Monday, 15 August 2011

Punishing industry with high energy prices will not save the world

To cut carbon emissions, we need energy-intensive industries. From the steel in wind turbines to the chemicals used in energy-saving lighting, they provide the building blocks for an energy-efficient and low-carbon economy.

Yet the current approach to climate change policy is increasingly putting their future at risk. Policies that push UK electricity prices above those of our competitors will undermine their ability to attract mobile investment and compete in international markets.

Industrial electricity prices in the UK are already far from the most competitive.

Over the past five years, they have been consistently higher than both the EU and G7 average.

Official statistics show that UK prices have typically been 20-25 per cent higher than the EU-15 average for the largest consumers. This competiveness gap extends to our major competitors – UK prices were 10-25 per cent higher than those in Germany and 60-75 per cent higher than those in France.

The situation is set to deteriorate further. Green policies already account for approximately 20 per cent of industrial electricity prices and a series of significant new measures are scheduled to be implemented over the next few years.

EEF estimates that one of these measures alone, the Carbon Price Floor could increase the price manufacturers pay for their electricity by another 10 per cent by 2020.

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