2050 industry roadmaps? We dont have that much time
The industrial, lobby has its work cut out for the next Parliament. The government’s 2050 roadmaps to decarbonise our most energy intensive industries, published today, reveal the enormous scale of investment needed. At a time of intensive international competition, our foundation industries are losing ground at an alarming rate, with the closure of over 1,000 enterprises and the loss of one in seven of their workforce between 2008 and 2013. These eight studies, a collaborative effort between industry and government at official level, share the same broad conclusions: there’s no sign in sight of the leadership, policy framework or funds required to meet the multi-billion investment challenge ahead. Yet it’s equivalent to decarbonising much of the electricity generation sector.
We’ve totalled the likely investment costs for these sectors: excluding food |(where the sky seems to be the limit) the range is £2.5 billion to £7.6 billion of technology development.
As Laura Cohen of the Ceramics Confederation said today: “We are keen to continue working collaboratively with government to identify and implement tangible measures that ensure investment and innovation to improve energy and carbon efficiency across the sector, whilst being able to compete internationally.”
Many in the sector have emphasised the two key ingredients for investor confidence: the need for a long-term energy and climate change investment framework, alongside immediate policy support for industrial competitiveness.
CO2 emissions, million tonnes, 2012
Iron and Steel 22.8
Oil Refining 16.3
Food and Drink 9.5
Pulp and Paper 3.3
Many recent plant closures have been linked to competitive pressures – the relatively high cost impact of the UK’s energy and climate change policies compared with our EU and non-EU competitors. Imports of once staple UK manufacturers, such as bricks, paper and steel – are growing at the expense of domestic manufacture. And the UK has failed to develop supply chains for a low carbon economy, so that, for example, much of the steel for wind turbine towers is imported.
The TUC and industry bodies such as the Energy Intensive Users Group, have called for government support to shield energy intensive industries from the impact of the UK’s energy and climate change policies, including relief from the UK’s anti-competitive carbon tax. Over successive Budgets since 2011 the government has patched together a package of support measures, and has acknowledged that by international comparisons, UK policy costs faced by foundation industries may be much higher than in other countries, in the absence of government intervention.
But governments in Germany, Belgium, Denmark, Norway, Republic of Ireland, Sweden and elsewhere provide support schemes for energy intensive industries which are often reportedly considerably more generous.
For example, in the TUC report, More German Lessons (2012), we estimated that over the period 2010-2012 Germany’s support for its energy intensive industries was worth 26bn euros, or some 8bn euros (£6.4bn) a year. Various forms of support cover thousands of firms.
Unlike the UK package, the support our competitors receive is not narrowly confined.
From available evidence, the UK’s compensation schemes covers about 55 UK firms or one per cent of the 5,500 enterprises operating across the foundation industries. Eligibility criteria appear to be excluding whole sectors.
Eco-innovation to ensure that our industries cut their energy costs and carbon emissions will clearly help to lift the cost impact of climate change policies. But as the government’s 2050 roadmaps show, this decarbonisation journey is only now making its first steps. One of the main barriers to energy intensive industries investing in low carbon technologies is the need for a competitive UK cost base for companies to be able to afford investment.
The loss of manufacturing capacity is slipping towards a new crisis. A number of steps are needed urgently to address competitiveness, import growth and eco-innovation. Fundamentally, an ambitious Foundation Industries strategy is required – combining both support measures and investment in low carbon technologies – to secure their future in a low carbon economy.
Eco-innovation: the cost estimates
Iron and steel £400 million to £600 million
Chemicals £600 million to £4 billion
Oil refining £200 million to £500 million
Pulp and paper £700 million to £1 billion
Cement £300 million to £600 million
Glass £30 million to £200 million
Ceramics £300 million to £700 million
Range: £2,530 billion £7.6 billion