Another day, another carbon tax

Posted on 22 Feb 2011 by The Manufacturer

Britain’s manufacturers have called for a re-think of proposals for a Carbon Price Floor, which threatens to damage competitiveness, says EEF.

The reappraisal should be based on a full assessment of the consequent damage to competitiveness, a proper regulatory impact assessment and a more co-ordinated approach to climate change policy, says the manufacturer’s organisation.

Responding to the HM Treasury Consultation on the carbon floor price (CPF), EEF supports measures to accelerate a move to a low carbon power generation mix and accepts that there will be some cost to bear for all sectors of the economy.

However, it believes that whilst the proposals may meet the wishes of the electricity generators for greater support to accelerate investment in low carbon electricity generation and nuclear power, they will have the unintended consequence of increasing costs for manufacturing, especially energy intensive sectors, with no indication of how these will be mitigated.

Industry already faces costs from the EU Emissions Trading Scheme, Climate Change Levy (CCL), the Renewables Obligation and the Carbon Reduction Commitment (CRC). Whilst some of these costs are EU borne, some are added at UK domestic level with the imposition of a CPF adding yet another layer of cost and complexity.

In response, EEF is calling for a proper impact reassessment of the negative impacts on the UK economy and countervailing measures to ensure the overall cost burden on UK manufacturing does not increase. In particular, this should include:

• In the light of any increase in cost from a Carbon Price Floor, scrap the CRC and replace it with mandatory Greenhouse Gas Reporting for those companies currently covered
• A reduction in the Climate Change Levy on electricity generation to marginally above the minimum rate required by EU law. This would offset the increase in costs to manufacturers by approximately £450 million.
• A firm commitment from government to expand Climate Change Agreements to cover all manufacturers. These have proven to be successful in reducing emissions.

“Industry accepts that addressing climate change comes with a price tag but we are rapidly reaching a tipping point where companies who are internationally mobile will say enough is enough,” said EEF chief executive Terry Scuoler.

“We simply cannot keep adding layer upon layer of cost and complexity without damaging our competitiveness and threatening future investment in UK plants.

“The policy objective should be to provide greater certainty for investors, not raising taxes at the expense of Industry, especially at a time when government is expecting the sector to help drive economic growth.”

UK Steel director, Ian Rodgers, added: “The Treasury acknowledges that this proposal will push up UK electricity prices, yet has failed completely to look at the impact of this on energy intensive sectors such as steel.

“We are as keen as the government to green the economy as these new technologies will require large amounts of steel. It would be far better from an environmental perspective if that steel was produced locally but the imposition of yet another new and costly tax will make it increasingly difficult for UK steelmakers to compete.

“The UK Steel industry shares the government’s objectives, but a fundamental re-think of the complex policy mix is called for if these objectives are to be achieved at an acceptable cost.”