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There are are three key policy instruments for reducing industry emissions:
- Climate Change Agreements (CCAs) - These cover energy intensive industries and set targets for emissions reduction. It is not clear how much of the emissions reduction in industry can be attributed to CCAs, or the scope for future emissions reduction given problems with the current evidence base.
- EU Emissions Trading Scheme (EU ETS) - Approximately two-thirds of industry emissions are covered by the EU ETS, of which around half are also covered by CCAs. Our working assumption has been that the combination of energy intense production processes and a carbon price would provide sufficient incentives for energy efficiency improvement and investment in low carbon process technology.
- The Renewable Heat Incentive (RHI) - The RHI as currently proposed will incentivise renewable heat use in industry. Projected abatement for industry under the RHI scheme is around 6 MtCO2, primarily from the use of biomass boilers.
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