EEF urges reform of climate policy

Britain ’s manufacturers have called for fundamental reform of the government’s climate-change policy, describing it as ‘chaotic, overcrowded and complicated’.

The call is made in a report entitled ‘Changing the climate for manufacturing’, published ahead of today’s budget by EEF, the manufacturers’ organisation.

‘Manufacturers have already made substantial reductions in emissions,’ said Gareth Stace, EEF head of Climate and Environment Policy. ‘However, there is now increasing evidence that they are struggling under the weight of legislation at European and national level.

‘We now need a fresh approach. This will help a vibrant manufacturing sector to make a sustainable contribution to reducing global emissions of greenhouse gases, and continue investing and creating jobs in the UK.’

EEF says that the report reviews how climate-change policy affects industry 10 years on from the introduction of the Climate Change Levy (CCL) and argues that the current climate-change policy mix is failing four key tests that should form the basis of the new approach.

It argues that incentives must be clear, reliable and transparent; regulation should target the right places and be simple and not administratively burdensome; and measures and initiatives must take clear account of their impact on the competitiveness of businesses subject to regulation.

EEF believes that the first step in a new approach must be an economy-wide carbon tax based on energy usage, which is expected to provide certainty for users and encourage investment in Britain’s energy infrastructure. Initially this should begin with reform of the CCL for industrial users with the medium-term goal, as and when political conditions allow, of extending it throughout the economy by applying it to energy generators.

EEF estimates that if a carbon tax were applied to the domestic sector, it would generate £1.7bn a year for the Exchequer. This tax should be fixed for five years, in line with business-investment cycles and the government’s carbon budgets.

EEF’s key recommendations include:

  • Reform the CCL so that energy users are taxed according to the carbon content of the energy and fuels they use. This would provide a clear, more consistent and more stable incentive to energy users to reduce high-carbon energy and fuel use, to use high-carbon fuels more efficiently and to provide electricity generators with a stronger incentive to invest in lower-carbon forms of energy.
  • Ensure that any carbon tax is accompanied by voluntary negotiated agreements with industry sectors that provide tax incentives for carbon-intensive industry to reduce emissions.
  • For climate-change and energy policies, the costs of new regulations and measures should be considered in terms of their cumulative impact on manufacturers. Specific consideration should be given to impacts on energy-intensive manufacturers.
  • The Committee on Climate Change should be tasked with carrying out an assessment of carbon leakage and its possible future effects on UK manufacturing. This should be done in conjunction with its annual assessment of the UK’s progress towards meeting carbon budgets.
  • A review of the Carbon Trust’s role by the National Audit Office. Currently, manufacturers report that the advice given by the Trust is too simple, generic or out of line with business investment strategies. The Industrial Energy Efficiency Accelerator is a step in the right direction.
  • Carry out a full review of the effectiveness of the Enhanced Capital Allowance scheme for low-carbon products.

Source: EEF