Reports: Carbon tax breaks planned for heavy energy users

Government set to offer rebates to energy-intensive industries next month in a bid to lessen impact of carbon floor price

A select handful of energy-intensive industries may be given a free pass that allows them to avoid proposed environmental levies when the government announces its planned growth review next month.

The Financial Times reported yesterday that the Treasury has bowed to pressure from the CBI and companies such as Tata Steel and Ineos and now plans to introduce tax breaks for some of the sectors affected by the £16 per tonne carbon floor price that the government plans to introduce from 2013.

Just this week, Karl-Ulrich Köhler, head of the European division of Tata Steel, warned the company’s planned £1.2bn investment in the UK was at risk from the “over-the-top” climate change policies imposed on heavy industry.

A Whitehall source told the paper that any rebate would effectively lower the cost of energy for the heaviest users, specifically eight plants in the aluminium, chloride-alkaline and electric arc furnace steel industries. It was not specified whether other sectors might also benefit.

A Treasury spokesman refused to comment on the speculation, but told BusinessGreen that the department was looking for ways to ensure energy-intensive industries remain competitive without “undermining the green agenda”.

“The government recognises the need to support energy-intensive industry, which is why we have already established a discount on the climate change levy and reduced corporation tax,” he added in a statement. “The Treasury and other departments are working on a further package of measures to be announced later this year.”

When announcing the electricity market reform (EMR) package, which includes the carbon floor price, the government did signal that it would introduce a support package to ensure large energy users remain “internationally competitive”.

The mooted rebates also fit with George Osborne’s pledge at the Conservative Party conference to scale back environmental regulations that he blamed for “piling costs on the energy bills of households and companies”.

Any move to appease heavy industry will infuriate green campaigners who have consistently argued large energy users are “crying wolf” over higher bills, noting that the government’s own estimates state that the EMR package will add just three per cent to corporate energy bills.

However, the EEF manufacturers’ organisation estimates the cost to industry will rise from £250m annually in 2013 to £1.2bn in 2020, and has called for the carbon floor price to be abolished altogether.

The CBI has also warned that investment in heavy industry will be forced away from the UK to countries with less stringent regulations, resulting in job losses and so-called “carbon leakage” whereby emissions continue to rise overseas

You can return to the main Market News page, or press the Back button on your browser.