Written evidence submitted by the British
budget needed to prioritise economic growth in the UK economyand
balance this with commitments to reduce emissions.
parts of the economy must play their part in reducing the UK's
emissions. We are disappointed that the green taxes in the budget
targeted certain sectors of the economy, such as energy intensive
industry through the Carbon Price Floor rather than spreading
the burden fairly amongst all sectors including transport, agriculture
Government needs to measure the cumulative costs of all the UK's
green taxes on energy intensive industries through impact assessments
to ensure that the UK does not just meet its emissions reductions
targets by off-shoring manufacturing. The UK needs to avoid "carbon
leakage" of energy-efficient manufacturing in the UK to less-regulated
economiesexporting of GDP and jobs.
welcome the need to secure UK electricity supplyafter many
decades of under-investmentand to move to a lower carbon
electricity mix. However, this has to be at least cost to avoid
damaging industrial competitiveness, growth and investment.
UK Carbon Price Floor adopted in the budget threatens the competitiveness
and viability of many companies in our sector and other energy
welcome the extension of Climate Change Agreements to 2023 and
that all participating sectors will continue to be eligible for
the scheme. The reinstatement of the 2010 electricity rebate (80%
rather than 65%) is welcome, but does not mitigate the extra costs
of the Carbon Price Floor in 2013 at £16/telet alone
later when CPF costs escalate to £70/te in 2030.
welcome the move for the government to fund Carbon Capture and
Storage (CCS) demonstration plants from general taxation, rather
than from a further tax on energy use.
accept the principle in the "Growth plan" of a cap on
green taxesand want to be involved in developing the detail.
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
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
||Clay Roof Tiles||
Our sector and its suppliers employs approximately 20,000 people
and generates £2 billion sales of which approximately £500
million are exports. The sector is a solution provider for the
low carbon economy including durable construction materials with
low lifecycle carbon footprints; industrial ceramics providing
critical components for low carbon energy and electricity distribution;
long-life refractory materials are essential for glass, steel
and ceramic production
3. Ceramics is an energy-intensive industry: 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. Although the sector uses more gas than
electricity, the amount of electricity used is still significant.
(About 85% of the total energy used is from gas). Much of the
electricity used is for process control or essential safety and
environmental equipment. It is therefore more difficult to reduce
consumption for these essential functions.
Whether Budget 2011 furthers the Government's green objectives,
including the impact of the cut in fuel duty on greenhouse gas
emissions and air pollution
Approaches to shifting the burden of taxation from "goods"
(eg labour) to "bads" (eg emissions) and factors that
need to be considered when designing and introducing green taxes
4. The Government recognises that the optimal way to achieve
a green economy is through the retention within the UK of the
whole supply chain for green products. This includes the energy
intensive industries who already enable a range of low carbon
5. Carbon Price Floorand broader impact on Energy
Intensive Industries. In our consultation response to Treasury
we outlined how this measure alone was likely to increase our
members' electricity bills in real terms by almost £40 million
per annum by 2030. Based on a survey of our members, we think
this will put about half of them out of business (ie the real
terms energy cost increase in the HMT Proposal
exceeds current profits). In the fiercely internationally competitive
market in which they operate, it is simply not an option to increase
prices to pass on this cost to customers. This is a unilaterally
imposed UK price increase that overseas competitors will not have
to bear. The extra Climate Change Agreement rebate on electricity
might only reinstate £200,000 of annual benefit to our members.
Ceramics is not a particularly electro-intensive industryso
it is of concern that HMT's impact assessment did not include:
5.1 A quantification of the cost to energy intensive industries.
5.2 The cumulative cost on energy intensive industries as
a result of all energy tax measures in the UK. The ceramics industry
included 2 examples in the "The Cumulative Impact of Climate
Change Policies on UK Energy Intensive IndustriesAre Policies
Effectively Focussed? A summary report for The Energy Intensive
Users Group and the Trades Union Congress Prepared by Waters Wye
Associates July 2010".
An updated WWA analysis including these proposals is available.
5.3 Broader effects on the UK economy from loss of these businesses.
For example: tax revenues from corporation tax / national insurance
/ income tax; extra costs (eg unemployment payments etc and consequences
on GDP / balance of payments if these companies were no longer
able to operate profitably in the UK. There is a significant GDP
multiplier for the construction sector covering many of our members.
Moreover, much of the supply chain is integrated and interconnected.
For example, materials and kiln suppliers work across many ceramic
sectors and we have seen in 2008-10 that a single manufacturer
in administration can cause a series of UK suppliers (and some
of their UK customers) to fail right across the industry in a
6. Investment is on hold and the UK regulatory framework
is even more complicated than previously. Return on capital
is being predicted at higher rates in competitor countries. Our
members say that UK investments are not viewed favourablyand
there is a track-record in the UK of a series of governments much
less sympathetic to manufacturing industry than overseas competitors.
Investment is essential for energy efficiencyand also for
expansion at this stage in the economic cycle and is largely on
holdespecially if parent companies can also invest in other
countries. The new UK carbon price floor exacerbates the problem.
An opportunity has been missed for the simplification and improvement
in economic efficiency of climate policiesinstead, the
energy industry and its consumers are facing even greater complexity
and policy overlap.
How policy proposals in "The Plan for Growth" will
affect sustainable development and environmental protection (ie
planning, green growth, low carbon investment, regulations etc)
our comments in italics
7. The areas affecting our members and their sustainable development
in the plan are:
7.1 Corporation tax reductionthe reduction will
only be of benefit if resource-efficient UK manufacturers can
remain internationally competitive and profitable. Many of our
members are concerned that unless the UK cumulative energy tax
issue is addressed they may not have a profitable business in
7.2 UK Carbon Price (Price Floor)see paragraph 5.
7.3 Green Investment Banksee paragraph 17.
7.4 Global action to tackle environmental challenges. We
support an international agreement on climate change which seeks
to regulate greenhouse gas emissions from industry on an equal
footing, regardless of location. We note that unfortunately the
majority of world ceramics production is not covered by mandatory
carbon dioxide / environmental legislation.
7.5 Taking action now to put the whole economy on a low-carbon,
resource efficient path that maintains UK competitivenesswe
are concerned that this is at odds with paragraph 7.7 below.
7.6 "Green growth opportunities"and resource
efficiency savingssee paragraph 17. Funding or co-funding
for technology demonstrator projects is essential. Options for
industrial scrappage and replacement schemes, low-carbon tax credits,
low-carbon capital allowances and accelerated depreciation should
all be explored. Incentives should apply to technologies, processes,
buildings and other innovative ways of reducing the carbon footprint
of business while still conducting activity in the UK. However,
businesses should not be forced to replace assets before the end
of their useful life.
7.7 Increased "transitional costs" of moving to
a green economy. Use of market-based approaches to simplify this
policy landscape, minimising the costs of transition and reducing
burdens on business. "Some aspects of the move to a green
economy will impose transitional costs. In the short-term cleaner
technologies may be more expensive than the conventional ones
they replace. Adopting new, low-carbon technologies in energy
production and consumption is currently expected to increase the
average non-domestic energy bill by around 11%". This
statement is of major concern to our members as it is not compatible
at all with "growth", "sustainable development"
or international competitivenesseven for companies in our
sector that have invested in brand new state-of-the-art energy-efficient
factories. The reference
is for 11% by 2015 and 26% by 2020. This was for a limited number
of policies in 2010 and so excludes a Carbon Price Floor. The
costs for energy intensive industries are not assessed.
7.8 Capping the cost of policies funded through energy bills
through a new frameworksee summary.
7.9 Green Dealwe support the principle here and
some of our members are developing innovative products for improved
measures in building energy efficiency.
7.10 Green Economy Council. At present our sector has no
representation that adequately articulates its concerns.
The scope for the tax system to create a "modal shift"
from high carbon transportation to low carbon alternatives, including
Fuel Duty, Vehicle Excise Duty, and Air Passenger Duty and issues
the Government should consider when developing strategies for
sustainable aviation and motoring
8. See summary.
The impact of the taxation system in general on sustainable
9. We need
a UK regime fair on companies that strive to be energy-efficient,
and provides transparency, predictability, simplicity and allows
them to compete internationally. This is not the case at present.
10. The Climate Change Act needs to be amended
to include imported carbon, so that UK policy is focussed on reducing
emissions on UK consumptionrather than just production.
The current UK policies allow products made in less stringent
environmental conditions overseas to have a competitive advantage
at the expense of UK jobs and increased net global emissions.
11. Thorough impact assessments on energy intensive
industries (covering all the areas in paragraphs 5.1-5.3) need
to be performed for the Carbon Price Floor and all future "green
taxes" that affect these industries. New policies to reduce
emissions should only be adopted that minimise the costs on the
UK economy as a whole and do not increase global emissions or
12. That the Government acknowledges the impact
of the carbon price floor and other carbon taxes on the bottom
line of energy intensive industries and takes appropriate steps
in the context of the ongoing Electricity Market Reforms to mitigate
the cumulative burden of this and other climate policies and ensures
that industrial users are actively involved in this process.
13. Low carbon electricity investors require
the certainty now that when new generation capacity comes on stream,
electricity will then receive financial support. A Carbon Price
Floora policy designed primarily to support nuclear electricityshould
therefore remain at zero until at least 2020 (estimated timescale
for new nuclear capacity) and should remain at a low level, say
£20/tonne from 2020 until 2030.
14. The Environmental Audit Select Committee
as a matter of urgency should examine the cumulative costs of
UK regulation on Energy Intensive Industries.
15. Future Climate Change Agreements for Energy
Intensive industries must continue to use sector-specific challenging
yet achievable targets. Rebates should mitigate the maximum
possible amount of the Climate Change Levy.
The scope for the taxation system to protect and
increase stocks of natural capital and the possible role of proposed
16. Waste infrastructure needs to operate at
scale in new ways, recognising that what was waste should now
be seen as a strategic resource around which value chains can
be created. An example relevant to ceramics and several other
energy-intensive sectors is waste the need for biogas generation,
yet current tax instead incentivises electricity from waste.
The announcement in Budget 2011 on the Green Investment
17. As in our earlier response to the EASC inquiry,
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. We welcome the government's commitment to provide
a further £2 billion to the Green Investment Bank on top
of the existing £1 billion, but are disappointed in the phased-in
21 April 2011
71 Chart 5.E: Time weighted baseload electricity prices
(£/MWh, real 2009 prices) in http://www.hm-treasury.gov.uk/d/consult_carbon_price_support_condoc.pdf Back
LEK Report for CBI / UKCG "Construction in the UK Economy-The
Benefits of Investment" October 2009.
Slide 10: £1 spent on construction output generates a
total of £2.84 in total economic activity (ie GDP increase)
Paragraph 23 in http://www.decc.gov.uk/assets/decc/What%20we%20do/UK%20energy%20supply/236-impacts-energy-climate-change-policies.pdf Back
Written evidence submitted by British
Ceramic Confederation (GIB 27) Green Investment Bank-Environmental
Audit Select Committee Session 2010-11 Back
While the GIB will start a year earlier than planned, in 2012,
initially its capital is staggered over the first few years, and
it will not be able to raise its own finance on the capital markets
until 2015 on the condition of the fiscal debt target being met Back