Economics, finance and data science consultancy Oxera releases Growth Zero: Reframing net zero as a lever of growth, highlighting how net zero could unlock a decades-long growth boom for Europe’s electricity sector while causing a rapid decline in output for the fossil fuel sector.
The study explores four levers to achieve net zero across Europe — regulation, private sector innovation, carbon pricing, and fiscal policy — revealing that rapid decarbonisation policy packages could unlock substantial growth for governments and businesses, while achieving net zero before 2050.
Key Findings:
- UK energy sector impact: Growth Zero levers show that the fossil fuel sector could experience a sharp decline of -19.5% output per year in the run up to achieving net zero, while the electricity sector could experience an additional 2.9% growth per year – unlocking up to £50.3 billion in output for the sector.
- Germany energy sector impact: Growth Zero levers show that the fossil fuel sector could experience a sharp decline of -40% output per year in the run up to achieving net zero, while the electricity sector could experience an additional 1.2% growth per year – unlocking up to €44.7 billion in output for the sector.
Oxera’s study comes at a point of transformation for energy policy across Europe. Recent EU elections and several national elections have seen a shift to the right, away from environmentally focused parties. Meanwhile, the newly elected Labour Party in the UK pledges to reach zero-carbon power by 2030, accelerate the move to net zero and make Britain a clean energy superpower, and Germany’s 2025 budget has seen record investments in renewable power, industrial decarbonisation, electric mobility and a faster transition in the heating sector. Amidst this turbulent political context, where the future of climate policies in several European countries looks uncertain, Growth Zero demonstrates that rapid decarbonisation can be a lever of economic growth as well as helping to mitigate the impact of the climate crisis.
| Growth Zero lever | Total electricity growth boost | Annual electricity growth rate | Total fossil fuel growth decline | Annual fossil fuel growth rate |
| Carbon pricing
Carbon prices are increased by around 30% on average year-on-year in the 2020s, by 8.6% in the 2030s and by 4-6% in the 2040s. |
£50.3 billion (UK)
€24.9 billion (Germany) |
2.9% (UK)
0.7% (Germany) |
-£583.6 billion (UK)
-€283.6 billion (Germany) |
-17% (UK)
-29.9% (Germany) |
| Private sector innovation
Large-scale deployment of new, green technology-based production capacities accelerates transition. |
£44.4 billion (UK)
€44.7 billion (Germany) |
2.8% (UK)
1.2% (Germany) |
–£597.1 billion (UK)
-€360.3 billion (Germany) |
-18.3% (UK)
-37.1% (Germany) |
| Fiscal policy
Subsidies for established low-carbon technologies are supercharged whilst taxes are increased on carbon-intensive industries. |
£40.2 billion (UK)
€33.4 billion (Germany) |
2.4% (UK)
1% (Germany) |
-£630.9 billion (UK)
-€357 billion (Germany) |
-18.7% (UK)
-38.1% (Germany) |
| Regulation
Strict penalties are placed on high-emission sectors and phase-out dates are brought forward. |
£22.1 billion (UK)
€5.7 billion (Germany) |
1.3% (UK)
0.1% (Germany) |
-£656.9 billion (UK)
-€377.3 billion (Germany) |
-19.5% (UK)
-40% (Germany) |
Sahar Shamsi, Partner at Oxera said:
“The Growth Zero findings come in the context of a period of significant transition for the energy sector – one that is characterised by rising energy bills, supply chain challenges, and the need to decarbonise. A huge increase in electrification is needed to reach net zero before 2050, but this cannot be achieved without a transition away from the use of fossil fuels. While it is no secret that the transition from fossil fuels will incur massive capital expenditure for the energy sector – such as shifting to renewables infrastructure, extensive investments in the grid and corresponding to changes to the workforce – Growth Zero demonstrates that rapid decarbonisation can be a lever of economic growth as well as helping to mitigate the impact of the climate crisis.”
Net zero: an economy-wide growth opportunity
Outside the energy sector Growth Zero highlights that there are huge economy-wide benefits that can be drawn from the transition to net zero. The study shows that the levers could unlock up to €4.8 trillion in GDP across the EU economy and £726 billion in the UK economy. Growth Zero also highlights that these levers could support up to 1.4 million EU jobs and 309,000 British jobs, while reaching net zero in the UK as early as 2044 and by 2046 in the EU.
Growth Zero: Macroeconomic benefits require microeconomic insight
Growth Zero uses a macroeconomic model to investigate the potential impact of four different levers—regulation, private sector innovation, carbon pricing and fiscal policy — for achieving net zero in Europe. Each lever represents a distinct pathway to net zero, with a specific set of relevant policy assumptions applied as “shocks” to a macroeconomic model to examine their impact.
The results of the macroeconomic modelling have been combined with microeconomic insight from Oxera’s experts to help business leaders understand the potential implications for their business.
To find out more about methodology underpinning Growth Zero, as well as a full breakdown of the impact of the four growth levers on the UK, German and EU economies visit: https://www.oxera.com/insights/agenda/topics/growth-zero/
