In October 2018, the UK Government announced plans, as part of the Industrial Strategy, to establish an Industrial Energy Transformation Fund (IETF) providing up to £315 million until at least 2024. This is part of a package of support for decarbonising energy-intensive industries (EII) alongside the Industrial Clusters Mission and Climate Change Agreements.
In 2020, Scottish Ministers opted to deliver a separate IETF in Scotland over a similar timeframe and announced that £34 million would be made available, via the Scottish Industrial Energy Transformation Fund (SIETF), for capital projects over the next five years. This represents an additional £8 million (or 30%) over the £26 million budget transfer from UK Government. The 2021 Programme for Government reinforced the contribution of this fund to connect strategic decarbonisation aims to investment at sites spread around the country, across a range of industrial sectors, enabling direct action to reduce carbon and improve industrial energy efficiency.
The importance of shared objectives to meet climate change targets ensures that we continue to cooperate with other UK administrations and that the SIETF is in broad alignment with the IETF. Yet a distinct fund allows flexibility towards the specific characteristics of Scotland’s industrial manufacturing base, supporting industry to go further and faster in the transition to a low carbon future.
Having almost halved our greenhouse gas (GHG) emissions since 1990, Scotland is at the forefront of the international response to the global climate emergency. We have committed to become a net-zero society by 2045, five years before the rest of the UK and in line with advice from the government’s independent expert advisors, the Climate Change Committee.
To achieve this, emissions from industrial processes must be reduced wherever feasible. Energy intensive industries (EII) form a core part of Scotland’s manufacturing base and cover sites that consume high levels of energy, these being responsible for over 15% of all Scotland’s greenhouse gasses emissions (GGS) in 2018.
Scotland’s updated Climate Change Plan included the following targets relevant to EII:
- by 2032 industrial and commercial energy productivity will improve by at least 30% from 2015 levels through a combination of fuel diversification, energy efficiency improvements and heat recovery
- by 2032 industrial and commercial emissions intensity will fall by at least 30% from 2015 levels, through a combination of fuel diversification, energy efficiency improvements and heat recovery
Green recovery and Just Transition
Manufacturing industries across all sectors continue to face significant economic challenges because of the COVID-19 pandemic and the high costs of energy. Investment in EII can sustain a significant number of high-value jobs that are often in the supply chains. This economic activity is vital for regional communities, the Scottish manufacturing sector and economy as a whole. SIETF is therefore considered as part of a wider strategic approach to support a just and green recovery.
SIETF was launched in 2020 as part of a £400 million suite of investment support and is aimed at those industries who are ready to equip themselves to thrive in new and emerging lower-carbon markets. Of this total, £60m was allocated to decarbonise manufacturing, split into:
- £34m for SIETF, primarily to deploy mature technologies on industrial sites
- £26m for a Low Carbon Manufacturing Challenge Fund to support manufacturing businesses to innovate in the development of new low carbon technology, products, processes and encourage adoption
In June 2020, we announced a separate £62 million Energy Transition Fund to support businesses in the oil, gas and energy sectors over the next five years to provide an economic stimulus to re-start the economy and support supply chains in the transition to low-carbon energy.
This call for SIETF, through its assessment mechanisms, will encourage connection with our approach to planning for managed transition and the ambitions of the Green Jobs Fund. In September 2021, we published our National Just Transition Planning Framework, which sets out the consistent, ambitious approach we will take to developing transition plans.
We are gathering views in advance of delivering the first Just Transition Plan as part of the forthcoming refreshed Scottish Energy Strategy and also committed to consult on the requirement of large businesses receiving significant public support to commit to reduce emissions at levels consistent with Scotland’s net zero target. A key principle of Just Transition Plan is that they must build upon existing work and experience, and therefore should be aligned with opportunities or projects that are within the remit of SIETF - i.e. proposals that are ready or potentially ready for deployment, or have a pathway towards implementation wherever possible.
Fair Work First
Scotland is leading the way in creating a wellbeing economy, delivering sustainable and inclusive growth for the people of Scotland. This means creating a more resilient economy where businesses can thrive, innovate and create good quality jobs in a way that enhances quality of life, reduces inequalities and is compatible with a net zero, sustainable economy. Fair Work is central to achieving the priority for sustainable and inclusive growth, through which everyone in Scotland can contribute to and benefit from our country’s success.
Fair Work First is our policy for driving high quality and fair work across the labour market in Scotland by applying fair work criteria to grants. The SIETF grant funding process requires businesses to consider how their operations can be assessed against the Fair Work First criteria.
It will become a requirement for public sector grant recipients to pay at least the real Living Wage to all employees and provide appropriate channels for effective workers’ voice, such as trade union recognition.
About the SIETF
As well as an environmental necessity, industrial decarbonisation is an economic opportunity – to grow our existing energy intensive sectors and to attract the manufacturing industries of the future. However, engagement with industry leaders has shown that there are significant barriers to attracting the necessary investment – particularly long payback periods – whilst sites must remain internationally competitive.
Via match-funding, the SIETF is incentivising investment in existing sectors, building on their considerable strengths. SIETF-supported projects already demonstrate that government and industry are taking steps together to deliver against Scotland’s climate change ambitions by co-investing to decarbonise the industrial sites that local jobs and communities depend upon. Technological investment will also support inclusive growth, aligned to the global Sustainable Development Goals.
Whilst the initial calls for projects have been positive, the pace of change required means that we require companies with projects that investment ready stage or require development support to apply to SIETF. We are working with agency partners to identify projects that could be progressed into a pipeline and work with these projects to make them investment ready.
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