London, 15th December 2021 – Following the announcement that the UK Emissions Trading System Cost Containment Mechanism (CCM) threshold has been exceeded, Government has again chosen not to act to contain escalating costs for energy intensive industries (EIIs).
High energy and carbon prices have seen UK industrial costs escalate, impacting UK operations in highly competitive international markets. The CCM threshold was exceeded after the monthly average carbon price in September, October and November was above the December trigger price of £52.88. This gave the UK ETS Authority an option to intervene, which it has decided not to act upon. UK Government claims that the CCM is more responsive than its EU equivalent but a CCM that is not used serves no purpose.
Dr Richard Leese, the EIUG Chair, commented:
‘The CCM was put in place to contain sudden escalations in carbon price in an immature carbon market. If used effectively it could also help reduce the transitional impact whilst the technologies to decarbonise UK industry are being developed. Using the CCM doesn’t in anyway undermine the desire for EIIs to meet net zero, but UK decarbonisation must be managed to minimise adverse impacts on UK industrial competitiveness. The UK Government’s ETS Authority had an opportunity to intervene to temper carbon costs. The choice not to take action sends the wrong investment signal to business leaders. If the CCM threshold is exceeded again, the UK ETS Authority must intervene to contain the carbon price’.
EIUG Contact: Director – Energy Intensive Users’ Group (firstname.lastname@example.org)
Notes to editors:
The EIUG represents the UK’s Energy Intensive Industries (EIIs) including manufacturers of steel, chemicals, fertilisers, paper, glass, cement, lime, ceramics and industrial gases. EIUG members produce materials which are essential inputs to UK manufacturing supply chains, including materials that support climate solutions in the energy, transport, construction, agriculture and household sectors. They add an annual contribution of £38bn to UK GDP, supporting 200,000 jobs directly and 800,000 jobs indirectly around the country.
These foundation industries are both energy and trade intensive – remaining located & continuing to invest in the UK and competing globally requires secure, internationally competitive energy supplies and freedom to export without tariff barriers. However, inward investment, growth and competitiveness have been hampered for years by UK energy costs higher than those of international competitors. In some cases, investment, economic activity & jobs have relocated abroad, leading to a subsequent increase in imports.