Deep Dive: Strategic Insights for Industrial Decarbonisation
Following our introduction to industrial decarbonisation, it’s time to dig deeper into key strategies highlighted by the International Energy Agency’s (IEA) comprehensive "Policy Toolbox for Industrial Decarbonisation."
Emissions Trading Systems (ETS): A Proven Mechanism The IEA report specifically highlights ETS as an effective market-driven tool for industrial decarbonisation. ETS sets a cap on total emissions, allowing businesses to trade emission allowances within a decreasing cap over time. Successful ETS implementations, such as the EU ETS, have demonstrated that clear long-term caps create market signals strong enough to incentivise innovation and investment in near-zero emissions technologies. According to the IEA, carbon pricing systems like ETS should aim for allowance prices of around USD 200/t CO₂-eq to fully close the gap between conventional and cleaner technologies. The EU’s ETS, already pushing prices close to USD 100/t, provides a model that the UK industry can leverage further.
Carbon Border Adjustments: Leveling the Playing Field Carbon leakage remains a concern for businesses, but the IEA highlights that carbon border adjustments (CBAs) can mitigate these risks effectively. By placing a fair price on carbon-intensive imports, CBAs protect domestic industry competitiveness, ensuring emissions reduction incentives remain strong without driving businesses offshore.
Innovation in Action: CCUS and Hydrogen The IEA underscores the importance of early investment in critical technologies, particularly Carbon Capture, Utilisation and Storage (CCUS) and low-carbon hydrogen production. CCUS, as identified in the report, is essential for industries like cement and steel, where emissions are inherently challenging to eliminate. Early movers, such as Norway’s "Northern Lights" CCUS project and the UK’s HyNet hydrogen hub, illustrate practical first steps in implementing scalable, low-carbon infrastructure.
Carbon Capture, Utilisation and Storage (CCUS): Commercial Reality or Future Vision? CCUS technology is increasingly transitioning from demonstration to commercial deployment. Projects like Norway's Northern Lights, part of the Longship project, and the UK's own Teesside cluster demonstrate genuine commercial potential. Northern Lights, operational since 2024, is a pioneering project that captures industrial emissions and securely stores them underground beneath the North Sea. In the UK, commercial adoption is advancing swiftly, supported by robust policy frameworks and dedicated industry clusters, proving CCUS isn't just conceptual but a commercially viable solution today.
Hydrogen: From Promise to Action Green hydrogen, generated using renewable electricity, is rapidly maturing from pilot projects to fully commercial initiatives. Projects such as HyNet in the northwest of England and the Gigastack initiative on the Humber are actively scaling production, demonstrating that hydrogen is not merely a theoretical option but a commercially viable industrial energy solution. These developments are supported by significant government funding and corporate partnerships, proving hydrogen’s viability in achieving near-zero emissions for heavy industry.
By taking immediate, focused actions based on these insights, businesses can position themselves ahead of the curve, capturing competitive advantages that will become increasingly significant as the UK moves closer to net-zero targets.
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