TUC Briefing: Bring industry back home

TUC Briefing: Bring industry back home: a new climate-aware industrial policy

As UK manufacturing has 'hollowed out', we now import more carbon than we produce. This is due to the energy embedded in imports of everything from food and smart phones to wind turbines. The latest report from the Committee on Climate Change (April 2013) shows that exporting our manufacturing capacity has boosted the UK's carbon footprint by 10% since 1993, as banking and services have replaced skilled manufacturing jobs.

The CCC report, Reducing the UK's carbon footprint and managing competitiveness risks, also argues that the current package of government support for energy-intensive industries like steel and ceramics should underpin their UK operations and competitiveness risks up to 2020. WE're not so sure - as there is still a great deal of negotiating to be done on the full package.

Yet these two sides of the UK's carbon footprint - imported and home produced carbon emissions - point to a new climate-aware industrial policy, one that targets high carbon import substitutes, and builds a long term framework for our energy intensive industries so they stay, and grow, here.

Competitiveness risks facing our heavy industry

The Climate Committee takes a close look at the competitiveness risks facing our heavy industry in the transition to a low carbon economy. Are they overburdened with green taxes? It estimates that UK carbon taxes make a £400m hit on profits for energy intensive industries. This, it suggests, is roughly balanced by the government's complex compensation package now under discussion with industry and trade unions. Since just £250m of the package is on the table, it's short term to 2015, with no costed commitment to extend it to 2020, and industries are missing, this package is arguably well short of what's needed. It's far from a done deal, and not comprehensive, unlike, say, the £6.8bn German exemptions for industry. And UK base electricity prices are higher than our competitors.

Manufacturing industry accounted for 164 million tonnes of CO2, or 36% of UK CO2 emissions, half of it from the energy intensives. But UK industry has become increasingly carbon efficient per unit of output, as the falling line shows:

Keep an eye on the competition

What also counts from an investor standpoint is what the opposition is doing. The CCC provides some insights: Germany funds industry with £6.8bn relief from energy costs per year, similar exemptions are made in other EU states like The Netherlands, and there's £2bn a year in Australia.

The study shows that unions and industry have been right to work together through bodies like the Green Economy Council to argue for government support for heavy industries. Steel, cement, glass, paper, ceramics, chemicals and others are the bedrock of UK manufacture. They provide the fundamental inputs for our low carbon economy. What they now need is a long term and sustained industrial strategy.

Bring industry back home

As the UK has shifted from manufacture to banking, we are now one of the world's largest net importers of emissions, with a carbon footprint that is around 80% larger than its production emissions. It's perverse to import wind turbines or electric vehicles rather make them here. There's a powerful new argument in this study for regrowing UK manufacturing, building supply chain and procurement policies for the massive £200bn due to be invested in energy infrastructure by 2020. This will cut both our production and consumption carbon emissions.