Will we sacrifice our global competitiveness?

over recent years, the CBI has taken an active role in the development of climate change policy. We recognise the threat of climate change and its implications as legitimate areas of concern. Indeed, we have been involved in numerous activities intended to help the UK meet the commitments it made at the Kyoto summit, including […]

over recent years, the CBI has taken an active role in the development of climate change policy. We recognise the threat of climate change and its implications as legitimate areas of concern.

Indeed, we have been involved in numerous activities intended to help the UK meet the commitments it made at the Kyoto summit, including the development of an emissions trading scheme and encouraging UK business involvement in emission reduction initiatives.

The Royal Commission on Environmental Pollution’s report, Energy – The Changing Climate offers a perspective on global and domestic climate change action. It suggests that the focus should be on accelerating action to put the UK on a path to reducing CO2 emissions by 60% from current levels by 2050. Moreover, the RCEP recommends the replacement of the climate change levy with a carbon tax.

While the CBI accepts that business has a role to play in helping the UK meet the Kyoto target, there is considerable concern within business that moving unilaterally towards a 60% reduction in greenhouse gases by 2050 would significantly affect UK competitiveness.

Indeed, without similar commitments from other governments, the global impact of UK reductions above the Kyoto target – given that the UK represents only 3% of global greenhouse gas emissions – will be minimal.

The RCEP’s recommended carbon tax would apply to all sectors of society. Revenue raised from the tax could be used to reduce fuel poverty, encourage investment in energy efficiency and R&D. While the CBI agrees that the climate change levy, which is based on energy content rather than carbon content of fuels, is mistaken, we are deeply concerned that a carbon tax would result in increased import penetration and a loss of market share in non-taxed countries.

Energy-intensive users might also relocate their production facilities to ensure that they are not competitively disadvantaged within the global market, and continuing to pollute as before. The CBI believes a carbon trading scheme would offer more abatement flexibility over time by encouraging participants to minimise their abatement costs. The development of a UK trading scheme under the auspices of the CBI and the joint business/government Advisory Committee on Business and the Environment is indicative of our commitment to tradeable permits.

With regard to other elements in the report, the CBI believes action on climate change should be undertaken by all sectors of society. In the government’s draft programme, there is very little evidence of an attempt to tackle domestic emissions and assumptions regarding transport are extremely ambitious. Furthermore, the CBI believes that the government has missed the opportunity to address some crucial issues, including the potential long-term contribution of nuclear energy to the UK’s climate change commitments, and the stimulation of markets for new and existing low carbon technologies.

Michael Roberts is the CBI’s director of business environment

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