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Emissions Trading Scheme May Bankrupt UK Industries

A CARBON “tax” could hit the North East’s industrial heartland with companies going bust or moving abroad, a minister has signalled. Energy Minister Lord Hunt made the apparent admission as he came under pressure over the European Union emissions trading scheme in the Lords.

Northumberland peer Nigel Vinson asked if ministers had assessed the scheme’s impact on carbon dioxide generating industries such as steel, aluminium, glass and cement production.

All of these industries have major bases in the region and Lord Vinson, a former businessman, warned of “massive” job losses if the next phase of the EU scheme goes ahead.

Energy-intensive users have to buy permits to emit carbon dioxide into the atmosphere, and Lord Vinson said firms would effectively face a new tax with those allowances being cut by 20%.

There are fears that could spark “carbon leakage”, where firms move to developing countries that have more relaxed regulations.

Lord Hunt said: “The Government consider that a very limited number of sectors are likely to be at significant risk of carbon leakage as a result of the EU Emissions Trading Scheme.

“The risk of carbon leakage is reviewed regularly in close consultation with UK business, and my department has commissioned further research on this risk, which we hope will be completed in the summer.”

Lord Vinson, a former businessman, said: “Does he really think it sensible to pile penalty taxes on to industries that are inherently carbon producing and, under the existing technologies, incapable of making worthwhile carbon savings?

“Instead of enforcing yet another damaging EU regulation, would it not be more sensible to have our own carbon saving scheme as Australia does, rather than face the possibility of creating massive redundancies over the next two or three years, particularly in the North East?”

But the Energy Minister insisted it was “entirely appropriate” that the UK was part of the EU emissions trading system.

“On the substantive question, from the research that has been undertaken, there is very little evidence that companies are at risk of competitive disadvantage because of the emissions scheme,” he added.

Speaking later to The Journal, Lord Vinson said: “If the next phase of the tax is fully applied our heavy industries like Corus, Alcan and cement manufacturers will either go bust or go overseas to countries like India, which don’t have this inappropriate tax.”

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