George Osborne’s 2012 Budget has been branded a major “setback” for manufacturing and for the Combined Heat and Power sector.
The trade body Combined Heat and Power Association (CHPA) is concerned thousands of jobs in manufacturing could be threatened by planned cuts to tax incentives.
Many large energy users such as refineries, chemical plants and paper mills use CHP because of their high demand for heat in their processes, many needing temperatures as much as 500 degrees celsius. They choose CHP because of its high “efficiency rates”, according to the CHPA, saving 13 million tonnes of CO2 a year.
There are 1,568 CHP schemes in the UK, producing 7% of the UK’s electricity, according to DECC figures. More than four-fifths of that capacity is on industrial sites.
Last week manufacturing industry leaders sent a letter to George Osborne warning him half of this – around six million more tonnes of carbon – could be released if he didn’t reverse a move in the 2011 Budget which cuts support for CHP.
Their pleas fell on deaf ears though, as yesterday’s Budget reinforced plans to chop CHP plants’ eligibility for CCL Levy Exemption Certificates in 2013.
These are tradable certificates which exempt electricity from CHP from the Climate Change Levy.
The industry was not impressed by the Chancellor’s attempt to curry favour with them another way. Mr Osborne said in the Commons: “Combined heat and power plants will not be liable for carbon price support rates on fuels used for heat,” meaning they won’t have to pay tax on emissions from their fuel.
The trade body argues the benefits of this will be totally negated.
Graham Meeks, Director of the CHPA said: “This is a setback for growth and a setback for the Government’s green ambitions. Across the country hundreds of businesses employing tens of thousands of workers are already facing the prospect of rising energy costs. For many, combined heat and power is their only realistic prospect of addressing this threat and controlling their carbon emissions. The Chancellor has taken this option off the table for the foreseeable future.”
He said it was now up to Energy Secretary Ed Davey to give CHP a boost in the Electricity Market Reform.