Manufacturers urge Treasury to rethink Carbon Price Floor

Posted on 15 Feb 2011 by The Manufacturer

UK manufacturing industry has called for a re-think of potentially damaging proposals for a Carbon Price Floor.

Manufacturers’ organisation EEF stressed the importance of a CPF based on a full assessment of the damage to competitiveness, a proper regulatory impact assessment and a more co-ordinated approach to climate change policy.

Responding to the HM Treasury Consultation on the CPF, the organisation said it supports measures to accelerate a move to a low carbon power generation mix and accepts that there will be some costs to bear. However, it believes that the Carbon Price Floor as it is being proposed will have the unintended consequence of increasing costs for manufacturing, especially energy intensive sectors (while meeting the wishes of electricity generators for greater support to accelerate investment in low carvon electricity generation).

EEF chief executive Terry Scuoler said: “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.”

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

Scouler added: “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.”

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: scrapping the CRC and replacing it with mandatory Greenhouse Gas Reporting for those companies currently covered; reducing 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 £450million); a firm commitment from government to expand Climate Change Agreements to cover all manufacturers.

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.”