UK manufacturers are well placed to take advantage of the major commercial opportunities offered by the drive towards a low carbon economy, according to a new report from EEF, the manufacturers' organisation, and accountants Deloitte.
By 2020, the UK must source 15 per cent of its energy from renewable sources and cut CO2 emissions by 16 per cent in response to challenging targets set by the European Commission. This will create significant challenges for industry in terms of its competitiveness.
However, according to the report - Delivering the Low Carbon Economy - significant business opportunities exist for manufacturers in three key areas: low carbon energy, low carbon vehicles and energy efficiency.
Ian Smith, chief executive of EEF West Midlands, said: "Moving to a low carbon economy will create significant business opportunities and UK industry is well placed to exploit them.
"However, this will only happen if companies are quick to identify these opportunities and move swiftly to take advantage of them.
"The Government also needs to back industry with a strategy that provides leader-ship, overcomes the barriers and helps develop the capabilities needed to deliver a low carbon economy."
Jane Lodge, Deloitte's Birmingham-based UK manufacturing industry leader, agreed.
"A range of opportunities exist for manufacturers to develop new climate friendly technology and many UK businesses are already world class in their sectors," she said.
"However, there is still much work to be done both by manufacturers themselves and also by government in order for the right environment to be created that will allow these opportunities to be realised."
One strategy to reduce carbon emissions is through the use of renewable energy. The most promising opportunities for UK industry are in 'clean' coal, offshore wind and marine renewables.
Mr Smith added: "The UK is well positioned to take advantage of any growth in the global market for clean coal technologies and possesses the best wind and marine energy resources in Europe.
"Further, there are more businesses engaged in the development of devices to harness energy from waves and tidal streams in the UK than in any other country."
Two major areas of opportunity for UK manufacturers are in internal combustion engines and hybrid and electric vehicles.
The UK produces close to three million engines a year and also has a number of market-leading designers and developers of engines and engine-related technologies.
The UK also has significant expertise in a range of technologies key to the development of hybrid vehicles such as control systems and electric drivetrains.
Ms Lodge said: "The UK automotive engine industry is strong but faces a growing challenge from low cost countries which are beginning to play a significant role in the manufacture of vehicles and engines. The industry also faces a challenge to become a supplier of choice of hybrid drivetrains to the major vehicle manufacturers."
When it comes to saving energy, the report states that there are two simple and very quick actions that could be taken to improve energy efficiency significantly in the home and in business.
The first would involve the replacement of all boilers in the home with a condensing boiler, an area where the UK is a world leader.
Secondly, motor systems account for nearly 60 per cent of energy consumption in industry and there is considerable scope to increase the use of variable speed drives which would produce substantial energy savings and financial benefits.
Mr Smith said: "The UK is the largest gas boiler market in Europe and there is considerable potential to accelerate the uptake of highly efficient condensing boilers and in the longer-term deploy micro combined heat and power (CHP) technology.
"The large manufacturing base currently focused on condensing boilers could be, and in some cases already is being, adapted to produce micro CHP units.
"Increasing the application of variable speed drives (VSD), sophisticated control systems, to the motors which power industrial processes, offers considerable scope to save energy.
"Growing concern over climate change and energy prices gives UK VSD manufacturers a major opportunity to grow their markets."
But despite these opportunities, the industry still faces a number of barriers to overcome before it can realise the potential of the low-carbon economy.
EEF and Deloitte have proposed a series of recommendations to help create a conducive business environment, encourage the development of key technologies and empower consumers to make decisions that will allow these markets to take off, including:
* Give greater priority to research and development * Provide targeted support for the wind energy supply chain * Develop a long-term strategy and review support for marine renewables * Establish a specific support mechanism for carbon capture and storage * Make low carbon products more financially accessible * Broaden range of low carbon products
Ms Lodge said: "Ambitious manufacturers are determined to employ carbon efficient production methods to deliver climate-friendly goods that can contribute towards UK targets."
