Final report for One North East And NEPIC 21/12/10 - The Carbon ...

The case for a Tees CCS networkFinal Report2 Setting the Scene2.1 Tees Valley industry in the North East EconomyThe North East of England has an economy worth £40 bn/year, of which £7bn/year arisesfrom manufacturing 7 , wherein more than 40,000 people are directly employed. Within theNorth East, more than 30,000 people are directly employed in the manufacturing industryin the Tees Valley, an area within the North East that contributes £10/bn per year in GrossValue Added (GVA) 8 .Initially Tees Valley manufacturing industry was developed on the basis of access to rawmaterials (coal and iron, and later oil and gas) and world leading delivery (ICI and BritishSteel). This created a legacy of highly desirable physical infrastructure, workforce, anddegree of co-operation between businesses. The Tees Valley remains home to Europe‟slargest integrated cluster of manufacturing industries 9 , with major proportions of the UK‟spetrochemical, pharmaceutical, and specialty chemical sectors. 10Recent investments in the Tees Valley industry exceed £800 million 11 . Tees Valleycontains the world‟s largest polyethylene plant, the world‟s largest combined cycle gasturbine heat and power plant, and one of Europe‟s largest bioethanol plants 12 . Proposedinvestments in the energy engineering sector, worth £8 billion are presently underconsideration. Proposals include a heavy oil upgrader, coal gasification, biomass, energyfrom waste and nuclear power plants, wind turbine construction facilities, and improvedport facilities.Tees Valley process industries are critical to the overall prosperity of the North East andthe UK. Recent years have seen inward investment of more than £800m frominternational businesses and further investments worth several billion pounds are underconsideration.2.2 Value at Risk from CO 2 regulation in the Tees ValleyThe reliance of the North East regional economy on manufacturing and process industriesmake it the most emissions intensive in the UK. Well over half the regions emissions(63%) arise from large industrial sources and power – the highest percentage in the UK –whilst the regions emissions intensity per unit of gross value added (GVA) is double theUKs national rate (767 tCO 2 /£million GVA compared to the national figure of 391tCO 2 /£million GVA; Figure 2). This clearly shows that the North East regional economy isparticularly exposed to the effects of CO 2 regulation and pricing relative to other parts ofthe UK.7 ONS(2009) Regional GVA and COE NUTS data available athttp://www.statistics.gov.uk/downloads/theme_economy/NUTS1_A31_GVA_COE.xls8 Tees Valley Unlimited (2010): Local Enterprise Partnership – A proposal; See also ONS (2009) Regional GVAand COE NUTS level 3 data available athttp://www.statistics.gov.uk/downloads/theme_economy/NUTS3.xls9 www.nepic.co.uk10 To put these figures into context, the UK is the world‟s sixth largest manufacturer by output and the chemicalprocess industry sector is the UK‟s highest exporter with exports in the region of £30bn/year, and 60% ofchemical exports originate within the Tees Valley.11 PB/Genecon (2009) North East Industrial Carbon Emissions – Socio-Economic Analysis12Tees Valley Unlimited (2010) Tees Valley Low Carbon Economic Transition Planhttp://www.teesvalleyunlimited.gov.uk/economyplanningenvironment/documents/tees%20valley%20unlimited%20low%20carbon%20economic%20transition%20plan.pdf6