The proposed Fifth Carbon Budget will not harm the UK’s international competitiveness and could actually boost economic growth, according to a new report.

The London School of Economics’ (LSE’s) Grantham Research Institute said that the UK’s competitors were also introducing similar measures, particularly after the Paris Agreement.

“Climate change policies can increase the competitiveness of the UK in the long term by encouraging greater innovation and efficiency,” the report said.

“Well-designed climate change policies could offer business opportunities in fast-growing global markets.”

4% of GDP affected

The LSE report said only a few sectors – which collectively account for 4% of economic output – were at risk of significant negative impacts from the proposed budget.

“Policies to support vulnerable sectors are already in place in the UK, in the form of free emissions trading permits and sector discounts or exemptions from national policies,” the report added.

“However, there is evidence to suggest that current measures are often too generous and target too many sectors.”

> Download the report