• 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.

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.

Please reach out to us at info@energyinst.org.