The push for net zero cannot be at the expense of British industry

Our Technical Director Andrew McDermott has led our detailed and comprehensive response to the Government consultation on the UK Emissions Trading Scheme. We have been lobbying Ministers, MPs, and Government officials about the inherent risks the ceramics sector may face due to what is being proposed and this work will continue in the weeks ahead. Read more about our concerns. Decarbonisation through deindustrialisation – think about these three words for a moment because they pack a mighty punch.Today, the Government’s consultation on developing the UK Emissions Trading Scheme (UK ETS) is bringing these three words into sharper focus. This meaty consultation, which includes 196 questions, delves deep into the UK ETS as it looks to evolve following Brexit and the split from the EU Emissions Trading Scheme (EU ETS).Ceramics is one of the most energy-intensive manufacturing industries in the UK, on account of the need to fire at high temperatures to form strong bonds between the constituent atoms that give rise to their unique properties.It is also an extremely diverse sector and comprises manufacturers of heavy clay construction products (such as bricks, blocks, roof tiles and drainage pipes); whitewares (tableware, giftware, sanitaryware, wall tiles); refractories (vital in all high-temperature processes); advanced ceramics (for numerous electronic, medical, aerospace, environmental, military and structural applications); as well as raw material and equipment suppliers to the sector.The Government-run UK ETS aims to cut greenhouse gas emissions through a cap-and-trade system, creating a market where the carbon price incentivises decarbonisation. Over time, the cap reduces so that total emissions have to fall as well.However, in peeling back the layers in this latest consultation, it is clear that some of the proposals have the potential to devastate UK ceramics. The current UK ETS scheme affects 51 sites and 5,000 employees, often in areas in need of levelling up. It is feared many ceramic companies will be forced to close their UK operations during the second half of this decade, with potential knock-on effects.The proposed deep cuts to the UK ETS cap (of between 36 and 58% of current levels) from 2024 create serious concerns for the sector, particularly as the technologies that will enable deep decarbonisation (hydrogen, electrification, carbon capture and bioenergy) are either commercially unviable or simply unavailable. Any suggestion of ‘low hanging fruit’, such as viable measures we can do now, ignores the fact that such options were used up a long time ago.The proposed cap reduction is also highly likely to significantly increase already uncompetitive and unavoidable carbon prices, increase already uncompetitive electricity prices, reduce competitiveness against rival international ceramic companies, and in turn perversely reduce our ability to develop and deploy net zero technologies.The consultation also includes proposals to extend the scope of the scheme, possibly pulling in smaller sites from across the sector, which would saddle them with extra financial and administrative burdens.We fear the proposed UK ETS policies will be ineffective in delivering decarbonisation and, instead, will result in further loss of competitiveness, carbon leakage (loss of emissions, jobs, and investment to places with weaker or even no carbon reduction policies) and emissions offshoring, leading to an increase in global emissions, as well other detrimental environmental and modern slavery impacts.All ceramic businesses compete in fiercely competitive global markets and therefore the sector’s success is fundamentally reliant on internationally competitive energy and climate costs.We are already seeing that the cost of carbon emissions in the UK is notably higher than in the EU and much higher than elsewhere in the world, where manufacturers typically face low or no carbon costs.Naturally, this is already placing UK manufacturers at a growing competitive disadvantage, which undermines our ability to invest in low-carbon technologies and increases our susceptibility to carbon leakage. In short, decarbonisation in the UK through deindustrialisation.In some cases, investment, economic activity, and jobs have already relocated abroad, leading to a notable, subsequent increase in imports.Of course, we would not be discussing this if the ceramics sector had a viable decarbonisation pathway to net zero – but that simply does not exist. Therefore, carbon reduction targets need to be more closely aligned with the ability of industry to decarbonise and so avoid putting the UK ceramics sector at a severe competitive disadvantage.The sector is committed to decarbonising in line with the UK ambition for net zero by 2050 and to working in partnership with Government to achieve this. Aligned and holistic policy support is needed to prepare sites for deep decarbonisation from the 2030s while maintaining their competitiveness in the meantime.This will require urgent Government action to secure: a supportive regulatory framework that delivers decarbonisation through incentivisation and international competitiveness; internationally competitive, and secure, energy and carbon costs; substantial funding to support industrial decarbonisation and a greater policy focus on consumption emissions and whole life emission assessments of end products.Government will say it is funding research into alternative, mainly hydrogen, fuels. Whilst that is very welcome, much of this is focussed on the large industrial clusters which are not where ceramic sites are located. They also say they are providing help to electro-intensive industries. However, industrial electricity costs are prohibitively expensive. We are many years from large-scale, electrified continuous kilns, and the additional help for electro-intensive industries supports very few UK ceramics businesses.BCC has submitted a detailed and comprehensive response to the consultation document urging a major rethink of the cap trajectory. We have also been lobbying Ministers, MPs, and Government officials about the inherent risks the proposals present and this work will continue.Britain was the home of the industrial revolution, and we can lead the way in the net zero revolution. But to do that, the ceramics sector needs support, so that it can free up investment to develop and deploy innovative technologies in order to make the low-carbon transition, while at the same time remaining a vibrant and internationally competitive industry.Dr Andrew McDermott                                                                 Rob FlelloTechnical Director                                                                           Chief Executive