A report published by the Carbon Disclosure Project (CDP) has highlighted the issue of carbon leakage as a barrier to reducing emissions. The report found that scope 1 emissions in Europe had fallen from 2010-11, but risen in every other region of the world.
The CDP put this down to ‘significant offshoring', with them recognising the emissions reduction targets in Europe are creating a competitive disadvantage and pushing production outside of Europe to less regulated countries.
We certainly welcome these findings as this is something that manufacturers have been highlighting for a while. However, the report then goes on to state that, whilst ambitious emission reduction targets are set in the short term, in the long term companies need to be more ambitious. The four highest emitting sectors apparently come out the worst with reductions ‘of not even one-half a percent of their cumulative emissions' to 2030.
I think this shows a lack of understanding of these sectors. When by the nature of the production processes, it is energy (and therefore carbon) intensive, there is only so far you can in reducing your emissions. This is where the source of offshoring comes from; when you cap emissions absolutely you push these sectors out to less regulated regions. Time and time again we have argued these industries are at the heart of the low carbon economy as they are the building blocks for renewable and low carbon technologies.
To take the steel sector as an example of a sector that, at present, will only see incremental efficiency savings until there are new technologies available. Significant research and funding is needed to enable further efficiencies to be made. This will not happen over night but the steel sector is already taking steps to get there. The European steel industry's ultra-low carbon steelmaking (ULCOS) research programme has already invested £66m in the last six years to find ways to halve steel making's carbon emissions. The cost of delivering these unproven technologies at scales will run into the billions. Pilots and demonstrations, such as HIsarna (which replaces the traditional blast furnace with a combined melting cyclone), will take time, ten years in this case. And the UK government has also proved the difficulty in making new technologies viable when trying to establish CCS demonstration projects.
Yes, everyone should be ambitious in reducing emissions but it must be recognised that some industries have already gone as far as they can without a significant shift in energy sources and massive investment in new technologies. At least Ministers in the UK are starting to recognise this.