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MPs concern over compensation for energy-intensive industries

A cross-party group of MPs has said it is “nonsensical” to compensate heavy industry - which includes some reprocessors - for the impact of green policies.

Energy-intensive companies, such as Tata Steel which has recently announced 900 job cuts, say they will be penalised by the EU’s Emissions Trading System (ETS) because escalating fuel and other energy costs will hit them harder.

That is why a £250m compensation package was proposed by George Osborne in the Autumn Statement to offset costs and the scheme has completed the consultation process.

But a report from the Environmental Audit Committee at Westminster says: “It is nonsensical that the Government will compensate energy-intensive companies for the impact of the Emissions Trading System on their electricity bills when those companies are making windfall profits from the very same programme.”

In November 2012, MRW reported that the Welsh Government called for urgent help after Tata Steel’s announcement that it was slashing 600 jobs in Wales and another 300 in North Yorkshire.

A Welsh Government spokesperson told MRW: “Tata’s decision reflects the serious and ongoing challenges faced by manufacturing industries during these very difficult economic times”.

“In addition to these challenges, it is clear that high energy costs and uncertainty over UK government energy policy are having a significant impact on business investment decisions. As a government, we have warned for some time of the need for these costs to be reduced.”

The carbon trading thinktank Sandbag was reported as claiming that Tata, the largest steel recycler in the UK, received 31 free carbon trading permits between 2008-2011, worth €480m (£389m).

Sandbag’s senior policy advisor, Damien Morris, told the Guardian: “We welcome the committee’s headline finding that the government consider each company’s surplus carbon allowances and profits from the EU ETS before awarding additional compensations.”

A spokesman form Tata Steel said: “What we are asking for is a level playing field. Our competitors in Europe are already exempt from additional carbon costs so it is right that UK producers are given similar exemptions.

“If you deprive industries like ours of the proposed exemptions - to instate the additional costs of energy policy - it is a recipe for disaster for manufacturing in the UK, which will decline, and it will damage UK competitiveness.”

Environmental Services Association (ESA) economist Jacob Hayler said there were competitive disadvantages to not supporting energy intensive industries: “Without the support of compensation for energy intensive industry - including many reprocessors - there could be less domestic demand for domestic recovered materials and more dependency on exports from abroad.

“There may also be fewer opportunities to co-locate energy from waste plants on sites with industrial activities,” he added.





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