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Government should exempt energy-intensive users from carbon floor tax

The Government needs to act swiftly to ensure the global competitiveness of the UK’s most energy-intensive manufacturers is not undermined by rising costs and climate change and energy policies, the CBI said today (Friday).

In a new report Protecting the UK’s foundations: a blueprint for energy-intensive industries, the UK’s leading business group argues that these companies form a crucial part of the manufacturing and supply chain and will play a key role in tackling climate change. Energy-intensive companies also employ 225,000 people in the UK and account for one percent of annual GDP (£15bn).

But the carbon floor price is making it increasingly uncompetitive for the most energy-intensive users to remain in the UK, and the CBI is calling on the Government to consider exempting these firms from the tax.

Katja Hall, CBI Chief Policy Director, said:

“Energy intensive industries underpin the UK’s manufacturing sector, making products as diverse as the steel and chemicals needed for wind turbines and low-rolling resistance tyres.

“The Government is in serious danger of throwing out the baby with the bathwater if it continues to pile new costs onto industries that are responsible for hundreds of thousands of jobs and bring in £15bn to the UK economy every year.

“Businesses accept that they must share the cost of moving to a low-carbon economy, but we simply cannot afford to price out this vital sector. The Government must ensure its autumn energy strategy looks at ways of exempting companies most at risk from the carbon floor price, while encouraging them to be as energy efficient as possible and use new technology to reduce emissions further.

“Unless the Government acts swiftly, there’s a real risk that these companies will decide it’s not cost effective to remain in the UK and simply relocate elsewhere.”

The CBI welcomed the Government’s recent impact assessment on its energy and climate change policies but argued it should go further. The CBI’s proposals to ensure that energy-intensive industries can compete globally include:

  • Working with business to assess the cumulative impact on energy-intensive industries of current and proposed energy and climate change policies
  • Exempting those energy intensive industries most at risk from the carbon floor price – this offers the most immediate solution
  • Using EU state aid to create a level playing field so that all member states are able to protect the competitiveness of their energy intensive industries equally
  • Looking at letting conglomerates negotiate long-term power contracts with energy suppliers
  • Undertaking an investigation of the industrial sectors’ ability to contribute to balancing the electricity network
  • Exploring ways of giving credit to energy industries for decarbonising their UK supply chains
  • Working with business on private procurement standards for low-carbon products made by energy intensive industries

The CBI’s proposals for support to new and existing energy efficient technologies include developing:

  • Roadmaps to show how different sectors can de-carbonise
  • New plans to support combined heat and power
  • A carbon capture and storage strategy for energy-intensive industries
  • Financial support for industrial efficiency programmes from the Green Investment Bank
  • Low-carbon heat and bio-energy strategies which include using waste heat and take energy intensive industries into account
  • Address barriers to better waste management for energy intensive industries.

A copy of Protecting the UK’s foundations: a blueprint for energy-intensive industries is attached.

Notes to Editors:

The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and Delhi the CBI communicates the British business voice around the world.

CBI Energy report Aug 11.pdf

Media Contact

CBI Press Office on 020 7395 8239 or out of hours pager on 07623 977 854. Follow the CBI on Twitter at: www.cbi.org.uk/twitter

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