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PA OPINION

How to use public funding to promote innovation in Net Zero technology 

The UK Government’s Ten Point Plan for a Green Industrial Revolution sets out an ambition to lead the world in the drive to Net Zero. But to do that, the country will need to continue promoting innovation in sustainability technology whilst rapidly maturing and deploying the results. 

To do this, the Department for Business, Energy and Industrial Strategy (BEIS) is investing more public funding, such as its £240m Net Zero Hydrogen Fund and £1bn support for Carbon Capture and Storage infrastructure. At the same time, the Department for Environment, Food and Rural Affairs (DEFRA), the Department for Transport (DfT) and other government departments are putting together similar funding initiatives. 

It’s critical such investments deliver results, not only to ensure value for UK taxpayers but also to drive the progress in key technologies needed to accelerate the UK’s transition to net zero. 

But government departments have historically struggled to address the challenges of moving from policy into delivery, and to effectively track the benefits of their interventions. For instance, The Newton Fund, which BEIS managed, was an ambitious policy that the Independent Commission for Aid Impact (ICAI) said lacked management and coherence in its approach to delivering impactful outcomes. 

Better management of such funds will be key to driving Net Zero innovations. But how can government departments build their expertise to deliver funds that match their policies? 

In our experience of helping public sector organisations better manage funding interventions, there are three areas to consider to ensure effective delivery: 

1. Fund design 

Your operating model defines how you’ll achieve your policy goals. Getting your operating model right will enable you to deliver your fund programme more efficiently and effectively by maximising the people, processes and technology at your disposal. 

To design the right operating model, it’s important to first agree the vision for your intended intervention. With a defined vision, you can then identify the optimal blend of skills and capabilities needed for delivery and plan how they’ll interact and work together. 

Remember, however, that the required capabilities will change as the fund progresses through its lifecycle and responds to challenges and opportunities. It takes very different skills to design the fund than it does to evaluate its application, for example. So, build flexibility into your operating model, and ensure the fund’s capabilities adapt over time to constantly deliver effectively.  

2. Mobilisation and delivery 

The long-term success of an intervention depends on ensuring sustainable delivery. To do this, Environmental, Social and Governance (ESG) criteria need to be at the heart of the delivery approach.  

ESG focusses the fund’s operations on delivering measurable outcomes for the planet and ensuring prosperity for all. This includes both ensuring the right governance is in place to hold the fund accountable to its commitments, and integrating sustainability into the fund’s risk identification and management procedures. 

The fund must also focus on the applicant to ensure the optimal experience for the businesses applying. The context within which the applicant is operating (such as their typical funding cycles and project timelines) must be central to the delivery of the fund, so competitions should have simple and convenient application processes that will attract the right candidates. 

3. Monitoring, reporting, evaluating and learning (MREL) 

Rigorous MREL practices will ensure you can track fund performance and clearly demonstrate its benefits and value for money against its original commitments.  

However, simply tracking progress alone is not enough – you must be responsive and decisive, applying lessons learnt to iterate and improve fund performance.  

From the start of the fund lifecycle, it’s important to have a clear outcome in mind and a detailed theory of change that articulates how you get there. The theory of change should provide a robust set of metrics that allow you to track progress over the fund lifecycle and enable you to take those quick decisions to address any underperformance. 

Public funding interventions will be key to reaching Net Zero 

The UK government’s Net Zero goals are very ambitious. To achieve these ambitions, the public sector will play a key role in driving innovation in key technologies. Funds will be a particularly effective driver, but departments must design and deliver them in a way that maximises outcomes and ensures value for money for UK taxpayers. Is your fund set up to deliver the outcomes you want? 

Responsive Government Index: Investigating the responsiveness of the civil service globally

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Contact the economic development team