The Government’s Industrial Decarbonisation Strategy is another major landmark for industry. It provides all the right signals to give the confidence that our country is politically ready to take action on the Net Zero by 2050 target. The important role that the manufacturing sector plays is very clearly recognised, to which we can breathe a sigh of relief… the lessons from the Covid-19 crisis have been learnt.
All the right signals are there as is the level of ambition. It closely follows the recommendations of the Committee on Climate Change, ensuring that ambitions and indeed policies are aligned.
The bulk of UK manufacturers are SMEs, and they will need the support of government as well as bodies such as Make UK to realise these ambitions and take advantage of the opportunities that this agenda presents.
The strategy highlights the role of the ‘less energy intensive’ sector which is in fact is the second emitter in total after the non-iron and steel. This will concern the bulk of UK manufacturers. Encouragingly, the report emphasises Government’s crucial role in supporting the manufacturing industry especially during the first decade and the need to incentivise energy efficiency improvements. We know from Make UK’s research that manufacturers are keen to invest in energy efficiency improvements, but there remain barriers include upfront costs that must be addressed.
Carbon pricing can provide certain for the domestic market
Carbon pricing is the market signal that is needed to provide certainty for the domestic market and to enable manufacturers to stay competitive internationally. Aligning the UK-ETS with the Net Zero target will make it very tough but it is something that should be addressed sooner or later. The willingness of the government to have this discussion with the stakeholders is a very positive thing and we look forward to engaging with them on this.
Carbon labelling can be complex and costly
Defining low-carbon products is on paper a very good idea but in practice will be extremely challenging. It is perhaps feasible for ‘simple’ products and materials – but we know that manufacturing products are a lot more complex.
Energy efficiency improvement barriers must be addressed
Energy costs, and in particular electricity costs are a barrier to electrification for many energy intensive manufacturers, in particular Small businesses. despite the current package of compensations and exemptions from electricity policy costs that the government has put in place in the recent years. However, these measures have either fallen short or are not relevant for many businesses. More should be done to enable these smaller businesses to shift to a new fuel system.
Digital and green
Innovation will be a critical contributor, and a ‘Made Greener’ programme akin to the Made Smarter one, should be an idea for Government consider. – We must push the message that digital technology is in fact an enabler of the low-carbon economy and that ‘digital and green’ go hand in hand.
It must not be forgotten however that the low-hanging fruit can be picked within the factory, and that what are often perceived to be less ‘exciting’ projects such as replacing old equipment such as compressors, pumps, ventilation systems, turbines and the like will be the locomotive of the transformation of industrial processes.
Green collar jobs and the need for a Green Skills Tax Credit
Ambitions for net zero can only be realised if we have the right people equipped with the right skills. This may not mean the creation of “new” jobs” but the “greening” of existing job roles. The Strategy sets out the positive steps Government has already taken on this including the introduction of T Levels and setting up the Green Jobs Taskforce. But if we want to kick-start the green skills agenda, Government should introduce a Green Skills Tax Credit to encourage sectors with high emissions our manufacturers to invest in green collar jobs. This would work much like the R&D tax credit and help businesses recruit for the skills to help them become green.
As always, the devil is in the detail
As always, the devil is in the detail, and there is still much work to do to understand exactly how in practice, the transformation of industrial processes can happen. The good news is that the government is willing to work with industry on many of these streams and to understand in more depth the challenges of our manufacturers (e.g. retrofitting industrial sites, addressing specific barriers faced by less energy intensive sites). But every step is a step in the right direction and the manufacturing sector is up to the challenge and keen to get started on the right footing.