The Industrial Strategy - Planning Plans

Author

Harry Holmes

The Department for Business, Energy and Industrial Strategy last month released a white paper setting out their industrial strategy. This document claims to contain a plan which is “building a Britain fit for the future”, as such, it is important to see how environmentally friendly that future appears.

The first notable thing is that the government identifies four “grand challenges” which are to be tackled to put the UK at the forefront of the world economy; the ageing society, future of mobility and AI & data economy are three of them. But the final challenge the government has identified is clean growth, which appears to be a strong environmental commitment. The government states it “will maximise the advantages for UK industry from the shift to clean growth.”

So what does the government mean by this? And more importantly, what do they plan to do? Let’s begin by going through the “early priority areas” identified in the strategy.

Early Priorities of the Clean Growth Challenge

Firstly, the government claims it wants to “develop smart systems for cheap and clean energy across power, heating, and transport” as one of its early priorities. The government cites its already existing “Smart Systems and Flexibility Plan” which has been around since July, which discusses how to implement “smart technologies” in the energy grid to ensure “flexible markets”. The government also reaffirms its desire to continue to work closely “with the nuclear and offshore wind industries” and continue to “explore the long-term options for clean heating” and the “potential uses of low carbon hydrogen”. Three things can be said about this first early priority. Firstly, it is notable that there is no mention of support or continued support to domestic solar technologies. The references to continued support are to wind, which is admittedly the UK’s geographical energy advantage, and nuclear, which is environmentally controversial to say the least. Whether this early omission of reference to solar, which China shows is an export viable technology, is purposeful or accidental will only be shown in practice. Secondly, it is difficult to square this supposed continued support for clean power when the subsidy was confirmed to be removed in the latest budget. Finally, the only new policy in this early priority is a proposed new industrial strategy programme “prospering from the energy revolution”, which we are given no time frame for. So to summarise the government is continuing its existing policy in this area and writing a new white paper. The phrase kicking the can further down the road comes to mind.

The next early priority the government is focusing on is that it will “transform construction techniques to dramatically improve efficiency”. Here we have two announcements, another industrial strategy programme “Transforming Construction”, which has no time-frame and is not released yet, and a call for evidence on “additional measures to build a market for energy efficiency among homeowners.” Construction and housing are an often neglected part of the transition to a zero-carbon society, a complaint I have previously stated on this blog about the budget was the lack of measures to decarbonise housing, so I congratulate the government on its foresight to include this. However, calls for evidence and unreleased programmes do not alone decarbonise the sector, there needs to be action and not just proposals.

The third early priority identified in the clean growth challenge is to “make our energy-intensive industries competitive in the clean economy.” Here the government stresses it is investing £162m in innovation for the low carbon industry, a concrete proposal at last. They also have agreed “Sector Deals” with certain areas of our economy, some of which contain measures about energy efficiency and the government stresses its existing Decarbonisation Action Plans agreed with seven of “the most energy-intensive sectors.” Alongside this the government announced a scheme to support investment in energy efficiency alongside the development of a new strategy for the bio-economy. This early priority already seems to have some action occurring, painting a much more positive picture for development than the prior two.

The penultimate early priority is the government stressing that it will “put the UK at the forefront of the global move to high-efficiency agriculture.” Here it announces another programme, “Transforming food production: from farm to fork” for the agricultural sector, with details yet to come on it. The government stresses that after leaving the EU there will be a transition to replace the Common Agricultural Policy (CAP), with help from the devolved administrations. It is a shame that nothing more conclusive has been said about this yet, the CAP has been heavily criticised by environmentalists since its inception and the transition away from it presents a great opportunity to the government to lead on sustainability. Finally, the lack of discussion on soil quality and the raging debate about the future of meat are cause for concern. The government need not state anything until the programme and CAP replacement scheme are revealed, but acknowledging the leading issues in agriculture at least shows environmentalists the government has some priorities about the future of the sector.

The final early priority in the “Great Challenge” of Clean Growth is the need to “make the UK the global standard-setter for finance that supports clean growth.” This will be done by working with industry through the Green Finance Taskforce, which was announced well prior to the industrial strategy. The other announcement is that the government is working with the British Standards Institute and London’s Green Finance Initiative to create the first green financial management standards. This is good news, the need to decarbonise investment portfolios has been high on the agenda for a few years now. Ultimately the test of success will be twofold; will these standards be sufficient and will the finance sector follow them? There is no mention here of the Green Investment Bank, or the consequences of its part privatisation, so it is unclear how big a role the government wants that body to have.

The Future of Mobility Challenge

One of the other “Great Challenges” is the future of mobility, which has some clear overlap with clean growth. Of notice here is the early priority to “address the challenges of moving from hydrocarbon to zero emission vehicles.” Which includes investments into charging infrastructure for electric vehicles (£400m), £100m in new funding for the plug-in care grant as well as new R&D spending on new charging tech. Alongside this the government has pledged that 25% of all its central government department vehicles are to be ultra-low emission by 2022. And as with many other sections of this white paper, a new strategy will be released about the transition to zero emission road transport. Whilst this signifies good progress on stimulating the market for electric vehicles in the UK, the government seems to be neglecting the transition to low emission transport also needed in air, rail and naval transport, which get no mention in the early priorities for this challenge.

The government is seeming to put all its hope into the reduction in emissions that may be brought by electric cars. The success of this strategy is yet to be seen.

The Foundations of Productivity

The report also states five things which are the foundations of stimulating productivity in the economy. They are ideas, people, infrastructure, business environment and places. Whilst indirectly these may overlap with environmental concerns, it is disappointing that sustainability is not seen as a core foundation of productivity the UK’s future.

In relation to the section on “ideas” there are a few key climate related announcements. Firstly new “Industrial Strategy Challenge Fund Programmes” have been announced, where government support is provided to research into new technologies. These new programmes are related to “transforming construction” and “prospering from the energy revolution”, meaning respectively new investment in both construction and home energy efficiency and “smart systems” around renewable energy, to produce new technologies. A final new programme under clean growth for the fund is “transforming food production” which is designed to stimulate innovation in the agricultural sector. What the fund will produce will be interest, this is certainly a policy to watch.

Another policy announced within the “ideas” section is the continuation of Science and Innovation Audits with the expansion of the areas included. The purpose of these audits is to map out local research and innovation strengths existing already in areas within the UK, so the government can better support them. A number of these audits are themed around environmental innovation, such as an audit on agri-tech in the North and East of England, an audit of the extent of offshore and marine energy, a few biotechnology audits and even one on Sustainable Airports. What these audits will discover is uncertain, what is even more uncertain is what the government intends to do with the information once it has it. There is no certainty that learning of environmental innovation will spur the government or the private sector into action, so we will have to wait with baited breath to see what results.

Another foundation of productivity is “infrastructure”. In this section the government states that it intends to set high standards of climate change resilience for government projects, what these standards will consist of is unclear, but it is good to see climate resilience registering on project development. Alongside this the forthcoming 25-year Environment Plan will set out how “natural capital” will be considered in infrastructure decisions as well as allowing devolved administrations to do their own work to secure natural assets.  Whilst these are good steps in ensuring infrastructure development does not damage nature in this country, the results will be only visible when the standards are released. There are practical climate adaptation measures being taken though, notably there is £2.6bn to be invested in flood protection, an increasingly frequent environmental issue in the UK.

But all is not rosy in the “infrastructure” section of the strategy. As usual the government reaffirmed its commitment to road transport and producing a less congested road network, in particular by targeting important “A” roads. As well the Transforming Cities Fund will allow local authorities to compete for funding for transport projects alongside giving some money to existing Mayors. The concern here is that without limitations on how this money is used it will be spent on road expansion, rather than low carbon transport. Pressure will now have to be placed on the cities that receive funding to ensure this is not the case. Later in the strategy the government uses its proposed corridor between Cambridge and Oxford as a case study, demonstrating the government's continued support for road infrastructure, the environmental impacts of this road expansion are disconcerting to say the least. The government reaffirmed its commitment to both HS2 and airport expansion, most likely building a new runway at Heathrow, both of which are projects with huge environmental impacts. Whilst HS2 may reduce road congestion, the money could be used to decarbonise and make efficient the extremely outdated rail network of the “Northern Powerhouse” the project is meant to support, which would likely have a larger effect on emissions.

The industrial strategy does have a section about the clean growth aspect of infrastructure, which is a welcome sight. It begins by citing existing schemes of investment under the Clean Growth Strategy and the three fund programmes discussed earlier. The strategy then goes on to start discussing the policies the government had previously discussed and proposed for electric and low emission vehicles. One new announcement is updating building regulations to ensure that charging points are available for electric transport. The government then announces its desire to attract foreign investment into environmental projects through the usual channels of trade diplomacy; overseas missions, campaigns, industry briefings et al. The new campaign will be “Green is GREAT” to amplify the UK’s reputation for clean growth, though this perhaps would be better done through better investment into actual clean growth projects. The government also continues to reference its existing “Smart Systems” plan and Clean Air Fund, all of which have been policy for a number of months now. When I initially saw this section of the industrial strategy I was hopeful, a whole section of the infrastructure plan devoted to clean growth seemed very forward thinking. But most of the policies within it are ones already announced and discussed earlier in the strategy or have been policy for a while now. I found myself merely bemused as I read.

Shockingly we reach a surprisingly pleasant final portion, on “moving towards a regenerative circular economy.” Here we have commitments to approach infrastructure with an aim to regenerate natural capital, promotion of recycling and secondary materials markets to raise resource productivity, working with food businesses to deliver a 20% reduction in food waste in the next 8 years and a confirmation that the national ambition is zero avoidable waste and doubled resource productivity by 2050. Not only this but it is stated that the “Transforming Food” programme will include policies to reduce food waste, a new Bioeconomy Strategy to develop new low carbon biological products and processes and a separate strategy for resources and waste alongside the 25-year Environment Plan. There is announced a new scheme to support investment in industrial energy efficiency with a desire for at least a 20% increase in efficiency by 2030. This section was unexpected but welcome, and whilst some of the commitments may seem lacklustre, there seems to be a genuine attempt to control resource consumption in the UK, I hope the government expands and gets more confident with these policies as soon as possible. 

But then the government had to go and kick a surprised environmentalist when his defences were down. The government finishes the circular economy section by referencing its commitment to maintaining the oil and gas sector, with its £24bn in annual exports. As well as confirming the government’s commitment to more shale gas extraction within the UK, with passing reference to the “Shale Environmental Regulator” and the “devolved nature of planning”. This is disappointing to say the least.  Especially when in a later case study the government congratulates itself on the Aberdeen City Deal; part of which will be used to strengthen North Sea Oil and Gas. This behaviour has to stop if the government is really committed to clean growth.

Sector Deals

As part of the strategy the government has announced it has agreed bespoke deals with certain sectors of UK industry. There are two of these which likely concern us as environmentalists, namely the automotive sector deal and the proposed nuclear deal.

The automotive deal is focused around the transition to autonomous and electric vehicles. The government is attempting to improve the competitiveness of supply chains, meaning more vehicles driven in the UK produced in the UK as well as Centres and Hubs designed to increase research and technologies for these new kinds of vehicle. It’s notable that this deal seems to focus on low emission vehicles than the traditional fossil fuel transport methods. Perhaps this signifies a shift in the government’s attitude to renewing the automotive industry in the UK, accepting the decline of our polluting automotive industry as irreversible.

The other deal, which has not been finalised, is with the UK’s nuclear sector. There is a desire for cost reduction on both new builds and the decommissioning of old plants. As well as the desire to improve productivity, domestic capability, and export growth. Details are sparse and will be announced soon when a full agreement is made, in the meantime we will wait to see what impact this will have on low carbon energy.

What is notable here is the absence of sector deals, in progress or completed, with other low carbon industries, if the government wants to work with sectors to deliver clean growth it will need to change this. Especially with their removal of the subsidy to low carbon energy technologies undermining industry confidence in the government.

Conclusions

The industrial strategy leaves me with mixed feelings. It is clear that environmental issues the government previously didn't discuss are getting their rightful place on the agenda; electrification of road transport, the circular economy and making construction environmentally friendly for example. Notably the increased focus on bio-tech and agricultural efficiency are also to be welcomed as agricultural emissions leap up the environmentalist agenda. Yet for so much of the strategy we are left reading existing policies or proposals for future strategies and programmes. New policies are outweighed often by commitments to continued oil, gas and road expansion. We remain in the same place environmentalists were prior to the announcement of the strategy, limbo. Hopefully unlike Dante we don’t have to travel through hell to see the environmental policy paradise we desire.