Energy intensive businesses to be exempt from low carbon costs

The Government will exempt energy intensive industries from costs arising from new long-term 'contracts for difference' (CFD), which are designed to increase investment in low carbon technologies.

The announcement will be made alongside the introduction of the Energy Bill today by Secretary of State for Energy and Climate Change Edward Davey.

A consultation will be run in 2013 by the Department of Energy and Climate Change (DECC) and the Department for Business, Innovation and Skills (BIS) to consider the scope of the exemption.

DECC claims that exempting energy intensive industries from CFDs will help British industry compete internationally, benefiting the UK economy and supporting global emissions reductions.

A separate £250m scheme to compensate certain energy intensive industries for additional costs associated with the Carbon Price Floor and EU Emissions Trading System is the subject of a current consultation.

Davey said: “Decarbonisation should not mean deindustrialisation. Energy intensive industries are an important part of the UK economy, in terms of economic output and employment throughout the supply chain.

“There would be no advantage – both for the UK economy and for global emissions reductions – in simply forcing UK businesses to relocate to other countries.

“The transition to the low carbon economy will depend on products made by energy intensive industries – a wind turbine for example needing steel, cement and high-tech textiles. This exemption will ensure the UK retains the industrial capacity to support a low carbon economy.”

Business Secretary Vince Cable claimed that giving an exemption to industries that use high levels of energy, ensured that the transition to the green economy was “a genuine win-win” for Britain.

“This exemption is a critical reform. It is important that the UK’s energy intensive manufacturing industry remains competitive whilst significant investments are made to the UK’s energy infrastructure,” he said.

Conor McGlone

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