Green Taxes May Doom Britain’s Energy-Intensive Industry

  • Date: 21/04/14
  • Brian Groom, Andy Sharman and Alex Barker, Financial Times

Leading UK energy-intensive industries are set to miss out on tens of millions of pounds from a government scheme to compensate them for the impact of green taxes because of an EU state aid ruling.

The cement and lime, gypsum, glass and ceramics industries face losing their share of the £400m scheme to compensate high energy users for the cost of the carbon price floor, a British tax on electricity generated from fossil fuels.

Industry leaders warned that the ruling would undermine these sectors’ competitiveness and could put future investment plans at risk.

George Osborne, the chancellor, extended the planned compensation scheme to 2019-20 in the Budget, part of a package of measures aimed at saving a cumulative £7bn across the economy in lower energy costs.

Industries such as chemicals, steel and iron, paper and plastics are likely to get compensation, but a decision by the EU college of commissioners before Easter means other sectors are set to lose out.

The issue has arisen because the carbon price floor, introduced a year ago, acts as a top-up to the price set under the EU’s Emissions Trading Scheme. Mr Osborne’s compensation scheme is aimed at reimbursing up to four-fiifths of the cost of both the carbon price floor and the ETS for high energy users.

The Brussels commissioners ruled that only those sectors already listed as eligible for compensation under the ETS scheme could also receive compensation for the carbon price floor. British officials had been hoping to add other sectors.

The UK is considering its options, which could include going ahead with an application for companies in the excluded sectors to be approved despite the ruling, but the chances of success look slim.

The Mineral Products Association, a trade body, estimated that the ruling could cost the cement and lime sector alone up to £75m.

“This will significantly undermine competitiveness globally and specifically in Europe for the industries concerned, as no industries in Europe or elsewhere have to pay the equivalent of the UK carbon price floor,” said Jerry McLaughlin, the association’s director of economics and public affairs.

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