Researchers from Cambridge Institute for Sustainability Leadership call on government to redouble efforts to boost investment in decarbonisation of carbon-intensive industries
The government is again facing calls to "step up" and follow the example of the EU and US by introducing a stronger policy framework to support the decarbonisation of 'hard to abate' industries such as steel, cement, and glass.
That is the headline recommendation of a new policy briefing released today by the Cambridge Institute for Sustainability Leadership (CISL), which examined ways in which UK markets can better drive decarbonisation in carbon intensive 'foundation industries'.
The policy briefing outlines three main policy actions which it proposes the government should take to help drive down emissions from heavy industry. These include designing and implementing policies to create demand for low-carbon products and materials from these sectors; policies which support the contextual conditions which will encourage innovation and scaling up of demand for innovative technologies and approaches by businesses across the foundation industries' value chains; and establishing international collaborations to accelerate demand for low-carbon materials and products globally.
Beverley Cornaby, director for policy and systems change collaborations at CISL, said the government's policies to date have been "insufficient" to drive deep decarbonisation in heavy industries such as iron and steel, cement, glass, and basic chemicals, adding that these all require "long-term investment and new technologies".
"This report sets out clear policy recommendations for the government to enable demand-led innovation and create an attractive and competitive market for green investment," she added.
So called foundation industries are vital to the UK's manufacturing and construction sectors and are worth around £52 billion to the economy and account for nearly 15 per cent of annual CO2 emissions, according to Innovate UK.
The government has a range of policies in place to support the decarbonisation of carbon intensive sectors, including innovation funding, the UK's emissions trading scheme, and ambitious plans to deliver a series of net zero industrial hubs enabled by new carbon capture and storage (CCS) and hydrogen plants.
However, critics have repeatedly warned the government is failing to move quickly enough to unlock investment in these projects given growing competition from the US and EU, which are pursuing similar plans backed by generous subsidy programmes.
Today's report acknowledges that decarbonisation of these industries is "no easy task", and identifies what it calls "the supply-demand Catch 22" as one of the most complicated challenges that the sector faces.
CISL explains that this Catch-22 refers to a situation where an upstream company does not have a large enough market demand to upscale the production of low carbon materials or invest in the emerging technologies needed to produce such materials, while downstream companies can not risk investing in alternative technologies before they have a stable supply of upstream low carbon materials or products.
As such, the report warns that at present UK market demand for less carbon intensive materials and products, such as green steel, low carbon cement, sustainably mined raw materials or carbon capture storage technology, is not currently high enough to incentivise investment at scale. As such, government intervention is required to tackle this deadlock.
By comparison, the report highlights that other large economies such as the EU and US offer more support for the decarbonisation of heavy industry, both through direct funding and policy frameworks such as the Green Deal Industrial Plan (GDIP) and the Inflation Reduction Act (IRA).
Overall, the report warns that the UK is "lagging behind" its major competitors, and is at risk of a mass exodus of industrial firms to these countries as companies and investors look to access the low carbon infrastructure that can enable them to meet net zero goals and reduce their long term energy costs.
As such, the report suggests the UK should adopt more 'demand-led innovation' (DLI) which it has warned is "vital" if the UK is to drive significant emissions reductions in core materials industries. DLI, the report explains, refers to innovation which is incentivised by a gap in the market for a product or service which consumers want, and for which they would be willing to pay. It argues that demonstrating that there is a market for green materials could bolster the business case for low carbon industrial projects and curb the need for direct funding.
In conjunction with calls for government action, the report also highlights the role which non-governmental organisations such as academic institutions and the private sector could play in industrial decarbonisation by bringing companies together to boost demand for green materials, facilitate dialogue, and enable information sharing.
The report was the end result of a 12-month research project which examined the ways in which creating demand for low-carbon innovative products and materials could reduce emissions in carbon-intensive sectors, CISL said.
It came on the same day as one of the UK's leading solar technology developers, Oxford PV, told the Financial Times a lack of incentives in the UK meant it was not looking to locate its first factory overseas. "It seems to me the rest of the world is staking their future on solar and the UK is not," Chris Case, chief technology officer at the company told the paper, adding that "Germany and the US are strong candidates" for its planned production site.
Meanwhile, former Nissan and Aston Martin executive Dr Andy Palmer reportedly told MPs in a select committee hearing yesterday that the UK's lack of industrial strategy had left it playing "catch up" with international rivals for investment in the electric vehicles industry.
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