With George Osborne’s commitment to supporting energy intensive industries featuring prominently in the Budget last month, many in industry thought they could breathe a sigh of relief. However, new guidelines adopted by the EU Commission are threatening to deny this support, contradicting the Government’s plans and potentially crippling parts of the UK manufacturing industry.
The recent decision by the EU College of Commissioners to adopt new Environmental and Energy State Aid Guidelines, means that while some energy intensive industries will receive much needed compensation against the UK’s unique carbon price support tax, some will fall foul of a technicality in the new guidelines which excludes some electro-intensive manufacturing impacting the affected sectors by hundreds of millions of pounds.
“The guidelines were updated to take account of, amongst other things, changes in renewable energy taxation policy”, explains Dr Richard Leese, Director of Energy and Climate Change at the
Mineral Products Association(MPA).
“There is only one member state in Europe [the UK] that has a carbon tax directly linked to the EU Emissions Trading Scheme carbon price, so one feels they must have known exactly who they were going to upset when they rewrote them.”
The decision in Brussels undermines George Osborne’s statement in the Budget and directly contradicts what Business Secretary Vince Cable said in Parliament on 16 April, when he made clear that the Government will provide compensation support for energy intensive industries.
The MPA, the British Ceramic Confederation (BCC) and British Glass (BG) are therefore calling on the Chancellor and Business Secretary to go to the barricades to defend Britain’s interests on this vital issue for the nation’s competitiveness.
Dr Leese stresses the importance of this issue and that MPA, BCC and BG are keen to work urgently with the Government to find a way of delivering on UK policy whilst simultaneously securing the future of the essential cement, ceramics, kaolin & ball clay, glass and lime industries.
“It is a remarkable feature of the European Union that the UK can impose a tax which is completely unilateral and then as soon as they want to give certain elements of the economy, for good reason, a relief against that tax, they have to go to Brussels for state aid approval”, says Dr Leese. “State Aid approval should be about maintaining a level playing field within Europe. At the moment the UK is playing up hill.”
The fight comes at a difficult time for the manufacturing industry, he adds, with costs rising from all sides.
“Carbon price support is just one of the suite of measures in the reform of the electricity market which aim to move the power generation sector over to lower carbon and renewables. So the industry is not just faced by the carbon price support tax – any compensation for which is unlikely to be backdated. We are also seeing costs come through from renewable obligation costs and small scale feed in tariffs which adds to the cumulative burden of green taxes.”
The time for Government action is now, says Dr Leese.
“The Coalition Government, especially in the Budget, has reaffirmed its commitment to energy intensive industries. The Chancellor has committed to providing compensation for electro-intensive sectors, but at present the EU Guidelines would prevent the UK fulfilling that commitment. This should not only be unacceptable to the industries affected but also to the Government.”
“We will be relying on UK Government support to convince the Commission of our case or find alternative methods of supporting our key industries.”