Tees Valley Combined Authority: Industrial decarbonisation cluster plan economic impact analysis

In partnership with Tees Valley Combined Authority and Risk and Policy Analysts, Cambridge Econometrics carried out economic analysis to determine the potential benefits to the region in terms of the jobs and GVA that can be secured through investing in industrial decarbonisation. The analysis was informed by a survey of industrials with sites and operations within the Tees Valley, gauging their attitudes and future plans for decarbonisation using CCUS. The insights from this survey, coupled with scenarios developed in our Local Economy forecasting Model (LEFM), supported the Department for Energy Security and Net Zero (DESNZ) in selecting industrial decarbonisation projects for investment and bolstering green jobs in the Tees Valley. 

Using the data from industrials within the Tees Valley Cluster, three scenarios were developed to estimate the overall economic impacts of the Tees Valley Industrial Decarbonisation Plan by 2040, comparing the results from the Limited and Full Policy On scenarios against the Policy Off scenario to assess the influence of these policies.

Policy Off: this counterfactual scenario captured the impacts of the Department of Business, Energy and Industrial Strategy (BEIS) Clustering Sequencing Plan not being enacted at all. Dependent projects were therefore assumed to not occur either.

Limited Policy On: this scenario only captured the short-term impacts of the BEIS Clustering Sequencing Plan itself, its immediate supply chain impacts and knock-on local spending impacts. No assumptions were made about the long-run evolution of the Tees Valley industrial cluster after the completion of the project.

Full Policy On: this scenario captured the impacts of the BEIS Clustering Sequencing Plan Phases 1 and 2 and all dependent investments, projects and likely knock-on economic impacts. This included estimates of both long-run upstream and downstream impacts on the local industrial cluster as a result of the Plan (increasing industrial capacity in hydrogen, carbon capture, and other manufacturing within the region), and induced household spending effects in the local economy.

The scenario modelling results show that, relative to the Policy Off scenario, the two Policy On scenarios are projected to have better outcomes for the Tees Valley economy in terms of employment and GVA by 2040. All results showed the potential for investment in industrial decarbonisation, including establishing CCUS infrastructure in the UK, to lead to growth in green industrial jobs.

The outcomes of the project were used by TVCA to submit a business case to the Department for Energy Security and Net Zero (DESNZ) to request funding for further development of the industrial decarbonisation cluster in the Tees Valley. Several projects led by industrials in the Tees Valley were subsequently selected for negotiation of further support by DESNZ.

Get in touch

Shyamoli Patel Principal Economist [email protected]