Budget Reduces Pressure on Energy Intensive Industry

 

The Energy Intensive Users Group (EIUG) welcomes today’s Budget announcements on energy costs.   As the government now acknowledges, UK energy intensive industries (EIIs) pay up to 50% more for their electricity than in competitor economies where greater care has been taken to ensure climate policies do not damage industrial competitiveness 4.

The Government previously announced a package of measures partially addressing this risk, providing compensation to EIIs for the indirect impact on electricity prices of the EU Emissions Trading Scheme and the UK-only Carbon Price Floor, and exemption from the future impact of Contracts for Difference to support low carbon power generation.  Today’s announcement addresses the missing elements of this package – protection against perpetually rising unilateral carbon prices, and compensation for the impact of existing renewable subsidies such as the Renewables Obligation and Feed in Tariff for small scale renewables.

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Commenting on the announcements, EIUG Director Jeremy Nicholson said:

“These reforms will ease the pressure on Britain’s energy intensive industries.  Unilateral measures like the Carbon Price Floor simply damage competitiveness for no environmental benefit.  Compensation for the impact of the Renewables Obligation will help level the playing field for British industries with respect to their European competitors.  Unfortunately, climate policies have already caused lasting damage in terms of investment in Britain’s energy intensive industries, and even after these reforms electricity prices will continue to be inflated by a carbon price four times as expensive than in the rest of Europe.“

For further information please contact  Jeremy Nicholson, Mobile: 07785 280568,
e-mail: jnicholson@eef.org.uk

      1. EIUG represents the UK’s energy intensive industries that dependent on secure, internationally competitive energy supplies to remain in business, including manufacturers of steel, chemicals, paper, glass, cement, lime, ceramics, aluminium and industrial gases.
      2. Energy intensive industries employ 225,000 workers directly, support more than 800,000 jobs including their supply chains, and contribute over £15bn to UK GDP (http://www.tuc.org.uk/sites/default/files/tucfiles/buildingourlowcarboninds.pdf)
      3. Government analysis confirms that climate policies (EU Emissions Trading Scheme, UK-only Carbon Price Floor, Renewables Obligation,, etc.) have added around 21% to UK industrial electricity prices.  Absent compensating measures, UK climate policies will add 58% to industrial electricity prices by 2020 – the largest  increase of any country in the world (http://www.bis.gov.uk/assets/biscore/business-sectors/docs/i/12-527-international-policies-impacting-energy-intensive-industries.pdf)
      4.  “While UK electricity prices are currently close to the IEA average, a typical EII in Britain pays around 50% more for their electricity than they do in France, and costs for EIIs of policies to reduce the carbon intensity of the economy is set to increase 300% by 2020.” – see full Budget document, Section 1.105, p.31 (https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293759/37630_Budget_2014_Web_Accessible.pdf)