From the TUC

Energy policy? Or too busy infighting

23 Jul 2012, by in Economics, Environment

While the coalition wrangles over support for a green economy, other governments are busy protecting their manufacturers from the impact of electricity costs. New BIS research confirms that not only are our basic electricity costs higher than France or Germany, but the extra costs of environmental taxes are at least double that of some competitors. Steel, cement, chemicals, ceramics and other heavy energy users are paying £14.20 per megawatt hour (MWh) of electricity in the UK, compared with £6.30 per MWh in Germany and £2.50 in France.

While the Treasury fiddles, it seems, our competitors, it seems, are focussed on building green industrial policies. They’re not overburdening their core industries with climate change policies. Compared to France, Germany, Russia and the USA, not only is the UK’s base electricity price for energy intensive industries (EIIs) is significantly higher. But, crucially, see table, the UK has the highest additional environmental policy costs among the eleven EU and OECD states surveyed.

£ per megawatt hour extra cost of energy and climate change policies











































Source: BIS, 2012.

The difference is mainly due to the way governments share renewable energy costs. In Germany, renewable energy costs for EIIs are very low because the government caps their renewable energy costs. Also, the UK has adopted a carbon price floor (carbon tax) from 2013, which is additional to the Europe-wide emissions trading scheme.

The US, India and Russia have the lowest extra cost impacts on electricity prices as a result of climate change and energy policies. Of these, only Russia is a Kyoto Protocol signatory, and with the US, is opposed to renewing that emissions reduction treaty.

One caution with the statistics: the BIS analysis does not take account of the £250m package of measures announced by the Chancellor in the 2011 Autumn Statement to reduce the transitional impacts of policy on the costs for the most electricity-intensive industries. The TUC and industry have welcomed this package as a step in the right direction.

Nevertheless, there is a lot of ground to make up. Energy taxes for competitors are generally low due to significant government re-imbursements, especially in Germany, Denmark and Italy andFrance.

  • In Germany, the added costs of renewable electricity are distributed among consumers as a whole. The cost of renewables is capped in industries where the ratio of electricity costs exceeds 15% of output.
  • Eco-taxes are fully reimbursed for electrolysis, glass, ceramics, cement, lime, metals, fertilizers and chemical reduction methods.

The current battle over wind subsidies so damaging to jobs and growth are only a microcosm of a wider battle over the green agenda that is pitting the Treasury against DECC, the energy and climate change department.






One Response to Energy policy? Or too busy infighting

  1. HG
    Jul 28th 2012, 5:27 pm

    Would the reimbursement of eco-taxes be politically feasible at this point in time? How about addressing the energy gap via an increase in domestic production – surely the unions and the government can find common ground on this… HG