GETTING TO ZERO

Greening the Giants: Decarbonising carbon-intensive industries

How to decarbonise the most carbon-intensive industries in the UK
Ted Christie-Miller, Alex Luke
March 26, 2021
Greening the Giants: Decarbonising carbon-intensive industries
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This ground breaking research will enable evidence based policy making by Government both national and local and above all help avoid aggravating existing inequalities by seizing the opportunities that net zero affords.

Dame Caroline Spelman, co-chair of the Getting to Zero commission

 

Twelve carbon-intensive industries make up nearly two-thirds of all UK carbon emissions.

This report argues that the Government will not deliver on its commitment to net zero by 2050 without taking radical action to decarbonise the 12 most carbon-intensive industries, which include aviation, land transport, oil and gas, agriculture and manufacturing.

But if ministers take the right steps, the new demand for renewables and low carbon technologies could deliver up to 1.7 million new green jobs, half of which are likely to be located in the North, Midlands and Scotland.

The analysis finds that:

  • Just 12 carbon-intensive industries – which include aviation, agriculture, steel, manufacturing and construction – make up 62% of all UK carbon emissions. However decarbonising these industries will likely have a disruptive effect on the UK economy: these industries represent around 23% of UK output and 21% of current UK jobs.
  • These “carbon giants” are disproportionately concentrated in the Midlands, the North of England and Scotland, with 51% of jobs in these industries are located in these regions. In the East Midlands, Scotland and Wales one seventh of annual GVA (16%) comes from these industries, meaning they are twice as exposed economically to decarbonisation risks as London (8%).
  • These carbon-intensive industries are likely to be politically harder to decarbonise too. On average, Scottish constituencies and Red Wall seats have 11% and 14% more jobs, respectively, in these high emitting sectors, compared to the UK average. 62% of carbon-intensive manufacturing jobs and 49% of steel jobs are in Conservative seats. Two thirds (66%) of jobs in aviation are in Labour held constituencies and 64% of oil and gas jobs are in SNP held seats.

The research underlines the political and economic challenges of delivering net zero, and the wholesale transformation of the UK’s industrial base it will require. This is mitigated by the considerable opportunity to generate new net zero jobs through low and zero carbon technologies. The report finds that:

  • If the Government delivers on its commitment to the Net Zero Balanced Pathway in the Sixth Carbon Budget, which it committed to at the end of last year, its plans for decarbonisation will lead to up to 1.7 million additional green jobs by 2030. This comprises between 900,000 and 1.3 million jobs in low-carbon heating and energy efficiency, 367,000 jobs in electric vehicles and 36,000 jobs in low-carbon power.
  • In terms of economic value, this explosion of decarbonisation activity is the equivalent to an increase in annual turnover for low carbon heating and efficiency from £19 billion in 2018 to £173 billion in 2030, or for electric vehicles and infrastructure from £4 billion to £158 billion. In total, it could generate over £330 billion in additional economic value by 2030.
  • These jobs will be disproportionately located in places most exposed to the net zero transition and most associated with levelling up. 79% of industrial emissions abatement through hydrogen is likely to take place in the Midlands, North and Scotland, along with 77% from Carbon Capture and Storage and Bioenergy with Carbon Capture and Storage and 56% of electrification projects.
This programme is kindly supported by Purpose and the European Climate Foundation.

Problems with carbon intensive industries

Detail

Cross sector

Net zero technologies need to develop and commercialise at a faster rate. Hydrogen and carbon capture technologies have not been rolled out for industrial use yet.

Combined and local authorities do not have the powers or accountability to
ensure sufficient decarbonisation in their local areas.

Industrial decarbonisation risks losing domestic jobs and making UK businesses uncompetitive if the policies are not right.

Agriculture

There are poor price signals and perverse incentives in the agricultural system. Current technologies are also not sufficient to decarbonise farm vehicles, machinery, and other agricultural processes.

Aviation

Technology to decarbonise Aviation does not exist yet, and will not at a commercial level on any meaningful timeframe. Aviation fuel is not exempt from tax under international agreements, costing the Government up to £9.1bn a year.

Carbon Intensive Manufacturing

Decarbonising manufacturing will rely primarily on hydrogen, electrification and CCS, technologies which all require further development to scale up commercially.

Construction and Buildings

Decarbonising homes in the UK represents a huge challenge, as retrofitting is currently too expensive for many households. In addition, homes and buildings are still being built that are not fit for a net zero future. Alternatives to steel and cement are too costly, so many buildings have high levels of embodied carbon.

Land Transport

EVs are in the commercialisation stage, but are too expensive for the average consumer. Electrified or hydrogen powered HGVs and LGVs are only in the R&D stage.

Power generation

Decarbonisation of this industry is well underway. However, coal and gas still need to be phased out, whilst energy demands may more than double.

Shipping and Fishing

New technologies are primarily in the R&D stage and few are in commercial use on any major scale.

Waste and Sewerage

The quality of recycling in the UK is poor compared to some comparators. The landfill tax is increasing, but at a rate below inflation and major tax gaps exists.

Extractive Industries

These industries are generally not consistent with a net zero future and many sites will need to be decommissioned in coming years.
Tax breaks and subsidies equivalent to more than €11bn are provided to Oil and Gas companies, whilst other policies exist which promote oil and gas extraction that are not aligned with the net zero target.

Steel

Steel production is already close to its maximum energy efficiency potential, and electric arc furnaces can only produce certain types of steel so carbon-intensive blast furnaces will still be required. Steel producers also face higher energy costs than their European competitors, which may hinder decarbonisation and promote offshoring.

Retail

The decline of the high-street and shift to online shopping provides opportunities to decarbonise but could increase emissions if these opportunities are not taken.

The report puts forward 25 recommendations for the Government to green the giants and ease the transition for these carbon-intensive industries, while maximising the domestic economic potential of the transition to boost jobs and growth, including:

  1. Establish a Net Zero Delivery Taskforce. A taskforce should be modelled on the Vaccines Taskforce, with a specific remit and ministerial backing to initiate major government sponsored trials of high risk, high reward technologies still in the R&D phase.
  2. Introduce a new industrial Contracts for Difference scheme for green hydrogen and carbon capture.Such a scheme would build on the successful use of CfDs in encouraging wind and solar renewables over the last decade.
  3. Introduce a Carbon Takeback Obligation (CTBO). A CTBO would require importers and extractors of fossil fuels to permanently store a percentage of carbon dioxide generated by the products they sell, rising from 1% in 2025 to 10% in 2035.
  4. UK content requirements for net zero technology supply chains.UK content requirements would require companies to source a certain percentage of their supply chain from domestic sources, to stimulate local economies and jobs.
  5. Publish regional carbon budgets and use devolution to drive decarbonisation. Regional carbon budgets would hold local and mayoral authorities accountable for their progress on emissions. Responsibility for EV charging networks and retrofitting housing stock should be devolved to local government who are best placed to take charge of these initiatives.

Problems with carbon intensive industries

Cross sector

Net zero technologies need to develop and commercialise at a faster rate. Hydrogen and carbon capture technologies have not been rolled out for industrial use yet.

Combined and local authorities do not have the powers or accountability to
ensure sufficient decarbonisation in their local areas.

Industrial decarbonisation risks losing domestic jobs and making UK businesses uncompetitive if the policies are not right.

Agriculture

There are poor price signals and perverse incentives in the agricultural system. Current technologies are also not sufficient to decarbonise farm vehicles, machinery, and other agricultural processes.

Aviation

Technology to decarbonise Aviation does not exist yet, and will not at a commercial level on any meaningful timeframe. Aviation fuel is not exempt from tax under international agreements, costing the Government up to £9.1bn a year.

Carbon Intensive Manufacturing

Decarbonising manufacturing will rely primarily on hydrogen, electrification and CCS, technologies which all require further development to scale up commercially.

Construction and Buildings

Decarbonising homes in the UK represents a huge challenge, as retrofitting is currently too expensive for many households. In addition, homes and buildings are still being built that are not fit for a net zero future. Alternatives to steel and cement are too costly, so many buildings have high levels of embodied carbon.

Land Transport

EVs are in the commercialisation stage, but are too expensive for the average consumer. Electrified or hydrogen powered HGVs and LGVs are only in the R&D stage.

Power generation

Decarbonisation of this industry is well underway. However, coal and gas still need to be phased out, whilst energy demands may more than double.

Shipping and Fishing

New technologies are primarily in the R&D stage and few are in commercial use on any major scale.

Waste and Sewerage

The quality of recycling in the UK is poor compared to some comparators. The landfill tax is increasing, but at a rate below inflation and major tax gaps exists.

Extractive Industries

These industries are generally not consistent with a net zero future and many sites will need to be decommissioned in coming years.
Tax breaks and subsidies equivalent to more than €11bn are provided to Oil and Gas companies, whilst other policies exist which promote oil and gas extraction that are not aligned with the net zero target.

Steel

Steel production is already close to its maximum energy efficiency potential, and electric arc furnaces can only produce certain types of steel so carbon-intensive blast furnaces will still be required. Steel producers also face higher energy costs than their European competitors, which may hinder decarbonisation and promote offshoring.

Retail

The decline of the high-street and shift to online shopping provides opportunities to decarbonise but could increase emissions if these opportunities are not taken.

Detail

The report puts forward 25 recommendations for the Government to green the giants and ease the transition for these carbon-intensive industries, while maximising the domestic economic potential of the transition to boost jobs and growth, including:

  1. Establish a Net Zero Delivery Taskforce. A taskforce should be modelled on the Vaccines Taskforce, with a specific remit and ministerial backing to initiate major government sponsored trials of high risk, high reward technologies still in the R&D phase.
  2. Introduce a new industrial Contracts for Difference scheme for green hydrogen and carbon capture.Such a scheme would build on the successful use of CfDs in encouraging wind and solar renewables over the last decade.
  3. Introduce a Carbon Takeback Obligation (CTBO). A CTBO would require importers and extractors of fossil fuels to permanently store a percentage of carbon dioxide generated by the products they sell, rising from 1% in 2025 to 10% in 2035.
  4. UK content requirements for net zero technology supply chains.UK content requirements would require companies to source a certain percentage of their supply chain from domestic sources, to stimulate local economies and jobs.
  5. Publish regional carbon budgets and use devolution to drive decarbonisation. Regional carbon budgets would hold local and mayoral authorities accountable for their progress on emissions. Responsibility for EV charging networks and retrofitting housing stock should be devolved to local government who are best placed to take charge of these initiatives.

Ted Christie-Miller, report co-author, said:

“The UK has successfully halved its emissions since 1990, but that means the low-hanging fruit have already been picked. The next phase will require the wholesale transformation of industries that are integral to our economy and vital for regional jobs. It is essential the Government helps these industries to make the transition, while helping new net zero industries to flourish.“

“We need to green the giants of industry through smart regulation and bold industrial strategy, using the energy around COP26 and the recovery from the pandemic to drive a net zero agenda over the next decade that is as ambitious as the pandemic response has been over the past year.”

Rt Hon Caroline Flint, co-chair of the Getting to Zero commission, also spoke to Times Radio about the findings from the report:

 


 

This report is produced as part of our Getting to Zero research programme.

Getting to Zero

Practical and popular ways to decarbonise the economy.

Established a year before COP26, Onward’s Getting to Zero programme is dedicated to developing practical and politically possible ways for the UK to meet its net zero ambitions and lead the world in decarbonisation.

Read more in Getting to Zero: Qualifying for the Race to Net Zero | Green Shoots

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