The manufacturing industry reacts to net zero policy changes

Posted on 21 Sep 2023 by Lanna Deamer

At a time when we're all seeing the devastating effects of the climate crisis playing out around the world, it is concerning to see the government withdrawing on its commitment to action. And it seems most of the industry agrees.

Prime Minister Rishi Sunak has announced a revised set of green policies, including the pushing back of the ban on sales of new petrol and diesel cars by five years. Motorists in the UK will still be able to buy petrol and diesel cars until 2035, and you’ll still be able to buy them second hand after this date.

Sunak claimed in his speech that the original goals to reach net zero emissions, including the 2030 ban on petrol and diesel cars, would “impose unacceptable costs on hard-pressed British families” and that the government can “adopt a more pragmatic, proportionate and realistic approach to meeting net zero which eases the burden on working people”.

But how has the recent announcement been received by the manufacturing industry?

Stephen Phipson, Chief Executive of Make UK, said: “The announcement that the government will be watering down its net zero policies is a huge setback for manufacturers who require stability and confidence in order to invest. Many companies will have spent time and money planning on the basis of firm targets and we now run the risk of falling behind our international counterparts as a home for green technologies if we persist in frequently altering policies that impact businesses directly. This will hit SME businesses in the automotive supply chain particularly hard.

“This is a timely reminder that the UK also needs a long-term industrial strategy which encourages innovation in advanced, high value technologies such as net zero and AI to stimulate growth and skilled employment. This announcement sends entirely the wrong signal and suggests if we aren’t looking forward, we are simply going backwards.”

In response to yesterday’s announcement on the exemptions and delays to several key green policies, Christopher Knibb, Director of Policy at the IET, commented: “Reaching our net-zero targets won’t be easy in the short-term, but the transformation of our energy system to one that is sustainable and resilient will do more than just tackle climate change: it’s a whole system transformation that will deliver economic opportunity and societal benefits to people both locally and nationally, from creating skilled jobs across generations to health benefits – warmer housing can prevent 35,000 excess deaths in winter each year.

“The engineering community is poised and ready to deliver this transformation, but we need government to provide clarity and certainty that we can work towards.

“In particular, the transition to EVs is critical in helping to reduce emissions from petrol and diesel engines. With electricity demand set to increase by more than 70% by 2050, rather than letting deadlines slip the government should be providing further support and incentives for EV uptake, including investment to upgrade the electricity grid, if they are serious about meeting their net-zero goals.

“We need to stop seeing the targets as a burden and start seeing the opportunity of wider benefits to society and the economy.”

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Mike Hawes, SMMT Chief Executive: “The automotive industry’s commitment to a zero-emission new car and van market remains unchanged. Net zero cannot be achieved without this sector’s decarbonisation. The Prime Minister has confirmed that a mandate to compel the sale of EVs – the single biggest mechanism to deliver net zero – will be published shortly, starting in January 2024.

“Manufacturers will continue to put innovative new models on the market but consumers need encouragement to buy more than ever. Yesterday’s announcement must be backed up with a package of attractive incentives and measures to accelerate charging infrastructure to give consumers the confidence to switch. Carrots move markets faster than sticks.”

Cara Haffey, Head of Automotive at PwC UK, said: “The extension of the date of the ban on selling new petrol and diesel vehicles until 2035 will have an end-to-end impact on the automotive industry. Manufacturers will have already begun adjusting the direction of their investment with the initial 2030 deadline in mind, it will be interesting to see if this extension will now lead to reallocation of capital to other areas.

“Separately, this could lead to a dampening of EV demand by consumers. Our latest eReadiness report showed consumer demand has fallen in the UK market compared to last year, and with an extension confirmed – consumers may look to postpone their EV transition plans. The possible impact on the roll-out of vital EV infrastructure such as charging networks, is key, as this is only incentivised for developers if there is adequate consumer demand to meet the required deployment of capital.”

Ford’s UK Chair, Lisa Brankin also released a statement in response to the news, urging the government to re-think this change. She said: “Three years ago the government announced the UK’s transition to electric new car and van sales from 2030. The auto industry is investing to meet that challenge.

“This is the biggest industry transformation in over a century and the UK 2030 target is a vital catalyst to accelerate Ford into a cleaner future. Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.”

Rowan Crozier, CEO of Brandauer, a metal pressings and stamping specialist that produces wafer thin laminations for electrification, said: “I think it’s a tricky balance to strike, but progress towards Net Zero is a must for the UK.

“The cynic in me can’t shake the feeling that the change is politically motivated and not in the best interests of the country.

“Whilst it may be a good move for reuniting the Conservative party, it is a killer for a manufacturing sector that has embraced the initial strategy and made the shift towards developing components for the new green future. This decision will only damage the work we’ve put in.

“What we really need of a coherent Government is ambitious investment support and 100% R&D grant funding for SMEs that supports the greening of existing and emerging technologies.

“This has to a real focus if we are going to come even close to our “new” Net Zero targets, instead of the continual political games that seem to be unfolding.”

Sam Hollister, Head of Economics and Finance, LCP Delta, commented: “The government is paying no regard to the investment needed to meet net zero, with the latest announcements another nail in the coffin that could see investors take flight to other markets. Weeks after a CfD auction which failed to attract investment in offshore wind, and still no answer to the US’s Inflation Reduction Act, today’s rumours will act as another signal to investors that the UK’s commitments and plans for net zero are not guaranteed.

“Delivering net zero is not an option but an obligation to protect future generations. The UK needs to invest billions to make the transition, and with every delay and failed opportunity to garner investment, the cost is going up. LCP Delta analysis says an increase of just 1% WACC (Weighted Average Cost of Capital) will increase the cost of delivering the power generation infrastructure to meet net zero by £35bn, and this quickly increases to £75bn if the cost of capital increases by 2%.

“While many of the row-backs are designed to protect voters from the cost of net zero, these delays on the consumer front will create great uncertainty and delays for investors and wider parts of the UK economy. At a time when other governments such as the US are doubling down on the transition to EV’s with its NEVI (National Electric Vehicle Infrastructure) programme, the UK’s move will hit the brakes on investment needed in EV charging infrastructure. This is a similar story for the critical steps needed to decarbonise people’s homes. The government has no strategy to insulate people’s homes, and now, looks further away than ever in putting in place the necessary measures needed to support customers in replacing carbon emitting gas boilers.

“This is a time for strong leadership, and big decisions are required from this government. These rumours will cause further uncertainty, putting at risk the creation of new jobs that a move to a green economy will bring.”

Lysan Drabon, Regional Managing Director, Europe at the Project Management Institute (PMI) said: “Relaxing the UK’s net zero ambitions casts serious doubts over the country’s commitment and ability to meet targets, at a time when businesses crucially need consistency.

“Like many major challenges facing society, climate change will continue to require important investment and commitment to drive the delivery of large-scale transformation projects, even on a pushed back schedule. Right now, we know that 70% of all major transformation projects fail according to McKinsey, which leaves a pressing need for more experienced and qualified project managers to be involved in the transformation work if we are to successfully deliver the changes society requires. We need to act before it is too late.”

“For procurement professionals and global supply chains, the government’s move emphasises the need to fully embed sustainability into all aspects of existing and upcoming projects. The onus is on companies to continue to push sustainability forward by focussing on the successful delivery of projects that are being progressed despite the announcement.”

While most agree the announcement will slow the transition to greener cars and cause further disruption to supply chains, some car manufacturers have welcomed the news.

A spokesperson from Toyota said: “Toyota has consistently adopted a multi path technology approach to reduce emissions as much as possible as soon as possible – based on our company’s principles of carbon is the enemy and providing mobility for all. We have spent billions developing and bringing to market hybrid electric, plug-in hybrid electric, battery electric and hydrogen fuel cell electric powertrains to support the transition to greater zero emissions transport.

“Yesterday’s government announcement is welcome as it provides the clarity industry has been asking and recognises that all low emission and affordable technologies can have a role to play in a pragmatic vehicle transition. We believe this can also help relevant parties to further adapt including consumers, manufacturers, infrastructure and energy providers.

“Toyota fully shares the Prime Minister’s key goal of zero carbon, and is committed to achieving the government’s target of zero emissions vehicles from 2035 in the UK. We will work in collaboration with government and all our stakeholders to jointly promote the realisation of greater zero emissions transport.”

JLR also said: “Yesterday’s announcement by the government on the revised end date for the sale of petrol and diesel cars in the UK is pragmatic and brings the UK in line with other nations, which we welcome.

“JLR’s commitment to be fully carbon net zero by 2039 is on track and we look forward to the building of the much-needed infrastructure which will help clients transition to an exciting electric future.“

Meanwhile, Tony Hague, CEO of PP Control & Automation, the UK’s leading strategic manufacturing outsourcing specialist, said: “I actually think it is a sensible move – albeit perhaps not popular with all.

“The fact is we neither have the infrastructure to support the initial pledges (made in good faith) or the money to make them happen.

“Equally – with the current impact of inflation/interest rates on consumers – any form of additional costs to further support the move to Net Zero are, right now, inappropriate. Don’t get me wrong, everyone wants green energy until they get a surcharge on their bill!

“The focus around ESG is real and, certainly at a business level, we can do plenty to support without Government intervention. People will talk about the ‘goal posts moving’ and I get that, but in truth ‘they were always going to be moved!”.

Mitchell Barnes, Founder of RYSE 3D, a specialist manufacturer of next or same day additive manufacturing production and prototype solutions, added: “I view this as a constructive shift that resonates with the public’s sentiments. We share a collective desire for a brighter future, and I hope we can achieve it through genuine investment in infrastructure and mindful decisions rather than imposing measures that could undermine democratic values.

“While it’s difficult to ignore the potential influence of the upcoming election on this policy change, only time will reveal the depth of commitment to these principles and policies.”

75% of decentralised energy businesses say PM has damaged confidence

An overwhelming 75% of decentralised energy sector professionals and businesses have voiced a significant erosion of confidence in the wake of Prime Minister Rishi Sunak’s announcement yesterday, which diluted crucial net zero policies.

That’s according to the results of a poll taken this morning at the Association for Decentralised Energy’s (ADE) annual Decentralised Energy Conference, hosted at the Barbican Centre in London. Only 20% of the 250-strong audience reported that the announcement had not affected their business confidence, while 5% said the speech had actually strengthened their outlook.

This marks a dramatic shift in a sector that is making meaningful headway in modernising and strengthening the UK’s energy system – 74% of attendees reported that prior to the announcement, they felt either medium or high levels of confidence in the government’s ability to introduce vital policies to support their businesses, a figure that has now sharply fallen.

More positively, the ADE and its members have today reaffirmed their commitment to advocating for policies that empower businesses, protect the public, support the economy and foster renewed confidence in the pursuit of a sustainable and prosperous energy future for the United Kingdom.

When asked about how the sector should respond to the government’s new approach for net zero, 89% of the audience said they wanted to ‘raise the stakes’ and step up action to ensure that progress is not allowed to falter, while just 6% said the sector should maintain the status quo and 7% said it should ‘keep under the radar’.

Joanne Wade, Chief Strategic Advisor at the ADE, said: “The delays announced yesterday not only jeopardise our commitments to tackle climate change head-on but undermine the UK’s economic prosperity and impose unwarranted financial burdens on consumers during a cost-of-living crisis.

“While the Conservative Party boasts a distinguished legacy of decisive climate action, yesterday’s speech threatens to derail this tradition. These delays not only risk destabilising our commitment to addressing climate change but will also lead to lost jobs and the erosion of business confidence in investing in the UK. This comes at a time when other nations are actively courting such investments, making it even more vital that we demonstrate unwavering resolve in our deployment of energy efficiency measures, heat networks, flexibility upgrades and industrial decarbonisation.”

Speaking to the audience, ADE CEO, Caroline Bragg said: “It’s been an extremely interesting couple of days. We need to have a serious discussion about where this is going to push policy and how we’re going to make up the shortfall the government already knew it had in the Sixth Carbon Budget, because we simply have to. There are positives to take from this – we should welcome more public engagement and debate about where this is going, to strive towards delivering net zero even more effectively than before and repair the damage done by the Prime Minister yesterday.”

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