Welcome ambition to cut industrial emissions must come with clear market mechanisms

Reacting to the publication of the Industrial Decarbonisation Strategy, Nick Molho, Executive Director of the Aldersgate Group said: “We welcome the ambition to cut heavy industrial emissions by at least two-thirds by 2035. With continued ambitious support on innovation and the development of stable market mechanisms, the decarbonisation of heavy industry can provide UK businesses with competitive advantages in the production of low carbon industrial goods and deliver significant benefits in terms of job creation, skills development and the revival of industrial heartlands in many parts of the UK.

The funding under the Industrial Decarbonisation Challenge Fund will make a welcome contribution to the potential development of key technologies like CCUS and hydrogen production, but it is important that such funding continues to be made available in the years to come to help accelerate the demonstration of these technologies at scale.”

Nick Molho added: “Building on efforts to accelerate innovation, it will be essential for the UK Government to put in place a comprehensive set of long-term policies that drives timely and cost-effective private investment in industrial decarbonisation and strengthens the competitiveness of UK businesses in the process. [1] This requires ensuring that the price of carbon under the UK Emissions Trading Scheme is clearly aligned with the net zero target, with the use of free allowances gradually reducing and the UK considering a linkage between the UK and EU ETS on the basis of a shared ambition for climate neutrality.

Product standards that drive improvements in resource efficiency and embodied carbon in the production process could be very effective at stimulating private investment and providing a level playing field, with well-designed carbon border adjustment measures also needing to be considered. The development of these policy measures also provides the opportunity to develop collaborative approaches on industrial decarbonisation with other large emitting economies at COP26 and beyond.”

Nick Molho concluded: “It is important that the UK’s ongoing approach on industrial decarbonisation does not just focus on industrial clusters. [2] British industries like cement, glass or ceramics are located outside of clusters and face additional challenges to deploying technologies like CCS, particularly due to the uncertain availability of transport and storage infrastructure and limits to economies of scale. Additional and more tailored policy incentives will be required for these dispersed industries, including support for electrification, developing new carbon capture and usage business models and fiscal incentives to drive greater resource efficiency.”