Carbon policies will drive heavy industry out of UK, report warns

Rising energy prices and the government’s climate change policies will drive energy-intensive industries overseas, warns a report published jointly today by the Energy Intensive Users Group (EIUG) and the TUC.

The report cites steel making, ceramics, paper, cement and lime manufacture, aluminium and basic inorganic chemicals as industries based in the UK which face increases in their energy costs of up to 141 per cent by 2020, taking into account electricity, gas and emission-reduction schemes.

“The current policies do seem to be angled towards creating a market for overseas competitors,” EIUG director Jeremy Nicholson told Businessgreen.com. “As green tax structures stand today, energy intensive industries are carrying a heavy burden of policies to tackle climate change and reduce energy use. Yet these companies make a significant contribution to UK GDP and exports.”

The report says that these cost increases present a major challenge to the viability of a number of named companies across different energy-intensive industries in the UK – including ceramics, chemicals, steel, aluminium and paper.

Even though successive governments have said Britain’s future lies in the low-carbon economy, a low-carbon future isn’t possible without them, says the report. The firms involved in these activities produce feed-in products essential to the low-carbon economy, such as ceramics, glass, steel, light-weight composites for wind turbines and electric cars and advanced insulating materials for low-energy housing.

“Clearly the low-carbon economy is going to require a lot of cement and steel, but where is it going to be made?” said Nicholson. “We’re not lobbying for protectionist measures but we do need to decarbonise in an economically efficient way.”

Combined, these activities currently employ some 225,000 workers says the TUC.

“Employers and unions in these manufacturing industries are determined to make sure these companies have a future in the UK’s low-carbon economy,” said TUC general secretary Brendan Barber. A just transition to a greener economy is vital for these industries and the jobs of the workers they employ, and they make a significant contribution to the UK economy.”

The EIUG and the TUC both support the shift to a low-carbon economy as an essential response to the acknowledged challenge of climate change, but they also believe the UK’s energy intensive industries are vital to this transition.

Specifically the report calls for:

• A balance of climate change policies between industry and other sectors of the UK to transform the UK to a low-carbon economy.

• UK climate change policies to have accompanying impact assessments that look at the combined effect of all related policies on intensive energy users.

• The government to undertake a full cost-benefit analysis of energy-intensive sectors to understand the direct impact on the companies and the GDP benefit to the UK and its regions.

“Many governments have determined that man-made climate change is one of the most pressing issues the world faces today,” said: Tata Steel’s European chief executive Kirby Adams. “Corus can be part of the solution through relentless process improvements, investing in breakthrough technologies and supplying and developing new products that underpin a lower CO2 economy.”

“Many of the taxes and costs identified in this report are UK-specific and will reduce the competitiveness of Corus’s British operations,” added Adams. “Moreover, the very significant cumulative nature of the additional costs likely to come in under European legislation will damage the competitiveness of all EU steelmakers and limit their ability to fulfil their crucial role in a low-carbon future.”