UK strikes industrial energy efficiency deal

Energy-intensive industries commit to emissions cuts in return for 80% rebate from energy tax

The UK's ten most energy-intensive industrial sectors have agreed to emit 2.5m tonnes less carbon dioxide (CO2) annually by 2010 in return for substantial rebates on a forthcoming energy tax, the UK environment ministry said yesterday. The agreement on energy efficiency will bring to at least 4m tonnes the total annual emissions reduction from the tax package, it said.

Due to start generating revenues from April 2001, the climate change levy was announced in March this year and was recently fine-tuned after a consultation process with industries, which had argued for a 90% rebate for the most energy-intensive sectors (ENDS Daily 9 November). The levy will be charged on all businesses at UK£0.15 (euros 0.24) per kilowatt-hour (kWh) for gas and coal, and UK£0.43 per kWh for electricity. Revenues will fund a 0.3% reduction in business employment taxes and will support renewable energy projects.

Under yesterday's accord, companies in areas such as cement-making, steel, chemicals and paper will receive an 80% rebate on the tax if they adhere to an emission-reduction schedule leading to cuts of around 2.5m tonnes of CO2 within a decade. The ten sectors account for over half of manufacturing energy use in the UK. Agreements with other eligible sectors are expected to be concluded in February. Eligibility is based on classification as energy-intensive under the UK's national legislation implementing the 1996 EU integrated pollution prevention and control directive.

Companies will continue to be eligible for the rebate if they pass twice-yearly checks that they are meeting interim goals towards the main target. The government says the level of stringency is comparable between sectors, and that companies will be able to use a planned national emissions trading scheme to help meet their targets (ENDS Daily 27 October).

Along with the changes announced in November, the rebate represents a big shift towards meeting industry concerns that the levy would harm the competitiveness of energy intensive firms. Industries such as chlorine manufacture using electricity as a "feedstock" in electrolytic processes will be exempt from the tax, as will energy products which serve a dual purpose as a fuel and as a feedstock within the same process (ENDS Daily 29 July).

Follow Up:
UK environment ministry, tel: +44 171 890 3000. References: Ministry press release.

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