Downed by the Levy

The Engineering Employers’ Federation has concluded that the introduction of the £1 billion Climate Change Levy in April 2001 will harm manufacturing competitiveness.

Data collected by the UK based EEF (Engineering Employers’ Federation) has concluded that the introduction of the £1 billion Climate Change Levy (CCL) in April 2001 will harm manufacturing competitiveness, while missing the opportunity to secure a greater reduction in industrial CO2 emissions.

The EEF say that the CCL will be prejudicial to many UK manufacturers because it: will increase companies’ energy bills and damage international competitiveness as well as remove many companies’ ability to make capital investments in energy efficiency.

These conclusions are supported by an independent study undertaken for the EEF by Ernst & Young. The study estimates the number of UK enterprises with annual energy bills in excess of £100,000 and the number which do not have access to negotiated energy efficiency agreements with Government.

Further analysis by the EEF illustrates that some 2300 enterprises, employing more than 1.3 million people, will face new net costs of almost £100 million, even after a reduction in employer’s National Insurance contributions linked to the levy.

Alternative proposals from the EEF claim to lessen the impact on manufacturers’ competitiveness, and lead to a greater reduction in industrial CO2 emissions than envisaged under the Government’s proposals. The EEF proposals would see more companies signing up to negotiated agreements which would involve meeting challenging energy efficiency targets, in return for a major reduction in the levy.

EEF calculations have shown that even if only 50% of the 2300 companies signed up to energy efficiency targets, it could reduce industrial CO2 emissions by over 1.5 million tonnes (around 0.5MtC, or ‘million tonnes of carbon equivalent’), a substantial environmental benefit.

EEF Director-General, Martin Temple, said:

‘We have never opposed the need for action on climate change, but believe the Levy to be one of the most badly designed economic instruments in recent times. We fail to understand why the Government, having accepted the reliability of our data, will not accept alternative proposals which would be of greater benefit to the environment whilst supporting the competitiveness of manufacturing companies.’

Nick Turner of Ernst & Young’s Environmental and Sustainability Services Group commented: ‘There is no doubt that the climate change levy will penalise a number of manufacturing enterprises in the UK, particularly those who have made considerable improvements to their energy efficiency prior to the introduction of the levy’.

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