UK Government shields heavy industry from rising energy costs

‘Missed opportunity’, says Chemical Industries Association

THE UK Government is extending a compensation scheme to help shield heavy industry from rising energy costs and guard against “carbon leakage” – but the measures have received mixed support from industry.

Government has extended the Energy Intensive Industries (EII) compensation scheme for a further three years and has doubled its budget as it seeks to shield industries including chemical, steel and paper manufacturers from spiralling energy costs and encourage greater electrification. The scheme provides business with relief for the costs of the UK Emissions Trading Scheme (ETS) and Carbon Price Support mechanism in their electricity bills, given that UK electricity costs are higher than for competitors in other countries. The support follows a consultation by Government that concluded that “there continues to be a risk of carbon leakage due to indirect emission costs for some sectors. This means that there is a risk that the indirect emission costs found in the electricity price could lead to the displacement of production, and associated greenhouse gas emissions that would not have happened if climate rules and policies across jurisdictions were implemented in the same way.”
UK Steel Director General Gareth Stace said: “The three-year extension of the EII compensation scheme and the increase in the level of relief provided by it delivers on a long-standing industry ask and gives the UK steel sector a much-needed reduction in electricity costs. This increase in compensation is a key priority for the steel sector and is a much-needed step to tackling the industrial electricity prices that hold the UK steel sector back from competing with our European counterparts.”