The EIUG have submitted their thoughts ahead of the Spring Budget and note that the consumers which they represent provide an annual contribution of £29bn to the UK economy and support 210,000 jobs directly and another 800,000 indirectly. It is for this economic value why the EIUG stressed the need for the government to provide such consumers with fair, competitive and secure energy. The report welcomed the efforts to achieve this and reduce EII costs through the ‘British Industry Supercharger’ scheme but noted that the 60% compensation rate for network charges is still lower than the 90% offered in Germany and France.
The document also noted that EIIs were at risk of carbon leakage and facing challenges due to the government’s ‘piecemeal’ approach toward industrial decarbonisation. The EIUG therefore set out the following the proposals to address the two concerns:
Risk of Carbon Leakage:
- Although the government has acknowledged the risk of carbon leakage for EIIs, its carbon border adjustment mechanism (CBAM) is not due until 2027, compared with 2026 in the EU.
- The EIUG argued this creates substantial risk of ‘dumping’ low-cost, high-carbon products in the UK and consequently endangering manufacturing jobs and investments.
- The UK’s CBAM scheme also excludes sectors included in the EU, putting certain industries at greater risk.
- The scheme needs to consider exports according to the EIUG, EIIs in other countries have an exemption from the cost of carbon pricing for manufacturing products for exports.
- Overall, the EIUG called on the government to align its timetable with the EU’s CBAM scheme, alongside its continued calls for the removal of the Carbon Price Support Mechanism (CPSM)
Industrial Decarbonisation:
- The EIUG welcomed the decision in December 2023 to allocate £410m over three years for industrial energy efficiency and decarbonisation.
- However, this approach remains piecemeal and greater taxpayer funding will be required to play a key role in ensuring that industries stay internationally competitive whilst reducing emissions.
- In order to decarbonise, the EIUG noted that EIIs need access to carbon capture & storage, hydrogen and electricity networks but due to the dispersed nature of some EIIs there are challenges with accessing these opportunities without increased costs.
- The EIUG therefore called on the government to deploy a model for electrification similar to that of carbon capture & storage technologies and hydrogen.
The full report can be found at the following link: 20240124-EIUG-Spring-Budget-2024-submission-final.pdf
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