The government should accelerate investment in greening the steel industry to support the Covid-19 recovery while tackling climate change, a report from think tank Common Wealth has urged.
According to the report, A Test of Mettle, the carbon footprint of the steel industry has been in decline since 1999. It currently contributes 15 per cent of the UK’s industrial greenhouse gases; this is equivalent to 11.5 million tonnes of carbon every year.
However, the steel industry is a key contributor to employment (employing 32,000 people directly in Wales and Yorkshire & the Humber), the economy, and providing materials for low-carbon technology such as wind turbines and other clean energy infrastructure.
Common Wealth said that meeting the UK’s climate goals (reaching net-zero greenhouse gas emissions by 2050) must involve the decarbonisation of this carbon-intensive sector. It called for an ambitious and feasible plan, developed with the involvement of workers and unions throughout.
The investment is also essential for supporting the industry as part of the government’s “levelling-up” agenda (which aims to support economically underperforming regions). The Covid-19 pandemic cut demand for UK steel products by 45 per cent in the first half of 2020. The industry had already been facing a “perfect storm” of challenges pre-Covid, due to Brexit uncertainties and unprecedented growth in steel production globally, at more competitive prices due to lower overheads. Failing to support the green steel industry would not only undermine decarbonisation efforts, but also lead to job losses and damage to communities around steelworks.
The report called for the government to provide strategic support for the sector and stimulate demand for low-carbon steel by accelerating investment in infrastructure projects which will contribute to cutting carbon emissions. It called for the implementation of a green industrial strategy which aims to develop green areas such as hydrogen steelmaking, carbon capture and storage, and electric arc furnaces.
It also proposed that trade policy should ensure that carbon emissions are cut from domestic industry without offshoring jobs and manufacturing to places with a worse environmental footprint. This could involve a “carbon border adjustment system” for steel products, which applies a fee to imported goods in relation to their carbon footprint.
The report was welcomed by both sides of the Commons.
“Whether we are building railways, schools, or hospitals, a national infrastructure programme will require millions of tonnes of high-quality steel,” said shadow business secretary Ed Miliband. “Now is the time to deliver for steel workers and their communities with a Green New Deal to turbocharge our economic recovery and deliver a strong future for our steel industry.”
Gareth Stace, director general of UK Steel, commented: “The focus of businesses is to reduce our carbon footprint, and we need government to step up and play a role, with us, in securing this transformation – it can support jobs in foreign steel industries or it can support jobs in ours.”
A spokesperson from the Department for Business said: “Whether for offshore wind farms or electric vehicles, the steel industry will play a role in providing the infrastructure we need for a green economic recovery. That is why we are taking comprehensive action to secure the sector’s future and protect jobs, supporting it to cut emissions and invest in low-carbon innovation with over £550m in funding.”
Meanwhile, the parliamentary Environmental Audit Committee has called for tax incentives in the March budget to encourage the purchase of electric vehicles, to support both Covid-19 recovery and decarbonisation efforts.
It also called for VAT to be cut on home energy efficiency projects, repair services, and products using recycled materials to support circularity. It said that the Green Homes Grant – which was launched last year to support adaptations to make homes more energy efficient – should be overhauled and extended, having been beset with problems so far.
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