Net Zero Carbon Policy is an Energy Systems Catapult thought leadership project, focusing on how the UK can develop an innovation-friendly, economy-wide policy framework for Net Zero. We are building on the insights from our Rethinking Decarbonisation Incentives project, to develop credible industrial decarbonisation policy options for an efficient and socially beneficial transition.

Pathways to industrial decarbonisation

In this report we highlight key themes for policymakers to consider in developing industrial clusters as a key component of a broader national industrial strategy and policy framework to drive industrial decarbonisation across the economy.

Our proposals draw on Energy Systems Catapult’s whole systems approach, our work on Net Zero Carbon Policy, and our work with innovators and clusters across the UK. This report also sets the scene for further thought leadership later this year on how best to build an enduring, innovation-friendly industrial decarbonisation policy framework.

Industrial clusters are responsible for over half of the UK’s industrial emissions, with many ideally situated for use of carbon capture, utilisation, and storage (CCUS) for abatement and/or negative emissions, as well as low carbon hydrogen production and use. For this reason, to date Government policy for industrial decarbonisation has largely focused on clusters, mainly through direct funding, as well as developing support mechanisms (supplemented by additional funding), for CCUS and hydrogen scale up.

What is the UK’s industrial decarbonisation strategy?

The UK Government’s Industrial Decarbonisation Strategy also contains positive steps towards an enduring long-term policy framework that can drive the major investments required to deliver deep decarbonisation of industry, where there may only be one asset replacement cycle between now and 2050.

What remains less clear is the role that industrial clusters can and should play in enabling:

• decarbonisation of industrial sites located outside of industrial clusters, known as dispersed sites, which when combined can also form ‘mini-clusters’;
• broader decarbonisation across the economy.

Industrial decarbonisation challenges

We have identified four areas of key challenges to unlock synergies between industrial clusters and wider decarbonisation of industry and the energy system:

• Leveraging cluster investment and trials
• Ensuring investment in clusters is beneficial for the whole system
• Integrating with Local Area Energy Planning
• Managing the international dimension of industrial decarbonisation

Decarbonising industry – recommendations for policymakers

Developing low carbon industrial clusters is important for reducing carbon emissions from industry. However, industrial clusters can also play a key role in building a longer-term strategy and policy framework for industrial decarbonisation and competitiveness across the economy.

This needs further focus and analysis to ensure that the UK extracts maximum value from cluster-focused investment and policies for wider industrial decarbonisation in the decades ahead. The following are recommended early actions:

1. Establish regular reviews of whole system modelling scenarios for CCUS and hydrogen supply and demand. These can be used to inform wider decision making when considering the challenges associated with CCUS and hydrogen infrastructure/network investment as a national resource. This could potentially form part of the National Infrastructure Commission’s ‘National Infrastructure Assessment’.
2. Commission tailored Local Area Energy Plans that include the spatial and energy demands of industrial clusters. LAEP can have a significant role in decarbonising communities, including regional industrial clusters, and enabling investment for associated infrastructure requirements. These should support the UKRI funded Net Zero industrial cluster plans to develop regional roadmaps, which can eventually be combined to inform a UK-wide route to Net Zero industry.
3. Review, update, and align the existing ‘Industrial Decarbonisation and Energy Efficiency Roadmaps to 2050’ with Net Zero for key foundational sectors. These should include regularly updating data for mapping pathways for clusters and their role within the whole system, which can be fed into Local Area Energy Plans and industrial cluster plans.
4. Expand the proposed scope of the Carbon Regulator for greenhouse gas removals to support the development of an industry-wide approach to the monitoring, reporting, and verification of emissions. Carbon accounting across the domestic industrial supply chain can initiate standards for use globally, as a stepping stone for carbon border standards and/or carbon border adjustment mechanisms.