The guidance sets out how businesses can claim compensation from the first tranche of the £250m for the indirect costs of the EU Emissions Trading System (EU ETS).

Eligible firms will be able to apply from June 3 as part of measures to reduce the impact of energy and climate change policies on the cost of electricity for energy intensive industries in the UK.

Published alongside the government response to its consultation, the guidance is part of a £250m Energy Intensive Industries Package, with up to £113m allocated to the scheme.

Business and Energy Minister Michael Fallon said: “Energy intensive industries are a critical part of the UK economy. It is essential that as we put in place policies to generate the necessary investment in energy infrastructure we do not undermine the competitiveness of UK industry.

“This compensation package will support firms, protect jobs and help reduce the risk of industries leaving our shores.

“The energy intensive industries also provide many of the components for low carbon goods. For example, steel is vital for the manufacture of wind turbines”.

The government has also committed to establishing a compensation scheme to address the indirect costs of the Carbon Price Support (CPS) mechanism, subject to state aid clearance. According to the Government, this scheme is currently being considered by the European Commission and will be announced later this year.

In the Autumn Statement on the 29 November 2011 the Chancellor announced that the Government intends to implement measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries, beginning in 2013. Up to £250 million has been earmarked for this over the Spending Review period.

The Government’s approach is to compensa te industry as closely as possible for the relevant costs they bear and therefore to use an emissions factor that reflects that.

Having considered all the responses, the Government said it recognises that the outlook for fossil fuel price relativities and other factors affecting the economics of operating plant are inherently uncertain.

Leigh Stringer

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie