The UK Chemical Industries Association (CIA), the industry’s leading trade and employer’s association announced on 2 March that the agreement with the Department of the Environment, Transport and the Regions (DETR) will bring the energy efficiency improvement between 1990 and 2010 to a total of 34%. The chemical sector estimates that the agreement will deliver savings of over one million tonnes of carbon by 2010, which based on DETR’s calculations makes the chemical industry the largest contributor to energy efficiency of any sector.

The CIA estimates that the direct cost to the chemical sector of the Climate Change Levy (see related story) (CCL) will be £20 million after the reductions, which are due to it under the agreement (see related story and this month’s feature). A significant part of this cost will be borne by companies which, although energy intensive, are not eligible to participate in the sector agreement, the association says. The CIA is also concerned that the package of UK CCL concessions has yet to receive approval from the European Commission under its state aid guidelines. This includes the production of industrial gas, which accounts for around 1% of total UK electricity consumption.

When the Climate Change Levy (CCL) was first announced in the 1999 Budget, the CIA estimated the full cost of the levy to the UK chemical industry would be £150 million from a total estimated energy bill for UK industry at around one billion pounds.

“The chemical sector will continue to contribute a considerable increase to wealth creation in the UK for very little change in its environmental footprint,” commented CIA Director of Business and Responsible Care, Judith Hackitt. “Our agreement commits us to a challenging energy efficiency target which builds on our excellent voluntary record. Indeed, we believe we would have delivered a similar improvement without the additional impetus provided by the Climate Change Levy (CCL). Although the UK government has done much to reduce the impact of the full cost of the CCL on the intensive sectors, overall UK energy prices remain significantly above those of our main EU competitors. Securing state aids approval is vital to these agreements.”

The UK chemical industry is one of manufacturing’s largest industries and the number one export earner. It creates an annual trade surplus in excess of £4 billion per year and directly employs 250,000 people.

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