Wales Centre for Public Policy’s Dr Helen Tilley expands on the first webinar delivered in partnership with the IWA
Net zero is often portrayed as a cost, but in practice it is one of Wales’ best opportunities to spark local prosperity, create skilled jobs, build healthier, more resilient communities, and increase productivity if done well. If the next Welsh Government treats the transition as the foundation of long-term economic strength, Wales can generate growth that benefits both current residents and future generations.
Net zero is far more than a climate target. It is an economic strategy that can help Wales grow thriving local economies, reduce inequalities and secure better jobs for generations to come.
The case for acting now is clear, and urgent, given the scale of the challenge. Environmental pressures are already affecting nature, communities and public health across Wales, and delaying action only raises future risks and costs. But alongside this challenge sits a substantial economic opportunity in areas such as renewable energy, domestic retrofit, transport and digital innovation. Wales can harness this momentum to attract major investment, create secure jobs and reduce regional inequalities.
We must not forget that economic conditions vary across Wales. Some places benefit from strong links to transport, education, and industry, while others still experience the effects of long-term industrial decline. Furthermore, as Wales has a higher concentration of carbon-intensive industries compared to the rest of the UK – including steelmaking, oil refining and fossil-fuel processing – these sectors face significant disruption as they undergo decarbonisation, as we have seen recently in Port Talbot. These regional differences show up in productivity levels, wages and job opportunities. A just transition must therefore be designed to close these divides rather than entrench them, as the potential economic gains cannot be achieved without the transition being a just one.
To achieve this, Wales will need policies that build strong local economies, confidence among employers and investors, and to ensure people have the skills required for changing industries. To make this a reality, the next Welsh Government should focus on the following aspects to support both people and places.
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1) Invest in key sectors and their supply chains
Use the framework of the Social Partnership and Public Procurement (Wales) Act to prioritise investment in sectors that have the greatest potential to create long-term, good-quality jobs and stimulate economic activity across local areas. This includes renewable energy, advanced manufacturing, transport and digital innovation. These sectors generate both direct employment and a wide spread of indirect benefits; supporting business linked in the supply chain from engineering firms to local cafés, shops and transport providers. By designing investment around the needs of communities and ensuring that local supply chains can respond, Wales can strengthen its economic base.
For example, investment in domestic retrofit has the potential to stimulate both demand and supply. The sector faces high upfront costs, skill shortages, complex finance and strong disruption for households, but large-scale, well-structured investment can de-risk market entry, create economies of scale and drive innovation.
2) Strengthen and coordinate the skills system
A successful transition depends on a workforce that can move into new and evolving roles. This means ensuring that workers in sectors facing major change, such as steel, heavy manufacturing and fossil-fuel-linked industries, benefit from a coordinated reskilling programme, receiving strong support to retrain and move into secure new roles, arising from investment. This requires a skills system that is easy to navigate. Stronger coordination and collaboration are essential for this, both between industry and education providers and within Welsh Government; supported by robust labour market intelligence. Ongoing collaboration with Medr, the Commission for Tertiary Education and Research, and regional skills partnerships will help to create a more flexible skills system capable of responding to emerging needs, for example through reviewing apprenticeship frameworks.
Regional variations could be addressed through cross-sector skills hubs, as highlighted in the Welsh Government’s recent Green Skills Review. Building on initiatives such as the £500 million Local Growth Fund, which support business expansion and skills development in key areas including low-carbon energy is critical. When anchored within a clear national narrative, funds like this can attract substantial private investment and strengthen regional economies over time.
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3) Use innovative finance and support local capacity
In an increasingly constrained financial environment where councils often face fragmented funding streams and limited specialist expertise, the next Welsh Government should simplify the funding landscape. An important part of this is supporting local authorities to have access to shared technical support in areas such as financial risk assessment, procurement, and legal advice. Drawing on examples, our research has shown how pooling resources across local authorities could help overcome both challenges and improve delivery at scale.
4) Build a clear policy framework and a consistent long-term vision
Communities, businesses, councils and investors need confidence in Wales’ future direction. The Well-being of Future Generations Act (Wales) 2015 already provides a framework which anchors decisions in fairness, environmental stewardship and long-term prosperity. Consistent messaging is important for building confidence among investors and communities, allowing businesses to plan ahead and households to understand the benefits the transition will bring. With a stable national strategy linked to a long-term vision, Wales would be well placed to attract major investment.
In conclusion, net zero is far more than a climate target. It is an economic strategy that can help Wales grow thriving local economies, reduce inequalities and secure better jobs for generations to come. With clear leadership, coordinated planning and a strong commitment to fairness, the next Welsh Government can use the transition to build a more prosperous, resilient and inclusive Wales.
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