UK business opportunities of moving to a low carbon economy

UK business opportunities of moving to a low

carbon economy

FINAL REPORT

______________________________________________________________

Ricardo Energy & Environment for the Committee on Climate Change.

Tender Reference Number TH [2]/10/16

ED 10039 | Issue Number V7 | Date 15/03/2017

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Authors:

Heather Haydock, Alan McCullough, Chris

Nuttall, Louise Evans, Anna-Liisa Kaar, Eugenia

Bonifazi, Raphael Sibille, Martin Houghton

(TBR/OrtusER) and Sam Nair (TBR/OrtusER),

Approved By:

James Tweed

Date:

15 March 2017

Ricardo Energy & Environment reference:

Ref: ED10039 Draft Final Report- V7

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Table of contents 
Introduction ................................................................................................................ 1 
The timelines for the global LCE transition ............................................................. 1 
1  Introduction ........................................................................................................................ 2 
2  Overview of key sources ................................................................................................... 2 
2.1  IEA Energy Technology Perspectives 2016 ............................................................. 2 
2.2  CCC Fifth Carbon Budget Scenarios ....................................................................... 4 
3  Phase 1: 2017 to 2030 – A more energy efficient world ................................................... 6 
3.1  Power Generation .................................................................................................... 6 
3.2  Transport .................................................................................................................. 6 
3.3  Industry ..................................................................................................................... 7 
3.4  Buildings ................................................................................................................... 8 
3.5  Other Sectors ........................................................................................................... 8 
4  Phase 2: 2031 to 2050 – A more resource efficient world ................................................ 8 
4.1  Power Generation .................................................................................................... 8 
4.2  Transport .................................................................................................................. 9 
4.3  Industry ................................................................................................................... 10 
4.4  Buildings ................................................................................................................. 10 
4.5  Greenhouse gas removal technologies .................................................................. 11 
5  Phase 3: 2051 to 2100 – A sustainable, low carbon world ............................................. 11 
6  Timeline Analysis Conclusions ........................................................................................ 12 
Current UK Competitive Position............................................................................ 14 
1  Low carbon technology RD&D ........................................................................................ 14 
2  UK strengths in low carbon innovation ............................................................................ 15 
3  UK Export Performance .................................................................................................. 16 
4  Current UK low carbon goods and services market ........................................................ 17 
Global opportunities for UK Manufacturing ........................................................... 21 
1  Approach to the quantification of market opportunity ...................................................... 21 
2  Future global low carbon economy markets ................................................................... 21 
2.1  Low Carbon Electricity ............................................................................................ 23 
2.2  Low Emission Vehicles ........................................................................................... 24 
2.3  Low Carbon Financial Services .............................................................................. 25 
2.4  Other Low Carbon Products and Services ............................................................. 26 
3  Size of the LCE opportunity for UK business .................................................................. 27 
3.1  Low Carbon Electricity ............................................................................................ 29 
3.2  Low Emissions Vehicles ......................................................................................... 30 
3.3  Low carbon financial services ................................................................................ 31 
3.4  Oher Low Carbon Products and Services .............................................................. 32 
4  Projection of overall future market opportunities ............................................................. 33 
5  Opportunities for UK firms to capture a greater share of future global markets ............. 34 
Stakeholder views on opportunities, barriers and potential actions ................... 35 
1  Introduction ...................................................................................................................... 35 
2  Low carbon electricity ...................................................................................................... 35 
2.1  Opportunities .......................................................................................................... 35 
2.2  Barriers ................................................................................................................... 35 
2.3  Actions that could be taken to increase share of global market ............................ 35 
2.4  Other issues around capturing new market opportunities ...................................... 36 
3  Low emission vehicles ..................................................................................................... 37 
3.1  Opportunities .......................................................................................................... 37 
3.2  Barriers ................................................................................................................... 37 
3.3  Actions that could be taken to increase share of global market ............................ 38 
4  Energy efficient products ................................................................................................. 38 
4.1  Opportunities .......................................................................................................... 38 
4.2  Barriers ................................................................................................................... 38 
4.3  Actions that could be taken to increase share of global market ............................ 38 
4.4  Other issues around capturing new market opportunities ...................................... 38 

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5.5 Other sectors ................................................................................................................... 39

5.5.1 Opportunities .......................................................................................................... 39

5.5.2 Barriers ................................................................................................................... 39

5.5.3 Actions that could be taken to increase share of global market ............................ 39

5.5.4 Other issues around capturing new market opportunities ...................................... 40

6 Conclusions on opportunities to increase the UK share of future global

markets .............................................................................................................................. 40

Acknowledgements .......................................................................................................... 41

Appendices

Appendix 1: Methodology for estimating current market value for UK manufacturers of low carbon goods

and services

Appendix 2: Comparison of sectors and technologies considered

Appendix 3: Data sources and assumptions for estimating the size of future global markets associated

with the low carbon economy

Appendix 4: Summary data from current analysis

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Executive summary

The Paris Agreement on climate change action aims to limit global warming to well below 2°C and to

pursue efforts to limit it to 1.5°C. This agreement came into force in November 2016 and requires major

reductions in greenhouse gas emissions (GHG) by 2050 and net zero global emissions in the second

half of this century. This transition will require goods such as renewable energy and energy efficient

technologies, and services such as green bonds and the recycling of batteries for electric vehicles.

This transition to a low carbon economy (LCE) presents opportunities for UK businesses to supply the

goods and services required by the UK and other countries. Businesses and government can enhance

the exploitation of these global market opportunities through identification of, and investment in, the

range of areas where UK businesses have particular strengths and leading technologies.

The aim of this report is to extend the analysis of opportunities for UK business to supply global markets

for low carbon materials, goods and services that are anticipated to be required for transition to a low

carbin economy. The report consists of six sections:

 Section 1 provides a brief introduction to the project

 Section 2 describes the timelines for the global transition to a low carbon economy,

 Section 3 considers the position of the current UK low carbon economy,

 Section 4 quantifies the size of the market opportunity for UK business in 2030 and 2050

 Section 5 describes the barriers to UK business capturing a larger share of the global market.

 Section 6 presents conclusions.on opportunities to increase UK share of future global markets.

The work was funded by the Committee on Climate Change (CCC) and delivered by Ricardo Energy &

Environment supported by Trends Business Research and Ortus Economic Research Ltd.

To identify sectors where the UK might have “first mover advantage”, we compared the projected

timelines for the global and UK low carbon transition, as outlined in the International Energy Agency’s

(IEA) scenarios for global emissions reductions, and CCC’s scenarios and best estimates of the most

cost effective path for reaching the UK’s 2050 target of an 80% reduction in GHG emissions compared

to 1990.

A key finding of this analysis is that the UK and the EU were likely to make the transition to the low

carbon economy around 10 years ahead of the world average. We also identified three sectors

(electricity, transport and waste) where the UK is making major progress and investment in emission

reduction and these clearly offer business opportunities in the UK home market, and global export

markets. However there are also opportunities for UK business to supply goods and services in other

sectors, and a range of new technologies will be needed to complete the global transition, particularly

beyond 2050.

We also concluded that the technologies need to complete the global transition are broadly similar to

those required by the UK market, although there were some geographical variations, for example: the

UK is likely to deploy higher levels of off-shore wind and lower levels of solar PV than the global average.

The overall approach to the transition in other regions is also similar to that in the UK, and involves:

 Implementing energy efficiency measures, particularly in the period up to 2030.

 Deploying proven low carbon technologies. Costs for some of these will be expected to

decrease with deployment, as has been the case recently with solar photovoltaic cells.

 Demonstration projects for other technologies that are close to deployment and/or require cost

reduction, in preparation for wide scale deployment, particularly between 2030 and 2050.

 Investing in further research and innovation in hard-to-reduce sectors, such as aviation.

 Undertaking basic research and development on novel greenhouse gas removal technologies

which are likely to be required to reach zero net emissions in the second half of the century

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Current UK Competitive Position

Over the last 15 years, the UK has made a substantial investment in energy and low carbon technology

research, development and demonstration (RD&D). For example, the Research Councils UK (RCUK)

Energy Programme invested £839 million between 2003 and 2011, and a further £625 million is being

invested between 2012 and 2018. Innovate UK has also funded a wide range of industrial RD&D

projects, and knowledge transfer networks (KTN) in many sectors of the economy

that support

business seeking to develop new materials, goods and services for the low carbon economy. These

investments, and others related to the wider impact of climate change on business and society mean

that the UK is well placed to obtain a share of the growing market associated with transition to a LCE,

provided concerted action is taken by suppliers and government to ramp up export activities.

With the aid of our experts and stakeholder feedback, we have assessed whether there is a low, medium

or high potential for UK business to capture market share in each of the main segments of the UK LCE

market and identified some examples where the UK currently has particular strength, including:

 Electric Vehicles

 Smart Grids

 Transport telematics

 Energy storage

 Off-shore wind

 Biofuels

 Solar PV

We have also identified some technologies that will need to be fully deployed by 2050, where the UK

could exploit its existing capabilities in other fields to capture a share of the global market. These

include:

 Advanced materials and manufacturing, including design for reuse and waste recovery.

 Low carbon chemical processes using bioprocessing, catalysts and membrane technology

In addition, there are significant opportunities for the UK services sector to establish itself as a financial

hub for green finance and gain a sizable share of the financial services associated with the estimated

capital investment of between $1.5 and $6 trillion per annum needed to deliver the global transition.

Current Size of the UK LCE Market.

We used two methods to assess the size of the UK market for low carbon goods and services in 2015,

which we estimated employed between 230 and 450 thousand people, and had a turnover of between

£42 billion and £120 billion. The first method used the provisional results of ONS’s Low Carbon and

Renewable Energy Economy Survey published in late 2016. This assessed direct employment and

turnover for the LCE sector only. The second method updated the estimates published by BIS of the

size of the LCE market in 2013. This assessed both direct and indirect employment and turnover.

Size of the LCE Market Opportunities for UK Business

Our analysis suggests that the UK low carbon economy could grow from around 2% of UK Total Output

in 2015 to up to around 8% by 2030, and around 13% by 2050. The projected compound annual growth

rate for the low carbon economy is 11% per annum between 2015 to 2030, and 4% per annum between

2030 and 2050, which is substantially higher than the OECD’s projection of average UK GDP growth

of 2.3% per annum between 2015 and 2050

This corresponds to a UK LCE market size of between

£210 billion and £600 billion in 2030 and between £510 billion and £1,400 billion in 2050. The levels of

UK employment associated with the LCE are between 1.0 and 2.2 million in 2030, and between 2.5 and

5.0 million in 2050.

These projections are based on an assessment of the potential size of 25 selected areas of the UK and

global LCE market in 2030 and 2050, and draw on the scenarios for technology deployment outlined in

the IEA’s Energy Technology Perspectives 2016 and technology roadmaps, the CCC’s own scenarios

and a number of estimates by market research organisations of current market size and growth rates.

These projections also include an estimate of the UK share of the global market, which is based on the

UK’s current share of global exports, and hence on the UK’s current strengths in manufacturing and

services. There is the potential to increase this share by building on UK strengths in research and

innovation and by addressing barriers to market entry and growth outlined in Section 5 of this report.

https://admin.ktn-uk.co.uk/app/uploads/2016/09/KTN-Annual-Report-2015_2016.pdf

https://data.oecd.org/gdp/gdp-long-term-forecast.htm

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1 Introduction

The Paris Agreement on climate change action entered into force in November 2016, having been

ratified by the USA, China, India, Brazil, the EU and other countries. The Agreement aims to limit global

warming to well below 2°C and to pursue efforts to limit it to 1.5°C. This will require major reductions in

greenhouse gas emissions by 2050 and net zero global emissions in the second half of this century,

which in turn will drive a transition to a low carbon economy (LCE) in both developed and developing

countries. The LCE includes goods such as renewable energy and energy efficient technologies, and

services such as green bonds and the recycling of batteries for electric vehicles.

This transition to a low carbon economy presents opportunities for the UK in provision of the goods and

services required. This can be both in supplying the UK market as it makes the transition and also in

supplying global markets. Businesses and government can enhance the exploitation of these

opportunities through identification of and investment in the range of areas where the UK has particular

business strengths and leading technologies.

The CCC published a review of the UK’s research and innovation arrangements for delivering

technologies required to meet the UK’s climate change targets in 2010

. This report also identified

opportunities for the UK to develop new technologies and take a lead in global markets, including in

offshore wind, marine, Carbon Capture & Storage (CCS), smart grids, aviation and electric vehicle

technologies. In 2013, the CCC also reported on opportunities to create new global markets for products

from the energy-intensive sectors

The aim of this report is to update and extend the analysis of opportunities for UK business to supply

global markets for low carbon materials, goods and services that the LCE transition will create by:

 Exploring the timelines around the global transition to a low carbon economy.

 Quantifying the size of the global market for low carbon materials, goods and services

 Identifying potential export opportunities for UK’s manufacturing and service sectors

 Assessing the potential UK share of the global market in example application areas.

This will feed into an updated assessment of the opportunities that transitioning to a LCE could provide

for the UK’s manufacturing sectors, to be undertaken by CCC in early 2017.

This report comprises five sections in addition to this introduction. Section 2 describes the timelines for

the global transition to a low carbon economy, Section 3 considers the position of the current UK low

carbon economy, Section 4 quantifies the size of the market opportunity for UK business in 2030 and

2050, and Section 5 describes the opportunities and barriers to UK business capturing a larger share

of the future global market. Section 6 presents conclusions.

2 The timelines for the global LCE transition

The technologies needed to complete the global transition are boadly similar to those required by the

UK market, although there were some geographical variations, for example: the UK is likely to deploy

higher levels of off-shore wind and lower levels of solar PV than the global average.

The overall approach to the transition in other regions is also similar to that in the UK, and involves:

 Implementing energy efficiency measures, particularly in the period up to 2030.

 Deploying proven low carbon technologies. Costs for some of these will be expected to

decrease with deployment, as has been the case recently with solar photovoltaic cells.

 Demonstration projects for other technologies that are close to deployment and/or require

cost reduction, in preparation for wide scale deployment, particularly between 2030 and

2050.

 Investing in further research and innovation in hard-to-reduce sectors, such as aviation.

“Building a low-carbon economy – the UK’s innovation challenge ”, The Committee on Climate Change, 2010

“Managing competitiveness risks of low-carbon policies”, The Committee on Climate Change, 2013.

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 Undertaking basic research and development on novel greenhouse gas removal

technologies which are likely to be required to reach zero net emissions in the second half

of the century

2.1 Introduction

This section provides an overview of the timeline for the deployment of different technologies for the

transition towards a low carbon economy, including both global and UK perspectives.

The information provided in this section is based on a number of key sources. This includes the

scenarios developed under the IEA Energy Technology Perspectives 2016

and the CCC’s reports on

the Fifth Carbon Budget

and ‘UK climate action following the Paris agreement’

for information related

to global and UK emission reductions respectively.

The timeline for the transition to a low carbon economy has been split into three district phases:

 Phase 1: 2017 to 2030 – this aligns with the time period for the pledges made by countries as

part of the Paris Agreement

 Phase 2: 2031 to 2050 – this aligns with IEA models and UK’s commitment to a reduction in

emissions of at least 80% in 2050

 Phase 3: 2051 to 2100 – to align with the global objective to hold the increase in global

temperature to below 2°C and to pursue efforts to limit it to 1.5°C

For Phases 1 and 2 information is presented for the following key emissions-reduction sectors

; power

generation, transport, industry and buildings. For each sector the key activities/technologies are

highlighted for the respective phases. Where information is available, other emission-reduction sectors

such as agriculture, waste and F-gases are also covered. Information for Phase 3 is less detailed and

as such an overview of the key trends that can currently be expected is provided.

2.2 Overview of key sources

2.2.1 IEA Energy Technology Perspectives 2016

The International Energy Agency (IEA) Energy Technology Perspectives 2016 sets out a series of

scenarios for different levels of ambition up to 2050 – see examples in Table 1.

Table 1: Summary of IEA Energy Technology Perspective 2DS and 6DS Scenarios 2016

Scenario

Description

2°C

Scenario

(2DS)

2DS lays out an energy system deployment pathway and an emissions trajectory

consistent with at least a 50% chance of limiting the average global temperature

increase to 2°C. The reductions in carbon dioxide emissions envisaged under the 2DS

scenario go considerably beyond the Nationally Determined Contributions (NDCs) set

out in the Paris Agreement

6°C

Scenario

(6DS

6DS is largely an extension of current trends and is used as the baseline against

which to determine the additional investment in energy efficiency measures and

renewable energy deployment that will be required by 2050.

IEA (2016) Energy Technology Perspectives 2016 - Towards Sustainable Urban Energy Systems

Committee on Climate Change (2015) The Fifth Carbon Budget – The next step towards a low-carbon economy

Committee on Climate Change (2016) UK climate action following the Paris Agreement

This report is about business opportunities arising from transition to a low carbon economy. Later sections will refer to sectors based on analysis

by the Office of National Statistics and in this work of the low carbon economy in the UK. Power generation, later termed low carbon electricity,

and transport, are common to the two breakdowns. Other emissions-reduction sectors do not match 1:1 with low carbon economy sectors. As an

example some areas of opportunity such as low carbon finance and adaptation are not included in the emission-reduction sectors.

http://www.iea.org/publications/scenariosandprojections/

https://www.iea.org/publications/freepublications/publication/ECCE2016.pdf

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The IEA Energy Technology Perspectives provides a consistent approach at a global level at which

different scenarios can be compared against each other. Further details about the Energy Technology

Perspectives model approach and the assumptions used are detailed on the IEA website

The difference between the scenarios can be compared to identify the reduction in emissions for

different sectors. Table 2 summarises the percentage contribution to reduction in emissions between

the 6DS and 2DS for the period 2015-2050 by sector.

Table 2: Percentage contributions by sector to reductions at 2030 and 2050 in energy related CO

and

Green House Gas (GHG) emissions between 6DS and 2DS scenarios

Sector

2030

2050

Agriculture

Commercial

Residential

Transport

Industry

Other transformation

Power

The information presented in Table 2 indicates the following key global trends over the 2015-2050

period with respect to relative energy related global reductions in CO2 and Green House Gas (GHG)

emissions:

 The largest relative contributor to emissions reductions in 2030 and 2050 is the power

generation sector, which was responsible for 47% of global energy related emissions in 2014

;

 The transport and industry sectors, which were responsible for 43% of global energy related

emissions in 2014, also make major contributions to emissions reduction in 2030 and 2050;

 All other sectors contribute about 20% of emissions reductions in 2030 and 2050

Sectors that will make the largest contribution to global emissions reductions in 2030 and 2050 are

power generation, transport and industry. These are prime candidates for significant business

opportunities arising from the low carbon transition.

The IEA scenarios also illustrate the relative time of the low carbon transition in different regions of the

world. Figure 1 presents relative projected changes in emissions from 2011 levels for the world and

major regions and countries.

http://www.iea.org/etp/etpmodel/ and http://www.iea.org/etp/etpmodel/assumptions/

http://www.iea.org/etp/explore/

http://www.iea.org/publications/freepublications/publication/CO2-emissions-from-fuel-combustion-highlights-2016.html

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Figure 1: Emissions with time compared to 2011 figures for some major countries/ regions compared with

the overall projection for the world

Source: International Energy Agency, Energy Technology Perspectives 2016 - www.iea.org/etp2016

The UK (which is included in the projections for EU in Figure 1) and USA are projected to make the

transition about 10 years earlier than the world average.

For countries, including the UK, that make the low carbon transition earliest, there may be

opportunities to supply technology, products and services to countries that make the transition later.

2.2.2 CCC Fifth Carbon Budget Scenarios

To understand in which sectors the UK might have “first mover advantage”, we examined the analysis

in support of CCC’s Fifth Carbon Budget

, which provides estimates of carbon emissions and

reductions for a number of scenarios across the power, transport, industry, agriculture, waste and F-

Gas emission-reduction sectors for the period 2014-2050 (see Figure 2). We explored CCC’s Central

Scenario, which represents the CCC’s best estimate of the cost effective path for reaching the UK’s

2050 target of at least an 80% reduction in emissions of greenhouse gases compared to 1990.

Committee on Climate Change (2015) The Fifth Carbon Budget – The next step towards a low-carbon economy

Committee on Climate Change (2015) Sectoral scenarios for the Fifth Carbon Budget – Technical Report

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Figure 2: Central scenario emissions paths to 2050

Projected reductions of emissions by time and sector are summarised in Table 3.

Table 3: Summary of UK projected emissions reductions by time and sector

Sector

% UK CO

Emissions in

2014

2015 – 2030

2030-2050

Power

23 %

Very significant reduction

in emissions (about 75%)

Further reduction in emissions at a

slower rate (about a further 20%)

Transport

23 %

Significant reduction in

emissions (about 45%)

Further significant reduction in

emissions (about another 35%

Waste and

F-gases

7 %

Major reduction in

emissions (about 60%)

Relatively low further reduction by 2035,

then flattens off (about another 5%)

Buildings

16 %

Modest reduction in

emissions (about 25%)

Significant reduction in emissions

(about another 55%)

Industry

21 %

Modest reduction in

emissions (about 25%)

Modest reduction in emissions (about

another 20%)

Agriculture

9 %

Relatively low reduction in

emissions (about 15%)

Relatively low reduction in emissions

(about another 10%)

The progression with time reflects the relative ease of and effort in addressing emissions in the

sectors. A major early focus is the power sector with almost complete elimination of emissions

projected by 2050 through the deployment of renewable electricity, nuclear or CCS technologies.

Progress in emissions reductions from transport is projected to be relatively linear to 2050 through the

progressive deployment of battery electric, hybrid plug in electric and fuel cell electric vehicles, and by

shifting car journeys to low and no carbon alternatives e.g. public transport, cycling and walking.

In the waste sector and F-gas sector, a rapid reduction in emissions is envisaged prior to 2030 due to

reductions in emissions from landfill, and leaks from refrigeration and air conditioning equipment.

In the other sectors, a modest or low rate of reduction is anticipated between 2015 and 2050, except

in the buildings sector, where the more significant emissions reduction is anticipated from 2030 to

2050 through increased energy efficiency and the use of low carbon space heating technologies.

Source – Figure 1.14 from Committee on Climate Change (2015) Sectoral scenarios for the Fifth Carbon Budget – Technical Report

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Sectors where UK is making major progress and investment in emissions reductions, clearly offer

opportunities in the home market and also offer opportunities for supply to global markets

2.3 Phase 1: 2017 to 2030 – A more energy efficient world

2.3.1 Power Generation

 Key technologies globally include solar PV, on-shore wind, hydro and nuclear

 Key technologies within the UK will include renewables including offshore wind,

nuclear, CCS and bioenergy

 The initial deployment of less mature technologies will be required

To reduce the carbon intensity of power generation at a global level up to 2030 key technologies

identified by the IEA will include onshore wind, solar PV, and hydro, with increasing importance of

nuclear, as shown in Figure 3.

The position in the UK will be similar, increasing the share of low carbon generation through a range of

different mixes of technologies such as renewables including offshore wind, nuclear and plants with

carbon, capture and storage fitted. Bioenergy is also identified as having an important role, but is limited

by sustainable supply. The implementation of technologies such as offshore wind and CCS during this

period will be important for the UK to meet 2050 targets. Reduced support from UK Government for

CCS Research, Development and Demonstration (RD&D) could impact the deployment of this

technology.

Other technologies will start to be deployed, but this will increase post 2030, and are covered in phase

2 below. The deployment of less mature technologies will be important to enable these to become lower

cost options in future phases in order to meet 2050 targets.

Figure 3: Global deployment rates for low carbon power technologies in the 2DS

2.3.2 Transport

 Energy efficiency improvements in conventional internal combustion engines and use

of biofuels

 Ongoing electrification of vehicles

Source – Figure 1.8 from IEA (2016) Energy Technology Perspectives 2016 - Towards Sustainable Urban Energy Systems

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 Technologies to improve efficiency of different transport modes such as materials

substitution to reduce weight, advanced lubricants and advanced aerodynamics

To meet the IEA 2DS requires a number of changes in the transport sector across all modes of transport.

In this phase improvements in conventional internal combustion engines will continue to be important

in improving energy efficiency. This will be complemented by replacement of fossil liquid fuels with

biofuels – initially in trucking and aviation and by electrification of passenger vehicles, with 2 and 3

wheel vehicles and light freight phased in rapidly – in particular in OECD countries, China and India.

Electric vehicles could include battery electric vehicles (BEVs), Plug in Hybrid Electric Vehicles (PHEVs)

and Fuel Cell Electric Vehicles (FCEVs), which include fuel cell systems and hydrogen storage, though

the FCEV stock is expected to remain marginal in this phase.

Possible technologies for public buses include overhead energy supply, batteries and supercapacitors

together with inductive charging and contact based systems and battery swapping concepts. The use

of hydrogen buses up to 2030 is also included as part of the UK’s Fifth Carbon Budget central scenario.

Hybridisation of trucks is anticipated to start slowly in this phase and increase in the next phase. The

aviation sector, in addition to initial deployment of biofuels, will also need continued deployment of

energy efficient technologies.

At the sub-system level it is anticipated that the phase to 2030 will see deployment of technologies to

improve energy efficiency of road transport. These may include: material substitution to reduce weight,

low rolling resistance tyres, advanced lubricants, advanced aerodynamics, exhaust heat recovery,

powertrains with low energy consumption per unit load (this could include hybridisation and

electrification).

Similarly, for rail transport, deployment is anticipated of technologies to improve energy efficiency of

trains, for example material substitution to reduce weight, improved aerodynamics, designs allowing

higher capacity, powertrains with low energy consumption per unit load (mainly electric motors).

In addition to vehicle technologies, the phase to 2030 is also expected to exhibit development of

information and communication technologies for travel demand management. This includes: providing

information for car sharing and bike rental systems, car-pooling users and public transport; and

automatic identification and data capture to enable real time variable congestion charging and regulate

access to segments of the road network.

2.3.3 Industry

 Deployment of energy efficiency measures within industrial sectors

 Use of low carbon fuels and feedstock and increased recovery of excess energy

 CCS identified as key technology within the UK

For the IEA 2DS emission requirements industrial energy consumption needs to be decoupled from the

increasing demand for materials. Under the 2DS industrial energy use will increase slightly through to

2050, but CO

emissions will peak in 2020. This requires a reduction in the carbon intensity of energy

used in industrial sectors.

In the short term (up to 2020) this change is primarily driven by energy efficiency (Best Available

Technology deployment), with energy efficiency measures varying between sectors and processes.

The use of low carbon fuels and feedstocks and increased recovery of excess energy will also be

important. This includes the electrification of industrial processes to meet 2DS requirements.

Similar action has been identified for the UK with emission reductions driven by technologies covering

better energy management and process control, the use of more energy efficient plant and equipment,

waste heat recovery and use of bioenergy in space and process heat. CCS is again identified as a key

technology, with CCS cluster developments enabling its use in key industry sectors, including iron and

steel and chemicals. Depending on technological developments, hydrogen could also be used as an

alternative to CCS. As noted above, the reduced support from UK Government for CCS RD&D could

impact the deployment of this technology

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More innovative low carbon processes may start to be deployed from 2020, but this will be more

predominant post 2030, and are detailed in phase 2 below.

2.3.4 Buildings

 Reduce heating and cooling energy demands in buildings, both retrofit and for new

build

 Components/controls to improve the energy efficient building e.g. lighting, appliances

 Use of heat pumps to provide heat for homes and businesses

There are a range of technologies and options identified for limiting emissions from buildings. The IEA

scenarios place an important focus on reducing heating and cooling energy demands from urban

buildings in order to achieve targets. The IEA identifies near term action (through to 2025), with a focus

on the following, much of which will need to be promoted through relevant policies/targets:

 Driving uptake in deep energy renovations of existing buildings

 Promote and strive for near zero energy buildings in new construction

 Promoting high performance building envelopes – air sealing, insulation, highly insulating

windows and cool roofs.

 Increasing the promotion and use of solar thermal and heat pump technology for space heating

and cooling and condensing boilers for gas heating/hot water.

 Promotion of heat pump water heaters

 Promotion of solid state lighting and other innovative designs while phase out traditional

incandescent and halogen bulbs

 Promote efficient appliances and cooking technologies

The UK scenarios cover similar areas including the use of heat pumps and heat networks, the

continuing implementation of insulation, and increased use of heating controls and energy efficient

lighting and appliances within buildings. The CCC scenarios also highlights low carbon heat could be

provided through hybrid heat pumps, or adding hydrogen to the gas grid. There are currently

technological and acceptance issues limiting the implementation of these technologies.

2.3.5 Other Sectors

The IEA scenarios do not focus on Agriculture, Waste and F-gases, but the following is identified from

the UK’s Fifth Carbon Budget scenario:

Agriculture: Emissions could be reduced through a range of measures, for example the reduction of

O though improved fertiliser use, livestock measures to reduce methane, waste and manure

management, e.g. anaerobic digestion, and improvements in machinery fuel efficiency.

Waste and F-Gases: Under the Fifth Carbon Budget, the improvements in these sectors relate to the

full diversion of biodegradable waste streams from landfill and the replacement of f-gases by low carbon

alternatives in uses such as refrigeration and air conditioning.

2.4 Phase 2: 2031 to 2050 – A more resource efficient world

This phase will build on the work, and foundations provided in earlier years, as well as developments

in new areas. Given the timeframes and uncertainties around technological developments and uptake,

information on the key technologies during this phase is less certain.

However, there are a number of key aspects included in the 5

Carbon Budget and IEA 2DS scenarios

that provide an indication of what is expected or required during the period 2030 – 2050 to meet future

targets, such as the UK’s target in 2050 or the IEA 2DS.

2.4.1 Power Generation

 Key low carbon technologies are solar PV, onshore wind and hydro

 Use of other low carbon generation technologies such as offshore wind will increase

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 Other solutions relevant to electricity generation and distribution increase in

deployment, such as smart urban (or city) energy networks.

The IEA 2DS indicates that beyond 2030, the amount of electricity generated by onshore wind, solar

PV, hydro and nuclear continues to increase. However other low carbon power technologies, including

biomass, geothermal, ocean, offshore wind, solar thermal electricity and fossil fuels with CCS, also

increase as the level of renewables increases to 64% of electricity generation.

This is also reflected in the UKs Fifth Carbon Budget scenarios, which expects the decarbonisation of

the power sector will continue in order to provide low carbon electricity, as electricity consumption

increases due to electrification in transport, heat and other applications. CCS also plays an important

part in these scenarios, although alternative routes to decarbonisation such as higher levels of

renewables or nuclear are also considered.

In addition to changes in generation through the deployment of low carbon technologies, the IEA

identifies other solutions are also relevant to electricity generation and its distribution. These include:

 District Heating & Cooling networks

 Energy from Waste technologies (role of this is identified as modest in IEA report)

 Energy recovery at wastewater treatment plants

 Use of excess heat from industrial processes through thermal networks

 Smarter urban energy networks

 Smarter distribution grids

 Advanced metering infrastructure

Such technologies may have started to come on-line in the previous phase, but their deployment will

increase throughout this second phase.

2.4.2 Transport

 Increased electrification of vehicles, including heavy duty transport

 FCEVs – main use for hydrogen in fuel cells

 More high speed rail

 Stronger uptake of alternative / low carbon fuels, for example biofuels and methane

The IEA highlights that the following trends can be expected during the period 2030-2050:

 Annual sales of EVs rising from 28% of light duty vehicles in 2030 to 69% in 2050.

 Increased share of FCEVs in this phase – through deployment of FCEVs among light duty

vehicles

 Increased electrification of heavy duty transport.

 Development of more high speed rail (HSR) to provide an alternative to intra-continental air

travel particularly in non-OECD countries

 Expect a stronger uptake of alternative fuels vehicles and low carbon fuels in the longer term.

This aligns with the UKs Fifth Carbon Budget, which expects surface transport to have reached near

full decarbonisation by 2050 through a continuation of technologies implemented in Phase 1. This

includes for example the increasing market uptake of electric vehicles and potential increased uptake

of other technologies such as hydrogen instead of battery electric vehicles

The Fifth carbon Budget includes an alternative scenario in the transport sector which involves the widespread uptake of hydrogen

technologies, rather than battery electric vehicles.

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2.4.3 Industry

 Increased deployment of innovative low carbon process technologies, including

integration of CCS into industrial processes

 Emission reductions through recycling solutions

The IEA identifies that over the period, 2030-2050, other measures will need to contribute to achieve

the target. This includes using innovative low carbon process technologies (i.e. those not yet

demonstrated, but could become commercially available by 2050), many of which require the integration

of CCS into industrial processes. Examples include the use of CCS in cement kilns, the use of smelt

reduction or direct reduced iron technology in steel making, inert anode technology in aluminium

production and chemical production from biomass based process routes.

In the longer term recycling solutions will also account for emission reductions, primarily in iron and

steel and aluminium sectors, but also plastic recycling to alleviate the demand for primary chemicals.

The UKs Fifth Carbon Budget is consistent with the IEA, in that it identifies CCS will continue be a key

technology to meets targets at least cost, particularly as it will help reduce emission across heavy

industry.

2.4.4 Buildings

 Continuing improvements in energy efficiency e.g. lighting and appliances

 Use of highly insulated, integrated building envelopes

 Integrated heating and cooling solutions with net-zero emissions

 Solar solutions – including solar cooling technologies and solar thermal systems

 Potential use of hydrogen from natural gas to provide low carbon heat

Building on the implementation of technologies and solutions in Phase 1, the IEA identified the following

examples of what can be expected to be implemented up to 2050, alongside greater enforcement of

near zero energy building standards in new construction:

 Deep energy renovations of buildings, including implementation of energy efficiency measures,

such as the use of energy efficient technologies and building envelope improvements.

 Energy efficient technology solutions include as advanced lighting e.g. LEDs – continued

deployment in OECD countries and particular focus on other countries, water heating

technologies e.g. instantaneous condensing gas water heaters, heap pump water heaters,

solar thermal systems to provide high proportion of annual water heating load, low cost solar

cooling technologies

 Advanced building envelope materials e.g. insulations, windows, including highly insulated,

integrated building envelopes

 Reduce cooling and heating demands through improved insulation, use of reflective surfaces

low-emissivity glass windows, solar control, exterior shading, reflective roadways and

pavements, improved doors, air sealing and distribution systems and energy or heat recovery

equipment.

 Building design considerations for new construction including orientation, shape, profile,

materials, technology choices, passive ventilation and solar heating contributions,

 Geothermal technologies as part of new constructions utilising local natural water resources

 Integration of energy efficient building and district energy

Overall, a similar rate of investment in energy saving measures is expected in phases 1 and 2, but 2.5

times the level of savings that needs to realised in phase 2 (2030-2050) compared with phase 1.

The UK’s Fifth Carbon Budget also highlights the potential use of hydrogen produced from natural gas

(with CCS) as an alternative means of providing low carbon heat. This includes converting parts of the

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gas grid to hydrogen use, together with the use of hydrogen boilers to provide heat for residential,

commercial and public buildings.

2.4.5 Greenhouse gas removal technologies

In addition, the CCC report ‘UK climate action following the Paris agreement’

includes some further

indications of the potential trends that could be increasingly relevant for this phase in order to meet the

UK’s 2050 target.

Greenhouse Gas Removal Technologies (GGR) are already included as part of the scenario to 2050 in

terms of bioenergy with carbon capture and storage, afforestation and wood in construction, with the

removal of up to 67 MtCO2/year from these options.

2.5 Phase 3: 2051 to 2100 – A sustainable, low carbon world

 Continued deployment of low carbon technologies from earlier phases, though

deployment rates may now be declining

 Focus on hard to decarbonise sectors such as aviation, agriculture and parts of the

industry

 Refined fuel demand decrease due to electrification and/or switch to hydrogen

 Potential for geoengineering and other greenhouse gas removal technologies

Information beyond 2050 on the types of technologies that will be implemented is limited, and tends to

relate to higher level trends rather than sector specific actions due to the uncertainty of what will happen

in this phase. While the ETP 2016 2DS and the UK’s Fifth carbon Budget do not give any information

for the period beyond 2050, the CCC report ‘UK climate action following the Paris agreement’

highlights the following in relation to continued savings beyond 2050:

 Continued deployment of low-carbon measures to replace high carbon stock e.g. vehicles

power generators, heating systems

 Continued displacement of fossil fuelled engines by electric and hydrogen vehicles. In addition,

motorcycles, construction vehicles and aircraft support vehicles could be fully decarbonised.

 Increased use of heat pumps, district heating and low carbon hydrogen in buildings to reduce

emission. Potential for a more rapid move away from gas for heating, should it become

uneconomical to maintain the gas grid.

 After 2050 refining output and refining emissions will continue to reduce as transport and

heating are electrified or switched to hydrogen, lessening the demand for refined fuels.

In addition, beyond 2050 there will be a need to focus on sectors where emissions are still expected to

remain. This includes aviation, agriculture and parts of industry.

 Within the aviation sector some further emission reductions could be possible through

improvements in fuel efficiency and take up of biofuels, however further reductions would

require further options. This could include for example; advanced low carbon fuels, alternative

propulsion methods e.g. LNG, hydrogen, nuclear, solar, hybrid planes, greater shifts away from

aviation to alternatives by consumers

 Emissions from agriculture will be mainly from livestock and fertilisation of soils. Emissions

could potentially be reduced beyond 2050, for example through increased diet change, food

waste reduction, breakthroughs in genetically modified livestock, novel crops and precision

livestock farming.

 It is envisaged that remaining emissions from industry will be primarily from fuel combustion,

process emissions and residual CCS emissions from manufacturing (such as iron & steel, food

& drink), water management and construction sectors. Further electrification or the use of

hydrogen may be possible to reduce fuel combustion emissions. Process and CCS emissions

Committee on Climate Change (2016) UK climate action following the Paris Agreement

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will be more difficult to decarbonise. The sector may be able to reduce emission through less

carbon intensive products and increased reuse of products and materials.

The report also covers Geoengineering options in order to help achieve targets, including spraying

reflective particles into the upper atmosphere, enhancing the reflectivity of clouds by spraying particles,

and enhancing the reflectivity of land surfaces. However, there is a larger degree of uncertainty

regarding such approaches and further exploration of these options would be required. Greenhouse

Gas Removal, which is already included in Phase 2, would also have a potential role in this phase, as

other options of greenhouse gas removal as developed.

Other sources do provide scenarios with some information on the period 2050-2100. The recent report

‘Bending the Curve’, published by the University of California

identifies a series of clusters for moving

towards a low carbon economy:

 Science Solutions Cluster

 Societal Transformation Solutions Cluster

 Governance Solutions Cluster

 Market- and Regulations-Based Solutions Cluster

 Technology-Based Solutions Cluster

 Natural and Managed Ecosystem Solutions Cluster

This highlights the wider activities in addition to technology based solutions that need to be considered.

For the technology based cluster, the report indicates the various solutions, if fully implemented, could

reduce global warming by as much as 1.5 degrees Celsius by 2100. Therefore, solutions identified

would continue to be implemented beyond 2050. This includes technologies such as photovoltaics,

wind turbines, battery and hydrogen fuel cell electric light-duty vehicles and more efficient end-use

devices, together with innovations for the complete electrification of energy and transport systems and

improvements to building efficiency.

2.6 Timeline Analysis Conclusions

This section has identified the key technologies likely to be required to move towards a low carbon

economy, based on the IEA’s ETP 2016 and the UK’s Fifth carbon Budget scenarios.

The overall approach to transition to a low carbon economy is:

 Implement known and developing energy efficiency measures

 Deploy technologies that have been developed and are known. Costs for some of these will be

expected to decrease with deployment, as has been the case recently with solar photovoltaic

cells

 Demonstrate other technologies that are close to deployment

 This leaves hard-to-reduce sectors, such as aviation, where further innovation is likely to be

required

 Greenhouse gas reduction technologies may be required to reach zero net emissions in the

second half of the century

The expected deployment of technologies in the UK and globally is broadly similar. There are some

obvious differences based on geography – offshore wind is likely to provide a higher proportion

electricity for UK than globally and solar PV a lower proportion.

Clearly there is a range of technologies that can be implemented, and also a degree of uncertainty in

terms of when they will be deployed in reality. However key trends for each phase have been

identified and are in Table 4 below.

and http://www.ccacoalition.org/en/resources/executive-summary-report-bending-curve-10-scalable-solutions-carbon-neutrality-and-climate

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Table 4: Summary of technology requirements by emissions-reduction sector and time

Emissions-

reduction

sector

2017-2030

2030-2050

2050-2100

Power

generation

 Key technologies globally

include solar PV, on-

shore wind, hydro and

nuclear

 Key technologies within

the UK will include

renewables including

offshore wind, nuclear,

CCS and bioenergy

 The initial deployment of

less mature technologies

will be required

 Key low carbon technologies

are solar PV, onshore wind

and hydro

 Deployment of other low

carbon generation

technologies such as offshore

wind will increase

 Other solutions relevant to

electricity generation and

distribution increase in

deployment such as smart

urban (or city) energy

networks

 Continued

deployment of low

carbon technologies

from earlier phases

though deployment

rates may be

declining

 Focus on aviation,

agriculture and parts

of the industry

sectors

 Refined fuel

demand decrease

due to electrification

and/or switch to

hydrogen

 Potential for

geoengineering and

other greenhouse

gas removal

technologies

Transport

 Energy efficiency

improvements in

conventional internal

combustion engines and

use of biofuels

 Ongoing electrification of

vehicles

 Technologies to improve

efficiency of different

transport modes such as

materials substitution to

reduce weight, advanced

lubricants and advanced

aerodynamics

 Increased electrification of

vehicles, including heavy duty

transport

 FCEVs – main use for

hydrogen in fuel cells

 More high speed rail

 Stronger uptake of alternative

/ low carbon fuels, for example

biofuels and methane

Industry

 Deployment of energy

efficiency measures

(BAT) within industrial

sectors

 Use of low carbon fuels

and feedstock and

increased recovery of

excess energy

 CCS identified as key

technology within the UK

 Increased deployment of

innovative low carbon process

technologies, including

integration of CCS into

industrial processes

 Emission reductions through

recycling solutions

Buildings

 Reduce heating and

cooling energy demands

in buildings both retrofit

and for new build

 Components/ controls to

improve the energy

efficient building e.g.

lighting, appliances

 Use of heat pumps to

provide heat for homes

and businesses

 Continuing improvements in

energy efficiency e.g. lighting

and appliances

 Use of highly insulated,

integrated building envelopes

 Integrated heating and cooling

solutions with net-zero

emissions

 Solar solutions – including

solar cooling technologies and

solar thermal systems

 Potential use of hydrogen

from natural gas to provide

low carbon heat

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3 Current UK Competitive Position

 Used two methods to assess the size of the UK LCE in 2015

 Estimated employment of 230,000 to 450,000

 Estimated turnover of £42 billion to £120 billion

 Broadly stable over 2013 to 2015

3.1 Low carbon technology RD&D

Over the last 15 years, the UK has made a substantial investment in energy and low carbon technology

research, development and demonstration (RD&D). For example, the Research Councils UK (RCUK)

Energy Programme invested £839 million between 2003 and 2011, and a further £625 million is being

invested between 2012 and 2018. Analysis by the programme managers at EPSRC, indicates that this

investment has been made across a wide range of technical areas, including renewable energy,

alternative fuels, low carbon transport, nuclear power, energy storage and CCS, as well as energy

efficient electricity and heat generation, distribution and end use, as illustrated in the Figure 4 below.

Figure 4: Breakdown of Energy Programme investment up to 2014 by technology area

About one third of all RCUK research grants are made through the Supergen initiative in sustainable

power generation and supply

, which has provided core funding to 14 hubs undertaking basic

research on energy technologies at low state of technology readiness (TRL) since 2001, and is

continuing to support six hubs under its fourth phase of investment working on:

 Alternative energy carriers (such as hydrogen),

 Bioenergy,

 Energy networks,

 Energy storage,

Research Councils UK, Energy Portfolio Breakdown, EPRSC, April 2014

Supergen Introduction and background, RCUK 2016, http://www.rcuk.ac.uk/documents/energy/supergenintroductionbackground-pdf/

Supergen Draft Programme Strategy, RCUK 2016, http://www.rcuk.ac.uk/documents/energy/supergenprogrammestrategy-pdf/

Supergen Benchmarking report, RCUK, 2016, http://www.rcuk.ac.uk/documents/energy/supergenphase3-benchmarking-pdf/

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 Fuel cells,

 Offshore renewable energy,

The RCUK also has 10 national research centres which act as focal points for mid TRL applied

research and development in the energy technologies, including:

 The UK Energy Research Centre (UKERC),

 The National Centre for Energy Systems Integration (CESI),

 The EPSRC Centre for Power Electronics, CCS Research Centre (UKCCSRC),

 The Dynamics of Energy, Mobility and Demand (DEMAND) Centre

 The Centre for Energy Epidemiology (CEE)

 The Centre on Innovation and Energy Demand (CIED),

 The Centre for Industrial Energy, Materials and Products (CIE-MAP),

 The Interdisciplinary centre for Storage, Transformation and Upgrading of Thermal Energy (i-

STUTE).

 The Centre for Sustainable Energy Use in Food Chains (CSEF).

In addition, 8 out of 11 Innovate UK catapult centres

are commercialising research work in energy or

supporting the development of sustainable solutions for UK manufacturing, business, and society:

 The Offshore Renewable Energy Catapult,

 The Energy Systems Catapult,

 The Future Cities Catapult,

 The Transport Systems Catapult,

 The High Value Manufacturing Catapult,

 The Compound Semiconductor Applications Catapult,

 The Satellite Applications Catapult,

 The Digital Catapult.

As part of its mission to support innovation, increased productivity and growth in UK business Innovative

UK also funds a range of industrial research, development and demonstration (RD&D) projects

,, and

knowledge transfer networks (KTN) in many sectors of the economy

that support business seeking to

develop new materials, goods and services for the low carbon economy and specialist interest groups

in emerging technology areas such as sustainability and the circular economy and energy harvesting.

These investments in research and innovation, and others related to the wider impact of climate change

on business and society (e.g. adaptation), mean that the UK is well placed to obtain a share of the

growing market for the materials, goods and services needed by the transition to a low carbon economy

provided concerted action is taken by suppliers and government to ramp up export activities

Technologies where UK is investing in research and innovation are candidates for UK opportunities

from transition to a low carbon economy.

3.2 UK strengths in low carbon innovation

During our review, we identified a substantial volume of world class research, and innovative product

designs in all of the areas that we made estimates of potential global market size (See section 4).

In many cases, the UK research has the potential to produce a new generation of low carbon products

and services, and work is under way to commercialise the results through the Catapult Centres and

Industrial Research Centres. (See Section )

https://catapult.org.uk/about-us/about-catapult/

Innovate UK, Delivery Plan 2016/17,

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/514962/CO300_Innovate_UK_Delivery_Plan_2016_2017_WEB.pdf

https://admin.ktn-uk.co.uk/app/uploads/2016/09/KTN-Annual-Report-2015_2016.pdf

https://www.carbontrust.com/media/504208/ctc829-a-must-win-capitalising-on-new-global-low-carbon-markets.pdf

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With the aid of our experts and stakeholder feedback, we have assessed whether there is a low, medium

or high potential for UK business to capture market share in each of the main segments of the UK low

carbon economy market (Table 5) and identified some examples of areas where the UK currently has

particularly strength based on an assessments of UK low carbon capabilities produced by the Foreign

& Commonwealth Office (FCO), UK Trade & Industry (UKTI) and Carbon Trust

and Low Carbon

Coordination Innovation Group (LCCIG)

Table 5: Assessment of UK potential to capture market share and examples of current UK strengths

Low carbon economy (LCE) sector

Potential to

capture market

Examples of current UK strengths

Energy efficient products

Medium

Smart Grids, advanced building design,

materials and manufacturing systems

Energy from waste and biomass

Low to Medium

Biofuels, waste recycling techniques

Low carbon electricity

Medium

Off-shore wind, energy storage, solar PV

Low carbon services

High

Finance, insurance, consultancy

Low emission vehicles, infrastructure,

fuels cells and energy storage

Medium to high

Power systems & transmissions,

batteries, logistics, telematics,

Other products and services

Medium to high

Membranes, catalysts, bioprocessing

These ratings are intended as high level assessments looking at the short to medium term potential for

UK business to capture global market share by 2030. The list of example UK strengths is not exhaustive,

and there are other promising but less well known technologies that could be included from sector

strategies and sector benchmarking reports

by BIS and regional/country strategies

If we look over the immediate time horizon, research is underway to develop the next generation of

innovations that will be needed to enable and deliver the circular economy and on the technologies that

will enable UK society and the global economy to adapt to the impact of climate change. We expect

that many of these technologies will take advantage of the UK’s strengths in advanced manufacturing

and materials; robotic, autonomous and digital systems; and energy storage.

3.3 UK Export Performance

Analysis of global production and trade data between 2010 and 2014

, indicates that 75% of UK exports

(by Value) related to:

 Financial services (11.6%)

 Wholesale and retail products (11.5%)

 Transport equipment (11.1%)

 Machinery and electricity products (9%)

 Chemicals and related products (8.2%)

 Business services (8.1%)

 Professional services (6.1%)

 Metals / Metal Products (4.9%)

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/199886/UK_Capabilities_Report_EN.pdf

https://www.carbontrust.com/media/190038/tina-bioenergy-summary-report.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34647/12-1207-benchmarking-uk-competitiveness-in-the-global-

economy.pdf

2014-17 Business Plan, Scottish Enterprise, https://www.scottish-enterprise.com/~/media/5793a121a3ff431a8453f4b0c83b8744.ashx

As published in the World Input-Output Database, http://www.wiod.org/home. For details of the method see: Timmer, M. P., Dietzenbacher, E.,

Los, B., Stehrer, R. and de Vries, G. J. (2015), "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive

Production", Review of International Economics., 23: 575–605

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 Computer and information services (4.2%)

In 2014, UK business captured approximately 3.6% of global export market. Sectors that captured more

than this percentage of the global export market for their particular category of materials, goods services

are considered to have a comparative advantage

. Of these nine sector groupings listed above, six of

exceeded this threshold, whilst three (metals / metal products, chemicals and related products, and

machinery / electrical products) do not. In part, these market shares reflect the shift in UK industry

towards production of higher value added materials, goods and services, and the globalised nature of

the some manufacturing sectors. The six sectors groupings with comparative advantage are broadly

similar to the sectors identified by BIS’s benchmarking of revealed comparative advantage of in 2003

and 2008

, although mineral products and the food and drink sector have lost competitive position.

The results of analysis for all sector groupings are shown in Figure 5. The UK’s share of the global

export market for Low Carbon Economy related materials, goods and services might be maximised by

helping sectors that generate a significant share of UK exports to develop new products, and by

investment in sectors with future growth potential where the UK has a competitive advantage.

Figure 5: Analysis of UK Exports and UK Share of the Global Export Market by sector grouping

Markets which represent a relatively high proportion of UK exports and particularly where the UK has

a high share of global exports give areas where low carbon opportunities may start from a strong

current base.

Research and innovation investments (Section 3.1) may lead to enhancing the UK share of global

exports.

3.4 Current UK low carbon goods and services market

The current UK market for low carbon goods and services has been estimated using an established

method described in detail in Appendix 1.

A baseline for the market was set with the publication of the report ‘The size and performance of the

UK low carbon economy’ by BIS in 2015

. This work, which was led by TBR, set out employment,

turnover and gross value added (GVA) data for a range of sectors that made up the low carbon

economy, as of 2013.

http://www.rbs.com/content/dam/rbs/Documents/News/2014/08/UK%20export%20performance%20August%202014.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/34647/12-1207-benchmarking-uk-competitiveness-in-the-global-

economy.pdf

The Size and performance of the UK low carbon economy, BIS, March 2015.

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The current work sought to update the BIS baseline with data for 2015. The analysis is based on the

performance of 5,600 businesses known to operate across the low carbon economy and which were in

existence in both years, viz 2013 and 2015.

Subsequent to the publication of the BIS report, ONS undertook survey work to generate its own data

for the low carbon and renewable energy economy. While there was significant commonality between

the sectors used, there were also important definitional differences such as in the way supply chain

effects were incorporated.

Headline data by group is presented below in Table 6 to Table 8 to show changes in employment,

turnover and GVA between 2013 and 2015.

Table 6: Low carbon employment 2013 – 2015

Sector Group

2013

2015

Change

Energy Efficient products

94,200

90,900

-3.5%

Low carbon electricity

140,800

139,400

-1.0%

Low carbon heat

32,600

30,800

-5.4%

Low carbon services

28,000

28,600

2.0%

Low emission vehicles, infrastructure, fuels cells

and energy storage

18,100

18,400

1.5%

Waste processing, energy from waste and biomass

146,900

141,300

-3.8%

Total

460,600

449,400

-2.4%

Source: TBR/OrtusER 2017

The view is that, overall, the low carbon economy lost some jobs in the period between 2013 and 2015.

However, as the data only covers one year (2015), the change may not be statistically significant so

should be treated with caution. The BIS report showed that between 2010 and 2013 employment in the

low carbon economy grew by 3.8% per annum

Table 7: Low carbon turnover (£M) 2013 – 2015

Sector Group

2013

2015

Change

Energy efficient products

16,400

17,000

4.1%

Low carbon electricity

33,300

29,500

-11.4%

Low carbon heat

4,900

5,100

4.2%

Low carbon services

3,700

4,000

8.5%

Low emission vehicles, infrastructure, fuels

cells and energy storage

8,800

9,600

10.1%

Waste processing, energy from waste and

biomass

54,600

57,300

5.0%

Total

121,700

122,600

0.8%

Source: TBR/OrtusER 2017

The turnover data are also broadly static, though the change between the two years is marginally

positive. Turnover over the period 2010 to 2013, grew by 7.6% on an annual basis

Ibid, see Table 31.

Ibid, see Table 33.

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The differences in growth rates between the sector groupings between 2013 and 2015, also suggest

that additional data are needed before definitive judgements can be made on the way the low carbon

economy is performing.

Table 8: Low carbon GVA (£M) 2013 – 2015

Sector Group

2013

2015

Change

Energy efficient products

7,300

-1.3%

Low carbon electricity

10,400

10,500

0.1%

Low carbon heat

1,700

1,800

5.8%

Low carbon services

1,800

2,000

8.8%

Low emission vehicles, infrastructure, fuels

cells and energy storage

1,300

1.1%

Waste processing, energy from waste and

biomass

21,900

19,200

-12.3%

Total

44,500

42,000

-5.6%

Source: TBR/OrtusER 2017

Overall, the data suggest that any growth identified in the work for BIS may have stalled. However, the

data are not robust enough to provide a definitive statement. In the period 2010 to 2013, there was

annual growth of 8.7%

The lack of consistency between the three data sets could also be interpreted as indicating changes

within the low carbon sector, e.g. margins are tightening in some sectors, yet loosening in others,

especially as the nature of activity changes, e.g. nuclear focuses on decommissioning, offshore wind

farms increase output and technical/financial challenges continue to be felt in marine. However, the

previously mentioned caution is reiterated.

For comparison, ONS data from the 2013 and 2014 surveys are presented in Table 9 and Table 10

below. These data show a possible slow down, though ONS urge caution due to large margins of

error, along with differences in method across the two years..

Table 9: ONS low carbon and renewable energy direct employment 2013 - 2014

Low carbon economy (LCE) sector group

2014

2015

Change

Energy efficient products

155,500

142,500

-8.4%

Energy from waste and biomass

11,500

10,000

-13.0%

Low carbon electricity

40,500

47,000

16.0%

Low carbon heat

7,000

3,500

-50.0%

Low carbon services

13,000

15,000

15.4%

Low emission vehicles, infrastructure, fuels cells

and energy storage

11,000

15,000

36.4%

Total

238,500

233,000

-2.3%

Source: ONS

Ibid, see Table 35.

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Table 10: ONS low carbon and renewable energy direct turnover (£M) 2013 - 2014

Low carbon economy (LCE) sector group

2014

2015

Change

Energy efficient products

21,900

19,900

-9.1%

Energy from waste and biomass

5,600

4,400

-21%

Low carbon electricity

12,400

12,200

-1.6%

Low carbon heat

1,400

1,200

-14%

Low carbon services

1,200

700

-44%

Low emission vehicles, infrastructure, fuels cells

and energy storage

3,800

Total

46,300

42,200

-8.9%

Source: ONS

The similarities between the data showing change in Table 6 and Table 9 indicate a degree of

consistency. It should be noted that the ONS data are for 2014 and 2015, rather than 2013 and 2015.

The apparent lack of growth, compared to the period up to 2013 would seem consistent with changes

to key policy measures, e.g. reduction in feed in tariffs and local challenges to planning consents for

onshore wind.

Direct comparison of the data from the two sources cannot be made due to the differences in definition.

It could be suggested that the results in Table 6 to Table 9 omit some activities that could be considered

as part of the low carbon economy. For instance, activities associated with adaptation to climate change

are not included. As an initial trial, further analysis was undertaken to investigate the ‘Adaptation’ sector.

(See Appendix 1B). This sector includes the design, production, installation and maintenance of

products and services aimed at adapting to the effects of climate change.

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4 Global opportunities for UK Manufacturing

Analysis suggests:

 UK LCE could grow from 2% of UK total output in 2015 to up to around 8% by 2030 and

13% by 2050

 Compound annual growth rates of 11% per annum between 2015 and 2030 and 4% per

annum between 2030 and 2050

 UK LCE market size of between £230 billion and £640 billion in 2030 and between £510

billion and £1,400 billion in 2050

 Employment associated with the LCE between 1.1 and 2.4 million in 2030 and between 2.5

and 5.0 million in 2050

4.1 Approach to the quantification of market opportunity

We approached the quantification of the size of market opportunity for UK manufacturing in six stages:

1. Assessing the current size of the UK and global market for selected low carbon technologies

and services, based on reported levels of deployment and market research reports.

2. Deriving estimates of the future global market size for the selected low carbon technologies

and services in 2030 and 2050, based on the IEA’s 2DS scenario and technology roadmaps,

national technology cost forecasts and published estimates of future global market sizes.

3. Deriving estimates of future UK home market size for the selected low carbon technologies and

services in 2030 and 2050, based on CCC scenarios and sector analysis, or pro rata estimates

of UK market size based the ratio of UK GDP to global GDP or future electricity demand.

4. Making assumptions about the proportion of the total global market size that the UK might

expect to capture, based on the UK’s current share of global exports in the most relevant sector

grouping (Figure 5) and the proportion of the global sector output that is traded internationally.

5. Combining the estimates of UK home and export market and exploring variants of the IEA

2DSand CCC’s scenarios to obtain the estimated UK share of the global market for the selected

low carbon technologies and services in 2015, 2030 and 2050, expressed as a range.

Deriving compound annual rates of growth for groups of technology areas, and applying these to the

UK low carbon market statistics (Table 6 to Table 10) to obtain a ball park estimate of the overall

potential size of the UK market for low carbon materials, goods and services in 2030 and 2050.

4.2 Future global low carbon economy markets

Global market opportunities arising from the transition to a low carbon economy were developed using

an iterative process as illustrated in Figure 6.

 An initial review of roadmaps for transition to a low carbon economy identified over 500 discrete

opportunities, which were reduced to 100 potential new global export markets by screening out:

o Duplicates and “generic” opportunities e.g. increased energy efficiency

o Well established technologies & incremental developments

o Opportunities not applicable to the UK market

o Difficult to value niche market opportunities

o Out of scope topics (e.g. nuclear energy)

 The remaining opportunities were grouped into 50 market segments (see Appendix A4.4) of

which 25 were selected in consultation with CCC for further assessment, including opportunities

in areas:

o Of existing, particular or emerging UK strength in the global export market (18)

o Where the UK is considered to be lagging behind major competitors, competing with

lower cost economies, or constrained by resource availability (5)

o At an early stage of technology development (2)

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It was not intended that this work should be comprehensive in considering all possible opportunities for

the UK arising from transition to a low carbon economy. Considering the seven low carbon economy

sectors used by ONS and TBR (See Table 6), the approach has been:

 Low carbon electricity – this has been considered in detail with separate estimates for all of the

sub-sectors apart from hydropower and nuclear

 Low emission vehicles – this has been considered in detail with separate estimates for six

aspects of low emission vehicles

 Low carbon services – low carbon finance and insurance have been considered but not other

low carbon advisory services

 Low carbon heat - has not been considered

 Energy from waste and biomass – one example, that of biofuels has been considered

 Energy efficient products – selected examples have been considered

The alignment of the sectors considered by ONS and TBR and the opportunities analysed further are

in Appendix 2.

In addition, we also examined two areas of the LCE not covered by ONS:

 Adaptation – an initial estimate has been made of the size of the opportunity

 Circular economy - an initial estimate has been made of the size of the opportunity (see Box

1).

Figure 6: Iterative approach to selected opportunities for UK from transition to low carbon economy

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4.2.1 Low Carbon Electricity

Our estimates of the potential global market size for six selected opportunities within the low carbon

electricity sector are given in Figure 7. These identified a potential global market size of between £260

bn and £360 bn per year in 2030 and £580 bn and £900 bn per year in 2050, with a compound annual

growth rate (CAGR) of 5 to 7% between 2015 and 2030 and 4% to 5% between 2030 and 2050.

Our assessment of the potential future global market size for products and services related to the

generation of low carbon electricity is based on the forecast level of electricity generated from wind,

marine and solar PV technologies in 2030 and 2050, compared with reported generation in 2013.

The annual capital investment required to deliver these electricity outputs was estimated using the

investment costs per GW and anticipated technology cost reductions outlined in the IEA’s technology

roadmaps

. For Solar PV, capital costs were based on NREL forecasts of future technology costs

as there has been a significant reduction in solar PV costs since the IEA roadmap was prepared.

The annual capital investment in Carbon Capture and Storage (CCS) schemes was estimated from

IEA’s review of progress of CCS technology development

. The “No CCS in Power” (NCCP) variant of

the 2DS scenario was used to generate high estimates for renewables and low estimates for CCS.

The capital investment associated with Energy Storage needed to enable variable renewables to deliver

between 67% and 75% of global electricity generation by 2050 was also factored into the assessment.

These assessments included an allowance for end-of-life replacement (normally after 20 years), but did

not include the costs of Operation and Maintenance (O&M) which potentially could increase the market

for products and services by 12% to 140% depending on the technology and location of deployment.

Figure 7: Estimated global market size for selected low carbon electricity sectors in 2015, 2030 and 2050

https://www.iea.org/roadmaps/

http://www.nrel.gov/analysis/data_tech_baseline.html

https://www.iea.org/publications/freepublications/publication/20YearsofCarbonCaptureandStorage_WEB.pdf

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4.2.2 Low Emission Vehicles

Our estimates of the potential global market size for five selected opportunities within the low emission

vehicles are given in Figure 8. These identified a potential global market size of between £1.0 tn and

£2.0 tn per year in 2030 and £3.6 tn and £7.6 tn per year in 2050, with a CAGR of 26% to 29% between

2015 and 2030 and 6% to 7% between 2030 and 2050.

Our assessment of the potential future global market size for products and services related to low

emission vehicles is based on the forecast sales of light duty Battery Electric Vehicles (BEV), Plug-in

Hybrid Electric Vehicles (PHEV) and Fuel Cell Electric Vehicles (FCEV) under the 2011 IEA road map

for Electric and Plug-in Hybrid Vehicles

and the 2016 Global EV outlook

. These assume a much

higher rate of EV deployment is needed post 2030 to avoid temperature increases above 2

C than

some other market projections

. The High Hydrogen (“High H

”) variant of the 2DS scenario was used

to generate high and low estimates with FCEV displacing sales of PHEV under the high scenario

The annual capital investment required to realise the forecast global sales of each type of Electric

Vehicle was estimated using the initial purchase cost of vehicles and anticipated cost reductions

published in the technical annex to the 2015 IEA Technology Road Map for Hydrogen and Fuel Cells

The proportion of the annual investment in EVs related to transmission systems, electric motors, and

batteries was also calculated, but excluded from the overall total market size to avoid double counting.

The annual capital investment required to provide public and workplace charging solutions to support

the uptake of electric vehicles, and of building a hydrogen refuelling infrastructure was also included.

The annual revenue from logistics and telematics services associated with the provision of Integrated

Mobility Products and Services and Advanced Driver Assistance Systems needed to improve overall

transport integration and efficiency was also estimated based on a 2015 report by Frost & Sullivan

These assessments do not include the costs of Operation and Maintenance (O&M) of electric vehicles

or supporting infrastructure, or the costs of deploying medium and heavy duty electric vehicles.

Figure 8: Estimated global market size for selected low emission vehicles in 2015, 2030 and 2050

https://www.iea.org/publications/freepublications/publication/technology-roadmap-electric-and-plug-in-hybrid-electric-vehicles-evphev.html

https://www.iea.org/publications/freepublications/publication/Global_EV_Outlook_2016.pdf

https://about.bnef.com/blog/electric-vehicles-to-be-35-of-global-new-car-sales-by-2040/

http://www.iea.org/publications/freepublications/publication/TechnologyRoadmapHydrogenandFuelCells.pdf

https://www.iea.org/media/freepublications/technologyroadmaps/TechnologyRoadmapHydrogen_Annex.pdf

https://www.sitra.fi/julkaisut/Selvityksi%C3%A4-sarja/Selvityksia102.pdf

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4.2.3 Low Carbon Financial Services

Our estimates of the potential global market size for two selected opportunities within the low carbon

services sector are given in Figure 9. These identified a potential global market size of between £66 bn

and £280 bn per year in 2030 and £110 bn and £460 bn per year in 2050, with a CAGR of 12 to 15%

between 2015 and 2030 and 2 to 3% between 2030 and 2050.

Our assessment of the potential future global market size for low carbon financial services is based on

the range of estimates of annual capital investment required to transform the global energy supply

system by 2050 and simultaneously meet emissions targets consistent with restricting the rise in

average global temperature to less than 2 degrees.

These estimates were collated in the 2016 Review by the City of London that examined the potential

for the UK to act as an international hub for green finance

and correspond to average annual low

carbon investments equivalent to between 1.4% and 6% of global GBP. This latter estimate is higher

than previous estimates for the global low carbon transition, which range up to 2.5% of global GDP

The assessment assumes that 5% of the capital raised is related to financial services

, and a further

0.4%

is spent on the financial services related to insuring the performance and lifetime of low carbon

technologies and energy savings and that typical premium rates are 1% to 3% of the initial investment

The assessments exclude financial and advisory services related to project and programme de-risking

consultancy, weather related performance risks, climate change risks and other risks, manufacturers’

and contractors’ warranties and home insurance products related to the deployment of low carbon

technologies. These additional services were not included in the assessment due to a lack of data, but

in some cases can increase the proportion of project costs spent on financial services to 15%.

Figure 9: Estimated global market size for low carbon financial services in 2015, 2030 and 2050

https://www.cityoflondon.gov.uk/business/economic-research-and-information/research-publications/Documents/research%202016/globalising-

green-finance.pdf

Finance: Supporting the transition to a global green economy, (Extract from: Towards a green economy, Pathways to Sustainable Development

and Poverty Eradication), UNEP, 2011, http://web.unep.org/greeneconomy/sites/unep.org.greeneconomy/files/field/image/15.0_finance.pdf

Cost of raising equity, OFGEM/CEPA, 2010, https://www.ofgem.gov.uk/publications-and-updates/cost-raising-equity-cepa-2010

Based on analysis of OECD Insurance Statistics, 2005-2012, https://stats.ukdataservice.ac.uk/metadata/OECD/Insurance/2113031e.pdf

Financial Risk Management Instruments for Renewable Energy Projects, UNEP, 2004,

http://www.unep.org/pdf/75_Risk_Management_Study.pdf

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4.2.4 Other Low Carbon Products and Services

Our estimates of the potential global market size for six selected opportunities within other low carbon

products and services sectors are given in Figure 10. These identified a potential global market size of

between £1.1 tn and £1.6 tn per year in 2030 and £2.8 tn and £4.5 tn per year in 2050, with a CAGR of

6 to 8% can be expected between 2015 and 2030 and 5% between 2030 and 2050. Biofuels,

bioprocessing, catalysts and membranes are approximately 70% of the global market for this group of

products and reflect the transition to lower energy / low carbon industrial processes.

Our assessment of the potential future global market size for other low carbon products and services

was based on the assessment of the potential market for selected products and services, including:

 Advanced insulation of buildings

 Alternative batteries (for electric vehicles)

 Alternative magnets (for the motors in electric vehicles)

 Biofuels

 Industrial bioprocessing

 Industrial catalysts

 Membranes for separation processes

 Recycling of Lithium batteries (from electric vehicles)

 Smart grids (including smart meters, home automation, demand response, grid management,

control and automation and high voltage transmission reinforcement)

We excluded products related to electric vehicles from our analysis of the market size of other low

carbon products and services, since the costs of these are already included within the estimates for low

emission vehicles. This reduced the annual market size by 15% in 2030 and 20% in 2050.

A range of sources of market data was used to build estimates for growth in the markets for these

technologies from 2015 to 2030 and 2050. These included the IEA roadmap for sustainable buildings,

market forecasts by consultants and market analysts, and estimates of EV sales described in section

4.2.2.

Figure 10: Estimated global market size for other products and services considered in 2015, 2030 and 2050

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Box 1: Market opportunities associated with the Circular Economy

“A circular economy is one that keeps products, components and materials at their highest use and value at all

times. It is an alternative to the current linear economy, where we make, use and then dispose of products,

components and materials. A circular economy can stimulate innovation in areas like product design, re-use and

remanufacturing facilities, business models as well as new forms of finance.”

(Towards a circular economy – context and opportunities, London Waste & recycling Board, 2015 )

The literature did not provide sufficient detailed information on global impact on the circular economy

to enable the overall size of the market opportunity in 2030 and 2050 to be quantified. There are

some partial estimates for current markets, for example CLEPA (the European Association of

Automotive Suppliers) puts the vehicle remanufacturing market in Europe at US$ 10 to 12 billion.

There are many estimates of the benefits of the circular economy, but not of the market value. For

example, a report on the potential benefits of a circular economy in London estimates that:

 Circular economy opportunities in the build environment will add £3-5bn to GDP by 2036

 The annual circular economy with savings in the textiles sector of over £1bn by 2036

 The annual circular economy savings in the plastics sector will be at least £200m by 2036

 The circular economy opportunities in the food sector will add £2-4bn to GDP by 2036

 The circular economy savings in the electrical and electronic equipment will be at least

£900m by 2036

The circular economy represents a radical shift in perspective—as it involves redesigning products

to increase product lifetime and end of life component reuse, new business models based on shared

use rather than individual ownership, and changes in consumer behaviour to eliminate waste. The

disruptive nature of its approach means that it will have a major impact on all sectors of the economy.

4.3 Size of the LCE opportunity for UK business

Our estimates of the size of the opportunity for UK business to provide the products and services that

will be needed during the global transition to low carbon economy are based on:

 An estimate of the size of the UK market in 2015, 2030 and 2050

 An estimate of the share of the global market that UK will capture, assuming that export

performance is as currently for relevant sectors – as illustrated in Figure 5 in Section 3.2.

Current export performance for sector groups that relate to low carbon products and services gives

a starting point for estimating the size of the UK opportunity from global transition to a low carbon

economy.

Section 5 considers possibilities to increase UK market share in areas of strength

In this analysis, the size of the UK market is a major factor in assessing the potential turnover that UK

companies could realise, since exports only represented around 25% of turnover across the 8 sector

groupings supplying the products and services considered by our market assessments (see Table 11

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Table 11: Current levels of global imports/exports, UK exports and UK share of global export market

Sector Grouping

% Global Output

imported/exported

UK % of Global

export market

% UK Output

Exported

Chemicals / Related Industries

26.3%

2.5%

43.8%

Computer and information

services

9.9%

6.2%

12.6%

Metals / Metal Products

19.4%

2.7%

40.7%

Machinery / Electrical Products

37.1%

1.8%

48.1%

Transport Equipment

31.3%

4.5%

62.6%

Construction

0.9%

2.1%

0.5%

Financial services

8.0%

19.9%

30.7%

Insurance

8.5%

14.1%

14.9%

Total (8 sectors)

18.7%

3.7%

24.3%

Based on analysis of World Input Output Tables 2010 to 2014, World Input-Output Database http://www.wiod.org/home (November 2016)

These sector groupings are as used in World Input Output Tables (see previous footnote). Each of the low carbon sectors considered in the

current work was associated with a sector grouping that was considered to give the best fit. Figures from Table 6 were then used in analysis of

the UK share of the global market. The association of sector groupings with the low carbon products and services considered is given in Appendix

2 and in sub-sections 4.3.1 to 4.3.4.

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4.3.1 Low Carbon Electricity

Estimates of the opportunity for UK business for the low carbon electricity sector are given in Figure 11.

These identified a potential global market size of £11 bn per year in 2030 and £18 bn and £19 bn per

year in 2050, with a CAGR of 9% can be expected between 2015 and 2030 and 3% between 2030 and

2050.

The assessment of potential UK share of the global market for low carbon electricity related products

and services, is based on obtaining the same percentage of the global export market as is currently

obtained in sectors supplying machinery and electrical products, and related services, and on estimates

of the annual capital investment needed to achieve the decarbonisation of the UK electricity generation

sector by 2050 as envisaged under the scenarios used by CCC in developing the 5

Carbon Budget.

For consistency with the assessments of global market size outlined in Section 4.2.1, the UK

assessments used the same estimates of capital cost per GW and an allowance for end-of-life

replacement (normally after 20 years). They also did not include the costs of Operation and

Maintenance (O&M).

Figure 11: Estimated UK share of global market for selected low carbon electricity sectors in 2015, 2030

and 2050

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4.3.2 Low Emissions Vehicles

Estimates of the opportunity for UK business for selected products and services relating to low emission

vehicles are given in Figure 12. These identified a potential global market size of between £46 bn and

£95 bn per year in 2030 and £120 bn and £240 bn per year in 2050, with a CAGR of 22 to 26% can be

expected between 2015 and 2030 and 5% between 2030 and 2050.

The assessment of potential UK share of the global market for products and services related to low

emission vehicles is based on obtaining the same percentage of the global export market as is currently

obtained in sectors supplying transport equipment and related services. It is also based on estimates

of the annual capital investment needed to increase the share of Electric Vehicles sold to 60% of annual

sales of light duty vehicles by 2030, and 100% by 2050 as envisaged under the scenarios used by CCC

in developing the 5

Carbon Budget, with high and low estimates depending on the proportion of FCEV

sold.

For consistency with the assessments of global market size outlined in Section Error! Reference

source not found., the UK assessments used the same estimates of initial purchase costs of electric

vehicles. They also do not include Operation and Maintenance (O&M) costs or the costs of medium and

heavy duty electric vehicles.

It is assumed that the UK market for logistics and telematics evolves at the same rate as the global

market, and that the UK market is in proportion to its share of the global market for light duty vehicles.

It is also assumed that annual sales of UK light duty vehicles remain at 2015 levels in line with recent

trends in vehicle registrations

, whereas global sales increase by over 200% between 2015 and 2050

Figure 12: Estimated UK share of global market for selected low emission vehicles in 2015, 2030 and 2050

Table VEH0252, Department for Transport, 2015, Vehicle Licensing Statistics https://www.gov.uk/government/collections/vehicles-statistics

Figure 2, IEA Technology Roadmap: Electric and plug-in hybrid electric vehicles, 2011.

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4.3.3 Low carbon financial services

Estimates of the opportunity for UK business for selected opportunities assessed in the financial

services sector are given in Figure 13Error! Reference source not found.. These identified a potential

global market size of between £1.7 bn and £7.5 bn per year in 2030 and £4 bn and £17 bn per year in

2050, with a CAGR of 12 to 15% can be expected between 2015 and 2030 and 4 % between 2030 and

2050.

The assessment of potential UK share of the global market for low carbon financial services, is based

on obtaining the same percentage of the global export market as is currently obtained in sectors

supplying financial and insurance services. It is also based on a UK home market that proportional to

the ratio of UK electricity demand to global electricity demand, which is expect to remain around 1.3%.to

2050. This method of allocation results in an average annual investment of between 0.5% and 2% of

UK GBP, which is in line with the estimated cost of the UK low carbon transition in the Stern Review

As outlined in section 4.2.3, the assessment only covers the financial services related to raising the

capital needed to invest in low carbon technology projects and excludes the capital sums raised.

Figure 13: Estimated UK share of global market for low carbon finance services in 2015, 2030 and 2050

http://webarchive.nationalarchives.gov.uk/20100407011151/http://www.hm-treasury.gov.uk/sternreview_index.htm

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4.3.4 Oher Low Carbon Products and Services

Estimates of the opportunity for UK business for selected other products and services are given in

Figure 14These identified a potential global market size of between £26 bn and £41 bn per year in 2030

and £64 bn and £110 bn per year in 2050, with a CAGR of 5 to 8% can be expected between 2015 and

2030 and 5% between 2030 and 2050.

The assessment of potential UK share of the global market for selected other low carbon products and

services is based on obtaining the same percentage of the global export market as is currently obtained

in sectors supplying similar products and using the ratio of UK GDP to global GDP in 2015 to estimate

the size of the UK home market. The potential UK market share is the sum of the resulting values.

Figure 14: Estimated UK share of global market for other products and services in 2015, 2030 and 2050

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4.4 Projection of overall future market opportunities

Projected UK turnover arising from transition to a low carbon economy grows from £43bn to 126bn

in 2015 to £210bn to £600bn by 2030 and £0.5tn to £1.4tn by 2050.

Projected UK employment arising from transition to a low carbon economy grows from 0.2m to 0.4m

in 2015 to 1.0m to 2.2m by 2030 and 2.5m to 5.0 by 2050.

To estimate the overall size of the UK low carbon market in 2030 and 2050, we applied the estimates

of CAGR derived in section 4.3 to the estimates of the current UK market size produced by ONS and

TBR, which were rebased to 2017 prices and used to generate low and high estimates. The results of

this analysis are shown in Table 12, which indicate an overall market growth of around 11% pa between

2015 and 2030, and 4% between 2030 and 2050. The method assumes that the products and services

assessed in this project are broadly representative of all segments of the market.

Table 12: Projected UK turnover related to the low carbon economy (£2017 Prices)

Low carbon economy

(LCE) sector

2015 Turnover (£bn)

2030 Turnover (£bn)

2050 Turnover (£bn)

Low

High

Low

High

Low

High

Energy efficient products

20.4

17.5

55.7

47.7

146.4

125.4

Energy from waste and

biomass

4.6

27.1

12.4

73.9

32.6

194.3

Low carbon electricity

12.5

34.9

43.7

121.7

75.5

210.4

Low carbon heat

1.2

7.8

3.3

21.4

8.7

56.3

Low carbon services

0.7

4.1

4.5

27.0

10.4

62.5

Low emission vehicles,

infrastructure, fuels cells

and energy storage

3.9

9.9

94.1

237.0

240.1

604.6

Waste processing and

materials recovery

0.0

24.6

Not

included

67.1

Not

included

176.4

Total

43.3

125.9

213.6

595.3

513.9

1,429.7

To estimate the level of employment generated by UK low carbon market in 2030 and 2050, we applied

the estimates of CAGR derived in section 4.3 to the estimates of the current UK employment produced

by ONS and TBR, which were used to generate low and high estimates. The results of this analysis

are shown in Table 13 which indicate an overall growth in LCE market employment levels of around 11

between 2015 and 2030, and 4% between 2030 and 2050. The method assumes that the products

and services assessed in this project are broadly representative of all segments of the market. The

growth rates applied to each LCE sector are given in Appendix A4.4,

The sectors in this table have been used by the Office of National Statistics to present the size of the UK low carbon economy. As this report

relates to opportunities for the UK low carbon economy, these sectors will be used from this point onwards. A comparison of the sub-sectors

included by ONS and by the analyses in this report is in Appendix 2.

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Table 13: Projected UK employment related to the low carbon economy

Low carbon economy

(LCE) sector

2015 Employment

(thousands)

2030 Employment

(thousands)

2050 Employment

(thousands)

Low

High

Low

High

Low

High

Energy efficient products

143

389

248

1,023

652

Energy from waste and

biomass

137

Low carbon electricity

161

164

562

283

971

Low carbon heat

115

301

Low carbon services

187

227

433

Low emission vehicles,

infrastructure, fuels cells

and energy storage

359

440

916

1,123

Waste processing and

materials recovery

584

1,353

Total

233

449

1,046

2,187

2,546

4,970

4.5 Opportunities for UK firms to capture a greater share of

future global markets

The estimates of potential UK share of global markets presented in this section are based on the UK’s

current share of global exports, and hence on the UK’s current strengths in manufacturing and services.

There is potential to increase this share by building on UK strengths in research and innovation (see

Section 3), and by addressing barriers to market entry and to increasing market share (see Section 5).

Comparing our results with previous analysis of the LCEGS market in 2011/12

, our model forecasts:

 A lower ratio of UK to Global Market Size (2.5% compared with 3.7%)

 A higher proportion of UK turnover that is exported (21.7% compared with 9.5%)

These differences suggest that the UK LCE market is not yet focused on the export market and that

there is scope to grow UK exports as the UK invests in the transition to a low carbon economy

The sectors in this table have been used by the Office of National Statistics to present the size of the UK low carbon economy. As this report

relates to opportunities for the UK low carbon economy, these sectors will be used from this point onwards. A comparison of the sub-sectors

included by ONS and by the analyses in this report is in Appendix 2.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/224068/bis-13-p143-low-carbon-and-environmental-goods-and-

services-report-2011-12.pdf

The modelling approach probably over estimates the potential for exports, and could be refined by splitting project costs down into the costs of

construction, manufactured goods and services and modelling the proportion of turnover exported on each cost element separately.

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5 Stakeholder views on opportunities, barriers and

potential actions

5.1 Introduction

To provide additional views on the business opportunities of moving to a low carbon economy, 19

interviews were conducted with a total of 23 stakeholders. The stakeholders were from the business,

and academic communities as well as from trade associations and devolved administrations. The

stakeholders were chosen as being involved in the range of areas addressed in this report. It was not

attempted to seek views on every individual technology considered, and the summary of views below

should be considered in that light. The views summarised below are as expressed and have not been

assessed. They are those of the stakeholders interviewed and do not represent the views of Ricardo

Energy & Environment or of the CCC.

The interviews were structured around a number of key areas. After initial feedback on areas of

expertise and of collaboration, views were sought on: opportunities for the UK arising from the transition

to the low carbon economy – in the area of interest of the interviewee; barriers to exploiting R&D and/or

developing these new market opportunities, both in the UK and globally; actions that the interviewee

considered the UK Government could take to increase the UK share of the global market in the area of

interest; and any other issues.

The stakeholder views are summarised below using the headings for opportunities used in this report.

For each group views are summarised on the opportunities, barriers and potential actions to increase

market share.

5.2 Low carbon electricity

5.2.1 Opportunities

The UK has a world class oil and gas industry, which is well placed to be active in Carbon Capture and

Storage (CCS). UK companies within the existing oil and gas industry supply chains would be well

placed to capture value from new CCS plants. The market for solar in the UK remains significant and

supply chain opportunities in relation to renewable energy are also possible. For example,

manufacturers close to the deployment location of technologies could capture value where their location

makes them more competitive, for example turbine tower manufacturers in Scotland may be able to be

more competitive due to reduced transport costs. The service sector also offers opportunities for long

term jobs e.g. service technicians in localities close to installations.

The UK has strong research and is leading the way in some areas, for example in terms of integrating

renewables into the electricity network and smart grids. There is expertise in this area that could be

exported as other countries diversify their energy mix.

5.2.2 Barriers

There is uncertainty over CCS, with no Government incentives or clear business case at present. Higher

renewable energy penetration could mean a reduced role for CCS, and high capital expenditure means

investors would need to be confident in available opportunities.

The unbundled nature of the UK market helps promote competition and drive changes. However there

also needs to be clear policy to support this. Overall policy aims to provide low carbon electricity, reduce

imports, and lower costs for consumers. However, the lack of clear policy in some technology areas,

that could contribute to these overall aims, poses a barrier to the route to market. This, in turn, deters

investors. For example, there is a need for a long term policy direction on specific renewables sources,

such as on-shore wind, if stable markets and revenues are to be developed. Other renewables have

also been adversely affected by policy decisions, for example the Climate Change Levy on solar. Policy

uncertainty in other countries, for example following the recent US election, could also provide an

adverse signal to investors.

5.2.3 Actions that could be taken to increase share of global market

A vibrant UK market would help to enhance export potential and this could be encouraged by

Government providing a clear route to market, through policy. Current funding steams such as through

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Innovate UK and the Energy Catayst were commended. Action to address barriers will also assist the

UK market – examples of barriers cited include grid connection issues for renewable electricity and

access to funding for the whole supply chain. Addressing these would help commercialisation and

enable the scaling up of technologies for those ready to focus on delivery and roll out.

A proactive approach is needed to address various issues such as subsidy restrictions and planning

barriers. For example, technologies may have developed significantly in recent years since planning

consents were awarded. This may mean that latest technologies cannot be deployed due to restrictions

on heights, blade sizes etc. which have changed as technology has developed.

5.2.4 Other issues around capturing new market opportunities

Investment in smart grids will help increase connectivity of renewables to the grid as consumers start

to think more about where their energy comes from and when to buy it.

The unbundled market in the UK makes it easier for new entrants to get a foothold in the market,

however as energy markets develop and non-traditional models are used there is a concern from some

that those involved in these alternative models may not have the same level of regulation as traditional

suppliers to ensure all are providing value and acting in the interests of the energy system as a whole

and the end customers.

Devolved administration views

Opportunities

Opportunities exist to develop the industry e.g. for renewables and nuclear (in one devolved

administration area) close to the deployment of such solutions. This includes the development of the

right capabilities, technical expertise and knowledge. The alternative is that this will be brought in

from overseas, limiting local benefits.

There is an opportunity to demonstrate innovation projects that will benefit the local energy market

through grant funding. A scheme in Scotland currently includes 18 capital grant projects and data on

economic impacts of accelerating low carbon infrastructure should be available in the next 12-8

months.

Significant opportunities also exist through devolved administration support for energy efficiency,

further opportunities will be developed in future through actions identified in the Scottish

Government’s draft Climate Change Plan, such as through considering how the Energy Savings

Opportunity Scheme can be used as a tool beyond compliance, how low carbon technology

demonstrators can be encouraged and how to incentivise additional heat recovery opportunities

within businesses. The Scottish Government is currently consulting on its draft Energy Strategy,

Local Heat & Energy Efficiency Strategies and Regulation of District Heating as well as the Scottish

Energy Efficiency Programme.

Specific opportunities exist in Scotland to consider carbon capture and storage linked to North Sea

oil and gas infrastructure, whilst the Scottish electricity sector is already looking at distribution

networks to provide flexible approaches to active network management and storage. There is a

potential to build on this and export knowledge and skills to the wider UK and to Europe. Smart grid

technology is likely to be a growth sector given the moves towards active network management at

transmission and distribution levels and more local balancing. Specific opportunities also exist in

Scotland to maximise the use of renewable electricity generation through the production of hydrogen

by electrolysis for entry into future hydrogen markets in a low carbon economy. This hydrogen

production method is currently operating in Scotland in Fife and Aberdeen and will come on line soon

in the Orkney Islands.

Barriers

The main issue is clarity on what UK Government wants. Is it cheap technologies close to market

that will address energy issues, is it solutions which allow UK companies to enter new geographical

markets with new products i.e. supply of green hydrogen internationally, or is it the regeneration of

skills and capability in particular areas and the development of an industry? It is acknowledged that

in some cases the starting base may be low and therefore a realistic view on the value captured

locally initially needs to be taken. For some solutions e.g. tidal stream/lagoons, UK Government

strategy does not provide a clear steer.

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There are also a number of barriers to the development of emerging technologies. Research on the

practical application of hydrogen gas as a low-carbon substitute for methane within the current gas

grid is required. The transfer of emerging technologies from the academic stage to a commercial

stage can be difficult. And emerging technologies need help to find a route to market and to help to

de-risk demonstration projects – this may need a wider discussion at UK level. Local innovation

technology companies can be over-ambitious and need to consider the use of smaller scale

demonstrations in building confidence. Fostering collaboration, due to commercial sensitivities can

also be difficult.

A specific issue in Scotland is that the decommissioning of North Sea infrastructure may limit

opportunities for demonstration and development of carbon capture and storage (CCS). There is a

timeline for decommissioning and a need to consider alignment of this with opportunities for CCS.

The symbiotic relationship between a large scale hydrogen network of the future and CCS also needs

to be better understood.

Actions that could be taken to increase share of global market

There needs to be clarity in terms of direction from UK Government and then appropriate support

mechanisms in line with long term requirements. These could be, for instance, development of

industry and of appropriate skills and capabilities. A clear stable long term policy direction will also

attract long term investment and boost indigenous capabilities and supply chain evolution.

Government can also help facilitate collaboration in local clusters by providing an independent

partner, helping to facilitate knowledge sharing, and providing long term perspectives.

5.3 Low emission vehicles

5.3.1 Opportunities

The UK has opportunities in the electric vehicle battery manufacturing sector, which will be significant

as the market for such vehicles increases. There is also a very good academic base related to this,

which should be maintained. The right investments now by the UK in vehicle battery manufacturing

would set up the industry and manufacturers well for future opportunities in storage in the electricity

network and enhance their ability to enter the grid market.

Historically the UK has strengths in manufacturing and designing internal combustion engines (ICE).

Ultimately this will need to be replaced, but current research and development opportunities exist within

the ICE sector as well as for advanced fuels and electric vehicles. The UK would also be well placed

for research and development in areas such as electric machines and power electronics. However

actual manufacturing may be more likely in lower costs economies.

Other opportunities were identified in areas such as: charging software; new logistics approaches, such

as disruptive logistics, together with the necessary data collection requirements to put this into practice;

and inductive (wireless) charging.

5.3.2 Barriers

Within the UK, research and development support is good. However barriers exist in the scaling up of

technologies, including; investment gaps; sufficient expertise to exploit research; a conservative culture

as opposed to taking risks and accepting some may be failures; and a lack of UK manufacture

leadership.

Investment is hard to attract due to high infrastructure requirements and long return periods – investors

are usually focused on short payback with limited investment horizons. Political uncertainty and

potential policy changes also provide investment uncertainty. Therefore, help to set up manufacturing

and incentivise exports through integrated support covering aspects such as infrastructure, land,

financial and technical skills may be required.

The lack of a strategic overview of freight transport is a barrier to addressing this important carbon

emitter. The lack of data related to how full and heavy freight is also contributes to this.

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5.3.3 Actions that could be taken to increase share of global market

Continuing Government support and a long term policy direction is required. Areas of support needed

include infrastructure, e.g. charger installations, finance and investment, support to SMEs to help them

compete with global leaders, and development of good international standards to ensure the UK is not

disadvantaged on the global stage.

Strategic policy is required for freight transport, including appropriate approaches on data collection by

industry to enable new approaches to be utilised.

5.4 Energy efficient products

5.4.1 Opportunities

It was highlighted there could be benefits from closer links between material manufacturers and end

users to understand how materials are used and incorporated in products and components and make

improvements and efficiency savings. As an example, a Magnet Manufacturing Hub was suggested. A

similar approach has been used in Japan to link materials through to end user applications. In the UK

a water partnership

has been set up to come up with ways to improve marketing overseas to improve

UK goods sales levels.

There is significant opportunity at the micro and small medium enterprise business level. Such

businesses have the opportunity to develop into larger entities. However unless the development of

domestic markets can be supported, from which export markets can potentially be developed, there is

the risk that companies will look to move abroad to demonstrate and deploy their products.

5.4.2 Barriers

Funding is a major concern following Brexit, especially as significant amounts currently come from

European sources for some areas of research and development. European projects enable UK

expertise to participate in large integrated projects, providing links across Europe and partnerships to

access wider expertise and knowledge and in some cases feedstock for recovery of materials.

The participation of UK academics and industry in European projects also helps to ensure UK interests

and issues are represented and taken into account as part of the wider agenda. Following Brexit there

is the risk that UK specific aspects may not be considered as fully and the UK will need to consider

these itself, which will have funding implications.

Regulation and processes can favour larger entities and not necessarily SMEs. For example regulations

and terms and conditions aimed at larger companies in relation to public procurement could be

overcome by changes in the domestic market.

Political barriers mean that there is not always the will or prioritisation to help develop and promote

areas where the UK has strength, such as developing high tech solutions with export opportunities.

Other countries, such as China are moving forward themselves and could leave the UK behind with

opportunities missed.

5.4.3 Actions that could be taken to increase share of global market

Government could support new hubs and partnerships to drive efficiencies through material

manufacturers and end user applications having a better understanding of each other’s needs. There

could also be re-engagement on critical materials and security of supply, particularly from a UK specific

perspective given current work is predominately EU led.

A strategic view of funding across larger integrated projects is required to ensure UK involvement, as

well as greater prioritisation of technology developments and incentivising uptake. Regulations and

procurement guidelines can also be reviewed and revised accordingly to ensure public procurement

markets are readily accessible to all sizes of companies.

5.4.4 Other issues around capturing new market opportunities

There is a need for whole systems planning, it is not just about the product and solution level inputs but

also the supporting infrastructure and outputs it leads to. Examples might be in the areas of smart

infrastructure and electric vehicles where it is important to consider and develop the infrastructure

See https://theukwaterpartnership.org/

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required as well as developing the core technologies. This overall perspective will enable Government

to capture opportunities as they arise. This requires agility in reacting to the market and promoting

innovation.

5.5 Other sectors

5.5.1 Opportunities

Opportunities exist in the UKs food waste processing to capture food and green waste currently sent

to landfill, reducing emissions such as methane, and providing a useable output to use on land as

fertiliser as an alternative to artificial fertilisers. This includes the growing media sector, who are using

compost to replace all or some of the peat in their products.

The biofuels sector also provides UK opportunities if barriers can be overcome both in terms of using

first generation biofuels and developments with second generation biofuels, such as waste feedstocks.

The UK could have technology and skills advantages in this area, providing real benefits, through the

research and development UK companies are doing.

Finance and professional service opportunities are promoted within the UK. For example the City of

London’s Green Finance Initiative aims to promote London and the UK as a leading global centre for

the provision of green financial and professional services

, in addition to other initiatives such as the

Green Investment Bank. The opportunities include raising finance but also the support needed

alongside this such as advice on technical, legal, international obligations and secondary market

matters.

5.5.2 Barriers

A key barrier for food waste processing is that collection in England is not mandated, and financial

pressures mean that, while local authorities are keen to collect food waste, it may not always be done.

Investment in the infrastructure for treating food waste requires assurances over feedstock availability,

while cut backs in incentive schemes mean that the viability of smaller plants has reduced.

For Biofuels there is the potential for too much wishful thinking. There needs to be a realistic view on

what can be achieved. Inconsistent policy and support for areas that are required but are perhaps not

the main focus needs to be addressed to provide stability and investor confidence. Political barriers,

feedstock availability and a local willingness to use biofuels are also issues.

In terms of finance, barriers relate to the cost of electricity produced by different sources, for example

how is low carbon electricity, that is cheaper than electricity from fossil fuels, delivered? This is linked

to aspects such as storage, the integration of renewable energy into local grids and the use of smart

grids to better balance the supply of and demand for electricity. The price of carbon also needs to be

considered. It could be beneficial for the level of a carbon tax to be agreed globally – this could reflect

the real cost of 1 tonne of carbon emitted into the atmosphere and hence the cost of avoiding this.

5.5.3 Actions that could be taken to increase share of global market

For food waste processing, Government could mandate the collection of food waste in England. There

could also be more done in terms of diverting more food that is still fit for human consumption through

its collection and redistribution to those who need food through schemes such as Fairshare.

Government could provide consistent support on biofuels, and stick with decisions the closer biofuels

get to reaching market in order to provide stability. Work could also be done to remove political barriers,

for example on the food vs. fuel debate, with appropriate messaging for the public and decision making

based on the problem and available solutions, rather than allowing politics to deflect decisions.

While the UK is leading the way in terms of the Climate Change Act, this may be an expensive way of

addressing emissions – are there smarter ways of financing or investing in ways to reduce greenhouse

gas emissions, perhaps at an integrated global level. Alongside carbon savings, the benefits of

investments in secondary markets, such as developmental prosperity and improvements in people’s

lives are also important factors.

http://greenfinanceinitiative.org/about/who-we-are/

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5.5.4 Other issues around capturing new market opportunities

Further opportunities exist with the 'bio-based' economy area, where more can potentially be done with

natural materials e.g. algae for energy production, composite materials.

Stakeholder views – some themes

Some themes emerge from across the range of stakeholder interviews

 The UK has a strong academic, industrial and business base in many areas that will grow

with transition to a low carbon economy

 Current support for research and innovation is welcomed

 A vibrant UK low carbon sector will provide a base for growing export market share

 This growth will be enhanced by:

o Long term certainty, to the extent this can be achieved, in the policy and financial

context

o Continuing to consider means to enhance commercialisation of key technologies

needed for the low carbon transition

o A holistic approach considering infrastructure issues at the same time as

developing key technologies – for instance in considering developing of a charging

infrastructure at the same time as batteries and other aspects of electric vehicles

6 Conclusions on opportunities to increase the UK

share of future global markets

During this project, we have examined the potential role that various low carbon technologies could play

in reducing global emissions of Greenhouse Gases (GHG) and outlined a timeline for the transition to

a global low carbon economy that is consistent with limiting the rise in global temperature to below 2

We have assessed the potential size of the global and UK markets for selected low carbon products

and services, and used these to estimate the potential for future growth in the UK low carbon economy

manufacturing and service sectors in the periods from 2015 to 2030 and from 2030 to 2050.

Our analysis suggests that the low carbon economy will grow from around 2% of UK Total Output in

2015 to up to around 8% by 2030, and around 13% by 2050

. The projected compound annual growth

rate for the low carbon economy is 11% per annum between 2015 to 2030, and 4% per annum between

2030 and 2050, which is substantially higher than the OECD’s projection of average UK GDP growth

of 2.3% per annum between 2015 and 2050

However realising this potential growth rate depends on maintaining and improving on the UK’s

competitive position in the global low carbon technology market, and investing in the development of

new products and services across a wide range of technologies and applications. In terms of immediate

priorities for investment, we have identified some high growth technologies that will be needed to deliver

the commitments made in the Paris Agreement, including:

 Electric Vehicles

 Transport telematics

 Off-shore wind

 Solar PV.

 Smart Grids

 Energy storage

Assuming that UK total output grows on average by 2.3% per year.

https://data.oecd.org/gdp/gdp-long-term-forecast.htm

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 Biofuels

We have also identified some technologies that will be need to be fully deployed by 2050:

 Advanced materials and manufacturing, including design for reuse and waste recovery.

 Low carbon chemical processes using bioprocessing, catalysts and membrane technology

In addition, there are significant opportunities for the UK services sector to establish itself as a financial

hub for green finance and gain a sizable share of the financial services associated with the estimated

capital investment of between $1.5 and $6 trillion per annum needed to deliver the global low carbon

economy.

Acknowledgements

Ricardo Energy & Environment would like to thank a number of organisations that participated in

interviews as part of this work including: ATP Controls, the Carbon Capture and Storage Association,

the Chartered Institution of Water and Environmental Management (CIWEM), Global Smart

Transformations, Heriot Watt University, Jaguar Land Rover, Oxford University, the Renewable Energy

Association, Scottish Government, the Solar Trade Association, University of Birmgham, University of

Warwick, Vestas, Welsh Government and Western Power Distribution.

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Appendices

Appendix 1: Methodology for estimating current market value for UK manufacturers of low carbon goods

and services

Appendix 2: Comparison of sectors and technologies considered

Appendix 3: Data sources and assumptions for estimating the size of future global markets associated

with the low carbon economy

Appendix 4: Summary data from current analysis

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Appendix 1 - Methodology for estimating current

market value for UK manufacturers of low carbon

goods and services

This method note is presented in two parts.

Part A describes the method used to develop up to date estimates of the low carbon economy, excluding

climate change adaptation. This method has been designed to allow CCC to generate further estimates

in the future.

Part B describes the method used to estimate the market value associated with climate change

adaptation, which has not been included in previous assessments of the low carbon economy.

Part A: Method used to estimate the current market value for UK

manufacturers of low carbon goods and services

This note sets out the key decisions taken and approaches adopted in:

 Developing up to date estimates of the low carbon economy.

 Preparing a method to allow CCC to generate further estimates in the future.

The aim of the project has been to provide estimates that are consistent with those prepared previously

and which would be recognised as being ‘of the correct order’ by experts operating within the low carbon

domain.

The philosophy underpinning the work has been to rely on data already in the public domain or which

are readily available from commercial sources.

The challenge in defining and quantifying the low carbon economy arises from the fact that its activities

and products are not well served by the current method of industrial classification, the Standard

Industrial Coding system. Thus alternative methods are required.

A1A.1 Definition

The work has focused on two main areas:

1. A generally accepted notion of the low carbon economy based on the creation of recognised

end products and services.

2. A group of activities and, often intermediary, products that are increasingly being considered

as being part of the move to a low carbon economy.

The generally accepted definition of the low carbon economy comprises:

• Renewable electricity generation

• Renewable heat

• Energy efficient products

• Alternative fuels

• Low emission vehicles

• Energy storage

• Low carbon services and finance

This has been the focus of activity aimed at generating up to date estimates of the low carbon economy.

In addition to this, efforts have been applied to acquiring quantitative data on:

• The circular economy

• Low carbon management

• Adapting to climate change

• Low carbon manufacturing

• Materials and product substitution

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As these areas are less well defined, dispersed and often incorporated into supply chains, access to

quantitative data has proven challenging.

A1A.2 Available estimates of the size of the low carbon economy

It was decided that efforts to generate a current estimate of the low carbon economy and to prepare a

model that would allow the CCC to produce its own figures in the future, could best be achieved by

focusing on prior work and published statistics.

A review of the literature identified:

1. The Low Carbon and Renewable Energy Economy survey undertake by ONS.

2. The Size and performance of the low carbon economy report, published by BIS/DECC in

2015 and prepared by TBR.

3. A range of sector based data published by trade associations and based on surveys of their

members.

4. Statistics prepared by Innovas/K-Matrix.

Each of the methods is considered below:

The ONS estimates are based on a survey sample of approximately 14,000 taken from across the UK

and includes all sectors, except those unlikely to be involved in the low carbon economy, e.g. public

administration, human health etc. were excluded. The sample was stratified by industry, employment

and UK country. The survey has run twice and data are available for 2014 and 2015 (preliminary

aggregated data only). There is some doubt regarding the future of the survey.

The BIS/DECC commissioned work utilises a different approach to the ONS survey. The method for

the BIS work is based around a database of 11,500 companies known to operate in the low carbon

economy based on a review of websites, membership of trade organisations or inclusion in schemes

such as the microgeneration certification scheme. A telephone survey was used to establish the extent

to which the businesses operated in each sector. The data published are for 2013. The database was

derived from IDBR and TBR’s own data on an approximately equal basis. TBR’s data are readily

available and can be used to provide estimates into the future.

A number of trade associations, e.g. Nuclear Industry Association (NIA) and RenewableUK (RUK)

undertake surveys of their members and publish these on a regular basis. The Renewable Energy

Association (REA) indicates that its estimates are provided by Innovas/K-Matrix. The Innovas/K-Matrix

data are derived using a proprietary model based on a range of input materials. The exact nature of

the model is not available.

A1A.3 Data methods and sources

A more detailed assessment of the three open methods is provided below. This seeks to offer the

strengths and weaknesses of each and its suitability for incorporation into a model for use by CCC.

ONS Low Carbon and Renewable Energy Economy

Since 2015, ONS has run a survey to establish the size of the low carbon economy. Whilst yet to be

classified as official statistics, they are provided by government, so are regarded as a de facto standard.

The survey covers the ‘generally accepted definition’ of the low carbon economy. The cost of the 2014

and 2015 surveys was borne by several government departments and the devolved administrations.

Funding for the survey into the future is unclear.

Strengths

Weaknesses

Governed by ONS rules – seen as reliable.

Governed by ONS rules – limits disclosure and

hence usefulness.

Provided by ONS – considered to be robust.

Not overly granular, some data suppressed.

This limits the usefulness of the data.

Used by government, so in general use and

‘numbers’ will be recognised.

Time lag between the survey and publication,

circa 18-24 months.

Method open and available for scrutiny.

Uncertainty over the future of the survey.

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As ‘near to’ official statistics, these data provide an ideal basis for any future estimates. In fact, if the

survey continues to be published there may not be a need for alternative estimates.

The initial results of the 2015 survey were published on 26/12/2016. However, this did not include

sector level data and only covered direct employment. The latter are scheduled for publication at the

end of Q1, 2017.

BIS Size and performance of the low carbon economy 2015 (TBR)

This work was commissioned by BIS/DECC/Defra and undertaken by TBR in advance of the ONS

survey being run. ONS sat on a peer review board and there are significant similarities in the sector

definitions used. The method used was published in the report published by BIS.

Strengths

Weaknesses

Scrutinised method – peer reviewed.

Limited survey sample (630) underpinning the

analysis.

Granular – not subject to ONS suppression rules.

Database requires updating.

Can be updated – to some extent.

Supported by a database of businesses, so an

audit trail is available.

The method used is significantly different to the ONS survey, so provides an alternative approach.

Updating is possible by importing up to date company data into the database

. Over time the database

will need to be refreshed to take account of new entrants into the sector and those which have ceased

operations in low carbon . This work will require access to similar sources to those used previously,

e.g. trade directories, certification schemes as well as financial data from IDBR, Companies House and

Dun & Bradstreet. A follow up survey to establish the extent to which firms operate across the various

low carbon sectors will also have to be undertaken.

Both the ONS and BIS approaches allowed for businesses to operate in multiple low carbon sectors.

However, the differences in approach could magnify any sampling errors.

Trade Associations – survey based only

Some of the trade associations undertake survey work to assess performance and change over time.

The surveys tend to focus on trade associations’ members, so coverage may be limited, and with some

activities receiving greater attention than others.

Strengths

Weaknesses

Sector specific.

Not all low carbon sectors covered.

Some sectors provide detailed data on location

(nuclear).

Some surveys cover members only.

Operated by sector specialists, so potentially

more insightful than those run by 3

parties.

Issues over objectivity.

The trade association data may run the risk of ‘optimism bias’, so present potentially inflated results.

Up to date data are available for approximately half of the records. Costs will apply.

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A1A.4 Comparisons

The results of the comparative analysis are set out in the following table.

Clearly, some differences were to be expected. The principal causes of divergence include:

 Lack of consistency within the definition of sectors.

 Misalignment of sector groups, i.e. the sectors within the groups are not exactly the same.

 The scope of the sectors in terms of how much of the supply chain is included in direct activity,

and where/how boundaries are drawn.

 The methods used for assessing indirect employment.

 The metrics used, e.g. employment count versus full time equivalents (FTE).

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ONS 2015 Sector

ONS Employment

(direct and indirect)

2014

Updated BIS 2015

employment

Commentary

Alternative fuels

Bioenergy

52,100

TBR sector is “Energy generation from waste and biomass”, “Biomass

equipment” and Alternative fuels”

Carbon capture and storage

4,200

ONS data appear to be suppressed.

Energy efficient lighting

31,000

14,600

The availability and prevalence of low energy lighting has increased since the

BIS work was published, so this may under report the sector. Defining the

boundary to include/exclude lighting types and installation is challenging.

Energy monitoring, saving or control systems

33,000

12,100

The BIS survey asked businesses to self identify as providers of products and

services. As many of these products are contained within larger products,

e.g. software, controls, componentry, inconsistency in definition is the most

likely cause of the differences. The BIS work sought to ‘pre-identify’

companies and hence may under report for this large and very diverse sector.

Fuels cells and energy storage

1,000

Included in low emission vehicles in BIS work.

Hydropower

2,500

7,300

This sector is characterised by large and small schemes. Many of the

smaller schemes operate as subsidiary activities, so may have been

excluded from the ONS survey based on SIC codes.

Low carbon financial and advisory services

20,000

28,600

A very diverse sector so differences were expected.

Low emission vehicles and infrastructure

25,000

18,400

The ONS definition expressly includes storage, so may have captured some

businesses not included in the BIS work.

Nuclear

37,500

60,400

The ONS survey excludes decommissioning and reprocessing of fuel, which

is included in the BIS data.

Offshore wind

11,500

13,000

The stated definitions were similar so the differences are likely to result from

sampling and alternative methods used.

Onshore wind

13,000

19,700

The stated definitions were similar so the differences are likely to result from

sampling and alternative methods used.

Other energy efficient products

216,500

144,300

As per energy monitoring, the diversity of the sector along with the methods

used are the likely causes of the discrepancies.

TBR/BIS analysis includes: energy-efficient doors and windows, insulation,

recycling – recovery and reprocessing of materials from waste; and

sustainable architecture.

Other renewable electricity

7,300

Geothermal and marine

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ONS 2015 Sector

ONS Employment

(direct and indirect)

2014

Updated BIS 2015

employment

Commentary

Renewable combined heat and power

3,500

Renewable heat

9,000

36,200

The stated definitions were similar so the differences are likely to result from

sampling and alternative methods used. TBR/BIS group includes: heat

networks, heat pumps, solar thermal and heat recovery and ventilation.

Solar photovoltaic

19,000

31,300

The stated definitions were similar so the differences are likely to result from

sampling and alternative methods used.

Total

447,500

449,400

Source: ONS and TBR/OrtusER

ONS have published initial figures for employment for 2015. These are only available for direct employment in groups of sectors and not yet for individual

sectors. Ortus have modelled the sector data to gain total (direct plus indirect) employment data for 2015, using the same multipliers applied by ONS for the

2014 numbers. This allows comparisons to be made between the ONS and BIS data for 2015. Differences are considered to be largely due to differences in

the definitions of the sector groups and in the methods used to determine employment numbers.

ONS Group

ONS Employment

(direct and indirect)

Updated BIS 2015

employment

2014

2015

Energy efficient products

280,500

257,000

202,000

Energy from waste and biomass

22,000

19,100

30,200

Low carbon electricity

86,000

99,800

139,400

Low carbon heat

12,500

6,500

30,800

Low carbon services

20,000

23,700

28,600

Low emission vehicles,

infrastructure, fuels cells and

energy storage

26,000

35,500

18,400

Total

447,500

441,600

449,400

Source: ONS and TBR/OrtusER

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Part B: Method used to estimate the current market value for UK

companies associated with climate change adaptation

A1B.1 Summary

Neither the BIS 2015 report, or the ONS Low Carbon and Renewable Energy Economy Survey included

the climate change adaptation sector. As such, we have devised a method to define and value the

adaptation sector.

As there were no existing estimates for the sector work had to be undertaken de novo, so the data must

be considered less robust than those presented above. The numbers were derived using a mix of key

words to identify firms operating in the sector along with coefficients to estimate the degree of

engagement of those firms known to operate the area, but not identified through the keywords.

Examples of the latter include the large engineering consultancies. The results are set out in the table

below.

The data are gauged to be of the correct order of magnitude when compared to government’s stated

spend of £170m in one year on flood defences and mitigation

Table A1B.Summary: Initial estimate of the UK adaptation sector, 2015

Group

Employment (n)

Turnover

(£000)

GVA (£000)

Building adaptation

520

96,700

30,200

Business mitigation and management

6,000

2,900

Climate event planning and response

570

69,300

19,600

Flood mitigation and management

3,140

252,600

85,900

Public realm adaptation

1,990

393,900

154,400

Engineering related scientific and technical

consulting activities

1,340

187,300

95,600

Other engineering activities

730

102,200

55,100

Other research and experimental

development on natural sciences and

engineering

1,530

235,600

78,700

Total

9,860

1,343,600

522,400

Source: TBR/OrtusER 2017

It should be noted that to some extent the adaptation sector will already be incorporated into the existing

low carbon economy. Thus the data set out in the table above cannot be simply added to the numbers

in Table 6 to Table 8 in the main text.

A1B.2 Defining the adaptation sector

The research team undertook desk research to collate the range of activities, technologies and systems

that form the adaptation sector. Through this process, a number of firms known to engaged in these

activities were also investigated.

This desk research identified five thematic groups within the adaptation sector, along with keywords to

describe the activities. These groups and keywords are:

Autumn Statement 2016.

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Table A1B.1: Keyword groups and sectors

Group

Keyword sectors

Building adaptation

Air Conditioning, Mechanical Ventilation, Ventilation Systems

Business mitigation and management

Business Continuity, Resilience, Risk Management

Climate event planning and response

Catastrophe, Disaster Management, Disaster Recovery,

Emergency Management, Emergency Planning, Emergency

Response, Reinsurance, Storm

Flood mitigation and management

Flood, Flood Barrier, Flood Defence, Flood Protection, Flood

Resilience, Flood Risk, Flooding

Public realm adaptation

Adaptation, Climate Change, Climate Risk, Coastal

Management, Extreme Heat, Green Infrastructure, Heat wave,

Heatwave, Reservoir Engineering, Sea Level, Solar Films,

Solar Shading, Sustainable Drainage, Thermal Management,

Urban Design, Water Engineering, Weather

Source: TBR 2017

A number of firms known to be active in the sector were not identified by keywords, as climate change

adaptation represents only a small proportion of their work. Thus additional steps needed to be taken

to include the impact of these businesses. This involved two steps; first of all, establishing suitable SIC

codes that would capture all these businesses, and secondly, estimating the proportion of their work

that could be deemed as being for the adaptation sector.

Establishing which SIC sectors to use was carried out by identifying the ones used by firms which were

known to be active in the adaptation sector.

These sectors were then included in the adaptation definition, as follows:

Table A1B.2: SIC sectors

SIC sector

Engineering related scientific and technical consulting activities

Other engineering activities

Other research & experimental development on natural sciences & engineering

A1B.3 Building the dataset

A total of 22,444 TCR records have been identified (following cleaning and checking):

1. 3,309 in the keyword sector data extract

2. Of which 2,748 are located in air conditioning and ventilation

3. 18,935 are in the ‘SIC based’ data extract (viz engineering related)

4. Of which 11,510 are located in Engineering related scientific and technical consulting

activities

5. Several hundred records were common in both data extracts. These were kept in the key

word dataset.

Due to the large number of firms appearing in the SIC-based search, coefficients have been applied to

estimate the extent of their activity that can be allocated to the adaptation sector. Three coefficients

were identified for each keyword sector and SiC sector..

The coefficients were based on judgement after reviewing websites and related data and comparisons with other activities. For example,

government planned to invest £170m in flood mitigation in the year following the Autumn Statement, 2016.

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Table A1B.3: Coefficients

Keyword sector

Low

coefficient

Medium

coefficient

High

coefficient

Risk Management

0.01

0.03

0.05

Reinsurance

0.01

0.03

0.05

Air Conditioning

0.02

0.05

0.07

Ventilation Systems

0.02

0.05

0.07

SIC sector

Engineering related scientific and technical consulting activities

0.02

0.05

0.07

Other engineering activities

0.02

0.05

0.07

Other research & experimental development on natural sciences &

engineering

0.02

0.05

0.07

Source: TBR 2017

A1B.4 Adaptation analysis

Employment, turnover and GVA have been calculated for each keyword sector and each SIC sector

using the coefficients.

The employment, turnover and GVA calculated for each keyword sector has been aggregated into the

relevant keyword group.

The three tables below present the data for scenarios based on the use of low, medium or high

coefficients:

Table A1B.4: Low coefficient scenario

Group

Employment (n)

Turnover (£000)

GVA (£000)

Building adaptation

522

96,691

30,245

Business mitigation and management

5,968

2,872

Climate event planning and response

568

69,262

19,626

Flood mitigation and management

3,136

252,576

85,947

Public realm adaptation

1,989

393,931

154,423

SIC Sector

Engineering related scientific and technical

consulting activities

1,341

187,273

95,640

Other engineering activities

732

102,175

55,056

Other research and experimental development

on natural sciences and engineering

1,531

235,607

78,669

Total

9,861

1,343,482

522,478

Source: TBR 2017

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Table A1B.5: Medium coefficient scenario

Group

Employment

(n)

Turnover (£000)

GVA (£000)

Building adaptation

1,304

241,604

75,574

Business mitigation and management

8,265

4,048

Climate event planning and response

593

94,591

27,013

Flood mitigation and management

3,136

252,576

85,947

Public realm adaptation

1,989

393,931

154,423

SIC Sector

Engineering related scientific and technical

consulting activities

3,353

468,184

239,101

Other engineering activities

1,831

255,437

137,640

Other research and experimental development on

natural sciences and engineering

3,828

589,017

196,673

Total

16,084

2,303,604

920,419

Source: TBR 2017

Table A1B.6: High coefficient scenario

Group

Employment

(n)

Turnover

(£000)

GVA (£000)

Building adaptation

1,826

338,213

105,794

Business mitigation and management

10,562

5,224

Climate event planning and response

619

119,920

34,400

Flood mitigation and management

3,136

252,576

85,947

Public realm adaptation

1,989

393,931

154,423

SIC Sector

Engineering related scientific and technical consulting

activities

4,694

655,457

334,742

Other engineering activities

2,563

357,612

192,696

Other research and experimental development on

natural sciences and engineering

5,359

824,623

275,342

Total

20,244

2,952,894

1,188,568

Source: TBR 2017

A1B.5 Overall LCE estimate

The medium coefficient scenario totals for the adaptation sector have been added to the previous

estimates for the overall low carbon and renewable energy economy. The results are shown below in

Table A1.7.

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Table A1B.7: Total LCE including adaptation (medium coefficient scenario)

TBR total employment

TBR total turnover

(£billions)

TBR GVA (£billions)

TBR LCE 2016

449,411

122.64

41.93

TBR Adaptation

16,084

2.30

0.92

TBR Total

465,495

124.94

42.85

Adaptation as a percent

of total LCE

3.5%

1.9%

2.1%

Source: TBR 2017

The totals compared to the ONS Low Carbon and Renewable Energy Economy Survey estimates are

shown in the two tables below.

Table A1B.8: LCE TBR vs ONS employment comparisons

Sector Group

ONS 2014

TBR 2015

Energy efficient products

155,500

90,882

Energy from waste and biomass

11,500

19,032

Low carbon electricity

40,500

161,242

Low carbon heat

7,000

41,977

Low carbon services

13,000

28,610

Low emission vehicles, infrastructure, fuels cells and energy

storage

11,000

18,387

Waste processing and materials recovery

Not included

89,281

Adaptation (medium scenario)

Not included

16,084

Total

238,500

465,495

Source: TBR 2017

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Table A1B.9: LCE TBR vs ONS turnover comparisons

Sector Group

ONS

2014

TBR 2015

Energy efficient products

24.17

17.02

Energy from waste and biomass

2.45

26.35

Low carbon electricity

10.27

34.04

Low carbon heat

37.82

7.63

Low carbon services

1.96

4.02

Low emission vehicles, infrastructure, fuels cells and energy

storage

6.76

9.64

Waste processing and materials recovery

Not

included

23.94

Adaptation (medium scenario)

Not

included

2.30

Total

83.42

124.94

Source: TBR 2017

Note: margins of error in the ONS data are as follows.

Sector group

Variance

Low carbon electricity

> 10% and < 20%

Low carbon heat

> 20% and < 30%

Energy from waste & biomass

> 10% and < 20%

Energy efficient products

< 10%

Low carbon services

> 20% and < 30%

Low emission vehicles

> 10% and < 20%

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Appendix 2 – Comparison of sectors and

technologies considered

Three analyses have been used in the current work:

 Analysis by the Office of National Statistics of the size of the UK low carbon economy

 Analysis by TBR Ltd of the size of the UK low carbon economy

 Current analysis of the size and growth potential for opportunities arising from transition to a

low carbon economy

The first two analyses are intended to be comprehensive. The analysis of future opportunities covers:

 All sectors for low carbon electricity apart from hydropower and nuclear

 Low emission vehicles

 Low carbon finance and insurance, but not other low carbon analysis services

 Selected other low carbon opportunities

 Broad estimate for adaptation

 Broad estimate for the low carbon economy

Alignment of the areas covered by these analyses is given in Table A2.1

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Table A2.1: Alignment of the low carbon economy sectors considered by ONS, TBR and IEA and the technologies and areas considered in the current work

ONR Group

ONS Sector

TBR sector

IEA group

Technology/ measure,

current work

Area, current work

Sector grouping

used for

assessing % UK

share of global

market

Group for graph in

Section 4

Low carbon electricity

Offshore wind

Offshore Wind

Power

Onshore wind

Machinery /

Electrical Products

Low carbon electricity

Onshore wind

Onshore Wind

Power

Offshore wind

Machinery /

Electrical Products

Low carbon electricity

Solar photovoltaic

Solar PV

Power

Solar Photovoltaic (PV)

Machinery /

Electrical Products

Low carbon electricity

Hydropower

Hydroelectric

energy

Power

Low carbon electricity

Other renewable

electricity

Marine

Power

Marine energy

Machinery /

Electrical Products

Low carbon electricity

Carbon capture

and storage

Carbon capture and

storage

Power

Carbon capture and storage

Machinery /

Electrical Products

Low carbon electricity

Nuclear

Nuclear energy

Power

Low carbon electricity

Power

Energy storage (Power)

Machinery /

Electrical Products

Low carbon electricity

Low carbon heat

Renewable heat

Geothermal heat

Residential

Low carbon heat

Solar thermal

Residential

Low carbon heat

Renewable

combined heat and

power

Heat networks

Residential

Low carbon heat

Heat pumps

Residential

Energy from waste and biomass

Bioenergy

Energy generation

from waste and

biomass

Industry

Energy from waste and biomass

Biomass equipment

Industry

Energy from waste and biomass

Alternative fuels

Industry

Alternative fuels

Biofuels

Chemicals /

Related Industries

Other low carbon

products and services

Energy efficient products

Energy efficient

lighting

Energy-efficient

lighting

Residential

Energy efficient products

Other energy

efficient products

Energy-efficient

windows and doors

Residential

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ONR Group

ONS Sector

TBR sector

IEA group

Technology/ measure,

current work

Area, current work

Sector grouping

used for

assessing % UK

share of global

market

Group for graph in

Section 4

Energy efficient products

Heat recovery and

ventilation

Residential

Energy efficient products

Insulation

Residential

Insulation

Advanced Insulation

Construction

Other low carbon

products and services

Energy efficient products

Sustainable

architecture

Residential

Energy efficient products

Power

Materials and Product

Substitution

Alternative Batteries

Machinery /

Electrical Products

Other low carbon

products and services

Energy efficient products

Transport

Materials and Product

Substitution

Alternative Magnets

Metals / Metal

Products

Other low carbon

products and services

Energy efficient products

Industry

Materials and Product

Substitution

Bioprocessing

Chemicals /

Related Industries

Other low carbon

products and services

Energy efficient products

Industry

Materials and Product

Substitution

Catalysts

Chemicals /

Related Industries

Other low carbon

products and services

Energy efficient products

Industry

Materials and Product

Substitution

Membranes

Chemicals /

Related Industries

Other low carbon

products and services

Energy efficient products

Energy monitoring,

saving or control

systems

Energy controls and

control systems

Residential

Energy controls and control

systems

Smart grids

Computer and

information

services

Other low carbon

products and services

Low carbon services

Low carbon

financial and

advisory services

Low carbon finance

Services

Low carbon finance

Green Finance

Financial services

Low carbon financial

services

Low carbon services

Services

Low carbon finance

Performance/lifetime

insurance

Insurance

Low carbon financial

services

Low carbon services

Low carbon

advisory services

Services

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Low emission

vehicles and

infrastructure

Low emission

vehicles

Transport

Low emission vehicles

Transmission /

Engines

Transport

Equipment

(Not included as

already in figures for

vehicles)

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Fuels cells and

energy storage

Transport

Low emission vehicles

Charging Solutions

Transport

Equipment

Low emission vehicles

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Transport

Low emission vehicles

Fuel Cell Electric

Vehicles

Transport

Equipment

Low emission vehicles

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ONR Group

ONS Sector

TBR sector

IEA group

Technology/ measure,

current work

Area, current work

Sector grouping

used for

assessing % UK

share of global

market

Group for graph in

Section 4

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Transport

Low emission vehicles

Electric Vehicles

Transport

Equipment

Low emission vehicles

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Transport

Low emission vehicles

Hybrid electric

vehicles

Transport

Equipment

Low emission vehicles

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Low emission vehicles

Logistics /

Telematics

Transport

Equipment

Low emission vehicles

Waste processing

and materials

recovery

Recycling of materials from

waste

Lithium Batteries

Machinery /

Electrical Products

Other low carbon

products and services

Adaptation

Construction

Box on adaptation

Circular Economy

Machinery /

Electrical Products

Box on circular

economy

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Appendix 3 - Data sources and assumptions for

estimating the size of future global markets

associated with the low carbon economy

See xls file “CCC Global Market Size Estimates_v01-17”

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Appendix 4 – Summary data from current analysis

[From “CCC Global Market Size Estimates_v01-17.xls”]

Table A4.1: Estimates of global market size for technologies and areas considered.

Grouping

Technology /

Measure

Area

2015 Global

£m/year (low)

2015 Global

£m/year (high)

2030 Global

£m/year (low)

2030 Global

£m/year (high)

2050 Global

£m/year (low)

2050 Global

£m/year (high)

Low carbon

electricity

Onshore wind

59,000

77,000

82,000

120,000

150,000

Low carbon

electricity

Offshore wind

3,200

16,000

17,000

38,000

48,000

Low carbon

electricity

Marine energy

4,400

4,700

81,000

100,000

Low carbon

electricity

Solar Photovoltaic

(PV)

63,000

70,000

74,000

170,000

220,000

Low carbon

electricity

Carbon capture and

storage

1,200

86,000

170,000

150,000

360,000

Low carbon heat

Energy storage

(Power)

11,000

12,000

17,000

21,000

Waste processing,

energy from waste

and biomass

Recycling of

materials from

waste

Lithium

Batteries

120

3,400

12,000

Waste processing,

energy from waste

and biomass

Alternative fuels

Biofuels

160,000

180,000

400,000

470,000

1,200,000

1,400,000

Energy efficiency

products

Insulation

Advanced

Insulation

110,000

86,000

Energy efficiency

products

Energy controls and

control systems

Smart grids

72,000

320,000

450,000

360,000

500,000

Low carbon

services

Low carbon finance

Green Finance

11,000

32,000

60,000

260,000

96,000

430,000

Low carbon

services

Low carbon finance

Performance/lif

etime insurance

850

2,600

6,300

19,000

10,000

31,000

Other low carbon

Low emission

vehicles

Transmission

3,000

110,000

390,000

Other low carbon

Low emission

vehicles

Charging

Solutions

7,300

15,000

220,000

450,000

700,000

1,400,000

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology /

Measure

Area

2015 Global

£m/year (low)

2015 Global

£m/year (high)

2030 Global

£m/year (low)

2030 Global

£m/year (high)

2050 Global

£m/year (low)

2050 Global

£m/year (high)

Other low carbon

Low emission

vehicles

Fuel Cell

Electric

Vehicles

65,000

140,000

340,000

560,000

Other low carbon

Low emission

vehicles

Battery Electric

Vehicles

6,800

190,000

1,100,000

Other low carbon

Low emission

vehicles

Hybrid electric

vehicles

14,000

540,000

480,000

1,300,000

1,200,000

Other low carbon

Low emission

vehicles

Logistics /

Telematics

5,300

31,000

700,000

160,000

3,300,000

Other low carbon

Adaptation

50,000

65,000

120,000

270,000

440,000

Other low carbon

Circular Economy

800,000

1,600,000

1,400,000

2,700,000

Other low carbon

Materials and

Product Substitution

Alternative

Batteries

6,900

7,300

20,000

26,000

Other low carbon

Materials and

Product Substitution

Alternative

Magnets

6,900

260,000

270,000

910,000

920,000

Other low carbon

Materials and

Product Substitution

Bioprocessing

87,000

200,000

490,000

790,000

1,900,000

Other low carbon

Materials and

Product Substitution

Catalysts

16,000

20,000

27,000

34,000

49,000

62,000

Other low carbon

Materials and

Product Substitution

Membranes

16,000

18,000

68,000

93,000

350,000

570,000

Total

692,670

764,120

3,802,000

6,508,600

10,119,000

17,926,000

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Table A4.2: Estimates of UK home market size for technologies and areas considered.

Grouping

Technology /

Measure

Area

2015 UK Home

Market £m (low)

2015 UK Home

Market £m (high)

2030 UK Home

Market £m (low)

2030 UK Home

Market £m (high)

2050 UK Home

Market £m (low)

2050 UK Home

Market £m (high)

Low carbon

electricity

Onshore wind

900

1,400

1,800

1,200

1,600

Low carbon

electricity

Offshore wind

970

2,900

3,700

2,600

3,300

Low carbon

electricity

Marine energy

110

150

530

670

Low carbon

electricity

Solar Photovoltaic

(PV)

430

1,300

1,600

2,000

2,500

Low carbon

electricity

Carbon capture and

storage

2,800

1,600

7,900

5,500

Low carbon heat

Energy storage

(Power)

640

820

350

430

Waste processing,

energy from waste

and biomass

Recycling of

materials from

waste

Lithium

Batteries

390

490

410

520

Waste processing,

energy from waste

and biomass

Alternative fuels

Biofuels

310

360

500

580

160

180

Energy efficiency

products

Insulation

Advanced

Insulation

3,700

3,400

2,400

Energy efficiency

products

Energy controls and

control systems

Smart grids

940

4,200

5,900

4,700

6,500

Low carbon

services

Low carbon finance

Green Finance

130

400

700

3,000

1,200

5,400

Low carbon

services

Low carbon finance

Performance/lif

etime insurance

220

1,200

5,400

Other low carbon

Low emission

vehicles

Transmission

210

3,400

4,800

7,300

8,200

Other low carbon

Low emission

vehicles

Charging

Solutions

460

940

7,400

20,000

14,000

32,000

Other low carbon

Low emission

vehicles

Fuel Cell

Electric

Vehicles

6,800

14,000

Other low carbon

Low emission

vehicles

Battery Electric

Vehicles

530

10,000

17,000

34,000

40,000

Other low carbon

Low emission

vehicles

Hybrid electric

vehicles

960

14,000

11,000

5,700

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology /

Measure

Area

2015 UK Home

Market £m (low)

2015 UK Home

Market £m (high)

2030 UK Home

Market £m (low)

2030 UK Home

Market £m (high)

2050 UK Home

Market £m (low)

2050 UK Home

Market £m (high)

Other low carbon

Low emission

vehicles

Logistics /

Telematics

140

170

600

13,000

2,200

46,000

Other low carbon

Adaptation

510

640

810

1,000

1,400

1,700

Other low carbon

Circular Economy

24,000

48,000

38,000

76,000

Other low carbon

Materials and

Product Substitution

Alternative

Batteries

390

490

410

520

Other low carbon

Materials and

Product Substitution

Alternative

Magnets

490

110

150

270

320

Other low carbon

Materials and

Product Substitution

Bioprocessing

2,900

6,100

15,000

22,000

52,000

Other low carbon

Materials and

Product Substitution

Catalysts

510

640

810

1,000

1,400

1,700

Other low carbon

Materials and

Product Substitution

Membranes

510

600

2,000

2,800

9,600

16,000

Total

14,619

15,820

88,034

163,130

173,030

328,290

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Table A4.3: Estimates of UK market share of global market (home market + exports) for technologies and areas considered.

Grouping

Technology / Measure

Area

2015 Total

UK share

£m/year

(Low)

2015 Total

UK share

£m/year

(high)

2030 Total UK

share £m/year

(Low)

2030 Total UK

share £m/year

(high)

2050 Total UK

share £m/year

(low)

2050 Total UK

share £m/year

(high)

Low carbon electricity

Onshore wind

1,300

1,900

2,300

2,000

2,600

Low carbon electricity

Offshore wind

980

3,000

3,800

2,800

3,600

Low carbon electricity

Marine energy

140

180

1,100

1,300

Low carbon electricity

Solar Photovoltaic (PV)

840

1,800

2,100

3,100

3,900

Low carbon electricity

Carbon capture and

storage

3,300

2,700

8,800

7,800

Low carbon heat

Energy storage (Power)

710

890

460

570

Waste processing,

energy from waste and

biomass

Recycling of materials

from waste

Lithium Batteries

410

510

490

600

Waste processing,

energy from waste and

biomass

Alternative fuels

Biofuels

1,400

1,500

3,100

3,700

8,100

9,400

Energy efficiency

products

Insulation

Advanced Insulation

3,700

3,400

2,400

Energy efficiency

products

Energy controls and

control systems

Smart grids

1,400

6,200

8,600

6,900

9,600

Low carbon services

Low carbon finance

Green Finance

300

900

1,600

7,100

2,700

12,000

Low carbon services

Low carbon finance

Performance/lifetime

insurance

150

440

1,300

5,700

Other low carbon

Low emission vehicles

Transmission

250

4,900

6,300

13,000

14,000

Other low carbon

Low emission vehicles

Charging Solutions

560

1,100

10,000

26,000

24,000

51,000

Other low carbon

Low emission vehicles

Fuel Cell Electric

Vehicles

910

8,700

11,000

22,000

Other low carbon

Low emission vehicles

Battery Electric

Vehicles

620

13,000

19,000

49,000

55,000

Other low carbon

Low emission vehicles

Hybrid electric

vehicles

1,100

21,000

18,000

29,000

22,000

Other low carbon

Low emission vehicles

Logistics /

Telematics

210

240

1,000

23,000

4,400

91,000

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology / Measure

Area

2015 Total

UK share

£m/year

(Low)

2015 Total

UK share

£m/year

(high)

2030 Total UK

share £m/year

(Low)

2030 Total UK

share £m/year

(high)

2050 Total UK

share £m/year

(low)

2050 Total UK

share £m/year

(high)

Other low carbon

Adaptation

520

650

830

1,000

1,400

1,800

Other low carbon

Circular Economy

29,000

58,000

47,000

93,000

Other low carbon

Materials and Product

Substitution

Alternative Batteries

430

530

540

690

Other low carbon

Materials and Product

Substitution

Alternative Magnets

520

1,500

1,600

5,000

5,100

Other low carbon

Materials and Product

Substitution

Bioprocessing

3,500

7,400

18,000

27,000

64,000

Other low carbon

Materials and Product

Substitution

Catalysts

610

770

980

1,200

1,700

2,100

Other low carbon

Materials and Product

Substitution

Membranes

610

710

2,400

3,400

12,000

20,000

Total

18,458

20,160

119,060

219,290

265,190

500,930

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Table A4.4: List of 50 Market Segments reviewed.

Grouping

Technology /

Measure

Area

Rationale

Priority

Assessed?

Low carbon electricity

Onshore wind

Lagging behind other major

economies

Low

Yes

Low carbon electricity

Offshore wind

Area of emerging UK strength

Medium

Yes

Low carbon electricity

Nuclear energy

Outside scope (Fusion,

Fission)

Not

Relevant

Low carbon electricity

Hydroelectric energy

Normally sourced from local

suppliers

Low

Low carbon electricity

Marine energy

Area of emerging UK strength

Medium

Yes

Low carbon electricity

Solar Photovoltaic

(PV)

Competing with lower cost

economies

Low

Yes

Low carbon electricity

Carbon capture and

storage

Lagging behind other major

economies but required

longer-term and some UK

strengths

High

Yes

Low carbon electricity

Energy storage

(Power)

Area of particular UK strength

High

Yes

Low carbon heat

Geothermal heat

Limited market size / home

market

Low

Low carbon heat

Heat pumps

Lagging behind other major

economies

Low

Low carbon heat

Solar thermal

Lagging behind other major

economies

Low

Waste processing, energy

from waste and biomass

Heat networks

Normally sourced from local

suppliers

Low

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology /

Measure

Area

Rationale

Priority

Assessed?

Waste processing, energy

from waste and biomass

Recycling of materials

from waste

Lithium Batteries

Area of existing UK strength

Medium

Yes

Waste processing, energy

from waste and biomass

Energy from waste

and biomass

Normally sourced from local

suppliers

Low

Waste processing, energy

from waste and biomass

Alternative fuels

Biofuels

Area of emerging UK strength

Medium

Yes

Waste processing, energy

from waste and biomass

Alternative fuels

Hydrogen

Constrained by resource

availability

Low

Waste processing, energy

from waste and biomass

Alternative fuels

Other

Normally sourced from local

suppliers

Low

Waste processing, energy

from waste and biomass

Biomass equipment

Lagging behind other major

economies

Low

Energy efficiency products

Energy-efficient

lighting

Existing market / technology

Not

Relevant

Energy efficiency products

Insulation

Advanced Insulation

Area of existing UK strength

Medium

Yes

Energy efficiency products

Energy-efficient

windows and doors

Existing market / technology

Not

Relevant

Energy efficiency products

Heat recovery and

ventilation

Existing market / technology

Not

Relevant

Energy efficiency products

Energy controls and

control systems

Smart Meters

Existing market / technology

Not

Relevant

Energy efficiency products

Energy controls and

control systems

Smart grids

Area of emerging UK strength

Medium

Yes

Energy efficiency products

Energy controls and

control systems

Energy Management

Covers multiple

solutions/technologies

Non-

Specific

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology /

Measure

Area

Rationale

Priority

Assessed?

Energy efficiency products

Sustainable

architecture and

buildings

BIPV

Area of emerging UK strength

Medium

Energy efficiency products

Other energy efficient

equipment

Existing market / technology

Not

Relevant

Low carbon services

Low carbon advisory

Covers multiple

solutions/technologies

Non-

Specific

Low carbon services

Low carbon finance

Green Finance

Area of particular UK strength

High

Yes

Low carbon services

Low carbon finance

Performance/lifetime

insurance

Area of particular UK strength

High

Yes

Low carbon services

Low carbon

management

Covers multiple

solutions/technologies

Non-

Specific

Other low carbon

Low emission vehicles

Transmission

Area of particular UK strength

High

Yes

Other low carbon

Low emission vehicles

Charging Solutions

Area of emerging UK strength

Medium

Yes

Other low carbon

Low emission vehicles

Fuel Cell Electric Vehicles

Area of emerging UK strength

Medium

Yes

Other low carbon

Low emission vehicles

Battery Electric Vehicles

Area of emerging UK strength

Medium

Yes

Other low carbon

Low emission vehicles

Hybrid electric vehicles

Lagging behind other major

economies

Low

Yes

Other low carbon

Low emission vehicles

Logistics / Telematics

Area of emerging UK strength

Medium

Yes

Other low carbon

Adaptation

Early stage of technology

development

Non-

Specific

Yes

Other low carbon

Circular Economy

Early stage of technology

development

Non-

Specific

Yes

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

Grouping

Technology /

Measure

Area

Rationale

Priority

Assessed?

Other low carbon

Low carbon

manufacturing

Lean / Agile Manufacturing

Area of particular UK strength

High

Other low carbon

Low carbon

manufacturing

Lightweighting /

Dematerisation

Area of particular UK strength

High

Other low carbon

Low carbon

manufacturing

Other

Covers multiple

solutions/technologies

Non-

Specific

Other low carbon

Materials and Product

Substitution

Alternative Batteries

Area of particular UK strength

High

Yes

Other low carbon

Materials and Product

Substitution

Alternative Magnets

Constrained by resource

availability

Low

Yes

Other low carbon

Materials and Product

Substitution

Alternative materials

(Other)

Competing with lower cost

economies

Low

Other low carbon

Materials and Product

Substitution

Bioprocessing

Area of particular UK strength

High

Yes

Other low carbon

Materials and Product

Substitution

Catalysts

Area of particular UK strength

High

Yes

Other low carbon

Materials and Product

Substitution

Membranes

Area of particular UK strength

High

Yes

Other low carbon

Materials and Product

Substitution

Rare Elements Alternatives

Constrained by resource

availability

Low

Other low carbon

Materials and Product

Substitution

Other

Covers multiple

solutions/technologies

Non-

Specific

UK business opportunities of moving to a low carbon economy

Ricardo Energy & Environment

Ricardo in Confidence

Ref: Ricardo/ED10039 V7

A4.5: Compound Annual Growth Rates (CAGR) used in 2030 & 2050 projections

Low carbon economy (LCE)

sector

Study Area based on

2015-2030

2030-2050

Energy efficient products

Low carbon other

6.9%

5.0%

Energy from waste and biomass

Low carbon other

6.9%

5.0%

Low carbon electricity

8.7%

2.8%

Low carbon heat

Low carbon other

6.9%

5.0%

Low carbon services

13.3%

4.3%

Low emission vehicles,

infrastructure, fuels cells and

energy storage

Low emission vehicles

23.6%

4.8%

Waste processing and materials

recovery

Low carbon other

6.9%

5.0%

The sectors in this table have been used by the Office of National Statistics to present the size of the UK low carbon economy. As this report

relates to opportunities for the UK low carbon economy, these sectors will be used from this point onwards. A comparison of the sub-sectors

included by ONS and by the analyses in this report is in Appendix 2.

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