Theme 5
Net Zero Innovation
Net Zero Innovation
For many, the greatest challenge of the 21st century is climate change. Net zero refers to achieving a balance between the carbon emitted into the atmosphere and the carbon removed from it. Markets for new technologies that can help businesses and countries to achieve net zero are expanding, and therefore they are a key area in which innovative activity has the potential to contribute to national economic growth and competitive advantage.
Our UK Innovation Report 2022 has chosen net-zero innovation as a topic in focus, to highlight how the UK is performing in what has the potential to be a high-growth economic sector. While climate-change mitigation technologies are not clearly classified within typical economic indicators, this section brings together the available data from global patent data and the so-called low-carbon and renewable-energy economy (LCREE) sectors within the UK. These allow us to provide a snapshot of whether net-zero innovation is translating into economic growth in the UK.
Policy questions and key messages
- How does the UK compare in low-carbon and renewable-energy technology research and development (R&D) investment?
- How is R&D expenditure translating into patenting performance?
- Is the UK capturing the economic potential of the transition towards net zero?
Although the UK’s public R&D budget in low-carbon and renewable-energy technologies is comparable to other leading nations, the country underperforms slightly in terms of patenting
- The International Energy Agency (IEA) estimates that in 2020 the UK’s public R&D budget in low-carbon and renewable-energy technologies was $1.2 billion (USD $2020), lower than the US ($8.1 billion), Japan ($2.9 billion) and France ($2.1 billion), but ahead of Germany ($1.1 billion) and Canada ($0.8 billion).
- In the period of 2013–17, the UK ranked eighth in the development of climate-change mitigation technology (CCMT) patents, behind Japan, the US, Germany, Korea, China, France and Taiwan but ahead of Italy and Canada. Key technology fields covered in this ranking include buildings, carbon capture and storage (CCS), energy, information and communication technology (ICT), manufacturing, transportation and waste management.
Most of the low-carbon and renewable-energy sectors in the UK have been declining over the last five years
- The ONS defines the low-carbon and renewable-energy economy (LCREE) as 17 low-carbon sectors, including wind, renewables, PV, CCS, nuclear and energy-efficient products. Most of the low-carbon and renewable-energy sectors in the UK have been declining over the last five years, except for a small number of activities such as offshore wind. A total of 10 out of 17 sectors showed a decline in turnover between 2014 and 2019.
- Overall, there were 27,000 fewer LCREE business and 33,800 fewer jobs in LCREE sectors in 2019 than in 2014.
There are some national disparities, with Scotland performing strongly
- At £1.073 million turnover, 4.1 jobs and 2.2 businesses per 1,000 inhabitants, Scotland performed above the UK annual average for all categories between 2014 and 2019.
- Similarly, Wales performs above the national average for LCREE businesses and jobs, at 2.46 businesses and 3.35 jobs per 1,000 inhabitants.
- In contrast, Northern Ireland is under-performing relative to its size on turnover and employment in LCREE sectors, whereas England has a lower turnover (£605,000 per 1,000 inhabitants) than the national average (£643,000 per 1,000 inhabitants).
UK carbon emissions by sector
Note: UK resident basis, greenhouse gases under the Kyoto Protocol. Source: ONS (2021). Atmospheric emissions: greenhouse gases by industry. Industry definitions provided in Appendix 5.1.
- Climate change is a current and pressing global challenge. The Intergovernmental Panel on Climate Change’s (IPCC) most recent report identified that, unless there are immediate, rapid and large-scale reductions in greenhouse-gas emissions, limiting warming to 1.5°C or even 2°C will be beyond reach.[1]
- The UK is one of the top 20 emitters globally and has above-average emissions per capita, even before accounting for emissions embedded in imported goods. The UK’s emissions are the 17th largest in the world,[2] with 1% of global emissions produced by 0.9% of the global population.
- The UK’s high emissions represent a significant challenge but also a significant opportunity for innovation under regulatory constraints.
[1] IPCC (2021). Climate Change widespread, rapid, and intensifying.
[2] World Bank (2021). Total greenhouse gas emissions (kt of CO2 equivalent), 2018 figures.
Public R&D spending on low carbon and renewable energy technologies
Source: IEA (2021) IEA Energy Technology RD&D Budgets – October 2021 – Selected data.
- Climate-change mitigation is an international priority. At COP26, countries worldwide reaffirmed their mitigation targets, including the UK’s targets for a reduction in emissions of 78% by 2035 compared to 1990 levels and net-zero emissions by 2050.[1]
- This is reinforced by significant spending on innovation, including the £1 billion Net Zero Innovation Portfolio announced in March 2021.[2]
- The International Energy Agency (IEA) estimates that in 2020 the UK’s public R&D budget in low-carbon and renewable-energy technologies was $1.2 billion (USD $2020), lower than France ($2.1 billion), Japan ($2.9 billion) and the US ($8.1 billion) but ahead of Germany ($1.1 billion) and Canada ($0.8 billion).[3]
- Categories included in the IEA’s analysis include: energy efficiency; renewables; nuclear; hydrogen and fuel cells; other power and storage technologies; and other cross-cutting technologies.
[1] UK Government (2021). UK enshrines new target in law to slash emissions by 78% by 2035.
[2] UK Government (2021). Net Zero Innovation Portfolio.
[3] IEA (2021). IEA Energy Technology RD&D Budgets – October 2021 – Selected data.
Top 10 countries by global share of patents in climate change mitigation technology (CCMT)
Source: Probst et al., (2021) Global trends in the invention and diffusion of climate change mitigation technologies
- The UK ranks eighth in the registration of climate-change mitigation technology (CCMT) patents, behind Japan, the US, Germany, Korea, China, France and Taiwan but ahead of Italy and Canada.[1][2]
- Technologies covered under the CCMT group include: buildings, carbon capture and storage, energy, information and communication technology, manufacturing, transportation, and waste management.
- It is unclear, however, whether this strength in patents is translating into economic performance for the UK or if the economic benefits are being exploited elsewhere.
[1] Climate-change mitigation technologies (CCMT) are defined as patents classified as “Y02” patents within the CPC classification scheme. The Y02 classification covers technologies for mitigation or adaptation against climate change and is a cross-sectional tagging scheme for new technological developments, particularly with the goal of highlighting patents in the field of climate-change mitigation. The classification was jointly developed by the USPTO and European Patent Office (EPO). See Appendix 5.2 for more detail.
[2] Probst et al. (2021). Global trends in the invention and diffusion of climate change mitigation technologies. Compiled with global data from the Worldwide Patent Statistical Database (PATSTAT) maintained by the European Patent Office (EPO). It contains bibliographical data relating to more than 100 million patent documents from leading industrialised and developing countries
Top 10 UK patent applications in the field of climate change mitigation technologies (CCMT)
Note: the analysis includes patents published with the USPTO in 2020.. Source: Patent data was retrieved from Lens.org
- The chart shows the top 10 UK-based patent applicants for climate-change mitigation technology patents published in 2020 with the USPTO.[1]
- The top patent applicant in the field of climate-change mitigation technologies is Rolls-Royce, with 385 patents.
- Johnson Matthey (75 patents), Airbus Operations (68 patents) and ARM (44 patents) follow in the ranking of climate-change mitigation technology patents.
- The top 10 UK-based companies patented a total of 703 patents.
- UK-based companies patented a total of 1,578 climate-change mitigation technology patents in 2020 with the USPTO.
[1] Climate-change mitigation technologies (CCMT) are defined as patents classified as “Y02” patents within the CPC classification scheme. The Y02 classification covers technologies for mitigation or adaptation against climate change and is a cross-sectional tagging scheme for new technological developments, particularly with the goal of highlighting patents in the field of climate-change mitigation. The classification was jointly developed by the USPTO and European Patent Office (EPO). See Appendix 5.2 for more detail.
UK low carbon and renewable energy economy (LCREE) sector performance
Source: ONS (2021) Low Carbon and Renewable Energy Economy (LCREE) survey estimates, UK, 2014 to 2019
- The overall turnover of the LCREE sectors showed a slight decline from £44 billion in 2014 to £43 billion in 2019 (for context, the overall automotive industry turnover is estimated at approximately £80 billion).[1]
- Activity captured within the largest sector – other energy-efficient products – is extremely broad. Examples include the design, manufacture or installation of energy-efficient doors, windows and insulation.
- Ten sectors showed a decline in turnover between 2014 and 2019. The largest growth industry between 2014 and 2019 was the low-emission vehicles and infrastructure sector, with a growth in turnover of just under £2.6 billion, or 12% p.a., between 2014 and 2019. Other growth sectors included offshore wind, renewable heat and hydropower.
- Despite the similar sizes of the onshore and offshore wind sectors, between 2014 and 2019 offshore wind was growing, while onshore wind was declining, in approximately equal proportions. There was a net decrease in turnover in wind between 2014 and 2019 (~-£65 million turnover difference).
Note: This analysis uses results from the low-carbon and renewable-energy economy (LCREE) survey, run by the ONS (2021), which identifies 17 low-carbon sectors within the UK economy (see Appendix 5.2 for full detail).
[1] SMMT (2021). Economy – Automotive’s Economic Contribution – Key Industry Indicators.
Employment and number of businesses in the low carbon and renewable energy economy (LCREE)
Source: ONS (2021) Low Carbon and Renewable Energy Economy (LCREE) survey estimates, UK, 2014 to 2019
- Despite the potential for LCREE to represent a growth sector within the UK economy during a period of increasing policy importance, the number of businesses and employees within these sectors in the UK declined from 2014 to 2019.
§There were 27,000 fewer businesses in 2019 than in 2014, a net loss of ~5,400 businesses per year. - Similarly, there were 33,800 fewer jobs in the LCREE sectors in 2019 than in 2014, a net loss of ~6,700 jobs per year.
- SMEs employed the vast majority (69% FTE) of individuals working in the LCREE sectors between 2014 and 2019.
- Total employment has been falling within SMEs in the LCREE sector, at an average rate of 9,860 fewer jobs in SMEs per year between 2014 and 2019. While employment has been increasing in larger companies, at an average rate of 3,100 jobs per year, this still results in a net decline.
Low carbon and renewable energy economy (LCREE) sectors, comparison by country
Source: ONS (2021) Low Carbon and Renewable Energy Economy (LCREE) survey estimates, UK, 2014 to 2019
- Analysing LCREE data by country indicates that Scotland punches above its weight, while Northern Ireland is under-performing relative to its size on turnover and employment in the LCREE sectors.
- While England has the highest total turnover in LCREE businesses, Scotland has a higher performance on a per-capita basis.
- Relative to the other countries, Scotland has the highest proportion of its average turnover generated by onshore wind. It also has above-average input from nuclear and hydropower and below-average input from low-emission vehicles and infrastructure.
- Perhaps surprisingly, offshore wind makes up only 5% of Scotland’s average turnover – less than England (8%) or Wales (6%) but above Northern Ireland (0.5%).
- Northern Ireland performs poorly on turnover on a per capita basis. Northern Ireland has the highest per capita share of employment within the low-emission vehicles and infrastructure sector, at 25% of all LCREE employment in Northern Ireland, compared to no more than 5% in other countries. Overall, Northern Ireland has fewer employees in the LCREE sectors despite having more businesses on a per capita basis.
Appendix 5.1 - Sectoral breakdown
Appendix 5.2: Key definitions
Appendix 5.2: Key definitions
Defining climate-change mitigation technologies (CCMT) within patent analysis globally
- High-value climate-change mitigation technologies (CCMT), compared to other similar countries.
- This analysis is based on the Y02 classification scheme, which provides the most comprehensive and standardised low-carbon patent classification. It covers most technology fields, buildings, carbon capture and storage (CCS), energy, information and communication technology (ICT), manufacturing, transportation and waste management.
- This analysis uses international patent families for high-value inventions (which comprise the top ~25% of all patented CCMT inventions).
- Analysis compiled with global data from the Worldwide Patent Statistical Database (PATSTAT) maintained by the European Patent Office (EPO). It contains bibliographical data relating to more than 100 million patent documents from leading industrialised and developing countries.
More information at:
- https://www.uspto.gov/web/patents/classification/cpc/html/cpc-Y.html#Y02
- https://www.epo.org/searching-for-patents/business/patstat.html
Defining low-carbon and renewable-energy economy (LCREE) sectors within the UK
The low-carbon and renewable-energy economy (LCREE) survey, run by the ONS (2021), identifies 17 low-carbon sectors, as follows:
- offshore wind
- onshore wind
- solar photovoltaic
- hydropower
- other renewable electricity
- bioenergy
- alternative fuels
- renewable heat
- renewable combined heat and power
- energy-efficient lighting
- other energy-efficient products
- energy monitoring, saving or control systems
- low-carbon financial and advisory services
- low-emission vehicles and infrastructure
- carbon capture and storage
- nuclear
- fuel cells and energy storage
Activity captured within the largest sector – other energy-efficient products – is extremely broad. Examples include the design, manufacture or installation of energy-efficient doors, windows and insulation.
Within this report, these sectors are used as the best available proxy to understand the dynamics of the UK’s climate-change mitigation technology economy.
