Brussels Thwarts UK Reduced Carbon and Energy Costs
Following Wednesday’s decision by the EU College of Commissioners to adopt new Environmental and Energy State Aid Guidelines, leading UK energy intensive industry bodies expressed their severe disappointment and frustration that help with crippling energy costs promised by the UK Government will not now be forthcoming to the all-important cement, ceramics, kaolin ball clay and lime industries.
The decision in Brussels undermines George Osborne’s statement in the Budget and directly contradicts what Business Secretary, Vince Cable, also said on Wednesday in the House of Commons, when he made clear that “We believe in it (energy intensive industry), and it is important that it is able to compete on a level playing field. That was the purpose of the changes announced in the Budget and we are now actively pursuing state aid clearance to make sure that these compensation mechanisms go through”. Dr Cable went on to say “The only concern from the industrial point of view is that energy-intensive industries should have those costs offset. Under the mechanism the Chancellor has proposed, which we are now pursuing through the European Commission, they will be offset”.
While some energy intensive industries will receive compensation against the UK’s unique carbon price support tax, sectors such as those represented by the British Ceramic Confederation and the Mineral Products Association, will fall foul of a technicality in the new guidelines, which excludes electro-intensive manufacturing by their members.
Commenting on the severe blow to the competitiveness of the cement, ceramics, kaolin ball clay and lime industries, the Chief Executives of the two trade associations , Nigel Jackson for the Mineral Products Association and Laura Cohen for the British Ceramics Confederation, said “the UK Government has recognised the importance of our vital manufacturing industries to the economy and jobs. They want to help our members stay in business in this country where we face some of the highest electricity costs in Europe and are vulnerable to rising imports. Yet in the face of their best intentions, UK Ministers have been thwarted by these new rules from Brussels. Our members will pay the price of this unequal treatment, further undermining their competitiveness globally and specifically in Europe. We call on George Osborne and Vince Cable to work urgently with us to find a way of delivering on UK policy whilst at the same time securing the future of these essential industries and the jobs we support”.
Notes:
Support for energy intensive industries against the cost of the UK’s Carbon Price Floor was announced by the Chancellor during the Autumn Statement in 2011 and expanded on in Budget 2014 and is subject to EU State Aid approval. This measure was to ensure the ongoing competitiveness of UK industry against those who do not face the same costs in the rest of Europe.
Paragraph 181 of The new Environmental and Energy State Aid Guidelines state:
(181) Therefore, if the tax referred to in point (180) is designed in a way that it is directly linked to the EU ETS allowance price and aims to increase the allowance price, compensation for those higher indirect costs may be considered. The Commission will consider the measure compatible with the internal market only if
(a) the aid is only granted to sectors and subsectors listed in Annex II of the ETS State Aid Guidelines to compensate for additional indirect cost resulting from the tax.
The Annex II list referred to are those sectors who stand to receive support against in-direct EU Emissions Trading Scheme costs. The Commission has yet to announce this list but none of the above sectors are on it. Without being on the Annex II list which relates to a European wide tax, sectors such as cement, ceramics, kaolin ball clay, glass and lime, are being prevented from receiving support against a UK-only tax.
