After the Industrial Strategy: decarbonisation, not deindustrialisation?
Cement is essential for modern civilisation, while also being one of the harder to decarbonise industries in the economy. As the active ingredient in concrete, cement is key to building everything the Government has pledged to build, from nuclear power stations and wind turbines to 1.5m homes and their supporting infrastructure. It is a key part of delivering economic and national security, climate resilience and quality of life, so we all need a reliable, domestic supply chain.
While essential, cement production in the UK faces significant headwinds. This has resulted in a big rise in imports as a share of the market, from around 10 per cent twenty years ago, to over 30 per cent today, all while also trying to decarbonise. The combination of the UK’s very high industrial electricity costs, volatile carbon costs and difficult planning and regulatory regimes has meant that the industry has, to be frank, been struggling.
In the UK economy, cement is the single most vulnerable industry to carbon leakage – the export of production driven by carbon costs - according to the UK Emissions Trading Authority in a recent analysis. With the fertiliser industry in the UK closed down and steel needing significant Government intervention and support, it is essential to tackle the underlying factors that are impacting the competitiveness of cement, before it too reaches this point.
Recent positive steps
The Government has taken positive steps to address some of the challenges in the last few weeks. Industrial electricity costs have historically been high in the UK compared to similar economies, so the announcement alongside the Industrial Strategy that the UK would be matching key EU competitors on support for industrial energy users on network costs is very welcome.
Likewise, the funding announced yesterday into the Peak Cluster, with the National Wealth Fund crowding in private investment, is a huge vote of confidence in the sector’s future. The Peak Cluster covers around 40 per cent of UK cement and lime production, and is a great opportunity to deliver carbon capture at scale in our sector, creating new, high-value jobs while securing existing ones.
This is all going on while work is proceeding on the details of the UK’s Carbon Border Adjustment Mechanism. This policy will mean that imports from countries with a lower carbon price, or no carbon price at all, will have to pay for the carbon embodied in their products at the same level as that paid by domestic producers. This is one of the most important pieces of the puzzle, but it is essential we get the details right.
The announcement of a consultation on public procurement supporting industry, jobs and skills has some potential, but for major industries has to go a lot further than proposed to make a difference. Prioritising the procurement of domestic mineral products, including cement, will be vital to securing the sector’s future. Getting the fundamentals right on energy, carbon, planning and regulation is needed to ensure that we see decarbonisation of thriving, growing industries, not deindustrialisation through lack of investment and slow decline.
The long term
Recent announcements are positive, but there is a long way to go. The UK concrete and cement roadmap sets out how we can deliver net negative emissions by 2050, with the right policy framework supporting significant private investment. The key elements of this framework are competitive electricity prices, competitive labour markets and regulation, a watertight carbon border adjustment mechanism, procurement policy that prioritises domestic production and support for deep decarbonisation including at ‘dispersed’ sites located away from the clusters.
The Industrial Strategy recognised cement, alongside concrete, lime and asphalt, as “foundational” sectors supporting the growth sectors (we think it should also have recognised essential minerals such as aggregates for industry and construction too). With the creation of the Supply Chain Centre, there is some hope that we will see a more strategic approach to the support of these vital foundational sectors, ensuring that the benefits of growth remain in the UK, supporting British jobs.
While delivering the Comprehensive Spending Review, the Chancellor declared “Put simply: where things are made, and who makes them, matters.” The cement industry is a great opportunity for the Government to put these words into action, avoiding the long-term trajectory of decline and instead supporting investment to deliver a thriving, decarbonised industry with more jobs than today, underpinning the whole UK economy.
