PRESS RELEASES | 16/03/2022
Move to net zero emissions creates an opportunity to grow UK industrial supply chains – but a comprehensive plan is needed
The Aldersgate Group launches a new report today arguing that the decarbonisation of the UK’s heavy industrial and manufacturing sectors could drive the growth of low carbon industrial supply chains in the UK, increase these sectors’ contribution to the economy, and make UK industry more resilient to global economic shocks and supply chain disruptions.
Based on significant engagement with major businesses across heavy industrial and manufacturing sectors, this report calls on Government to build on its Net Zero and Industrial Decarbonisation Strategies and put in place a comprehensive plan to establish stronger low carbon industrial supply chains. It outlines the measures required to accelerate innovation, grow the demand for low carbon industrial products, incentivise greater resource efficiency, provide a level playing field against high carbon imports, and stimulate investment in skills. The key recommendations are summarised below. 
As of COP26, 136 countries – covering over 90% of global GDP – have committed to achieving net zero.  This presents a significant opportunity for heavy industry and manufacturing to supply the essential materials for net zero infrastructure: from green steel in wind turbines and EVs, glass for solar panels and low carbon concrete in energy efficient buildings.
Establishing strong low carbon industrial supply chains will be pivotal to ensuring that the UK reaps the economic benefits of supplying these components. For example, just one 10MW wind turbine requires £880,000 worth of steel. This presents domestic producers with a significant opportunity if they are able to provide a share of the materials needed to meet the Government’s target of 40GW of offshore wind capacity by 2030.
Similarly, were the UK to retain and reprocess the lithium and cobalt in its existing EV fleet – which together are worth over £57m  – it could mitigate the environmental and human rights impact of new mining exploration, reap the economic benefits from greater resource efficiency, and become less dependent on imports of precious metals from countries such as China and Russia.
With heavy industry a major employer outside of London and the South East, growing a strong industrial base, fit to supply the building blocks of a net zero economy, will be key to Government’s levelling up agenda. For example, the UK’s regionally dispersed industrial clusters are hubs of economic activity, providing 1.5 million jobs and exporting goods and services worth £320 billion. 
However, high electricity prices, low public investment, and low retention of key materials for remanufacture have led to an increase of imports of industrial products rather than increased demand for domestic low carbon products. This can lead to major delays – as has been seen in the construction sector, where the delivery of key products (such as bricks) is taking as long as 12 months due to supply shortages, affecting the UK’s capacity to build and exacerbating the housing crisis.  Meanwhile, the current gas price crisis and shortages of key raw materials illustrate the impacts of fluctuations in global supplies.
Despite welcome commitments in the Industrial Decarbonisation and Net Zero Strategies, a comprehensive plan from government, including targeted and more accessible investment to support fuel switching and large-scale deployment of key technologies is needed to create a business environment conducive to investment in low carbon production.
Backed by extensive engagement with representatives from heavy industry and manufacturing such as the steel, cement, glass, construction and automotive sectors, today’s publication makes recommendations to establish a robust industrial and manufacturing base in the UK that is able to take advantage of growing demand for low carbon products, and mitigate key dependencies on other countries for critical materials and components vital to the UK’s economy.
Nick Molho, Executive Director of the Aldersgate Group, said: “UK heavy industrial sectors already employ more than 2.6 million people and contribute £170bn each year  to the UK economy. The net zero transition provides an opportunity to grow this contribution even further by increasing investment in domestic supply chains to support these sectors as they decarbonise. For this to materialise, the Government must put in place a comprehensive set of measures that grows the demand for low carbon industrial products, accelerates innovation in key technologies such as CCS and low carbon hydrogen, makes the price of electricity more competitive and provides a level playing field against high carbon imports whilst maximising opportunities to export low carbon industrial products.”
Key recommendations for government include:
- Introduce measures to reduce UK industrial electricity prices by accelerating investment in grid development and low-cost renewables (such as solar, onshore wind and offshore wind), improving co-ordination between grid and generation infrastructure, supporting continued growth of interconnection and storage, and establishing a market for long-term, zero carbon and tradable electricity contracts.
- Put forward tangible proposals for a Carbon Border Adjustment Mechanism (CBAM) – a system through which importers must purchase carbon certificates that correspond to the domestic carbon price they would have paid if they produced those goods in the UK. This would prevent high carbon imports from gaining a growing market share at the expense of low carbon goods produced by UK firms.
- Alongside proposals for a CBAM, Government should finalise the consultation on product standards with a view to introducing mandatory standards with targets on embodied carbon, lifecycle emissions, and the recycled content of products sold on the UK market. This would grow the demand for products such as car bodies made with recycled steel, or cement with a lower level of embodied carbon in the buildings sector.
- In public and private procurement contracts, Government and businesses with significant purchasing power should implement requirements for a higher percentage of goods procured to be low carbon. This would drive demand for goods with lower levels of embodied and lifecycle emissions, such as glazing made with recycled glass, and incentivise the UK’s heavy industries to pivot to greener production processes.
- Increase innovation funding to facilitate fuel switching and the development of new low carbon technologies where routes to electrification and low carbon production do not yet exist. This could follow a similar model to the Glass Futures initiative, which, through industry and government collaboration, has established an ultra low carbon glass making plant that trials new technologies and fuels, and has created a research and developing sector to take the sector closer to net zero. Rapidly finalising the hydrogen and CCUS business models will be essential in lowering the cost of these technologies and speeding up their adoption across key sectors.
- BEIS and the Department for Education (DfE) should work with industry, unions, and Local Authorities (LAs), to design skills centres to train and reskill workers in areas that are essential to delivering a net zero economy. This should include delivering the National Skills Fund to retrain workers and ensure a just transition.
- Offer tax relief on investments that create cheaper, more efficient practices for recovering and sorting materials, and introduce tax incentives, such as reduced business rates on waste materials sold in the UK to stimulate investment in the recovery and reprocessing of valuable resources that already exist within the UK.
- Establish mandatory sustainability criteria for the export of waste and scrap to create a level playing field between domestic and international markets for waste materials.
Alan Tinline, Group Head of Health, Safety and Environment at Associated British Ports, said: “It has never been more apparent that the UK must transition urgently towards low carbon industrial supply chains. This will require a more efficient use of energy, widespread modal shifts, and expansion in low carbon energy production to power a resource-efficient economy through innovation and upskilling. ABP is working at pace in all these areas to support and facilitate rapid decarbonisation in the supply chain. This policy briefing from the Aldersgate Group highlights a number of key areas that will accelerate decarbonisation in the supply chain, with actions that could be undertaken in short order.”
Ed Heath-Whyte, Head of Environment and Sustainability at Liberty Steel, said: “As the drive towards net zero intensifies, low-carbon products present significant opportunities to reduce energy consumption, cut waste, and increase reuse. The role of demand-side policies from UK Government in addressing product standards, public procurement, carbon leakage mitigation amongst others will be crucial to encouraging this market growth. The recommendations from the Aldersgate Group report provide important thinking on the policy environment needed to support industrial competitiveness and to develop relevant supply chains.”
Kate Turner, Regulation and Policy Director at ScottishPower Renewables, said: “Doubling down on decarbonisation will create a secure, clean, green and fairer economy and going faster and harder on net zero is critical if we’re to retain the UK’s competitive advantage in renewables and support long-term energy security. Across ScottishPower we’re investing £10bn to accelerate low carbon infrastructure, creating green jobs and huge opportunities to establish a sustainable UK supply chain that can compete globally for decades to come. We need to seize this moment, the recommendations in this report can help to unlock clean, cheap and secure power generated at home and provide the framework for green growth.”
Olivia Whitlam, Head of Sustainability at Siemens, said: “Taking a thorough approach to creating a low carbon market in all tiers of the supply chain not only supports decarbonisation of the economy, but has the potential to deliver significant economic benefits, driving resource efficiency and security to ensure the UK can thrive. We welcome the recommendations of this Aldersgate Group report, which lay out a clear framework for government to accelerate strong supply chains while harnessing these benefits of the transition to net zero.”
John Scanlon, Chief Executive Officer for SUEZ recycling and recovery UK said: “Improved resource efficiency is critical to decarbonising the UK’s heavy industries and manufacturing sectors, and the recycling and resource management sector has an important role to play in this. Whether it is working on solutions to re-use material that others throw away, recycling wind turbine blades or supplying the cement industry with a fossil fuel alternative, at SUEZ we are already playing our part. However, there is much more to do for the UK to meet the net zero challenge. I therefore welcome the recommendations in this Aldersgate Group paper, that set out tangible steps to improve performance throughout the supply chain.”
Fiacre O’Donnell, Director of Sustainability at Encirc, said: “Establishing a low carbon industrial sector offers a number of significant opportunities to the UK, from emissions reductions and resource efficiency, to job creation, exports, and expansion into rapidly growing markets for low carbon goods. We welcome this Aldersgate Group briefing and the recommendations it makes to government, who must support the growth of competitive low carbon industrial supply chains to ensure the UK stands ready to harness these opportunities as we approach net zero.”
Roz Bulleid, Deputy Policy Director at Green Alliance, said: “Forward thinking companies and consumers are already asking for greener raw materials and components – recycled steel, lower carbon cement, more efficient glass – UK industries need to adapt or see their markets wither away. But adaptation isn’t easy when you’re talking about large, capital intensive plants with long lifecycles. That’s why, as this report sets out, the government needs to step in, bridging the gap to a greener industrial future with a suite of policy measures that can level up the playing field for early movers and give long term confidence to those looking to invest in lower carbon processes and products.”
Sam French, Business Development Director at Johnson Matthey, said: “The UK’s transition to net zero is urgently needed for both the climate and economy. It also gives industrial producers and manufacturers the opportunity to benefit from growing demand for low carbon products. This report outlines the steps needed to drive innovation towards low carbon production, and the measures that will ensure the UK can provide vital industrial goods and services at a time when the world is facing increasing political and economic instability.”
Chris McDonald, Chief Executive Officer at the Materials Processing Institute, said: “Industrial products are vital for our security and economic prosperity, they are also the basis on which the green economy can be realised. Our industrial supply chains are key employers throughout the UK, but are at risk from high energy prices and offshoring. As we look to green our economy and increase resilience, the recommendations in this report from Aldersgate Group, will ensure that the UK captures the opportunities of Net Zero, creates jobs and protects our vital sovereign capability.”
Adam Whitmore, Principal Policy Adviser at Bellona, said: “Achieving net zero presents tremendous opportunities for UK industry and the wider UK economy. This report provides a welcome range of practical recommendations for how these opportunities can be realised, from developing innovation and skills to creating demand for low carbon products and enhancing competitiveness. It is an important contribution to the policy debates.”
John Howe, Managing Director of Michelin UK, said: “Re-treaded truck tyres can be a significant contributor to resource efficiency and decarbonisation. We welcome this Aldersgate Group paper and we would echo the calls for government to do all it can to retain valuable secondary materials for remanufacturing in the UK.”
Danial Sturge, Carbon Policy Practice Manager at the Energy Systems Catapult, said: “Industry sits at the heart of innovation, which is not only important for the UK’s Net Zero ambitions, but provides an opportunity to lead the world in creating a market for low carbon manufacturing and products, supported by robust carbon accounting and standards. The Aldersgate Group’s recommendations lay out the near-term steps needed to reach our long-term climate goals.”
Julia Barrett, Chief Sustainability Officer at Willmott Dixon, said: “We warmly welcome the Aldersgate Group’s new briefing on low carbon industrial supply chains. The built environment consumes almost half of the materials extracted globally every year, and as this report highlights, we need a systematic rethink to drive the supply of low carbon products and investment in skills and resource efficiency. There is an opportunity for Government to accelerate the transition through its own procurement, and by joint departmental working to eliminate the unintended consequences of siloed policy development.