What is industrial decarbonisation and why is it important for net zero?
Industrial decarbonisation is the transformative action we need to curb greenhouse gas emissions from heavy-duty industries, including iron and steel, cement, refining, food and drink, and chemical sectors. Did you know these sectors alone are responsible for a staggering 16% of the UK’s total emissions? Yet, these industries aren’t just crucial for the economy, they form the backbone of society too. Here’s the twist – moving towards a greener future isn’t a walk in the park for these industries. Why? Their operations lean heavily on fossil fuels for energy and feedstock needs. Now, tackling this reliance is where the true challenge lies.
Industrial decarbonisation is crucial for achieving the UK’s net zero target, which means balancing the amount of greenhouse gases emitted with the amount removed from the atmosphere by 2050. This target was legislated by the UK government in 2019, making it the first major economy to do so. It is also aligned with the global ambition of limiting the rise in average temperature to well below 2°C above pre-industrial levels, as agreed by 195 countries in the Paris Agreement on climate change.
How the UK is leading the way in decarbonising its energy-intensive industries by 2050
The UK is one of the world leaders in industrial decarbonisation, with a long history of innovation and excellence in its industrial sectors. The UK has already reduced its industrial emissions by 66% since 1990 while increasing its industrial output by 16%. The UK is also home to some of the most advanced and ambitious projects in low carbon technologies and infrastructure, such as carbon capture, usage and storage (CCUS) and hydrogen.
The UK’s vision for industrial decarbonisation is set out in the Industrial Decarbonisation Strategy, which was published by the Department for Business, Energy & Industrial Strategy in March 2021. This strategy is the first of its kind by a major economy and provides the industry with the long-term certainty and support it needs to invest in decarbonisation. It also sets out how industrial decarbonisation can support the UK’s green industrial revolution, which aims to create jobs, boost growth and enhance competitiveness in a low-carbon world.
Policy Framework for industrial decarbonisation
The UK government has established a robust and comprehensive policy framework for industrial decarbonisation, which provides a clear direction and support for industry to achieve net zero by 2050.
The policy framework consists of four main elements:
- ●ㅤThe UK’s net zero targets and its Implications for Industry
- ●ㅤThe Industrial Decarbonisation Challenge and its funding opportunities
- ●ㅤThe Role of COP26 and international collaboration
- ●ㅤThe cross-cutting policies and measures to enable decarbonisation
The UK’s net zero targets and its Implications for Industry
The UK was the first major economy to legislate a net zero target in 2019, which means that by 2050, the UK will balance the amount of greenhouse gases it emits with the amount it removes from the atmosphere. This target is aligned with the global ambition of limiting the rise in average temperature to well below 2°C above pre-industrial levels, as agreed by 195 countries in the Paris Agreement on climate change.
The net-zero target has significant implications for industry, which accounts for about 16% of the UK’s total emissions. According to the Industrial Decarbonisation Strategy, which was published by the Department for Business, Energy & Industrial Strategy in March 2021, the industry will need to reduce its emissions by at least two-thirds by 2035 and by at least 90% by 2050, relative to 2018 levels. This will require a radical transformation of industrial processes and practices, as well as a shift to low-carbon energy sources and technologies.
The Industrial Decarbonisation Strategy sets out the government’s vision for a prosperous, low-carbon UK industrial sector in 2050, which will contribute to the green industrial revolution and create new opportunities for growth, innovation and competitiveness. The strategy also outlines the key actions that the government will take to support the industry in its decarbonisation journey, such as providing long-term certainty, enabling innovation, creating markets, and ensuring a just transition.
The Industrial Decarbonisation Challenge and its funding opportunities
One of the main actions that the government has taken to support industrial decarbonisation is launching the Industrial Decarbonisation Challenge, which is part of the Industrial Strategy Challenge Fund. This challenge aims to accelerate the development and deployment of low-carbon technologies and infrastructure that can reduce emissions from energy-intensive industries, such as iron and steel, cement, refining and chemicals.
The Industrial Decarbonisation Challenge has allocated £171 million from 2018 to 2024 to support nine green tech projects in Scotland, South Wales and North West England, Humber, and Teesside. These projects involve engineering and design studies for the rollout of decarbonisation infrastructure such as carbon capture, usage and storage (CCUS) and hydrogen. The challenge also supports cross-cutting activities such as skills development, knowledge sharing, and stakeholder engagement.
The Industrial Decarbonisation Challenge is expected to leverage up to £261 million of private sector investment and deliver up to 2.6 megatonnes of cumulative carbon savings by 2032. It will also help create regional low-carbon clusters and hubs that can attract further investment and innovation.
The legacy of COP26 and the international collaboration it fostered
The UK, having demonstrated leadership in industrial decarbonisation domestically, played a pivotal role in driving global action on climate change. In November 2021, the UK hosted COP26, the 26th UN Climate Change Conference of the Parties, in Glasgow. This conference was a crucial juncture for the global community to unite and commit to more ambitious targets and actions to limit global warming to 1.5°C above pre-industrial levels.
The UK government identified five priority areas for COP26: adaptation and resilience; nature; energy transition; clean road transport; and finance. Industrial decarbonisation was pertinent to all these areas, as it could help reduce emissions, enhance resilience, protect nature, support clean energy and transport systems, and mobilise finance.
The UK government showed commitment to working with its international partners, both old and new, to expedite industrial decarbonisation worldwide. The UK co-led several initiatives that aimed to foster collaboration and innovation on low-carbon technologies and solutions across different regions and sectors.
- ●ㅤThe Clean Energy Ministerial (CEM) Industrial Deep Decarbonisation Initiative (IDDI), brought together governments, industries, research institutions, and civil society organisations to share best practices and develop roadmaps for industrial decarbonisation.
- ●ㅤThe Mission Innovation (MI) Clean Hydrogen Mission (CHM), which aimed to reduce the cost of clean hydrogen by 80% by 2030.
- ●ㅤThe Leadership Group for Industry Transition (LeadIT), supported governments and businesses in developing pathways for net zero emissions in hard-to-abate sectors.
Following COP26, the world turned its attention to COP27, which took place in Sharm el-Sheikh, Egypt in November 2022. The conference concluded with a call for increased climate ambition, with UN Secretary-General António Guterres stating, “The world still needs a giant leap on climate ambition (…) COP27 concludes with much homework and little time.” Key outcomes of COP27 included breakthroughs on loss and damage, the launch of the Sharm El-Sheikh Adaptation Agenda, and the Africa Carbon Markets Initiative. The legacy of COP26 and the initiatives it spurred continue to influence the global climate agenda, with the lessons learned and partnerships formed providing a foundation for future action.
Technology deployment for industrial decarbonisation
One of the key enablers of industrial decarbonisation is the development and deployment of low carbon technologies that can reduce emissions from energy-intensive industries. The UK government has identified three main types of technologies that can help decarbonise the industry: carbon capture, usage and storage (CCUS); hydrogen; and electrification. These technologies can also improve energy efficiency and resource productivity, which are essential for reducing costs and enhancing competitiveness.
Carbon capture, usage and storage (CCUS) and it’s potential for reducing emissions
Carbon capture, usage and storage (CCUS) is a process that involves capturing carbon dioxide (CO2) from industrial sources, such as power plants, steelworks, or cement factories. The captured CO2 can then be redirected for various purposes, including producing chemicals or fuels, or even in other industrial processes where it is necessary. For instance, carbonation in beverage production plants could significantly benefit from this approach. Alternatively, the captured CO2 can be stored permanently underground in geological formations. CCUS can prevent up to 90% of CO2 emissions from reaching the atmosphere, making it a vital technology for decarbonising hard-to-abate sectors. I would strongly suggest exploring and implementing CO2 storage and usage, particularly in industries where its application is both feasible and beneficial.
The UK is a world leader in CCUS, with a strong track record of research and innovation, as well as favourable geological conditions for CO2 storage. The UK government has committed to deploying CCUS at scale by the mid-2020s, with an ambition to capture up to 10 megatonnes of CO2 per year by 2030. The government has also allocated £1 billion for a CCUS Infrastructure Fund, which will support the development of four low-carbon clusters with CCUS infrastructure by 2030.
The UK is taking a cluster-led approach to industrial decarbonisation, focusing early effort on developing four decarbonised clusters in the UK’s key industrial centres: Scotland, South Wales, North West England, Humber, and Teesside. These clusters will involve engineering and design studies for the rollout of CCUS infrastructure, as well as collaboration among different industries, such as iron and steel, cement, refining and chemicals. The clusters will also enable the integration of CCUS with other low-carbon technologies, such as hydrogen and bioenergy.
Hydrogen and electrification as low-carbon alternatives to fossil fuels
Hydrogen is a versatile energy carrier that can be used for various applications in industry, such as heating, power generation, or feedstock. Hydrogen can be produced from different sources, such as natural gas, biomass, or water. Depending on the production method and the associated emissions, hydrogen can be classified into different colours: grey (from natural gas without CCUS), blue (from natural gas with CCUS), green (from water using renewable electricity), or turquoise (from methane using pyrolysis).
Hydrogen can help decarbonise the industry by replacing fossil fuels in processes that require high temperatures or pressures. For example, hydrogen can be used to produce steel through direct reduction of iron ore instead of using coal in blast furnaces. Hydrogen can also be blended with natural gas in existing pipelines or burners to reduce emissions.
The UK has a strong potential for developing a low-carbon hydrogen economy, with abundant natural resources, existing gas infrastructure, and leading expertise in hydrogen production and use. The UK government published a Hydrogen Strategy in August 2021, which sets out its vision for hydrogen to play a key role in achieving net zero by 2050. The strategy aims to support the development of 5 gigawatts (GW) of low-carbon hydrogen production capacity by 2030, as well as stimulate demand from various sectors, including industry.
Electrification is another way of decarbonising industry by replacing fossil fuels with electricity from low-carbon sources, such as renewables or nuclear. Electrification can enable more efficient and flexible processes that can reduce energy consumption and emissions. For example, electrification can be used to power electric arc furnaces for steel production instead of coal-fired blast furnaces.
The UK has made significant progress in decarbonising its electricity system over the past decade, with renewable sources accounting for 43% of electricity generation in 2020. The UK government has announced plans to further decarbonise its power system by 2035, which will create more opportunities for electrification in industry. The government has also introduced various policies and measures to support electrification in industry, such as the Contracts for Difference scheme, which provides long-term price stability for low-carbon electricity generators.
Energy efficiency and resource productivity as key enablers of decarbonisation
In addition to deploying low-carbon technologies, industry can also reduce its emissions by improving its energy efficiency and resource productivity, which are key enablers of decarbonisation. Energy efficiency means using less energy to provide the same level of output or service. Resource productivity means using less material or water to produce the same amount or quality of goods.
Improving energy efficiency and resource productivity can help industries save costs, enhance competitiveness, and increase resilience. For example, improving energy efficiency can reduce energy bills and improve profitability. Improving resource productivity can reduce waste and pollution and improve environmental performance.
The UK government has introduced several policies and measures to support the industry in improving its energy efficiency and resource productivity.
- ●ㅤThe Industrial Energy Transformation Fund (IETF), provides funding for energy efficiency projects that can deliver significant reductions in energy consumption and carbon emissions. (Open for applications until 2027)
- ●ㅤThe Energy Savings Opportunity Scheme (ESOS), requires large organisations to identify cost-effective energy-saving opportunities every four years. (Now past the application stage)
- ●ㅤThe Climate Change Agreements (CCA) scheme, offers a discount on the Climate Change Levy (CCL) in return for meeting energy efficiency or carbon reduction targets. (Extended until 2025)
- ●ㅤThe Green Gas Levy (GGL), aims to increase the proportion of green gas in the grid. (Open for applications until 2025)
These policies and measures provide incentives and support for industry to reduce its emissions, improve its energy efficiency, adopt low-carbon technologies, and increase its competitiveness.
Market development for industrial decarbonisation
Another key enabler of industrial decarbonisation is the development of markets for low-carbon industrial products and services, which can stimulate demand and supply, increase competitiveness and innovation, and create new opportunities for growth. The UK government has identified three main aspects of market development for industrial decarbonisation: demand-side policies; supply-side policies; and cross-cutting policies.
The demand and supply of low-carbon industrial products and services
The demand for low-carbon industrial products and services refers to the willingness and ability of consumers, such as businesses, governments, or individuals, to purchase products and services that have lower emissions than their conventional counterparts. The demand for low-carbon industrial products and services can be influenced by various factors, such as price, quality, availability, awareness, preferences, standards, regulations, or incentives.
The supply of low-carbon industrial products and services refers to the willingness and ability of producers, such as manufacturers, suppliers, or service providers, to offer products and services that have lower emissions than their conventional counterparts. The supply of low-carbon industrial products and services can be influenced by various factors, such as costs, revenues, risks, opportunities, technologies, infrastructure, skills, or innovation.
The development of markets for low-carbon industrial products and services requires a balance between demand and supply, as well as coordination and collaboration among different actors along the value chain. The UK government has introduced several policies and measures to support both the demand and supply sides of the market for low-carbon industrial products and services.
- ●ㅤThe Towards a Market for Low Emissions Industrial Products Call for Evidence (TMLEIP), seeks views on the design and implementation of policies that can encourage the demand for low-carbon industrial products in the UK.
- ●ㅤThe Industrial Energy Transformation Fund (IETF), provides funding for energy efficiency and decarbonisation projects that can reduce costs and emissions for industrial producers.
- ●ㅤThe Industrial Strategy Challenge Fund (ISCF), supports research and innovation projects that can develop new technologies and solutions for low-carbon industrial production.
The competitiveness and innovation of the UK industry in a global market
The competitiveness of the UK industry refers to its ability to produce goods and services that meet or exceed the expectations of domestic and international customers in terms of price, quality, performance, or environmental impact. The competitiveness of the UK industry can be affected by various factors, such as productivity, costs, revenues, skills, regulation, or trade.
The innovation of the UK industry refers to its ability to create new or improved goods and services that meet or anticipate the needs of domestic and international customers in terms of functionality, usability, reliability, or environmental impact. The innovation of the UK industry can be affected by various factors, such as research, development, testing, demonstration, or diffusion.
The development of markets for low-carbon industrial products and services requires enhancing the competitiveness and innovation of the UK industry in a global market that is increasingly demanding lower emissions. The UK government has introduced several policies and measures to support the competitiveness and innovation of the UK industry in a global market.
- ●ㅤThe Carbon Price Support (CPS), is a tax on fossil fuels used for electricity generation that aims to encourage switching to low-carbon alternatives.
- ●ㅤThe Contracts for Difference (CfD) scheme, is a mechanism that provides long-term price stability for low-carbon electricity generators.
- ●ㅤThe Leadership Group for Industry Transition (LeadIT), supports governments and businesses in developing pathways for net zero emissions in hard-to-abate sectors.
The incentives and regulations for driving decarbonisation across sectors
The incentives for driving decarbonisation across sectors refer to the benefits or rewards that motivate actors to reduce their emissions or adopt low-carbon practices. The incentives for driving decarbonisation across sectors can be financial or non-financial, such as subsidies, grants, loans, tax credits, rebates, certificates, recognition, reputation, or social norms.
The regulations for driving decarbonisation across sectors refer to the rules or standards that require actors to reduce their emissions or adopt low-carbon practices. The regulations for driving decarbonisation across sectors can be mandatory or voluntary, such as laws, directives, regulations, codes, guidelines, agreements, or commitments.
The development of markets for low-carbon industrial products and services requires a combination of incentives and regulations that can drive decarbonisation across sectors in a fair and effective way. The UK government has introduced several policies and measures that provide incentives and regulations for driving decarbonisation across sectors.
- ●ㅤThe Climate Change Levy (CCL), is a tax on energy use by businesses that aims to encourage energy efficiency.
- ●ㅤThe Climate Change Agreements (CCA) scheme, is a voluntary agreement between industry and government that offers a discount on the CCL in return for meeting energy efficiency or carbon reduction targets.
- ●ㅤThe Streamlined Energy & Carbon Reporting (SECR) framework, is a mandatory reporting scheme that requires large businesses to disclose their energy use and emissions.
Regional collaboration for industrial decarbonisation
One of the key drivers of industrial decarbonisation is the regional collaboration among different stakeholders, such as industries, governments, communities, and academia, that can foster collective action, knowledge sharing, and innovation. The UK government has recognised the importance of regional collaboration for industrial decarbonisation and has supported the development of low-carbon industrial clusters across the UK.
The benefits and challenges of regional collaboration for industrial decarbonisation
Regional collaboration for industrial decarbonisation refers to the cooperation and coordination among different actors within a specific geographical area that shares common interests, challenges, or opportunities related to reducing emissions from industry.
Regional collaboration can bring various benefits for industrial decarbonisation, such as:
- ●ㅤLeveraging economies of scale and scope by sharing infrastructure, resources, or services among different industries or sectors
- ●ㅤEnhancing learning and innovation by exchanging best practices, data, or technologies among different industries or sectors
- ●ㅤIncreasing social acceptance and legitimacy by engaging with local communities, stakeholders, or regulators on decarbonisation issues
- ●ㅤAttracting investment and funding by creating a clear vision, strategy, or roadmap for decarbonisation in a region
However, regional collaboration can also face various challenges for industrial decarbonisation, such as:
- ●ㅤManaging complexity and uncertainty by dealing with multiple actors, interests, or objectives in a dynamic environment
- ●ㅤOvercoming barriers and risks by addressing technical, financial, regulatory, or behavioural obstacles to decarbonisation
- ●ㅤBalancing trade-offs and conflicts by reconciling different perspectives, preferences, or expectations among different actors
- ●ㅤEnsuring equity and fairness by distributing costs and benefits of decarbonisation among different actors
The UK’s approach and support for regional collaboration for industrial decarbonisation
The UK has adopted a cluster-led approach to industrial decarbonisation, which recognises that different regions have different industrial characteristics, strengths, and opportunities. The UK has several large-scale industrial clusters that are currently working on roadmaps to collaborate on decarbonisation: North East Scotland and Grangemouth, Teesside, Humberside, Merseyside, South Wales and Southampton Water. But they are not the only geographical regions considering the industrial cluster approach.
The UK government has provided various forms of support for regional collaboration for industrial decarbonisation.
- ●ㅤThe Industrial Clusters Mission (ICM), aims to support the delivery of four low-carbon regional zones by 2030 and at least one net zero green hotspot by 2040.
- ●ㅤThe Industrial Decarbonisation Challenge (IDC), is part of the Industrial Strategy Challenge Fund (ISCF) and provides funding for engineering and design studies for the rollout of decarbonisation infrastructure in industrial clusters.
- ●ㅤThe Industrial Energy Transformation Fund (IETF), provides funding for energy efficiency and decarbonisation projects in energy-intensive industries.
- ●ㅤThe Towards a Market for Low Emissions Industrial Products Call for Evidence (TMLEIP), which seeks views on the design and implementation of policies that can encourage the demand for low-carbon industrial products in the UK.
The examples and lessons learned from regional collaboration for industrial decarbonisation
There are several examples of successful regional collaboration for industrial decarbonisation in the UK and abroad that can provide valuable lessons learned for future initiatives. For example:
- ●ㅤThe Humber Cluster Plan (HCP), which is led by Equinor in partnership with Associated British Ports (ABP), British Steel (BS), Centrica Storage Limited (CSL), Drax Group (Drax), Mitsubishi Power Europe (MPE), National Grid Ventures (NGV), Phillips 66 Limited (P66), SSE Thermal (SSE), Saltend Cogeneration Company Limited (SCCL), Uniper Energy Sales GmbH (Uniper), VPI Immingham LLP (VPII), px Group Limited (px), University of Hull (UoH), Catch, Humber Local Enterprise Partnership (HLEP), North Lincolnshire Council, Hull City Council, East Riding of Yorkshire Council, North East Lincolnshire Council, Zero Carbon Humber Partnership. The HCP aims to create the world’s first net zero carbon cluster by 2040 by deploying CCUS and hydrogen technologies across various industries.
- ●ㅤThe Tees Valley Net Zero Innovation Centre (TVNZIC), which is led by Teesside University in partnership with TWI Ltd., Northern Gas Networks Ltd., Northumbrian Water Ltd., Sembcorp Utilities UK Ltd., Venator Materials PLC., Lotte Chemical UK Ltd., CF Fertilisers UK Ltd., BOC Ltd., SABIC UK Petrochemicals Ltd., Huntsman Polyurethanes Ltd., Johnson Matthey PLC., Lucite International UK Ltd., px Group Ltd., FUJIFILM Diosynth Biotechnologies UK Ltd., Quorn Foods Ltd., CPI Innovation Services Ltd., NEPIC Ltd., Tees Valley Combined Authority. The TVNZIC aims to develop and demonstrate low-carbon technologies that can reduce emissions from industry, such as hydrogen production and utilisation, CCUS integration, biotechnology applications, and circular economy solutions.
- ●ㅤThe Rotterdam-Moerdijk Industrial Cluster (RMIC), which is located in the Netherlands and comprises various industries such as refining, chemicals, power generation, waste management, biofuels, and steel. The RMIC aims to achieve net zero emissions by 2050 by implementing a portfolio of measures that include energy efficiency improvements, electrification of processes, hydrogen production and use, CCUS deployment, and biomass utilisation.
These examples show that regional collaboration for industrial decarbonisation can be facilitated by factors such as:
- ●ㅤHaving a clear vision and strategy that aligns with national and international goals
- ●ㅤEstablishing a strong governance structure that involves all relevant stakeholders
- ●ㅤSecuring adequate funding and incentives from public and private sources
- ●ㅤLeveraging existing infrastructure and assets that can enable decarbonisation
- ●ㅤFostering a culture of innovation and learning that can overcome barriers
In conclusion, this blog post delved into the significant challenges and promising opportunities within the realm of industrial decarbonisation in the UK. It underscored the necessity of industrial decarbonisation in meeting the UK’s net zero target by 2050, and concurrently, in amplifying the UK industry’s global competitiveness and innovative prowess.
Moreover, the blog post illuminated that a comprehensive and cooperative strategy, engaging diverse stakeholders like industries, governments, communities, and academia, is key to successful industrial decarbonisation.
It has pinpointed four primary domains that require concentrated focus:
- ●ㅤTechnology Deployment
- ●ㅤMarket Development
- ●ㅤRegional Collaboration
For each of these domains, the blog post furnished tangible examples and recommendations, drawing upon existing policies, initiatives, and best practices.
By effectively addressing these areas, the blog post argues that the UK could catapult itself to the forefront of industrial decarbonisation. This achievement could be instrumental in fostering a prosperous, low-carbon future not only for its industry but for its society at large. With this ambition in sight, the UK can truly lead the way in constructing a sustainable, carbon-neutral future.
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FAQ: Industrial Decarbonisation Strategy (IDS)
What are the main goals of the IDS?
The IDS targets a prosperous, low-carbon UK industrial sector by 2050. Key objectives include reducing industrial emissions by at least 90% by 2050, establishing low-carbon clusters, supporting the development of key technologies like CCUS and hydrogen, and ensuring a just transition for affected workers and communities.
How much funding is available for decarbonisation projects?
The UK government committed £1 billion over four years for industrial decarbonisation. This includes funding for green tech projects, replacing natural gas with hydrogen power, and improving energy efficiency. Additional funding schemes like the IETF, IDC, and the Green Distilleries Competition also support these efforts.
What technologies can help decarbonise the industry?
Main technologies include CCUS (captures and reuses or stores CO2), hydrogen (a clean fuel), electrification (replaces fossil fuels with renewable electricity), and energy efficiency (reduces the energy required for specific tasks).
How can the industry benefit from low-carbon clusters?
Low-carbon clusters and industrial hubs provide benefits such as economies of scale, enhanced learning and innovation, increased social acceptance and legitimacy, and attraction of investment and funding.
What challenges exist for industrial decarbonisation in the UK?
Challenges include technical difficulties in developing suitable low-carbon technologies, securing adequate funding, ensuring supportive policies and standards, and overcoming resistance from industry or consumers to adopt low-carbon practices.
How can consumers support industrial decarbonisation?
Consumers can support by choosing low-carbon products and services, thus stimulating demand for such offerings. They can do this by checking labels or certifications, comparing options, and seeking reliable information.
How does industrial decarbonisation contribute to the UK’s economy?
Decarbonisation can create new jobs, markets, and industries aligned with net zero, contributing to economic recovery and growth. A report by Vivid Economics suggests net zero could create up to 1.7 million new jobs by 2030.