• The Government released the Industrial Decarbonisation Strategy in March 2021, and has committed to publish the funding mechanism for Carbon Capture and Storage (CCS) in 2021.
• Out of twenty-four recommendations for the manufacturing and construction sector, five have been met in full, with ten partially met, and nine not met.
• The Industrial Decarbonisation Strategy does go beyond targets, setting out some policies to help achieve the goals, but lacks detailed delivery plans in key areas (such as policy to create a viable business model for hydrogen/electricity fuel-switching in industrial applications).
• No new funding was announced as part of the Industrial Decarbonisation Strategy.

1. Available funding must be expanded urgently, and timelines for funding delivery accelerated. For example, the Clean Steel Fund should be expanded, and delivery of funding brought forwards from 2023.
2. Off-road mobile machinery appears to have fallen through the gaps of government departments and planned strategies. However, with emissions of 12MtCO2e in 2018, this sector should not be ignored. Clarity is needed on where off-road mobile machinery will be addressed.
3. There is a lack of clarity on the roadmap for hydrogen infrastructure deployment, including when different areas of the UK will convert the gas network to hydrogen, and the need for dedicated hydrogen pipelines before this. Greater clarity on hydrogen infrastructure should be provided in the Hydrogen Strategy.
4. Climate change levies must be reformed to represent carbon content of electricity/gas appropriately, and the Government should commit to introducing cost-reflective industrial electricity pricing.
5. The Government should work with construction industry to set a standard for the ‘whole-life’ carbon footprint of buildings, with mandatory disclosure and continually strengthening standards.

• Manufacturing and construction emissions in 2019 were 67MtCO2e, or 12% of the UK total (CCC Sixth Carbon Budget, 2020)
• Emissions fell 2% from 2018-19 (CCC Sixth Carbon Budget, 2020). Emissions fell 7% from 2019-20, with some of this due to reduced manufacturing due to the COVID-19 pandemic (CCC Progress Report 2021)
• Significant sources of decarbonisation will come from resource efficiency, energy efficiency, clean electricity, hydrogen and CCS.
• Currently government ambition is on track for only three of these areas (energy efficiency, hydrogen and CCS), and government policy is only only track to deliver for one of these areas (CCS).

1

Overarching Strategy - Industrial Decarbonisation Strategy

We need to move from the current piecemeal approach. The Industrial Decarbonisation Strategy needs to be comprehensive (e.g. not exclude historically neglected areas such as off-road mobile machinery), have clear long-term vision, and integrate with other strategies around Hydrogen, Infrastructure, Heat and Buildings and Energy.

The Net Zero strategy sets out ambition to reduce industrial emissions by 63-76% by 2035 from 2019 levels. This represents a substantial step forward in Government’s ambition, and is broadly aligned to the CCC Balanced Pathway, in which the equivalent emissions are reduced by 71% by 2035. Strategy does have long-term vision and references other strategies – but does not detail how/whether off-road mobile machinery will be dealt with. The Hydrogen Strategy references the launch of a new £40 million Red Diesel Replacement Competition to fund the development and demonstration of innovative technologies that enable Non-Road Mobile Machinery (NRMM) used for quarrying, mining, and construction to switch from red diesel to hydrogen or other low carbon fuels.

Partly

2

Policies to support jobs and the recovery

The Government should ensure prompt award of existing industrial funding schemes to create jobs in regions with large industrial bases, and increase the ambition of these schemes.

No increase in funding for these schemes, just allocation of existing funds.

No

3

Competitiveness concerns. To address these, the Government will need to think about taxpayer funding, carbon pricing with border carbon tariffs, or minimum standards to protect domestic industries. Industrial decarbonisation should likely start with taxpayer funding, and then transition towards some form of border carbon tarriff/minimum standards to protect a UK market.

Developing carbon intensity/measurement standards

They will ‘consider the benefits of a voluntary product standards system following the results of the call for evidence, with a view to their potential introduction by 2025. This is a good start – but should be stronger than simply ‘considering’ and ‘potential introduction’.

Partly

4

Competitiveness concerns.

Mandating disclosure of carbon intensity for selected products

Mandatory disclosure of carbon intensity is mentioned but left as a possibility, with no firm commitment made.

No

5

Competitiveness concerns.

Fostering international consensus around future trade policy for traded industrial goods.

There are many references to the importance of international consensus and the UK’s desire to work on this.

Yes

6

Carbon and electricity pricing for decarbonisation

Introduce a decarbonisation price signal in the non-traded sector. Currently the only price signal here is the climate change levy (CCL), and the CCL price is higher on electricity than gas, which will not drive decarbonisation. Although this will equalise by 2025, more needs to be done. The future carbon price should apply to whole sector, and CCL should be reformed to actually focus on carbon content.

UK ETS doesn’t cover whole sector, and no mention of reforming the CCL

No

7

Carbon and electricity pricing for decarbonisation

Stronger carbon pricing. Prices should be higher than current EU ETS prices

The NZS states carbon pricing through emissions trading underpins the UK approach to decarbonising industry, and is now supplemented by grant funding and contracts for capturing carbon from, and supplying hydrogen to, industrial clusters. Commits cap on UK ETS to be net-zero aligned by 2024, and the initial cap to be 5% below the EU ETS equivalent cap.

Partly

8

Carbon and electricity pricing for decarbonisation

Ensure cost-reflective electricity prices. Current electricity prices include legacy costs from network development, and the price support for renewables that was needed in the 2000s and 2010s. They therefore do not reflect the actual cost of introducing new renewable generation to meet demand.

Plans to support electrification and resource efficiency, and for manufacturers not covered by emissions trading, are less advanced. This however, is not equivalent to committing to future cost-reflective prices.

No

9

Addressing manufacturer's appetite for risk

Capital grants could be provided e.g. via the Industrial Energy Transformation Fund or other existing capital allocation schemes.

- Industrial Energy Transformation Fund – Phase 2: will provide additional support for businesses to fuel switch to hydrogen or electrify their industrial processes through grants that support the upfront costs of installing or retrofitting onsite industrial equipment. - The Fuel Switching innovation competition and Hydrogen Supply competition will help to proactively accelerate the development of potential electrification or hydrogen technologies.

Yes

10

Addressing manufacturer's appetite for risk

Introduce tailored loans that reduce risk and allow long-term investments (e.g. below-market-rate loans, or funding from National Infrastructure Bank)

While there is no mention of tailored loans, there is a strong emphasis on sharing risk between the Government, producers and consumers.

Partly

11

Funding mechanisms for deep decarbonisation - Should establish a funding mechanism to enable early deployment of low-carbon solutions. Currently there is not a business model for these, and policies have focused on capital costs rather than operational costs.

Establish funding mechanism(s) to support both electrification and hydrogen-use in manufacturing, as soon as possible, with the aim of awarding funding in 2022. There must be mechanisms for both options, not only hydrogen, and the mechanism(s) should be designed to ensure that, in the medium term, hydrogen-use and electrification compete on a level playing field, to ensure the best value for consumers and taxpayers. Support for electrification may be combined with reforms to electricity pricing.

The Hydrogen Strategy states the Government intend to provide a response to the consultation on a Hydrogen Business Model in Q1 2022. The Government aims to finalise the business model in 2022, enabling the first contracts to be allocated from Q1 2023. They will provide further detail on the revenue mechanism which will provide funding for the Business Model in 2022. There has been no mention of a business model for electricity, however. 

Partly

12

Funding mechanisms for deep decarbonisation.

Deliver industrial carbon capture contracts for CCS to enable final investment decisions on the first CCS projects by mid-2022.

They plan to ‘finalise the industrial carbon capture business model in 2021 and to implement it in 2022.’ This will cover both costs for capturing CO2 and also the transport and storage of CO2.

Yes

14

Support for Innovation and Demonstration

Continue to support innovation and demonstration of fuel switching and CCS technologies for decarbonising manufacturing and construction. Ensure that a full range of options is developed, filling previous gaps in support, such as encouraging electrification projects to come forward.

The Industrial Decarbonisation Strategy provides a whole section on accelerating innovation of low-carbon technologies, but there is no new money announced for existing funds which can drive innovation and demonstration (e.g. Clean Steel Fund), or any acceleration of spending commitments,  and in particular no detailed plan for supporting key technologies such as hydrogen-based steelmaking.

In February 2021, a new research agency focused on high risk, high reward science was launched, the Advanced Research and Invention Agency (ARIA). However, it is not clear how this body will lead to innovation and successful commercialisation of low-carbon industrial technologies at the pace needed.

Partly

15

Policies focused on resource efficiency, energy efficiency and material substitution

Consumer products: the Government should take Eco-design regulation from the EU, and enforce continual improvements in product standards, and expanded coverage to cover all major goods. The Government should consider expanding plastics tax to all single-use materials. The Government should work with businesses to develop more sustainable consumer behaviour – e.g. car clubs and libraries of things.

The Government will ‘consider’ expanding existing labelling for consumer products to cover embodied emissions by mid-2020s. The Industrial Decarbonisation Strategy commits to driving a transition towards a circular economy model with greater reuse, repair and remanufacturing (Action 5.5), but no particular details of how this will occur. No mention of expanding the plastics tax.

Partly

16

Policies focused on resource efficiency, energy efficiency and material substitution

The Government should work with industry to set a standard for the ‘whole-life’ carbon footprint of buildings, introduce mandatory disclosure of whole-life carbon in buildings/infrastructure by 2025 (to enable benchmarking), and then introduce a continually strengthening limit on whole-life carbon standards, differentiated targets by function, scale, and public/private construction.

The Government state they are working with industry to develop and test Whole Life Carbon methodologies for major built assets but nothing has been formally committed.

No

Develop policies to drive more resource-efficient construction and use of existing low-carbon materials, including a substantial increase in the use of wood in construction. Policies should include:

• Reviewing and clarifying the position of structural timber in the ban on combustible materials, underpinned by further research and testing where necessary, and ensuring there are no barriers to the safe use of timber in buildings. The buildings safety regulator to play a role in overseeing this on an ongoing basis.

• The development of a fully-funded policy roadmap on the use of timber, including policies to support the development of UK wood supply chains.

Step up efforts to deliver the waste prevention and resource efficiency improvements required as part of the pathway to Net Zero, including by:

• Accelerating delivery of the Waste Prevention Programme so that key policies, such as Extended Producer Responsibility and new product standards, are on track to be in place well before 2025.
• Setting out how levels of resource efficiency improvements identified within the Industrial Decarbonisation Strategy will be delivered.
• Beginning to develop and implement any additional policies needed to deliver these resource efficiency improvements, by the end of 2022.
• Ensure cross-departmental working, potentially through new cross-Whitehall governance focused on resource efficiency

19

Policies focused on resource efficiency, energy efficiency and material substitution

Manufacturer’s energy efficiency. Government should consistent strengthening enabling policies, such as Climate Change Agreements, or mandating use of Energy Management Systems, which can help businesses improve their energy performance, in order to achieve the additional 12TWh of industrial energy efficiency potential identified by the Government.

The Government note that the Climate Change Agreements (CCA) scheme was extended in 2021 by two years through the addition of a new target period (1 January 2021 to 31 December 2022) and reduced rates of Climate Change Levy in place until March 2025. There is a commitment to 'supporting' sites to use Energy Management Systems, and an acknowledgement that uptake so far has been limited. There is no mention of mandating EMSs.

Partly

20

Off-Road Mobile Machinery

If Off-Road Mobile Machinery is not covered here, or in Heat and Buildings/Transport Strategies, it should be covered in the Net-Zero strategy.

There is no mention of where this sector will be covered.

No

21

Infrastructure Development

CCUS: Develop plans for 2 clusters by 2025, and at least 4 by late 2020s, with more around 2030. Also work with mineral industries to detail a plan for CO2 transport from dispersed sites.

The Industrial Decarbonisation Strategy commits to achieving 2 clusters by 2025, and 4 clusters by 2030. Arguably the CCC recommendation is to exceed this ('four by the late 2020s, with more around 2030). There is commitment to plan with mineral industries around CO2 transport from dispersed sites.

Partly

22

Infrastructure Development

Hydrogen: Early hydrogen distribution will be via dedicated pipelines, in advance of any gas network conversion. Therefore the Government needs to decide how to do this, and consider which areas should have gas network conversion first.

There is no mention in the Hydrogen Strategy of how the Government will approach the geographical challenge of H2 rollout and determine which areas should be converted first. There is also no mention in the Hydrogen Strategy on decisions about whether initial areas of the gas transmission and distribution networks should be converted to hydrogen, this may come in the heat and buildings strategy. The Hydrogen Strategy states that by 2025-2027 there will be dedicated networks in place/repurposed, expanded trucking and the necessary centralised storage in place for hydrogen, with large dedicated networks and storage in place (new or repurposed) by 2028-2030. From the mid-2030s onwards, the Hydrogen Strategy states that regional and potentially national distribution networks will be in place.

No

23

Target Dates

Gov should be targeting near-zero primary steel from 2035, and near-zero cement from 2040.

The Net Zero Strategy says it will consider the implications of the recommendation of the Climate Change Committee to set targets for ore-based steelmaking to reach near-zero emissions by 2035. The IDS Strategy mentions near-zero steel from 2035, but neglects to mention cement. The discussion of near-zero steel is not a clear commitment, but simply a decision to 'consider the implications' with industry. 

No

24

Skills

Should engage with the Engineering Construction Industry Training Board, and new Green Jobs Taskforce to think about skills gap for industrial decarbonisation.

There is a commitment to map the skills requirement for a net-zero industrial sector during 2021

Yes