CPI Urges UK Government to Fix Flawed Energy Policies

"National carbon accounting focuses on direct emissions in the UK, meaning swapping UK manufactured goods for imported ones simply offshores the emissions, resulting in no reduction in global emissions." – David Workman, Director General, CPI.

Nov. 12, 2013 - David Workman, Confederation of Paper Industries’ (CPI) Director General, has written to the Chancellor outlining a number of measures that could be announced during the Autumn Statement to enhance the competitive position of the UK Paper Industry — especially in beginning to address the cumulative effect of Government policies on UK energy prices.

The policy of rebalancing the economy by strengthening manufacturing is being severely hindered by high UK energy costs, especially ironic when these are intended to reduce emissions of carbon.

“National carbon accounting focuses on direct emissions in the UK, meaning swapping UK manufactured goods for imported ones simply offshores the emissions, resulting in no reduction in global emissions. Of course, alongside the emissions being offshored, so also are the jobs and wealth creation that we should be benefitting from,” commented Workman.

While it is the cumulative impact of Government policies that is critical to CPI Members, Workman highlights a number of specific measures that should be taken as a matter of urgency:

  • The Carbon Price Floor (CPF) should be cancelled or frozen at the current level. The near doubling of Carbon Price Support (CPS) rates in 2014 and then doubling again in 2015 are simply unaffordable, especially in the absence of State Aid approval for the promised compensation for electro-intensive installations.
  • Industrial energy generation should be supported. With so much investment required in new electricity generation equipment, supporting investment by industry in producing its own electricity should be a priority. Unfortunately during 2013, the economics of operating and building industrial Combined Heat & Power (CHP) plant has been severely damaged by a number of new Government policies. A simple way to undo this damage would be to make CHP exempt from CPS taxation.
  • The compensation package for electro-intensive installations should be extended and widened in scope. Investment cycles in industry are long and so short term support packages do not provide the certainty required to justify investment – if a long term policy needs mitigation to avoid competitive damage, then support is required for the full length of the policy.
  • The Carbon Reduction Commitment (CRC) should be scrapped. CRC simply adds costs to the cost of energy for much of UK industry with no environmental benefit. CRC effectively remains a tax collected in a very complicated way — its priority for abolition under any red tape review is obvious.
  • There should be a well-funded programme to support industrial energy efficiency. Present policies assume the stick of ever-higher energy prices will force energy efficiency. However, the other option is to move outside the UK to more welcoming locations. The ‘carrot’ of strong financial support for energy efficiency would be a real attraction to help secure and retain UK investment.
  • Being realistic in a role for the UK in global leadership. It is critical that UK policy is set in the context of policies being followed by other nations. Antonio Tajani, (EU industry commissioner) has warned that current energy policies and high prices risk “a systemic industrial massacre”.
  • A long-term role for gas generation. Much progress has been made in accepting a role for lower carbon gas in displacing coal in electricity generation. But for this to be effective, the gas market needs to operate properly. In particular, the working of the wholesale market should be examined with any link between oil and gas prices decoupled.

CPI is the voice and face of the UK's Paper and Paper-Based Industries, representing recovered paper merchants, paper and board manufacturers and converters, corrugated packaging producers and tissue makers. CPI represents 70 Member Companies, with a combined annual turnover of £5 billion and 25,000 direct and more than 100,000 indirect employees. For more information about CPI, visit: www.paper.org.uk.

SOURCE: Confederation of Paper Industries (CPI)