Written evidence submitted by INEOS Manufacturing
Scotland and INEOS Infrastructure (Grangemouth) Limited|
INEOS IN GRANGEMOUTH
1. INEOS functions as three operating companies
in Grangemouth: INEOS Manufacturing Scotland Limited, INEOS Chemicals
Grangemouth Limited and INEOS Infrastructure (Grangemouth) Limited.
Together, these companies employ directly ~ 1,350 people.
2. INEOS Manufacturing Scotland Limited operates
a 210,000 barrel per day capacity fuels refinery, which produces
over nine million litres of clean fuels every day. This is the
only fuels refinery in Scotland and supplies over 70% of the Scottish
3. INEOS Chemicals Grangemouth Limited operates
two ethylene crackers and derivative plants that produce polymers,
synthetic ethanol and other chemical commodities. It is significantly
integrated with other site operations, including the Refinery
and the Forties Pipeline System (operated by BP Exploration Company
Limited, transporting oil and natural gas liquids from the North
4. INEOS Infrastructure (Grangemouth) Limited
operates facilities for raising steam and power which are integrated
with a 3rd party's operations to form a "good quality"
CHP plant, registered with the CHPQA programme. It provides steam
and power to the INEOS businesses and the Forties Pipeline system,
along with other utilities. It also operates the infrastructure
to export products from the site.
5. 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.
6. From the consultations during the first quarter
of this year, we can see clear evidence of an intention to achieve
the first of these aspirations.
7. Unfortunately, there is however no evidence
that due regard has been given to the latter. There appears to
be no considered plan for helping energy intensive industries
transition from a fossil fuel economy to a low carbon one. Indeed,
elements of the proposals contained in the consultations on the
former have (unintended) consequences on the energy intensive
industries to such an extent that without urgent action from the
UK Government there will be a progressive abandonment of the UK
as a manufacturing centre.
8. The UK should be seeking to export energy
intensive goods into higher carbon economies, creating jobs and
economic growth within the UK, whilst simultaneously delivering
real and significant decreases in global emissions. For this
to happen, the same political will that has been applied to decarbonisation
of electricity needs to be applied to a manufacturing strategy
that will allow a transition to a low carbon economy.
9. Energy intensive manufacturing industry does
not need subsidy, but it does require recognition that the costs
of carbon, either through EU ETS or proposals for Carbon Price
Support (and other energy tax measures, such as CRC Energy Efficiency),
create a far from level playing field.
10. All of the INEOS businesses at Grangemouth
process feed-stocks and produce products that are globally traded
commodities; there is no option to pass on carbon taxation costs
to the end consumer, instead these costs are taken from our margins.
This directly affects the profitability of UK operations as compared
to non-UK, and will ultimately impact upon investment decisions.
11. Taking the Carbon Tax elements announced
in the 2011 budget as a whole, the costs of UK only carbon and
energy taxation will be to add costs to our Grangemouth operations
equivalent to up to 50% of our estimated EU ETS compliance costs.
12. There are multiple levels of carbon and energy
taxation either in place or in consultation / development, many
with uncertainties in their detail:
ETS Phase III - Allocations not finalised, for scheme starting
Energy Efficiencyscheme commenced April 2011, but rules
being re-visited for "simplification" which may have
significant impacts on application.
Change Agreementsto consult on extensions.
Price Floor - level of CHP exemption not determined
As noted by the Commons Treasury Committee, the UK
carbon and energy taxation measures "lack overall coherence"
as a package; when coupled with these uncertainties it further
undermines confidence in the fiscal environment when making investment
decisions in UK manufacturing.
20 April 2011