The EIUG has sent its submission to the autumn budget 2024 to Treasury.
As the Labour Party election manifesto states, British industry is held back by relatively high electricity prices, which has often made investing in the UK often uncompetitive. Previous Governments have taken measures to reduce policy costs and network charges on industrial electricity prices, and the EIUG encourages Government to continue delivering the network charge compensation (NCC) scheme and removal of business-level test to determine eligibility. Network charges remain relatively high compared to France and Germany, even after taking the NCC scheme into account, and the EIUG urges Government to match their schemes by increasing the rate from 60% to 90%.
Government currently provides compensation to certain energy intensive industries for indirect emission costs in industrial electricity prices due to the UK ETS and carbon price support mechanism (CPS). However, the Departmental budget for these schemes will run out at the end of this fiscal year. The EIUG urges Government to continue providing budget for them until UK EIIs and imports face equal indirect emission costs.
The EIUG welcomes the commitment to introduce a UK CBAM in a number of sectors in 2027. A CBAM can level the playing field for British industries as the UK decarbonises, prevent other countries from dumping lower-quality goods into British markets, and support the UK in meeting our climate objectives. Yet, by not aligning the timetable of its introduction with the EU CBAM in 2026, HMT creates a substantial risk that high-carbon products will be diverted to the UK as they face a lower cost compared to the EU due to having no CBAM in place, putting UK manufacturing jobs and investments at risk. Moreover, the proposal includes sectors, such as ceramics and glass, that are not included in the EU CBAM. Although they want to be included eventually, they strongly prefer to align any inclusion with the EU CBAM.
The EIUG also calls for the withdrawal of the carbon price support mechanism – unilateral carbon tax on top of the UK ETS – since there is no good economic rationale for it anymore, it contributes to higher electricity prices, and is not value-for-money.
The previous Government promised to allocate part of the UK ETS auction revenue to establishing an Innovation Fund to match the similar fund established by the EU. However, such a fund has never come forward, and the EIUG calls on HMT to keep its commitment to allocate part of the auctioning revenue to increase the budget for this industrial energy efficiency and decarbonisation programmes.