British industry has reached a “tipping point” where the burden imposed by energy and climate change policies will begin to jeopardise jobs and investment, according to the EEF manufacturers’ association.
The government has significantly underestimated the extra cost of these measures, it added.
Last week, the Department of Energy and Climate Change (DECC) published an official assessment of the burden its policies could load onto energy-intensive manufacturers. The median scenario, assuming no change in wholesale gas prices, predicted that government policy could add 22 per cent to the electricity bill of large industrial users by 2020.
But the EEF said that only one policy – the imposition of a carbon price floor – would cost British manufacturers £250m when it comes into effect in 2013, rising to £1.2bn by 2020. This measure alone would increase the electricity costs of energy-intensive companies by 10 per cent.
“UK Industry was already facing energy bills which made them uncompetitive before the substantial additional burden of the unilateral carbon price floor,” said Steve Radley, director of policy at the EEF. “We have now reached a tipping point where the cumulative burden of UK climate change policy will make it uncompetitive for some sectors to invest and create jobs in the UK.”
Energy-intensive sectors, particularly the chemicals industry, will carry the heaviest burden. But the EEF said the impact of the carbon price floor “would also be felt widely across manufacturing, including amongst those ‘advanced manufacturers’ the government is looking at to drive economic growth”.
Roger Salomone, energy adviser to the EEF, said that DECC’s assessment of the cost of its policies “looked low to us” and was based on “unstated assumptions”.