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Energy Essentials: Transitioning energy-intensive industries to net zero

Energy Essentials: Transitioning energy-intensive industries to net zero

This Energy Essentials guide provides an easy way into understanding some of the challenges and opportunities presented as the UK’s energy-intensive industries move towards net zero greenhouse gas emissions.

The sections below outline changes that will be needed, advice for those working in, buying from, and living near energy-intensive industries, and further sources of information.  The resource intends to inform conversations about the environmental, business, policy, and social dynamics of the transition to net zero industry.

  • In the UK alone, industrial sectors (energy-intensive and less energy-intensive industries) contribute around £170 billion to the economy, accounting for 9% of GDP and 2.6 million direct jobs. However, industrial sites produced approximately 16% of UK emissions in 2021, require significant amount of energy and their pathways to net zero are expensive and technologically difficult.
  • A suite of measures is likely needed to transition these industries to net zero including demand reduction and efficiency improvements, fuel and feedstock switching or carbon capture. The best pathway varies from sector to sector.
  • There are novel and innovative technologies being developed to transition the industries. Many of these are nearing technological maturity; however, it is unlikely that one technology will emerge as a “winner” and the best route will depend on regional contexts.

Energy-intensive industries

Energy-intensive industries (EIIs) are those with high energy demands and usage, typically in the processing of raw materials or manufacturing sector[1]. They include, among others:

  • Steel, iron and non-ferrous metals
  • Cement and lime
  • Chemicals
  • Paper and pulp
  • Ceramics
  • Glass

It is common for industries to be located in coastal regions or near lakes or rivers, where they tend to create local, clustered hotspots of economic activity, for example, in the UK in South Wales, Southampton, Humberside, Teesside, Grangemouth and Merseyside. Such locations provide access to water for use in processing, washing, cooling, and importing feedstocks or exporting products. Industrial clusters also provide opportunities for decarbonisation in terms of shared infrastructure for carbon capture, utilisation, and storage (CCUS) and hydrogen.

However, the pathways to reducing or eliminating their greenhouse gas (GHG) emissions are often technologically difficult and/or expensive. And, given that energy makes up a high proportion of their costs, these sectors are extremely exposed to energy price changes, such as the energy prices rises in 2022. These factors make being market competitive a challenging prospect due to the capital-heavy nature of investments to reduce emissions.

Nevertheless, they do have the potential for a net zero by 2050, with any residual emissions offset by greenhouse gas removal measures and the benefits they bring. Getting there from where we are today is poised to be challenging – for the companies, workforce, supply chains, local communities, and governments.

Across the UK, industrial sectors (energy-intensive and less energy-intensive industries) contribute around £170 billion to the economy, accounting for 9% of the GDP and 2.6 million direct jobs [2]. The outputs of these industries are the building blocks of many consumer products, from buildings and infrastructure to plastic goods. Due to their role in the supply chain, they are central to reaching net zero emissions: from concrete and cement for construction to steel and aluminium for car manufacturers and wind farms.


Making a wind turbine


Decarbonisation drivers

In 2020, EIIs accounted for 26% of global CO2 emissions[3] with emissions being reduced during the Covid pandemic but surging back during 2022. Emissions from industrial processes also include methane (CH4) and nitrous oxides (NOx), both potent greenhouse gases:

  • Globally, iron and steel along with cement production contributed to 55.6% of the 9.37Gt CO2 released by EIIs during 2021.
  • In the UK, industrial sites were estimated to have contributed 65 MtCO2e in 2021, approximately 16% of the UK’s emissions.
  • Industrial clusters represent around 20% of Europe’s GHG emissions[4].
  • In China, the steel industry alone accounts for 15% of the country’s total CO2 emissions[5], with industrial emissions totalling around 4.5Gt of CO2 per annum[6].
  • The industrial sector in India accounts for approximately 20% of the country's total GHG emissions[7].


Industrial processes and products CO2 emissions (MtCO2e) in 2019 - examples


And there are a growing number of reasons for industries to cut their emissions:

  • National targets and legislation: More than 130 countries, including the UK, have set, or are considering a target to reduce GHG emissions to net zero by 2050. Of the top ten emitters, Japan, Canada and the EU have legally binding net zero commitments.
  • These extend down into environmental regulations which companies must follow[8]. For countries with legally binding targets, such as the UK, this is the key reason why emissions must be reduced.
  • Business opportunities: To build resilience, transparency, and competitiveness. This includes avoiding stranded assets, using waste products, and saving money through improving process efficiency, on-site renewable energy generation, energy storage and energy flexibility.
  • Economics: Investment decisions are driving global market developments, e.g. rising taxes on carbon emissions. This impacts energy price changes and may incentivise fuel switching and decarbonisation.
  • Local co-benefits: Changes which reduce GHG emissions can benefit the local environment by improving local air quality and reducing water pollution.
  • Stakeholder sustainability expectations: There is a growing shareholder, customer, and employee expectation to minimise harm as part of wider environmental, social and governance (ESG) criteria.

Routes to net zero

Getting to net zero in these industries will take time and requires further development and cost reductions in future technologies and innovations. The main routes to reducing GHG emissions are the same for industrial processes as for other energy uses, with actions required across each area: demand reduction and efficiency improvement measures; where possible, switching to low carbon energy sources such as renewables; and, where the energy source cannot be made low carbon, carbon abatement measures such as CCUS will be required. Due to the specific processes, infrastructure, and resources involved, the best pathway varies from sector to sector and by location.


Efficiency improvements: Reducing demand and making efficiency improvements at industrial sites could be achieved through increasing product longevity, improving processes, and installing more efficient equipment, as well as material efficiency and circular economy measures such as expanded material reuse and recycling networks. Specifically, a more circular economy could reduce CO2 emissions from four major industry sectors (plastics, steel, aluminium, and cement) by 40% globally and by 55% in developed economies like Europe by 2050[9]. A specific risk, however, is that investing in efficiency improvements could create stranded assets by causing delayed investment in other decarbonisation activities. It is, therefore, important for businesses to maintain a long-term strategic focus and be aware of the future implications of immediate actions.

Diversification of energy sources: Focus on the source of energy is also required to reach net zero. Electrification has become more economically attractive for some producers as it has become more feasible to electrify processes which require lower heat (of less than 1,000ᵒC), with increasing supply of low-carbon electricity. For other processes, which may require higher temperatures or round-the-clock heating, other options will be more appealing. These include low-carbon hydrogen, biomass, and thermal storage.

Abating fossil fuels: Another element is the use of measures to address emissions that cannot currently be reduced entirely by other means – particularly where emissions can’t be abated as they are produced during the process, such as in steel and cement production. These measures include CCUS, and CO2 removal approaches such as direct air capture (DAC),  bioenergy with carbon capture and storage (BECCS), carbon offsetting and nature-based solutions:

  • The IEA predicts that to reach net zero emissions, 5,000 million tonnes of CO2 will need to be captured globally per annum by 2050. These measures, as well as market mechanisms such as product standards and carbon taxes, could also limit so-called ‘carbon leakage’ by safeguarding the competitiveness of local and national industries. As such, CCUS is predicted to become a £200 billion global industry with the potential to export skills, expertise, and supply chains. However, it is also expensive per tonne captured and there are concerns that it legitimises continued fossil fuel use and risks locking manufacturers into fossil fuel-based processes.
  • Carbon offset is another way through which EIIs can mitigate their carbon emissions by funding projects, on compliance or voluntary markets, that take a similar amount of CO2  and other GHGs out of the atmosphere. The projects may include forestation, renewable energy funding, carbon or methane capture or energy conservation funding. In order for offsets to be effective they must provide funding for a project that otherwise would not have occurred ("additionality"). "Additionality" of CO2 reduction of removal must be clearly specified in the offset. They also must be unique, real and measurable and have a long-lasting effects. Finally, offset instruments must not be exploited ("greenwashed") to cover up an environmentally harmful activity or delay more significant actions.

Future technologies

Whilst the hierarchy of measures indicates the overall approach to achieving net zero greenhouse gas emissions, there are technologies and pathways where sectors differ. For example:

  • For steel, the introduction of alternative ore-based production processes using hydrogen, including Direct Reduced Iron (DRI) technology, as well as increased electric arc furnace production, are seen as critical to decarbonisation.
  • Within cement production, process emissions from clinker calcination account for two-thirds of emissions. Therefore, clinker substitution, in which alternative materials including volcanic ash, ground limestone and broken glass are used, is being pursued as a key decarbonisation step.
  • Within aluminium production, inert anode technology is seen as a promising option for the sector to decarbonise, as most aluminium production facilities currently use carbon anodes.
  • Electrification is seen as a major opportunity for the paper industry, as 96% of these operations could be electrified using existing technologies[10] – as it mostly requires temperatures below 400ᵒC during its manufacturing processes.

For more information on each of the sectors and their potential pathways to reaching net zero emissions, please see the International Energy Agency’s (IEA) Achieving Net Zero Heavy Industry Sectors in G7 Members report[11].

Notably, many low-carbon technologies have reached large prototype and demonstration phases. For example, steel production using green hydrogen or electric arc furnaces could be scaled commercially by 2025.

However, at their current pace of development, most of these technologies won’t be commercially ready for industry adoption before the second half of the 2020s. This is particularly important, as energy-intensive industries operate in highly competitive, global markets and face low profit margins, high capital costs for equipment, and long asset life (of over 15 to 25 years). This means that 2050 is just one investment cycle away and therefore urgent decisions will be needed on which technologies to install or pursue.

It is also unlikely that one of these technological methods will emerge as a “winner”. The IEA calls for at least two or three different near-zero emission methods for each sector. Integrating the whole system, infrastructure and technology maturation timelines will be key to an effective and smooth transition.

As part of its industrial decarbonisation strategy, and due to the natural distribution of these industries, the UK government is focussing its industrial decarbonisation efforts on regional clusters as a way to build these integrated systems.

However, it remains uncertain how the UK government will support the decarbonisation of dispersed sites. Also, high costs will be incurred to abate their large quantities of emissions, as a result of connecting them to existing networks or shared infrastructure considering the distance from clusters.

  • Industrial sectors provide about one-quarter of global employment, including many indirect jobs up and down the supply chain. Roles range from technical engineering leads to communications officers to data and software consultants.
  • A shift to a net zero economy is projected to generate up to 37 million additional jobs worldwide by 2030, including up to two million ‘green collar’ jobs in the UK. There is also a global market opportunity of £1 trillion for British businesses by 2030.
  • Workforce skills are a key enabler of the net zero transition and can differentiate candidates in the job market. Many are the same as those already needed in existing science, technology, engineering, and mathematics (STEM) jobs.

Net zero jobs

In the UK, industrial sectors (energy-intensive and less energy-intensive industries) provide 2.6 million direct jobs. Europe is home to over 1,500 industrial clusters, representing 54 million jobs or almost 25% of total EU employment. Industrial companies are estimated to provide about one-quarter of global employment, as they also support many jobs indirectly throughout the supply chain, from specialised legal firms[1] to clothing and PPE manufacturers[2].

A shift to a resilient, net zero economy will generate up to 37 million additional jobs worldwide by 2030[3]. The UK Government is investing £4 billion to support two million green jobs in the UK by 2030. As a growing area, there were already over 410,000 jobs, specifically in low-carbon businesses and their supply chains in the UK in 2021.

It is important to highlight that decarbonisation will play out differently in each sector, likely shaped when individual technologies reach commercial maturity. The work to decarbonise energy and industry, and then continuing to work in decarbonised industrial sectors, could encompass a wide variety of jobs, for example:

  • CCUS Engineering and Technical Lead
  • Communications Manager
  • Data and Software Management Consultant
  • Energy Manager
  • Heavy Equipment Mechanical Technician
  • Industrial Asset Manager
  • Maintenance Technician and others.


Skills required for the net zero transition


Skills required for the net zero transition


Skills required for the net zero transition


Given the variety of job opportunities, the industrial sector has been described as an ‘employees’ market’ where industries will compete for these skill sets.

Specifically in the UK, skills and competencies such as construction and project infrastructure skills will be in high demand, with major infrastructure projects such as CCUS and hydrogen plants, High Speed Two (HS2) and Hinkley Point C nuclear power station competing for the same people.

Many businesses, therefore, are predicting shortfalls in the availability of suitably qualified and experienced personnel to fill critical roles[4] – with some businesses are already experiencing this. As such, these sectors need to access the best people from the largest possible pool of candidates.

For that, these sectors will need to improve their diversity, particularly at senior levels. According to a Deloitte report in 2021, fewer than one in three manufacturing professionals in the US were women[5]. The latest annual board statistics published by POWERful Women (PfW) show that in 2021 only 14% of executive director roles in the UK energy sector were held by women. And in 2019, women were reported to only make up an average of 23% of total employees across 135 international energy companies[6].

Zero carbon competencies

Meet Jasmin – she’s a GCSE student navigating the first steps towards her working life. She is exploring the current and future job market for white collar jobs in industry and how she can develop useful skills.
  • Why should I consider working in industry?

Research by National Grid suggests that more than three-quarters of UK adults (78%) think it’s important to play a part in the UK’s journey to reaching net zero emissions[7]. And there are already strong incentives to move into ‘green jobs’ as they carry an average wage premium of 8 per cent over ‘non-green’ jobs (in part because they are currently often higher-qualified, professional jobs)[8][9].

  • What overarching competencies will I need?

Competencies are a key enabler of the net zero transition and can differentiate you in the job market now and in the future. These broad ways of working which will be needed between now and 2050 include:

  • Active listening
  • Adaptability
  • Change and risk management
  • Creative thinking
  • Critical thinking
  • Empathetic leadership
  • Innovation (including ability to fail and learn)
  • Problem solving
  • Systems thinking
  • Teamwork and collaboration

These are many of the same skills and competencies which are needed already in existing science, technology, engineering, and mathematics (STEM) jobs, as well as being required in the future.

Having these technical and transferable skills creates opportunities for you to enter the workforce close to your hometown or to work around the world, choose between a wide variety of jobs and organisations, and constantly be in demand.

  • What technical skills and competencies might different jobs require?

The development of offshore wind, hydrogen, and CCUS, as well as ongoing oil and gas activities, are likely to be key sectors for which skills gaps exist[10]. More widely, certain skills could be in demand:

  • Climate skills (e.g. climate finance, geographic information system [GIS] mapping)
  • Construction and project infrastructure skills
  • Data and evidence analysis
  • Digital skills, including digital security
  • Engineering skills (electrical, mechanical, chemical, civil)
  • Fundamental energy knowledge (e.g. energy systems, energy efficiency, energy finance)
  • Public policy development (at local and national level)

Importantly, the required skills will change as technologies mature or are invented and depend on the area.

  • Where can I go to get qualified?

There are many different training opportunities and routes:

  • Further education: Level 3 qualifications, such as Construction and the Built Environment or T Levels, such as Science or Design, Surveying and Planning for Construction;
  • Further education: A Levels, such as Mathematics or Physics;
  • Non-degree/technical apprenticeships;
  • Degree apprenticeships (e.g. software engineering, R&D engineering);
  • Mature apprenticeships;
  • University – for more information on universities, please follow the link to the Energy Institute’s learning affiliates page.

Be ambitious about what you want to do!

The Energy Institute’s Careers page will be able to offer further help and information.

Existing roles

Long asset life and technology maturation timeframes mean that existing industrial jobs will continue to be required. And many of the technical skills, such as precision working, equipment management and problem-solving, will always be important across many sectors. Most skills are transitionary - using the same skills in a different context or process - in the net zero economy.

There are also many opportunities for the current industrial workforce to develop new skills as processes and practices change or to use skills in a new or evolving context. Undertaking training to reskill certain areas allows for manoeuvrability between different industries and helps to future-proof careers by creating long-term job security.

In the UK, skills, or lack of them, is one of the current big barriers to achieving net zero. Yet, the UK specifically has advantages of engineering excellence, oil and gas history, and North Sea storage potential. Over 90% of the UK’s oil and gas workforce have medium to high skills transferability and are well positioned to work in other energy sectors[11]. For example, there is medium skills transferability from oil and gas to CCUS and blue hydrogen.

However, that still leaves many people who are not well positioned and whose skills are not readily transferable.

Meet Bill - he’s worked in a chemical plant in Scotland for over 20 years. His employer is starting to change the way they do business. Bill is assessing what this this means for him: how quickly might changes happen, and what might this mean for his job? Are there likely to be opportunities to re-train?
  • What does upskilling or retraining mean for me?

The shifts in roles within decarbonisation of existing industries are likely to be incremental. Many existing skillsets only need small ‘tweaks’ to apply them to new technologies; the actual job role will not change. For example, a technician may need a hydrogen safety course to learn about the safety aspects of fuel switching between natural gas and hydrogen but does not necessarily need an overhaul of their job.

As companies’ plans become clearer so too will any need for additional skills and training. This may include training workers to operate new technologies within industrial plants, or to work in new areas e.g. operating CO2 transport and storage networks or on expanded material re-use and recycling networks.

Relevant to this is also ongoing efforts, within various organisations and governments around the world, to develop skills passports[12]. These would provide a trusted, portable credential of your skills and qualifications. This would ensure that any skills gained through upskilling or retraining would be transferable and not dependent on the awarding body, location of accreditation or industrial sector they have been achieved in.

  • Where could I go to undertake these kinds of training?

In England, the National Skills Fund may offer opportunities to upskill and access training - groups such as the Aldersgate Group believe these adult-learning provisions should be extended. The Energy Institute also runs seminars and courses. There are also opportunities to take courses through Trade Union Learning Funds in Scotland and Wales or enrol at Further Education colleges.

Unfortunately, it is common for people to have to fund training themselves and take time off to complete their studies. In the Energy Institute Energy Barometer 2021, almost half (49%) of respondents had concerns about cost, time and availability of courses standing in the way of their skills development. This is a significant barrier, particularly without certainty of demand. Talk to your manager, trade union representative and local MP about your needs.

There has been a lot of work undertaken around the just transition to the net zero economy and what it could mean for people. This includes the establishment of a Just Transition Commission.

  • How can I share my experience with others?

The transition provides a great opportunity for the exchange of ideas, experience, and expertise:

  • Teaching apprentices – both those new to the workforce as well as helping to upskill and retrain the existing workforce. It will also be important to develop apprenticeship standards and qualifications related to decarbonisation.
  • Delivering or taking part in courses in local colleges and universities – blue collar workers have the technical knowledge and lived experience which few others can replicate and there is a lack of trained instructors at further education colleges.
  • Becoming a mentor - this could be within an organisation or externally, such as through a professional body like the Energy Institute.
  • Supply chains tend to be a significant source of a business’s emissions due to the energy required to make and transport materials.
  • Accurate and up-to-date data will allow businesses to assess their supply chain and identify the most impactful actions or changes accurately and effectively.
  • Market demand is being stimulated through business collaborations, such as the First Movers Coalition, and government procurement.

Enabling low carbon supply chains

Emissions reduction targets have become a reputational, financial and in some cases legal imperative for businesses, and a strong differentiator in highly competitive markets. In particular, the ESG (Environmental, Social and Governance) finance market is growing and changing the business landscape.

Supply chains tend to be a significant source of a business’s emissions due to the energy required to make and transport materials. Improving the supply chain emissions data collection and analysis undertaken by companies is crucial for a number of reasons: to inform mechanisms like environmental product declarations (EPDs), product standards, and green public procurement, as well as to be able to model and anticipate future demand.



However, many companies are finding scope 3 emissions to be the most difficult to address due to data limitations, system complexity and supplier engagement. Only around one in five UK manufacturers (17%) measured their value chain emissions in 2022.

Stimulating market demand

Businesses across the world are collaborating to decarbonise their supply chains through initiatives such as the Mission Possible Partnership, SteelZero, First Movers Coalition and bodies such as the Global Cement and Concrete Association (GCCA).

Similarly, industrial clusters or hubs create opportunities for businesses to jointly engage the original equipment manufacturers (OEMs) to develop and test standards for monitoring, reporting, and verifying emissions.

Government procurement power also drives demand and is a major tool at each government’s disposal. Global public procurement amounted to $11 trillion in 2018, 12% of global gross domestic product (GDP)[1]. Existing initiatives to drive green public procurement include the Buy Clean California Act and the Netherland’s Sustainable Construction Calculator, DuboCalc. In the UK, the Environment Agency announced in 2021 that they would use low carbon concrete when constructing flood defences and other critical infrastructure projects[2].

The UN Industrial Deep Decarbonisation Initiative (IDDI), a global coalition, is also collaborating with national governments to establish public and private sector procurement targets for decarbonised steel and cement. This provides greater certainty and targeted demand pull.

However, there is concern about the ability of global and national supply chains to scale up in line with demand for materials needed for the transition to net zero, such as electronic chips and rare earth metals. As such, there is a need to understand and manage the flow of critical materials and minerals. More resource-efficient and circular supply chains can mitigate against this kind of shortfall. Further, a more circular economy has been predicted to reduce emissions from plastics, steel, aluminium, and cement by 40% globally. This will be increasingly important as global demand for critical resources increases.

Meet Sia – she runs a medium-sized builders’ merchant that supplies imported steel and locally-produced cement to construction firms. While price and quality are her main criteria when sourcing suppliers, her customers increasingly expect her to consider environmental impact, including carbon footprint.
  • How can suppliers decarbonise their supply chains and take advantage of the growing low carbon materials market?

Communicate, with both manufacturers and customers, where your priorities are and the importance you are placing on them. Engage your supply chain in those changes, rather than just changing suppliers. For example, Ørsted have announced that it expects all its suppliers to use 100% renewable electricity by 2025[3]. This could attract new customers who share those values.

Accurate and up-to-date data will allow you to assess your supply chain and identify the most impactful actions or changes. Availability of data to measure progress in these sectors is currently particularly poor and limits the effectiveness of monitoring and evaluation.

Don’t assume that buying locally is the lowest-carbon option by default. Instead, be led by the whole lifecycle emissions of products.

Low carbon products

Some low carbon products are at early stages of commercial roll-out, meaning they already are available or will be soon:

  • Skanska have trialled low carbon reinforced concrete on a motorway improvement scheme. Other construction firms are looking to eliminate waste and use alternative materials such as timber and reinforced fibre polymers[4].
  • There are projects looking at alternative cement constituents and carbon capture technologies in the demonstration stage, including in Norway and Italy, and pilot stage, including in Canada and Germany.
  • In Sweden’s HYBRIT project, 1.3 million tonnes of fossil-free sponge iron will be produced by 2026, and full-scale production will start in 2030[5].

Although the characteristics and quality of these new low-carbon materials will face the same health and safety requirements, stress testing and checks, these technologies have not existed for the same length of time or have faced the same real-world applications.

Importantly, international standards and accounting frameworks already exist or are under development for evaluating the emissions intensity of certain materials, both for production (e.g., ISO 14404, ISO DIS19694-3, ResponsibleSteel, Cement CO2 and Energy Protocol) and products (e.g. ISO 20915, EPDs).

These make it possible to compare the impacts of different materials and products to select the most sustainable option. However, as an example, EPD data on French, German or Dutch products is more readily available than products and materials sourced in the UK[6]. This means that the only way to get that information is to call individual suppliers, presenting a challenge to constructing low-carbon buildings with locally sourced materials and developing clear business cases that provide customers with confidence in the decision-making process.

Labelling of products is also regulated to ensure traceability of the source, embodied CO2, energy efficiency or recycled content of materials. Performance bands, as demonstrated by the EU’s well-established energy efficiency labels, provide one example of showcasing credentials and enabling informed purchase decisions.

Meet Adam – he is planning to undertake a renovation of his house and, due to his desire to live sustainably, he wants to use low carbon materials where possible. He is wary of paying more and wants to know if there any government schemes to help him pay for low carbon materials.
  • How can I reduce the carbon emissions associated with building materials?

The two main methods to reduce embodied carbon are by using less material and eliminating waste - which should be more cost-effective and deliver long-term payback – or by switching to lower carbon materials – which generally should have required less energy in their manufacture.

A study was completed by Mesh Energy assessing the embodied and whole-life carbon associated with a building project under scenarios using a range of materials[7], which provides a range of outcomes in terms of carbon and cost.

The report advises that you could conduct a whole-life carbon assessment (WLC). However, WLC assessments in the UK cost £200 to £400 per property as a minimum, and there is no standardised process yet.


Whole life cycle carbon assessment


Therefore, it is important to engage your suppliers or builders’ merchants so that they understand your priorities and ambitions. This will allow you to assess the options more effectively and whether construction firms possess the required skillsets.

  • Will this increase or decrease my costs?

When looking at materials, carbon-intensive products are often cheaper than low-carbon alternatives. Steel is expected to become 20 to 40 percent more expensive if produced from renewable hydrogen, and cement could cost 70 to 100 percent more with CCS[8].

It depends on the sector, but in general, this is not predicted to impose major costs on end consumers. For example, an increased cost of steel is likely to add around £150 to the price of a car. And even with increased cement costs, your predicted increase in total building construction costs is 3%.

An important element of cost, and therefore material and building design choices, is the cost of insurance. Some lower carbon materials, such as timber, can lead to rising insurance costs in some countries. Therefore, it is critical to engage with relevant experts and advisors.

It is also important to be aware of the context that, energy prices reached historic highs in 2022[9]. The effects of those increased energy prices and the knock-on effects on manufacturers worldwide are unknown. There are, examples of energy-intensive industries having to shut down or reduce activities due to the costs – for example, over half of UK manufacturers adjusted their business practices to cut energy consumption and/or raised their product prices in 2022[10]. This could make decarbonising, as an added cost on top of existing energy costs, infeasible or increase the cost of low-carbon products. On the other hand, decarbonisation activities, such as installing renewable energy sources and implementing process efficiencies, could save money and lead to greater production of lower carbon products. The response to this crisis could be critical to developing the market for low-carbon products.

  • Are there any government schemes to incentivise the use of low carbon materials?

Emissions from construction and the materials used are receiving greater scrutiny. In the UK, the Building Research Establishment Environmental Assessment Method (BREEAM) provides a sustainability assessment method for buildings and infrastructure.

However, at the moment, there are no incentives in the UK specifically for individuals to use low-carbon materials. This means that you will have to cover any extra costs yourself. As such, many groups are calling on governments to implement and use fiscal incentives to create market demand and improve the housing stock of their countries.

  • Industries often have a prominent, active presence in their community, and drive local prosperity.
  • The major local opportunities from industrial decarbonisation include job security and environmental improvements. However, there are risks which require management of safety, noise, and environmental impacts.
  • Local knowledge can help planning authorities to make informed decisions based on local resources, skills, and sensitivities.

A sense of place

Industries can be a focal point in the local community. They tower over the landscape and frame the experiences of those living nearby, sometimes shaping local identities for generations and instilling a sense of pride in the local area. These businesses are often actively engaged in the community, running events, funding local projects, and directly and indirectly supporting livelihoods.

They tend to be drivers of prosperity for the surrounding area as employers. The average wage of steel industry employees is 18% higher than the UK average and 36% higher than the regional average in Wales and Yorkshire & Humberside. The Humber cluster generates approximately £4.8 billion of value to its surrounding area, representing nearly a quarter of the region’s total Gross Value Added (GVA).

However, industrial activities can cause negative impacts on the environment and local communities[1]. Environmental issues to be managed include high water usage, quarrying and acquiring raw materials, releasing emissions into the atmosphere and water ecosystems, and waste generation. Alongside this, noise pollution increases as industries and associated transport grow. Safety considerations include the transport and use of dangerous chemicals, heavy machinery, and energy-intensive processes (using high temperatures, complex activities and producing potentially dangerous side-products). Therefore, businesses need to have strict safety protocols and procedures in place to mitigate risks to their employees, local communities, and the environment.

Change on the horizon

The industrial transition to net zero could mitigate some existing environmental risks and raise some new ones such as arising from the transport of hydrogen or captured CO2. Local communities will want to know more about any changes to processes, be reassured about the people and the environment being protected, and see evidence-based decision making in place.

Decarbonisation will look very different in different parts of a country – from waste handling to decisions about the location of new infrastructure. For example, South Wales is similar to most international clusters around the globe and does not have immediate access to geological storage for carbon dioxide: CO2 will need to be transported to the coast and shipped away from the area. Conversely, the Scottish cluster is central to industrial decarbonisation for the whole of Scotland, with plans to reuse gas pipelines, and use existing offshore oil and gas infrastructure.

If successful, industrial decarbonisation can reshape industries (for example, focussing on recycling scrap steel in the UK) and achieve environmental and economic gains. In doing so, this would ensure industries remain or return to an area, protecting and creating jobs and bringing increased investment.

Involving those who will be affected


Involving local communities


Workers and local communities should be involved in conversations and given practical help if this transition is going to be trusted by local communities. This requires consistent, open, and two-way engagement between businesses and communities over the long term. Local government should take the lead in this engagement as they can develop and manage multiple trusted pathways of communication.

Specifically, in the UK, councils, local authorities, local enterprise partnerships (LEPs) and mayors are vital to the planning system, convening relevant local stakeholders and offering support and information for local community groups.  Local knowledge should be fed into planning authorities, ensuring they are aware of the context and facilitating engagement with affected individuals, businesses, and institutions.

However, the role of local authorities is limited. Consent for offshore clean energy generation, for example, is typically granted through Nationally Significant Infrastructure Planning (NSIP) which can over-rule local interests – this can be damaging to local trust and support.

What to expect

Meet the Jones family – they are from Port Talbot, South Wales. Industry has a significant presence in their community as an employer, funder of community initiatives, as well as an unmistakeable part of the landscape. What changes can they expect in their town as industries come in line with net zero legislation?
  • Could decarbonisation of industries positively impact the local area?

The major opportunities from industrial decarbonisation include economic security, knowledge transfer and environmental improvements. Retrofitting CO2 capture equipment, for example, could enable the continued operation of existing plants, infrastructure, and supply chains, but with significantly reduced emissions. And greater UK competitiveness could lead to increased long-term employment security.

Decarbonisation could also create opportunities to share new skills and ideas. One example is “Glass Futures”, a research technology organisation which is developing a pilot plant for decarbonised glassmaking on the site of a former glass works in St Helens, Merseyside[2]. It will provide a global Centre of Excellence for research into glass decarbonisation, building on the local industrial history to develop skills and existing supply chains.

Alongside this, decarbonisation should also have positive impacts on the local environment. It should lead to better air quality and less polluted water due to the reduction in air, water, and soil contamination with pollutants. This reduction in emissions, particularly air pollution through reduction in NOx, SOX, and CO2, should improve the health of people and nature in the local area.

Whilst these positives impacts are possible, it is important to remain pragmatic. The route to achieving these benefits may be bumpy and not always successful. It will be important to maintain shorter term pragmatism and strategic planning to overcome challenges and difficulties.

  • How could it affect our energy bills?

A key effect could be the lowering of energy bills through improved local area energy planning. Local authorities could work with anchor organisations (e.g., schools, trade unions, businesses, industry) to develop a smart local energy plan for how electricity and heat is produced, stored and distributed locally. Industries would play an important role through shifting the time they produce and consume energy, supporting flexibility and resilience in the system. In the UK, local energy planning (to make it smarter and more flexible) could contribute to savings of up to £10 billion per year by 2050, some of which will be passed onto customers[3].

However, using flexible technologies, integrating infrastructure between industrial sites and local communities would require levels of coordination which do not currently exist. There is a risk of ‘energy islands’ with companies relying on storage and retreating from the grid – potentially leading to higher energy bills.

  • What are the downsides?

There are potential negative impacts from decarbonisation activities, some of which will be a continuation or slight adaptation of existing activities. These could include temporary increases in traffic due to construction, as well as additional infrastructure, such as pipelines, which could go through local areas. There are specific risks related to the safe transport and storage of hydrogen, captured CO2 and chemicals to and from industrial sites[4]. Some sites will also require pipelines - either repurposed pipelines or new - and shipping routes. Populated or protected areas are often along the transport routes, requiring careful management of safety, noise, and environmental impact.

Other sites will need an increased supply of electricity and energy storage facilities, with 27,000TWh of electricity required in 2050 for steel production alone (for a perspective, the total global electricity generation in 2021 was around 27,000TWh)[5]. One of the issues, and potential constraints, will be grid capacity to supply the huge amounts of green electricity required for industrial sites.

Planning and safety will continue to be carefully regulated, with standards and procedures being developed to regulate new technologies proportionately, but without stifling innovation. For example, there are processes in place on existing high-pressure pipelines that allow for continuous monitoring – these will need to be assessed for suitability for hydrogen and CO2 pipelines to assure asset integrity[6]. It will be important that local planning and consultation with those directly affected is undertaken to minimise the impacts on local people. This could lead to the provision of a form of compensation where appropriate, such as in Scotland where the Scottish Government encourages wind farm developers to make an annual payment to local areas impacted by the building of a new project[7].

  • Businesses and industries want certainty of demand, support and regulation towards the net zero future through stable and ambitious policy frameworks.
  • Governments should enable policy outcomes by developing business models, coordinating skills development, introducing carbon trading schemes, investing in energy infrastructure and flexibility, and by building standards and the capabilities of regulators.
  • No country in the world has developed a perfect route to net zero in industry. Many regions, businesses and NGOs can provide valuable sources of information and ideas to inform locally sensitive policies and initiatives.
Meet Lisa – she’s a policy advisor in a government department. Her work focusses on industrial decarbonisation and how government and regulators can support businesses to transition. What side effects should she be wary of?
  • How can governments provide businesses with the certainty needed to transition?

Updating the powers of regulators to monitor and enforce will be critical for the government. They will need to adapt to rapidly evolving industries by developing realistic standards within energy-intensive industries and down the value chain.

In relation to this, the Energy Institute’s good practice work involves technical guidance, research reports, equipment and fuel specifications, test methods and videos covering the entire energy system. For example, this includes a resource that provides a life cycle assessment (LCA) for the hydrogen value chain.

To provide targeted support, governments will need to maintain effective communication with energy-intensive industries, local communities, and other relevant stakeholders. Communication is a critical enabler to ensure policymakers address pressing concerns, respond quickly to changes, build trust, and deliver effective outcomes.

For more information on the toolbox of plans and policies , please see the IEA’s Annex to the Climate, Energy and Environment Ministers’ Communiqué ‘Conclusions regarding the Industrial Decarbonisation Agenda’[1].

  • Could carbon leakage be a major problem?

Carbon leakage (when businesses transfer activities and jobs to countries with less stringent regulations to avoid the cost of reducing their emissions, leading to an increase in the total emissions) is a major concern from both an emissions and economic perspective. Alongside this, investment leakage (when companies do not shut down or leave but directly invest in other places) is also a major concern. To avoid these, it is important that governments incentivise industries to implement decarbonisation practices and technologies within existing sites.


Carbon border adjustment mechanism


Long-term, stable investment from governments and infrastructure deployment, such as pipelines to transport CO2 and hydrogen production facilities, can incentivise companies to reduce emissions and continue local operations. Effective trade policies, such as carbon border adjustment mechanisms (CBAMs), will also be key to addressing the risk of carbon or investment leakage by disincentivising the import of high-carbon materials and products from abroad.

  • How do governments support the transition?

Stable and ambitious policy frameworks are necessary to support the energy transition. Some countries, such as the UK, are taking the lead in some areas of industrial decarbonisation.

The UK government is pursuing an ambitious programme of decarbonisation through clusters – as highlighted in their Industrial Decarbonisation Strategy. The UK government is investing significant funds into technology development and demonstration to support this. This has included establishing the Industrial Decarbonisation Research and Innovation Centre (IDRIC) to research new technologies (e.g., potential for an industry to fuel switch), risks (e.g., public perception) and system connectivity. Moreover, other governmental innovation projects include funding clusters to develop shared infrastructure. The UK government has also focussed on developing business models for hydrogen and CCUS which would subsidise their production or capture.

Industrial Decarbonisation Strategy

Strategic framework by the government to help industries decarbonise to help achieve net-zero and avoid carbon leakage.

From high carbon fossil fuels to low carbon alternatives like hydrogen to reduce emission production. Use technologies like CCUS to capture and store the produced emissions.

Net-zero 2050

Aim of the UK government to get greenhouse gas emissions to net zero by 2050.

Net zero refers to emissions released = emissions captured/offset

EII Exemption Scheme

The cost incurred to transition the industries results in passing down to the consumer in the form of energy bills.

To avoid the cost-burden, qualifying businesses can claim an exemption of up to 85% of their Contract for Differences (CfD), Renewables Obligation (RO), and Feed-in Tariff (FiT) costs.

To aid industries reliant on international trade and heavy usage electricity and reduce the risk of carbon leakage, the UK government has introduced the Energy Intensive Industries Exemption Scheme. It allows businesses to be exempt of up to 85% of their various costs including Contract for Differences (CfD), Renewables Obligation (RO), and Feed-in Tariff (FiT). By providing support for electrification, the government looks forward to encouraging EIIs to help transition towards renewables and aid towards the goal of net-zero

In the US, the Advanced Manufacturing Office (AMO) consulted in early 2022 on how their manufacturing sector can reduce emissions while increasing global competitiveness. Alongside this, the $700 billion Inflation Reduction Act includes subsidies for carbon capture and hydrogen, and $260 billion in clean energy tax credits[2].

The Chinese government have also published action plans for industrial sectors to peak their total carbon emissions by the end of 2030. Companies in the steel, building material, refining and petrochemical sectors are required to accelerate the deployment of CCUS facilities and replace inefficient, emission-intensive machinery.[3]

The World Economic Forum has developed a Net Zero Industry Tracker to raise transparency and accelerate industrial transformation. This provides insights to inform industry leaders, policymakers and consumers about the most critical and effective actions.

  • Where can I find more policy information and ideas?

Many organisations provide resources about this topic and the related areas. These include organisations which have fed into the development of this guide: Aldersgate Group, Carbon Capture & Storage Association (CCSA), Cardiff University, CATCH, Climate Change Committee (CCC), Drax, Energy-intensive Users Group (EIUG), Energy Safety Research Institute (ESRI) at Swansea University, Energy Systems Catapult (ESC), Energy UK, Imperial College London, Industrial Decarbonisation Research and Innovation Centre (IDRIC), Tyndall Centre at Manchester University, the UK Energy Research Centre (UKERC), Whitetail.

The Energy Institute also performs many roles, including informing energy decision-making through convening expertise and advice and developing and equipping the diverse future energy workforce and will be able to help.

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About Energy Essentials

Produced and published by the Energy Institute (EI), the Energy Essentials series aims to explain energy topics in an accurate, concise and accessible format. The guides are intended to promote greater understanding of energy, and are suitable for students, professionals whose work crosses over into the energy sector, or anyone with an interest in energy.

Energy Essentials guides are designed to provide foundation-level understanding with a scientific basis. The information, tailored for non experts, is presented in a format intended to be accessible, neutral and based on sound science. The development of this guide has involved an extensive review and analysis of relevant literature. The document has been through a robust peer review process, with contributions from over 30 subject specialists, including professionally qualified Fellows and Members of the EI, with a broad range of backgrounds and experience.

Due to the constantly evolving nature of energy technologies and markets, all data and information is current as of the date of publishing (May 2023). For more information, visit the Energy Institute Knowledge Service, or get in contact using

Other titles in this series

Energy Essentials: A guide to shale gas
Energy Essentials: A guide to hydrogen
Energy Essentials: A guide to energy and carbon management


Aldersgate Group

Carbon capture, usage and storage (CCUS): public dialogue

Carbon Trust: The next frontier: decarbonising industrial heat

CBI: Decarbonising supply chains

CCC progress report 2022

Clean Energy Buyers Institute

Energy Barometer 2021 - The net zero skills issue

Energy Institute: Energy Insights

Grantham Institute

Green Jobs Taskforce 2021 Report

House of Commons Committee report - Building to net zero: costing carbon in construction

IEA - Achieving net zero heavy industry sectors in G7 members

Leadership group for industry transition

Lombard Odier

MakeUK - Decarbonising manufacturing: Challenges and opportunities

Mission Possible - Reaching net-zero carbon emissions from harder-to-abate sectors by mid-century

New Economics Foundation: Powering the just transition

POWERful women - Cultivating female talent in energy

Resolution Foundation: Net zero jobs

TUC: Cutting carbon, growing skills – green skills for a just transition

UK Industrial Decarbonisation Strategy


UKPIA: Future skills for the downstream sector

Unlocking the “Hard to Abate” Sectors

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