVA of the subset - for the housing, clothing, food, would turn up in those other subsets if we were to analyse them. As, when we calculate GDP we do not include those run on effects. For, obviously, if we included the run on effects in GDP of each sector then we’d be double, triple, multiply counting every sector and end up with a GDP that is hundreds of times larger than reality.
We’re fine with people doing economic analysis of the green economy. In fact we’d welcome it if people did. We’re really very sure indeed that the result will be that green economy jobs are less productive than the rest of the economy. For the obvious reason that the green economy is attempting to solve externalities - those things not included in market prices nor our market price based measures of the economy like GDP or GVA. As the value of the output - lower emissions - is not in our measures of output, but the working hours to achieve them are then we run into the productivity measurement equation. Value of output at market prices divided by hours of work put in to gain it.
Exactly because we are trying to solve externalities by our green policies then and therefore green jobs will be less productive.
As we say, we’re absolutely fine with, even look forward to, economic analysis of the green sector. While we wait for that we can reject political fluff jobs like this.