The Government’s compensation package for the energy intensive industry only addresses a “fraction” of the financial burden caused by EU carbon prices.
That’s the view of EEF, the manufacturers’ organisation, who welcomed the news for energy intensive companies to claim up to £113 million in compensation but said the Government needs to do more to provide the right level of the required cost offset.
Gareth Stace, Head of Climate & Environment Policy said: “We recognise that Government is keen to ensure a level playing field with our competitors both within Europe and globally. This package goes some way to addressing our concerns. However, we are concerned that the package will only compensate about two thirds of the additional pass through costs within electricity prices for energy intensive industries from the EU emissions trading scheme and the carbon price floor.
“Currently, the Package only addresses a fraction of the cumulative burden. The Renewables Obligation and small scale renewable FiTs, for example, together are costing over £11 per MWh.”
The package is part of a wider £250 million fund aimed at helping energy intensive users such as steelmakers and ceramics companies to cope with policies such as the EU’s Emissions Trading System (ETS).
Mr Stace added that long-term certainty is crucial for UK manufacturers, which the package doesn’t provide.
He said: “Currently, the lifetime of the package is only three years. This is highly inadequate and sends the wrong signal to investors in UK manufacturing. The Government must, at the forthcoming spending review, commit to a much longer time frame for this Package.
“Finally we are concerned at the lack of progress regarding State Aida approval for part of the package, namely the carbon price floor compensation. Unless we receive a positive outcome from the Commission very soon, the UK Government risks not being able to backdated compensation for the carbon price floor to April 2013. This would mean that UK energy intensive manufacturers would be paying uncompetitive electricity costs, in relation to their overseas competitors, at a time when this will have the greatest impact.”
Energy intensive firms will be able to apply for the cash starting next month.