Industry pushes for Budget energy discounts
3 Mar 2014
Manufacturing organisations are calling on Chancellor George Osborne to roll back the cost of various climate-change related policies in his forthcoming Budget this month.
Groups including EEF and the Chemical Industries Association (CIA) are asking Osborne on March 19 to freeze and subsequently reduce the Carbon Price Floor mechanism, as well as extend existing compensation packages for the added cost to energy bills of the EU Emissions Trading Scheme (ETS) and the Climate Change Levy.
“Rising energy costs represent a major threat to growth and could damage efforts to support and sustain long term recovery,” said EEF chief executive Terry Scuoler.
“Many manufacturers now feel that they are being severely penalised by high energy costs, some of which are being unilaterally imposed and, are not shared by competitor nations.”
In the UK there are four climate policies affecting power costs and there is only compensation for two of these
CIA energy, trade & competitiveness director Nick Sturgeon
EEF is calling on the government to freeze and then reduce the cost of the Carbon Price Floor, which was introduced last year as a tax on greenhouse gas pollution to encourage investment in low carbon generation. EEF estimates that the tax on its own will account for almost 10% of a large industrial user’s electricity bill by the general election next year. The manufacturers’ trade body claims industrial consumers in Europe are paying significantly less carbon tax compared to the UK.
It is also asking the government to shield energy intensive industries like steel and chemicals by addressing the costs of the Renewables Obligation and Small Scale Feed in Tariffs, which can add an additional 15% to the bill of a steel company.
EEF also wants Osborne to use his Budget on 19th March to extend the availability of existing measures, such compensation for ETS costs, out to 2021.
Likewise, the CIA is seeking for compensation to be ramped up.
“We are looking for the government in 2014 to extend compensation package for climate policy impacts on electricity costs,” CIA energy, trade & competitiveness director Nick Sturgeon told Process Engineering.
“For example in Germany the most energy intensive activities pay only Euro 0.5 / MWh in renewables subsidies due to generous exemptions. In the UK there are four climate policies affecting power costs and there is only compensation for two of these with one of those still awaiting EU state aid approval. There is an opportunity in Budget 2014 to extend compensation and rebates to address the impacts of all four policies.”
However, some leaked reports from the Treasury are suggesting that Osborne will only go as far as freezing the carbon price floor. The Financial Times claims the floor is likely to be frozen in the Budget at its 2015-16 level of just over £18 per tonne of CO2 emitted, according to industry sources. It was due to rise to £30 by 2020.
As the government seeks to encourage industry to return to Britain as part of its “Reshore UK” scheme, the EEF published a survey of 300 manufacturing firms revealing that that, for half of them, government commitment to keep energy costs at, or below, the EU average would be the biggest single factor in encouraging more companies to expand their manufacturing activity in the UK.
