Delving into decarbonisation
Dr Richard Oblath FIMMM, Chair of the IOM3 Energy Transition Group, Corporate Adviser and Executive Chairman of H2Transition Capital LLP and Non-Executive Director at Boson Energy S.A. (RO)
Dr Sophie Parsons MIMMM, member of the IOM3 Sustainable Development Group Board, IOM3 Strategic Advisor, and LCA Specialist at the UK National Composites Centre (SP)
Chris McDonald FIMMM, member of the IOM3 Iron and Steel Society Board and Chief Executive Officer of the Materials Processing Institute (CM)
Dr Sarah Connolly MIMMM, Member of the IOM3 Iron and Steel Society Board and IOM3 Advisory Council, and Innovation Technologist – Transforming Foundation Industries at Innovate UK (SC)
How do you think the Industrial Decarbonisation Strategy will contribute towards a change in industrial activity across the UK?
RO: As long as there is consistent joined-up legislation and incentives started within a couple of years with a pathway through the 20s, 30s and 40s by the UK Government, industrial activity should grow along with the overall economy. The UK would be positioned well to compete globally with low-carbon industries. The consistency should be based on the global first ‘net-zero by 2050’ UK legislation, passed in 2019 combined with the Energy White Paper when developed into law; plus the UK’s forthcoming legislation of the announced changes in the Nationally Determined Contribution, as per the Paris Agreement, to at least a 68% reduction in greenhouse gases (GHGs) versus a 1990 baseline; and more recently, the introduction of the UK’s 6th Carbon Budget targeted at a 78% reduction in GHGs by 2035 versus 1990.
It is critical that the current focus ahead of the UK hosting COP26 is not lost in the next couple of years. To meet these goals, industry must know soon that the targets are set in legislation to allow them to make long-term plans with timed investment decisions over the remainder of this decade, particularly in the metals and minerals, chemicals, food and drink, paper and pulp, ceramics, glass, oil refineries, and offshore oil and gas segments.
In addition, it will be critical that the power sector’s decarbonisation is both accelerated and rapidly grown as clean electricity is an important part of helping the industrial segments meet this pathway. Just as important will be the early initiation at scale of the commercialisation of carbon capture and storage (CCS) and increased hydrogen production (both blue, which requires CCS, and then green).
SP: Achieving net-zero is a tremendous systems transformation challenge, and I welcome the Industrial Decarbonisation Strategy addressing policy interventions across multiple fronts in order to do this. By targeting the greening of industrial processes as well as demand-side aspects, the strategy has the potential to deliver the transformation needed while combating challenges such as competitiveness and carbon leakage.
Measures like low-carbon product standards, product labelling and rethinking cost as the main driver in procurement could all drive the market for low-carbon products across the value chain. What is really important is that demand-side measures do take into account the whole product life-cycle, in addition to embodied carbon, to ensure that environmental burdens are not just shifted from one life-cycle stage to another. Potential unintended consequences of technology adoption, as well as impact on other environmental and social aspects, should also be considered. The interventions suggested need to be acted upon now and at real pace if we are to achieve our target of net-zero by 2050.
CM: The UK already is, in many respects, a global leader in decarbonisation. It was the first country to set legally binding decarbonisation targets, the first G7 country to ban petrol and diesel vehicles, and the fastest to decarbonise grid electricity. However, up to now, industrial decarbonisation has largely been as a result of offshoring and a general contraction in UK industrial output. In this year of the COP26 Climate Conference, the UK once again has an opportunity to assume a leadership position – this time on how advanced industrial economies can both decarbonise and maintain their vital industrial base. The Industrial Decarbonisation Strategy aims to do this.
For those of us working in industry, we understand the scale of the challenge, but we also know that we cannot do it alone. In steel, for instance, the sector that I know best, we can be reasonably confident of the available technologies and those that need to be developed to enable us to decarbonise our processes. However, any such investment from industry will need to be made in the confidence that there will be the available infrastructure, be that low-carbon electricity, hydrogen, or CCS, to which these advanced low-carbon processes can be connected. The Industrial Decarbonisation Strategy shows a commitment from government to work together with industry on these issues.
SC: The latest Industrial Decarbonisation Strategy provides clear direction to industry as to the changes needed for these sectors to meet 2050 targets, and the role government will take in supporting the transition. This support is vital to achieving these targets, as it not only helps de-risk technology investments through grant funding, but also provides greater certainty of future infrastructure and policies, and allows businesses the confidence to make the decisions they need to reach net-zero.
The over-arching nature of this strategy, with improved co-ordination between decarbonisation and environmental policies, is really positive, and is required to meet the common sustainability agenda. Also, of great importance to those foundation industries with existing, well-established sites, is the willingness of government to work with industry to establish how to make these sites retrofit-ready.
The UK’s industrial heartlands contribute £170bln each year to the economy and 2.6 million jobs. Combined the sectors produce 16% (72MtCO2e) of UK emissions.
Source: Office of National Statistics and the Department for Business, Energy & Industrial Strategy
As the strategy is implemented are there any areas that could be developed further?
RO: In the short run (well before 2030), a carbon tax (or equivalent) needs to be put in place with upward ratcheting above inflation over time and a carbon border adjustment mechanism to protect from countries and companies who do not follow the globally needed pathway in decarbonisation and thus disadvantage UK industry. The latter should be in line with free and fair-trade principles (World Trade Organisation aligned) and global policy agreements made at COP26 and beyond.
In the medium term (in the early 30s), global agreements should be reached in decarbonising shipping (via the International Maritime Organisation) and aviation (via the International Civil Aviation Organisation).
In the long run, significant investment in modular nuclear fission reactors (both safer and more cost efficient) will likely be needed in the 30s, and by the 40s, commercial-scale nuclear fusion to further diminish the need for natural gas for many applications, especially to a very low level in the provision of heat to residential and commercial customers.
SP: Decarbonising industry is going to require new technology to be implemented at scale and quickly. There is still a way to go in terms of understanding where that technology fits in, how it is used, what infrastructure is needed, and how technology needs will be met in the context of the wider UK decarbonisation agenda.
Materials underpin all new technology – within the technology itself as well as supporting infrastructure. While the document discusses resource efficiency, we still lack a clear vision and strategy on the materials life-cycle in the UK. In this context, I would like to see more on the management of materials through extraction to end-of-life, as well as more on enabling markets for secondary materials. This will need to include new standards and regulatory changes. This can only be achieved by closer working between industry sectors, with a clear role here for the UK High Value Manufacturing Catapults (HVMCs) in bringing these together.
There are big challenges ahead, with new product markets and an increasingly heterogenous energy supply making use of a larger range of energy vectors. This will inevitably place increased demand on a far greater range of materials and we need a coherent strategy in place to deal with this.
CM: At some point, we need to start nailing down the tangible and practical aspects of implementation. For me, a big part of this has to be how we bring about a ‘just transition’ for workers and communities as we move to this new green economy.
Investing in green technologies will inevitably mean also investing in more automation and digitisation, leading to leaps in productivity. This is good news for industry, but could be devastating for the workforce and community, if it leads to large-scale job losses. However, we know that the Green Industrial Revolution will require new, highly skilled workers, to develop new technology and build out infrastructure, in sectors such as offshore wind, electric vehicles and nuclear power. Managing the transition between these different industrial sectors gives us the opportunity, both as a nation and for individual workers, to successfully retrain people to move from one industry to another. The alternative is to risk blighting communities with unemployment and, as a result, failing to realise the benefits of the new industry and export opportunities with which the Green Industrial Revolution presents us.
SC: Although it is only lightly mentioned, it will be important not to underestimate the need for a skills transition. Not only will this be needed to underpin the current and future workforce, but the skills themselves will change dramatically in the future to meet net-zero targets. More managers and leaders need to be aware of, and confident in, providing their own strategy to meet net-zero, and the workforce as a whole will need more digital and automation skills. The sectors also need to ‘rebrand’ with a focus on net-zero, sustainability and the future, to ensure that they are attractive to future workers.
The strategy is also, understandably, fairly high level. In future, this will need the support of a more tangible deployment strategy for some of the key technologies mentioned, to aid in further de-risking investment opportunities by business.
The UK Industrial Decarbonisation Strategy aims to:
- Reduce industry emissions by about two-thirds by 2035 and by at least 90% by 2050
- Capture 3MtCO2 per year through carbon capture, utilisaton and storage (CCUS) in 2030 and 8Mt-14MtCO2 per year in 2050
- Switch a minimum of 20TWh to low-carbon fuels per year in 2030
What opportunities and challenges are there for your sector?
RO: The IOM3 Energy Transition Group Technical Community represents, of course, all the energy segments, current and future, which support each sector of UK industry. The opportunities for those already engaged in the energy transition are plentiful in terms of process plus materials development and new investment openings.
As our IOM3 heritage derives from the oil and gas industry, one big challenge facing us is the reskilling of the over 140,00 people engaged directly and indirectly in the oil and gas sector. There are many oil and gas skills and technologies that will be critical to the renewable energy and industrial sectors in the coming decades as the need for oil and gas declines, such as geophysics, reservoir engineering, HSE, energy efficiency and digitalisation to mention just a few. It should be noted that oil and gas will still be required but at much lower levels for such industries as chemicals and others, especially if combined with CCS. However, good planning and spending in retraining/reskilling will be required for driving towards a fair transition and the government’s levelling up strategies. In addition, focusing on inclusive STEM education at graduate and post-graduate levels will be needed for an increasingly complex energy and industrial future.
SP: For composites and advanced materials, there are significant opportunities to support the expansion of renewable and low-carbon technology, as well as the roll-out of hydrogen.
Composites offer environmental gains from light-weighting and service life extension, with a strong future role for
bio-based and secondary materials. Advances in automation, as well as digital engineering technology and innovation, offer huge potential for reducing energy demand from manufacturing processes alongside optimisation and waste reduction.
End-of-life management, scaling up of recycling technologies, and creating a market for secondary materials like glass fibre are challenges which require cross-sector/industry engagement and collaboration. This means bringing together materials suppliers, original equipment manufacturers, and the waste management industry. This is where concepts like industrial symbiosis are really important, alongside more support to successfully scale recycling technologies and deal with some of the practical issues which arise from dismantling, recycling and reformatting into new products.
The Sustainable Composites Partnership is an example of cross-sector collaboration driving industrial research in this area. This is also where a more comprehensive materials strategy (separate to existing waste and resource strategies) would be very valuable.
CM: For steel and metals, it is possible to envisage a pathway to decarbonisation that will also lead to significant increases in productivity. There is also an opportunity in that the Green Industrial Revolution requires new infrastructure and new industries that will themselves be significant consumers of steel. The market for steel could also grow as a proportion of the overall materials market, given the potential for zero-carbon steel to displace other materials that could prove more difficult to decarbonise, such as cement.
The challenge comes in financing this transition. I estimate the cost of transforming the UK steel production facilities to be of the order of £6bln, with additional funding required for enabling infrastructure, such as hydrogen, zero-carbon electricity and CCS. More than this, it is likely that moving to these technologies will increase production costs, which could negate, or even exceed the productivity gains. Until the financial and economic consequences of this transition are understood with some confidence, it will be difficult for companies to manage the risk around the investment.
SC: The foundation industries (metals, paper, glass, cements, ceramics and chemicals) cover most of the industrial sectors in the report, alongside oil refining, food and drink, and downstream manufacturing. There are numerous challenges for these sectors – high operational temperatures, already very efficient processes, the need for a complete business model redesign to move towards a circular economy, and the long and complex investment cycles. But this strategy also offers substantial opportunities. These businesses are not alone, there is a great deal of support from bodies including UK Research and Innovation (UKRI), and Innovate UK, not just financially but also technically to understand state-of-the-art technology options and policy drivers.
With the promise of support for first-of-a-kind demonstrators, including CCU/S, heat recovery, digital techniques and resource efficiency models, this is a great opportunity to be involved and shape the technology at early stage, as the indirect benefits and knowledge gained are invaluable. A coherent communications plan regarding the support available will be welcomed, as often signposting is the most challenging aspect when there are various support systems in place.
What needs to happen to stimulate investment in low-carbon technology and improve resource efficiency?
RO: The good news is that, over time, non-fossil fuel energy costs have been shown to be lower than fossil fuel costs which helps offset some of the costs (especially in early investments) of industrial decarbonisation. The strategy describes some of the more important stimulants to getting investors to choose low carbon i.e. 1) carbon taxes or equivalent 2) funding mechanisms for private investment and 3) policy reform to mitigate the risk of carbon leakage.
For item two, investment tax incentives (general and regional to enhance levelling-up) and one-off grants (to enable risk mitigation for early investors) for as yet to be fully developed keystone technologies (such as green hydrogen and CCS) are good examples. Encouragement such as was used for the development of offshore wind power, such as a Contracts for Difference scheme, could be rolled out for some industry segments to accelerate decarbonisation.
I prefer using the term ‘low-risk’ in employing decarbonising technology, as low-regret tech (as described in the strategy) implies small incremental steps which may slow up progress. Risk mitigation such as described above in relation to funding mechanisms for private investment would be my recommendation.
Resource efficiency is an area where experience and skills from those in the oil and gas industry could be encouraged. Reducing the need for energy or materials in reaching a goal are usually the cheapest route to meet any target, offsetting any increased costs elsewhere in the transition. Government incentives to speed up these endeavours (tax incentives for early adopters for instance) could be considered.
CM: To stimulate private sector investment in low-carbon technology and resource efficiency will require both regulation and a market pull. In some ways, the regulatory changes have already started and indicators from government are that more regulation will follow. This becomes a strong incentive for businesses to invest and we have also seen now financial organisations preparing to undertake audits on businesses to which they loan money, to assess their preparedness for these changes.
Another important factor is the behaviour of the market, in rewarding businesses that are both green and resource efficient. We have seen recently that Mercedes Benz is to become a leader in sourcing green steel for its vehicles and others will surely follow this example. This in turn drives behaviour further up the supply chain, as component manufacturers and ultimately steel producers themselves invest to meet the needs of their customers.
SC: The barriers to resource efficiency set out in the strategy are important and must be addressed. Customer drive, whether by an end-user or through the supply chain, is crucial in enabling investment decisions, and a concerted effort is needed to influence both organic and incentivised innovation behaviours as a result of this drive. Expertise and finance options are already available, but these need to be clearer to access and more interconnected. Feedback also needs to be supplied for what works well and what could be tailored to support industry more successfully.
Supply chains also need to be consistent and transparent with their data, equipping customers with the information they need to compare options and make informed choices, as well as encouraging competition through innovation.
Modelling reported on in the strategy suggests that by 2050:
- The potential for hydrogen fuel switching in industrial clusters is at around 24TWh
- Electrification of industry could reduce emissions by 5Mt-12.3MtCO2e per annum
- Energy efficiency measures could contribute to 4MtCO2e abatement in industry
- Resource efficiency and material substitution could save 9MtCO2e per annum in industry, including 3MtCO2e relating to consumption
How should the government drive low-carbon product choice and what are the biggest challenges?
RO: The biggest challenge is the myth or reality that costs for consumers will rise in the short-term during decarbonisation. The government could provide direct incentives for early customer adoption, especially in lower income households by direct payments for a time to offset these costs, or tax credits for higher earners.
SP: Low-carbon product choice needs to consider the whole product life-cycle alongside embodied carbon. What is crucial is that any labelling scheme is robust, consistent and transparent, with underlying life-cycle assessments (LCA)s relating to environmental claims properly verified. There are varying levels of environmental information out there for different materials, with some industries far more mature than others in terms of developing LCA datasets and releasing information. Going forward, it is important that organisations are actually able to access carbon emissions information relating to their supply chain, particularly where no comprehensive trade association lead datasets (e.g. those compiled by World Steel) exist.
For emerging advanced materials, a big challenge is appropriately representing the level of certainty or potential variability within specific use cases – particularly where these are not yet well defined, technology for management at end-of-life is at an immature stage, and/or the life time of the material is very long.
Product labelling is an essential part of driving greener procurement, which is in turn needed to increase market and demand for lower carbon products. Getting the balance right between having a product label which is thorough and representative, as well as being easy to communicate is difficult, and ultimately requires a much greater level of education around the use and interpretation of LCA or carbon footprinting information. Even within existing training on LCA, often we do not place enough emphasis on how this information is understood and used. This opens the door for green-washing and misleading environmental claims. Going forward, education is absolutely key to product labelling actually leading to better low-carbon choices being made. Again, there are opportunities here for the UK’s HVMCs to support, in both the development of embodied emissions assessment frameworks and on education around LCA itself.
CM: It is essential that the market provides stimulus for companies to invest in low-carbon products, but where there is a market failure, then there is a role for government to support the creation of such a market. Government can achieve this by regulation to some extent, but such policies also potentially place domestic manufacturers, or service providers at a disadvantage, as compared with importers from countries with less stringent environmental regulations. In this situation, green tariffs, or ‘carbon border adjustments’ will be required to ensure that there is a level playing field internationally and that the right behaviours are properly rewarded by the market.
SC: Supporting and facilitating demand-led innovation is key. This includes areas such as setting standards for labelling and reporting, defining what ‘low-carbon products’ really means, ensuring that non-sustainable material switching to avoid tariffs does not occur, providing suitable policy to ensure costs are spread throughout the supply chain, and setting a clear direction and timeline for future fuel sources and tariff changes. This, alongside UKRI’s role in de-risking the technology options, will ensure that the industry works well together with government and progresses towards 2050 targets.
In terms of levelling up and maximising the UK’s potential, what opportunities are there to do this? What current successes can we build on?
RO: Levelling up is naturally helped in the path to UK-wide decarbonisation as the major areas of GHG emissions are in some of the areas targeted for levelling up (Grangemouth, Teesside, Humberside, Merseyside and South Wales). The key is to encourage direct investment in these areas and new support facilities for decarbonisation close to or within these areas. Teesside could be an early example with decarbonisation underway combined with a freeport. Moving part of the UK Department for Business, Energy & Industrial Strategy to one, or more of these areas, would also incentivise policymakers to live in the areas requiring levelling up and decarbonisation.
SP: There is real opportunity to lead the way on decarbonisation through the onshoring of our supply chains – reducing emissions from transportation, improving materials security and offering new possibilities for a circular economy. Where supply chains for sustainable materials are not yet mature, or do not even exist yet, this offers a real chance for the UK Government to secure capability in these new and emerging spaces. This brings new job opportunities, building on our existing skills base, as well as providing the chance to develop new expertise and leadership in low-carbon technology. To do this requires significant investment across industrial hubs to help scale up new technology, improve the efficiency of existing technology and increase opportunities for industrial symbiosis.
CM: It is clear that, alongside decarbonisation, levelling up is an important part of government’s political mandate and a necessity as the UK seeks to correct historic imbalances in wealth and opportunity in places around the country. Industrial decarbonisation presents both risks and opportunities in this regard. Decarbonisation, and the inevitable automation associated with new investment in traditional manufacturing sectors, will lead to a displacement of many valuable and hard-won skills. This could potentially lead to significant pockets of redundancy and unemployment in the very areas of the UK that levelling up is designed to support. To counter this, green investment must be part of a ‘just transition’ for people and skills in these places, where opportunities for retraining sit alongside significant investment in the new industries of the Green Industrial Revolution, enabling people to successfully transition across industries. This cannot be left to the market, or we will see the sort of devastation that I and my family experienced, growing up in the coalfields of County Durham.
Instead, we need to recognise the importance of supporting individuals to attain the new skills that will be needed in abundance for industries such as offshore wind, nuclear power, hydrogen and electric vehicles. This is essential for the workers involved, their families and communities, but also for these new industries on which our future economic prosperity depends and which will need a large supply of highly skilled workers to succeed.
SC: Decarbonisation of the industrial clusters is now moving forwards rapidly and many of these will contribute significantly to delivering the levelling up agenda. It is heartening to see though that the industrial strategy also aims to address the issues facing industries with sites that are more widely dispersed. In both, the investment in low-carbon technologies will provide increased numbers of jobs, the opportunity for re/upskilling, and economic opportunities for the local areas. Deployment of demonstration trials in any or all of these regions would give them a real boost, while the incentives for new industrial sectors to co-locate within industrial hubs, and the foreign investment this will attract, is also incredibly important to levelling up.