CBI warns government of setting tough carbon targets

Posted on 6 Jun 2011 by The Manufacturer

The CBI confirmed today that it will ask government to rethink conflicts of interest between low carbon and industrial policies.

Before last year’s general election the CBI set out 12 priorities for the incoming government to consider in relation to business policy and wealth creation in the UK. Today a press briefing was held to review progress on these points.

The CBI was largely positive about the Coalitions actions over the past year, particularly congratulating government on decisive actions taken to reduce the national deficit. Four points were however, considered to have been overlooked or to have received unsatisfactory levels of attention from government.

These four points, pertain to energy infrastructure and strategy, public sector reform, a measured approach to balancing the economic reliance of the UK on financial services and industry and finally, labour market reform – a subject very much at the forefront of the public psyche following Business Minister, Vince Cable’s comment this morning on this likelihood of further regulation to prevent strike action in response to trade union threats.

Sir Roger Carr, who was today elected CBI president, said that part of the organisation’s ongoing work to obtain action on the above issues would be to keep a high level view of interactions between government policy areas to ensure that inconsistencies and conflicts of interest do not have a negative impact on business in the UK.

In response to this statement TM questioned CBI on its view of the interaction between low carbon policy and industrial strategy. The most recent Carbon budget has again caused sounds of discontent from heavy industry and comment from manufacturing leaders, such as Eric Le Corre, MD of Michelin UK, indicating extreme dissatisfaction with the pressure being put on energy intensive manufacturers by a gamut of environmental legislation and spiralling energy prices.

In a recent interview with TM Le Corre said: “As a company we are strongly committed to decarbonising the economy, but the mechanisms that are being put in place [in the UK] on top of what Europe is already implementing are adding an extra burden.” Le Corre went on to say that current policy was taking a narrow minded approach to carbon regulation and that government needed to “look more widely at the whole life cycle of products.”

CBI director general, John Cridland’s comments in response to TMs questioning supported Le Corre’s view. Cridland said: “There is a tendency to focus on cutting edge eco-industries but it is the the chemicals industry which makes the lubricants which allow wind turbines to turn, it is the steel sector which allows wind turbine to stand and I want that manufacturing to be done in the UK.”

Cridland went on to say that this meant energy must be obtainable at a competitive price for energy intensive companies, despite the need to raise Carbon prices in order to generate investment in a low carbon revolution. He confirmed that the CBI would be advocating targeted help for identified sectors such as steel, aluminium and chemicals. Cridland said such help should not undermine low carbon intentions but should: “Stop the unintended consequences of losing jobs and exports which should be based in the UK.”

Comparing the UK environment for energy intensive manufacturers to that elsewhere in Europe and around the globe Cridland suggested that the UK had reached a point where it was pushing too far ahead of the herd. “We need to avoid carbon leakage whereby industry simply creates pollution elsewhere in the world if it is less highly regulated but we also need to avoid capital flight where traditional but vital forms of manufacturing simply become too expensive in the UK. That challenge has been with us since low carbon became a public policy priority but what has is made it more difficult now is that the platform for international agreement is not as positive as it looked like it might be when we made some of these commitments.”

The CBIs position for action on this situation is that government should seek agreement from all EU members to commit to the same carbon reductions and price increases. “We can then use that as a stepping stone to getting the Americans, Indians and Brazilians on board so that we can achieve our carbon targets without putting our competitive position at risk,” said Cridland. He also stated that since this was now looking very difficult Britain should be extremely careful about making any further commitments. Cridland Concluded: “Leadership is about being one step ahead, it is not about being three steps ahead.”