Is there a tension between 'green growth' and regional 'levelling up'? Impacts of introducing an infrastructure-intensive carbon transport and storage industry to service the UK's regional manufacturing clusters

Turner, Karen and Race, Julia and Alabi, Oluwafisayo and Calvillo, Christian and Katris, Antonios and Swales, Kim (2021) Is there a tension between 'green growth' and regional 'levelling up'? Impacts of introducing an infrastructure-intensive carbon transport and storage industry to service the UK's regional manufacturing clusters. Preprint / Working Paper. University of Strathclyde, Glasgow.

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Abstract

The UK Industrial Decarbonisation Strategy identifies carbon capture and storage (CCS) as a route to decarbonising regional industry clusters while safeguarding supported jobs and income. The potential for carbon capture in these clusters, together with offshore and supply chain capability developed in the oil and gas industry, provides the foundation for a new regional CO2 Transport and Storage (T&S) industry. The UK Government has already identified policy challenges around the probable requirement to initially oversize the indivisible T&S infrastructure, to lower unit costs and build user confidence. One key issue is guaranteeing demand for the T&S industry output and how any public intervention may be funded, with potential wider economy multiplier effects identified as a source of benefit to offset costs, and a route to helping deliver wider 'Green Growth' and regional 'levelling up' agendas. Here, we develop a CGE model of the UK economy through scenarios involving the staged infrastructure investment required for the new T&S sector. We consider the potential direct and economy-wide impacts of introducing a T&S industry, where government guarantees demand for output but can recover costs from households or emitters. We find that the need to recover costs, particularly in a supply constrained economy, will offset new industry multiplier effects. While establishing that a T&S industry could deliver regional and wider economy gains, the aim of moving to 'polluter pays' approach poses a risk damaging the industrial cluster activity that policymakers look to CCS to safeguard, with wider economy impacts potentially concentrated in host regions.

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