UK urged to exempt Tata Steel from carbon levy

Britain has been urged by a major business organisation to exempt high energy users such as Tata Steel from a carbon levy, which, it is argued, could cripple many industries and lead to carbon leakage.

“The carbon floor tax is making it increasingly uncompetitive for the most energy-intensive users to remain in the UK,” the CBI, Britain's top business organisation concluded in a report published on Friday on the impacts of the changes on industries such as steel, chemicals, and cement.

Earlier this year, the British Government announced the introduction of the minimum price for carbon dioxide in 2013. It will act as a floor should European prices — under the European Emission trading scheme — fall. The policy has already provoked an uproar among industry which has warned that the unilateral action (Britain will be the only country in the world to have such a scheme) will do more harm than good. Already facing higher energy costs than much of Europe, the new tariff could ‘tip the balance' for many energy-intensive users, the CBI warned.

Employment generation

Energy-intensive users directly employ nearly a quarter of a million people and contribute to around one per cent of GDP, though the report argues it's impact is far wider pointing to a Tata Steel figure that each job it creates leads to five further indirect jobs.

Many of the products produced by high energy users, such as steel, were also essential for creating a green future, it argues. While for some industries that either cater to the domestic market or for whom energy were just a small proportion of the total, the levy could be sustainable, for those that export or face competition internationally the result could be devastating.

Survival of the fittest

“The end result would be that some UK businesses may simply not survive, and the products they currently make will instead be sourced from overseas,” argues the CBI.

“The Government is in serious danger of throwing out the baby with the bath water if it continues to pile new costs onto industries that are responsible for hundreds of thousands of jobs,” says Mr Katja Hall, the CBI's Chief Policy Director.

It calls on the Government to consider exempting the most at risk industries by a rebate system based on energy efficiency benchmarks. This would cost up to £400 million in 2013 and up to £700 million in 2015 - a small price it argues for keeping industry competitive and in the UK. It also suggests using EU state aid to create a ‘level playing field' so that all member States are able to protect the competitiveness of their energy-intensive industries, among 11 other recommendations.

Tata Steel has been a vocal critic of the floor price, warning earlier in the year that it could cost its UK operations as much as £20 million a year annually by 2020.

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