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A short route to deindustrialisation?: An introduction to the UK Emissions Trading Scheme (UK ETS) and its challenges

Jim McConalogue, May 2023

In this analysis, Jim McConalogue (CEO, Civitas) looks at the UK’s Emissions Trading Scheme (ETS) and the regulation of carbon emissions on energy intensive industries.

This new publication asks whether energy and industrial policy is helping needlessly to render unprofitable energy intensive industries. Investment and recruitment into some of our most important industries may also become harder if they continue to find it difficult to demonstrate profitability, or even the ability to stay above water, in the long-run.

Recent events have brought the UK’s energy and industrial costs into a new focus. The costs now faced by energy-intensive industries in the UK are especially pressing, and opinion is beginning to question whether the costs of our energy policies are conducive to economic productivity and national prosperity.

Meanwhile, questions are beginning to be raised about the risk of offshoring from our
industrial heartlands to more polluting economies, with possible dependency on imports as
a result, and whether this may create a new status quo of needless and irreparable de-

The UK government has proposed stringent controls on industry with a ‘Net Zero consistent’ cap on carbon emissions far beyond those of our competitors. McConalogue says ‘this stands to push British companies out of the global marketplace, especially without anti-carbon leakage provisions, while the proposal risks breaking any link between compliance and the incentivisation of emissions reductions.’

The costs of the UK ETS now exceed those imposed on competitors in most jurisdictions. Should British industrial facilities close as a result, domestic decarbonisation will have been
achieved via deindustrialisation, with production liable to move to more carbon-intensive

In response McConalogue makes a series of recommendations to limit the impact of government attempts to impose controls on energy intensive industries and support economic growth.

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