Simon Clarke is the Conservative Member of Parliament for Middlesbrough South and East Cleveland.
Successive Government schemes to incentivise investment in energy efficiency and low carbon sources of electricity, like solar and wind, have helped to reduce greenhouse gas emissions from the UK’s power system, as Amber Rudd has argued on this site.
The policy that has made the greatest difference, however, is the UK’s carbon tax, which is imposed on domestic electricity generation that uses fossil fuels. This has helped tip the economic balance in favour of gas over coal, which given has meant that coal power, the most polluting source of electricity, has almost completely disappeared from our energy system. This is the power of a carbon tax.
The Committee on Climate Change is tasked with monitoring the progress of decarbonisation in the UK, and their latest report praised the pace with which our electricity generation has been cleaned up, but pointed to a lack of action in other sectors, like transport, agriculture, and industry. For heavy industry in particular (e.g. production of steel and cement), a carbon tax would be a vital tool to incentivise a switch to cleaner technologies.
Currently, the processes used in steel making and other heavy industry primarily use fossil fuels, resulting in carbon emissions, but this does not have to be the case. Through a process known as carbon capture and storage (CCS), the carbon dioxide from these processes can be compressed and sent via pipeline to undersea geological storage sites (including potentially the former sites of North Sea oil and gas), where it will remain indefinitely, thus mitigating the negative effects on our climate.
People are also increasingly referring to CCUS, where the ‘U’ stands for ‘utilisation’. Inventive companies are coming up with ways to turn this waste gas into useful products like chemicals, fuel or plastic. This creates economic value from waste and removes the necessity to store it underground.
As a Teesside MP, I know how important industry is to our region, employing thousands of people in high-skilled, well-paid jobs. That is why I am supporting plans to develop the world’s first CCUS hub in the north east of England.
A group of energy intensive industries, known as the Teesside Collective, are proposing to lead on the development of clean industrial zones, with multiple companies sharing the same carbon dioxide transport and storage infrastructure in order to reduce costs and exploit synergies. This would put the UK at the forefront of the development of technologies vital to decarbonise our energy system, produce good high paid jobs for the North East, and potentially open up new export opportunities.
In order for such a project to succeed in the long term, carbon taxes must be applied to more polluting production processes so that cleaner technologies are not undercut. Most importantly, the tax must be applied in a way that does not simply send businesses overseas where they can avoid such environmental levies. This process is known as ‘carbon leakage’, and it presents a threat to UK industry if we unilaterally apply a carbon tax alone.
A recent report by the think tank Policy Exchange, ‘The Future of Carbon Pricing’, proposes a solution: border carbon adjustments. Through this process, carbon taxes are applied in the country where a product is consumed or used, rather than where it is produced. For example, if China wanted to export a tonne of steel to the UK, they would have to pay the same carbon taxes as a UK company, based on the ‘embedded emissions’ (the carbon dioxide that is released in making the steel). By making all companies that sell energy intensive goods in the UK, no matter where they are located, pay the same carbon tax, this levels the playing field between domestic and international producers and eliminates the incentive to move overseas to avoid such taxes.
This would also make the UK an attractive destination for inward investment in clean energy technologies. There is a threat of being undercut by foreign competitors who do not have to pay environmental levies in their own countries. That is one of the leading factors preventing investment in the technologies, like CCUS, required to clean up all sectors of our economy.
Finally, the Intergovernmental Panel on Climate Change once again this week highlighted the importance that negative emissions technologies (NETs) will have in reducing greenhouse gas emissions in the future. NETs are anything that helps to remove gases that cause global warming from our atmosphere – this can be as simple as planting trees to increase forest coverage. But the most important NET may be bioenergy with carbon capture and storage (BECCS). By using biomass as the fuel source for a power station and then capturing and storing the resulting carbon dioxide, the overall life-cycle emissions from that plant will be negative. It is effectively sucking CO2 from the air. The UK is already leading on this, with Drax announcing they will building Europe’s first BECCS pilot plant on their Yorkshire site.
The UK is well-placed to lead the world in the development of CCS technologies that will be vital worldwide in order to fight climate change. We should get on with it, but we must also ensure that domestic industries are not unfairly disadvantaged.