Industry floored by carbon price

18th July 2011

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  • Business & Industry ,
  • Manufacturing ,
  • Carbon Trading



Energy-intensive sectors should be exempt from the proposed carbon floor price (CFP), CBI director general John Cridland told the organisation's recent energy conference.

He expressed concern that even if the price of carbon in the EU emissions trading scheme (ETS) rises, as it has done recently, the CFP will not necessarily fall correspondingly.

“It risks tipping energy-intensive industries over the edge. We have to see exemptions for those industries most at risk,” Cridland said. He told delegates that the CFP put at risk the ability of UK companies to manufacture goods essential for the transition to a low-carbon economy.

“We’re already seeing warnings from companies like Ineos that its chlorine plant in Runcorn could become uneconomical under the sudden introduction of the proposed CFP. Tata Steel is facing the same problem. One major construction company is now finding it will soon cost less to import its cement from Spain than to produce it at its UK plant.

“Yet, Tata makes the steel that goes into the turbines. Ineos makes the lubrication that helps the blades turn. And we need up to 150 tonnes of cement to generate every megawatt of offshore wind,” said Cridland.

Other speakers also criticised plans for a CFP. Rupert Steele, director of regulation at ScottishPower, described the CFP as the “worst of both worlds” for energy companies, saying that it would not provide sufficient certainty for new developers to invest, while its introduction could scare existing energy providers into closing plants earlier than planned.

Responding, energy minister Charles Hendry promised that before the end of the year the government would announce a package of measures for the energy-intensive industries whose international competitiveness is most affected by its energy and climate change policies, such as the CFP.

“It would be madness to end up in a situation where big companies in the UK moved overseas, we lost the jobs, and carbon emissions would still be emitted in other parts of the world. We would have to re-import those products, there would be no climate change benefit, simply an economic loss to Britain,” he told the audience.

In the March Budget, the chancellor announced that the CFP would be £16 a tonne of CO2 from 1 April 2013, rising to £30 by 2020.

The CBI’s call for CFP exemptions comes as Sandbag reports that energy-intensive sectors stand to make millions from huge surpluses in ETS allowances.

Using publicly available data, the analysts calculate that at the end of 2010, 10 firms manufacturing steel and cement in Europe held more than 240 million surplus allowances under the scheme, worth approximately £3.6 billion.

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