Scunthorpe Telegraph reported that plans to introduce a new carbon tax that could threaten the competitiveness of Scunthorpe steel giant TATA will artificially raise electricity prices for consumers while failing to reduce carbon emissions.
Plans were announced in the Chancellor's Budget for a new Carbon Floor Price, which TATA said would make UK steelmakers less competitive.
TATA fears the floor price will lead to higher costs for generating electricity, hitting energy intensive industries such as steel. It said that steel produced elsewhere in the world would not be subject to the extra costs.
Under the existing rules, energy companies must generate a fixed amount of green energy every year, or else buy permits to pollute on the open market. The new tax kicks in if the cost of these permits falls too low.
From 2013, the floor price of a permit needed to emit a tonne of carbon will be set at GBP 16, rising to GBP 30 by 2020.
Previously Europe's TATA Steel chief warned that a planned investment program to make the company’s steelworks in Scunthorpe and elsewhere in the UK more efficient could be put at risk by the Government's over the top climate change policies directed at heavy industry.
But now MPs on the Energy and Climate Change Select Committee are warning that ordinary families could also be hit by the super tax that could artificially inflate electricity bills. The Committee also claims the CFP will do nothing to reduce carbon emissions.
Mr Tim Yeo MP chairman of the Committee said that "The Chancellor was right to say we won't save the planet by putting the UK out of business. Ironically, however, it is the Treasury's decision to set a Carbon Price Floor that could result in industry and electricity production relocating to other EU countries. Unless the price of carbon is increased at an EU wide level, taking action on our own will have no overall effect on emissions other than to out source them."
He added that "A revenue raising exercise disguised as a green policy won't help anybody, the price of carbon has to be increased at an EU level to kick start investment in clean energy."
The Committee claims that electricity prices will increase as the price floor keeps the cost of carbon higher than in other countries, effectively subsidizing other EU Member States at the expense of the UK consumer.
It argues that will cut emissions in the UK, but may not reduce them overall, as electricity production and industries may simply relocate to other EU countries resulting in carbon leakage.
Mr Yeo added that "Instead of going it alone, the Chancellor would be better off working with other European Governments to make the EU Emissions Trading System more effective as a whole. Before Phase III starts next year, EU countries must set aside pollution permits to end the glut that has caused the price of carbon to collapse."
The Committee claims that the UK Government should push for a strong and stable carbon price across the whole EU Emissions Trading System instead of taking unilateral action.
A trio of measures that could knock up to 10% off the electricity bills of energy intensive industries was announced in the Chancellor’s Autumn Statement in 2011.
The Chancellor announced up to GBP 60 million per year in compensation for companies affected directly or indirectly by the CFP and said there will be up to GBP 50 million per year in funding to offset the cost of the EU Emissions Trading Scheme.
The Chancellor also announced that relief from the climate change levy for heavy industries that have entered into climate change agreements will rise from 65% to 90%.
The total value of the three measures over the current funding period is expected to be GBP 250 million.
(Sourced from www.thisisscunthorpe.co.uk)
