Ministers should abandon a central pillar of their energy policy and abolish a carbon floor price that amounts to a “tax” on British industry, according to the head of the manufacturers’ association.
Terry Scuoler, chief executive of the EEF, told the Financial Times that UK companies were deeply concerned by the cost of the government’s ambition to cut carbon dioxide emissions and expand renewable energy.
“There’s a fundamental view that the direction of travel, in terms of particularly the renewables targets and the taxation, is wrong,” he said.
The last Budget announced a floor price on carbon emissions from 2013 onwards. The aim is to tip the balance of the UK energy mix in favour of nuclear power and renewable technologies by making it more expensive to generate electricity using coal or gas.
But one consequence will be rising electricity bills across the board, with energy-intensive manufacturing particularly exposed. The EEF calculates the floor price will cost British industry £250m when it begins in 2013 at a rate of £16 per ton of carbon. The price will then rise each year to reach £30 per ton by 2020, which would cost industry £1.2bn.
Business groups have previously urged the government to provide compensation for the extra cost or delay the policy’s introduction. But Mr Scuoler said: “We are calling for its abolition.” The measure was, he added, “not in line with the government’s stated policy of rebalancing the economy, regenerating the British manufacturing sector, encouraging exports”.
Mr Scuoler described the floor price as “clearly a tax on business”, pointing out that no other European Union country is planning a similar measure. This unilateral decision would damage Britain’s competitive position.
“Perhaps we in the UK, an advanced economy, should accept – maybe – that our electricity prices will be more expensive than China, India, perhaps even North America,” said Mr Scuoler.
“But why on a unilateral basis would you wish to push us into a situation where our cost of energy is more expensive than even our EU partners? There’s a non-sequitur there that lies uncomfortably on our shoulders.”
The coalition has adopted the toughest carbon reduction targets in the developed world, promising to cut British emissions by 50 per cent by 2025. To achieve this, it aims to generate 30 per cent of the country’s electricity from renewable sources by 2020, compared with 7 per cent today.
Such ambitions require investment of £200bn in new energy infrastructure by 2020, a burden that would inevitably cause electricity bills to rise. Mr Scuoler said: “British manufacturing has a right to be somewhat disappointed.”
“Given the rhetoric and some very positive messages from the coalition government post-recession about the importance of British manufacturing, the importance of exporting and the importance of the sector in general, many of these policies are not matched up to that rhetoric,” he added.