Government consults industry over energy costs

London – The Government has launched a consultation over its proposed £250 million Energy Intensive Industries Package (EIIP).

The 11-week consultation will be used to gather views on proposals for the multi-million pound package, which aims to reduce the impact of energy and climate change policies on the cost of electricity for energy intensive industries. Industry and other interested parties are encouraged to comment on the proposals.

“Rising electricity prices are a real concern for many businesses that see the issue as a barrier to growth,” said Business Secretary Vince Cable. “This is why we set aside up to £250 million in the Autumn Statement to offset some of the costs of energy and climate change policies for the most energy intensive industries.

“Many energy intensive businesses are located in areas that have been hit hard by the economic downturn, which is why it’s important that we get this right and present the best support package available.

“Following detailed consideration of the responses to this consultation, I will announce the proposed scheme for compensation in spring 2013, subject to state aid considerations from the European Commission.”

Government estimates predict that energy and climate change policies could add up to 28% on average electricity prices paid by large energy intensive users in 2020.

“It is important we ensure that as we move to a low-carbon economy, those industries that are more energy-intensive are not forced to relocate to other countries. This would not only have a negative impact on our economy, but could also result in us exporting emissions to countries that are not as strongly committed to cutting carbon emissions,” said energy minister Edward Davey.

“Compensating the most electro-intensive industries will benefit our economy by retaining vital jobs and preserving our manufacturing base, whilst enabling our industries to grow and transition to a green economy,” he added.

In his Autumn Statement of 29 Nov 2011, the Chancellor announced plans to implement measures to reduce the impact of energy and climate change policy on the costs of electricity for the most electricity-intensive industries, beginning in 2013. This will be worth around £250 million over the Spending Review period.

As part of the Autumn Statement the Government has committed to compensate key electricity-intensive businesses to help offset the indirect cost of the Carbon Price Floor and the EU Emissions Trading System , subject to state aid guidelines; and increase the level of relief from the climate change levy on electricity for Climate Change Agreement participants from 65% to 90%.