Low Carbon Manufacturing Challenge Fund: business regulatory impact assessment

Test run of business forms

Scottish Government will not be publishing any business forms.

Digital Impact Test

Our ambition is Scotland to become a world leader in low carbon manufacturing - the home of a thriving, innovative low carbon manufacturing sector and producer of goods. To achieve this ambition, the research, development and introduction of new technology, such as automation and artificial intelligence, is required.

Many experts believe we are now in the midst of a fourth industrial revolution, with a 5^th industrial revolution in the near future. New technologies are upgrading old technologies and automated systems and machinery have revolutionised mass production processes.

The LCMCF provides some businesses with the opportunity to make the vital advancement in technology that the Scottish manufacturing sector needs. Digital manufacturing solutions will help the Scottish manufacturing sector take a leading role in contributing to a more sustainable and circular economy.

In 2017, there were over 297,000 industrial robots at work in Japan, and there are 237,000^[23] in the USA. 2.7 million industrial robots are at work on production lines globally^[24]. It is forecast that robot unit shipments globally in 2021^[25] will amount to the installation of:

• China – 310,000
• Japan – 64,000
• USA and South Korea – 46,000
• Germany - 26,000

industrial robots in these countries. The global market of conventional robots in manufacturing is expected to reach almost $15 billion and advanced robotics $3.7 billion^[26].

In 2017, there were 71 robots per 10,000 employees in the UK manufacturing sector, compared to 300 in Germany and 200 in Sweden. The UK is investing in robotics, but there is a lack of digital development and manufacturing of robotic technology in the UK^[27]. Historically, the UK has been focused on the potential threat of digitalisation, robotics and automation replacing employees in the manufacturing sector, however evidence now suggests that the transition to a low carbon manufacturing sector will create more high value and skilled jobs in the sector than jobs lost.

COVID-19 had a significant impact on the ability of manufacturing sector to work to full capacity, due to the need for physical distancing, and reducing many manufacturers ability to have a full workforce on site. To work at full capacity, many of the existing processes in Scottish manufacturing sites require employees to work in close proximity. With much uncertainty in a world where future pandemics could pose significant health risks in the years to come, and taking into account the existing health and safety risks posed by current machinery and processes, the need for the introduction of new technologies to make manufacturing sites a safer place to work and undertake training is paramount.

Brexit has resulted in a different relationship existing between Scotland, the wider UK and the EU. The introduction of new technology in the manufacturing sector provides an opportunity for some Scottish manufacturers to better meet the demand from outside the EU and assist in the development of new products for new markets^[28].

Regardless of the pressing need for a low carbon manufacturing sector in order to reduce carbon emissions in the environment, if new technology is not developed and introduced to the Scottish manufacturing sector, many Scottish manufacturers will be unable to compete domestically or globally and many businesses will eventually become unviable.

Legal Aid Impact Test

Businesses are not eligible for legal aid. No impact is anticipated.

Enforcement, sanctions and monitoring

• The LCMCF is administered by Scottish Enterprise, with applications to the fund being appraised by the Large Grants Appraisal Team (LGAT) and subject to a number of due diligence checks in line with their Sanctions Checks policy and guidance.
• Scottish Enterprise will ensure that projects are able to be completed within 36 month and demonstrate the following:
  • Represent a significant innovation for the company
  • Are a low carbon project
  • Meet Scottish Government Fair Work criteria
  • Is of strategic importance to the company
  • Will deliver commercial benefits to Scotland's economy
  • Will create and/or safeguard jobs - How research and development spend and/or related jobs will be increased as a result of funding
• The project activity must fit within the EU's definitions of 'industrial research', 'experimental development', 'feasibility studies', 'process innovation', 'capital investment' or 'environmental aid' and will conform with subsidy control rules.

Implementation and delivery plan

• The LCMCF policy has been developed in collaboration with Enterprise Agencies and other relevant partners. It also applies many key learnings taken from a related SSAC report^[29].
• The LCMCF will be implemented by Scottish Enterprise who have been involved in the process during design and conception phases.
• All decisions on the award of funding will be by Scottish Enterprise.
• The timetable for implementation is that an open call will run from 19 May 2022 with funding available until 31 March 2026
• The LCMCF was first publically announced in the Programme for Government (PfG) 2020-21, as part of a wider £60 million investment for industrial decarbonisation. Our Manufacturing Recovery Plan contained a commitment to use LCMCF and other funds to drive collaborative development across supply chains. The fund was launched on 19 May 2022.

Post implementation review

• A review of the LCMCF will take place after implementation to assess whether the policy objective is being met. This review will be consistent with Scottish Enterprise's robust project review processes. As part of the review process, views will be sought from industry representatives, partner organisations and individual businesses to identify:
  • whether the impacts, including costs and benefits, have been as expected;
  • any unforeseen unintended consequences;
  • whether further government intervention is required.