Reports say net zero emissions are UK business opportunity

Apr 08 2019


Two new reports from the Aldersgate Group argue for policies that seek to accelerate the innovation at scale of critical technologies such as carbon capture and storage and hydrogen.

Businesses are positive about a UK net zero emissions target but it must come with bold innovation support say the two reports based on extensive business engagement and new research from Vivid Economics and the UK Energy Research Centre,.

They argue that a net zero emissions target could provide a significant industrial opportunity for UK businesses as long as it is accompanied by a much bolder innovation policy and ambitious market creation measures that are informed by a clear understanding of lifecycle emissions. These policies should seek to accelerate the innovation at scale of critical technologies such as carbon capture and storage and hydrogen, and rapidly grow the demand for ultra-low carbon infrastructure, products and services.

The first report, Accelerating innovation towards net zero, from Vivid Economics and the UK Energy Research Centre (UKERC) commissioned by the Aldersgate Group, sets out key recommendations to accelerate innovation. These recommendations come from a review of past case studies of rapid innovations relevant to decarbonisation from the banking, manufacturing and energy sectors [3]. 

The second report, Zeroing in: capturing the opportunities from a UK net zero emission target, from the Aldersgate Group, establishes key policy measures that should accompany a UK net zero emissions target to maximise industrial opportunities for UK businesses and avoid unintended consequences. It features innovative case studies from the energy, steel, aviation, manufacturing, ICT and cement sectors showing how businesses are already taking action towards net zero emissions.

Key messages to government include:

1. Urgently accelerate efforts to meet current carbon budgets to provide a credible foundation from which to achieve net zero emissions. The UK is currently not on track to meet the fourth and fifth carbon budgets [4]. To rectify this and put the UK on a credible and cost-effective pathway to achieve net zero emissions, government must urgently pursue low-regret policy options. These include significantly improving energy efficiency in buildings through the introduction of binding regulatory standards and fiscal incentives and accelerating the roll-out of zero emission vehicles through tightening emission standards in the 2020s and guaranteed plug-in vehicle grants.

2. Provide long-term visibility to businesses by setting a net zero target as soon as possible after the CCC publishes its advice [5]. Long-term clarity is essential to inform cost-effective business investment decisions in the new business models and high capital cost infrastructure required to achieve net zero emissions. Government should work with industry to set sector-based decarbonisation roadmaps underpinning this target, following the example of the Swedish fossil free industry roadmaps.

3. The Government’s innovation policy should overcome the fear of failure and be focused on demonstrating the viability of critical technologies and systems at scale, including through public-private funding arrangements. This should include supporting at scale demonstration of Carbon Capture and Storage (CCS), the use of hydrogen in heating, Direct Air Capture technology and continued innovation in offshore wind. Government – and its stakeholders – should recognise that successful and unsuccessful trials provide equally valuable lessons to inform good policymaking. 

4. Market creation policies based on an understanding of lifecycle emissions are essential to accelerate innovation and deploy new low carbon infrastructure, goods and services at scale. Market standards informed by lifecycle emissions can help grow the market for critical infrastructure and products such as ultra-low carbon building materials, guarantee a level playing field for business and avoid offshoring emissions. Stable revenue policies such as through incentives for fossil fuel using industries to store their carbon emissions can provide a market for CCS.

5. Mandate new or existing institutions to accelerate innovation and co-ordinate the early stage deployment of complex technologies such as low carbon heat and CCS. Past innovations show that third party institutions can accelerate knowledge sharing between businesses and sectors and co-ordinate the efficient deployment of complex infrastructure. For example, government-backed organisations in the UK and Denmark ensured that successful wind energy designs proliferated more quickly, whilst the Gas Council in the UK played an essential role in the late 1960s in developing bulk gas supplies, rolling out a gas network and supporting the rapid customer take-up of gas boilers and central heating in homes.

6. Support the UK’s workforce so it can benefit from the economic opportunities that a net zero target could provide. This requires developing a cross-departmental education and training strategy to ensure the workforce is equipped with the skills required by the net zero transition, working with industry to understand future needs. Government should also work with businesses and Local Enterprise Partnerships to encourage low carbon supply chain investment decisions to be made in parts of the country facing high unemployment risks and where similar skill sets can be found.

7. Use the UK’s diplomatic reach and new trade policy to promote the adoption of net zero targets globally. Through its extensive diplomatic network of climate attachés, the UK can play an influential role in encouraging the adoption of net zero targets globally in the run-up to the COP26 climate summit in December 2020. The UK’s future trade policy after Brexit should support the delivery of its net zero target and promote growing trade in low carbon goods and services.

Nick Molho, Executive Director, Aldersgate Group, said: “UK businesses are ready to take up the challenge of delivering a net zero emissions target but bold innovation and market creation policies will be essential to give them the support they need. Businesses want to see the government’s innovation policy move beyond the ‘fear of failure’ and trial critical technologies such as CCS and hydrogen at scale in order to inform key policy decisions in areas such as heat and industrial decarbonisation. Support for innovation must be combined with measures informed by lifecycle emissions, such as markets standards, to grow the demand for ultra-low carbon infrastructure, products and services and set a market level playing field in the process.”  

Download the reports


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