British industry points to problems with government decarbonization policy

British industry has pointed out the risks and impact of the government’s decarbonization policy on energy-intensive sectors. This is stated in an open letter to the Minister of State for Business and Trade, Sarah Jones, published by the Energy Intensive Users Group (EIUG).

Among the signatories to the letter are the UK Steel industry association, the Metalworkers’ Union (GMB Union), and representatives of the glass, chemical, oil refining, and other industries.

As noted, the UK’s energy-intensive sectors support the government’s ambitions to accelerate economic growth and achieve the goal of zero emissions.

“As major employers in industrial communities, these sectors will play a crucial role in the government’s ambitions as these industries seek to invest in decarbonization technologies. However, their ability to do so is constrained by relatively high energy costs, policy uncertainty and the risk of carbon leakage, which often makes investment in the UK uncompetitive,” the statement said.

The open letter proposes a number of changes that the government can make to address these issues.

In particular, the business notes that the cost of industrial energy in the UK is currently higher than in Europe, the US, and Asia. Although the UK Industrial Stimulus Package and other initiatives have helped to reduce this difference for many sectors, there is still a significant gap. Increasing compensation for network costs from 60% to 90% would bring electricity costs closer to the level of key European countries.

Industrialists also point to the importance of the issue of energy supply reliability, in particular, the risk of relying on the development of “intermittent technologies” such as renewable energy sources.

The energy-intensive industry notes a lack of understanding of whether funding for carbon capture and storage, hydrogen technologies, and electrification will continue across all industries in the country. This, in turn, hinders the attraction of private investment.

In addition, the letter states that the UK’s CBAM needs to be significantly improved to make it effective and without loopholes. Its implementation in 2027 threatens to create trade barriers and reorient trade with the EU, as the European mechanism will be fully operational in 2026.

“A gap of 12 months will lead to potentially negative consequences, as more carbon-intensive products that should be imported to the EU may be redirected to the UK,” the industrialists say.

If the government does not intend to postpone the implementation of the CBAM in the country until 2026, the business community is asking for mitigation measures, including trade protection.

High energy costs should be the first challenge for the Steel Industry Council, UK Steel said.