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The industry of decarbonisation

The new UK Government has an opportunity to take full advantage of the global shift to a low-carbon economy, says Matthew Bell, Chief Executive of the Committee on Climate Change.

Just before the summer break, the newly minted Department for Business, Energy and Industrial Strategy – with the backing of the new Prime Minister – passed the fifth carbon budget. As one of the first acts of this new Government it helps to set the tone: industrial strategy is, in part, the strategy to develop low-carbon industry.

Incorporating the global need to reduce emissions into industrial strategy will help the UK to meet its domestic carbon budgets, but it will also carve out an advantage for UK industry in a competitive export market. Producing low-carbon steel and low-carbon cement (alongside electric vehicles, wind turbines, low-carbon services and many other products) is a niche that offers the UK a chance to export into new and growing markets.

The main lesson that I took with me from the private sector is that success comes from differentiation – from adding value that others either cannot or have not yet thought to do. We should be seeking to differentiate our industrial products – while also developing new ones – rather than trying to compete in low-margin commoditised markets where substitutes abound for what we are trying to sell.

The increased ambition to tackle climate change pledged by over 190 nations in Paris last December means that the world will move more rapidly towards reducing its greenhouse gas emissions. The world will increasingly value low-carbon manufactured products. That explains the large and growing interest and participation of industry in the Paris process. It is one way the UK should be seeking to differentiate its steel, cement and countless other products for the benefit of domestic industry.

The CCC will play its role in helping that process. In mid-October the Committee will report back to the Government on the implications of the Paris Agreement for UK policy. We will consider the Climate Change Act in light of the Paris Agreement and what, if any, changes are needed. The first rule of good business is thinking ahead.

At the time of writing, the Committee’s conclusions on this subject are still under discussion. However, the increased ambition in Paris most certainly means that the UK needs to place even more focus on acting now to meet its existing obligations to reduce emissions.

The focus on reducing emissions should go alongside economic growth. Emissions have already fallen 38% since 1990 while GDP has increased by over 60%. Furthermore, most of the fall in industrial emissions (about 35%) occurred before the Climate Change Act had even been passed (between 1990 and 2008). The Climate Change Act has not caused a reduction in industrial output. More recently we have seen manufacturing growth alongside emissions reduction. The two can, and should, go hand-in-hand.

The Government has committed to setting out its actions to meet the fourth and fifth carbon budgets by the end of the year. This plan should take full advantage of the closer links in the new BEIS government department between energy, business and climate change. Most importantly, it should look seriously at the industry of decarbonisation as much as at the decarbonisation of industry.

The Committee on Climate Change will set out its analysis, evidence and conclusions in mid-October. As always, I very much look forward to hearing your thoughts through the autumn and beyond.