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Energy intensive businesses are being told how to claim compensation to offset the cost of energy policy in their electricity bills with the publication of new government guidance yesterday.

The guidance is being published alongside the government response to its consultation on a £250 million Energy Intensive Industries Package.

Eligible firms will be able to apply from 3 June as part of measures to reduce the impact of energy and climate change policies on the cost of electricity for energy intensive industries in the UK.

The guidance sets out how businesses can claim compensation from the first tranche of the £250 million for the indirect costs of the EU Emissions Trading System (EU ETS). Up to £113 million has been allocated for this scheme.

Business and Energy Minister Michael Fallon said:

“Energy intensive industries are a critical part of the UK economy. It is essential that as we put in place policies to generate the necessary investment in energy infrastructure we do not undermine the competitiveness of UK industry.

“This compensation package will support firms, protect jobs and help reduce the risk of industries leaving our shores.

“The energy intensive industries also provide many of the components for low carbon goods. For example, steel is vital for the manufacture of wind turbines”.

The government has also committed to establishing a compensation scheme to address the indirect costs of the Carbon Price Support (CPS) mechanism, subject to state aid clearance. That scheme is currently being considered by the European Commission and will be announced later this year.

Applications for the EU ETS scheme can be submitted from 3 June 2013, when the form will be made available on the GOV.UK website.

The deadline for applications for compensation which includes costs incurred from the 1 January 2013 will be the end of July. Applications received after the end of July will not be considered for costs already incurred.

Notes to editors

1. Guidance on how businesses can claim indirect EU ETS compensation was published yesterday. Further guidance will be issued later in the year, providing details of the indirect Carbon Price Support compensation scheme, where we currently await clearance from the European Commission. The EU ETS compensation guidance can be found here https://www.gov.uk/government/consultations/energy-intensive-industries-compensation-scheme

2. In the Autumn Statement on 29 November 2011 the Chancellor announced that the government intends to implement measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries, beginning in 2013. Up to £250 million has been earmarked for this over the Spending Review period.

3. As part of this commitment the government has decided to compensate those electricity-intensive industries most at risk of carbon leakage to help offset the indirect cost of the Carbon Price Floor and the EU Emissions Trading System, subject to state aid guidelines.

4. A consultation was held between 5 October and 21 December 2012 to seek views on the proposed eligibility and design of the scheme. The government response to the consultation on Compensation for the Indirect costs of EU Emissions Trading System in 2013/14 and 2014/15 is being published today and can be found here https://www.gov.uk/government/consultations/energy-intensive-industries-compensation-scheme

5. In addition, the Parliamentary Environmental Audit Committee (EAC) undertook an inquiry into the Energy Intensive Industries Compensation scheme. BIS Ministers attended an EAC hearing alongside BIS and DECC officials on 4 December 2012. The EAC presented their findings in their report which was published on 4 January 2013. The government response to the Committee is being published today and can be found here https://www.gov.uk/government/consultations/energy-intensive-industries-compensation-scheme

6. The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

• to create the most competitive tax system in the G20
• to make the UK the best place in Europe to start, finance and grow a business
• to encourage investment and exports as a route to a more balanced economy
• to create a more educated workforce that is the most flexible in Europe.

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.