The chemical and pharmaceutical industry is fundamental to modern society. With an immense variety of products, from vital medicines and foods, the construction of buildings, to transport and leisure, the industry truly does have an impact on virtually every aspect of our daily lives.
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The Autumn Statement was not short on energy and climate change announcements, although some key initiatives that might have been expected were not forthcoming.
Notably, there was nothing on free allocation in the UK Emissions Trading Scheme even though a consultation on free allocation has been promised, before the end of the year. There was welcome confirmation of the UK’s intention to pursue a carbon border adjustment mechanism but no detailed policy proposals and no timeline for when those might emerge. There was also nothing in terms of support for the electrification of industry, despite a key consultation on that topic closing in October.
Adding to these disappointments, it was confirmed that the Carbon Price Support would remain frozen for 2025-26 at £18/tCO2, pending a future review and engagement with industry. The intention of this measure was to increase the UK carbon price paid by fossil-fired power generators when the carbon price was very low, to push coal off the grid. The UK now has carbon prices which are achieving this on their own and the additional uplift is simply passed through to consumers in our electricity bills.
However, there were some key positives. It was confirmed that Phase 3 of the Industrial Energy Transformation Fund will commence from January 2024 and details of the scheme were published alongside the Statement. It was announced that permanent full expensing would support green investment and, critically, it was also confirmed that the Climate Change Agreements scheme would be extended for six years from 2025. CIA was pleased to see that the eligibility for our sector will remain the same, there will be no gap in Climate Change Levy relief up to 2033 (as long as obligations are met), and the target setting process will better account for decarbonisation investment.
The Chancellor also said that we can expect new details on hydrogen and carbon capture, use and storage deployment to be announced soon. This could be related to the extension of Track 1/ Track 2 cluster projects but no further information was given. And a further £20mn was announced for Innovate UK, to support the decarbonisation of foundation industries. In addition to these, a number of plans and papers were published which relate to accelerating the roll-out of electricity infrastructure, incentivising renewables investment, and supporting new connections to the electricity network.
The CIA has worked with the Department for Energy Security and Net Zero to help inform and develop one element of the Act, the ‘British Supercharger’ policy support package, to deliver a meaningful and permanent solution to the high electricity prices faced by domestic manufacturers.
