Manufacturers have reacted with disappointment to the Government’s decision to sign up to significantly more ambitious targets to reduce carbon emissions.
EEF, the manufacturers’ organisation, said the move risked damaging production sector competitiveness in the absence of convincing evidence of any appetite in the rest of Europe to make such a move, this risks
EEF Midlands region director Richard Halstead said the Government must now demonstrate that it understands the threat to competitiveness and the risk this poses for future investment and jobs.
It needs to put in place credible measures to safeguard the competitiveness of all manufacturing and not just energy-intensive industries, he added.
Mr Halstead said: “On its own this is a bad decision for manufacturing so the government must move quickly to address the competitiveness concerns faced across manufacturing, as well as energy-intensive industries.”
The Government has signed up to cutting Britain’s greenhouse gas emissions by nearly half – but with no clear agreement on how to achieve the target.
The Climate Change Secretary Chris Huhne announced that ministers had accepted proposals by the Committee on Climate Change to enshrine in law reductions in carbon emissions to 50 per cent of 1990 levels by 2027.
Mr Halstead added: “Government must reassure Industry that if there is no European agreement to move to tougher targets by 2014 it will automatically reverse the UK position.
“In particular, it must ensure that it does not lock itself into policies that will then be difficult to reverse.”
The Government has recently committed to introducing a Carbon Price Floor which will widen the existing gap between UK and EU electricity prices.
EEF has already argued that lawmakers should take measures to reduce this impact, not just on energy intensive sectors, but also on wider manufacturing.
To address this, EEF has argued for the following measures to help business close this gap:
1. Extending the rate of relief on electricity consumption which Climate Change Agreement (CCA) participants receive from the Climate Change Levy (CCL). In the first instance, government should apply for state aids approval to increase the rate of CCL relief for CCA participants to 100 per cent.
2. The Emissions Trading Scheme Directive has a provision allowing member states to compensate energy intensive sectors for the uplift in electricity prices caused by the EU ETS from 2013. Government should exercise the option and aim to provide 100 per cent compensation to energy intensive sectors.
Mr Halstead said this comes at a time when many other manufacturers who would not traditionally be described as energy intensive are increasingly affected by rising energy prices and the policy aim of increasing the role of green taxation.
If the UK is serious in wanting to move towards a re-balanced, export-focused economy then the impact of policies in this area should also be considered for wider manufacturing, he added.
Priorities would include compensating reductions in other taxation and using the revenue raised by green taxation to fund investment in low-carbon technologies, including carbon capture and storage.
EEF also believes that the Green Investment Bank remit should include financing for industrial energy efficiency projects.