Industrial decarbonisation: immediate next steps for policymakers

Industrial decarbonisation: immediate next steps for policymakers

Frontier’s report for Aldersgate Group on the decarbonisation of industrial clusters and dispersed sites has been launched today.

The report provides tangible recommendations for policymakers on the immediate next steps needed to accelerate the decarbonisation of UK heavy industry in a way that will drive innovation, increase competitiveness and create jobs across the country.

UK manufacturers are significant contributors to the wider economy and, when correctly implemented, decarbonisation policy can support cost-effective emissions reductions while also helping manufacturers to take advantage of new market opportunities and enhance economic growth. In particular, decarbonisation policy can support innovation, supply chain growth and job creation in regions across the UK and can enable manufacturers to better compete in markets for low carbon goods and adapt to rising carbon prices.

Industrial decarbonisation policies need to support both industrial clusters and dispersed sites and enable these sites to work together to decarbonise. Much of the existing policy debate has focused on industrial clusters, in part because these sites are well suited to the roll-out of decarbonisation infrastructure such as carbon capture, utilisation and storage (CCUS) and hydrogen. They are well placed to be used to trial deployment of low carbon solutions that can then be replicated more broadly. However, given their share of industrial emissions, it is vital that policy also addresses the needs of dispersed sites.

The policy environment must create a business environment that enables and encourages investment. The transition to net zero will be capital intensive. The industrial decarbonisation policy environment is therefore a crucial part of meeting the UK’s net zero target. In particular, government can create an overall business environment in which businesses are able to invest and reduce risks, or can bridge funding gaps where private investment may fall short.

Through sector-specific case studies and extensive engagement with industry stakeholders, we set out the key policy needs of the UK’s industrial clusters and dispersed sites. We go on to make targeted policy recommendations to help ensure that both types of site, and the heavy industry sector as a whole, are put on a successful path to decarbonisation.

While the specific pathways and outcomes will vary, the overall policy needs of dispersed sites and industrial clusters rely on a common set of infrastructure and fuel support and demand-side measures. These different areas of policy action need to be joined up and acted on together and should not be seen as independent interventions. A comprehensive, effectively designed suite of policies is needed to ensure that manufacturers have the necessary support to decarbonise and be competitive in a zero carbon world. In particular, both dispersed sites and industrial clusters need an overall business environment that is conducive to investment.

Policymakers should:

  • create incentives for electrification by increasing the availability of affordable renewable electricity and shifting the burden of policy and network costs;
  • provide certainty of supply and a clear timeline for when low carbon hydrogen, waste biomass, and CCUS will be available, using Contracts for Difference (CfDs) and government matchmaking;
  • use Local Enterprise Partnerships (LEPs) and local authorities (LAs) to design local infrastructure plans in coordination with central government and devolved administrations;
  • provide targeted UK Emissions Trading Scheme (ETS) free allowances on a temporary basis and support from policies such as Carbon Border Adjustment Mechanisms (CBAMs);
  • increase availability of recycled materials and move to a more circular economy through changes to regulation and increased accessibility of funding; and
  • continue to explore demand-side policies that support the development of markets for resource-efficient and low carbon products.

For more information on these policy recommendations as well as the opportunities for decarbonisation of UK industrial clusters and dispersed sites,  please click the following link.