Press release issued 26 February 2003
Energy intensive industries today expressed their concern
that rising energy prices, outlined in the Energy White Paper, could damage
competitiveness unless other economies follow similar policy routes. According
to the UK government's own figures, industrial electricity prices are set to
rise by up to 25%, and gas prices by up to 30% over the next
twenty years as a result of the proposals (see note 1 below). EIUG supports
the White Paper's emphasis on market solutions, both to ensure security of
supply and in providing economic mechanisms to reduce CO2 emissions.
But the big dilemma for energy policy remains how to achieve a low carbon
economy without damaging competitiveness, given that international agreement
may not be forthcoming. Many competitor economies, such as the United States,
Australia, and most developing countries, currently show no serious commitment
to decarbonise. If the UK and other EU states press ahead unilaterally, the
effect of higher energy prices on industries located in Europe - especially in
the energy-intensive sectors - could be devastating.
The White Paper rightly emphasises the need for all sectors
of the economy to increase energy efficiency, and for industry to develop new
low carbon technologies. The energy intensive sector has long demonstrated
leadership in improving energy efficiency, dating back to well before the
Climate Change Levy and escalating supply costs resulting from the Renewables
Obligation. The concern is that uncompetitive energy prices could accelerate
the erosion of the UK's manufacturing base, leaving industry in competitor
economies to deliver the solutions. Commenting on the government's
proposals, Jeremy Nicholson, EIUG's Director, says: "We must not neglect the
potential impact on industrial competitiveness. UK industry can and should be
providing the technological solutions to address climate change and energy
efficiency, but can only do this if we remain competitive. If it is driven
abroad, or out of business altogether, no-one gains."
Notes:
- Appendix 3 of the Energy White Paper indicates the likely
unit price increases by 2020 resulting from the government's policy measures on
emissions trading, renewables and energy efficiency measures.
- In its response to last year's consultation on the Energy
White Paper, EIUG called for competitive prices to remain the central aim of
energy policy, and for a multilateral approach on commitments to reduce
CO2 emissions.
- Contrary to popular belief, UK industrial energy prices
are not low by international standards. Contract prices for electricity are
currently broadly competitive with most EU competitor economies, though notably
above those in France.
- EIUG represents the energy intensive sectors which
produce essential materials like steel, chemicals, paper, glass, etc., that
compete in international markets and depend on secure, competitive supplies to
remain in business.
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