BY NEIL EISBERG, EDITOR
Most major economies will have to navigate a tricky path over the next couple of decades.
Whilst seeking to continue to grow industry, they are also having to balance sustainability. Reducing a reliance on virgin fossil carbon means that they’ll have to replace business models, supply chains and industrial processes that have been optimised over a century or more.
It will mean introducing new, more sustainable ways of doing business that – at least in the short term – will be more expensive. Doing it without losing customers to rivals that don’t face the same sustainability and net zero obligations is going to be a huge challenge. But it must be done: deindustrialisation is no more sustainable than using fossil fuels.
How and whether countries manage this switch without serious upheaval will distinguish the economic winners from the losers over the next few decades. It’s a problem that most governments are wrestling with now.
The UK is the latest country to set out an Industrial Strategy – in this case a 160-page document setting out initiatives from lowering energy costs (something industry will welcome) to better support life sciences and advanced materials. It’s far from the only attempt at this – Europe has its Clean Industrial Deal and China its ‘Made in China 2025’, while the US has used legislation like the CHIPS and Science Act to push forward industry.
Those C&I readers gifted with an elephantine memory will recollect that a previous UK government developed an industrial strategy. One of the main concerns identified at the time was – and still is – the impact of high energy costs, not just on the chemical sector, but all energy intensive industries. The sources of high energy prices are complicated, but the cost of sustainable energy and feedstocks is definitely a key contributing factor, including the Climate Change Levy. While previous governments have tinkered with these financial burdens through exemptions and discounts, no real progress has been made.
As such, the current UK government is to be congratulated for attempting to address this burden that has dragged down competitiveness for decades.
The potential conflict between the desire to reduce carbon emissions and the drive towards net zero carbon while supporting energy-intensive industries has already hit the headlines in other countries seeking to move to sustainable industries.
The EU is facing similar concerns and has been making some significant shifts in the EU Green Deal.
Launched in 2019 the Green Deal promised to bolster the EU economy whilst fundamentally reshaping industry, cutting emissions but going further to drive sustainability at all levels. This vision has now hit the harsh buffer of economic reality as the impact of the Ukraine war has hit industrial costs hard.
The EU has been responding by softening the Green Deal – some say watering it down – to more of a focus on cutting greenhouse gases by 2050. With looser rules on car emissions, and revised regulations have been adopted alongside some redirection of some funds originally allocated to the Green Deal.
Meanwhile other countries plough on with industrialisation that does not take into account the sustainability doctrine. And this divergence between countries will become more prominent over the coming decade.
Critical capabilities and unique assets will become the cornerstones of competitiveness. The UK has unique strengths in scientific research and innovation which sets it apart from its international competitors. However, in an increasingly competitive global economy, its position on the global economic stage is never guaranteed. It’s exactly these issues that SCI’s Manifesto for Industrial Science & Innovation aimed to tackle and have formed part of UK Government thinking.
As SCI CEO, Sharon Todd has noted: ‘SCI particularly welcomes the commitment to the R&D budget, previously announced. SCI also welcomed the announcement of energy price cuts for energy-intensive firms, for which it has argued consistently.
‘This will go some way towards bringing the UK into line with international competitors, though I would urge the government to ensure changes are brought in quickly to ease growing pressures on industry,’ she said.
Having the strategy is of course one thing. How a government sees through the necessarily difficult choices and decisions that follow is the key question.
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