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Baseefa Ltd

UK companies warn carbon price floor makes them uncompetitive

08 October 2013

The Daily Telegraph says Tata Steel and BASF have warned that the so-called carbon price floor, levied on fossil fuels used in power generation, is putting them at a competitive disadvantage. The Government promised that energy-intensive industries would be offered a £100m compensation package to protect them from the unilateral tax, which was introduced last April.

But the compensation has been held up for several months awaiting EU state aid approval, with businesses already facing millions of pounds in costs. Ministers said last October that they expected EU approval “by the summer of 2013”, but last night disclosed the earliest a resolution would come would be the end of this year.

If approval were rejected, it could call the whole tax into question. Industry hopes that the Government may be prompted to review the tax, especially after the Conservatives indicated that they were looking to mitigate rising energy costs in the wake of Ed Miliband’s price freeze pledge.

“We shouldn’t put British industry at a disadvantage against Europe and the US: for our manufacturers this would be assisted suicide,” Michael Fallon, the energy minister, said recently.

Karl Koehler, chief executive of Tata Steel, which employs 18,500 people in the UK, said: “Unilateral taxes like the carbon price floor hurt competitiveness. I welcomed the Government’s energy tax mitigation package, but the delay in its implementation caused by the EU state aid process harms UK manufacturers.”

Andrew Mayer, head of UK public affairs for chemical company BASF, which employs about 2,000 people in Britain, said: “Without clarity on state aid approval for energy intensive rebates from the CPS [carbon tax] we are facing a 5pc rise in our energy costs today and 20pc from April 2015.

“Even with that clarity, many of our customers and smaller sites are still facing that increase. It is an unsustainable policy that is damaging UK competitiveness. It should be scrapped,” he said.

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