Low Carbon Manufacturing Challenge Fund: business regulatory impact assessment

Does the measure affect a market where products or services are supplied by private or public sector organisations.

Yes

Is there likely to be a restriction of competition?

No. Funding opportunities are open to all manufacturing businesses based in Scotland

Will the measure directly or indirectly limit the number or range of suppliers?

In order for a Scottish low carbon manufacturing sector to be successful in a circular economy, the range of suppliers to whom the LCMCF will be available will be limited to those who operate under, or plan to adopt an approach to, low carbon manufacturing.

This will directly result in Scottish based manufacturers, not do not meet the criteria, being unable to obtain funding. It may also indirectly result in businesses who do not, or cannot, offer low carbon products, leaving the market where the demand for these products reduces and leaves businesses unviable. This may result in any residual demand for these goods having to be sourced from outwith Scotland. However, it is anticipated that the developments in low carbon manufacturing will eventually become mainstream processes, with businesses being able to access technologies developed.

The effect of low carbon manufacturing on the costs to suppliers is unknown and will need to be explored further. However there are indications that low carbon manufacturing techniques, such as 3D printing, can result in a reduction of the cost of materials, such as resin, due to the huge increase in their demand^[30].

The LCMCF does not introduce any licencing schemes that limits the numbers of suppliers or controls quality. However, businesses will be required to adhere to any quality standards imposed on them by legislation or regulation.

Will the measure limit the ability of suppliers to compete?

As the LCMCF is aimed at all manufacturers in Scotland, all businesses who have a manufacturing premises in Scotland, and meet the LCMCF criteria for funding, have equal opportunities to compete. The LCMCF imposes restrictions in that the funds must be used only for the purpose for which the funds are granted and not used for any other purpose.

In order to make low carbon manufactured products attractive to consumers, companies will need to ensure that pricing is competitive with products currently on the market, manufactured through higher carbon emission processes, and with products which may be available cheaper from other countries.

More information on how prices will be influenced and controlled to guarantee competiveness is required.

There will be no restriction on the geographic area in which a manufacturer can import and export. Circular economy strategies emphasise the benefits of being able to develop technology, source materials, manufacture, sell and deliver products within local distances, however it is recognised that in order to compete on a global scale, some materials may need to be sourced from outwith the Scotland, and products exported within the UK and internationally.

Other than the need for businesses to comply with advertising standards regulations and guidance, will be no restrictions on businesses being able to advertise their products.

The LCMCF imposes restrictions on production processes, in that these must comply with the spirit of the LCMCF and funds used to develop the technology, processes and skills required for low carbon manufacturing.

Will the measure limit suppliers' incentives to compete vigorously?

The LCMCF incentivises businesses to collaborate, rather than competitive, in the development of the technology, processes and skills required for low carbon manufacturing.

Will the measure limit the choices and information available to consumers?

The effect of low carbon manufacturing on the costs of products, manufactured by low carbon manufacturing companies, to consumers is unknown and will need to be explored further. However there are indications that low carbon manufacturing techniques, such as 3D printing, can result in a reduction of the cost of materials due to the huge increase in demand. It anticipated that as the production cost to businesses reduces, these savings will be passed to consumers.

The transition to a low carbon manufacturing sector will increase consumer choice when making purchasing decisions. A greater range of sustainable products from a greater range of low carbon manufacturers will be available. However, this may result in the availability of lower cost, high carbon, products reducing, which could potentially have a negative impact on consumers at the lower end of the socio-economic scale who may find that "green" choices are unaffordable.

Evidence shows that consumers have difficulty in identifying "green" purchase options and many think "green" options are inferior quality. Many would prefer to buy a new low cost item rather than a remanufactured or repaired branded item. This would indicate that consumer education is required and that low carbon manufactured goods are clearly labelled.

It is unknown whether there will be a consumer cost increase of switching from high to low carbon manufactured goods. More information is required, however it is anticipated that low carbon manufacturing will result in products which have an extended lifespan, and as a result, may be more expensive to initially purchase. However, longer term, the cost to consumers will be off-set as a result of not having to replace goods as often.

Will the LCMCF lead to worsening market trends, demand and supply conditions, and will market outcomes get worse?

Working towards a low carbon manufacturing circular economy is at the very heart of the LCMCF. As such, the ambition is to decrease consumption levels of resources, and manufacture recyclable products which have an extended lifespan. This will result in a decrease in sales of new products, but new and revitalised markets in remanufacturing, repairs, maintenance and recycling will emerge. Original manufacturers will be able to extend their business models to capture these new markets and new business opportunities will emerge for other companies.

Products with an extended life-span could potentially to be more expensive to produce due to being of more durable materials and quality, however it would be expected this would be reflected in the consumer price, which will off-set any reduction in consumption levels.

Innovation in technology, product characteristics and business models will be required in the transition towards a low carbon manufacturing sector. The LCMCF promotes coopetition between companies through collaboration and sharing of resources, and foster positive working partnerships between Scottish manufacturers.

The increased availability of low carbon products manufactured in Scotland will remove existing consumer obstacles and make it easier for consumers to source and purchase these products.