Industry kicks back against high carbon price
Industry is hurting from the Chancellor’s carbon tax. This is the plan to set a target price of CO2 at £30 a tonne by 2020. A new carbon tax, imposed when the market price is low, doubles the cost of carbon in the UK compared with Europe. Alcan, the UK’s aluminium producer, warns the tax on carbon emissions from power generation could fatally damage its plant in Northumberland, with 600 employees. The industry body for Energy Intensive Users says the tax will “add millions to the cost of manufacturing energy intensive products in this country.” Yet you search the Treasury’s Plan for Growth in vain for words like steel, ceramics and cement (except in words like announcement).
Producers of steel, paper, cement, lime, aluminium, basic inorganic chemicals, glass and ceramics are not happy. Together, these core industries employ some 225,000 workers. The products of energy intensive industries include steel for wind turbines, and basic products for solar panels, insulation and electric car components. They are leading the transition to a low carbon economy.
Although Ministers have claimed that they are talking to industry about their energy proposals, the lack of dialogue lies at the heart of the problem. We said in our 2011 Budget submission that the Government should, “ defer legislation on a CO2 floor price until it has assessed and addressed concerns over the impacts on our energy intensive industries and on low carbon technology investments, notable the CCS development programme.” So industry’s reaction was predictable.
Both the TUC and the Energy Intensive Users support the principle of a floor price of carbon, to encourage investment in renewables, new nuclear and other forms of low carbon generation. But the plans outlined in last week’s Budget will see UK energy consumers facing double the carbon costs of our European competitors.
In the absence of measures to mitigate the impact, energy intensive industries will find it harder to attract investment, encouraging production to move to countries where energy costs are more competitive. The result – ‘carbon leakage’ – does nothing for the global environment and undermines the government’s efforts to encourage industrial growth.
We’re currently working on a new technology study with these industries, looking at what further energy efficiency improvements can be made in the coming decades. So dropping a heavy CO2 price into the equation without an industrial plan is no plan at all.