When the Levy breaks

The CBI believes that negotiated agreements should be made available to as wide a spectrum of the business sector as is feasible, rather than being limited to those sites covered by IPPC. In return, participating sectors should receive relief from the Levy on a banded sliding scale related to factors such as their initial exposure to it. There are several reasons for this:

  • Widening the scope of agreements to non-IPPC sites and linking them to a sliding scale of rebates will increase businesses’ capital availability and so enhance their incentive and opportunity to invest in measures which reduce emissions.
  • Agreements accompanied by rebates are an essential tool in reducing the costs imposed on business and protecting its competitive position, whilst at the same time stimulating further emissions reductions beyond what would be delivered by the Levy alone. It is therefore inefficient that such agreements are restricted to those sectors covered by legislation which is primarily designed to tackle local air pollution problems. The Government should be maximising the incentive for all of business to change its behaviour cost-effectively, not just a part of it.
  • Linking agreements to IPPC coverage does not necessarily mean that all energy intensive processes within the relevant sectors will be covered by agreements. Certain energy intensive processes within sectors predominantly covered by IPPC are not actually subject to IPPC themselves. In the glass industry, for example, glass melting and glass bending are both energy intensive processes, but only one of them is subject to IPPC and therefore eligible to be part of an agreement and receive a levy rebate.
  • Using IPPC as the criterion by which agreements can be negotiated can cause competitive distortions within the relevant sectors between those firms which are eligible to negotiate and those which are not. Wire manufacturers, for example, have two alternative methods of delivering one of their processes, one of which is covered by IPPC, and one which is not. Those manufacturers using the non-IPPC process are, therefore, placed at a competitive disadvantage. Similarly, there are instances where some companies for historical reasons have non-IPPC processes alongside IPPC processes on a single site, and might be able to include the whole site’s processes in an agreement, while other firms have the same processes on separate sites, and so would not benefit to the same extent.

    There are a number of ways in which agreements and rebates could be organised:

    • They could be arranged by SIC codes and linked to indicators such as either energy intensity, net exposure to the levy or degree of exposure to global competition. However, such indicators may not be easy to define, and there is also a question as to how far groupings by SIC code would need to be disaggregated into sub-sectors.
    • Alternatively, the Government could instigate a voluntary approach to agreements. It could be the case that any group of industries with an aggregate energy consumption above a certain threshold, offering a certain aggregate reduction in emissions beyond “business as usual”, would be eligible to negotiate an agreement. Rebates could be banded according to one or a combination of the indicators mentioned above.

    Either of these approaches could throw up their own boundary issues, but the CBI believes that these can be resolved. Government needs to make a positive commitment to find an approach which allows the greatest scope for interested players to negotiate agreements and so minimise their exposure to the levy while increasing their emissions reductions.

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