The Economic Impacts of Climate Policy and the Green Transition in the United Kingdom: A Quantitative SEM Analysis

Abstract

The green transition, driven by national agreements and international terms such as the Paris Agreement, focuses on reducing carbon emissions and promoting renewable energy. Governments worldwide are introducing climate change mitigation policies and building low-carbon economies. However, these changes also cause massive economic disruptions, especially in those industries dependent on fossil fuels. The study aims to analyze the economic impacts of climate policy and green transition, focusing on their effects on the UK economy. It utilized a quantitative research design, where it surveyed 250 respondents in industries that were most influenced in the UK by climate policy measures. Smart PLS was used to apply SEM and CFA to the relationship between climate policy, green transition, and economic growth. The findings suggest that, even though both the green transition and the climate policies positively affect economic growth, the impact of green transition on economic development is much greater than that of climate policies. In particular, the green transition was derived to impact economically, the renewable energy and clean technology sectors strong direct effect, whereas climate policy effects had more moderate impacts. It contributes towards empirical evidence on the relative effects of climate policies and green transition initiatives on the economic development in the UK. It also identifies the threats and opportunities of the green transition, especially in fossil fuel-intensive industries and the necessity of balanced policy solutions helping environmental objectives and economic sustainability simultaneously.