Economic Benefits of Industrial Decarbonisation

Net zero is the business opportunity of the 21st century, and an increasingly competitive one. The US, European Union, and China have all implemented bold policy and investment measures designed to secure a major share of the global market for green goods. The UK has yet to fully set out its response to this opportunity.

This paper for Aldersgate Group focuses on one critical element of this response – the ambitious package of interventions needed to deliver a competitive and low carbon industrial base in the UK.

There are significant benefits to the decarbonisation of industry without deindustrialisation. In order to unlock these benefits, the Government must commit to a long-term industrial strategy that brings together a series of key interventions:

• A clear plan for industrial decarbonisation – including clarity on decarbonisation pathways for UK industry sectors, priorities for usage of limited technology like hydrogen and CCUS, and investment in the required infrastructure.
• Making electricity prices more competitive for UK industry – by rebalancing policy costs from electricity onto gas over time and introducing voluntary Contracts for Difference.
• Reforming the UK ETS and introducing a carbon border adjustment mechanism (CBAM) – linking the UK ETS to the EU’s, introducing a UK equivalent of the Market Stability Reserve, and introducing a CBAM no later than 2026.
• Consideration of a cluster policy which makes the most out of existing clusters whilst also considering the challenges faced by dispersed sites.

You can read the full report here.