Key UK manufacturing sectors are at a major competitive disadvantage due to climate change policies, a new Government report shows.
The data research, commissioned by BIS, suggests that steelmakers in competing countries such as Germany, Russia, India, USA and China, can expect to pay considerably less for their electricity.
Manufacturer’s association EEF say that, at the extreme, UK steelmakers could expect to pay over 280% more in 2020.
It is a similar situation for manufacturers in the cement, industrial gases and chloralkali spheres; all of whom provide the building blocks for thousands of products.
EEF suggest the findings prove the absence of a global deal on climate change is creating a ‘beggar thy neighbour approach’ with different countries pursuing carbon reduction policies at different rates and costs, even within the EU.
Terry Scuoler, Chief Executive of EEF, the manufacturers’ organisation: “This report provides clear, independent evidence supporting concerns we have long put to government - that UK manufacturers in energy intensive sectors are paying more for their electricity than many of their global and European competitors.
“Both the Treasury and DECC believe we must not outpace our competitors in loading costs onto hard-pressed businesses. However, this report shows that there is a mismatch between intent and reality.
“The proposed package of measures announced by the Chancellor in the Autumn Statement are welcome but only last until 2015. Similar measures must be put in place for 2015-2020 to give manufacturers certainty and a level playing field with their competitors.”
In the UK, the cost of renewable energy constitutes a major component of the increased costs.
The third phase of the EU Emissions Trading Scheme, which will be much more stringent than the previous phases, looks to impact even further.
Other measures, such as the Government’s unilateral Carbon Price Floor, also add additional costs not faced by competitors.
In a recent survey by EEF, two-thirds of UK manufacturing companies saw an emerging low-carbon economy as an opportunity, however the same survey showed only one-in-eight viewed the UK as a favourable place to invest in this area.
EEF has warned that without action, the current situation will lead to the movement of production and investment to other regions.
Katja Hall, CBI Chief Policy Director, said:“These figures should come as a wake-up call to the Government - the welcome support for energy intensives announced last year simply won’t go far enough. It must help those companies most at risk from higher energy costs, and make provisions for them in its forthcoming Energy Bill.
“These are the companies which produce the materials we need to build technologies, like wind turbines, that will help the UK make the transition to a low-carbon economy.
“We do not need to choose between going green and going for growth and, if we get our policies right, all parts of the economy can benefit from doing more green business.”