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Tata Steel has warned that the cost of levies supporting the UK Government's low carbon energy policy – for energy-intensive users here in the UK – could soar in the next 10 years.
“We anticipate the amount we pay to subsidise green power will rise by five times between 2010 and 2020,” Mr Tim Morris, the head of climate change at Tata Steel's European operations, told delegates at the CBI Energy Conference in London, referring to research done by the Energy Intensive Users Group, of which Tata Steel is part.
Cost of energy
Mr Morris described the company, which employs 20,000 people directly in the UK as one of the biggest energy consumers in the UK. “The cost of energy is enough to make the decision on plants, investment, jobs go one way or another,” he said.
The burden on industry here in the UK remained high even by European standards – with costs of energy use in the UK being significantly higher and more volatile – than in Germany or in France, he said. “You would struggle to convince me this is not a major problem,” he said.
Tata Steel has been outspoken about some of the recent reforms to the energy market brought in by the British coalition government – in particular the introduction of the world's first carbon floor price earlier this year. Back in March, Tata Steel warned that the scheme could cost the company £20 million a year.
Exemption system
The CBI, the body representing British industry, has warned that the scheme risks tipping the energy-intensive users over the edge, and has called for a rebate-based exemption system (based on energy efficiencies achieved) for the sector.
“At a time when rebalancing of the economy needs UK manufacturing to be playing a bigger role, energy-intensive users need more help,” warned the CBI Director, Mr John Cridland. “We have to see exemptions for those industries most at risk – those very industries that are a critical part of our low-carbon economy.”
Others within the industry have stepped into the debate too, with chemical maker Ineos warning that a chemical plant at Runcorn in the UK could prove uneconomical.
“Tata is facing the same problem,” warned Mr Cridland.
Challenges
Mr Morris warned that the new government policies presented three major challenges to the company – making it harder to sell its produce, making it harder to raise money to reinvest – at the same that it wasn't clear whether the scheme reduced carbon emissions in the way intended.
“The message we want to get across to Government is that steel is part of the solution for climate change because of the innovative ways steel can be used to reduce emissions, which dwarf the industry's own emissions,” said Mr Morris. “Unilateral taxes on energy-intensive manufacturing in the UK are therefore counterproductive.”
Govt's position
“We recognise that there are challenges,” Mr Charles Hendry MP, Minister of State Energy, said on Tuesday. “We believe the energy intensive industry should and must will play an important part in future growth of this country,” he said pointing to the Government's pledge to introduce ameliorating policies, specifically targeted at the energy-intensive industry, by the end of the year.
“It would be mad to end up with a situation which moved industry overseas, resulting in carbon being emitted at higher levels in other parts of the world, and then import those goods.”
He pledged, “We are determined that through these measures we will address the issue of carbon leakage and ensure they have a long-term viable future.”
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