Written evidence submitted by INEOS Chlor
1. INEOS Chlor is a manufacturer of chlorine
and caustic soda. We operate in the UK, Norway, Germany and Sweden.
The electrolytic processes we operate are very energy intensive
and electricity is a key raw material, representing approximately
60% of our manufacturing costs.
2. The cost of carbon - either through the
EU ETS or as proposed here as Carbon Price Support - has a direct
and significant impact upon our costs of production, as do all
other energy taxes.
3. The products we produce are globally
traded and we cannot pass on additional costs that are not faced
by our competitors. As a result, badly implemented energy and
environmental policies have the potential to severely impact the
ongoing viability of our business within the UK.
4. If the UK is to contribute fully and
properly to reducing anthropogenic CO2 emissions, Government
policy must achieve two goals:
UK must become a low carbon economy, in particular with respect
to energy (electricity) production; and
UK must manufacture the energy intensive goods it requires within
this low carbon economy.
5. We see clear evidence of a considered
plan to achieving the first of these aspirations, with binding
emission targets and a route map to a low carbon economy.
6. Unfortunately, there is however no evidence
that due regard has been given to the latter. There appears to
be no consideration of the needs of energy intensive industry
and no plan for helping industry manage the transition from a
fossil fuel economy to a low carbon one. This is a dereliction
of both economic and environmental policy. Without urgent action
from the UK Government we are faced with the progressive abandonment
of the UK as a manufacturing centre for energy intensive goods,
and the export of our carbon emissions.
7. The UK should be seeking to export energy
intensive goods into higher carbon economies, creating jobs and
economic growth within the UK alongside delivering significant
and real environmental benefits. This will not happen by chance.
The political will that has driven the decarbonisation agenda
needs to be applied to a manufacturing strategy that will allow
the transition to a low carbon economy.
8. Energy intensive manufacturing industry
does not need subsidy, but it does require a recognition that
the costs of carbon, either through EUETS or proposals for Carbon
Price Support (and other energy tax measures), create a far from
level playing field, which must be addressed.
9. The impact of environmental policy on
energy intensive industry within Europe is already creating an
unacceptable burden. Whilst there is some support for the costs
faced as a result of direct CO2 emissions, the impact
of "indirect emissions" is much more significant for
electro-intensive industry. Without adequate support for such
costs, we face a very difficult future within Europe. The Government
is now raising the prospect of an additional and unique UK-only
cost through the Carbon Price Support mechanism.
10 The Carbon Price Support mechanism seeks to
deliver additional certainty for low carbon investment. The
reality is that as planned it creates an equal but opposite
certainty that there will be no investment in electro-intensive
industry and as a result the prospect of its terminal decline
in the UK. We face the very real risk of exporting energy intensive
manufacturing to high carbon economies elsewhere in the world,
and increasing global CO2 emissions through ill considered
18 April 2011