Climate policies adding 21% to energy costs

27th March 2013

Related Topics

Related tags

  • Engineering and metals ,
  • Electronics ,
  • Chemicals ,
  • Manufacturing ,
  • Business & Industry



UK businesses are paying up to 21% more for energy as a result of government policies to cut carbon emissions and costs will increase further by 2030, confirms Decc

The energy department has revised its estimates of how much policies, such as the carbon price floor and electricity market reform, are increasing energy costs in the UK.

In November 2011, Decc calculated that climate change policies were going to add 19% to energy bills in 2020 for businesses classed as “medium-sized energy users” – those consuming between 2,000MW and 20,000MWh of electricity a year and 2,778MWh–27,777MWh of gas.

In a report published today (27 March), the energy department estimates that such firms will pay 15%–21% more for their energy this year as a result of climate change policies, and that these costs will increase energy bills by 22%-26% in 2020.

Even taking into account energy savings generated by policies like the carbon reduction commitment energy efficiency scheme (CRC) and the green deal, medium-sized energy consumers will be facing bills in 2030 that are up to 40% more expensive than they would be without carbon taxes.

For energy-intensive sectors, such as those manufacturing metals, cement and ceramics, Decc predicts that the impact on bills will not be as dramatic in 2013, with extra costs restricted to 1%–14%. But companies in these sectors relying mostly on electricity for their energy could face increases of up to 60% higher in 2030. Gas-intensive firms could see their bills rise by up to 28% by the end of the next decade.

Launching the analysis, energy secretary Ed Davey claimed that measures backing renewable technologies and improving energy efficiency would benefit household bills in the long-term, but conceded that the picture for businesses is less positive.

“Which is why our new proposals to exempt and compensate the most energy intensive industries from certain policy impacts is crucial. Nothing would be gained from forcing industry, jobs and emissions abroad,” he said.

Manufacturing body, EEF, described Decc’s report as a wake-up call for the government.

“Measures to shield the most energy intensive industries from a portion of the costs will make a difference but, unless we get a grip on spiralling policy costs, steeply rising electricity prices risk making the UK an increasingly unattractive location for industrial investment,” warned policy director Steve Radley.

“The first step is scrapping costly policies with questionable environmental impact, such as the carbon price floor and the CRC, as soon as public finances allow.”

According to Decc, the EU emissions trading scheme, the carbon price floor and the future contracts-for-difference for electricity supplies will account for the bulk of the increased costs for energy intensive sectors, adding 23% to total energy costs by 2020.

The government’s plans to compensate energy intensive firms for the impacts of such policies could, however, restrict increases to 13%, states Decc.

The report also compared UK energy costs for businesses with prices in Europe, concluding that the gas prices are the lowest in the EU-15 and that electricity prices for medium-sized businesses are comparable to the EU-15 average.

Estimated average impact of energy and climate change policies on a medium-sized business user’s energy bill in 2020 – CRC participant


Subscribe to IEMA's newsletters to receive timely articles, expert opinions, event announcements, and much more, directly in your inbox.

Transform articles

Four in five shoppers willing to pay ‘sustainability premium’

Despite cost-of-living concerns, four-fifths of shoppers are willing to pay more for sustainably produced or sourced goods, a global survey has found.

16th May 2024

Read more

One in five UK food businesses are not prepared for EU Deforestation Regulation (EUDR) coming into force in December, a new survey has uncovered.

16th May 2024

Read more

Each person in the UK throws a shocking 35 items of unwanted clothes and textiles into general waste every year on average, according to a new report from WRAP.

2nd May 2024

Read more

The largest-ever research initiative of its kind has been launched this week to establish a benchmark for the private sector’s contribution to the UK’s 2050 net-zero target.

2nd May 2024

Read more

Weather-related damage to homes and businesses saw insurance claims hit a record high in the UK last year following a succession of storms.

18th April 2024

Read more

The Science Based Targets initiative (SBTi) has issued a statement clarifying that no changes have been made to its stance on offsetting scope 3 emissions following a backlash.

16th April 2024

Read more

One of the world’s most influential management thinkers, Andrew Winston sees many reasons for hope as pessimism looms large in sustainability. Huw Morris reports

4th April 2024

Read more

Vanessa Champion reveals how biophilic design can help you meet your environmental, social and governance goals

4th April 2024

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert

IEMA Cookie Notice

Clicking the ‘Accept all’ button means you are accepting analytics and third-party cookies. Our website uses necessary cookies which are required in order to make our website work. In addition to these, we use analytics and third-party cookies to optimise site functionality and give you the best possible experience. To control which cookies are set, click ‘Settings’. To learn more about cookies, how we use them on our website and how to change your cookie settings please view our cookie policy.

Manage cookie settings

Our use of cookies

You can learn more detailed information in our cookie policy.

Some cookies are essential, but non-essential cookies help us to improve the experience on our site by providing insights into how the site is being used. To maintain privacy management, this relies on cookie identifiers. Resetting or deleting your browser cookies will reset these preferences.

Essential cookies

These are cookies that are required for the operation of our website. They include, for example, cookies that enable you to log into secure areas of our website.

Analytics cookies

These cookies allow us to recognise and count the number of visitors to our website and to see how visitors move around our website when they are using it. This helps us to improve the way our website works.

Advertising cookies

These cookies allow us to tailor advertising to you based on your interests. If you do not accept these cookies, you will still see adverts, but these will be more generic.

Save and close