Last week, Nick Clegg delivered a speech which aimed to dispel claims that environmental legislation was holding back industrial recovery.
In the speech, entitled ‘the myth: green versus growth,’ the Deputy Prime Minister argued that we do not have to give up on the green economy in order to grow, and pointed out that countries “powering away from the recession” such as Germany, China and Brazil were all investing in low carbon industries.
However, a new report from think-tank Civitas, suggests the UK’s energy policy is causing the collapse of a successful British industry.
“The closure of the Lynemouth aluminium smelter” examines the influence of Government policy decisions to move aluminium production elsewhere, using the Northumberland smelter as a case study.
David Merlin-Jones, author of the report, has charted the downward spiral of British primary aluminium business as UK energy prices have risen unilaterally.
The report highlights costs that British energy-intensive industries pay, that their rivals in other countries do not. The most recent addition to these costs is the carbon price floor, as total UK electricity costs in 2013 will be raised by 24% for energy-intensive sectors.
By contrast, German energy-intensive businesses will only be paying 16% extra through government-added costs in the same period.
Merlin-Jones explains that finding a buyer for the closed Rio Tinto Alcan plant was made difficult by rising energy bills, a future cost that no company would be prepared to absorbed.
He also argues the Government has failed to provide a credible long-term energy policy, leaving companies unwilling to commit to UK production.
In Iceland, Rio Tinto Alcan secured a 26 year electricity contract for its facility and will consequently invest US$350m to modernise the plant and increase output by 20%; a guaranteed forward security that is difficult to establish in the UK.
In his speech, Mr Clegg said: “We’re using the tax system - with our Carbon Price Floor and the Climate Change Levy.
“And, because not all companies can change to low carbon overnight, we’re helping traditional industries become more sustainable.
“One of the first areas UKGI will look at, for example, will be industrial energy inefficiency, making £100m available from this month.”
Elsewhere, Merlin-Jones argues that British aluminium production is noted worldwide for its efficiency and low emissions, relative to other countries. Since 1990, Lynemouth had reduced its emissions by 65%, significantly above the UK’s goal of a 34% reduction on 1990 levels by 2020, and the wider EU’s 20% reduction by 2020.
He stresses the irony in the demise of a plant that had done a lot to reduce environmental impact, due to environmental regulation.
The report concludes by arguing that aluminium production is an energy-intensive process, and there is no way to avoid using large quantities of electricity in the production process.
Commeting on the need for green policy making, Dr Colin Herron of Zero Carbon Futures, said: “The world has to face up to two simple facts (1) global warming is happening and (2) the carbon fuels which produce the CO2, which are warming the planet, are running out.
“Once we have used them there is no more simple laws of physics. We have two choices carry on as now or change, if we do not change what we are doing later generations will suffer.
“It is also true that new technologies tend to cost more to introduce until volume of scale or newer technology can bring down the cost.
“Unlike people who live in regions such as sub Sahara Africa we are mostly sheltered from the current level of climate change except for our wild weather fluctuations on a daily basis.
“The role government and industry has to play is to invest in the new technologies to create jobs and wealth in the region like our EV, PV and Wind turbine industries. And if necessary introduce legislation (the unpopular bit) to make us move to a greener life style.