Climate Change Plan: monitoring reports - 2021 compendium

Chapter 4: Industry

Part A - Overview of sector

The 2018 annual emissions envelope published in the 2018 Climate Change Plan^[23] for this sector was for 10.3 MtCO2e, whereas the outturn emission statistics for this year (published in June 2020) show a position of 11.5 MtCO2e. On the basis of comparing these figures, the sector was outside its envelope in 2018. However, it should be noted that the historical GHG inventory for the period 1990-2018 was subject to technical revisions since the time of development of the 2018 Plan, which places some limitations on the extent to which these figures can be directly compared.

The updated Plan sets out the following two policy outcomes for the sector, the indicators for which are summarised below:

Scotland's industrial sector will be on a managed pathway to decarbonisation, whilst remaining highly competitive and on a sustainable growth trajectory	On Track	Off Track	Too Early to Say
Industrial energy productivity (£GVAm per GWh)			x
Industrial emissions intensity (tCO2e per £GVAm)			x

Technologies critical to further industrial emissions reduction (such as carbon capture and storage and production and injection of hydrogen into the gas grid) are operating at commercial scale by 2030.	On Track	Off Track	Too Early to Say
% of Scottish gas demand accounted for by biomethane and hydrogen blended into the gas network			x

Just-Transition And Cross-Economy Impacts

We wish to understand and report on the broader just transition and cross-economy impacts of our emissions-reduction activities in addition to these sector specific policy outcomes and indicators. To do this, we use data from the Office of National Statistics: Low Carbon Renewable Energy Economy (LCREE) publication.

The LCREE is based on survey data of businesses which perform economic activities that deliver goods and services that are likely to help generate lower emissions of greenhouse gases, for example low carbon electricity, low emission vehicles and low carbon services.

The LCREE indicator is narrowly defined and, while useful within its limited scope, does not give us the full picture of the impacts on workforce, employers and communities and progress towards a just transition. Over the next few years we will work to develop a meaningful set of success outcomes and indicators which can improve our ability to track the impacts of our policies on a just transition to net zero and a wellbeing economy.

Sector commentary on progress

Scotland has already made great progress in this sector, with industrial emissions falling by over 45% (9.5 MtCO2e) between 1990 and 2018. While this has occurred, industrial sectors have remained fundamental to the Scottish economy, contributing £26 billion annually and employing over 300,000 people at present.

As we look ahead for the duration of the plan period, by 2032, emissions need to decrease by a further 43% on 2018 levels, with Scottish industry remaining globally competitive and sustainable, and the policies included in the plan update aim to make progress on this. However, due to the balance of reserved and devolved responsibilities, to some extent progress is often dependent on UK Government and/or international policy and markets.

There remains a significant risk that decarbonising faster than the rest of the UK and Europe could lead to carbon leakage. Both support for investment and a level regulatory playing field is therefore needed. Nevertheless, the Scottish Government is ensuring that the industrial sector understands its role in decarbonisation, the opportunities this can bring, and the support being offered to manage their transition.

Developments in monitoring arrangements since CCPu / last report

Following our commitment to net zero by 2045, in the update to the Climate Change Plan we presented two revised policy outcomes. One new indicator has been introduced to reflect the changes to the outcomes, alongside two indicators brought forward from our previous monitoring report.

Part B - Progress to Policy Outcome Indicators

Policy Outcome: Cross-sectoral social and economic indicator

Indicator: FTE employment in Low Carbon Renewable Energy Economy

On-Track Assessment (Milestones/ Targets): Year-to-year change

Most recent data: 2018

Data source(s): Office of National Statistics: Low Carbon Renewable Energy Economy (LCREE)

Assessment: Too early to say^[24]

Commentary:

• In 2018, Scottish low carbon and renewable energy (LCREE) sector was estimated to directly provide 23,100 full time equivalent (FTE) jobs
• The LCREE estimates are based on a relatively small sample of businesses and hence are subject to fairly wide confidence intervals. LCREE employment in Scotland in 2018 is similar to previous years and not statistically significantly different to 2017.

Source: ONS

Policy Outcome: 1

Indicator: Industrial energy productivity (£GVAm per GWh)

On-Track Assessment (Milestones/ Targets): Progress to target [Increase 30% by 2032]^[25]

Most recent data: £0.53million GVA per GWh – industrial energy productivity in Scotland in 2018.

Data source(s): BEIS sub-national energy consumption statistics, BEIS Energy Consumption in the UK statistics, Scottish Government Quarterly National Accounts.

Assessment: Too early to say^[26]

Commentary:

• Industrial energy productivity in Scotland (the GVA obtained through each GWh of energy used in the industrial sector) grew steadily, by over 55%, from 2005-2015, followed by 2 years of moderate (6%) decline, and an uptick in the most recent year 2018.
• Between the 2015 baseline and the most current data available in 2018, there has been a moderate (0.4%) improvement in industrial energy productivity. The on track assessment of 'too early to say' reflects the fact that many decarbonisation policies for the industrial sector are in the early stages of roll-out and, as such, it is too early to see the impact of these.
• Improvements on this indicator are likely to be stepped, or lumpy, rather than gradual year-year changes, as success depends on substantial process changes at a small number of large sites. We'll continue to review the suitability of the indicators used to reflect success in the sector and refine these as needed.
• Industrial GVA has continued to grow in recent years and is currently at its highest level, and although there has been a 28% decrease in energy consumption since 2005, this has remained relatively steady for the last few years.
• The data here cannot be directly compared to previous iterations of the Climate Change Plan monitoring report as a more robust method of tracking has now been developed, one which separates industrial from commercial energy use.

Source: BEIS, SG

Policy Outcome: 1

Indicator: Industrial emissions intensity (tCO2e per £GVAm)

On-Track Assessment (Milestones/ Targets): Progress to target [Reduce 30% by 2032]^[27]

Most recent data: 454 tonnes CO2e per £1 million GVA – industrial emissions intensity in Scotland in 2018.

Data source(s): Scottish Government Greenhouse Gas Emissions publication, Scottish Government Quarterly National Accounts

Assessment: Too early to say^[28]

Commentary:

• Emissions intensity in Scotland (the volume of emissions produced through each £1m of GVA in the industrial sector) fell by over 35% 2005-2015, rose 7% to 2017, and decreased to its current level in 2018.
• Between the 2015 baseline and the most current data available (2018) there has been a slight (3%) increase in emissions intensity of industry, and the 'too early to say' assessment above reflects the fact that many decarbonisation policies for the industrial sector are in the early stages of roll-out and, as such, it is too early to see the impact of these.
• Improvements on this indicator are also likely to be stepped, or lumpy, rather than gradual year-year changes, as success depends on substantial process changes at a small number of large sites. We'll continue to review the suitability of the indicators used to reflect success in the sector and refine these as needed.
• As outlined above, industrial GVA was at its highest level in 2018, and although emissions fell by over 25% between 2005-2018, they increased between 2014-2017 by approximately 1MtCO2e, largely due to increased activity in the refinery and petrochemicals sectors.
• The data here cannot be directly compared to previous iterations of the Climate Change Plan monitoring report as a more robust method of tracking has now been developed, one which separates industrial and commercial emissions.

Source: SG

Policy Outcome: 2

Indicator: % of Scottish gas demand accounted for by biomethane and hydrogen blended into the gas network

On-Track Assessment (Milestones/ Targets): Based on trend

Most recent data: 1.5% Scottish gas demand accounted for by biomethane blended into the gas grid in 2019/20

Data source(s): Scottish Gas Networks

Assessment: Too early to say^[29]

Commentary:

• The level of biomethane in the gas grid grew 5-fold between 2015 and 2019, from 126 GWh to 716 GWh. So despite a 14% increase in Scottish gas consumption over the same period, the percentage of this gas consumption which was accounted for by biomethane has risen from 0.3% to 1.5%.
• Although moderate, this growth in biomethane levels has contributed to a lower emissions intensity of the gas grid.
• Scottish gas networks estimates that the equivalent of 227,000 households were supplied with biomethane in 2019/20.

Part C - Information on implementation of individual policies

Outcome 1: Scotland's Industrial sector will be on a managed pathway to decarbonisation, whilst remaining highly competitive and on a sustainable growth trajectory.

Policy:

Emissions Trading Scheme (ETS): following EU Exit we will work with UK Government and other devolved administrations on maintaining carbon pricing that is at least as ambitious as the EU ETS. The Scottish Government's preference is to establish a UK ETS will have an interim cap 5% tighter than the EU ETS, and will be reviewed for consistency with Net Zero in 2021.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [June 2020]

Progress on implementation since time of last report / CCPu:

The UK ETS, established jointly by Scottish Ministers with the UK Government and the other devolved administrations, became operational on 1 January 2021. It currently mirrors the EU ETS to provide a smooth transition for the new market, but with clear commitment to review it for consistency with Net Zero.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

The policy was implemented on 1 January 2021.

There are no specific indicators in the CCPU.

The first data from participants will not be available until Q2 2022.

Timeframe and expected next steps:

Next steps include joint UKG-DA consultation on increasing the ambition of the UK ETS, most particularly its cap.

We have publically committed to consult on this within 9 months of the CCC's CB6 advice (so Sept 2021). And implement and changes by Jan 2023 if possible, but Jan 2024 at the latest.

Policy:

Deliver an Energy Transition Fund (ETF) to provide support for a sustainable, secure and inclusive energy transition in the North-East.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [June 2020]

Progress on implementation since time of last report / CCPu:

Since the announcement of the ETF we have been working closely with project partners to support them as they develop business cases at pace, the approval of which will allow these projects to move into delivery phase.

The ETF has announced grant offers for Aberdeen Hydrogen Hub and the Global Underwater Hub to date.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

The ETF will provide £62m funding to its associated projects over a five year period from 2020/21 to 2024/25.

Timeframe and expected next steps:

Business cases are now in a late stage of development and we'd expect to make further announcements on their progress in the near future.

Policy:

Establish and deliver a Scottish Industrial Energy Transformation Fund (SIETF) – to support the decarbonisation of industrial manufacturing through a green economic recovery.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [June 2020-2-21]

Progress on implementation since time of last report / CCPu:

First application window for the SIETF closed on 26^th February, followed by a 3 month period of assessment and due diligence.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

Estimates of annual cumulative carbon savings resultant from co-investment from SIETF will be revised as the scope is reviewed in 2021, and annually thereafter. However actual savings are unlikely to evidence until 2024 after significant energy efficiency or decarbonisation deployments are operational.

We will monitor number and value of projects supported, and track projected emissions and energy productivity savings.

Timeframe and expected next steps:

First batch of grants to be awarded after election. Competition will re-open later in 2021 following a review of the first application window.

Policy:

Making Scotland's Future: multi-faceted programme will boost manufacturing productivity, innovation, and competitiveness, supporting manufacturing businesses to make the transition to net zero and realise the opportunities of a low carbon economy.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [December 2020]

Progress on implementation since time of last report / CCPu:

Making Scotland's Future: A Recovery Plan for Manufacturing was published on 4 December 2020. Some actions underway and others out for consultation which closed on 12 February. Recovery Plan timeframe 12 months (i.e. end-2021) with absorption of initiatives into wider programme at that point.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

Final Recovery Plan milestones still being developed. Should be finalised at time of final Recovery Plan publication (now expected May due to election period)

Timeframe and expected next steps:

Finalisation of Recovery Plan and publication expected in May 2021

Policy:

Low Carbon Manufacturing Challenge Fund: to support innovation in low carbon technology, processes and infrastructure. Will be based on successful delivery of ERDF funded Advancing Manufacturing Challenge Fund.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [2020-2021 PFG]

Progress on implementation since time of last report / CCPu:

Confirmation of Fund announced in PfG 2020

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

No. Fund still in development

Timeframe and expected next steps:

First tranche of funding relatively small set for FY 21/22 will utilie existing delivery mechanisms. Phase 2 (FY22/23 onwards) will see implementation of Challenge Fund model

Policy:

The Renewable Heat Incentive (RHI) is a GB-wide scheme created by the UK Government (with the agreement of the Scottish Government).

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [August 2020]

Progress on implementation since time of last report / CCPu:

1,054.7 MW of accredited capacity under the non-domestic RHI between November 2011 and December 2020

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

Scotland consistently attracts more than its pro-rata share under the NDRHI, with around 19% of non-domestic accredited installations being in Scotland.

Timeframe and expected next steps:

The NDRHI is due to close on 31 March 2021, with the regulations for its closure laid on 25 January 2021, though qualified extension for both Tariff Guarantee and non-Tariff Guarantee applications have been implemented.

Policy:

Scottish Industrial Decarbonisation Partnership (SIDP): Scottish Government -convened cross-sector energy-intensive industrial (EII) stakeholder forum with representatives from manufacturing sites. Initial objectives: bring together other initiatives; build a shared narrative between government/ industry on decarbonisation; and disseminate best-practice.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [CCPu 2020]

Progress on implementation since time of last report / CCPu:

Developing the proposal's mission, objectives, structure and governance. Then consider options in context of other initiatives, and consider breadth of membership.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

Too early to set indicators or milestones

Timeframe and expected next steps:

Launch by end of 2021

Policy:

Deliver a Net Zero Transition Managers Programme to embed Managers in organisations tasked with identifying, quantifying and recommending decarbonisation opportunities for the business.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [CCPu 2020]

Progress on implementation since time of last report / CCPu:

Early stages of developing a pilot programme, considering market intelligence gained from SIETF on capacity within industrial sites to progress projects.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

Too early to set. Indicators likely to link to funding programmes such as SIETF or stakeholder partnerships such as SIDP.

Timeframe and expected next steps:

Detailed pilot proposal development in first half 2021. Pilot active by end of 2021

Policy:

Establish a Grangemouth Future Industry Board (GFIB) – forum to coordinate public sector initiatives on growing economic activity at the Grangemouth industrial cluster, whilst supporting its transition to our low-carbon future.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [2020-2021 PfG]

Progress on implementation since time of last report / CCPu:

GFIB has been established. Following a series of engagements between Partners (Scottish Government, Scottish Enterprise and Falkirk Council) to design the outline structure for the forum and its proposed workplan, GFIB is now established and has moved from an initiation phase to an action focussed delivery phase. The Board has agreed the scope and goal of each of its 5 workstreams, who will lead on them, and has identified the deliverables the Board will prioritise over the next 12 months.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

The Board has agreed its priorities for the next 12 months and is currently developing its strategic indicators as a tool to track progress.

Timeframe and expected next steps:

The Board will meet every 2 months to discuss specific areas of interest for the board and work together to deliver on the priorities set for the first 12 months (February 2021-22).

Policy:

Develop policy on providing market-benefit for Scottish industries that invest to decarbonise production.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [CCPu 2020]

Progress on implementation since time of last report / CCPu:

New policy in CCPu.

Commissioned research underway. Draft report submitted and reviewed by steering group. Contractor designing a second phase to use targeted stakeholder engagement to probe specific products within markets in more detail.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

No. This is a high-level scoping exercise to identify demand-side policy opportunities. It may warrant further investigation and development of Scottish products or demand-side levers.

Timeframe and expected next steps:

Commissioned research expected to complete Q2 2021.

Policy:

Green Jobs Fund, to help businesses create new, green jobs, working with enterprise agencies to fund businesses that provide sustainable or low carbon products and services to help them develop, grow and create jobs. Further funding will help to ensure that businesses and supply chains across Scotland can capitalise on our investment in low carbon infrastructure such as the decarbonisation of heating and green transport.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [2020-2021 PfG]

Progress on implementation since time of last report / CCPu:

Over the next five years, our enterprise agencies will provide £50 million Green Business Support funding to businesses, organisations and social enterprises. £9.6m has been added to their capital R&D budget for 21/22.

A further £50 million Green Supply Chain Development funding is available to help ensure that businesses and supply chains across Scotland can capitalise on our investment in low carbon infrastructure. Arrangements for the £4.4m available in 21/22 are being developed.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

As yet, no targets have been set. The enterprise agencies are in the process of finalising their plans for 2021-22 and arrangements for the Green Supply Chain Development Fund are still being made.

Timeframe and expected next steps:

First call for this funding was announced on 22 March with a go live for applications in May and awards to be made in August.

Policy:

Seizing the economic opportunity, we will work across government, enterprise agencies and the innovation system to identify strengths that can be built on as part of the decarbonisation journey, for example on The Clyde Mission and continued support for the Michelin Scotland Innovation Parc (MSIP).

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [CCPu 2020]

Progress on implementation since time of last report / CCPu:

A new Low Carbon Economy Unit is being established in SG to support the economic development contribution to net zero. Their work will include identifying strengths of the Scottish economy and related opportunities for economic growth / delivering net zero / and tackling place based poverty and inequalities. This will include key research, innovation and related capabilities.

The Scottish Government has committed £25m to Clyde Mission to support the development of zero carbon energy infrastructure and heat along the river Clyde's path.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

-

Timeframe and expected next steps:

From Summer 2021 onwards, produce place-based analysis to identify what 'buy', 'make' and 'innovate' investments are required by when for business and industry.

By end 2021 we will have in place a strategy for the utilisation of this funding, aiming to lever investment and activity from public and private sector partners.

Outcome 2: Technologies critical to further industrial emissions reduction (such as carbon capture and storage and production and injection of hydrogen into the gas grid) are operating at commercial scale by 2030

Policy:

ACORN CCS Project: support the delivery of the CCS and Hydrogen capability at St. Fergus Gas Processing complex by 2025.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Maintained

Progress on implementation since time of last report / CCPu:

Ongoing support.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

No specific milestones beyond policy support. in 21/22 we will need to make funding decisions and whether funding for Acorn is required from the EETF

Timeframe and expected next steps:

Clarity on UK business models and funding expected by November 2021. Following this we will have a clear picture of potential financial support.

Policy:

Establish and deliver a Carbon Capture and Utilisation (CCU) Challenge Fund.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [2020-2021 PfG]

Progress on implementation since time of last report / CCPu:

Working with Enterprise Agencies and undertaking stakeholder engagement to establish the fund and eligibility criteria. Opening for expression of interest in 2021.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

-

Timeframe and expected next steps:

The fund will open in 2021 for allocating grants and will pay out £5m to the end of 2023.

Policy:

Emerging Energy Technologies Fund – to support the development of Hydrogen, CCUS and Negative emissions technologies.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

New [CCPu 2020]

Progress on implementation since time of last report / CCPu:

The EETF has £5m available for projects in 2021/22.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

N/A

Timeframe and expected next steps:

CCS/NETS: In 2021 a NETs feasibility study and alongside CCS policy development can help inform the spending profile from 2022

Policy:

Carbon Capture Utilisation and Storage (CCUS): work closely with the UK Government to achieve commercial, policy and regulatory frameworks required to support CCUS at scale in the UK."

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [2020-2021]

Progress on implementation since time of last report / CCPu:

December 2020 BEIS released some details on relevant business models and we continue to press for further clarity, engaging on the UK led regulators forum.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

N/A

Timeframe and expected next steps:

Continued support to projects for business models to develop this year. Further clarity expected before COP26.

Policy:

Forums for CCUS and Blue (low-carbon) Hydrogen: to bring together industry, academics and membership organisations to promote and attract investment in CCUS and Blue Hydrogen.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [NECCUS 2019]

Progress on implementation since time of last report / CCPu:

Having established in November 2019 NECCUS have cemented their importance to the sector by developing paid membership and successfully bidding for £1.2m for work to deliver Scotland's Net Zero Roadmap (SNZR)

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

N/A

Timeframe and expected next steps:

Established in 2019. Grant Funded 2019/20, 2020/21, grant offer made for 2021/22. Aim for NECCUS to be self-sufficient for 2022/23

Policy:

Evidence for CCUS and Blue Hydrogen: building the evidence base on impact of technology, regulatory and market barriers.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [PfG 2020/21]

Progress on implementation since time of last report / CCPu:

Work has commenced on regulatory requirements, and geological risk.

An economic Impact Assessment has been commissioned.

Working with the Acorn Project on a Shipping of CO2 study.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

N/A

Timeframe and expected next steps:

Economic Assessment expected to complete in early summer 2021 for publication.

Working with Scottish regulators to update guidance on the regulatory landscape in 2021.

Shipping study will report at the end of 2021

Policy:

Strategic development of Scotland's hydrogen economy - This is a cross-portfolio proposal that will impact on the delivery of multiple outcomes.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [Hydrogen Assessment and Policy Statement 2020]

Progress on implementation since time of last report / CCPu:

The Hydrogen Policy Statement published in December 2020 articulates our ambitions and potential opportunities in this emerging sector.

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

n/a

Timeframe and expected next steps:

The policy statement provides a policy framework for the development of a Hydrogen Action Plan which we will publish in 2021.

Policy:

Hydrogen Demonstration: to replicate and scale-up demonstration projects and the evidence base for hydrogen based technologies.

Status: New, Boosted or Maintained compared to last CCP [date announced]:

Boosted [Hydrogen Assesment and Policy Statement 2020]

Progress on implementation since time of last report / CCPu:

We have completed and published several major pieces of work over the last 12 months to inform our hydrogen policy development; the Offshore Wind to Green Hydrogen Report, the Deep Decarbonisation Pathways for Scottish Industries Study, and the Hydrogen Assessment have provided an evidence base which informed our policies on hydrogen within the Hydrogen Policy Statement published in December 2020 and articulates our ambitions and potential opportunities in this emerging sector. The Hydrogen Policy Statement provides a policy framework for the development of a Hydrogen Action Plan which we will publish in 2021

Have any implementation Indicators / milestones been set for this policy? If so, most recent data for progress against these.:

n/a

Timeframe and expected next steps:

The £10m funding to support Hydrogen Demonstration announced in the 2020 SG Budget has supported strategically important hydrogen demonstration projects including the SGN H100 Fife gas network decarbonisation project.