Greening our energy supply can and should be compatible with growth, if it is done correctly and affordably. Energy Intensive Industries (EII) have a vested interest that we achieve realistic goals at least cost and most benefit to the UK and EU economy. What would upset EII would be an assessment that the objectives of greening our economy, whilst promoting economic growth, are not compatible and that government just pushed ahead with its green agenda at their expense.
To understand the contribution and importance of EII’s we need to clear up two misconceptions. Firstly, the term ‘Low Carbon Economy’ is often misunderstood and implies new sectors whereas, in contrast, these sectors are our established sectors, not new. For example, a low carbon supply chain looks very similar to a traditional supply chain with high carbon components in low carbon products (high speed rail, nuclear and wind). Therefore EII are vital to the growth of a ‘low carbon sector’ here in the UK.
Secondly, EIIs are committed to the green agenda and are taking action. For example, over the last 20 years Industry has reduced emissions by almost 40% whilst producing the same output whereas, in contrast, the residential sector has increased emissions.
The current policy landscape aims to increase costs through a carbon price aimed at de-risking investment in renewable technologies whilst making emitting carbon more expensive. What does this do to globally competitive sectors, such as steel, aluminium and cement where the price of their product is set globally and where the abatement opportunity using current technology is extremely limited? The effect is to make those sectors become uncompetitive in that global market and, if they are uncompetitive then production moves to less regulated regions. The result of this is higher global emissions and a disrupted low carbon supply chain here UK.
However, we should not forget our Climate Change Act targets or excuse globally exposed sectors from making their contribution to further reducing emissions and improving energy efficiency. But, we need to accept that different sectors require different solutions to achieve our common goal of reducing emissions globally.
In terms of the energy supply and the economy as a whole, the UK must change policy and set itself on a road to ‘affordable decarbonisation’. No successful business has a long term plan that isn’t affordable and sustainable, so government policy should be no different. But, in contrast, currently we have a crowded, confusing and costly policy landscape, one that can’t decide if its purpose is to decarbonise or just increase government income.
Creating a market for low carbon investment is easy by increasing the carbon price, regulating and setting standards. The difficult part is ensuring that the home market, be it UK or EU, can feed into and benefit from that market.
The answer for most globally exposed sectors is sector agreements that put all players on a level playing field and, create an environment where unlocking barriers to major technology changes are addressed. This process has started but it needs government support to become a reality. We are obsessed with top down targets, without a credible, strategic and cost effective route to achieving them.