Written evidence submitted by the British
Ceramic Confederation
EXECUTIVE SUMMARY
It is important that Green Investment Bank funds
are available for industrial energy efficiency and emissions reduction
projects as these can offer very cost-effective means of reduction
in the UK's emissions, with relatively short payback times compared
to other investments.
Many ceramic factories have already made some significant
investment in energy efficiency measures - in these firms the
next series of projects may have longer payback periods which
conventional banks (or other sources of shareholder funds) may
be unwilling to finance.
Some of our members have used, successfully, the
Carbon Trust interest free loans. Payback out of energy savings
made has proved opearable in our members' experience. Only very
limited funding was available, though, and only for SMEs for a
limited range of projects. There is therefore real benefit in
ensuring all companies can access these funds, with minimum bureaucracy,
provided they have a sound case and timing for payback. To ensure
value for investors, objective criteria should be used for determining
which projects are funded eg:
Tonnes carbon dioxide abated (including imported
emissions) per £ loan, with priority to short-term pay back
periods.
Products from manufacturing processes that themselves
have low lifecycle carbon emissions (for example a highly durable
product rather than a disposable/low life one) should also be
favoured as these will reduce emissions longer term too and strengthen
the UK's role in rebalancing the economy towards manufacturing.
This will also help achieve a change in consumer behaviour.
Potential for wider application of technology across
an industry - eg priority for technology demonstrator projects
which also meet the above criteria.
Employment of renewable energy generation is acceptable
if it also meets all the above criteria (ie efficiency of available
funds in abating the UK's emissions quickly is essential rather
than focusing solely on the employment of renewable technologies,
many of which are not yet sufficiently developed nor have competitive
payback periods compared with other potential investments).
An objective assessment of credit-worthiness is required.
These loans must not affect normal borrowing / access to loans
to run the day to day business.
BRIEF INTRODUCTION
TO THE
BRITISH CERAMIC
CONFEDERATION
1. The British Ceramic Confederation (BCC) is
the trade association for the UK Ceramic Manufacturing Industry,
representing the common and collective interests of all sectors
of the Industry. Its 100 member companies cover the full spectrum
of products and materials in the supply chain and comprise over
90% of the Industry's manufacturing capacity.
2. Membership of the Confederation includes manufacturers
from the following industry sectors:
| — Gift and Tableware
| — Floor and Wall Tiles | — Sanitaryware
|
| — Bricks | — Clay Roof Tiles
| — Clay Pipes |
| — Refractories | — Industrial Ceramics
| — Material Suppliers |
3. The industry is energy-intensive (but not energy inefficient):
energy bills / taxes can be up to 30-35% of total production costs.
85% of the energy used is natural gas. BCC is a member of the
Energy Intensive Users Group.
FACTUAL INFORMATION
The significance of any barriers or "market failures"
requiring the establishment of a Green Investment Bank, and any
risks of not getting this done quickly
4. Many ceramic factories have already made some significant
investment in energy efficiency measures - in these firms the
next series of projects may have longer payback periods and larger
investments (eg all possible improvements in an older plant may
have been made, the only option for further improvement is a new,
state-of-the-art energy-efficient plant)
5. Conventional banks (or other sources of shareholder funds)
have been less willing to finance these types of projects - and
the recession and reduction of available funds in banks has exacerbated
this problem.
6. Some of our members have used, successfully, the Carbon
Trust interest free loans. Payback out of energy bill savings
made (as in Carbon Trust loan scheme) has proved operable in our
members' experience. However:
(a) Only very limited funding was available, though (maximum
loan size currently £100,000).
(b) The payback period is limited to four years.
(c) Only SMEs were able to apply: larger firms in a Climate
Change Agreement were not eligible.
7. A Green Investment Bank could allow access to these larger
loans with slightly longer payback periods. This would help secure
investment for capital projects that might otherwise be diverted
to other countries - essential in the current economic climate.
This investment in more energy-efficient UK factories can also
help secure employment.
8. A market failure is emissions in imported goods are currently
not assessed under the UK's Climate Change Act. The Green Investment
Bank could help address this oversight - see paragraph 14a.
RECOMMENDATIONS
The objectives and roles the Green Investment Bank should assume,
the areas it should operate (and not operate) in, and how its
lending and investment decisions should balance green benefits
against financial risks
9. It is important that Green Investment Bank funds are available
for industrial energy efficiency and emissions reduction projects
as these can offer very cost-effective means of reduction in the
UK's emissions, with relatively short payback times compared to
other investments.
10. See "funding and governance structures" section.
Efficiency of available funds in abating the UK's emissions quickly
is essential rather than focusing solely on the employment of
renewable technologies, many of which are not sufficiently developed
nor have competitive payback periods compared with other potential
investments.
The Green Investment Bank's investment priorities, and whether
and how the bank should support and foster areas where the UK
has emerging green technology strengths
11. Products from manufacturing processes that themselves
have low lifecycle carbon emissions (for example a highly durable
consumer or construction product rather than a disposable / low
life one) should be favoured as these will reduce the UK's emissions
(and other countries emissions in the case of exported products)
longer term.[49]
12. This would also strengthen the UK's role in rebalancing
the economy towards manufacturing / improve balance of payments.
13. This will also help achieve a change in consumer behaviour.
The funding and governance structures required to create an
effective and accountable body, including the role of "green
bonds"
14. To ensure value for investors and the maximum efficiency
of available funds in abating the UK's emissions, objective criteria
should be used to determine which projects are funded eg:
(a) Tonnes carbon dioxide abated per £ loaned, with priority
to short-term pay back periods. Short payback periods ensure that
if funds are limited they can be recycled quickly to other projects.
The amount abated should include the abatement of imported emissions
- eg if products can be made in the UK for local consumption with
significantly lower emissions than importing the same product.[50]
(b) Products from manufacturing processes that themselves
have long life and therefore very low lifecycle carbon emissions
(for example a highly durable consumer or construction product
that may indeed use more energy in production, but uses this energy
efficiently, rather than a disposable/low life product) should
also be favoured as these will reduce global emissions longer
term.
(c) Potential for wider application of technology across an
industry - eg priority for technology demonstrator projects which
also meet the above criteria.
15. An objective assessment of credit-worthiness is required.
16. These Green Investment Bank loans must not adversely affect
normal bank borrowing / access to loans to run the day to day
business (eg "you already have £500,000 of green bank
loan for a heat recovery project therefore you can't have £10,000
of overdraft to buy materials for a new large sales order")
Please feel free to contact us if you require any more information
or would like oral evidence.
15 October 2010
49
Some ceramics examples:
The UK has several world-leading companies
manufacturing very long long-life durable catering tableware.
These products are widely exported, improving the UK's balance
of trade.
Bricks and other ceramic construction
materials have a much longer life than many other construction
materials (bricks have a life of over 100 years).
The UK has a niche in some refractory
materials - these technologically advanced materials enable a
considerable reduction of energy use in production of other essential
materials needed in the low carbon transition (eg glass and steel).
Again, these products are widely exported, improving the UK's
balance of trade. Back
50
A ceramics example:
Investment in a highly automated energy
efficient ceramics sanitaryware UK plant reduces the net global
emissions from firstly, a more energy efficient production process
and secondly, from the large amount of emissions in transport
if the heavy and bulky product were made in a distant continent
and then shipped to the UK. Back
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