The Confederation of Paper Industries (CPI), which represents 70 companies from an industry with an aggregate annual turnover of £6.5bn, says the carbon tax impedes British business.
“We are looking for a repeal of the carbon price floor - it is a big ask, but as a UK specific measure designed to raise the price of carbon, it has a knock-on effect on our competitiveness,” explains David Workman, Director General of CPI.
The carbon price floor (CPF) is a tax on fossil fuels used to generate electricity and only came into effect in April 2013. In April's Budget, the carbon price support (CPS) rate per tonne of carbon dioxide (tCO2) - the UK only element of the CPF - was capped at a maximum of £18 until 2020.
Workman is also hopeful that George Osborne will also take action on the Carbon Reduction Commitment, a carbon reduction tax on UK businesses that the government itself estimates costs industry £97m to manage.
“It does create a lot of costs,” Workman said. “The Chancellor has said he was minded to get rid of it, and we want him to firm that up and do it in the Autumn Statement next month.”
“The problem we have at the moment is that the Carbon Reduction Commitment was a tax designed to circulate money into carbon reduction targets but it is now just disappearing into the Treasury pot.”
He adds: “We are also concerned that the compensation packages already announced only run for the next six years, till 2020. We have investment cycles of up to 30 years, so we would like confirmation that the packages will be extended. At the moment, there is compensation for the impact of the EU Emissions Trading Systems (EU ETS) and for the CPF. They don’t cover the full cost, but are a move in the right direction.”
Workman does have some positive words for the Treasury.
“It is worth recording that in the last Budget, the Chancellor made a number of concessions to energy intensive industries, worth £170m to the Paper Industry.
“He recognised there is an issue here and attempted to do something about it, and we are appreciative of those concessions. But we are still concerned that we are not really operating on a level playing field with rest of the EU, never mind the rest of the world.”
Workman says CPI members and other energy intensive industries want the political parties to focus on security of energy supply in their manifestos for the general election.
“Security of supply is a concern over the next few winters in particular, and we look to the government to maintain a good mix of energy sources. There should be a review of the closure programme for fossil fuel power stations, especially coal. Shale needs to be exploited safely - we need to be exploiting reserves of our own energy sources.”
“There also needs to be a review of biomass, particularly at the Drax power station which is using huge amounts of wood – that is neither economically or environmentally sustainable.”
“Gas storage is pretty full across Europe for this winter but problems will arise in future years, partly due to the closure programme and also because of the time it takes for new nuclear plants to come on board.”
Workman also wants politicians to consider the ’cumulative cost’ to business of regulations, both EU and national, across a range of areas.
“It is quite massive and the fact is our competitors elsewhere in the world do not suffer the same penalties. “We abide by EU emissions directives as well as environmental permits under which our mills functions.
“Our own industry permit has been revised and over the next four years we will invest to meet new limits on emissions - another cost impact. It is important for politicians to understand how all this impedes our ability to remain competitive.”
Finally, Workman points to EU plans on recycling, which CPI supports, and the way that the policy could be frustrated by the way the UK manages recycling.
The European Commission’s ‘circular economy’ plan for a zero waste programme for Europe focuses on boosting recycling and preventing the loss of valuable materials.
“Here in the UK, recycling policies are decentralised, and the concept of quality does not seem to be a government priority. The only way to get quality materials for recycling is to segregate them at the point of collection, but many local authorities collect co-mingled materials.
“For example, if we have paper and glass collected and compacted together, it makes it virtually impossible to use the paper for recycling.
“We are concerned also at the looming over-capacity of ‘energy from waste’ plants which could lead to significant quantities of paper and other valuable resources being burnt. National controls are needed on the location and capacity of these plants, and to ensure that only unrecyclable waste is used in them. We are very supportive of the EEF’s campaign for an Office of Resource Management in BIS to oversee recycling.”
But in the lead up to the Autumn Statement, the message to George Osborne is loud and clear: “ditch the carbon floor tax”.