The CBI is on a collision course with the Treasury over claims that heavy industry will be put out of business unless it is exempted from the carbon tax.
The Government introduced the levy in April to top up the price paid by companies under an existing penalty-to-pollute scheme in Europe. The costs are passed on to all electricity users, from heavy industry to households, through higher energy bills.
But the scheme has landed steel, chemical and other energy-intensive businesses in Britain with spiralling energy bills, while the carbon costs of rivals in Europe have plummeted in recent months.
John Cridland, the Director-General of the CBI, said: “I’m very concerned. If we are to get this green growth nexus right, we can’t end up importing cement — or chlorine or aluminium or steel — because it’s too expensive to make it in the UK.”
The CBI wants the Treasury to unveil a new compensation package for heavy industry when it announces its spending round this month to help to protect 200,000 jobs.
The competition gap faced by British industry has widened after the carbon prices paid by companies in Europe under the European Union emissions trading scheme collapsed recently. In contrast, the Government’s carbon tax will almost double next April to £9.55 per tonne of carbon emitted, pushing electricity prices in the UK up by an estimated 9 per cent.
If present carbon prices in Europe remain at rock-bottom levels, the penalties to pollute paid by British companies will be almost four times higher than those on the Continent.