One of the more challenging aspects of the net zero agenda is how to decarbonise heavy industry. Industries such as metals (including iron and steel), minerals, chemicals, food and drink, paper and pulp, ceramics, glass and oil refineries account for about 16% of UK territorial emissions, both from energy use and from carbon dioxide and other greenhouse gases produced directly from industrial processes, such as calcination in the production of cement. Industry is commonly seen as a ‘hard to abate’ sector of the economy. A lot of industry is also exposed to international competition, so unless there is support from government there is a risk that it will close down and relocate, rather than actually cut emissions.
Having made progress on the decarbonisation of electricity the UK, like many other countries, is now giving much greater focus to this agenda. As laid out in the 2021 Industrial Decarbonisation Strategy, the centrepiece of the UK’s approach is to slash emissions in a number of industrial clusters around the UK, with key roles for carbon capture and storage and for hydrogen. This approach has been backed by revenue support for high carbon industrial emitters to pay for carbon capture, and a new regulatory framework for carbon transport and storage similar to that in gas and electricity networks. Similar proposals for hydrogen are also being developed. In addition, £1 billion of grant support for carbon capture and storage infrastructure is being made available.
While the final level of support is as yet unknown, what is clear is where the initial funding for CCS and hydrogen will go. Two clusters – the North West cluster around Merseyside centred on the Hynet hydrogen project, and the East Coast cluster with hubs at Humberside and Teesside – have been designated as ‘Track 1’ clusters, meaning that projects will go ahead in the first phase of the strategy.
Other locations designated as industrial clusters in the UK, Southampton/Solent, South Wales, the Black Country, and the Scottish cluster linking Grangemouth and Aberdeen, are currently waiting for the development of a Track 2 framework of support. Scotland has been designated a ‘reserve’ cluster meaning that it would become Track 1 if one of the existing Track 1 clusters dropped out, although observers think there is little chance of this.
This pattern of early resource allocation is a consequence of an approach that prioritises efficiency in emissions reduction, i.e. focus on those regions where large proportions of emissions are concentrated. However, it also leads in practice to regional inequality in where funds flow, made more significant by the fact that most of the clusters include areas of high deprivation, historical job loss and under-investment. This inequality across the clusters has not gone unnoticed, and one question sometimes raised is whether there is a party political dimension, related to the ‘Red Wall’ phenomenon, where the Conservative Party won a number of traditionally Labour-held seats at the 2019 election in the north-west and north-east of England and want to hang on to them. This issue echoes debates over the allocation of the Towns Fund.
In focusing on this issue, it is important to be clear that this is not an assertion that resources necessarily have been allocated on political grounds. The selection of Track 1 clusters was a competitive process run by a government department using detailed criteria, one of which was the availability of geological storage for captured carbon dioxide. Each cluster bid had strengths and weaknesses. Rather it is based on the view that perceptions can matter, especially the perception that there may have been a parallel, more political process, and it is worth examining how perceptions relate to evidence.
Is there any evidence that policy support is being targeted to areas that the Conservative party is also targeting electorally, either through the decision to make funding conditional on the existence of storage capacity or in the decisions on which clusters should be Track 1?
The table below shows various indicators for cluster constituencies, identified from maps of the clusters in roadmap documents and the UK constituency map.
One approach to the ‘Red Wall’ question is to assess how many constituencies in a cluster were Conservative gains from Labour in the 2019 election. The two clusters with the largest number of such swing seats were the East Coast cluster (especially the Teesside area) and the Black Country cluster. While the East Coast cluster is a Track 1 cluster, the Black Country is not, as it lacks access to any storage capacity. The decision to condition Track 1 resources on such capacity thus cuts across the pattern of swing constituencies.
On the other hand, within those clusters with storage capacity (NW, East Coast and the Scottish Cluster), the East Coast cluster stands out as having the most swing constituencies. From an electoral politics point of view, we might thus expect it to be included.
The Scottish Cluster, which currently includes no Conservative seats at all, is at the other extreme. With Scotland, as with South Wales, there is the additional factor of the politics of devolution. Both devolved nations have governments led by parties that are in opposition in Westminster.
However, looking at seats which swung to the governing party at the last election is only one indicator of the logic of investing in locations that might represent electoral gain. Another approach is to look at how marginal seats are, indicating either the need to shore up support or the opportunity to gain seats at the next election. Based on the size of majorities at the 2019 general election, the marginality ranking runs from 1 (the most marginal seat) to 650 (the least marginal), with data sourced from the House of Commons Library.
On this measure, the NW/Hynet cluster has the largest number of highly marginal seats (i.e. with a ranking of less than 100), whereas the East Coast cluster and the Black Country come second with 4 each. The Scottish and South Wales clusters have the fewest highly marginal seats. Since many of the highly marginal constituencies in the East Coast and NW/Hynet clusters are currently held by Labour, these clusters also have relatively high numbers of seats that are in the top 100 targeted by the Conservative party, according to the Election Polling website. This type of evidence is thus consistent with an electoral interpretation of the allocation of industrial decarbonisation policy resources.
Yet another approach is to look at the original definition of Red Wall seats as developed by James Kanagasooriam. This was not based on the outcomes of election swings, but rather on the potential for Labour-held constituencies to swing to Conservative, based on social and demographic indicators such as home ownership, education and age etc., identified before the 2019 election, across a broad area of England from the West Midlands up to the North East.
There are actually very few of these Red Wall seats in any of the industrial clusters, with the exception of the Black Country where many were actually gained by the Conservatives in 2019. In the other regions of England, most of these ‘true’ Red Wall seats were not in the core industrial areas. On this measure, a party political interpretation would lead one to expect that policy resources would be focused on the Black Country, which is the opposite of what is observed.
A final factor in this picture is the role of mayors. Both Teesside and the Black Country (in neighbouring Birmingham) have high-profile Conservative mayors (Ben Houchen and Andy Street respectively) who have given public support to the development of their zero carbon clusters. A party political interpretation here is again split between supporting evidence for the East Coast cluster being Track 1 and contradictory evidence for the Black Country receiving no support. This interpretation is also complicated by the enthusiasm for the NW/Hynet cluster from Manchester’s Labour mayor Andy Burnham.
Where does this leave us? The strongest support for a party political interpretation for the allocation of industrial decarbonisation policy resources amongst clusters with storage capacity for carbon dioxide comes from the marginality rankings measure, taken together with the fractious relationship between the Scottish National Party (SNP) and Conservative-led Westminster government. However, a counter-argument to this interpretation is that a truly political allocation would have given funding to the Scottish cluster to strengthen the case for the Union, thereby undermining the SNP.
However, the decision to focus early industrial decarbonisation policy on CCS and hydrogen, and therefore on clusters with storage capacity, does not in itself make sense from an electoral politics point of view, given the high number of marginal seats in the Black Country.
Disclaimer: The views and opinions expressed in this blog are those of the authors alone and do not necessarily represent the opinions of the University of Sussex, the Sussex Energy Group as a whole, IDRIC, or any of its partners.
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