On 17 March 2021, the Industrial Decarbonisation Strategy (IDS) was published. The IDS is the first significant BEIS strategy since the Energy White Paper was published in December 2020 and it is the next step in the government’s plan for unlocking the UK’s net-zero future. The CBI contributed ahead of the strategy, setting out clear asks for government.
Decarbonising industry and manufacturing is a significant part of the UK’s net-zero challenge, with many industrial processes currently unable to, or incurring significant costs to, electrify or use low-carbon fuels. However, the government’s target in the IDS is to reduce industrial emissions by two thirds by 2035, and by at least 90 per cent by 2050, therefore the sector must consider alternative routes to decarbonisation. The options available to industry include carbon capture, use and storage (CCS) technologies, alternative fuels, such as bioenergy and low-carbon hydrogen, and improving energy and resource efficiency. On top of this, wider policy is needed to unlock the investment and drive the rate of change required for net-zero. The IDS is the crucial next step in providing the clarity that the industry needs to support the investment in decarbonisation.
In the Strategy, government shares timings for upcoming next steps:
- The UK Emissions Trading System (ETS) will be aligned to the UK’s legally binding net-zero target by January 2024, the UK ETS Free Allocation Review call for evidence was published alongside the IDS
- There will be four low-carbon industrial clusters by 2030, and the world’s first net-zero industrial cluster by 2040
- Potential introduction of new product standards by 2025
- CCUS business models will be finalised in 2021 with implementation in 2022
- Consultation on low-carbon hydrogen business models due in Q2 2021 with a final model to be agreed in 2022
- Further details on a revenue mechanism to fund low-carbon hydrogen due in 2021
- A Bioenergy Strategy will be published in 2022
The CBI welcomes the range of actions committed to by government in the IDS, many of which align with our key asks. Significant wins for the CBI include the government’s announcements surrounding carbon pricing, emissions trading and carbon leakage, all of which are addressed in the IDS with clear actions for government to maximise the potential role of the UK ETS and to mitigate carbon leakage. In addition, CBI called for the empowerment of industrial product consumers through improved labelling and lifecycle analysis; we are pleased to see that government have actioned to develop proposals for improved data transparency, product standards and product labelling to help bolster UK low-carbon industrial products globally.
The IDS also addresses CBI asks on technology and energy efficiency. Firstly, across CCUS and low-carbon hydrogen, the strategy reiterates existing government’s commitments, and we welcome the timeframes laid out for the implementation of business models and funding. Secondly, CBI called for government to address the barriers to fuel switching, and we are pleased to see that a review of the existing policy landscape will take place in the coming months to enable government to make the necessary next steps by the end of 2021. Finally, CBI warmly welcomes government’s recognition of the role that energy efficiency will play in supporting industrial decarbonisation. Although further details are still to come, the range of actions set out by government indicates that energy and resource efficiency is a clear priority within the strategy.
The publication of this strategy is only the start for industrial decarbonisation, government must now deliver the actions and targets it has set and provide further clarity for industry in the upcoming consultations and strategies. To achieve its ambition, government must work seamlessly with industry, and the CBI is ready to support your business throughout our journey to net-zero.
Welcoming the publication, CBI Chief Economist Rain Newton-Smith said:
“The Industrial Decarbonisation Strategy marks another vital step in the UK’s plans to achieve its net-zero emissions target. Creating and championing competitive low-carbon industries will ensure the benefits of a green economic recovery, and the longer-term transition to net-zero, are shared across the whole country.
Ahead of COP26, this is a welcome demonstration of the UK’s commitment to act on climate change, to make our post-pandemic recovery a green one, and to give businesses the certainty they need to invest in the technologies of the future.”