In a letter to George Osborne ahead of the Budget, the
Confederation of Paper Industries(
CPI) said the industry has made “significant progress over recent years in reducing its energy consumption and its carbon emissions”.
However, production is inherently energy intensive and the sector remains a major user of both gas and electricity.
The
CPIsaid:
“The UK needs to be more realistic about our ability to ‘lead the world’ in decarbonising the economy.
“UK emissions are tiny in a global context and it should be better understood that unilateral actions are essentially irrelevant, especially when direct UK emissions are simply substituted for emissions embedded in imported manufactured goods previously made here. It is critical that UK policy is set in the context of policies being followed by other nations.”
CPIDirector General David Workman said in his letter to Osborne that the sector “has been put at a competitive disadvantage due to the increasing gap in energy costs between the UK and competing trading blocs, notably the USA”.
Workman said the Carbon Price Floor (CPF) should be cancelled or frozen at the current level.
“This is a unilateral UK-only tax that, with no link to European Union Emissions Trading System allowances, has no actual impact on the total level of emissions,” he said.
“Yet the CPF’s ‘escalator’ guarantees ever-increasing energy costs to UK energy-intensive manufacturers.”
Workman said the sector has invested hundreds of millions of pounds in Combined Heat & Power (CHP) plant, helping reinforce and decentralise the grid, and in delivering the generation infrastructure vital to the UK.
“At the very least, we would seek to make CHP exempt from Carbon Price Support taxation,” he said.
“The Climate Change Levy (CCL) discount from Climate Change Agreements (CCA) should be maximised,” Workman added.
“A significant way the Government could support energy-intensive industries would be to offer the maximum CCL discount allowed under EU law to companies that are participants in the CCA scheme, where the potential for energy efficiency measures are incentivised.”
Workman also called for the Treasury to create a well-funded programme to support industrial energy efficiency.
“Present policies assume the ‘stick’ of ever-higher energy prices will force energy efficiency,” he explained.
“However, the ‘carrot’ of strong financial support for energy efficiency would be a real attraction to help secure and retain UK investment.”
Mr Workman concluded by suggesting that gas should have a key role in helping reduce UK emissions until at least the 2030’s, and urged the Chancellor to examine the working of the wholesale market and decouple any link between oil and gas prices.
“The UK should be able to benefit from global gas markets and specifically narrowing the gap between UK and US gas prices should be a priority, especially with the forthcoming free trade deal.”