Isra-Mart srl: CBI attacks coalition energy policy, demands carbon price exemptions

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CBI director-ceneral John Cridland has today launched a stinging attack on the coalition's energy policy, warning that the complex measures proposed in its electricity market reforms could bankrupt energy-intensive firms.

Speaking at the CBI energy conference in London this morning, Cridland warned that the government's decisions risked driving "carbon leakage", whereby carbon intensive firms relocate to countries without carbon taxes. He referred to policies that would turn the Carbon Reduction Commitment (CRC) scheme into a tax, impose a carbon floor price on the EU emissions trading scheme, and increase taxes on North Sea oil and gas.

He added that the high cost of energy could not only hamper the development of the UK's manufacturing base, but also undermine those green sectors that are meant to build the UK's low-carbon infrastructure.

"We're already seeing warnings from companies like Ineos that its chlorine plant in Runcorn could become uneconomical under the sudden introduction of the proposed carbon floor price," he said. "Tata Steel is facing the same problem. One major construction company is now finding it will soon cost less to import cement from Spain than to produce it at its UK plant. Yet Tata makes the steel that goes into the turbines. Ineos makes the lubrication that helps the blades turn. And we need up to 150 tonnes of cement to generate every megawatt of offshore wind."

In his most detailed energy policy intervention to date, Cridland urged the government to use its upcoming Electricity Market Reform white paper to announce that energy-intensive industries will be protected from any significant increase in costs that results from measures such as the carbon floor price.

"The CBI supports the carbon floor price in principle, but we have to see exemptions for those industries most at risk – those very industries that a critical part of our low-carbon economy," he said. "Therefore, we propose a rebate-based exemption linked to the energy-intensive industries' work on energy efficiency."

He also reiterated the CBI's calls for the government to rethink its controversial hike in taxes for North Sea oil and gas producers, and axe the CRC scheme altogether. "If it wants a green tax [through the CRC], it should do the job properly," he said.

Cridland's comments come ahead of the release next month of the government's white paper on Electricity Market Reform, which is expected to feature a package of measures designed to drive investment in low-carbon energy infrastructure.

He called on the government to use the white paper to bring an end to the period of policy uncertainty that has undermined investor confidence in the energy sector.

"We [...] need the answers from this summer's energy white paper," said Cridland. "We don't want a white paper heavy on promises of round-table meetings and departmental listening exercises and light on the boldness and certainty that's required."

Cridland's address was followed by a keynote speech from energy minister Charles Hendry, who promised that greater certainty would be delivered in the coming weeks. He confirmed that the white paper was on track to be released next month and that the government's promised Energy National Policy Statements (NPS) – which will include a final list of sites for new nuclear power stations – will be published before parliament's summer recess.

He also pledged that the government would act to protect energy intensive industries from being adversely affected by the electricity market reforms.

"By the end of this year, we will put forward a package of measures for the energy intensive industries whose international competitiveness is most affected by our energy and climate change policies," he said. "It would be madness to end up in a situation where big companies in the United Kingdom moved overseas and we lost the jobs, the carbon was going to be emitted equally or potentially more in other parts of the world, and we would have to import those products so there was no climate change benefit and simply an economic loss to Britain."

In addition, he said DECC will publish a new Renewable Energy Roadmap that will detail how the UK plans to overcome the barriers that could stop it meeting its target of generating 15 per cent of energy from renewables by 2020.