High legal costs threaten energy tax rebates plan

SOARING legal costs and the complexity of the agreements involved are turning the government’s plans for climate change levy rebates into an expensive farce, exasperated industry associations warned this week.

With the controversial tax due to take effect in April next year, manufacturers are struggling to meet an October deadline to reach agreement with government negotiators on pollution reduction targets for companies in energy-intensive industries, which are supposed to be eligible for the rebates.

Despite months of discussion, none of the industrial sectors involved – steel, chemicals, aluminium, cement and others that use processes covered by the International Pollution Prevention and Control regulations – has yet signed an agreement.

`There are still quite a few outstanding issues,’ admitted Jeremy Nicholson, economic adviser to the Energy Intensive Users’ Group, which represents the various industry associations involved.

Lawyers for the associations are working on separate drafts, and some manufacturing organisations are concerned that the legal costs are becoming prohibitive. They are hoping a standard agreement can be drawn up which they can adopt.

According to the Engineering Employers’ Federation, the cost of negotiating and administering the pollution-cutting measures is threatening the viability of the whole rebate scheme – a key concession from chancellor Gordon Brown in the face widespread industry criticism of the levy.

About 10% of the EEF’s members are eligible to reach pollution control agreements, with some reportedly facing annual costs of £10,000 for doing so.

`The administration costs may be prohibitive in some cases,’ said Helen Woolston, the EEF’s environmental adviser. `Some engineering companies have worked out it would be as cheap for them to pay the levy.’

Although the Finance Act has removed the possibility of widening agreements beyond IPPC-covered companies in the first year, the EEF is continuing to press for more to be eligible – a move Woolston said would encourage the development of a standard agreement and lower the administration costs.

`We want to let people know that industry is far from happy with this scheme,’ Woolston said.

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