Energy and Climate Change

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The UK chemical industry faces challenges due to high and rising energy costs, impacting its international competitiveness. Despite success in deploying renewable electricity, the industry now faces higher prices compared to global competitors due to pass-through costs including carbon pricing, renewable power subsidies, and network capacity increases. The sector relies on lower gas prices for competitiveness, but fears rising costs if asked to pay for decarbonising the heat supply like the electricity grid.

The CIA collaborates with members, government, and regulators to insulate the industry from energy transition costs while transitioning to a net-zero energy system. To mitigate emissions, the industry plans fuel-switching to hydrogen or electricity and retrofitting carbon capture equipment. CIA works to ensure supportive policies for these investments and to prevent net-zero transition costs from harming manufacturers.

Position Statements

Growing the market for low carbon chemicals

2025-10-01T14:00:00+01:00

The chemical sector is complex, manufacturing tens of thousands of products, and it’s emissions are ‘hard-to-abate’. The success of policy mechanisms that aim to grow the market for low carbon chemicals would depend on appropriate targeting and nuanced policy-making. The UK Government should move carefully and consult fully as it considers intervening in the market for low carbon chemicals.

Position Statement
Exempt energy intensive chemical production from the Climate Change Levy
The CCL is a UK-only tax on energy that manufacturers do not face elsewhere. Its continued persistence is in direct contrast with efforts in the Industrial Strategy that aim to reduce energy prices to unlock investment here in the UK. Owing to existing CCA-related relief from the CCL, the cost to Treasury of removing this UK-only energy tax from EIIs in the chemical sector would be minimal (less than £20m) but it would immediately reduce regulatory burden and simplify the case for investment. This would help mitigate the impact of higher UK energy cost and align it with the Government’s growth agenda.
Position Statement
Hydrogen blending and industrial decarbonisation
To incentivise hydrogen production and enable industrial decarbonisation the government should permit UK ETS participants to purchase and surrender hydrogen certificates, to reduce their reported emissions under the ETS. The adoption of a low carbon gas certification scheme would be a small change to the UK ETS but could have an outsized impact on clean energy investment.
Position Statement
Eligibility for the new British Industrial Competitiveness Scheme
To mitigate the impact of high energy cost on the UK’s manufacturing supply chains it is critical that the Government’s flagship BIC Scheme provides relief across the whole scope of the chemical sector (all SIC codes between 20.11 and 21.10). The Government must also avoid any arbitrary business-level threshold for qualification, that might exclude firms that are hoping for much needed carbon leakage support. Meeting these criteria would immediately improve the competitiveness of one of the UK’s vital foundation industries, reduce the cost of critical inputs to downstream IS8 sectors, and improve the business case for electrification in a hard-to-abate sector.

Be part of it

Members are invited to get involved with our various energy and climate change strategy groups, networks and issue teams, which include: Energy and Climate Change Policy Network, Industrial Emissions Policy Issue Team, Sustainability Strategy Group , Environment Network.

For further information, or to express an interest in joining, please contact our team Nishma Patel at PatelN@cia.org.uk or Rich Woolley at WoolleyR@cia.org.uk.

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