£250m to help energy intensive industries

30th November 2011

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The UK government is to spend £250 million to reduce the cost of climate change policies to high-energy using sectors such as steelmaking and manufacturing

In the his autumn statement, the chancellor George Osborne confirmed government’s plans to offset the additional expense of initiatives, such as the carbon floor price and the EU emissions trading scheme (ETS), which are designed to encourage energy efficiency and reduce output of CO2.

According to figures published in DECC’s annual energy statement, published last week, climate change policies could see bills for energy-intensive users rise by up to 20% by 2020. In a bid to limit these costs the government plans to increase relief from the climate change levy to 90% from 1 April 2013, and provide compensation of up to £100 million to firms affected by the carbon floor price. A further £110 million compensation will aim to mitigate the indirect costs of the ETS.

“We are not going to save the planet by shutting down our steel mills, aluminium smelters and paper manufacturers,” said Osborne in announcing the autumn statement. “All we will be doing is exporting valuable jobs out of Britain.”

The proposed measures have been welcomed by the EEF, the manufacturers’ organisation, as going a long way to address the worries felt by heavy industry, but warned that consistency of policy over the long-term was also important.

“The government must build on this by sending a signal to companies looking to invest here that it will maintain this package beyond the current spending review period,” said Terry Scuoler, EEF chief executive.

John Cridland, CBI director-general, echoed Scuoler’s comments: “It's good that the government has committed to review the impact of its electricity market reforms on energy-intensive firms. Ensuring these industries are included in future energy policy is an important part of the UK continuing to lead the rest of the world on climate change.”

However, the chancellor’s plans to help energy-intensive sectors have come under fire as counter productive to the climate change agenda.

Friends of the Earth's executive director Andy Atkins said: "It's astounding that the chancellor has rewarded lobbying by some of the world's biggest businesses with a £250 million licence to pollute.

“Throwing billions of pounds at roads and dirty energy will increase our dependency on gas, coal and oil…Just a fraction of the money earmarked for new roads would throw a crucial lifeline to the solar industry – and the 30,000 jobs currently under threat from government cuts [to the feed in tariff].”

Other, less concrete, measures outlined in the statement include greater support for “green infrastructure projects”, with the government pledging £100 million of support from the proposed Green Investment Bank for commercial and industrial energy-efficiency projects and committing itself to developing five offshore energy centres around the UK to help businesses considering moving into the renewables sector.

The government is also making £25 million available to help local authorities buy new low-carbon vehicles and will be introducing new development rights to encourage more installations of non-domestic small-scale renewables.

To the dismay of environmentalists, the chancellor also said the government was dedicated to ensuring EU legislation aimed at protecting the environment, such as the habitats Directive didn’t place “ridiculous costs” on businesses.

“The protections the habitats Regulations provide are essential for internationally important sites and Europe’s most threatened species,” said the WWF’s Margaret Ounsley. “Weakening them is not only unnecessary for growth, but ultimately incompatible with long-term sustainable development.”

Peter Young, chairman of the Aldersgate Group, said the chancellor was wrong to claim such legislation was a burden for businesses.

"Environmental regulation is a fundamental driver for growth of tomorrow's businesses and our future global competitiveness,” he said. “Green policy should have been at the heart of the growth strategy, reducing our dependence on increasingly volatile global resource markets, stimulating investment and creating jobs.”


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